<PAGE>
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
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- --------------------------------------------------------------------------------
Prospectus Supplement Filed Pursuant to Rule 424(b)(5)
(To Prospectus Dated Registration No.: 333-90997
November 22, 1999) Registration No.: 333-91857
[LOGO OF UNITED GLOBAL APPEARS HERE]
10,000,000 Shares Class A Common Stock
5,000,000 Depositary Shares
Each Representing 1/20th of a Share of
7% Series D Senior Cumulative Convertible Preferred Stock
(Liquidation Preference Equivalent to $50 per Depositary Share)
- --------------------------------------------------------------------------------
UnitedGlobalCom:
. We are the largest provider, in terms of subscribers, of broadband
communications services outside the United States, including multi-channel
television, telephone and high-speed Internet/data services.
. UnitedGlobalCom, Inc.
4643 South Ulster Street, Suite 1300
Denver, Colorado 80237
(303) 770-4001
The Offering:
. We are offering all of these shares and will receive all of the net proceeds
of this offering.
. Use of Proceeds: For general corporate purposes, which may include
acquisitions, investment in our existing or new businesses, payment of
indebtedness and other obligations and working capital.
. Over-allotment Option: The underwriters may, under certain circumstances,
purchase up to an additional 1,500,000 shares of Class A common stock and
750,000 depositary shares at the public offering price less the underwriting
discount.
. Closing: December 7, 1999.
Common Stock:
. Our Class A common stock is traded on the Nasdaq National Stock Market under
the symbol "UCOMA." On December 1, 1999, the last reported sales price was
$50.75 per share.
Depositary Shares:
. Each depositary share represents ownership of 1/20th of a share of 7% Series
D Senior Cumulative Convertible Preferred Stock.
. Deposit Account: The purchasers of the depositary shares will deposit
approximately $17.5 million into an account from which the holders will be
entitled to quarterly payments in an amount equal to $0.8750 per depositary
share commencing on December 31, 1999 through September 30, 2000, in cash or
Class A common stock at our option.
. Listing: We have applied for the depositary shares to be listed on the Nasdaq
National Stock Market under the symbol "UCOMP."
Preferred Stock:
. Perpetual period.
. Dividends: Quarterly on March 31, June 30, September 30, and December 31 of
each year, commencing on December 31, 2000 payable in cash or Class A common
stock at our option.
. Conversion Right: Convertible at any time in whole or in part into shares of
our Class A common stock.
. Conversion Price: $63.79 per depositary share, subject to adjustment (equal
to an initial conversion ratio of 0.7838 shares of our Class A common stock
for each depositary share).
. Redemption: We have the right to redeem the preferred stock in certain
circumstances in cash or Class A common stock.
. Change of Control: Holders will have a one-time option to convert their
shares into Class A common stock at an adjusted conversion price upon the
occurrence of a change of control.
<TABLE>
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<CAPTION>
Price to Underwriting Discounts Deposit Proceeds to
Public and Commissions Account Company
- -------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Per Class A Common
Share.................. $ 50.6250 $ 0.8856 -- $ 49.7394
Per Depositary Share.... $ 50.0000 $ 1.2500 $ 3.5000 $ 45.2500
Total................... $756,250,000 $15,106,000 $17,500,000 $723,644,000
</TABLE>
- --------------------------------------------------------------------------------
This investment involves risk. See "Risk Factors" beginning on page S-9.
- --------------------------------------------------------------------------------
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved these securities or determined if this
prospectus supplement or the accompanying prospectus is truthful or complete.
Any representation to the contrary is a criminal offense.
- --------------------------------------------------------------------------------
Joint Bookrunning Managers
Donaldson, Lufkin & Jenrette Morgan Stanley Dean Witter
----------
Goldman, Sachs & Co. Merrill Lynch & Co.
December 2, 1999
<PAGE>
[ARTWORK APPEARS HERE]
<PAGE>
SPECIAL NOTE ON FORWARD-LOOKING STATEMENTS
This prospectus supplement and the accompanying prospectus, including
incorporated documents include forward-looking statements within the meaning of
the federal securities laws. We base forward-looking statements on our
reasonable beliefs, assumptions and expectations of our future economic
performance, taking into account information currently available to us.
However, forward-looking statements involve risks and uncertainties which could
cause actual outcomes and results to differ materially from the expected
outcomes and results expressed or implied in such forward-looking statements.
Some of the risks and uncertainties which could cause actual outcomes and
results to differ materially from our expectations include:
. the impact of general economic conditions;
. industry-wide market factors, including competition;
. our ability to identify and complete acquisitions and successfully
integrate the operating philosophies and practices of the businesses we
acquire;
. financial performance of start-up operations;
. capital expenditure requirements;
. regulatory developments affecting our operations, acquisitions and
dispositions;
. interest rates;
. taxes; and
. access to capital markets.
The words "believes," "anticipates," "expects" and similar expressions are
intended to identify such forward-looking statements. We undertake no
obligation to publicly update or revise any forward-looking statements, whether
as a result of new information, future events or other factors.
TABLE OF CONTENTS
Prospectus Supplement
<TABLE>
<CAPTION>
Page
<S> <C>
Special Note on Forward-Looking Statements................................. S-i
Prospectus Summary......................................................... S-1
Risk Factors............................................................... S-9
Use of Proceeds............................................................ S-20
Price Range of Our Class A Common Stock.................................... S-20
Currency Convenience Translation........................................... S-21
Description of Common Stock................................................ S-22
Description of the Depositary Shares....................................... S-23
Description of the Preferred Stock......................................... S-29
Certain United States Federal Tax
Consequences.............................................................. S-39
Underwriting............................................................... S-47
Legal Matters.............................................................. S-50
Prospectus
UnitedGlobalCom, Inc....................................................... 2
Use of Proceeds............................................................ 2
Ratio of Earnings to Fixed Charges and Preferred Stock Dividends........... 3
Description of Capital Stock............................................... 4
Description of the Debt Securities......................................... 7
Book-Entry Issuance........................................................ 11
Selling Stockholders....................................................... 12
Plan of Distribution....................................................... 13
Legal Matters.............................................................. 14
Experts.................................................................... 14
Where You Can Find More Information........................................ 16
Incorporation of Certain Documents by Reference............................ 17
</TABLE>
S-i
<PAGE>
PROSPECTUS SUMMARY
This summary highlights information contained elsewhere in, or incorporated
by reference into, this prospectus. This summary is not complete and does not
contain all of the information that you should consider before investing in the
securities. You should read the entire prospectus carefully, including the
"Risk Factors" section and the documents incorporated by reference. The
information in this prospectus reflects the two-for-one split of our common
stock that was effective December 1, 1999. Some of the financial and operating
figures appearing in this prospectus are qualified by the terms "aggregate,"
"proportionate" and "consolidated." When we refer to information as
"aggregate," we mean that the information is given in respect of all systems in
which we hold any equity interest that we either consolidate or account for
using the equity method for financial accounting purposes in accordance with
the applicable generally accepted accounting principles as though we wholly own
them. When we refer to information as "proportionate," we mean that we have
multiplied the figures attributable to each operating system in which we own
any equity interest by our percentage of the equity of that system we own. When
we refer to information as "consolidated," we mean that the figures we present
are the sum of those for all systems we consolidate in accordance with
applicable generally accepted accounting principles. All references in this
offering memorandum to "dollars" and "$" are to United States dollars. We have
converted foreign currency amounts to United States dollars using September 30,
1999 exchange rates. See "Currency Convenience Translation."
The Company
We are the largest broadband communications provider outside the United
States. We provide multi-channel television services in 22 countries worldwide
and telephone and Internet/data services in a growing number of our
international markets. Our operations are grouped into three major geographic
regions: Europe, Asia/Pacific and Latin America. Our European operations are
held through our majority-owned, publicly traded subsidiary, United Pan-Europe
Communications N.V., which is the largest European broadband communications
(multi-channel television, telephone and Internet/data) provider in terms of
numbers of subscribers. UPC had a market capitalization of approximately $14.0
billion based on the closing trade price on the Nasdaq National Stock Market on
December 1, 1999. Our Asia/Pacific operations are primarily held through our
majority-owned, publicly traded subsidiary, Austar United Communications
Limited, which owns the largest provider of multi-channel television services
in regional Australia, various Australian programming interests and the only
full service provider of broadband communications in New Zealand. Austar United
had a market capitalization of approximately $1.8 billion based on the closing
trading price on the Australian Stock Exchange on December 1, 1999. Our primary
Latin American operation is VTR Hipercable S.A., Chile's largest multi-channel
television provider and a growing provider of telephone services.
As of September 30, 1999, our systems on an aggregate basis passed
approximately 13.0 million homes and served approximately 6.6 million basic
video subscribers. As of the same date, our consolidated systems passed
approximately 11.5 million homes and had approximately 5.8 million subscribers.
In addition, our programming operations reach approximately 7.9 million
programming subscribers throughout the world. For the nine months ended
September 30, 1999, we had revenues of $460.6 million. If the systems we have
acquired during this year would have been acquired on January 1, 1999, we would
have had revenues of approximately $658.2 million for the same period. Since
the beginning of 1994, we have increased our aggregate subscriber base at a
compounded annual rate of approximately 55.1%. During the same period, we
increased the revenue for the systems we consolidated for financial reporting
purposes at a compounded annual rate of approximately 221.8%.
Our operating companies consist primarily of highly penetrated, mature
broadband systems that generate stable cash flow. We also operate a number of
earlier stage broadband businesses. Our primary goal in the majority of these
markets is to capitalize on the opportunity to increase revenues and cash flows
through the
S-1
<PAGE>
introduction of new and expanded video programming services and the launch of
telephone and Internet/data services over our broadband communications
networks. Today, we are a full-service provider of these video, voice and
Internet/data services in most of our Western European markets and in Chile and
New Zealand. As of September 30, 1999, our systems had over 245,000 telephone
lines and 84,000 high-speed Internet/data customers on an aggregate basis.
Recent Developments
On December 1, 1999, we effected a two-for-one stock split for our common
stock. The stock split increased our outstanding Class A common stock from
approximately 35.0 million shares to approximately 69.9 million shares and
Class B common stock from approximately 9.7 million shares to approximately
19.3 million shares. As a result of the stock split, prior to this offering, we
had outstanding approximately 89.3 million shares of common stock. This
prospectus supplement and accompanying prospectus reflect this stock split.
Other Information
We were incorporated in 1989 as a Delaware corporation. Our main offices are
located at 4643 South Ulster Street, Suite 1300, Denver, Colorado 80237. Our
telephone number is (303) 770-4001. Our fax number is (303) 770-4207.
S-2
<PAGE>
Summary Aggregate Operating and Financial Data
In the tables below, we show selected operating statistics and financial
information on an aggregate basis for our operating systems as of and for the
nine months ended September 30, 1999. These tables also show our ownership
percentage as of September 30, 1999. Our percentage interest in UPC was 61.5%
as of September 30, 1999, but is currently 55.1% as a result of UPC's October
1999 equity offering. In France, Romania and the Slovak Republic, we have
varying ownership interests in a number of systems. The financial information
presented in the tables below has been taken from unaudited financial
information of the respective operating companies that were providing service
as of September 30, 1999. Certain information presented in these tables has
been derived from financial statements prepared in accordance with foreign
generally accepted accounting principles which differ from U.S. generally
accepted accounting principles. The revenue and Adjusted EBITDA amounts have
been converted to United States dollars using September 30, 1999 exchange rates
(except for Chile whose functional currency is the Chilean peso, but whose
reporting currency is the United States dollar).
<TABLE>
<CAPTION>
As of and for the Nine Months ended September 30, 1999
-----------------------------------------------------------------------------------------
Homes in Two-way Basic
United Service Homes Homes Subscribers/ Basic Adjusted
Ownership Area Passed Passed Lines Penetration Revenue EBITDA
--------- ---------- --------- --------- ------------ ----------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
UPC (Europe) 55.1%
Multi-channel TV
Subscribers:
The Netherlands........ 61.5% 1,710,192 1,652,887 1,311,887 1,515,802 91.7% $124,695 $ 45,382
Austria................ 58.4 1,081,710 908,030 734,440 461,589 50.8 63,220 35,228
Hungary (UPC
Magyarorszag)......... 48.7 901,500 624,898 -- 498,325 79.7 25,871 8,838
Israel................. 28.7 610,500 599,443 377,234 415,754 69.4 125,756 56,102
Norway................. 61.5 529,000 466,742 44,492 324,469 69.5 36,476 15,838
Belgium................ 61.5 133,090 133,090 131,816 123,952 93.1 11,643 3,682
Malta.................. 30.8 175,000 167,744 -- 75,000 44.7 11,886 4,872
Romania................ 31.4-61.5 240,000 143,274 -- 94,234 65.8 1,907 789
Czech Republic......... 61.5 239,484 160,558 -- 56,638 35.3 3,623 (351)
Hungary (Monor) (1).... 29.2 85,000 70,061 -- 32,011 45.7 N/A N/A
France................. 58.6-61.3 1,265,827 900,020 238,309 331,029 36.8 13,165 3,005
Poland (2)............. 61.5 1,950,000 1,705,569 -- 1,165,504 68.3 14,639 (16,437)
Sweden................. 61.5 770,000 421,624 72,679 241,359 57.2 5,163 2,761
Slovak Republic........ 58.4-61.5 344,343 220,399 -- 191,592 86.9 2,844 756
---------- --------- --------- --------- -------- --------
Total.................. 10,035,646 8,174,339 2,910,857 5,527,258 $440,888 $160,465
---------- --------- --------- --------- -------- --------
Telephone Lines:
Hungary (Monor)........ 29.2% 85,000 85,000 N/A 72,880 85.7% $ 15,009 $ 9,713
The Netherlands (3).... 61.5 1,710,192 723,492 N/A 67,156 9.3 17,169 (6,857)
Austria................ 58.4 1,081,710 531,653 N/A 17,551 3.3 3,286 (7,148)
France................. 58.6-61.3 1,265,827 95,515 N/A 8,593 9.0 1,161 (3,492)
Norway................. 61.5 529,000 23,535 N/A 1,928 8.2 130 (4,752)
---------- --------- --------- --------- -------- --------
Total.................. 4,671,729 1,459,195 N/A 168,108 $ 36,755 $(12,536)
---------- --------- --------- --------- -------- --------
Data Subscribers:
Internet (4)........... 48.7-61.5% N/A N/A N/A 79,039 N/A $ 14,595 $(11,760)
---------- --------- --------- --------- -------- --------
Programming Subscribers:
Spain/Portugal (IPS)... 30.8% N/A N/A N/A 1,085,000 N/A $ 21,112 $ 9,318
Ireland (Tara)......... 49.2 N/A N/A N/A 1,168,548 N/A 658 (3,444)
---------- --------- --------- --------- -------- --------
Total.................. N/A N/A N/A 2,253,548 $ 21,770 $ 5,874
---------- --------- --------- --------- -------- --------
</TABLE>
- ------------
(1) Financial information is included as part of Telephone Lines below.
(2) Includes revenue and Adjusted EBITDA from sales of programming to other
operators.
(3) Does not include negative Adjusted EBITDA of $1.5 million for Priority
Telecom, consisting primarily of corporate level expenses.
(4) Does not include negative Adjusted EBITDA of $37.4 million for chello
broadband in The Netherlands, consisting primarily of corporate level
expenses.
S-3
<PAGE>
<TABLE>
<CAPTION>
As of and for the Nine Months Ended September 30, 1999
--------------------------------------------------------------------------------
Homes in Two-way Basic
United Service Homes Homes Subscribers/ Basic Adjusted
Ownership Area Passed Passed Lines Penetration Revenue EBITDA
--------- --------- --------- ------- ------------ ----------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Austar United
(Australia/New Zealand) 75.5%
Multi-channel TV
Subscribers:
Australia (Austar)..... 75.5% 2,085,000 2,083,108 -- 360,708 17.3% $102,956 $ (7,913)
New Zealand............ 75.5 141,000 83,582 83,071 13,907 16.6 1,442 (2,706)
--------- --------- ------- --------- -------- --------
Total.................. 2,226,000 2,166,690 83,071 374,615 $104,398 $(10,619)
--------- --------- ------- --------- -------- --------
Telephone Lines:
New Zealand............ 75.5% 141,000 83,071 N/A 20,547 24.7% $ 4,623 $ (2,140)
--------- --------- ------- --------- -------- --------
Data Subscribers:
New Zealand............ 75.5% N/A N/A N/A 4,826 N/A $ 826 $ (110)
--------- --------- ------- --------- -------- --------
Programming Subscribers:
Australia (XYZ
Entertainment)........ 37.8% N/A N/A N/A 870,972 N/A $ 22,359 $ 9,960
--------- --------- ------- --------- -------- --------
Other Asia/Pacific
Multi-channel TV
Subscribers:
Philippines............ 19.6% 600,000 425,239 -- 178,153 41.9% $ 13,074 $ 3,920
--------- --------- ------- --------- -------- --------
Latin America 100.0%
Multi-channel TV
Subscribers:
Chile.................. 100.0% 2,350,000 1,609,461 327,212 389,858 24.2% $ 83,459 $ 13,408
Mexico................. 49.0 341,600 229,451 -- 57,441 25.0 9,311 2,922
Brazil (Jundiai)....... 46.3 70,200 66,563 -- 17,877 26.9 4,245 1,532
Brazil (TVSB).......... 100.0 437,000 306,000 -- 15,107 4.9 3,006 (1,519)
Peru................... 62.2 140,000 61,268 -- 8,733 14.3 1,758 (542)
--------- --------- ------- --------- -------- --------
Total.................. 3,338,800 2,272,743 327,212 489,016 $101,779 $ 15,801
--------- --------- ------- --------- -------- --------
Telephone Lines:
Chile.................. 100.0% 2,350,000 345,160 N/A 56,623 16.4% $ 9,507 $ 4,127
--------- --------- ------- --------- -------- --------
Data Subscribers:
Chile.................. 100.0% N/A N/A N/A 706 N/A $ 32 $ --
--------- --------- ------- --------- -------- --------
Programming Subscribers:
Latin American......... 50.0% N/A N/A N/A 4,775,465 N/A $ 5,074 $ (9,521)
--------- --------- ------- --------- -------- --------
</TABLE>
S-4
<PAGE>
<TABLE>
<CAPTION>
As of and for the Nine Months Ended September 30, 1999
-------------------------------------------------------------------
Homes in Two-way Basic
Service Homes Homes Subscribers/ Adjusted
Area Passed Passed Lines Revenue EBITDA
---------- ---------- --------- ------------ -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Total Company Based on
Aggregate Data:
Multi-channel TV
Subscribers.......... 16,200,446 13,039,011 3,321,140 6,569,042 $660,139 $169,567
Telephone Lines....... 7,162,729 1,887,426 N/A 245,278 50,885 (10,549)
Data Subscribers...... N/A N/A N/A 84,571 15,453 (11,870)
Programming
Subscribers.......... N/A N/A N/A 7,899,985 $ 49,203 $ 6,313
Total Company Based on
Consolidated Systems
(1):
Multi-channel TV
Subscribers.......... 14,318,146 11,480,510 2,943,906 5,792,806 $397,353 $ 82,630
Telephone Lines....... 7,077,729 1,802,426 N/A 172,398 35,891 (21,746)
Data Subscribers...... N/A N/A N/A 84,571 19,163 (49,143)
Programming
Subscribers.......... N/A N/A N/A 1,168,548 $ 8,239 $(29,660)
Total Company Based on
Proportionate Data:
Multi-channel TV
Subscribers.......... 10,595,393 8,447,497 2,033,039 3,905,627 $396,102 $ 82,883
Telephone Lines....... 5,259,882 1,261,277 N/A 151,448 30,655 (8,103)
Data Subscribers...... N/A N/A N/A 52,041 9,349 (7,316)
Programming
Subscribers.......... N/A N/A N/A 3,625,088 $ 17,793 $ 171
</TABLE>
- ------------
(1) Local currency revenue and Adjusted EBITDA amounts have been converted to
dollars using average exchange rates for the period consolidated in our
financial statements in accordance with United States generally accepted
accounting principles.
We have presented "Adjusted EBITDA" statistics in the tables above and
elsewhere in this prospectus. The term "Adjusted EBITDA" represents profit
(loss) as determined using generally accepted accounting principles of the
local country, which differ from those of the United States, before:
.extraordinary items,
.income tax expense,
.miniority interest,
.share in results of affiliated companies (net),
.other non-operating income (expense) items,
.currency exchange gains (losses),
.net interest expense,
.gain on issuance of common equity securities by subsidiaries,
.depreciation,
.amortization and
.stock-based compensation charges.
We understand that industry analysts may consider Adjusted EBITDA to be a
helpful way to measure the performance of multi-channel television operations
and communications companies such as ourselves. We believe Adjusted EBITDA
helps investors to assess the cash flow from our operations from period to
period and thus to value our business. Adjusted EBITDA should not, however, be
considered a replacement for net income, cash flows or for any other measure of
performance or liquidity under generally accepted accounting principles, or as
an indicator of a company's operating performance. Not all companies and
analysts calculate EBITDA or Adjusted EBITDA in the same manner.
S-5
<PAGE>
The Offering
Securities Offered.......... 10,000,000 shares of Class A common stock, par
value $.01 per share.
5,000,000 depositary shares, each representing
1/20th of a share of 7% Series D Senior
Cumulative Convertible Preferred Stock, par value
$.01 per share.
Additionally, we have granted the underwriters an
option for 30 days to purchase up to an
additional 1,500,000 shares of Class A common
stock and 750,000 depositary shares at the
initial offering price solely to cover over-
allotments, if any.
Use of Proceeds............. We will use the net proceeds of this offering
(after expenses) of approximately $722.6 million
for general corporate purposes, which may include
acquisitions, investment in our existing or new
businesses, payment of indebtedness and other
obligations and working capital. See "Use of
Proceeds."
Risk Factors................ This offering involves a high degree of risk. See
"Risk Factors" beginning on page S-9.
Class A Common Stock
Common stock to be
outstanding after this
offering:
Class A common stock(1).... 79,931,824 shares
Class B common stock(2).... 19,323,940 shares
Total..................... 99,255,764 shares
Voting Rights............... Holders of Class A common stock are entitled to
one vote per share on all matters submitted to a
vote of stockholders, and holders of Class B
common stock are entitled to ten votes per share.
Both classes vote together as a single class on
all matters, except where class voting is
required by the Delaware General Corporation Law.
Nasdaq National Stock
Market Symbol...............
"UCOMA"
On December 1, 1999, the last reported sales price was $50.75 per share.
- --------------------
(1) Based upon the number of shares of Class A common stock outstanding at
November 26, 1999. Does not include Class A common stock issuable upon
conversion of the Class B common stock. Each share of Class B common stock
is convertible at the option of the holder into one share of Class A common
stock. Assuming full conversion into Class A common stock of all Class B
common stock, a total of 99,255,764 shares of Class A common stock would be
outstanding immediately after this offering. This amount does not include
6,161,022 shares of Class A common stock reserved under the Company's Stock
Option Plan, and 1,747,500 shares of Class A common stock reserved under
the Company's Stock Option Plans for Non-Employee Directors. Options to
purchase a total of 4,400,124 shares of the reserved Class A common stock
were outstanding under these plans as of November 26, 1999.
(2) Based upon the number of shares of Class B Common Stock outstanding at
November 26, 1999. Assumes no further conversion of Class B Common Stock
into Class A Common Stock.
S-6
<PAGE>
Depositary Shares
Liquidation Preference......
$50 per depositary share (equivalent to $1,000
per share of preferred stock).
Securities Account.......... Simultaneously with the closing of the offering,
the purchasers of the depositary shares will
deposit approximately $17.5 million into an
account (the "Securities Account"), and will be
entitled to quarterly cash payments from the
Securities Account in an amount equal to $0.8750
per depositary share (equivalent to $17.50 per
share of Preferred Stock) (the "Quarterly Return
Amount"), on March 31, June 30, September 30 and
December 31 of each year, commencing on December
31, 1999 through and including September 30,
2000. We may, prior to the date on which any
Quarterly Return Amount would otherwise be
payable, deliver notice instructing the deposit
agent to purchase from us, for transfer to each
holder of depositary shares, in lieu of the
Quarterly Return Amount, that number of whole
shares of common stock, determined by dividing
the Quarterly Return Amount by the "Market Value
Amount" as of the date of such notice. The Market
Value Amount is equal to 97% of the market value
of the common stock if a shelf registration
statement relating to such shares is then current
or to 93% of the market value of the common
stock. Any amounts remaining in the Securities
Account, as of September 30, 2000, after giving
effect to the payment of the Quarterly Return
Amount, will be paid to us.
