<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JULY 10, 1996
REGISTRATION NO. 33-
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
----------------
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
----------------
INTERNATIONAL CABLETEL INCORPORATED
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
----------------
DELAWARE 4899 52-1822078
(STATE OR OTHER (PRIMARY STANDARD INDUSTRIAL (I.R.S.
JURISDICTION OF CLASSIFICATION CODE NUMBER) EMPLOYER
INCORPORATION OR IDENTIFICATION
ORGANIZATION) NUMBER)
110 EAST 59TH STREET
NEW YORK, NEW YORK 10022
(212) 371-3714
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
RICHARD J. LUBASCH, ESQ.
SENIOR VICE PRESIDENT, GENERAL COUNSEL AND SECRETARY
INTERNATIONAL CABLETEL INCORPORATED
110 EAST 59TH STREET
NEW YORK, NEW YORK 10022
(212) 371-3714
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER INCLUDING AREA CODE,
OF AGENT FOR SERVICE)
COPY TO:
THOMAS H. KENNEDY, ESQ.
SKADDEN, ARPS, SLATE, MEAGHER & FLOM
919 THIRD AVENUE
NEW YORK, NEW YORK 10022
(212) 735-3000
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: At such
time or times on and after the Registration Statement becomes effective as the
Selling Holders may determine.
If the only securities being registered on this form are being offered
pursuant to dividend or interest reinvestment plans, please check the
following box. [_]
If any of the securities being registered on this form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. [X]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following
box and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [_]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration number of the earlier effective registration statement for the
same offering. [_]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [_]
----------------
<TABLE>
<CAPTION>
CALCULATION OF REGISTRATION FEE
- -------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------
PROPOSED PROPOSED
AMOUNT MAXIMUM MAXIMUM
TITLE OF EACH CLASS OF TO BE OFFERING PRICE AGGREGATE AMOUNT OF
SECURITIES TO BE REGISTERED REGISTERED PER NOTE(1) OFFERING PRICE(1) REGISTRATION FEE
- -------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
7% Convertible
Subordinated Notes Due
2008................... $275,000,000 100% $275,000,000 $94,827.59
- -------------------------------------------------------------------------------------------
Common Stock, par value
$0.01 per shares (2)... 7,260,726.07 -- -- --
- -------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------
</TABLE>
(1) Estimated solely for the purpose of calculating the registration fee,
pursuant to Rule 457 (i) of Regulation C under the Securities Act of 1933.
(2) Such number represents the number of shares of Common Stock as are
initially issuable upon conversion of the 7% Convertible Subordinated
Notes Due 2008 registered hereby and, pursuant to Rule 416 under the
Securities Act of 1933, such indeterminate number of shares of Common
Stock as may be issued from time to time upon conversion of the
Convertible Notes by reason of adjustment of the conversion price in
certain contingencies outlined in the Prospectus.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS
REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH
SECTION 8(a) OF THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT
SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID
SECTION 8(a), MAY DETERMINE.
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<PAGE>
INTERNATIONAL CABLETEL INCORPORATED
FORM S-3
CROSS-REFERENCE SHEET
<TABLE>
<CAPTION>
ITEM NUMBER AND CAPTION HEADING IN PROSPECTUS
----------------------- ---------------------
<C> <S> <C>
1. Forepart of the Registration
Statement and Outside Front
Cover Page of Prospectus.... Registration Statement Cover; Outside Front
Cover Page of Prospectus
2. Inside Front and Outside Back
Cover Pages of Prospectus... Inside Front and Outside Back Cover Pages
of Prospectus; Available Information
3. Summary Information, Risk
Factors and Ratio of
Earnings to Fixed Charges... Prospectus Summary; Risk Factors; Ratio of
Earnings to Fixed Charges; Selected
Consolidated Financial Information
4. Use of Proceeds.............. Use of Proceeds
5. Determination of Offering
Price....................... *
6. Dilution..................... *
7. Selling Security-Holders..... Selling Holders
8. Plan of Distribution......... Registration Statement Cover Page; Selling
Holders; Plan of Distribution
9. Description of Securities to
be Registered............... Outside Front Cover Page of Prospectus;
Description of Convertible Notes; Certain
United States Federal Income Tax
Considerations; Description of Capital
10. Interests of Named Experts Stock
and Counsel................. Legal Matters; Experts
11. Material Changes............. *
12. Incorporation of Certain
Information by Reference.... Available Information; Incorporation of
Certain Documents by Reference
13. Disclosure of Commission
Position on Indemnification
for Securities Act
Liabilities................. *
</TABLE>
- --------
* Omitted as inapplicable.