Dividends...................
Dividends will begin to accumulate on the
depositary shares from October 1, 2000. Holders
of the depositary shares are entitled to receive
cumulative annual dividends of 7% of the
Liquidation Preference of their depositary
shares, payable quarterly in arrears out of
assets legally available therefor on March 31,
June 30, September 30 and December 31 of each
year when, and if declared by the Board of
Directors, commencing December 31, 2000.
Dividends, to the extent declared by the
Company's Board, may, at the option of the
Company, be paid in cash, by delivery of fully
paid and nonassessable shares of our common
stock, determined by dividing the dividend amount
by the Market Value Amount, or a combination
thereof.
Conversion Rights........... Each outstanding depositary share may be
converted at any time at the option of the holder
into such number of fully paid and nonassessable
shares of Class A common stock as is equal to the
Liquidation Preference per depositary share
divided by an initial conversion price of $63.79
(the "Conversion Price"). The Conversion Price is
subject to adjustment upon the occurrence of
certain events. We have the right to require
conversion of all of your shares of preferred
stock into shares of common stock at prices
specified herein if:
S-7
<PAGE>
. on or after December 31, 2002 the closing price
of our common stock has equalled or exceeded
130% of the Conversion Price (as adjusted) for
at least 20 of 30 consecutive trading days, or
. on or after June 30, 2001, the closing price of
our common stock has equalled or exceeded 150%
of the Conversion Price (as adjusted) for at
least 20 of 30 consecutive trading days.
Optional Redemption......... The preferred stock (and the corresponding
depositary shares) may not be redeemed prior to
December 31, 2002. On or after December 31, 2002
the preferred stock (and the corresponding
depositary shares) may be redeemed, in whole or
in part, at our option in cash, by delivery of
fully paid and nonassessable shares of common
stock determined by dividing the redemption
amount by the Market Value Amount, or a
combination thereof, initially at the redemption
prices set forth herein, plus in each case all
accumulated and unpaid dividends to the
redemption date.
Change of Control........... Upon any Change of Control, we will make a
temporary adjustment in the Conversion Price so
that it will equal the greater of (1) the Market
Value (as defined) ending on the date on which a
Change of Control event occurs and (2) 66 2/3% of
the Market Value as of the issue date of the
preferred stock. In lieu of issuing the shares of
common stock issuable upon conversion in the
event of a Change of Control, we may, at our
option, make a cash payment equal to the market
value of the shares of common stock otherwise
issuable.
Ranking..................... The preferred stock will rank senior to our
common stock and pari passu with our existing
preferred stock. See "Description of the
Preferred Stock--Ranking."
Voting Rights............... Except as required by law, the holders of the
preferred stock (and the corresponding depositary
shares) will have no voting rights unless
dividends or Quarterly Return Amounts payable on
the preferred stock are in arrears for six
quarterly periods, in which case the holders of
the preferred stock voting separately as a class
with the shares of any other preferred stock or
preference securities having similar voting
rights, will be entitled at our next regular or
special meeting of stockholders to elect two
directors (such rights will continue until such
time as the dividend arrearage on the preferred
stock has been paid in full). The affirmative
vote or consent of holders of at least 66 2/3% of
the outstanding preferred stock will be required
for the issuance of any class or series of our
stock (or security convertible into stock)
ranking senior to the preferred stock as to
dividends or liquidation rights and for
amendments to our certificate of incorporation
that would affect adversely the rights of holders
of the preferred stock. The owners of depositary
shares will be entitled to direct the voting of
the shares of preferred stock represented
thereby.
Listing..................... We have applied for the depostory shares to be
listed on the Nasdaq National Stock Market under
the symbol "UCOMP."
For a more complete description of the depositary shares and the preferred
stock, see "Description of the Depositary Shares" and "Description of the
Preferred Stock."
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RISK FACTORS
An investment in the securities offered hereby is subject to a number of
risks. You should consider carefully the following risk factors, as well as the
more detailed descriptions cross-referenced to the body of this prospectus
supplement, all of the other information in this prospectus, the accompanying
prospectus and the information in the documents incorporated by reference.
We are restricted from paying cash dividends and from redeeming the preferred
stock; we also could be prevented from paying dividends on shares of our common
stock
The terms of the preferred stock permit us to use cash to pay dividends and
redeem the preferred stock. We do not believe, however, that we will be able to
pay dividends in cash or to redeem the preferred stock for cash for the
forseeable future. The terms of the instruments governing our indebtedness
restrict our ability to pay cash dividends and to redeem the preferred stock.
Our ability to pay cash dividends and redeem our preferred stock will depend on
our meeting certain financial criteria, which in turn will require significant
improvements in our Adjusted EBITDA and consolidated net worth. Even if the
terms of the instruments governing our indebtedness allow us to pay cash
dividends and to redeem the preferred stock, under Delaware law we can make
such payments only from our "surplus" (the excess of our total assets over the
sum of our liabilities plus the par value of our outstanding capital stock) or
net income and we cannot assure you that we will have any surplus or net
income. Moreover, without surplus, we cannot pay dividends on shares of our
common stock.
Your right to receive liquidation and dividend payments on the preferred stock
is junior to our existing and future indebtedness and to all of the liabilities
of our subsidiaries
Our obligations with respect to the preferred stock do not constitute
indebtedness and with respect to liquidation and dividend payments rank junior
to all present and future indebtedness and other payment obligations of ours
and of our subsidiaries, on parity with our Series B preferred stock, Series C
preferred stock and all future capital stock designated as on parity and senior
to all classes of common stock and any junior preferred stock. Further, the
claims of creditors of our subsidiaries will be effectively senior to all
payments, including liquidation and dividend payments on the preferred stock.
As of September 30, 1999, we had approximately $5.8 billion of indebtedness and
other liabilities (including capitalized lease obligations and trade payables
of our subsidiaries), all of which would have been senior in right of payment
to the preferred stock. In October 1999, UPC incurred $1.0 billion of
additional long-term debt. In the event of our bankruptcy, liquidation or
reorganization, our assets will be available to pay obligations on the
convertible preferred stock only after all of our indebtedness has been paid,
and there may not be sufficient assets remaining to pay amounts due on any or
all of the preferred stock then outstanding and any preferred stock ranking on
parity with the preferred stock. See "Description of the Preferred Stock--
Ranking."
We have no significant assets other than stock of our subsidiaries and the
proceeds generated from sales of our securities; once these proceeds are spent,
we will depend on our subsidiaries to generate the funds needed to operate our
business
All of our operations are conducted through our subsidiaries. Our only
material assets consist of the stock of our subsidiaries and the proceeds
raised from the sale of our equity and debt securities, all of which we have
loaned or contributed, or intend to loan or contribute, to our subsidiaries. We
will have to rely upon dividends and other payments from our subsidiaries to
generate the funds necessary to repurchase the preferred stock or make cash
dividend payments, if any. Our subsidiaries, however, are legally distinct from
us and have no
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obligation, contingent or otherwise, to pay amounts due pursuant to the
preferred stock or to make funds available for these payments. Our subsidiaries
have not guaranteed the preferred stock. The ability of our subsidiaries to
make dividend and other payments to us is subject to, among other things, the
availability of funds, the terms of our subsidiaries' indebtedness and
applicable state laws. There are significant restrictions on the payment of
dividends to us contained in the instruments governing the obligations of our
subsidiaries. As many of our subsidiaries are currently in early stages of
development, they likely will not have the ability to make such payments to us
regardless of any restrictions in debt instruments for the foreseeable future.
Our ability to issue senior preferred stock in the future could adversely
affect the rights of holders of preferred stock and our common stock
We are authorized to issue preferred stock in one or more series on terms
that may be determined at the time of issuance by our Board of Directors. In
certain instances, a series of preferred stock could include voting rights,
preferences as to dividends and liquidation, conversion and redemption rights
senior to the existing preferred stock, and in all instances, senior to our
common stock. The future issuance of preferred stock could effectively diminish
or supersede the dividends and Liquidation Preferences of the preferred stock
and adversely affect our common stock.
The exercise or conversion of our outstanding options and other convertible
securities into common stock will dilute the percentage ownership of our other
stockholders; the sale of such common stock in the open market could adversely
affect the market price of our common stock
There are outstanding options to purchase approximately 4.4 million shares of
our common stock as of November 26, 1999 and more options will be granted in
the future under our employee and non-employee director benefit plans.
Additionally, our outstanding preferred stock, as of September 30, 1999, is
convertible into approximately 12.6 million shares of our common stock. A large
number of the shares of common stock underlying such securities as well as the
preferred stock offered hereby are or will be registered for resale under the
Securities Act. The exercise or conversion of outstanding stock options or
other convertible securities and the payment of common stock as dividends or
otherwise on the preferred stock offered hereby will dilute the percentage
ownership of our other stockholders, including you. In addition, any sales in
the public market of shares of our common stock issuable upon the exercise or
conversion of such stock options or convertible securities, or the perception
that such sales could occur, may adversely affect the prevailing market price
of our common stock.
The sale of a substantial number of shares of our common stock in the public
market could adversely affect the market price of our common stock
Substantially all of our currently outstanding shares of common stock have
been registered for sale under the Securities Act, are eligible for sale under
an exemption from the registration requirements or are subject to registration
rights pursuant to which holders may require us to register such shares in the
future. Sales or the expectation of sales of a substantial number of shares of
our common stock could adversely affect the prevailing market price of our
common stock.
Our substantial indebtedness could adversely affect our financial health
We are highly leveraged. As of September 30, 1999, we had consolidated long-
term debt of approximately $5.1 billion which includes parent company debt of
$1.2 billion and subsidiary level debt of $3.9 billion. Pro forma for UPC's
debt offering in October 1999, we had consolidated long-term debt of
approximately $6.1 billion.
We currently believe that cash on hand, cash flow from our future
operations, asset sales and our borrowing capacity will be sufficient to meet
our obligations as they become due. In certain circumstances,
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some of which may be beyond our control, we may have to repay the indebtedness
prior to when it is scheduled to be repaid. We may not be able to satisfy all
of the conditions necessary for our lenders to continue to lend us money under
our existing credit facilities. Some of these conditions are beyond our
control. We also cannot assure you that circumstances will not require us to
sell assets or obtain additional equity or debt financing at our level or those
of our subsidiaries and affiliates. We may not at such time be able to sell
assets or obtain additional financing on reasonable terms or at all.
The degree to which we will be leveraged could have important consequences
to you, including, but not limited to, the following:
. a substantial portion of our cash flow from operations will be required
to be dedicated to debt service and will not be available for other
purposes,
. our ability to obtain additional financing in the future could be
limited,
. certain of our borrowings are at variable rates of interest, which could
result in higher interest expense in the event of increases in interest
rates, and
. our ability to execute our business plan, to compete effectively, to
respond adequately to unforseen events and to take advantage of
opportunities could be limited.
Our acquisitions strategy involves significant inherent risks
A key element of our publicly traded subsidiaries' growth strategy is to
continue acquiring systems near our current systems and to increase the
percentage we own in some systems, allowing us to upgrade and improve our
current services and to achieve economies of scale. We are almost continuously
engaged in discussions or negotiations regarding the acquisition of businesses
and systems, some potentially material in relation to our size. Any future
acquisitions will be accompanied by risks such as:
. Difficulty of identifying appropriate acquisitions. Our growth may
suffer if we are not able to identify and acquire cable/telephony
systems that are either near our existing networks or are large enough
to serve as the basis for expanded operations.
. Time of senior management. Our senior management may not be able to
devote their full attention to managing our existing business because of
the time they must spend negotiating agreements and monitoring
acquisition activities.
. Potential regulatory issues. We may not be able to obtain the required
approvals for acquisitions from the relevant regulatory authorities.
. Difficulties in completing acquisitions. We may not be able to satisfy
conditions that sellers of networks may demand in order to close
acquisitions. In addition, there may be significant legal and
contractual issues in connection with acquisitions, such as change of
control provisions in licenses and agreements, that could delay or
prevent completion. Finally, we may not be able to raise the financing
necessary to pay for such acquisitions.
. Entry into new markets. If we consummate acquisitions in markets in
which we have not previously operated, we will have no prior experience
in dealing with local regulators or with local market conditions.
We may not be able to raise sufficient capital to fund our acquisitions
strategy
We will need to raise significant capital to consummate and to fund our
acquisitions strategy. We may raise further capital by selling assets, issuing
debt or equity or borrowing funds at either our level or at the level of our
subsidiaries and affiliates. We are not sure whether we will be able to raise
capital through any of
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these or other methods. If we cannot, we may not be able to grow by acquiring
systems as we intend. In addition, our acquisitions strategy exposes us to the
risk of unanticipated expenditures. For example, we may be liable for
liabilities not disclosed to us in the purchase of such businesses, or we may
have to incur greater capital expenditure than we intended, in relation to a
particular acquisition.
We cannot be certain that we will be successful in integrating acquired
businesses into ours
Our success depends, in part, upon the successful integration of the new
acquisitions and any future acquisitions we make. Although we believe that the
consummation of the new acquisitions will result in significant benefits and
synergies, the integration of these businesses will also present significant
challenges, including:
. realizing economies of scale in interconnection, programming and network
operations, and eliminating duplicate overheads, and
. integrating networks, financial systems and operational systems.
We cannot assure you that, with respect to our recent acquisitions, as well
as future acquisitions, that we:
. will realize any anticipated benefits, or
. will successfully integrate any acquired business with our operations.
Failure to raise necessary capital could restrict the development of our
network and the introduction of new services
The video, telephone and Internet data businesses are capital intensive
because they require extensive telecommunications infrastructure, equipment
and labor; we may not have access to sufficient capital to remain competitive.
Lack of capital could harm our business.
Many of our operating companies are expanding and upgrading their networks
to offer new services. Technological change may make even more upgrades
necessary if our operating companies are to compete effectively in their
markets. Our financial resources, even with the proceeds from this offering,
may not be enough for our capital needs. Also, we plan that equipment vendors
will finance a good part of the cost of the equipment for our new services.
This vendor financing is not yet in place. We may not be able to secure vendor
financing on satisfactory terms, if at all. Not upgrading our operating
systems or making other planned capital expenditures could harm our operations
and competitive position.
UPC's recent acquisition of @Entertainment exposes it to a number of risks
As a result of UPC's acquisition of @Entertainment, it became subject to a
number of risks, including:
. Compliance with foreign ownership and change of control rules. Under the
Polish Communications Act of 1990 (the "Polish Telecommunications Act"),
permits for cable television operators may be issued only to residents in
Poland or companies in which foreign persons do not hold more than 49% of
the share capital and voting rights, and in which the majority of members
of the governing bodies are Polish citizens residing in Poland.
@Entertainment believes that the current ownership structure of PTK
Operator Sp. zo.o., its licensee company, is in material compliance with
Polish foreign ownership rules. However, certain aspects of this
structure have not been tested for compliance with Polish foreign
ownership rules in Polish administrative or court proceedings, and there
can be no assurance that such
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structure will not be challenged by Polish telecommunications regulatory
authorities. If such ownership structure was found to be in breach of
Polish foreign ownership rules, this could result in the cancellation of
@Entertainment's permits and the imposition of monetary penalties. In
addition, under the Polish Telecommunications Act, @Entertainment's
permits could be revoked or limited in scope upon a direct or indirect
change of control of PTK Operator Sp. zo.o. The Polish Telecommunications
Act does not define what constitutes a direct or indirect change of
control. There is a risk that UPC's acquisition of @Entertainment
constituted an indirect change of control of PTK Operator Sp. zo.o.
. Operating without necessary permits. @Entertainment is currently
operating in certain areas without the permits necessary for the
construction and operation of a cable television network issued by the
Polish State Agency for Radio Communications (the "PAR"). Failure to
obtain these permits could lead to governmental orders requiring
@Entertainment to stop operating in those areas, the imposition of
monetary penalties, and forfeiture of UPC's cable networks. In addition,
failure to be in compliance with all regulatory laws and licensing
requirements could result in @Entertainment being in breach under a
number of its operating agreements. In order to obtain new permits from
the PAR, @Entertainment must show, among other things, that it is in
compliance with Polish foreign ownership restrictions. @Entertainment's
operation without requisite permits could impair its ability to obtain
new permits in the future, renew current licenses and conduct its
business. There can be no assurance that PAR will issue any or all of
these permits.
. Arbitration with Canal+. @Entertainment is engaged in arbitration with
Telewizyna Korporacja Partycypacyjna ("TKP"), the company that broadcasts
Canal+ Polska, in relation to a letter of intent to form a joint venture
for the purpose of creating a joint DTH platform. The arbitration arises
from the failure of the parties to reach definitive agreements
contemplated by the letter of intent by the date required. As a result of
this, @Entertainment terminated the letter of intent. TKP and its
shareholders have informed @Entertainment that they believe
@Entertainment did not have the right to terminate the letter of intent
and that they believe that the failure to reach the definitive agreements
resulted from a breach of the letter of intent by @Entertainment. If this
arbitration is determined in a manner adverse to @Entertainment,
@Entertainment may be liable for damages up to $10.0 million, plus
interest and costs.
. Polish Regulation of the DTH Market. The Polish Radio and Television Act
of 1992 (the "Television Act") does not include regulations directly
applicable to the broadcasting of programs which are broadcast from
abroad and received in Poland. Specifically, there are no Polish
regulations in force concerning satellite broadcasting of a program
dedicated to a Polish audience where the uplink for the broadcasting of
such a program is made by a foreign broadcaster from outside Poland.
@Entertainment believes that the Television Act does not apply to such
broadcasting from outside Poland and that such activity is not subject to
Polish broadcasting requirements. The Polish National Radio and
Television Council, which, among other things, regulates the broadcasting
operations of broadcasters, has not officially adopted an interpretation
of this issue and there have been no court rulings on this issue. If
@Entertainment's interpretation were successfully challenged, its DTH
broadcasts from outside Poland would be required to comply with the
requirements of the Television Act. The Television Act would require a
broadcasting license and would impose foreign ownership restrictions. We
cannot assure you that @Entertainment would be able to comply with these
requirements. In addition, Poland has not currently sought to regulate
foreign DTH broadcasters that uplink outside of Poland. There can be no
assurances, however, that Poland will not seek to regulate this aspect of
the DTH industry.
. Minority shareholder litigation. In July 1999, certain minority
shareholders of a third-tier @Entertainment subsidiary filed a lawsuit
naming nine defendants, including @Entertainment and some of its
subsidiaries. The plaintiffs collectively own approximately 1.7% of the
third-tier subsidiary. The plaintiffs, relying upon a shareholders'
agreement, allege various breaches of duty by the defendants. The lawsuit
seeks damages in the amount of 1.7% of the amount UPC paid for
@Entertainment. Minority shareholders who own approximately 6.0% of the
third-tier subsidiary have made similar claims but have not filed suit.
Based on the damages claimed in the suit that has been filed, the total
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potential liability against UPC is approximately 7.7% of the amount UPC
paid for @Entertainment. We cannot assure that UPC or @Entertainment will
successfully be able to defend against these claims.
. DTH business risks. @Entertainment's DTH business depends on its ability
to broadcast using satellites. Satellites are subject to significant
risks that may prevent or impair proper commercial operations, including
satellite defects, destruction and damage. If one or more of its
transponders fails to operate, @Entertainment would not be able to pre-
empt any other transponder customer. @Entertainment does not insure
against possible interruption of access to transponders. Philips Business
Electronics B.V. has had difficulties delivering DTH reception systems on
schedule. Significant continued delays could harm the development and
operation of @Entertainment's DTH service. The encryption technology used
with @Entertainment's DTH system to prevent signal theft or "piracy," may
not remain effective. If the encryption technology is compromised in a
manner which is not promptly corrected, @Entertainment's business may
suffer.
The multi-channel television, telephone and Internet/data business is capital
intensive because it requires expensive telecommunications infrastructure,
equipment and labor; we may not have, or have access to, sufficient capital to
remain competitive
The development, construction and operation of multi-channel television,
telephone and Internet/data systems require substantial capital investment. It
requires constructing telecommunications infrastructure by laying cable over
great distances, as well as expensive labor and equipment. In addition, many of
our operating companies are expanding and upgrading their respective networks
to increase channel capacity and to be able to offer additional services. For
example, some of our operating companies are upgrading their existing one-way
video distribution infrastructure to full two-way capability. In some systems
we are buying equipment to offer telephone service. As technology changes in
the multi-channel television, telephone and Internet/data industry, we may need
to make additional system upgrades to compete effectively in our markets beyond
what we currently plan. We may not have enough capital available from cash on
hand, existing credit facilities and cash to be generated from operations for
our future capital needs. Our inability to continue upgrading our networks or
to make our other planned or unplanned capital expenditures could adversely
affect our operations and competitive position.
To the extent we pursue new acquisition or development opportunities, we or
our subsidiaries or other affiliates would likely need to raise additional
capital through asset sales, issuances of debt or equity securities or through
operating company borrowings in addition to the significant amounts we have
raised to consummate recent acquisitions. This could increase our leverage. We
may not be able to raise additional capital through any of these methods.
We expect to continue to experience net losses for the next several years
We have experienced significant losses every year since we started business.
As of December 31, 1998 we had an accumulated deficit of approximately $1.2
billion and expect to have continued losses. We had net losses of approximately
$91.3 million, approximately $138.8 million, approximately $342.5 million, and
approximately $545.5 million for fiscal years ended February 29, 1996, February
28, 1997, February 28, 1998 and the ten months ended December 31, 1998,
respectively. We expect to incur substantial additional losses for the
indefinite future. Continuing net operating losses could materially harm our
results of operations and increase our need for additional capital in the
future. See "--The multi-channel television, telephone and Internet/data
business is capital intensive because it requires expensive telecommunications
infrastructure, equipment and labor; we may not have, or have access to,
sufficient capital to remain competitive."
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The loss of key personnel could weaken our technological and operational
expertise, delay the introduction of our new business lines and lower the
quality of our service
Our success and our growth strategy depends, in large part, on our ability
to attract and retain key management, marketing and operating personnel, both
at the corporate and operating company levels. Retaining a successful
international management team may be particularly difficult because key
employees may be required to live and work outside of their home countries and
because experienced local managers are often unavailable. We may not be able to
attract and retain the qualified personnel we need for our business.
We are exposed to numerous risks inherent to foreign investment
We operate our businesses outside of the United States. Risks inherent in
foreign operations include loss of revenue, property and equipment from
expropriation, nationalization, war, insurrection, terrorism, general social
unrest and other political risks, currency fluctuations, risks of increases in
taxes and governmental royalties and fees and involuntary renegotiation of
contracts with foreign governments. We are also exposed to the risk of changes
in foreign and domestic laws and policies that govern operations of foreign-
based companies. In addition, our operations have been, and in the future may
be, adversely affected by downturns in global economic conditions. In recent
times, the economies of many of our markets, especially in emerging markets
such as Eastern Europe and Latin America, have not been as strong as the United
States' economy. Downturns in these economies could hurt our revenues and
profitability.
We are exposed to significant foreign currency exchange rate and conversion
risk against which we generally do not hedge
Our operating companies have attempted, and will continue to attempt, to
match costs with revenues and borrowings with repayments in terms of their
respective local currencies. However, payment for a majority of purchased
equipment has been, and may continue to be, required to be made in United
States dollars. In addition, the value of our investment in an operating
company is partially a function of the currency exchange rate between the
dollar and the applicable local currency. In general, we and many of our
operating companies do not execute hedge transactions to reduce our exposure to
foreign currency exchange rate risks. Accordingly, we may experience economic
loss and reduced earnings solely as a result of foreign currency exchange rate
fluctuations. For the years ended February 28, 1997 and 1998, the ten months
ended December 31, 1998 and the nine months ended September 30, 1999 we had
foreign exchange gains (losses) of approximately ($0.3) million, approximately
($1.4) million, approximately $1.6 million and approximately ($24.8) million,
respectively. We also experienced a change in cumulative translation
adjustments (resulting in decreases of stockholders' equity) of approximately
$8.4 million and approximately $50.3 million for the years ended February 28,
1997 and 1998, respectively, and approximately $24.7 million and approximately
$104.5 million for the ten months ended December 31, 1998 and the nine months
ended September 30, 1999, respectively.
Some of our operating companies have notes payable and notes receivable that
are denominated in currencies other than their own functional currency or loans
linked to the dollar. We may also experience economic loss and reduced earnings
related to these monetary assets and liabilities.
Adverse regulation to our multi-channel television, telephone or Internet/data
services could limit our revenues and growth plans and expose us to various
penalties
Our businesses are subject to governmental regulation, which may change from
time to time. Regulation could slow the introduction of our new services.
Changes in applicable laws and regulations could increase our costs. We cannot
assure you that material and adverse changes in the regulation of our existing
operating systems will not occur in the future. Regulation can take the form of
price controls, service requirements, programming content restrictions and
foreign ownership restrictions, among others. Delays in obtaining any required
regulatory approvals could hurt our ability to offer some or all of our
proposed range of services in some of our markets.
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As European Union ("EU") member states, Austria, The Netherlands, Belgium and
France are required to enact national legislation which implements directives
issued by the EU Commission and other EU bodies. Although not an EU member
state, Norway has generally implemented the same principles on the same
timetable as EU member states. As a result of EU directives, our Western
European operating companies may establish and provide telecommunications
networks and/or services, including public voice telephone and Internet/data
services, through their cable networks. The EU Commission has started to review
the consequences of the convergence of telecommunications, media and
information technology. This review may result in changes in the current
regulatory framework that may harm our business. Additionally, if any of our
operating companies in the EU with exclusive rights to cable television
infrastructure achieves annual revenue of more than (Euro)50 million, it must
account separately for its telecommunications services and any
cable television services. A draft EU Commission directive, if issued, will
require member states to enact legislation directing incumbent
telecommunications operators to separate their cable television and
telecommunications operations into distinct legal entities. This may increase
our competition as incumbents focus on specific services. In addition, certain
countries may impose interconnect obligations and other regulatory controls
with respect to the telecommunications services our operating systems offer.
The primary goal of regulation in the telecommunications sectors in many of
the countries in which we operate is to reduce the monopoly power of incumbent
telecommunications operators. While this has given us the opportunity to enter
the telephone and Internet/data services markets, the regulatory regimes
present some risks. Our operating companies need to retain and obtain licenses
and other regulatory approvals for our existing and new services. There is a
risk we may not succeed in obtaining and retaining such licenses, and there may
be long delays and adverse conditions in connection with them. The regulatory
process may be time-consuming and may impede our ability to offer new services
and to obtain interconnect arrangements with incumbent telecommunications
operators in a timely manner or on favorable terms. Our ability to compete
against large incumbent telecommunications operators depends on the regulation
of their pricing and service offerings to end-users and interconnected
carriers, which may be or become unfavorable to us. New laws and regulations
related to electronic commerce and the Internet could delay and impair our
Internet business. New and existing laws may cover issues such as:
. sales and other taxes,
. user privacy,
. pricing controls,
. characteristics and quality of products and services,
. consumer protection,
. cross-border commerce,
. libel and defamation,
. copyright and trademark infringement, and
. other claims based on the nature and content of Internet materials.
Our ability to offer telephone services depends on having interconnect
arrangements with other telephone providers
In the markets where we offer telephone services we compete with the
incumbent telecommunications operators. All of these operators are more
established and have more resources in their respective markets than we do. To
offer telephone service effectively, we must be able to interconnect with their
systems so that our customers can call customers served by those operators.
Regulatory frameworks in some countries in which we operate may not include the
requirement that other telephone providers interconnect with us. In such cases,
we may be unable to provide telephone service. In addition, if we are able to
interconnect, we may be unable to obtain interconnection on terms that are
acceptable to us.
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Changes in technology may limit the competitiveness of our new services;
sufficient demand may not develop for our new services
Technology in our multi-channel television and telecommunications services
industry is changing rapidly. This influences the demand for our products and
services. Our ability to anticipate changes in technology and regulatory
standards and to develop and introduce new and enhanced products successfully
on a timely basis will affect our ability to continue to grow and to remain
competitive. Upon completion of the upgrade of some of our systems, we intend
to offer a range of new services in those systems' markets. For example, we
plan to provide additional channels and tiers of premium channels beyond our
basic package, impulse pay-per-view services, high-speed data services,
Internet access and telephone services. We may not be able to implement the
technological advances that may be necessary for us to remain competitive. We
are also subject in all of our markets to the risks generally associated with
new product introductions and applications. These risks include lack of market
acceptance, delays in development and failure of new products to operate
properly or meet customer expectations. There is no proven market for some of
the advanced services we refer to above. There may not be sufficient demand for
our telephone, Internet/data and other enhanced services.
Computer systems may malfunction and interrupt our operating systems and our
services if they do not achieve Year 2000 readiness
Our cable television, programming, telephone and Internet/data operations
are heavily dependent upon computer systems and other technological devices
with imbedded chips. Such computer systems and other technological devices may
not be capable of accurately recognizing dates beginning on January 1, 2000.
This problem could cause miscalculations, resulting in our cable television,
telephone and Internet/data systems or programming services malfunctioning or
failing to operate. These problems are generally expected to be more
significant outside the United States, particularly in Eastern Europe.
In response to possible Year 2000 problems, our Board of Directors
established a task force to assess the impact that potential Year 2000 problems
may have on company-wide operations, and to implement necessary changes to
address such problems. The task force has developed a program to minimize Year
2000 problems.
Some of our critical operations depend on other companies and we believe
that our largest Year 2000 risk is our dependence upon third-party products.
Two significant areas in which our systems depend upon third-party products are
programming and telephone interconnections. We do not have the ability to
control third parties in their assessment and remediation procedures for
potential Year 2000 problems. Should these parties not be prepared for Year
2000, their systems may fail and we would not be able to provide our services
to our customers. Notwithstanding these limitations, the task force monitors
the websites for all vendors used by us, to the extent applicable, for
information on such vendors' Year 2000 programs. To the extent applicable, the
task force uses such information to verify Year 2000 compliance and to
implement remediation procedures. We also have requested information from
various third parties on the state of their Year 2000 compliance programs in an
effort to prevent any possible interruptions or failures. To date, responses by
programming vendors to such communications have been limited. The responses
received state only that the party is working on Year 2000 issues and does not
have a definitive position at this time. As a result, we are unable to assess
the risk posed by our dependence upon such third parties' systems. Vendors for
critical equipment components, such as the headend controllers, have been more
responsive, and we believe substantially all of our equipment will be Year 2000
compliant. We cannot, however, give any assurances concerning compliance of
equipment because such belief is based on information provided by vendors,
which cannot be independently verified, and because of the uncertainties
inherent in Year 2000 remediation. We have already considered certain limited
contingency plans, including preparing back-up programming and stand-by power
generators. These may not be sufficient, however, to prevent interruptions on
our systems. If we or other companies on whom we depend fail to implement Year
2000 procedures on time, our business, operating results and financial
condition could be significantly harmed.
S-17
<PAGE>
The task force is also including our subsidiaries' minority investments in
its program. No assurance can be given, however, that these entities will
implement the recommendations of the task force or otherwise be Year 2000
compliant.
The task force is not able to determine the full cost of its Year 2000
program and its related impact on our financial condition. In the course of our
business, we have made substantial capital investments over the past few years
in improving our systems, primarily for reasons other than Year 2000. Because
the systems' upgrades also result in Year 2000 compliance, replacement and
remediation costs have been low. Based on the task force review to date, we
currently estimate that these costs will be approximately $7.3 million. No
assurance can be made, however, as to the total cost for our Year 2000 program
until all of the data has been gathered. In addition, we cannot predict the
financial impact we will experience if Year 2000 problems are caused by third
parties upon which our systems are dependent or experienced by entities in
which we hold investments. The failure of any one of these parties to implement
Year 2000 procedures could have a material adverse impact on our operations and
financial condition.
Customers may not want our video services if we cannot obtain attractive
programming
Our success depends on obtaining or developing affordable and popular
programming for our video subscribers. We may not be able to obtain or develop
enough competitive programming to meet our needs. This would reduce demand for
our video services, limiting their revenues. We rely on other programming
suppliers for almost all of our programming. In some of our markets, including
Eastern Europe, there is only a limited amount of local language programming
available. In these markets we must repackage other programming in the local
language.
We may be limited in claiming foreign tax credits; we do business in countries
that do not have tax treaties with the United States
In general, a United States corporation may claim a foreign tax credit
against its United States federal income tax expense for foreign income taxes
paid or accrued. A United States corporation may also claim a credit for
foreign income taxes paid or accrued on the earnings of a foreign corporation
paid to the United States corporation as a dividend. Because we must calculate
our foreign tax credit separately for dividends received from certain of our
foreign subsidiaries from those of other foreign subsidiaries and because of
certain other limitations, our ability to claim a foreign tax credit may be
limited. We own operating companies located in countries with which the United
States does not have income tax treaties. Because we lack treaty protection in
these countries, we may be subject to high rates of withholding taxes on
distributions and other payments from these operating companies and may be
subject to double taxation on their income. Limitations on our ability to claim
a foreign tax credit, our lack of treaty protection in some countries, and our
inability to offset losses in one foreign jurisdiction against income earned in
another foreign jurisdiction could result in a high effective United States
federal tax rate on our earnings.
We expect to encounter increased competition
The multi-channel television and telephone industries in many of the markets
in which we operate are competitive and often are rapidly changing. We
recognize that in the future we are likely to encounter increased competition
as new entrants with competing technologies, including but not limited to, DTH,
satellite master antenna television, MMDS and local multipoint distribution
service, enter our markets and launch new services. Multi-channel television
also competes with the direct reception of broadcast television signals and, in
varying degrees, with other communications and entertainment media. The success
of our existing operating systems is dependent, in part, on our ability to
provide services and programming not otherwise available to subscribers. We may
also have to compete initially in certain areas with unlicensed operators. In
many of our markets, we compete with other multi-channel television and
telephone operators, many of which have substantially more resources than us.
S-18
<PAGE>
Some potential losses may not be covered by insurance
Our operating companies obtain insurance of the type and amount customary
for the property in their systems. Consistent with industry practice in the
United States, however, they do not insure the entire cable portion of their
multi-channel television, Internet/data or telephone systems. Should a
catastrophe occur that affects a significant portion of their systems, they
could incur substantial uninsured losses.
The complexities of our operating systems, large numbers of customers and rapid
growth could disrupt our operations and harm our financial condition
We may not have planned for or be able to overcome all of the problems in
introducing our new local telephone and Internet/data services. Our new
services may not meet our performance expectations. This would impede our
planned revenue growth and materially harm our financial condition. Problems
with the existing or new systems could delay the introduction of the new
services, increase their costs, or slow down successful marketing. We cannot be
sure whether our Internet access business will be able to handle a large number
of online subscribers at high data transmission speeds. As the number of
subscribers goes up, we may have to add more fiber connection points in order
to maintain high speeds. This would require more capital, which we may be
unable to raise. If we cannot offer high data transmission speeds, customer
demand for our Internet/data services would go down. This would harm our
Internet/data business, our operating results and our financial condition. We
have not yet tested the technology we plan to use for telephone services for
the numbers of subscribers we expect. It may not function successfully at these
scales. This would harm our telephone operations. We plan to use back-up
batteries for our cable phones for operation during power failures. These may
run out in prolonged power failures. This would interrupt the service and could
lead to customer dissatisfaction. We may not be able to manage our growth
effectively, which would harm our business, operating results and financial
condition.
We are establishing customer care facilities in our relevant markets to
support the launch of our telephone and other new services. We may not be able
to establish well-running facilities staffed with appropriate personnel. This
could harm the introduction of our new services.
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<PAGE>
USE OF PROCEEDS
Excluding $17.5 million to be deposited by the purchasers into the
Securities Accounts ($20.1 million if the underwriters' overallotment option is
exercised in full), the net proceeds, after expenses, from this offering are
estimated to be $722.6 ($831.2 if the underwriters' overallotment option is
exercised in full). We intend to use the net proceeds for general corporate
purposes, which may include acquisitions, investment in our existing or new
businesses, payment of indebtedness and other obligations and working capital.
Pending such uses, we plan to invest such proceeds in short-term, income
producing investments.
PRICE RANGE OF OUR CLASS A COMMON STOCK
Our Class A common stock trades on the Nasdaq National Stock Market under
the symbol "UCOMA." The following table shows the range of high and low sales
prices reported on the Nasdaq National Stock Market for the periods indicated:
<TABLE>
<CAPTION>
High Low
------ ------
<S> <C> <C>
Year ended February 28, 1998:
First Quarter.............................................. $ 5.13 $ 4.13
Second Quarter............................................. $ 5.75 $ 4.88
Third Quarter.............................................. $ 6.88 $ 5.16
Fourth Quarter............................................. $ 7.28 $ 5.19
Ten months ended December 31, 1998:
First Quarter.............................................. $ 9.63 $ 7.00
Second Quarter............................................. $ 9.72 $ 5.09
Third Quarter.............................................. $ 8.44 $ 3.88
Fourth Quarter............................................. $10.25 $ 7.94
Year ending December 31, 1999
First Quarter.............................................. $33.00 $ 9.38
Second Quarter............................................. $37.56 $21.75
Third Quarter.............................................. $46.00 $32.00
Fourth Quarter (through December 1, 1999).................. $59.22 $35.50
</TABLE>
The closing price for our Class A common stock on December 1, 1999 was
$50.75.
UPC's ordinary shares are traded on the Stock Market of the Amsterdam
Exchanges and American Depositary Shares evidencing its ordinary shares are
traded on the Nasdaq National Stock Market. The following table shows the range
of high and low sales prices reported on the Nasdaq National Stock Market since
UPC's initial public offering on February 11, 1999:
<TABLE>
<CAPTION>
High Low
------- ------
<S> <C> <C>
Year ending December 31, 1999:
First Quarter (from February 12, 1999).................... $ 45.00 $31.13
Second Quarter............................................ $ 67.00 $38.88
Third Quarter............................................. $ 71.00 $56.00
Fourth Quarter (through December 1, 1999)................. $100.25 $60.50
</TABLE>
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<PAGE>
Austar United's ordinary shares are traded on the Australian Stock Exchange
Limited. The following table shows the range of high and low sales prices
reported on the Australian Stock Exchange, converted to U.S. dollars at the
September 30, 1999 exchange rate, since Austar United's initial public offering
on July 19, 1999:
<TABLE>
<CAPTION>
High Low
----- -----
<S> <C> <C>
Year ending December 31, 1999
Third Quarter (from July 19, 1999)........................... $3.79 $2.91
Fourth Quarter (through December 1, 1999).................... $3.81 $2.84
</TABLE>
CURRENCY CONVENIENCE TRANSLATION
Certain foreign currency amounts have been converted to United States
dollars based on the following September 30, 1999 exchange rates:
<TABLE>
<CAPTION>
Country Currency Per U.S. $
- ------- -------- ----------
<S> <C> <C>
Australia............................................. Dollar (A$) 1.5336
Austria............................................... Shilling (AS) 12.8720
Belgium............................................... Franc (BEF) 37.7345
Brazil................................................ Real 1.9370
Chile................................................. Peso 530.0500
Czech Republic........................................ Koruna 33.4990
ECU................................................... Euro .9355
France................................................ Franc 6.1359
Germany............................................... Deutsche Mark 1.8295
Hungary............................................... Forint 241.4700
Israel................................................ Shekel 4.2752
Malta................................................. Lira .3960
Mexico................................................ Peso 9.3700
Netherlands........................................... Guilder (NLG) 2.0614
New Zealand........................................... Dollar 1.9316
Norway................................................ Krone (NKr) 7.6742
Peru.................................................. Nuevo Sol 3.4630
Philippines........................................... Peso 40.9000
Poland................................................ Zloty 4.1002
Romania............................................... Leu 16,488.0000
Slovak Republic....................................... Koruna 40.5060
Tahiti................................................ CFP Franc 111.1042
</TABLE>
UPC's reporting currency is the Dutch guilder and Austar United's reporting
currency is the Australian dollar. On November 30, 1999, the exchange rates,
per United States dollar, of the Dutch guilder and Australian dollar were
2.1839 and 1.5738, respectively.
S-21
<PAGE>
DESCRIPTION OF COMMON STOCK
We have 210,000,000 shares of Class A common stock and 30,000,000 shares of
Class B common stock authorized. As of November 26, 1999, we had outstanding
69,931,824 shares of Class A common stock and 19,323,940 shares of Class B
common stock. These share amounts are adjusted for our two-for-one stock split
that occurred on December 1, 1999.
Our Class A common stock and Class B common stock are identical, except that
. each share of Class A common stock entitles the holder to one vote, and
each share of Class B common stock entitles the holder to ten votes, on
each matter to be voted on by our stockholders and
. each share of Class B common stock is convertible at the option of the
holder into one share of Class A common stock. Class A common stock is
not convertible into Class B common stock.
Holders of the Class A common stock and the Class B common stock vote as one
class on all matters, including the election of directors, to be voted on by
our stockholders, with certain exceptions specified by the Delaware General
Corporation Law. Holders of the Class B common stock have the power to control
all matters requiring approval of our stockholders voting as a single class.
Holders of the Class A common stock and Class B common stock are entitled to
receive ratably such dividends, if any, as are declared by our Board of
Directors out of funds legally available for that purpose. In the event of our
liquidation, dissolution or winding up, holders of Class A common stock and
Class B common stock are entitled to share ratably in all assets available for
distribution to holders of common stock. Holders of Class A common stock and
Class B common stock have no preemptive rights. Our Restated Certificate of
Incorporation provides that if there is any dividend, subdivision, combination
or reclassification of either class of common stock, a proportionate dividend,
subdivision, combination or reclassification of the other class of common stock
shall simultaneously be made.
We have appointed ChaseMellon Shareholder Services as the transfer agent and
registrar for the Class A common stock.
S-22
<PAGE>
DESCRIPTION OF THE DEPOSITARY SHARES
The summary contained herein of the terms of the Depositary Shares does not
purport to be complete and is subject to and qualified in its entirety by
reference to all of the provisions of the Deposit Agreement and the Depositary
Receipts, copies of which may be obtained from us or the Depositary at the
principal office of the Depositary at which its depositary business shall be
administered upon request.
General
Each depositary share (the "Depositary Shares") represents one-twentieth of
a share of 7% Series D Senior Cumulative Convertible Preferred Stock (the
"Preferred Stock") deposited under the Deposit Agreement, to be dated December
7, 1999 (the "Deposit Agreement"), among us, Firstar Bank of Minnesota, N.A.,
as depositary (the "Depositary"), and all holders from time to time of
depositary receipts issued thereunder (the "Depositary Receipts"). Subject to
the terms of the Deposit Agreement, each owner of a Depositary Share will be
entitled, in proportion to the applicable fraction of a share of Preferred
Stock represented by such Depositary Share, to all the rights and preferences
of the Preferred Stock represented thereby (including dividend, voting,
redemption, conversion and liquidation rights) and subject, proportionately to
all of the limitations of the Preferred Stock represented thereby, contained in
the Certificate of Designation summarized under "Description of the Preferred
Stock."
The Depositary Shares will be evidenced by Depositary Receipts issued
pursuant to the Deposit Agreement. Immediately following the issuance and
delivery of the Preferred Stock by us to the underwriters as contemplated
herein, the underwriters will deposit the Preferred Stock with the Depositary,
which will then issue the Depositary Shares to the underwriters. Depositary
Receipts will be issued evidencing only whole Depositary Shares. We intend to
make application to DTC for acceptance of all or a portion of the Depositary
Receipts for its book-entry settlement system.
Pending the preparation of definitive engraved Depositary Receipts, the
Depositary may issue temporary Depositary Receipts substantially identical to
(and entitling the holders thereof to all the rights pertaining to) the
definitive Depositary Receipts but not in definitive form. Definitive
Depositary Receipts will be prepared thereafter and will be exchangeable for
temporary Depositary Receipts at the Depositary's expense.
In our discretion, no fractional shares of Common Stock or securities
representing fractional shares of Common Stock will be issued upon conversion,
redemption, change of control or in connection with dividend payments. Any
fractional interest in a share of Common Stock will be paid in cash based on
the Closing Price of the Common Stock on the Trading Day next preceding the
date of conversion or such later time as we are legally and contractually able
to purchase such fractional shares.
We have applied for the Depositary Shares to be listed on the Nasdaq
National Stock Market under the symbol "UCOMP."
Dividends and Other Distributions
The Depositary will distribute all cash and Common Stock distributions and
other distributions received in respect of the Preferred Stock for dividends
and otherwise to the record holders of Depositary Shares in proportion to the
number of such Depositary Shares owned by such holders.
In the event of a distribution other than in cash or Common Stock, the
Depositary will distribute property received by it to the record holders of
Depositary Shares entitled thereto, unless the Depositary determines that it is
not feasible to make such distribution, in which case the Depositary may sell
such property and distribute the net proceeds from such sale to such holders.
Record Date
Whenever:
. any dividend or other cash distribution becomes payable, any distribution
other than cash is made, or any rights, preferences or privileges are at
any time offered with respect to the Preferred Stock, or
S-23
<PAGE>
. the Depositary receives notice of any meeting at which holders of
Preferred Stock are entitled to vote or of which holders of Preferred
Stock are entitled to notice or any solicitation of consents in respect
of the Preferred Stock, or any call of any Preferred Stock, or if at any
time the Depositary and we otherwise deem it appropriate,
the Depositary will in each such instance fix a record date (which shall be the
same date as the record date for the Preferred Stock) for the determination of
the holders of Depositary Receipts who are entitled to:
. receive such dividend, distribution, rights, preferences or privileges or
the net proceeds of the sale thereof;
. receive notice of, and give instructions for the exercise of voting
rights at any such meeting, or otherwise; or
. receive notice of any such call, subject to the provisions of the Deposit
Agreement.
Withdrawal of Preferred Stock
Upon surrender of the Depositary Receipts at the corporate trust office of
the Depositary, or such other office as the Depositary may designate, unless
the related Depositary Shares have been previously called for redemption, the
holder of the Depositary Shares evidenced thereby is entitled to delivery at
such office to or upon his order of the number of whole shares of Preferred
Stock and any money or other property represented by such Depositary Shares or
cash in lieu of fractional shares. Holders of Depositary Shares will be
entitled to receive whole shares of Preferred Stock on the basis of one share
of Preferred Stock for each twenty Depositary Shares, but holders of such whole
shares of Preferred Stock will not thereafter be entitled to receive Depositary
Shares in exchange therefor. If the Depositary Receipts delivered by the holder
evidence a number of Depositary Shares in excess of the number of Depositary
Shares representing the number of whole shares of Preferred Stock to be
withdrawn, the Depositary will deliver to such holder at the same time a new
Depositary Receipt evidencing such excess number of Depositary Shares. We do
not expect that there will be any public trading market for the Preferred Stock
except as represented by the Depositary Shares.
Redemption or Conversion of Depositary Shares
As described under "Description of the Preferred Stock--Optional Redemption"
and "--Conversion Rights," the Preferred Stock is subject to our right to
redeem the Preferred Stock for cash or Common Stock at any time on or after
December 31, 2002 and the holder's right at any time to convert the Preferred
Stock into Common Stock at its option. The Depositary Shares are subject to
redemption or conversion upon the same terms and conditions (including as to
notice to the owners of Depositary Shares and as to selection of Depositary
Shares to be called if fewer than all of the outstanding Depositary Shares are
to be called) as the Preferred Stock held by the Depositary using the Common
Stock received by the Depositary, except that the number of shares of Common
Stock received upon conversion of each Depositary Share will be equal to one-
twentieth of the number of shares of Common Stock received upon conversion of
each share of the Preferred Stock. To effect a conversion at the option of the
holder, a holder of Depositary Shares must deliver Depositary Receipts
evidencing the Depositary Shares to be converted, together with written notice
of conversion and a proper assignment of the Depositary Receipts to us, to any
transfer agent for the Depositary Shares, or in blank, to the Depositary or its
agent. Each optional conversion of Depositary Shares shall be deemed to have
been effected immediately prior to the close of business on the date on which
the foregoing requirements have been satisfied. To the extent that Depositary
Shares are converted into shares of Common Stock and all such shares of Common
Stock cannot be distributed to the record holders of Depositary Receipts
without creating fractional interests in such shares, we will cause the
Depositary to distribute cash to holders in lieu of fractional shares as
provided above under "Description of the Depositary Shares--General." The
amount distributed in the foregoing case will be reduced by any amount required
to be withheld by us or the Depositary on account of taxes or otherwise
required pursuant to law, regulation or court process.