<PAGE>
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A +
+REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE +
+SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY +
+OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT +
+BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR +
+THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE +
+SECURITIES IN ANY JURISDICTION IN WHICH SUCH OFFER, SOLICITATION OR SALE +
+WOULD BE UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES +
+LAWS OF ANY SUCH JURISDICTION. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
SUBJECT TO COMPLETION DATED JULY 10, 1996
PROSPECTUS
$275,000,000
INTERNATIONAL CABLETEL INCORPORATED
7% CONVERTIBLE SUBORDINATED NOTES DUE 2008
This Prospectus relates to the 7% Convertible Subordinated Notes Due 2008
(the "Convertible Notes") of International CableTel Incorporated (the
"Company") and the shares of the Company's common stock, par value $.01 per
share ("Common Stock"), issuable upon conversion of the Convertible Notes. The
Convertible Notes were issued and sold on June 12, 1996 (the "Original
Offering") in transactions exempt from the registration requirements of the
Securities Act of 1933, as amended (the "Securities Act"), to persons
reasonably believed by the Initial Purchasers (as defined) of the Convertible
Notes to be "qualified institutional buyers" (as defined by Rule 144A under the
Securities Act) or in transactions complying with the provisions of Regulation
S under the Securities Act. The Convertible Notes and the Common Stock issuable
upon conversion thereof may be offered and sold from time to time by the
holders named herein or by their transferees, pledgees, donees or their
successors (collectively, the "Selling Holders") pursuant to this Prospectus.
The Registration Statement of which this Prospectus is a part has been filed
with the Securities and Exchange Commission pursuant to a registration rights
agreement dated as of June 12, 1996 (the "Registration Rights Agreement") among
the Company and the Initial Purchasers, entered into in connection with the
Original Offering.
The Convertible Notes will mature on June 15, 2008. Interest on the
Convertible Notes will be paid semi-annually on June 15 and December 15 of each
year, commencing December 15, 1996. The Convertible Notes are convertible at
the option of the holder thereof at any time after 90 days following the date
of original issuance thereof and prior to maturity, unless previously redeemed,
into shares of Common Stock of the Company, at a conversion price of $37.875
per share, subject to adjustment in certain events. On July 9, 1996, the
reported closing bid price of the Common Stock on the Nasdaq Stock Market's
National Market (the "NNM") (symbol "ICTL") was $28.00 per share.
The Convertible Notes are redeemable at the option of the Company, in whole
or in part, at any time on and after June 15, 1999, at the redemption prices
set forth herein. The Convertible Notes do not provide for any sinking fund.
Upon a Change of Control (as defined), holders of the Convertible Notes will
have the right, subject to certain restrictions and conditions, to require the
Company to purchase all or any part of the Convertible Notes at the principal
amount thereof together with accrued and unpaid interest to the date of
purchase.
The Convertible Notes are unsecured obligations of the Company and are
subordinate in right of payment to all existing and future Senior Debt (as
defined) of the Company. In addition, the Convertible Notes are effectively
subordinated to all existing and future liabilities of the Company's
subsidiaries, partnerships and affiliated joint ventures, including trade
payables. On March 31,1996, after giving effect to the financing of the
acquisition of NTL (as defined), the issuance of the Convertible Notes and the
use of proceeds therefrom, the Company would have had approximately $942.4
million of Senior Debt outstanding and the Company's subsidiaries would have
had approximately $594.6 million of liabilities that effectively rank senior to
the Convertible Notes. The ability of the Company and its subsidiaries to incur
additional indebtedness and liabilities is not limited by the terms of the
Indenture (as defined) pursuant to which the Convertible Notes were issued.
The Convertible Notes and the Common Stock issuable upon conversion of the
Convertible Notes may be sold by the Selling Holders from time to time directly
to purchasers or through agents, underwriters or dealers. See "Plan of
Distribution." If required, the names of any such agents or underwriters
involved in the sale of the Convertible Notes and the Common Stock issuable
upon conversion of the Convertible Notes in respect of which this Prospectus is
being delivered and the applicable agent's commission, dealer's purchase price
or underwriter's discount, if any, will be set forth in an accompanying
supplement to this Prospectus (the "Prospectus Supplement").
The Selling Holders will receive all of the net proceeds from the sale of the
Convertible Notes and the Common Stock issuable upon conversion of the
Convertible Notes and will pay all underwriting discounts and selling
commissions, if any, applicable to the sale of the Convertible Notes and the
Common Stock issuable upon conversion of the Convertible Notes. The Company is
responsible for payment of all other expenses in connection with the
performance by the Company of its obligations under the Registration Rights
Agreement.
The Selling Holders and any broker-dealers, agents or underwriters which
participate in the distribution of the Convertible Notes and the Common Stock
issuable upon conversion of the Convertible Notes may be deemed to be
"underwriters" within the meaning of the Securities Act, and any commission
received by them or purchased by them of the Convertible Notes and Common Stock
issuable upon conversion of the Convertible Notes at a price less than the
initial price to the public may be deemed to be underwriting commissions or
discounts under the Securities Act. See "Plan of Distribution" for a
description of indemnification arrangements.