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<PAGE>
Payment and Conversion
All amounts payable in cash with respect to the Depositary Shares will be
payable in United States dollars at our office or agency maintained for such
purpose with the City of New York or, at our option, payment of dividends,
Quarterly Return Amounts (as defined) and Liquidated Damages (if any) will be
made by check mailed to the holders of the Depositary Shares at their
respective addresses set forth in the register of holders of the Depositary
Shares maintained by the Transfer Agent, provided that all cash payments with
respect to Depositary Shares in global form or the holders of which have given
wire transfer instructions to us will be required to be made by wire transfer
in immediately available funds to the accounts specified by the holders
thereof.
Any payment on the Depositary Shares due on any day that is not a Business
Day need not be made on such day, but may be made on the succeeding Business
Day with the same force and effect as if made on such due date.
Voting of Preferred Stock
Upon receipt of notice of any meeting at which holders of Preferred Stock
are entitled to vote or upon receipt of any written consent to which holders of
Preferred Stock are entitled to give their consent, the Depositary will mail
the information contained in such notice of meeting or consent to the record
holders of the Depositary Shares relating to Preferred Stock. Each record
holder of such Depositary Shares on the record date (which will be the same
date as the record date of the Preferred Stock) will be entitled to instruct
the Depositary as to the exercise of the voting rights pertaining to the amount
of shares of Preferred Stock represented by such holder's Depositary Shares.
The Depositary will use best efforts insofar as practicable, to vote the amount
of shares of Preferred Stock represented by such Depositary Shares in
accordance with such instructions and we will agree to take all reasonable
action which may be deemed necessary by the Depositary in order to enable the
Depositary to do so. The Depositary will abstain from voting Preferred Stock to
the extent it does not receive specific instructions from the holders of
Depositary Shares representing Preferred Stock.
Each Depositary Share shall entitle the holder thereof to instruct the
Depositary to cast one-twentieth of a share of Preferred Stock vote on each
matter submitted to a vote of holders of Preferred Stock. See "Description of
the Preferred Stock--Voting Rights."
Amendment and Termination of the Deposit Agreement
The form of Depositary Receipt evidencing the Depositary Shares and any
provision of the Deposit Agreement may at any time be amended by agreement
between us and the Depositary. However, any amendment which materially and
adversely alters the rights of the holders of Depositary Shares (or, which
relates to or affects rights to receive dividends or distributions, or voting
or redemption rights) will not be effective unless such amendment has been
approved by the holders of at least 66 2/3% of the Depositary Shares then
outstanding. In no event may any amendment impair the right of any holder of
Depositary Receipts, subject to the conditions specified in the Deposit
Agreement, upon such surrender of the Depositary Receipts evidencing such
Depositary Shares, to receive shares of Preferred Stock or upon conversion of
the Preferred Stock represented by the Depositary Receipts, to receive shares
of Common Stock, and in each case any money or other property represented
thereby, including any accumulated dividends and return of Liquidation
Preference, except in order to comply with mandatory provision of applicable
law. Every holder of Depositary Receipts at the time any such amendment becomes
effective shall be deemed to consent and agree to such amendment and to be
bound by the Deposit Agreement.
The Deposit Agreement may be terminated by us or the Depositary only if:
. all outstanding Depositary Shares have been redeemed or converted;
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<PAGE>
. there has been a final distribution in respect of the Preferred Stock in
connection with any liquidation, dissolution or winding up of us and such
distribution has been distributed to the holders of Depositary Receipts;
or
. upon consent of holders of Depositary Receipts representing not less than
66 2/3% of the Depositary Shares then outstanding.
Whenever the Deposit Agreement has been terminated pursuant to the last
bullet point of the preceding paragraph, the Depositary will mail notice of
such termination to the record holders of all Depositary Receipts then
outstanding at least 30 days prior to the date fixed in such notice for such
termination. The Depositary may likewise terminate the Deposit Agreement if at
any time 90 days shall have expired after the Depositary shall have delivered
to us a written notice of its election to resign and a successor depositary
shall not have been appointed and accepted its appointment. If any Depositary
Receipts remain outstanding after the date of termination, the Depositary
thereafter will discontinue the transfer of Depositary Receipts, will suspend
the distribution of dividends to the holders thereof, and will not give any
further notices (other than notices of such termination) or perform any further
acts under the Deposit Agreement except as provided below and except that the
Depositary will continue to:
.collect dividends on the Preferred Stock and any other distributions with
respect thereto, and
. deliver the Preferred Stock together with such dividends and
distributions and the net proceeds of any sales of rights, preferences,
privileges or other property, without liability for interest thereon, in
exchange for Depositary Receipts surrendered.
At any time after the expiration of three years from the date of
termination, the Depositary may sell the Preferred Stock then held by it at
public or private sales, at such place or places and upon such terms as it
deems proper and may thereafter hold the net proceeds of any such sale,
together with any money and other property then held by it, without liability
for interest thereon, for the pro rata benefit of the holders of Depositary
Receipts which have not been surrendered.
We do not intend to terminate the Deposit Agreement or to permit the
resignation of the Depositary without appointing a successor Depositary.
Charges of Depositary
We will pay all transfer and other governmental charges arising solely from
the existence of the depositary arrangements. We will pay charges of the
Depositary in connection with the initial deposit of the Preferred Stock, and
any redemption of such Preferred Stock. Holders of Depositary Receipts will pay
transfer and other taxes and governmental charges and such other charges as are
expressly provided in the Deposit Agreement to be for their accounts. The
Depositary may refuse to effect any transfer of a Depositary Receipt or any
withdrawal of Preferred Stock evidenced thereby until all such taxes and
charges with respect to such Depositary Receipt or such Preferred Stock are
paid by the holder thereof.
Miscellaneous
The Depositary will forward to holders of Preferred Stock all reports and
communications from us which are delivered to the Depositary and which we are
required to furnish to the holders of Preferred Stock.
The Deposit Agreement will be governed by, and construed in accordance with,
the laws of the State of Colorado (without giving effect to principles of
conflict of law). Neither the Depositary nor us will be liable if it is
prevented or delayed by law or any circumstances beyond its control in
performing its obligations under the Deposit Agreement. Our obligations and
those of the Depositary under the Deposit Agreement will be limited to
performance in good faith of their and our duties thereunder and neither we nor
the Depositary will be obligated to prosecute or defend any legal proceeding in
respect of any Depositary Shares or Preferred Stock unless satisfactory
indemnity is furnished. They may rely on written advice of counsel or
accountants, or information provided by persons presenting Preferred Stock for
deposit, holders of Depositary Shares or other persons believed to be competent
and on documents believed to be genuine.
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<PAGE>
Resignation and Removal of Depositary
The Depositary may resign at any time by delivering to us notice of its
election to do so, and we may at any time remove the Depositary. Any such
resignation or removal of the Depositary will take effect upon the appointment
of a successor Depositary, which successor Depositary must be appointed within
45 days after delivery of the notice of resignation or removal and must be a
bank or trust company having its principal office in the United States and
having a combined capital and surplus of at least $50.0 million.
Book Entry; The Depository Trust Company
The Depository Trust Company ("DTC") will act as securities depository for
the Depositary Shares offered hereby. The Depositary Shares will be issued only
as fully registered securities registered in the name of Cede & Co. (as nominee
for DTC). One or more fully registered global securities will be issued,
representing in the aggregate the total number of shares of Depositary Shares,
and will be deposited with DTC (collectively, the "Global Securities").
The laws of some jurisdictions require that certain purchasers of securities
take physical delivery of securities in definitive form. Such laws may impair
the ability to transfer beneficial interests in Depositary Shares represented
by a Global Security.
DTC is a limited-purpose trust company organized under the New York Banking
Law, a "banking organization" within the meaning of the New York Banking Law, a
member of the Federal Reserve System, a "clearing corporation" within the
meaning of the New York Uniform Commercial Code and a "clearing agency"
registered pursuant to the provisions of Section 17A of the Exchange Act. DTC
holds securities that its participants ("Participants") deposit with DTC. DTC
also facilitates the settlement among Participants of securities transactions,
such as transfers and pledges, in deposited securities through electronic
computerized book-entry changes in Participants' accounts, thereby eliminating
the need for physical movement of securities certificates. Direct Participants
include securities brokers and dealers, banks, trust companies, clearing
corporations and certain other organizations ("Direct Participants"). DTC is
owned by a number of its Direct Participants and by the New York Stock
Exchange, Inc., the American Stock Exchange, Inc. and the National Association
of Securities Dealers, Inc. Access to the DTC system is also available to
others such as securities brokers and dealers, banks and trust companies that
clear through or maintain a custodial relationship with a Direct Participant,
either directly or indirectly ("Indirect Participants").
Purchasers of Depositary Shares within the DTC system must be made by or
through Direct Participants, which will receive a credit for the Depositary
Shares on DTC's records. The ownership interest of each actual purchaser of a
Depositary Share ("Beneficial Owner") is in turn to be recorded on the Direct
or Indirect Participant's records. Beneficial Owners will not receive written
confirmation from DTC of their purchases, but Beneficial Owners are expected to
receive written confirmations providing details of the transactions, as well as
periodic statements of their holdings, from the Direct or Indirect Participants
through which the Beneficial Owners purchased the Depositary Shares. Transfers
of ownership interests in the Depositary Shares are to be accomplished by
entries made on the books of Participants acting on behalf of Beneficial
Owners. Beneficial Owners will not receive certificates representing their
ownership interests in the Depositary Shares, except upon a resignation of DTC
or upon a decision by us to discontinue the book-entry system of the Depositary
Shares.
To facilitate subsequent transfers, all the Depositary Shares deposited by
Participants with DTC are registered in the name of DTC's nominee, Cede & Co.
The deposit of the Depositary Shares with DTC and their registration in the
name of Cede & Co. effect no change in beneficial ownership. DTC has no
knowledge of the actual Beneficial Owners of the Depositary Shares; DTC's
records reflect only the identity of the Direct Participants to whose accounts
such Depositary Shares are credited, which may or may not be the Beneficial
Owners. The Participants will remain responsible for keeping account of their
holdings on behalf of their customers.
S-27
<PAGE>
Conveyance of notices and other communications by DTC to Direct
Participants, by Direct Participants to Indirect Participants and by Direct
Participants and Indirect Participants to Beneficial Owners will be governed by
arrangements among them, subject to any statutory or regulatory requirements as
may be in effect from time to time.
Redemption notices with respect to the Depositary Shares shall be sent to
Cede & Co. If less than all of the Depositary Shares are being redeemed, DTC's
practice is to determine by lot the amount on the interest of each Direct
Participant in such securities to be redeemed.
Although voting with respect to the Depositary Shares is limited, in those
cases where a vote is required, neither DTC nor Cede & Co. will itself consent
or vote with respect to the Depositary Shares. Under its usual procedures, DTC
would mail an "Omnibus Proxy" (i.e., a proxy conferring on Direct Participants
the right to vote as their interests appear) to the Direct Participants as soon
as possible after the record date. The Omnibus Proxy assigns Cede & Co.'s
consenting or voting rights to those Direct Participants to whose accounts the
Depositary Shares are credited on the record date (identified in a listing
attached to the Omnibus Proxy). We believe that the arrangements among DTC,
Direct and Indirect Participants and Beneficial Owners will enable the
Beneficial Owners to exercise rights equivalent in substance to the rights that
can be directly exercised by a Direct Participant.
Cash distribution payments and distribution payments in shares of Common
Stock on the shares of Preferred Stock represented by the Depositary Shares
will be made to DTC. DTC's practice is to credit Direct Participants' accounts
on the relevant payment date in accordance with their respective holdings shown
on DTC's records unless DTC has reason to believe that it will not receive
payments on such payment date. Payments by Participants to Beneficial Owners
will be governed by standing instructions and customary practices, as is the
case with securities held for the account of customers in bearer form or
registered in "street name," and will be the responsibility of such Participant
and not of DTC or the Company, subject to any statutory or regulatory
requirements as may be in effect from time to time. Payment of distributions to
DTC is the responsibility of the Company, disbursement of such payments to
Direct Participants is the responsibility of DTC and disbursement of such
payments to the Beneficial Owners is the responsibility of Direct and Indirect
Participants.
Except as provided herein, a Beneficial Owner in the Global Securities will
not be entitled to receive physical delivery of the Depositary Shares.
Accordingly, each Beneficial Owner must rely on the procedures of DTC to
exercise any rights under the Depositary Shares, including elections as to form
of payment.
DTC may discontinue providing its services as securities depositary with
respect to the Depositary Shares at any time by giving reasonable notice to us.
Under such circumstances, in the event that a successor securities depositary
is not obtained, certificates representing the Depositary Shares will be
printed and delivered. If we decide to discontinue use of the system of book-
entry transfers through DTC (or a successor depositary), certificates
representing the Depositary Shares will be printed and delivered to the
registered holders.
The information in this section concerning DTC and DTC's book-entry system
has been obtained from sources that we believe to be reliable, but we take no
responsibility for the accuracy thereof.
S-28
<PAGE>
DESCRIPTION OF THE PREFERRED STOCK
General
Under our Second Restated Certificate of Incorporation, as amended, our
Board of Directors is authorized, without further stockholder action, to
provide for the issuance of up to 2,265,456 additional shares of preferred
stock, par value $.01 per share, in one or more series, with such voting powers
or without voting powers, and with such designations and preferences, as shall
be set forth in the resolutions providing therefor. As of November 26, 1999,
there were 116,185 shares of outstanding Series B Convertible Preferred Stock
and 425,000 shares of outstanding Series C Convertible Preferred Stock. None of
our Series A Convertible Preferred Stock is outstanding.
Each Depositary Share represents 1/20th of a share of Preferred Stock. The
holders of the Preferred Stock will have no preemptive rights with respect to
any shares of our capital stock or any of our other securities which are
convertible into or carrying rights or options to purchase any such shares. The
Preferred Stock will, when issued, be fully paid and nonassessable.
The transfer agent, registrar, redemption, conversion and dividend
disbursing agent for shares of the Preferred Stock will initially be Firstar
Bank of Minnesota, N.A. (the "Transfer Agent"). The Transfer Agent will send
notices to stockholders of any special meetings at which holders of the
Preferred Stock have the right to vote. See "--Voting Rights" below.
Set forth below is a description of the terms of the Preferred Stock and the
Deposit Account and the circumstances under which holders of shares of
Preferred Stock may be expected to receive payments from the Deposit Account.
The following summaries of the Preferred Stock and the Deposit Account do not
purport to be complete and are subject to, and qualified in their entirety by
reference to, the provisions of the Second Restated Certificate of
Incorporation, as amended, and the Securities Account Agreement (as defined
below).
Certain Definitions
"Closing Price" for each day shall be the last sales price or in case no
such reported sales take place on such day, the average of the last reported
bid and asked price, in either case on the principal U.S. national securities
exchange on which the shares of Common Stock are admitted to trading or listed,
or if not listed or admitted to trading on such exchange, the representative
closing bid price as reported by the Nasdaq National Stock Market, or if the
Nasdaq National Stock Market is no longer reporting such information, or if not
so available, the fair market price as determined, in good faith, by our Board
of Directors.
"Market Value" means, as of any date, the average of the daily Closing Price
(as defined) for the five consecutive Trading Days (as defined) ending on such
date.
"Notice Date" means the tenth day prior to a Deposit Payment Date.
"Trading Day" shall mean any business day on which the Nasdaq National Stock
Market (or any U.S. national securities exchange or quotation system on which
the Common Stock is then listed) is open for the transaction of business.
S-29
<PAGE>
Ranking
The Preferred Stock will rank senior to our Common Stock, pari passu to our
Series B Convertible Preferred Stock and Series C Convertible Preferred Stock
and senior to or pari passu with other future offerings of preferred stock.
The Certificate of Designation will provide that we may not, without the
consent of the holders of at least 66 2/3% of the outstanding shares of
Preferred Stock, authorize, create (by way of reclassification or otherwise) or
issue any class or series of our capital stock ranking senior to the Preferred
Stock ("Senior Securities") or any obligation or security convertible or
exchangeable into or evidencing a right, option or warrant to purchase shares
of any class or series of Senior Securities.
Securities Account
Simultaneously with the closing of the Offering, the purchasers of the
Depositary Shares will deposit $17.5 million into the Securities Account, and
will be entitled to a quarterly return amount from the Securities Account in an
amount equal to $0.8750 per Depositary Share (equivalent to $17.50 per share of
Preferred Stock) commencing December 31, 1999 and through and including
September 30, 2000 (the "Quarterly Return Amount"). Beginning on October 1,
2000 dividends will begin to accumulate on the Preferred Stock. We may, prior
to any date on which a Quarterly Return Amount would otherwise be payable,
deliver notice instructing the Depositary to purchase from us, for transfer to
each holder of Depositary Shares, in lieu of all or a portion of the Quarterly
Return Amount, that number of whole shares of Common Stock determined by
dividing the Quarterly Return Amount to be satisfied with shares of Common
Stock by:
(A) 97% of the Market Value of the Common Stock, if a shelf registration
statement registering the resale of such shares is effective or the
shares of Common Stock are eligible for resale pursuant to Rule 144(k)
under the Securities Act, or
(B) 93% of the Market Value of the Common Stock (clauses (A) and (B) are
collectively referred to as the "Market Value Amount")
as of the date of such notice. Any amounts remaining in the Securities Account
on September 30, 2000 after payment of all Quarterly Return Amounts will
promptly be paid to us by the Depositary.
The funds deposited in the Securities Account will be invested in U.S.
government obligations or U.S. government guaranteed obligations, which,
together with the earnings thereon will be sufficient to pay the aggregate
Quarterly Return Amounts.
Unless on or prior the Notice Date (as defined), we shall have delivered to
the Depositary a Direction Notice (as defined), the Depositary will deliver to
each holder of Depositary Shares the Quarterly Return Amount on March 31, June
30, September 30 and December 31 of each year (each such date being a "Deposit
Payment Date"), commencing on December 31, 1999 and continuing through and
including September 30, 2000 (the "Deposit Expiration Date"). If we shall have
delivered a direction notice to the Depositary (a "Direction Notice") on or
prior to the Notice Date, the Depositary shall, as instructed by us in such
Direction Notice, purchase from us, for delivery to each holder of Depositary
Shares in lieu of all or a portion of the Quarterly Return Amount on the
applicable Deposit Payment Date, that number of whole shares of Common Stock
determined by dividing such Quarterly Return Amount by the Market Value Amount
as of the Notice Date. At the written request of the Depositary, we have agreed
under the terms of the deposit agreement governing the Securities Account (the
"Securities Account Agreement") to deliver, for and on behalf of the
Depositary, the shares of Common Stock acquired by the Depositary directly to
holders of Depositary Shares.
In the event of any conversion of the Depositary Shares prior to the Deposit
Payment Date, we shall immediately after such conversion be paid any funds
remaining in the Securities Account allocable to the Depositary Shares so
converted. Such allocation shall be made pro rata based upon the number of
Depositary Shares so converted.
S-30
<PAGE>
On the Deposit Expiration Date after distributing all Quarterly Return
Amounts, the Securities Account Agreement requires the Deposit Agent to pay to
us any cash remaining in the Securities Account on such date and terminate the
Securities Account.
As a result of the foregoing, holders of Preferred Stock who have not
converted their Preferred Stock as of the Deposit Expiration Date will receive
through, and including such Deposit Expiration Date, cash distributions or
shares of Common Stock or a combination thereof in an aggregate amount or value
deemed at least equal to $3.50 for each Depositary Share ($70.00 per share of
Preferred Stock) held by such holder.
Dividends
Holders of the Preferred Stock will be entitled to receive cumulative
dividends at an annual rate of 7% of the Liquidation Preference (equivalent to
$70.00 per share of Preferred Stock or $3.50 for each Depositary Share),
payable quarterly out of assets legally available therefor on March 31, June
30, September 30 and December 31 of each year, when, as and if declared by the
Board of Directors, commencing December 31, 2000. Dividends will accumulate
from October 1, 2000. Dividends, to the extent declared by our Board, may, at
our option, be paid in cash or by delivery of fully paid and nonassessable
shares of our Common Stock or a combination thereof. Dividends will be payable
to holders of record as they appear on our stock register on such record dates,
not more than 60 days or less than 10 days preceding the payment dates thereof,
as shall be fixed by our Board of Directors. Dividends payable on the Preferred
Stock (and the corresponding Depositary Shares) for each full dividend period
will be computed by dividing the annual dividend rate by four; dividends for
any period less than a full dividend period will be computed on the basis of a
360-day year consisting of twelve 30-day months. The Preferred Stock (and the
corresponding Depositary Shares) will not be entitled to any dividends, whether
payable in cash, property or securities, in excess of the full cumulative
dividends. No interest, or sum of money in lieu of interest, will be payable in
respect of any accumulated and unpaid dividends.
If we elect to pay dividends in shares of Common Stock, the number of shares
of Common Stock to be distributed will be calculated by dividing such payment
by the Market Value Amount as of the dividend payment record date.
No dividends or distributions (other than a dividend or distribution in our
stock ranking junior to the Preferred Stock in right of payment as to dividends
and upon liquidation, dissolution or winding up) may be declared, made or paid
or set apart for payment upon any of our stock ranking junior to or pari passu
with the Preferred Stock in right of payment as to dividends, nor may any of
our stock ranking junior to or pari passu with the Preferred Stock as to
dividends or upon liquidation be redeemed, purchased or otherwise acquired for
any consideration (or any monies paid to or made available for a sinking fund
for the redemption of any shares of any such stock) by us (except by conversion
into or exchange for our stock ranking junior to the Preferred Stock as to
dividends and upon liquidation and in the case that monies for such dividends,
distributions, redemptions, purchases, or other acquisitions are derived from
the proceeds of a substantially concurrent offering of such securities) unless
full cumulative dividends have been or contemporaneously are paid or declared
and a sum sufficient for the payment thereof is set apart for such payment on
the Preferred Stock for all dividend payment periods terminating on or prior to
the date of such declaration, payment, redemption, purchase or acquisition.
Notwithstanding the foregoing, if full dividends have not been declared and
paid or set apart on the Preferred Stock and any other preferred stock ranking
pari passu with the Preferred Stock as to dividends, dividends may be declared
and paid on the Preferred Stock and such other pari passu preferred stock so
long as the dividends are declared and paid pro rata so that the amounts of
dividends declared per share on the Preferred Stock and such other pari passu
preferred stock will in all cases bear to each other the same ratio that
accrued and unpaid dividends per share on the shares of the Preferred Stock and
such other preferred stock bear to each other; provided that if such dividends
are paid in cash on the other pari passu preferred stock, dividends will also
be paid in cash on the Preferred Stock.
S-31
<PAGE>
The holders of shares of Preferred Stock (and the corresponding Depositary
Shares) at the close of business on a dividend payment record date will be
entitled to receive the dividend payment on those shares (except that holders
of shares called for redemption or conversion on a redemption or conversion
date between the record date and a date which is two days after payment of the
dividend payment date will be entitled to receive such dividend on such
redemption date as indicated under "--Optional Redemption" or such conversion
date as indicated under "--Conversion Rights," as the case may be) on the
corresponding dividend payment date notwithstanding the subsequent conversion
thereof or our default in payment of the dividend due on the dividend payment
date. Except as provided in the immediately preceding sentence and under the
heading "--Conversion Rights", we will make no payment or allowance for unpaid
dividends, whether or not in arrears, on converted shares or for dividends on
the shares of Common Stock issued upon conversion.
Our ability to declare and pay cash dividends and make other distributions
with respect to our capital stock, including the Preferred Stock (and the
corresponding Depositary Shares), is limited by provisions contained in various
financing agreements and indentures which restrict dividend payments to us by
its subsidiaries and which restrict the payment of cash dividends by us or any
of our subsidiaries on their respective equity securities. Similarly, our
ability to declare and pay dividends may be limited by applicable Delaware law.
As a result of these factors, we do not expect to pay cash dividends on the
Preferred Stock, or any Common Stock into which the Preferred Stock may be
converted, for the forseeable future. We expect Quarterly Return Amounts to be
paid in shares of Common Stock rather than in cash. See "Risk Factors--We are
restricted from paying cash dividends and from redeeming the preferred stock;
we also could be prevented from paying dividends on shares of our common
stock."
Liquidation Preference
The shares of Preferred Stock will be issued with a liquidation preference
(the "Liquidation Preference") equal to $1,000 per share (or $50 per Depositary
Share).
If upon any voluntary dissolution, liquidation or winding up of us, the
amounts payable with respect to the liquidation preference of the Preferred
Stock and any of our other shares ranking as to any such distribution pari
passu with the Preferred Stock are not paid in full, the holders of the
Preferred Stock (and corresponding Depositary Shares) and of such other shares
will share pro rata in proportion to the full distributable amounts to which
they are entitled. After payment of the full amount of the liquidating
distribution to which they are entitled, the holders of the Preferred Stock
(and corresponding Depositary Shares) will have no right or claim to any of our
remaining assets. Neither the sale of all or substantially all of our property
or business (other than in connection with the winding up of its business), nor
the merger or consolidation of us into or with any other corporation, will be
deemed to be dissolution, liquidation or winding up of us. In the event of any
voluntary or involuntary dissolution, liquidation or winding up of us, the
Deposit Agent will be required to return to the holders of the Preferred Stock
(and corresponding Depositary Shares) any funds at the time remaining in the
Deposit Account.
S-32
<PAGE>
Optional Redemption
The Preferred Stock (and corresponding Depositary Shares) are not subject to
any sinking fund or similar provisions. The Preferred Stock (and corresponding
Depositary Shares) may not be redeemed prior to December 31, 2002. On or after
December 31, 2002, the Preferred Stock (and corresponding Depositary Shares)
may be redeemed, in whole or in part, at our option, in cash, by delivery of
fully paid and nonassessable shares of Common Stock or any combination thereof,
upon not less than 20 days' notice nor more than 60 days' notice, during the
twelve-month periods commencing on December 31 of the years indicated below, at
the following redemption prices per Depositary Share, plus in each case all
accumulated and unpaid dividends to the redemption date plus any accrued but
unpaid liquidated damages:
<TABLE>
<CAPTION>
Redemption
Price per
Depositary
Year Share
---- ----------
<S> <C>
2002.............................................................. $52.00
2003.............................................................. 51.50
2004.............................................................. 51.00
2005.............................................................. 50.50
2006 and thereafter............................................... 50.00
</TABLE>
In the event that fewer than all the outstanding shares of the Preferred
Stock (and corresponding Depositary Shares) are to be redeemed, the shares to
be redeemed will be determined pro rata or by lot. If we elect to make any
redemption payments in shares of Common Stock, the number of shares of Common
Stock to be distributed will be calculated by dividing such payment by the
Market Value Amount (but for purposes of this redemption the period used in
calculating a Market Value shall mean the ten consecutive trading days ending
two days before the redemption date).
From and after the applicable redemption date (unless we are then in default
of payment of the redemption price), dividends on the shares of the Preferred
Stock (and corresponding Depositary Shares) to be redeemed on such redemption
date shall cease to accumulate, such shares shall no longer be deemed to be
outstanding, and all rights of the holders thereof as our Preferred Stock
holders (except the right to receive the redemption price and accumulated
dividend amounts and liquidation penalties, if any through the reduction date)
will cease.
If any dividends on the Preferred Stock are in arrears, no shares of the
Preferred Stock (and corresponding Depositary Shares) will be redeemed unless
all dividends in arrears are paid or all outstanding shares of the Preferred
Stock (and corresponding Depositary Shares) are simultaneously redeemed.
Voting Rights
Except as required by law, holders of the Preferred Stock (and corresponding
Depositary Shares) will have no voting rights except as set forth below. Under
Delaware law, holders of the Preferred Stock will be entitled to vote as a
class upon a proposed amendment to our certificate of incorporation or the
Certificate of Designation, whether or not entitled to vote thereon by the
Certificate of Designation, if the amendment would alter or change the powers,
preferences, or special rights of the shares of such class so as to affect them
adversely. If the dividends or Quarterly Return Amounts payable on the
Preferred Stock are in arrears for six quarterly periods, the holders of the
Preferred Stock voting separately as a class with the shares of any other
preferred stock preference securities having similar voting rights will be
entitled at the next regular or special meeting of our stockholders to elect
two directors to our Board of Directors (such voting rights will continue only
until such time as the dividend arrearage on the Preferred Stock has been paid
in full).
The affirmative vote or consent of the holders of at least 66 2/3% of the
outstanding Preferred Stock will be required for the issuance of any class or
series of our stock (or security convertible into stock or evidencing a right
to purchase any shares of any class or series of stock) ranking senior to the
Preferred Stock as to dividends, liquidation rights or voting rights and for
amendments to our Second Restated Certificate of
S-33
<PAGE>
Incorporation, as amended to date, that would affect adversely the rights of
holders of the Preferred Stock, including, without limitation,
. any increase in the authorized number of shares of all series of
preferred stock in excess of 3,000,000 shares, and
. the issuance of any shares of Preferred Stock in excess of the number of
shares of such stock authorized in the Certificate of Designation thereof
as of the date of the original issuance of the Preferred Stock.
In all such cases each share of Preferred Stock shall be entitled to one vote.
Holders of Depositary Shares will be entitled to direct voting of the shares of
Preferred Stock represented thereby.
Conversion Rights
Conversion at Option of Holders
Each outstanding share of the Preferred Stock (and corresponding Depositary
Shares) will be convertible at any time at the option of the holder thereof
into such number of whole shares of Common Stock as is equal to the Liquidation
Preference represented by such shares divided by an initial conversion price of
$63.79, equivalent to 0.7838 shares of Common Stock per Depositary Share,
subject to adjustment as described below (such price as adjusted at the time of
determination being referred to as the "Conversion Price"). We must pay all
unpaid dividends on the Preferred Stock which have accumulated since the
Deposit Expiration Date to the last quarterly dividend payment date preceding
the date of conversion in cash or by issuing that whole number of shares of
Common Stock, equal to the amount of accumulated and unpaid dividends to be
paid in Common Stock divided by the Market Value Amount as of the conversion
date, plus cash for any fractional amounts, or by any combination thereof. A
share of Preferred Stock called for redemption will be convertible into shares
of Common Stock up to and including but not after the close of business on the
second business day prior to the date fixed for redemption unless we default in
the payment of the amount payable upon redemption.
Conversion at our Option
We will have the option to convert all (but not less than all) of the shares
of Preferred Stock into shares of Common Stock at the then Conversion Price,
together with a payment equal to the sum of all accumulated but unpaid
dividends or Quarterly Return Amounts or liquidated damages, if any, through
the conversion date if, on or after, December 31, 2002, the Closing Price of
our Common Stock has equaled or exceeded 130% of the Conversion Price for at
least 20 Trading Days within any 30 consecutive Trading Days ending within 5
days of the date on which notice of the exercise of the conversion option is
given. We may effect this payment, at our option, in cash or by delivery of
fully paid nonassessable shares of Common Stock by issuing that whole number of
shares of Common Stock equal to the amount of such payment divided by the
Market Value Amount, as of the conversion date or by any combination thereof.
We will also have the option to convert all (but not less than all) of the
shares of Preferred Stock into shares of Common Stock at the then Conversion
Price, plus we must pay accumulated and unpaid dividends or Quarterly Return
Amounts or liquidated damages, if any, whether or not declared, to the
conversion date (the "Provisional Conversion Date"), on or after June 30, 2001,
(the "Provisional Conversion"), if the closing price of the Common Stock has
equaled or exceeded 150% of the Conversion Price for at least 20 Trading Days
within any 30 consecutive Trading Day period (which 30 consecutive Trading Day
period shall end no earlier than June 30, 2001) ending within 5 days of the
date on which notice of the exercise of the conversion option is given. If we
undertake a Provisional Conversion, holders of Preferred Stock to whom we give
notice of such Provisional Conversion, will, in addition to the shares of
Common Stock which they will receive pursuant to the preceding sentence, also
receive a payment (the "Additional Payment") in an amount equal to the present
value of the aggregate amount of the dividends that would thereafter have been
payable on the Preferred Stock (whether or not declared) from the Provisional
Conversion Date to December 31, 2002 (the "Additional Period"). The present
value will be calculated using as the discount rate the bond equivalent yield
on U.S. Treasury notes or bills having a term nearest in length to that of the
Additional Period, calculated as of
S-34
<PAGE>
the day immediately preceding the date on which a notice of Provisional
Conversion is mailed. We may effect payment of accumulated and unpaid dividends
or Quarterly Return Amount or liquidated damages or the above-described
additional payments, at our option, in cash or by delivery of fully paid
nonassessable shares of Common Stock by issuing that whole number of shares of
Common Stock equal to the amount of such payment divided by the Market Value
Amount as of the conversion date or by any combination thereof.
Notwithstanding the foregoing, we may not effect these conversions into
Common Stock at any time unless (1) such shares of Common Stock are eligible
for resale pursuant to Rule 144(k) under the Securities Act, or (2) a
registration statement relating to the resale of the shares of Common Stock
issuable upon such conversions is effective.
Upon the occurrence of an event specified above giving rise to our right to
cause a conversion of the Preferred Stock, and for so long as the conditions
giving rise to such right are continuing or within 10 days after the occurrence
thereof, if we elect to convert shares of Preferred Stock to Common Stock we
must give to holders of Preferred Stock a notice specifying:
.the date of such conversion (which date shall be the date of such notice);
.the Closing Price of the Common Stock as of the date of such notice;
. a statement that we are exercising our right to cause the mandatory
conversion and a brief description of the provisions of the Preferred
Stock conferring such right upon us;
.a brief summary of any transfer restrictions on the shares of Common Stock
issuable upon conversion;
.the approximate date and manner upon which shares of Common Stock will be
made available;
.the Conversion Price as of the date of the notice;
. the amount of accumulated but unpaid dividends, liquidated damages and
Quarterly Return Amounts, if any; and
. a statement that unless we default in delivery of the shares of Common
Stock into which such Preferred Stock has been converted, holders rights
as Preferred Stockholders shall cease as of the date of such notice and
holders shall thereafter have all rights as other holders of Common
Stock.
Conversion Price Adjustment
The Conversion Price is subject to adjustment (in accordance with formulas
set forth in the Certificate of Designation) in certain events, including:
. any payment of a dividend (or other distribution) payable in shares of
Common Stock to all holders of any class of our capital stock (other than
the issuance of shares of Common Stock in connection with the payment of
dividends on, redemption of or the conversion of the Preferred Stock or
any preferred stock pari passu to the Preferred Stock),
. any issuance to all holders of shares of Common Stock of rights, options
or warrants entitling them to subscribe for or purchase shares of our
Common Stock or securities convertible into or exchangeable for shares of
Common Stock at less than Market Value as of the date of conversion or
exchange; provided, however, that no adjustment shall be made with
respect to such a distribution if the holder of shares of Preferred Stock
would be entitled to receive such rights, options or warrants upon
conversion at any time of shares of Preferred Stock into Common Stock;
and, provided further, that if such rights, options or warrants are only
exercisable upon the occurrence of certain triggering events, then the
Conversion Price will not be adjusted until such triggering events occur,
. any subdivision, combination or reclassification of any class of Common
Stock,
. any distribution consisting exclusively of cash (excluding any cash
distribution upon a merger or consolidation to which the second
succeeding paragraph applies) to all holders of shares of Common Stock in
an aggregate amount that, combined together with:
(A) all other such all-cash distributions made within the then-preceding
12 months in respect of which no adjustment has been made, and
S-35
<PAGE>
(B) any cash and the fair market value of other consideration paid or
payable in respect of any tender offer by us or any of our
subsidiaries for shares of Common Stock concluded within the then-
preceding 12-months in respect of which no adjustment has been made,
exceeds 12.5% of our market capitalization (defined as the product of the
then-current market price of the Common Stock times the number of shares
of Common Stock then outstanding) on the record date of such
distribution,
. the completion of a tender or exchange offer made by us or any of our
subsidiaries for shares of any class of Common Stock that involves an
aggregate consideration that, together with:
(A) any cash and other consideration payable in a tender or exchange
offer by us or any of our subsidiaries for shares of any class of
Common Stock expiring within the then-preceding 12-months in respect
of which no adjustments have been made, and
(B) the aggregate amount of any such all-cash distributions referred to
in the preceding bullet point to all holders of shares of Common
Stock within the preceding 12-months in respect of which no
adjustments have been made,
exceeds 12.5% of our market capitalization just prior to the expiration
of such tender offer, or
. a distribution to all holders of Common Stock consisting of evidence of
indebtedness, shares of capital stock other than Common Stock or assets
(including securities, but excluding those dividends, rights, options,
warrants and distributions referred to above).
No adjustment of the Conversion Price will be required to be made until the
cumulative adjustments (whether or not made) amount to 1.0% or more of the
Conversion Price as last adjusted. We reserve the right to make such reductions
in the Conversion Price in addition to those required in the foregoing
provisions as we consider to be advisable in order that any event treated for
Federal income tax purposes as a dividend of stock or stock rights will not be
taxable to the recipients. In the event we elect to make such a reduction in
the Conversion Price, we will comply with the requirements of Rule 14e-1 under
the Exchange Act, and any other securities laws and regulations thereunder if
and to the extent that such laws and regulations are applicable in connection
with the reduction of the Conversion Price.
In the event that we distribute rights or warrants (other than those
referred to in the second bullet point in the preceding paragraph) pro rata to
all holders of Common Stock, so long as any such rights or warrants have not
expired or been redeemed by us, the holder of any Preferred Stock surrendered
for conversion will be entitled to receive upon such conversion, in addition to
the shares of Common Stock then issuable upon such conversion (the "Conversion
Shares"), a number of rights or warrants to be determined as follows:
. if such conversion occurs on or prior to the date for the distribution to
the holders of rights or warrants of separate certificates evidencing
such (the "Distribution Date"), the same number of rights or warrants to
which a holder of a number of shares of Common Stock equal to the number
of Conversion Shares is entitled at the time of such conversion in
accordance with the terms and provisions applicable to the rights or
warrants, and
. if such conversion occurs after such Distribution Date, the same number
of rights or warrants to which a holder of the number of shares of Common
Stock into which such Preferred Stock was convertible immediately prior
to such Distribution Date would have been entitled on such Distribution
Date in accordance with the terms and provisions of and applicable to the
rights or warrants. In the event the holders of the Preferred Stock are
not entitled to receive such rights or warrants, the Conversion Price
will be subject to adjustment upon any declaration or distribution of
such rights or warrants.
In case of any reclassification, consolidation or merger of us with or into
another person or any merger of another person with or into us (with certain
exceptions), or in case of any sale, transfer or conveyance of all or
substantially all of our assets (computed on a consolidated basis), each share
of Preferred Stock then outstanding will, without the consent of any holder of
Preferred Stock, become convertible only into the kind
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and amount of securities, cash and other property receivable upon such
reclassification, consolidation, merger, sale, transfer or conveyance by a
holder of the number of shares of Common Stock into which such Preferred Stock
was convertible immediately prior thereto, after giving effect to any
adjustment event; provided, however, that the adjustments described below may
apply upon the occurrence of a change of control.
In the case of any distribution by us to our stockholders of substantially
all of our assets, each holder of Preferred Stock (and corresponding
Depositary Shares) will participate pro rata in such distribution based on the
number of shares of Common Stock into which such holders' shares of Preferred
Stock would have been convertible immediately prior to such distribution,
unless the amount of such distribution would result in a payment less than the
Liquidation Preference, in which case the Liquidation Preference shall be
paid.
Notwithstanding the foregoing, upon a Change of Control (as defined below),
if the Market Value at such time is less than the Conversion Price, then the
Conversion Price will be subject to a temporary adjustment for a period of 60
days such that the Conversion Price will be equal to the greater of:
. the Market Value on the date on which a Change of Control event occurs,
and
. 66 2/3% of the Market Value as of the date of this prospectus supplement.
In lieu of issuing the shares of Common Stock issuable upon conversion in the
event of a Change of Control, we may, at our option, make a cash payment equal
to the greater of the above bullet points, or any combination thereof.
The Company's Certificate of Designation defines "Change of Control" as any
of the following events:
(A) the sale, lease, transfer, conveyance or other disposition of all or
substantially all of our assets to any "person" or "group" (within the
meaning of Sections 13(d)(3) and 14(d)(2) of the Exchange Act or any
successor provision to either of the foregoing, including any group
acting for the purpose of acquiring, holding or disposing of securities
within the meaning of Rule 13d-5(b)(1) under the Exchange Act) other
than Existing Shareholders (except in connection with a liquidation or
dissolution of us that does not constitute a Change of Control under
clause (B) below),
(B) the approval by our requisite shareholders of a plan of liquidation or
statutory dissolution (which shall not be construed to include a plan
of merger or consolidation) of us, unless Existing Shareholders
"beneficially own" (as defined in Rule 13d-3 under the Exchange Act) at
least the same percentage of voting power after the consummation of
such plan as before or otherwise retain the right or ability, by voting
power, to control the Person that acquires the proceeds of such
liquidation or dissolution,
(C) any "person" or "group" (within the meaning of Sections 13(d)(3) and
14(d)(2) of the Exchange Act or any successor provision to either of
the foregoing, including any group acting for the purpose of acquiring,
holding or disposing of securities within the meaning of Rule 13d-
5(b)(1) under the Exchange Act), other than Existing Shareholders,
becomes the "beneficial owner" (as so defined) of more than 35% of the
total voting power of all classes of our voting stock or a successor
and/or warrants or options to acquire such voting stock, calculated on
a fully diluted basis, provided that Existing Shareholders
"beneficially own" (as so defined), in the aggregate, a percentage of
such voting stock or warrants having a lesser percentage of voting
power than such other "person" or "group" and do not have the right or
ability by voting power, contract or otherwise to elect or designate
for election a majority of our Board of Directors, or
(D) during any period of two consecutive years, individuals who at the
beginning of such period constituted our Board of Directors (together
with any new directors whose nomination for election or appointment by
such board or whose election by our stockholders was approved by a vote
of the Existing Shareholders or a majority of the directors then still
in office who were either directors at the beginning of such period or
whose election or nomination for election was previously so approved)
cease for any reason to constitute a majority of the Company's Board of
Directors then in office.
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Notwithstanding clause (C) above,
. the acquisition by a Qualified Investor of 49% or less of our voting
stock shall not constitute a Change of Control, and
. a merger or consolidation that would otherwise constitute a Change of
Control hereunder shall not constitute a Change of Control if at
least 90% of the consideration consists of common stock that is, or
upon issuance, will be traded on a United States national securities
exchange or quoted on the Nasdaq National Stock Market.
"Existing Shareholders" means Albert M. Carollo, Lawrence J. DeGeorge,
Curtis Rochelle, Marian Rochelle, Rochelle Investments, Ltd. (so long as it
is controlled by Curtis or Marian Rochelle), Gene W. Schneider, G.
Schneider Holdings, Co. and The Gene W. Schneider Family Trust (so long as
each is controlled by Gene W. Schneider or trustees appointed by him),
Janet S. Schneider and Mark L. Schneider (collectively, the "Principals")
and with respect to any Principal means:
(A) any controlling stockholder or 80% (or more) owned subsidiary of
such Principal, or with respect to each individual Principal, (1)
family partnerships, corporations or other entities holding our
equity interests, the transferee(s) or the surviving entities or
entities solely for the benefit of such Principal or any of the
Persons listed in (2) through (5) below, (2) such Principal's
spouse, (3) such Principal's children, grandchildren, stepchildren,
step grandchildren and their spouses, (4) heirs, legatees and
divisees, and (5) trusts primarily for the benefit of any of the
foregoing; or
(B) any trust corporation, partnership or other entity, the
beneficiaries, stockholders, partners, owners or Persons
beneficially holding an 80% (or more) controlling interest of which
consist of such Principal and/or such other persons referred to in
the immediately preceding clause (A).
"Qualified Investor" means an investment grade debt issuer approved by our
Board of Directors, which either:
(A) is in the telecommunications industry, or
(B) engages in a business which will benefit from strategic synergies
from an investment in us.
The phrase "all or substantially all" of our assets is likely to be
interpreted by reference to applicable state law at the relevant time, and will
be dependent on the facts and circumstances existing at such time. As a result,
there may be a degree of uncertainty in ascertaining whether a sale or transfer
is of "all or substantially all" of our assets.
Amendment, Supplement and Waiver
To the extent permitted by law, without the consent of any holder of
Preferred Stock, we may amend or supplement the Certificate of Designation to
cure any ambiguity, defect or inconsistency, to provide for uncertificated
Preferred Stock in addition to or in place of certificated Preferred Stock, to
provide for assumption of our obligations to holders of the Preferred Stock in
the case of a merger or consolidation, to make any change that would provide
any additional rights or benefits to the holders of the Preferred Stock or that
does not adversely affect the legal rights under the Certificate of Designation
of any such holder.
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CERTAIN UNITED STATES FEDERAL TAX CONSEQUENCES
The following is a general discussion of certain of the expected United
States federal tax consequences applicable to persons who purchase the
depositary shares or common stock from the Initial Purchasers for cash pursuant
to this offering and who hold the depositary shares, the underlying preferred
stock, the common stock (including common stock received with respect to the
preferred stock), and the interest in the underlying assets of the Securities
Account as "capital assets" for United States federal income tax purposes (such
persons are referred to in this discussion as "Holders"). This discussion is
intended as a descriptive summary only and does not purport to be a complete
technical analysis or listing of all potential tax considerations that may be
relevant to Holders. This discussion is based on current provisions of the
Internal Revenue Code of 1986, as amended (the "Code"), applicable Treasury
regulations promulgated thereunder (the "Regulations"), and public
administrative and judicial interpretations of the Code and the Regulations,
all of which are subject to change, which changes could be applied
retroactively. This discussion is also based on the information contained in
this prospectus supplement and the related documents. This discussion does not
cover all aspects of United States federal taxation that may be relevant to, or
the actual tax effect that any of the matters described herein will have on,
particular Holders and does not address foreign, state, or local tax
consequences.
We have not sought and will not seek a ruling from the United States
Internal Revenue Service (the "Service") with respect to this offering. There
can be no assurance that the Service will not take a different position
concerning the tax consequences of the acquisition, ownership, or disposition
of the depositary shares, the underlying preferred stock, the common stock
(including common stock received with respect to the preferred stock), or an
interest in the Securities Account, or that the Service's position would not be
sustained by a court.
The tax consequences to a Holder may vary depending on the Holder's
particular situation or status. Holders who are subject to special rules under
the Code (including insurance companies, tax-exempt organizations, mutual
funds, retirement plans, financial institutions, dealers in securities or
foreign currency, persons who hold the depositary shares, the underlying
preferred stock, the common stock (including common stock received with respect
to the preferred stock), or an interest in the Securities Account as part of a
straddle, hedge, conversion, synthetic security, or constructive sale
transaction for United States federal income tax purposes or who have a
functional currency other than the United States dollar, investors in pass-
through entities, traders in securities who elect to mark-to-market, certain
expatriates, and except as expressly addressed herein, Non-U.S. Holders (as
defined below)) may be subject to tax rules that are not discussed herein or
that differ significantly from the rules summarized below.
As used in this discussion, the term "U.S. Holder" means a beneficial owner
of the depositary shares, the underlying preferred stock, the common stock
(including common stock received with respect to the preferred stock), or an
interest in the Securities Account who is a Holder and, for United States
federal income tax purposes, is (i) an individual who is a citizen or resident
of the United States, (ii) a corporation, partnership, or other entity created
or organized in or under the laws of the United States, of the District of
Columbia, or of any State (except, in the case of a partnership, to the extent
provided in the Regulations), (iii) an estate the income of which is subject to
United States federal income tax, regardless of its source, or (iv) a trust if
(a) a court within the United States is able to exercise primary supervision
over the administration of the trust and (b) one or more United States persons
have the authority to control all substantial decisions of the trust. To the
extent to be prescribed in the Regulations, which Regulations have not been
issued, a trust that was in existence on August 20, 1996 (other than a trust
treated as owned by the grantor under sections 671 through 679 of the Code),
and which was a United States person on August 19, 1996, and properly elected
to continue to be treated as a United States person, will be treated as a U.S.
Holder for purposes of this discussion notwithstanding the preceding sentence.
As used in this discussion, the term "Non-U.S. Holder" means a beneficial owner
of the depositary shares, the underlying preferred stock, the common stock
(including common stock received with respect to the preferred stock), or an
interest in the Securities Account who is a Holder and, for United States
federal income tax purposes, is not a U.S. Holder.
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THIS DISCUSSION IS FOR GENERAL INFORMATION PURPOSES ONLY AND A PROSPECTIVE
PURCHASER SHOULD NOT CONSTRUE THE CONTENTS HEREOF AS TAX ADVICE. EACH
PROSPECTIVE PURCHASER IS URGED TO CONSULT ITS TAX ADVISOR AS TO THE PARTICULAR
TAX CONSEQUENCES TO SUCH PERSON OF THE ACQUISITION, OWNERSHIP, OR DISPOSITION
OF THE DEPOSITARY SHARES, THE UNDERLYING PREFERRED STOCK, THE COMMON STOCK
(INCLUDING COMMON STOCK RECEIVED WITH RESPECT TO THE PREFERRED STOCK), OR AN
INTEREST IN THE Securities Account, INCLUDING THE APPLICABILITY AND EFFECT OF
ALL FOREIGN, STATE, AND LOCAL TAX LAWS, AND OF ANY CHANGE IN UNITED STATES
FEDERAL TAX LAW OR ADMINISTRATIVE OR JUDICIAL INTERPRETATION THEREOF SINCE THE
DATE OF THIS OFFERING MEMORANDUM.
General
Depositary Share Arrangement
Each depositary share represents one-twentieth of a share of preferred stock
deposited under the Deposit Agreement. Subject to the terms of the Deposit
Agreement, each Holder who holds a depositary share will be entitled, in
proportion to the applicable fraction of a share of preferred stock represented
by the depositary share, to all of the rights and preferences of the preferred
stock represented thereby and subject, proportionately, to all of the
limitations of the preferred stock represented thereby, as contained in the
certificate of designation for the preferred stock. As a result, a Holder who
holds depositary shares will generally be treated, for United States federal
income tax purposes, as the owner of its proportionate interest in the
underlying shares of preferred stock held by the Depository. Accordingly, no
gain or loss will be recognized upon the exchange of the depositary shares for
the Holder's proportionate interest in the shares of the preferred stock
represented thereby, the Holder's tax basis in such shares of the preferred
stock will be the same as its tax basis in the depositary shares surrendered
therefor, and the holding period of such shares of the preferred stock will
include the period during which the Holder held the surrendered depositary
shares. The United States federal tax treatment for Holders who hold depositary
shares is generally the same as the United States federal tax treatment
described below for Holders who hold shares of the underlying preferred stock
directly, and references in this discussion to shares of the preferred stock
are intended to include the depositary shares where appropriate.
Securities Account
Pursuant to the terms of the Securities Account Agreement, each Holder who
holds shares of the preferred stock should be treated as holding a direct
interest in the Securities Account and owning a pro rata portion of the assets
held in the Securities Account. Although there is no authority directly
applicable to the treatment of the Securities Account, we believe that the
intended treatment is appropriate for United States federal income tax purposes
because (i) the Securities Account assets are not intended to be subject to the
claims of our creditors, (ii) we will not be entitled to receive the Securities
Account assets except under limited circumstances, and (iii) earnings generated
by the Securities Account assets will be available for distribution to or
application for the benefit of the Holders. As a result, we will not treat the
cash deposited in the Securities Account as received in exchange for shares of
the preferred stock. Instead, we intend to take the position that the purchase
of a share of preferred stock together with an interest in the Securities
Account, is the equivalent of a purchase of a unit for United States federal
income tax purposes. Under such treatment, the issue price of each component
(i.e., the preferred stock and an interest in the Securities Account)
comprising the unit would be determined by allocating the issue price of the
unit between the components based on their relative fair market values on the
date of issuance, and the initial tax basis of each such component would equal
its issue price.
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U.S. Holders
Shares of Preferred Stock
Distributions
General. Distributions of cash or shares of common stock with respect to
shares of the preferred stock following the Deposit Expiration Date will
constitute dividend income for United States federal income tax purposes,
subject to tax as ordinary income, to the extent paid from our current or
accumulated earnings and profits as determined for United States federal income
tax purposes. In the case of a distribution of shares of common stock, the
amount of such distribution will equal the fair market value of such shares on
the date of distribution. For a summary of the United States federal income tax
treatment of the distribution of cash or shares of common stock on or prior to
the Deposit Expiration Date, see the discussion below under the heading "U.S.
Holders--Securities Account--Income Inclusion; Distributions in Respect of the
Quarterly Return Amount."
We presently do not have any accumulated earnings and profits and we may not
have any current earnings and profits in the current taxable year, as
determined under United States federal income tax principles. Distributions of
cash and shares of common stock paid to a U.S. Holder in excess of our current
and accumulated earnings and profits will be treated as a nontaxable return of
capital and will reduce the U.S. Holder's adjusted tax basis in its shares of
preferred stock, but not below zero. Distributions paid to a U.S. Holder in
excess of the U.S. Holder's adjusted tax basis in its shares of preferred stock
will be subject to tax as capital gain and will constitute long-term capital
gain if the U.S. Holder's holding period is more than one year.
Dividends Received Deduction and Extraordinary Dividend Treatment. Corporate
U.S. Holders will generally be entitled to claim as a deduction 70 percent of
the amount of any distribution on shares of preferred stock that qualifies as a
dividend for United States federal income tax purposes, subject to limitations,
including limitations relating to minimum holding periods, the financing of
such U.S. Holder's acquisition or ownership of shares of preferred stock, and
alternative minimum tax. In addition, if the distribution constitutes an
"extraordinary dividend" within the meaning of section 1059 of the Code, a
corporate U.S. Holder may be required to reduce its adjusted tax basis in its
shares of preferred stock by the amount of the dividend excluded from income
under the dividends received deduction provisions. Distributions with respect
to shares of the preferred stock will not qualify as dividends and thus, will
not be eligible for the dividends received deduction, unless and until such
distributions are paid out of current or accumulated earnings and profits for
United States federal income tax purposes.
Constructive Distributions
Redemption Premium. Under certain circumstances, section 305 of the Code
requires that any excess of the redemption price of the preferred stock over
its issue price, subject to a de minimis exception, be treated as a
constructive distribution and be taken into account by a U.S. Holder on an
economic accrual basis, prior to actual receipt of the redemption premium. For
purposes of this provision, the Regulations disregard any premium attributable
to optional redemption provisions that are not more likely than not to occur
based on all of the facts and circumstances as of the issue date. A premium
will be treated as not more likely than not to occur under the Regulations if
(i) the issuer and the holder are not related, applying certain modified
related party rules, (ii) no plan, arrangement, or agreement exists that
effectively requires or is intended to compel the issuer to exercise the
redemption right, and (iii) the exercise of the redemption right would not
reduce the yield on the preferred stock. Due to the nature of our redemption
rights (see Description of the Preferred Stock--Optional Redemption and
Description of the Preferred Stock--Conversion Rights--Conversion at our
Option) we do not intend to treat the preferred stock as being subject to the
redemption premium provisions of section 305 of the Code.
Adjustment of Conversion Price. In general, any adjustment in the conversion
price that increases the interest of the U.S. Holders who hold shares of the
preferred stock in our assets or earnings and profits will
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result in a constructive dividend distribution to such U.S. Holders, unless a
safe harbor under the Regulations applies. The antidilution safe harbor
provides that changes in the conversion price made solely to avoid dilution in
the interests of U.S. Holders who hold shares of the preferred stock will not
result in a constructive dividend, but the safe harbor specifically does not
cover conversion price adjustments that are made to compensate the U.S. Holders
who hold shares of the Preferred Stock for taxable cash or property
distributions to other stockholders. The antidilution safe harbor covers some
but not all of the possible circumstances that could result in an adjustment to
the conversion price with respect to shares of the preferred stock. For
example, a decrease in the conversion price in the event of distributions of
indebtedness or assets by us will generally result in deemed dividend treatment
to U.S. Holders who hold shares of the preferred stock to the extent of our
applicable earnings and profits, but generally a decrease in the event of stock
dividends or the distribution of rights to subscribe for our common stock will
not result in a taxable stock dividend.
Sale, Redemption, or Conversion
Sale. Upon a sale or other disposition, other than a redemption or
conversion, of shares of the preferred stock, a U.S. Holder will generally
recognize capital gain or loss equal to the difference between the amount
realized by the U.S. Holder (other than the amount, if any, treated as received
in respect of a disposition of an interest in the Securities Account) and the
U.S. Holder's adjusted tax basis in such shares. Such gain or loss will be
long-term gain or loss if the U.S. Holder's holding period with respect to the
shares of preferred stock is more than one year.
Redemption. Generally, any gain or loss recognized by a U.S. Holder upon
redemption of the shares of preferred stock for cash will be treated as gain or
loss from the sale or exchange of such shares if, taking into account stock
that is actually or constructively owned as determined under section 318 of the
Code: (i) such U.S. Holder's equity interest in the Company (including shares
of preferred stock and common stock) is completely terminated as a result of
the redemption, (ii) such U.S. Holder's percentage ownership in our voting
stock immediately after the redemption is less than 80% of such percentage
ownership immediately before the redemption, or (iii) the redemption is "not
essentially equivalent to a dividend," within the meaning of section 302 of the
Code. In applying each of these tests, certain attribution and constructive
ownership rules apply. If none of the foregoing tests is met, the proceeds of
the redemption will be treated as a distribution, potentially subject to tax as
ordinary dividend income, as described above under the heading "U.S. Holders---
Shares of Preferred Stock--Distributions."
In the event that we redeem shares of preferred stock for a combination of
cash and shares of common stock, a U.S. Holder who holds shares of preferred
stock will recognize gain, but not loss, in an amount equal to the lesser of
the gain, if any, realized in the redemption and the cash received. Any such
gain will be subject to tax as capital gain unless none of the tests described
in the foregoing paragraph are met, in which case such gain will be treated as
a distribution, potentially subject to tax as ordinary dividend income, as
described above under the heading "U.S. Holders--Shares of Preferred Stock--
Distributions." In the event that we redeem shares of the preferred stock
solely for shares of common stock, such redemption will generally be a tax-free
transaction as described below under the heading "U.S. Holders--Sale,
Redemption, or Conversion--Conversion of Shares of Preferred Stock."
In addition, any cash or shares of common stock received by a U.S. Holder
upon a redemption of shares of preferred stock, that are attributable to
dividend arrearages will be treated as a distribution with respect to the
shares of preferred stock, in an amount equal to the cash or the fair market
value of the shares of common stock as determined on the date of distribution,
potentially subject to tax as ordinary dividend income, as described above
under the heading "U.S. Holders--Shares of Preferred Stock--Distributions." A
U.S. Holder will have a tax basis in such shares of common stock equal to their
fair market value as determined on the date of distribution and the holding
period of such shares will begin on the day following that date. In the event
that funds remaining in the Securities Account are paid to us as a result of a
redemption of shares of preferred stock on or prior to the Deposit Expiration
Date, such payment should not represent a current deduction for United States
federal income tax purposes, but rather an additional contribution by the U.S.
Holder that should increase the U.S. Holder's adjusted tax basis in its shares
of our preferred stock or common stock.
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Conversion of Shares of Preferred Stock. A U.S. Holder will generally not
recognize gain or loss as a result of a conversion of shares of preferred stock
into shares of common stock, except to the extent of cash received in lieu of a
fractional share of common stock. In addition, the fair market value of any
shares of common stock received by a U.S. Holder, upon conversion of shares of
preferred stock, that are attributable to dividend arrearages will be treated
as a distribution on such shares of preferred stock, potentially subject to tax
as ordinary dividend income, as described above under the heading "U.S.
Holders--Shares of Preferred Stock--Distributions."
Generally, the adjusted tax basis of the shares of common stock received
pursuant to the exercise of the conversion feature will equal the tax basis of
the shares of preferred stock surrendered in exchange therefor and the holding
period of the shares of common stock received upon conversion will include the
holding period of such shares of preferred stock. Any shares of common stock
received by a U.S. Holder that are attributable to dividend arrearages,
however, will have a tax basis equal to the fair market value of the shares as
determined on the date of distribution and the holding period of the shares
will begin on the day following such date. In the event that funds remaining in
the Securities Account are paid to us as a result of a conversion of shares of
preferred stock into shares of common stock, on or prior to the Deposit
Expiration Date, the amount paid should not represent a current deduction for
United States federal income tax purpose, but rather an additional contribution
by the U.S. Holder that should be added to the adjusted tax basis of the shares
of preferred stock surrendered in arriving at the initial adjusted tax basis in
the shares of common stock received pursuant to the exercise of the conversion.
Securities Account
Income Inclusion; Distributions in Respect of the Quarterly Return Amount
In accordance with the treatment of U.S. Holders who hold an interest in the
Securities Account as owning a pro rata portion of the assets held in the
Securities Account, each such U.S. Holders should include in income its pro
rata share of the items of income and gain earned on the investments held in
the Securities Account when such items are accrued or received in accordance
with the U.S. Holder's regular method of tax accounting. As a result, cash
distributions of the Quarterly Return Amount paid to a U.S. Holder from the
Securities Account should generally be treated as nontaxable withdrawals of a
portion of the funds held in the Securities Account.
Shares of common stock purchased by the Depositary from Securities Account
funds and distributed to a U.S. Holder who holds an interest in the Securities
Account should generally be treated as a purchase of such shares by the U.S.
Holder for an amount equal to the U.S. Holder's share of the Securities Account
funds used to purchase such shares of common stock. The shares of common stock
received should generally have a tax basis equal to their fair market value,
determined as of the date on which the Depositary purchased such shares, and a
holding period that begins on the day following such date. Although there is no
authority directly addressing the issue, to the extent that the fair market
value of the shares of common stock, as determined on the date of purchase by
the Depositary, exceeds the amount paid by the Depositary for the shares, it is
likely that the excess would be treated as a payment on the shares of preferred
stock, in which case such amount should be treated as a distribution on the
shares of preferred stock held by the U.S. Holder, potentially subject to tax
as ordinary dividend income, as described above under the heading "U.S.
Holders--Shares of Preferred Stock--Distributions."
Sale or Exchange
Upon a sale, exchange, or other disposition of an interest in the Securities
Account, including a disposition of the Securities Account in connection with a
redemption or conversion of shares of Preferred Stock on or prior to the
Deposit Expiration Date, a U.S. Holder will generally recognize capital gain or
loss equal to the difference between the amount realized by the U.S. Holder
(other than the amount received, if any, in respect of accrued but unpaid items
of interest income earned on investments held in the Securities Account) and
the
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U.S. Holder's adjusted tax basis in the Securities Account assets. Such gain or
loss will be short term or long-term depending upon the holding period of the
investments held in the Securities Account. For a discussion of tax bases
adjustments to shares of preferred stock that are redeemed, or a conversion of
shares of preferred stock into shares of common stock, in either case on or
prior to the Deposit Expiration Date, see the discussion above under the
heading "U.S. Holders--Shares of Preferred Stock---Sale, Redemption, or
Conversion."
Common Stock
Distributions with respect to shares of common stock will generally be
subject to tax to U.S. Holders in the manner and under the circumstances
described above for distributions with respect to shares of the preferred
stock. In addition, upon the sale or other taxable disposition of shares of
common stock, U.S. Holders will generally be subject to tax in the same manner
and under the circumstances described above with respect to shares of the
preferred stock.
Non-U.S. Holders
Distributions of Shares of Common Stock and Preferred Stock
A distribution of cash with respect to common stock, or a distribution of
cash or shares of common stock with respect to shares of preferred stock, that
constitutes the payment of a dividend for purposes of United States federal
income taxation, as discussed above under the heading "U.S. Holders--Shares of
Preferred Stock--Distributions," will generally be subject to withholding of
United States federal income tax at the rate of 30 per cent unless the dividend
is effectively connected with the conduct of a trade or business in the United
States by the Non-U.S. Holder, in which case the dividend will be subject to
the United States federal income tax imposed on net income on the same basis
that applies to United States persons generally (and, with respect to corporate
Non-U.S. Holders and under certain circumstances, the branch profits tax).
Distributions in excess of current or accumulated earnings and profits
generally are treated as dividends for purposes of the foregoing. Under
regulations effective for payments made after December 31, 2000, however,
corporations may elect to treat distributions in excess of current or
accumulated earnings and profits as distributions other than dividends not
subject to withholding to the extent of such excess.
Non-U.S. Holders should consult any applicable income tax treaties that may
provide for a reduction of, or exemption from, withholding taxes. Non-U.S.
Holders may be able to claim a refund for over-withheld amounts by filing an
appropriate claim for a refund with the Internal Revenue Service. A Non-U.S.
Holder may be required to satisfy certain certification requirements in order
to claim such treaty benefits.
In the case of any distribution made in shares of common stock that is
treated as a dividend for United States federal income tax purposes, we intend
to withhold a number of shares of common stock with a fair market value equal
to the amount of any United States federal taxes that are required to be
withheld. In addition, in the event of any deemed dividend distribution
resulting from an adjustment to the conversion price as discussed above under
the heading "U.S. Holders--Shares of Preferred Stock--Constructive
Distributions-- Adjustment of Conversion Price," we intend to withhold, on the
next distribution of any value to Non-U.S. Holders who hold shares of preferred
stock, an amount equal to any United States federal taxes that are required to
be withheld in respect of any such deemed dividend distribution.
Distributions from the Securities Account
Because a distribution paid from the Securities Account in respect of the
Quarterly Return Amount should be treated as nontaxable withdrawal of a portion
of the funds held in the Securities Account as discussed above under the
heading "U.S. Holders--Securities Account--Income Inclusions; Distributions in
Respect of the Quarterly Return Amount, a Non-U.S. Holder should not generally
be subject to United States federal income or withholding tax on such
distribution. Distributions made from the Securities Account attributable to
amounts earned on United States government obligations held by the Securities
Account should also be exempt from
S-44
<PAGE>
United States federal income or withholding tax as portfolio interest, provided
that the Non-U.S. Holder provides to the Depositary a properly completed United
States Internal Revenue Service Form W-8 (or Form W-8BEN) or a similar
substitute form.
Shares of common stock purchased by the Depositary from Securities Account
funds and distributed to a Non-U.S. Holder of an interest in the Securities
Account should generally be treated as a purchase of shares of common stock by
the Non-U.S. Holder for an amount equal to the Non-U.S. Holder's share of the
Securities Account funds used to purchase such shares of common stock. The
shares of common stock received should have a tax basis equal to their fair
market value, determined as of the date on which the Depositary purchased such
shares, and a holding period that begins on the following date. To the extent
that the fair market value of the shares of common stock, as determined on the
date of purchase by the Depositary, exceeds the amount paid by the Depositary
for the shares, the excess should be treated as a distribution on the shares of
preferred stock held by the Non-U.S. Holder, potentially subject to United
States federal withholding taxation, as described above under the heading "Non-
U.S. Holders--Distributions of Shares of Common Stock and Preferred Stock."
Sale, Redemption, or Conversion of Preferred Shares; Sale of Interest in
Securities Account; Sale of Common Stock
A Non-U.S. Holder will generally not be subject to United States federal
income tax on gain recognized on a sale, redemption, or other disposition of
shares of preferred stock or common stock, or a sale or other disposition of an
interest in the Securities Account, unless (i) the gain is effectively
connected with the conduct of a trade or business in the United States by the
Non-U.S. Holder or (ii) in the case of a Non-U.S. Holder who is a nonresident
alien individual, such holder is present in the United States for 183 or more
days in the taxable year and certain other requirements are met. Gain that is
effectively connected with the conduct of a trade or business in the United
States by the Non-U.S. Holder will be subject to United States federal income
tax imposed on net income on the same basis that applies to United States
persons generally (and, with respect to corporate Non-U.S. Holders and under
certain circumstances, the branch profits tax) but will not be subject to
withholding tax. Non-U.S. Holders should consult any applicable income tax
treaties that may provide for different rules.
In addition, any cash or shares of common stock received by a Non-U.S.
Holder upon a conversion or redemption of shares of preferred stock that are
attributable to dividend arrearages will be treated as a distribution on the
shares of preferred stock, in an amount equal to the cash or the fair market
value of shares of common stock as determined on the date of distribution,
potentially subject to United States federal withholding tax, as described
above under the heading "Non-U.S. Holders-- Distributions of Shares of Common
Stock and Preferred Stock."
United States Federal Estate Taxes
The value of any shares of preferred stock or common stock owned or treated
as owned by an individual who is not a citizen or resident (as specially
defined for United States federal estate tax purposes) of the United States on
the date of death will be included in such individual's gross estate for United
States federal estate tax purposes, unless an applicable estate tax treaty
provides otherwise. Any United States government obligations held by the
Securities Account that are treated as owned by such an individual, however,
should not be included in such individual's estate for United States federal
estate tax purposes.
Backup Withholding and Information Reporting
Current United States federal income tax law provides that in the case of
payments of dividends and interest to a Non-U.S. Holder, the 31% backup
withholding tax will not apply provided that the Non-U.S. Holder certifies to
its status as a non-United States person on a United States Internal Revenue
Service Form W-8 (or Form W-8BEN) or similar substitute form, or an exemption
has otherwise been established, provided in each case that we or the paying
agent, as the case may be, do not have actual knowledge that the payee is a
United States person.
S-45
<PAGE>
Under current Regulations, payments of the proceeds of the sale of shares of
preferred stock or common stock, or an interest in the Securities Account, to
or through a foreign office of a broker will not be subject to backup
withholding but will be subject to information reporting if the broker is a
United States person, a controlled foreign corporation for United States
federal income tax purposes, or a foreign person 50 percent or more of whose
gross income is from a United States trade or business for a specified three-
year period, unless the broker has in its records documentary evidence that the
holder is not a United States person and certain other conditions are met or
the holder otherwise establishes an exemption. Payment of the proceeds of a
sale to or through the United States office of a broker is subject to backup
withholding and information reporting unless the holder certifies its non-
United States status under penalties of perjury or otherwise establishes an
exemption.
Recently, the Treasury Department has promulgated final Regulations (the
"Final Regulations") regarding the withholding and information reporting rules
discussed above. In general, the Final Regulations do not significantly alter
the substantive withholding and information reporting requirements but unify
current certification procedures and forms and clarify reliance standards.
Under the Final Regulations, special rules apply which permit the shifting of
primary responsibility for withholding to certain financial intermediaries
acting on behalf of beneficial owners. The Final Regulations are anticipated to
become effective for payments made after December 31, 2000.
S-46
<PAGE>
UNDERWRITING
Subject to the terms and conditions of an Underwriting Agreement, dated
December 1, 1999 (the "Underwriting Agreement"), the underwriters named below
(the "Underwriters"), who are represented by Donaldson, Lufkin & Jenrette
Securities Corporation and Morgan Stanley & Co. Incorporated (the
"Representatives"), have severally agreed to purchase from UnitedGlobalCom the
respective number of shares of Common Stock and Depositary Shares set forth
opposite their names below.
<TABLE>
<CAPTION>
Number of Number of
Shares of Depositary
Underwriters Common Stock Shares
------------ ------------ ----------
<S> <C> <C>
Donaldson, Lufkin & Jenrette Securities
Corporation...................................... 3,500,000 1,750,000
Morgan Stanley & Co. Incorporated................. 3,500,000 1,750,000
Goldman, Sachs & Co. ............................. 1,500,000 750,000
Merrill Lynch, Pierce, Fenner & Smith
Incorporated................................. 1,500,000 750,000
---------- ---------
Total........................................... 10,000,000 5,000,000
========== =========
</TABLE>
The Underwriting Agreement provides that the obligations of the several
Underwriters to purchase and accept delivery of the shares of Common Stock and
the Depositary Shares offered hereby are subject to approval by their counsel
of certain legal matters and to certain other conditions. The Underwriters are
obligated to purchase and accept delivery of all the shares of Common Stock
offered hereby if any are purchased and all Depositary Shares offered hereby if
any are purchased (in each case, other than shares covered by the overallotment
option described below).
The Underwriters initially propose to offer the shares of Common Stock in
part directly to the public at the initial public offering price set forth on
the cover page of this Prospectus Supplement and in part to certain dealers
(including the Underwriters) at such price less a concession not in excess of
$0.5310 per share. The Underwriters may allow, and such dealers may re-allow,
to certain other dealers a concession not in excess of $0.1000 per share. After
the initial offering of the Common Stock, the public offering price and other
selling terms may be changed by the Representatives at any time without notice.
The following table shows the underwriting fees that we will pay to the
Underwriters in connection with the offering of Common Stock. These amounts are
shown assuming both no exercise and full exercise of the Underwriters' option
to purchase additional shares of Common Stock.
<TABLE>
<CAPTION>
Paid by us
----------------------
No Full
Exercise Exercise
---------- -----------
<S> <C> <C>
Per share........................................... $0.8856 $0.8856
Total............................................... $8,856,000 $10,184,400
</TABLE>
The Underwriters initially propose to offer the Depositary Shares in part
directly to the public at the initial public offering price set forth on the
cover page of this Prospectus Supplement and in part to certain dealers
(including the Underwriters) at such price less a concession not in excess of
$0.75 per Depositary Share. After the initial offering of the Depositary
Shares, the public offering price and other selling terms may be changed by the
Representatives at any time without notice.
S-47
<PAGE>
The following table shows the underwriting fees that we will pay to the
Underwriters in connection with the offering of Depositary Shares. These
amounts are shown assuming both no exercise and full exercise of the
Underwriters' option to purchase additional Depositary Shares.
<TABLE>
<CAPTION>
Paid by us
---------------------
No Full
Exercise Exercise
---------- ----------
<S> <C> <C>
Per share............................................ $1.2500 $1.2500
Total................................................ $6,250,000 $7,187,500
</TABLE>
We estimate that the total expenses of this offering, excluding underwriting
discounts and commissions, will be approximately $1.0 million.
UnitedGlobalCom has granted to the Underwriters an option, exercisable for
30 days after the date of this Prospectus Supplement to purchase, from time to
time, in whole or in part, up to an aggregate of 1,500,000 additional shares of
Common Stock at the initial public offering price less underwriting discounts
and commissions. The Underwriters may exercise such option solely to cover
overallotments, if any, made in connection with the Offering. To the extent
that the Underwriters exercise such option, each Underwriter will become
obligated, subject to certain conditions, to purchase its pro rata portion of
such additional shares based on such Underwriter's percentage underwriting
commitment as indicated in the preceding table.
In addition, UnitedGlobalCom has granted to the Underwriters an option,
exercisable for 30 days after the date of this Prospectus Supplement, to
purchase, from time to time, in whole or in part, up to an aggregate of 750,000
additional Depositary Shares at the initial public offering price less
underwriting discounts and commissions and amounts deposited by the
Underwriters in the Securities Account. The Underwriters may exercise such
option solely to cover overallotments, if any, made in connection with the
Offering. To the extent that the Underwriters exercise such option, each
Underwriter will become obligated, subject to certain conditions, to purchase
its pro rata portion of such additional shares based on such Underwriter's
percentage underwriting commitment as indicated in the preceding table.
UnitedGlobalCom has agreed to indemnify the Underwriters against certain
liabilities, including liabilities under the Securities Act of 1933, or to
contribute to payments that the Underwriters may be required to make in respect
thereof.
UnitedGlobalCom and some of its executive officers, directors and certain
stockholders have agreed with the Underwriters subject to certain exceptions,
not to, directly or indirectly, offer, sell, contract to sell, grant any option
to purchase or otherwise dispose of, without the prior written consent of the
Representatives any shares of Common Stock, or Preferred Stock, or any
securities convertible into or exercisable or exchangeable for, or warrants,
options or rights to purchase or acquire, Common Stock or Preferred Stock or in
any other manner transfer all or a portion of the economic consequences
associated with the ownership of any Common Stock or Preferred Stock, or enter
into any agreement to do any of the foregoing, for a period of 45 days after
the date of this Prospectus Supplement.
The Class A common stock of UnitedGlobalCom is traded on the Nasdaq National
Stock Market under the symbol "UCOMA." UnitedGlobalCom has applied for the
Depository Shares to be listed on the Nasdaq National Stock Market under the
symbol "UCOMP."
Other than in the United States, no action has been taken by UnitedGlobalCom
or the Underwriters that would permit a public offering of the shares of Common
Stock or the Depositary Shares offered hereby in any jurisdiction where action
for that purpose is required. The shares of Common Stock and the Depositary
Shares offered hereby may not be offered or sold, directly or indirectly, nor
may this Prospectus Supplement or the accompanying Prospectus or any other
offering material or advertisements in connection with the offer and sale of
any such shares of Common Stock or any Depositary Shares be distributed or
published in any jurisdiction, except under circumstances that will result in
compliance with the applicable rules and regulations of such jurisdiction.
Persons into whose possession this Prospectus Supplement or the accompanying
Prospectus comes are advised to inform themselves about and to observe any
restrictions relating to the Offering and the distribution of this Prospectus
Supplement and the accompanying Prospectus. This Prospectus Supplement and
S-48
<PAGE>
the accompanying Prospectus do not constitute an offer to sell or a
solicitation of an offer to buy any shares of Common Stock or any Depositary
Shares offered hereby in any jurisdiction in which such an offer or a
solicitation is unlawful.
In the event Class A Common Stock and the Depositary Shares do not
constitute excepted securities under the provisions of Regulation M by the
Commission, the Underwriters and dealers may engage in passive market making
transactions in accordance with Rule 103. In general, a passive market maker
may not bid for or purchase shares of Common Stock or the Depositary Shares at
a price that exceeds the highest independent bid. In addition, the net daily
purchases made by any passive market maker generally may not exceed 30% of its
average daily trading volume in the Common Stock or the Depositary Shares
during a specified two-month prior period, or 200 shares, whichever is greater.
A passive market maker must identify passive market making bids as such on the
Nasdaq electronic inter-dealer reporting system. Passive market making may
stabilize or maintain the market price of the Common Stock or the Depositary
Shares above independent market levels. Underwriters and dealers are not
required to engage in passive market making and may end passive market making
activities at any time.
In connection with the Offering, the Underwriters may engage in transactions
that stabilize, maintain or otherwise affect the price of the Common Stock or
the Depositary Shares. Specifically, the Underwriters may overallot the
Offering, creating a syndicate short position. The Underwriters may bid for and
purchase shares of Common Stock or the Depositary Shares in the open market to
cover such syndicate short position or to stabilize the price of the Common
Stock or the Depositary Shares. These activities may stabilize or maintain the
market price of the Common Stock or the Depositary Shares above independent
market levels. The Underwriters are not required to engage in these activities
and may end any of these activities at any time.
The Underwriters are providing, have provided and may in the future provide
investment banking or other financial services to us and our affiliates in the
ordinary course of business and will receive customary compensation in
connection therewith. In connection with the private placement of our
Depositary Shares representing fractional shares of our 7% Series C Senior
Cumulative Convertible Preferred Stock, Donaldson, Lufkin & Jenrette Securities
Corporation acted as bookrunning manager and as an initial purchaser and
Goldman, Sachs & Co. acted as a co-lead manager and an initial purchaser.
Donaldson, Lufkin & Jenrette Securities Corporation acted as solicitation agent
in connection with consent solicitations involving UIH Australia/Pacific,
Inc's. 14% Senior Discount Notes due 2006 and has provided and is providing
financial advisory services and strategic advice to us for which it will
receive compensation. In connection with the February initial public offering
of 44,600,000 UPC ordinary shares, Goldman Sachs International, an affiliate of
Goldman, Sachs & Co., acted as a joint global coordinator of the international
offering and the United States offering, Goldman Sachs International acted as
an underwriter in connection the international offering and Goldman, Sachs &
Co. acted as an underwriter in connection with the United States offering;
Donaldson Lufkin & Jenrette International, an affiliate of Donaldson, Lufkin &
Jenrette Securities Corporation, acted as an underwriter in connection with the
international offering and Donaldson Lufkin & Jenrette Securities Corporation
acted as an underwriter in connection with the United States offering. In
connection with the July public offering of 15,000,000 UPC ordinary shares A,
Morgan Stanley & Co. International Limited, an affiliate of Morgan Stanley &
Co. Incorporated, and Goldman Sachs International acted as joint global
coordinators and joint bookrunning managers of the international offering and
the United States offering; Morgan Stanley & Co. International Limited, Merrill
Lynch International, an affiliate of Merrill Lynch & Co., Goldman Sachs
International and Donaldson Lufkin & Jenrette International acted as
underwriters in connection with the international offering; and Morgan Stanley
& Co. International Limited, Merrill Lynch International, Goldman Sachs
International and Donaldson, Lufkin & Jenrette International acted as
underwriters in connection with the United States offering. Morgan Stanley &
Co. International Limited acted as sole bookrunning manager. In connection with
the placement of UPC's $200,000,000 10 7/8% Senior Notes due 2007,
(Euro)100,000,000 10 7/8% Senior Notes due 2007, $252,000,000 11 1/4% Senior
Notes due 2009, (Euro)101,000,000 11 1/4% Senior Notes due 2009, $478,000,000
13 3/8% Senior Discount Notes due 2009, and (Euro)191,000,000 13 3/8% Senior
Discount Notes due 2009, Morgan Stanley & Co. International Limited acted as
sole bookrunning manager and Morgan Stanley
S-49
<PAGE>
& Co. International Limited, Donaldson Lufkin & Jenrette International, Goldman
Sachs International and Merrill Lynch International acted as initial
purchasers.
LEGAL MATTERS
The validity of the securities offered hereby will be passed upon for us by
Holme Roberts & Owen LLP, Denver, Colorado. Skadden, Arps, Slate, Meagher &
Flom LLP, Los Angeles, California, has passed upon certain matters regarding
this offering for the underwriters.
S-50
<PAGE>
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
$1,200,000,000
-----------
The following are types of securities that we may offer and sell under this
prospectus:
. common stock (which may include shares being sold by certain of our
stockholders)
. debt securities
. preferred stock
We may offer these securities separately or as units which may include other
securities. We will describe in a prospectus supplement, which must accompany
this prospectus, the securities we are offering and selling, as well as the
specific terms of the securities. Those terms may include:
. Maturity
. Interest rate
. Sinking fund terms
. Currency of payments
. Requirements to repurchase the securities
. Redemption terms
. Listing on a securities exchange
. Amount payable at maturity
. Restrictive covenants
-----------
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved these securities or determined if this
prospectus is truthful or complete. Any representation to the contrary is a
criminal offense.
-----------
We may offer the securities in amounts, at prices and on terms determined at
the time of offering. We may sell the securities directly to you, through
agents we select, or through underwriters and dealers we select. If we use
agents, underwriters or dealers to sell the securities, we will name them and
describe their compensation in a prospectus supplement.
November 22, 1999
<PAGE>
UNITEDGLOBALCOM, INC.
We are a leading broadband communications provider outside the United
States. We provide multi-channel television services in over 20 countries
worldwide and telephone and Internet/data services in a growing number of our
international markets. Our operations are grouped into three major geographic
regions: Europe, Asia/Pacific and Latin America. Our European operations are
held through our approximately 55.1% owned, publicly traded subsidiary, United
Pan-Europe Communications N.V., which is the largest pan-European broadband
communications provider (multi-channel television, telephone and
Internet/data) in terms of numbers of subscribers. Our primary Asia/Pacific
operations are primarily held through our approximately 75.5% owned, publicly
traded subsidiary, Austar United, which owns the largest provider of multi-
channel television services in regional Australia, various Australian
programming interests and the only full service provider of broadband
communications in New Zealand. Our primary Latin American operation is VTR
Hipercable S.A., Chile's largest multi-channel television provider and a
growing provider of telephone services.
UnitedGlobalCom, Inc.
4643 South Ulster Street, Suite 1300
Denver, Colorado 80237
(303) 770-4001
USE OF PROCEEDS
Except as may otherwise be described in the prospectus supplement relating
to an offering of securities, we will use the net proceeds from the sale of
the securities offered under this prospectus and the prospectus supplement for
possible repurchases or pay-down of our outstanding securities or debt and for
general corporate purposes, including working capital, acquisitions and other
business opportunities. Pending application of the proceeds, we may invest the
proceeds in short-term, interest-bearing investments. We will determine any
specific allocation of the net proceeds of an offering of securities to a
specific purpose at the time of the offering and will describe the allocation
in the related prospectus supplement. We will not receive any of the proceeds
from the sale of common stock by any selling stockholders.
2
<PAGE>
RATIO OF EARNINGS TO FIXED CHARGES AND PREFERRED STOCK DIVIDENDS (000's)
<TABLE>
<CAPTION>
For the Year For the Year For the Year For the Year For the Ten For the Nine
Ended Ended Ended Ended Months Ended Months Ended
February 28, February 29, February 28, February 28, December 31, September 30,
1995 1996 1997 1998 1998 1999
------------ ------------ ------------ ------------ ------------ -------------
<S> <C> <C> <C> <C> <C> <C>
Income (loss) from
continuing operations
before other items..... $(25,583) $(43,757) $(95,608) $(196,364) $(492,776) $524,430
Fixed charges and
preferred stock
dividends:
Interest, whether
expensed or
capitalized.......... 9,328 36,045 79,659 124,288 163,227 234,712
Preferred stock
dividend
requirements......... -- 232 1,221 1,271 1,623 9,126
-------- -------- -------- --------- --------- --------
Total fixed charges
and preferred stock
dividends.......... 9,328 36,277 80,880 125,559 164,850 243,838
Adjusted earnings
(losses)............... (16,255) (7,480) (14,728) (70,805) (327,926) 768,268
Fixed charges and
preferred stock
dividends.............. 9,328 36,277 80,880 125,559 164,850 243,838
-------- -------- -------- --------- --------- --------
Ratio of earnings to
fixed charges and
preferred stock
dividends.............. -- -- -- -- -- 3.15
Dollar amount of
coverage deficiency.... $(25,583) $(43,757) $(95,608) $(196,364) $(492,776) $ --
======== ======== ======== ========= ========= ========
</TABLE>
3
<PAGE>
DESCRIPTION OF CAPITAL STOCK
Our authorized capital stock consists of:
. 210,000,000 shares of Class A common stock,
. 30,000,000 shares of Class B common stock and
. 3,000,000 shares of preferred stock, all $0.01 par value per share.
As of November 2, 1999, there were outstanding:
. 69,115,598 shares of Class A common stock,
. 19,323,940 shares of Class B common stock,
. 116,185 shares of Series B convertible preferred stock, and
. 425,000 shares of Series C convertible preferred stock.
On November 11, 1999, we announced a two-for-one stock split of our Class A
common stock and Class B common stock, which occurred on December 1 and is
reflected in the outstanding shares above.
Common Stock
Our Class A common stock and Class B common stock are identical, except
that:
. each share of Class A common stock entitles the holder to one vote, and
each share of Class B common stock entitles the holder to ten votes, on
each matter to be voted on by our stockholders and
. each share of Class B common stock is convertible at the option of the
holder into one share of Class A common stock. Class A common stock is
not convertible into Class B common stock.
Holders of the Class A common stock and the Class B common stock vote as one
class on all matters, including the election of directors, to be voted on by
our stockholders, with certain exceptions specified by the Delaware General
Corporation Law. Holders of the Class B common stock have the power to control
all matters requiring approval of our stockholders voting as a single class.
Holders of the Class A common stock and Class B common stock are entitled to
receive any dividends that are declared by our Board of Directors out of funds
legally available for that purpose. In the event of our liquidation,
dissolution or winding up, holders of Class A common stock and Class B common
stock are entitled to share in all assets available for distribution to
holders of common stock. Holders of Class A common stock and Class B common
stock have no preemptive rights. Our Restated Certificate of Incorporation
provides that if there is any dividend, subdivision, combination or
reclassification of either class of common stock, a proportionate dividend,
subdivision, combination or reclassification of the other class of common
stock will be made at the same time.
We have appointed ChaseMellon Shareholder Services as the transfer agent and
registrar for the Class A common stock.
Preferred Stock
Our Series B preferred stock has an initial liquidation value of $212.50 per
share. The preference increases at a rate of 6.5% per annum, compounded
quarterly, and was $229.23 per share at October 31, 1999. Each share of Series
B preferred stock is convertible into the number of shares of Class A common
stock equal to the liquidation value at the time of conversion divided by
$10.63. We are required to redeem our Series B preferred stock on June 30,
2008.
4
<PAGE>
Our Series C preferred stock has a liquidation value of $1,000 per share.
Each share of Series C preferred stock is convertible at any time at the
option of the holder into the number of shares of Class A common stock equal
to the liquidation value divided by $42.15 (subject to adjustment). The Series
C preferred stock is evidenced by depositary shares, each representing 1/20th
of a shares of Series C preferred stock. The purchasers of the Series C
preferred stock deposited $29.8 million into an account from which the holders
will be entitled to quarterly payments in an amount equal to $17.50 per
preferred share commencing on September 30, 1999 through June 30, 2000, in
cash or Class A common stock at our option. We have the right to require
conversion or after December 31, 2000 if the closing price of our Class A
common stock has equaled or exceeded 150% of the conversion price for at least
20 of 30 consecutive trading days or after June 30, 2002 if the closing price
has equaled or exceeded 130% of the conversion price for at least 20 of 30
consecutive trading days. We have the option to redeem our Series C preferred
stock on or after June 30, 2002.
We are authorized to issue 3,000,000 shares of preferred stock, of which
541,185 shares are outstanding as of November 15, 1999. Our board of directors
is authorized, without any further action by the stockholders, to determine
the following for any unissued series of preferred stock:
. voting rights,
. dividend rights,
. dividend rates,
. liquidation preferences,
. redemption provisions,
. sinking fund terms,
. conversion or exchange rights,
. the number of shares in the series and
. other rights, preferences, privileges and restrictions.
In addition, the preferred stock could have other rights, including economic
rights senior to our common stock, so that the issuance of the preferred stock
could adversely affect the market value of our common stock. The issuance of
preferred stock may also have the effect of delaying, deferring or preventing
a change in control of us without any action by the stockholders. We have no
current plans to issue any preferred shares other than the Series B and Series
C preferred stock currently outstanding.
Certificate of Incorporation and Bylaws
The provisions of our certificate of incorporation and bylaws summarized
below may have an anti-takeover effect and may delay or prevent a tender offer
or takeover attempt that a stockholder might consider in its best interest,
including attempts that might result in a premium over the market price for
the shares held by stockholders.
Our certificate of incorporation or bylaws provide:
. that directors can be removed from office only for cause and only with
the approval of 80% of the votes of outstanding shares of stock entitled
to vote in the election of directors,
. for a classified board of directors, with each class containing as
nearly as possible one-third of the number of directors on the board and
the members of each class serving for three-year terms,
. that vacancies on the board of directors may be filled only by the
remaining directors,
. that the stockholders may take action only at an annual or special
meeting of stockholders, and not by written consent of the stockholders,
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. that special meetings of stockholders generally can be called only by
the board of directors,
. that our stockholders may adopt, amend or repeal Bylaws only with the
approval of holders of at least 80% of the voting power, and
. for an advance notice procedure for the nomination, other than by the
board of directors or a committee of the board of directors, of
candidates for election as directors as well as for other stockholder
proposals to be considered at annual meetings of stockholders. In
general, we must receive notice of intent to nominate a director or
raise business at meetings not less than 30 nor more than 60 days before
the meeting, and must contain certain information concerning the person
to be nominated or the matters to be brought before the meeting and
concerning the stockholder submitting the proposal. The affirmative vote
of the holders of at least 80% of the voting power is required to amend
or repeal these provisions or to provide for cumulative voting.
Delaware General Corporation Law, Section 203
We are subject to Section 203 of the Delaware General Corporation Law, which
limits the ability of a publicly held Delaware corporation to consummate a
"business combination" with an "interested stockholder" for a period of three
years after the date such person became an "interested stockholder" unless:
. before such person became an interested stockholder, the board of
directors of the corporation approved the transaction in which the
interested stockholder became an interested stockholder or approved the
business combination;
. upon consummation of the transaction that resulted in the interested
stockholder's becoming an interested stockholder, the interested
stockholder owned at least 85% of the voting stock of the corporation
outstanding at the time the transaction commenced (excluding shares held
by directors who are also officers of the corporation and certain shares
held by employee stock plans); or
. following the transaction in which such person became an interested
stockholder, the business combination is approved by the board of
directors of the corporation and authorized at a meeting of stockholders
by the affirmative vote of the holders of 66 2/3% of the outstanding
voting stock of the corporation not owned by the interested stockholder.
An "interested stockholder" generally is defined as a person who, together
with affiliates and associates, owns (or, within the prior three years, owned)
15% or more of a corporation's outstanding voting stock.
For purposes of Section 203, the term "business combination" is defined
broadly to include:
. mergers with or caused by the interested stockholder;
. sales or other dispositions to the interested stockholder (except
proportionately with the corporation's other stockholders) of assets of
the corporation or a subsidiary equal to 10% or more of the aggregate
market value of the corporation's consolidated assets or its outstanding
stock;
. the issuance or transfer by the corporation or a subsidiary of stock of
the corporation or such subsidiary to the interested stockholder (except
for transfers in a conversion or exchange or a pro rata distribution or
other transactions that do not increase the interested stockholder's
proportionate ownership of any class or series of the corporation's or
such subsidiary's stock); or
. receipt by the interested stockholder (except proportionately as a
stockholder), directly or indirectly, of any loans, advances,
guarantees, pledges or other financial benefits provided by or through
the corporation or a subsidiary.
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DESCRIPTION OF THE DEBT SECURITIES
The debt securities will be our direct, unsecured or secured obligations and
may be senior debt securities, senior subordinated debt securities or junior
subordinated debt securities. The total amount of additional debt securities
that we may issue is limited by covenants in our existing debt instruments.
The debt securities will be issued under one or more indentures in the form
that has been filed as an exhibit to the registration statement of which this
prospectus is a part. The indentures will be subject to and governed by the
Trust Indenture Act of 1939.
We may issue the debt securities in one or more series. Specific terms of
each series of debt securities will be contained in resolutions of our board
of directors or in a supplemental indenture. The specific terms will be
described in a prospectus supplement.
All debt securities of one series need not be issued at the same time and,
unless otherwise provided in the prospectus supplement, we may issue
additional debt securities of the series without the consent of the holders.
The specific terms of the debt securities may include any of the following:
. the title of the debt securities and whether the debt securities are
senior debt securities, senior subordinated debt securities or junior
subordinated debt securities;
. the aggregate principal amount of the debt securities and any limit on
the aggregate principal amount;
. the price at which the debt securities will be issued;
. any right of the holders to convert the debt securities into stock,
including the initial conversion price and rate and the conversion
period and any limitations on the transferability of the stock received
on conversion;
. the dates on which the principal of the debt securities will be payable;
. the interest rates, which may be fixed or variable;
. the dates from which any interest will accrue, the dates on which the
interest will be payable, the record dates for the interest payments,
the persons to whom the interest will be payable, and the manner of
calculating interest;
. any right of ours to extend the dates on which principal or interest
will be payable;
. the currency or currencies of payment of principal or interest;
. the terms applicable to any debt securities issued at a discount from
their stated principal amount;
. the terms, if any, pursuant to which any debt securities will be
subordinate to any of our debt;
. if the amount of payments of principal or interest is to be determined
by reference to an index or formula, or based on a coin or currency
other than that in which such debt securities are stated to be payable,
the manner in which such amounts are determined and the calculation
agent, if any, with respect thereto;
. the places where the principal and any interest will be payable, where
the debt securities may be surrendered for registration of transfer and
where notices to us regarding the debt securities and the indenture may
be served;
. any right of ours to elect to redeem the debt securities, including the
redemption prices and redemption periods;
. any obligation of ours to redeem the debt securities under any sinking
fund or similar provision or at the option of a holder, including the
redemption prices and redemption periods;
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. the events that would cause us to be in default and the consequences of
default; and
. any discharge and release provisions of the indenture.
The debt securities may be issued at a discount below their principal amount
and provide for less than the entire principal amount to be payable on
acceleration of the maturity. In that case, all material U.S. federal income
tax, accounting and other considerations applicable to the securities will be
described in the prospectus supplement.
Except as may be set forth in any prospectus supplement, the debt securities
will not contain any provisions that would limit our ability to incur debt or
that would protect holders of debt securities in the event of a change of
control of us. The prospectus supplement will contain information with respect
to any changes to the events of default that are described below.
Covenants
The prospectus supplement will describe any material covenants of a series
of debt securities.
Merger or Sale
We cannot consolidate or merge with or into, or transfer or lease all or
substantially all of our assets to, any person unless:
. we will be the continuing corporation or
. the successor corporation or person to which our assets are transferred
or leased is a U.S. corporation and assumes our obligations on the debt
securities and under the indenture. In addition, we cannot effect the
transaction unless immediately after, no Event of Default shall have
occurred and be continuing. Subject to certain exceptions, when the
person to which our assets are transferred or leased has assumed our
obligations under the debt securities and the indenture, we will be
discharged from all our obligations under the debt securities and the
indenture.
This covenant would not apply to any recapitalization transaction, a change
of control of us or a highly leveraged transaction, unless structured to
include a merger or consolidation or transfer or lease of all or substantially
all of our assets.
Events of Default
The prospectus supplement and each indenture will describe the events that
would cause us to be in default and the consequences of default, including the
following:
. failure to pay interest for 30 days after the date payment is due and
payable. A valid extension of an interest payment period by us in
accordance with the terms of the debt securities shall not constitute a
failure to pay interest;
. failure to pay principal or any premium on a debt security when due,
either at maturity, on any redemption, by declaration or otherwise;
. failure to make sinking fund payments when due;
. failure to perform any other covenant for 90 days after notice that
performance was required; and
. our bankruptcy, insolvency or reorganization.
An event of default for a particular series of debt securities does not
necessarily constitute an event of default for any other series of debt
securities issued under the indenture. If an event of default relating to the
payment of interest, principal or any sinking fund installment with respect to
any series of debt securities shall
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have occurred and be continuing, the trustee or the holders of not less than
25% in aggregate principal amount of the debt securities of such series may
declare the entire principal of all the debt securities of the series to be
due and payable immediately. If an event of default involving certain events
in bankruptcy, insolvency or reorganization of us or another event of default
under a particular series of debt securities shall have occurred and be
continuing, the trustee or the holders of not less than 25% in the aggregate
principal amount of each affected series of debt securities may declare the
entire principal amount of their respective debt securities to be due and
payable immediately. Subject to certain conditions, the holders of not less
than a majority in aggregate principal amount of the debt securities of a
series may rescind and annul any such declarations and consequences with
respect to such series.
The indenture imposes limitations on suits brought by holders of debt
securities against us. No holder of debt securities of any series may
institute any action against us under the indenture, except actions for
payment of overdue principal, premium, if any, or interest, unless:
. such holder has previously given to the trustee written notice of
default and continuance of such default,
. the holders of at least 25% in principal amount of the outstanding debt
securities of the affected series have requested that the trustee
institute the action,
. the requesting holders have offered the trustee reasonable indemnity for
expenses and liabilities that may be incurred by bringing such action,
. the trustee has not instituted the action within 60 days of the request
and
. the trustee has not received inconsistent direction by the holders of a
majority in principal amount of the outstanding debt securities of the
series.
We will be required to file annually with the trustee a certificate, signed
by one of our officers stating whether or not such officer knows of any
default by us in the performance, observance or fulfillment of any condition
or covenant of the indenture.
Discharge, Defeasance and Covenant Defeasance
We can discharge certain obligations to holders of any series of debt
securities that have not already been delivered to the trustee for
cancellation and that have either become due and payable or are by their terms
to become due and payable within one year or are scheduled for redemption
within one year. The discharge may be affected by our irrevocably depositing
with the trustee cash or U.S. government obligations, as trust funds, in an
amount certified to be sufficient to pay when due, whether at maturity, on
redemption or otherwise, the principal of, premium, if any, and interest on
the debt securities and any mandatory sinking fund payments.
Unless otherwise provided in the prospectus supplement, we may also
discharge our obligations to holders of any series of debt securities at any
time ("defeasance"). We may be released with respect to any outstanding series
of debt securities from the obligations imposed by any covenants imposed by
the series of debt securities and certain provisions of the indenture, and we
may omit to comply with the covenants without creating an event of default
("covenant defeasance"). Defeasance and covenant defeasance may be effected
only if:
. we irrevocably deposit with the trustee cash or U.S. government
obligations, as trust funds, in an amount certified to be sufficient to
pay at maturity or on redemption the principal, premium, if any, and
interest on all outstanding debt securities of such series;
. we deliver to the trustee an opinion of counsel from a nationally
recognized law firm to the effect that the holders of such series of
debt securities will not recognize income, gain or loss for U.S. federal
income tax purposes as a result of such defeasance or covenant
defeasance and that defeasance or covenant defeasance will not otherwise
alter such holders' U.S. federal income tax treatment of principal,
premium, if any, and interest payments on such series of debt securities
and
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. in the case of subordinated debt securities, no event or condition shall
exist that, under the subordination provisions applicable to such
series, would prevent us from making payments of principal of, premium,
if any, and interest on any of the subordinated debt securities at the
date of the irrevocable deposit referred to above or at any time during
the period ending on the 91st day after the deposit date.
Although we may discharge or decrease our obligations under the indenture as
described in the two preceding paragraphs, we may not avoid, among other
things, our duty to register the transfer or exchange of any series of debt
securities, to replace any temporary, mutilated, destroyed, lost or stolen
series of debt securities or to maintain an office or agency in respect of any
series of debt securities.
Modification of the Indenture
The indenture provides that we and the trustee may enter into supplemental
indentures without the consent of the holders of debt securities to:
. secure any debt securities,
. evidence the assumption by a successor corporation of our obligations,
. add covenants for the protection of the holders of debt securities,
. cure any ambiguity or correct any inconsistency in the indenture,
. establish the forms or terms of debt securities of any series and
. evidence and provide for the acceptance of appointment by a successor
trustee.
The indenture also provides that we and the trustee may, with the consent of
the holders of not less than a majority in aggregate principal amount of debt
securities of all series then outstanding and affected, voting as one class,
add any provisions to, or change in any manner, eliminate or modify in any way
the provisions of, the indenture or modify in any manner the rights of the
holders of such debt securities. We and the trustee may not, however, without
the consent of the holder of each outstanding debt security affected thereby:
. extend the final maturity of any debt security;
. reduce the principal amount or premium, if any;
. reduce the rate or extend the time of payment of interest;
. reduce any amount payable on redemption;
. change the currency in which the principal (other than as otherwise may
be provided with respect to such series), premium, if any, or interest
is payable;
. reduce the amount of the principal of any debt security issued with an
original issue discount that is payable on acceleration or provable in
bankruptcy;
. alter certain provisions of the Indenture relating to the debt
securities not denominated in U.S. dollars;
. impair the right to institute suit for the enforcement of any payment on
any debt security when due; or
. reduce the percentage of holders of debt securities of any series whose
consent is required for any modification of the indenture.
No Individual Liability of Incorporators, Shareholders, Officers or Directors
The indenture provides that no incorporator and no past, present or future
shareholder, officer or director, of UGC or any successor corporation in their
capacity as such shall have any individual liability for any of our
obligations, covenants or agreements under the debt securities or the
indenture.
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Governing Law
The indenture and the debt securities will be governed by, and construed in
accordance with, the laws of the state of New York.
Subordination
The prospectus supplement will describe any subordination provisions and
will define the senior debt to which the debt securities may be subordinated
and will set forth the approximate amount of senior debt outstanding as of the
end of UGC's most recent fiscal quarter.
BOOK-ENTRY ISSUANCE
Unless otherwise specified in the applicable prospectus supplement, DTC will
act as depositary for securities issued in the form of global securities. The
securities will be issued only as fully registered securities registered in
the name of Cede & Co., DTC's nominee. One or more fully registered global
securities will be issued for the securities representing in the aggregate the
total number of the securities, and will be deposited with or on behalf of
DTC.
DTC is a limited purpose trust company organized under the New York Banking
Law, a "banking organization" within the meaning of the New York Banking Law,
a member of the Federal Reserve System, a "clearing corporation" within the
meaning of the New York Uniform Commercial Code, and a "clearing agency"
registered under the provisions of Section 17A of the Exchange Act. DTC holds
securities that its participants deposit with DTC. DTC also facilitates the
settlement among participants of securities transactions, such as transfers
and pledges, in deposited securities through electronic computerized book-
entry changes in participants' accounts. This eliminates the need for physical
movement of securities certificates. Direct participants include securities
brokers and dealers, banks, trust companies, clearing corporations and certain
other organizations. DTC is owned by a number of its direct participants and
by the New York Stock Exchange, Inc., the American Stock Exchange, Inc. and
the National Association of Securities Dealers, Inc. Access to the DTC system
is also available to others such as securities brokers and dealers, banks and
trust companies that clear through or maintain custodial relationships with
direct participants, either directly or through others. The rules applicable
to DTC and its participants are on file with the SEC.
Purchases of securities within the DTC system must be made by or through
direct participants, which will receive a credit for the securities on DTC's
records. The beneficial ownership interest of each actual purchaser of each
security is in turn recorded on the direct and indirect participants' records.
Beneficial owners will not receive written confirmation from DTC of their
purchases. However, beneficial owners are expected to receive written
confirmations providing details of the transactions, as well as periodic
statements of their holdings, from the direct or indirect participants through
which the beneficial owners purchased securities. Transfers of ownership
interests in securities issued in the form of global securities are tobe
accomplished by entries made on the books of participants acting on behalf of
beneficial owners. Beneficial owners will not receive certificates
representing their ownership interests in the securities, except if use of the
book-entry system for the securities is discontinued.
DTC has no knowledge of the actual beneficial owners of the securities
issued in the form of global securities. DTC's records reflect only the
identity of the direct participants to whose accounts the securities are
credited, which may or may not be the beneficial owners. The participants will
remain responsible for keeping account of their holdings on behalf of their
customers.
DTC delivers notices and other communications to direct participants, by
direct participants to indirect participants, and by direct participants and
indirect participants to beneficial owners under arrangements among them,
subject to any statutory or regulatory requirements.
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Redemption notices will be sent to Cede & Co. as the registered holder of
securities issued in the form of global securities. If less than all of a
series of the securities are being redeemed, DTC's current practice is to
determine by lot the amount of the interest of each direct participant to be
redeemed.
Although voting with respect to securities issued in the form of global
securities is limited to the holders of record of the securities, in those
instances in which a vote is required, neither DTC nor Cede & Co. will itself
consent or vote with respect to the securities. Under its usual procedures,
DTC would mail an omnibus proxy to the issuer of the securities as soon as
possible after the record date. The omnibus proxy assigns Cede & Co.'s
consenting or voting rights to those direct participants to whose accounts the
securities are credited on the record date, identified in a listing attached
to the omnibus proxy.
Payments for securities issued in the form of global securities will be made
by the issuer of the securities to DTC. DTC's practice is to credit direct
participants' accounts on the payment date in accordance with their holdings
shown on DTC's records unless DTC has reason to believe that it will not
receive payments on the payment date. Payments by participants to beneficial
owners will be governed by standing instructions and customary practices and
will be the responsibility of the participant and not of DTC, the trustee or
us, subject to any statutory or regulatory requirements. Payments to DTC are
the responsibility of the issuer of the securities, disbursements of the
payments to direct participants are the responsibility of DTC, and
disbursements of the payments to the beneficial owners are the responsibility
of direct and indirect participants.
DTC may discontinue providing its services as depository with respect to any
securities at any time by giving reasonable notice to the issuer of the
securities. In the event that a successor depositary is not obtained,
individual security certificates representing the securities are required to
be printed and delivered. We may decide to discontinue use of the system of
book-entry transfers through DTC or a successor depositary.
The information in this section concerning DTC and DTC's book-entry system
has been obtained from sources that we believe to be accurate, but we assume
no responsibility for the accuracy of the information. We have no
responsibility for the performance by DTC or its participants of their
respective obligations as described in this prospectus or under the rules and
procedures governing their operations.
SELLING STOCKHOLDERS
Some of the shares of common stock being offered by this prospectus may be
offered by certain selling stockholders, including our officers or directors.
Identification of any such selling stockholder will be made in the applicable
prospectus supplement.
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PLAN OF DISTRIBUTION
We (and with respect to shares of common stock, the selling stockholders)
may sell any of the securities being offered in any one or more of the
following ways from time to time:
. through agents;
. to or through underwriters;
. through dealers; and
. directly by us.
The distribution of the securities may be effected from time to time in one
or more transactions at a fixed price or prices, which may be changed, at
market prices prevailing at the time of sale, at prices related to the
prevailing market prices or at negotiated prices.
Offers to purchase securities may be solicited by agents designated by us.
Any agent involved in the offer or sale of the securities will be named, and
any commissions payable by us to the agent will be set forth, in the
prospectus supplement. Unless otherwise indicated in the prospectus
supplement, the agent will be acting on a reasonable best efforts basis for
the period of its appointment. The agent may be deemed to be an underwriter,
as that term is defined in the Securities Act of 1933, of the securities so
offered and sold.
If securities are sold by means of an underwritten offering, we will execute
an underwriting agreement with underwriters at the time an agreement for the
sale is reached. In that case, the names of the specific managing underwriter
or underwriters, as well as any other underwriters, the amounts underwritten
and the terms of the transaction, including commissions, discounts and any
other compensation of the underwriters and dealers, will be set forth in the
prospectus supplement which will be used by the underwriters to make resales
of the securities. The underwriters will acquire securities for their own
account and may resell them from time to time in one or more transactions,
including negotiated transactions, at fixed public offering prices or at
varying prices determined by the underwriters at the time of sale. Securities
may be offered to the public either through underwriting syndicates
represented by managing underwriters or directly by one or more underwriters.
Unless otherwise indicated in the prospectus supplement, the underwriting
agreement will provide that the obligations of the underwriters are subject to
conditions precedent and that the underwriters will be obligated to purchase
all the securities if any are purchased.
We may grant to the underwriters options to purchase additional securities
to cover any over-allotments at the initial public offering price, with
additional underwriting commissions or discounts, as may be set forth in the
prospectus supplement.
If a dealer is used in the sale of the securities, we will sell the
securities to the dealer as principal. The dealer may then resell the
securities to the public at varying prices to be determined by the dealer at
the time of resale. The dealer may be deemed to be an underwriter, as the term
is defined in the Securities Act, of the securities so offered and sold. The
name of the dealer and the terms of the transaction will be set forth in the
prospectus supplement.
Offers to purchase securities may be solicited directly by us and may be
sold by us directly to institutional investors or others, who may be deemed to
be underwriters within the meaning of the Securities Act with respect to any
resale. The terms of the sales will be described in the prospectus supplement.
If described in the prospectus supplement, securities may also be offered
and sold, in connection with a remarketing on their purchase, in accordance
with a redemption or repayment under their terms, or otherwise, by one or more
remarketing firms, acting as principals for their own accounts or as agents
for us. Any remarketing firm will be identified and its compensation and the
terms of any agreement with us will be described in the prospectus supplement.
Remarketing firms may be deemed to be underwriters, as that term is defined in
the Securities Act, in connection with the securities remarketed.
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If described in the prospectus supplement, we may authorize agents and
underwriters to solicit offers by certain institutions to purchase securities
from us at the public offering price set forth in the prospectus supplement
under delayed delivery contracts providing for payment and delivery on the
date or dates stated in the prospectus supplement. The delayed delivery
contracts will be subject to only those conditions set forth in the prospectus
supplement. A commission indicated in the prospectus supplement will be paid
to underwriters and agents soliciting purchases of securities under delayed
delivery contracts accepted by us.
Agents, underwriters, dealers and remarketing firms may be entitled under
agreements with us to indemnification by us against certain liabilities,
including liabilities under the Securities Act, or to contribution for
payments that the agents, underwriters, dealers and remarketing firms may be
required to make.
Each series of securities will be a new issue. Other than the Class A common
stock, which trades on the Nasdaq National Market SM, new securities will have
no established trading market. We may elect to list any series of securities
on an exchange, and in the case of the common stock, on any additional
exchange, but, unless otherwise specified in the prospectus supplement, we
will not be obligated to do so. No assurance can be given as to the liquidity
of the trading market for any of the securities.
Agents, underwriters, dealers and remarketing firms may be customers of,
engage in transactions with, or perform services for, us and our subsidiaries
in the ordinary course of business.
LEGAL MATTERS
The validity of the common stock and the preferred stock and the status of
the debt securities as our binding obligations will be passed on for us by
Holme Roberts & Owen LLP, Denver, Colorado. Certain legal matters will be
passed on for any underwriters, agents and dealers by underwriters' counsel.
We will identify in a prospectus supplement underwriters' counsel and the
legal matters that underwriters' counsel will pass on for any underwriters.
EXPERTS
Our consolidated financial statements and schedules incorporated by
reference in this prospectus and elsewhere in the registration statement from
our Transition Report on Form 10-K for the ten months ended December 31, 1998,
have been audited by Arthur Andersen LLP, independent public accountants, as
indicated in their reports with respect thereto, and are incorporated by
reference herein in reliance upon the authority of said firm as experts in
giving said reports.
The consolidated financial statements of United International Properties,
Inc. incorporated by reference in this prospectus and elsewhere in the
registration statement from our Transition Report on Form 10-K for the ten
months ended December 31, 1998, have been audited by Arthur Andersen LLP,
independent public accountants, as indicated in their report with respect
thereto. In that report, that firm states that with respect to the year ended
February 28, 1998, it did not audit the financial statements of Tele Cable de
Morelos S.A. de C.V. and related companies ("Megapo"), as of and for the year
ended December 31, 1997, an investment that is reflected in its consolidated
financial statements using the equity method of accounting. Instead its report
with respect to Megapo is based on the report of other auditors (Galaz, Gomez
Morfin, Chavero, Yamazaki S.C.). The reports referred to above have been
incorporated by reference herein in reliance upon the authority of those firms
as experts in giving said reports.
The consolidated financial statements of UIH Europe, Inc. incorporated by
reference in this prospectus and elsewhere in the registration statement from
our Transition Report on Form 10-K for the ten months ended December 31, 1998,
have been audited by Arthur Andersen LLP, independent public accountants, as
indicated in their report with respect thereto, and are incorporated by
reference herein in reliance upon the authority of said firm as experts in
giving said report.
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The consolidated financial statements of United Telekabel Holding N.V. as of
December 31, 1998 and for the period from August 6, 1998 (inception) to
December 31, 1998 incorporated by reference in this prospectus and elsewhere
in the registration statement from our Transition Report on Form 10-K for the
ten months ended December 31, 1998 have been audited by Arthur Andersen,
independent auditors, as indicated in their report with respect thereto and
are incorporated by reference herein in reliance upon the authority of said
firm as experts in giving said report.
The consolidated financial statements of N.V. TeleKabel Beheer as of
December 31, 1998 and for the year then ended incorporated by reference in
this prospectus and elsewhere in the registration statement from our Form 8-K
dated June 28, 1999, have been audited by Arthur Andersen, independent
accountants, as indicated in their report with respect thereto, and are
incorporated by reference herein in reliance upon the authority of said firm
as experts in giving said report.
The consolidated financial statements of A2000 Holding N.V. incorporated by
reference in this prospectus and elsewhere in the registration statement from
our Form 8-K dated June 28, 1999, have been audited by Arthur Andersen,
independent auditors, as indicated in their report with respect thereto, and
are incorporated by reference herein in reliance upon the authority of said
firm as experts in giving said report.
The consolidated financial statements of Kabel Plus a.s. and subsidiaries as
of December 31, 1998 incorporated by reference in this prospectus and
elsewhere in the registration statement from our Form 8-K dated June 28, 1999,
have been audited by Arthur Andersen s.r.o., independent public accountants,
as indicated in their report with respect thereto, and are incorporated by
reference herein in reliance upon the authority of said firm as experts in
giving said report.
The consolidated financial statements of N.V. TeleKabel Beheer as of
December 31, 1997 and 1996, and for the two years ended December 31, 1997 and
1996, and for the period from August 22, 1995 (date of incorporation) until
December 31, 1995 incorporated by reference in this prospectus and elsewhere
in the registration statement from our Form 8-K/A-1 dated February 17, 1999,
have been audited by PricewaterhouseCoopers N.V., independent accountants, as
indicated in their report with respect thereto and are incorporated by
reference herein in reliance upon the authority of said firm as experts in
giving said report.
The consolidated financial statements of @Entertainment, Inc. incorporated
by reference in this prospectus and elsewhere in the registration statement
from our Form 8-K dated June 28, 1999 and Form 8-K/A-1 dated July 30, 1999,
have been audited by KPMG Polska Sp. zo.o., independent auditors, as indicated
in their report with respect thereto and are incorporated by reference herein
in reliance upon the authority of said firm as experts in giving said report.
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WHERE YOU CAN FIND MORE INFORMATION
We file annual, quarterly and special reports, proxy statements and other
information with the Securities and Exchange Commission under the Securities
Exchange Act of 1934. You may read and copy this information at the following
locations of the SEC:
Judiciary Plaza, Room 10024
450 Fifth Street, N.W. Street
Washington, D.C. 20549
Seven World Trade Center,
Suite 1300
New York, New York 10048
Citicorp Center
500 West Madison Street
Suite 1400
Chicago, Illinois 60661
You can also obtain copies of this information by mail from the Public
Reference Room of the SEC, 450 Fifth Street, N.W., Room 10024, Washington D.C.
20549, at prescribed rates. You may obtain information on the operation of the
Public Reference Room by calling the SEC at (800) SEC-0330.
The SEC also maintains an internet world wide web site that contains
reports, proxy statements and other information about issuers, like us that
file electronically with the SEC. The address of that site is
http://www.sec.gov. Our Class A common stock is traded on the Nasdaq National
MarketSM, and copies of reports, proxy statements and other information can be
inspected at the offices of the National Association of Securities Dealers,
Inc., 1735 K Street, N.W., Washington, D.C. 20006.
We have filed with the SEC registration statements on Form S-3 that register
the securities we are offering. The registration statement, including the
attached exhibits and schedules, contains additional relevant information
about us and our securities. The rules and regulations of the SEC allow us to
omit certain information included in the registration statement from this
prospectus.
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INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
We have filed the following documents with the SEC (File No. 0-21974) and
these documents are incorporated in this prospectus by reference and made a
part hereof.
. Our Transition Report on Form 10-K for the ten months ended December 31,
1998 (as amended by Form 10K/A filed June 24, 1999).
. Our Quarterly Reports on Form 10-Q for the quarters ended March 31,
1999, June 30, 1999 and September 30, 1999.
. Our Proxy Statement for a special meeting dated June 24, 1999, filed
June 21, 1999.
. Our Proxy Statement for our annual stockholders' meeting dated August 5,
1999, filed August 5, 1999.
. Our Current Reports on Form 8-K dated February 17, 1999 (as amended by
Form 8K/A-1 filed on March 12, 1999), February 24, April 29, June 16,
June 28, July 6, July 23, July 30 (as amended by Form 8K/A-1 filed on
August 30, 1999), September 7, 1999 and November 12, 1999.
All documents subsequently filed by us pursuant to Section 13(a), 13(c), 14
or 15(d) of the Exchange Act, after the date of this prospectus and prior to
the termination of the offering, shall be deemed to be incorporated by
reference in this prospectus and tobe a part hereof from the dates of filing
of such documents.
Any statement contained in a document incorporated or deemed to be
incorporated by reference in this prospectus shall be deemed to be modified or
superseded for purposes of this prospectus to the extent that a statement
contained herein or in any other subsequently filed document which also is or
is deemed to be incorporated by reference in this prospectus modifies or
supersedes such statement. Any statement so modified or superseded shall not
be deemed, except as so modified or superseded, to constitute a part of this
prospectus.
We will provide you without charge upon your written or oral request, a copy
of any and all of the information that has been incorporated by reference in
this prospectus (not including exhibits to such information unless such
exhibits are specifically incorporated by reference into such information).
Any such request should be directed to UnitedGlobalCom, Director of Finance,
4643 South Ulster Street, Suite 1300, Denver, Colorado 80237 (telephone number
303-770-4001).
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[LOGO OF UNITEDGLOBALCOM]
10,000,000 Shares Class A Common Stock
5,000,000 Depositary Shares
Each Representing 1/20th of a Share of
7% Series D Senior Cumulative Convertible Preferred Stock
(Liquidation Reference equivalent to $50 per Depositary Share)
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PROSPECTUS
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Joint Bookrunning Managers
Donaldson, Lufkin & Jenrette
Morgan Stanley Dean Witter
----------------
Goldman, Sachs & Co. Merrill Lynch & Co.
December 2, 1999
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No dealer, salesperson or other person has been authorized to give any infor-
mation or to make any representations other than those contained in this pro-
spectus supplement or the accompanying prospectus, and, if given or made, such
information or representations must not be relied upon as having been autho-
rized by UnitedGlobalCom or any of the underwriters. This prospectus does not
constitute an offer to sell or a solicitation of an offer to buy any of the
securities offered hereby by anyone in any jurisdiction in which such offer or
solicitation is not authorized, or in which the person making the offer or so-
licitation is not qualified to do so, or to any person to whom it is unlawful
to make such offer or solicitation. Neither the delivery of this prospectus
supplement and the accompanying prospectus nor any sale made hereunder shall
create any implication that the information contained herein is correct as of
any time subsequent to its date.
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