PROSPECTIVE INVESTORS SHOULD CAREFULLY CONSIDER MATTERS DISCUSSED UNDER THE
CAPTION "RISK FACTORS" BEGINNING ON PAGE 10.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
The date of this Prospectus is July , 1996.
<PAGE>
2
<PAGE>
AVAILABLE INFORMATION
The Company is currently subject to the informational requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and in
accordance therewith files reports, proxy statements, information statements
and other information with the Securities and Exchange Commission (the
"Commission"). Any reports, proxy statements, information statements and other
information filed by the Company with the Commission may be inspected and
copied at the public reference facilities maintained by the Commission at Room
1024, Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549, and at
the Commission's Regional Offices located at Suite 1400, Northwestern Atrium
Center, 500 West Madison Street, Chicago, Illinois 60661 and 13th Floor, Seven
World Trade Center, New York, New York 10048, and copies of such material may
also be obtained by mail from the Public Reference Section of the Commission at
450 Fifth Street, N.W., Washington, D.C. 20549, at prescribed rates. The
Commission also maintains a site on the World Wide Web, the address of which is
http://www.sec.gov, that contains reports, proxy and information statements and
other information regarding issuers, such as the Company, that file
electronically with the Commission. Such reports, proxy statements and other
information concerning the Company also may be inspected at the offices of the
Nasdaq Stock Market, Reports Section, at 1735 K Street, Washington, D.C. 20006.
The Company has filed with the Commission a Registration Statement on Form S-
3 (herein together with all amendments and exhibits thereto, called the
"Registration Statement") under the Securities Act with respect to the
securities offered by this Prospectus. This Prospectus does not contain all of
the information set forth or incorporated by reference in the Registration
Statement and the exhibits and schedules relating thereto, certain portions of
which have been omitted as permitted by the rules and regulations of the
Commission. For further information with respect to the Company and the
securities offered by this Prospectus, reference is made to the Registration
Statement and the exhibits filed or incorporated as a part thereof, which are
on file at the offices of the Commission and may be obtained upon payment of
the fee prescribed by the Commission, or may be examined without charge at the
offices of the Commission. Statements contained in this Prospectus as to the
contents of any documents referred to are not necessarily complete, and, in
each such instance, are qualified in all respects by reference to the
applicable documents filed with the Commission.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed by the Company with the Commission are hereby
incorporated by reference into this Prospectus:
(a) the Company's Annual Report on Form 10-K for the year ended December
31, 1995, dated March 22, 1996;
(b) the Company's Quarterly Report on Form 10-Q for the period ended March
31, 1996, dated May 22, 1996, as amended by Form 10-Q/A-1 dated May 25,
1996;
(c) the Company's Current Reports on Form 8-K, dated January 8, January 16,
January 17, January 18, January 23, January 30, February 7, March 19, March
28, May 9, (as amended by Form 8-K/A-1) and June 11, 1996; and
(d) the description of the Common Stock of the Company contained in its
Registration Statement on Form S-1 (File No. 33-63570), dated May 28, 1993,
its report on Form 8-B, dated October 14, 1993 and any amendment or report
filed with the Commission for the purpose of updating such description.
All documents subsequently filed by the Company pursuant to Sections 13(a),
13(c), 14 or 15(d) of the Exchange Act prior to the termination of the offering
of securities hereunder shall be deemed to be incorporated by reference in this
Prospectus and to be a part of this Prospectus from the date of the filing
thereof. Any statement contained in a document incorporated or deemed to be
incorporated by reference herein shall be deemed to be modified or superseded
for purposes of this Prospectus to the extent that a statement contained
3
<PAGE>
herein or in any other subsequently filed document which also is or is deemed
to be incorporated by reference herein modifies or supersedes such statement.
Any such statement so modified or superseded shall not be deemed, except as so
modified or superseded, to constitute a part of this Prospectus.
The Company hereby undertakes to provide without charge to each person to
whom a copy of this Prospectus has been delivered, on the written or oral
request of any such person, a copy of any or all of the documents referred to
above which have been or may be incorporated in this Prospectus by reference
(other than certain exhibits). Requests for such copies should be directed to:
International CableTel Incorporated, 110 East 59th Street, 26th Floor, New
York, New York 10022. Attention: Richard J. Lubasch, Esq., telephone (212) 371-
3714.
In this Prospectus, references to "pounds sterling," "(Pounds)," "pence" or
"p" are to the lawful currency of the United Kingdom and references to "U.S.
dollars," "dollars," "$" or "c" are to the lawful currency of the United
States. Solely for the convenience of the reader, this Prospectus contains
translations of certain pound sterling amounts into U.S. dollars. These
translations should not be construed as representations that the pound sterling
amounts actually represent such U.S. dollar amounts or could have been or could
be or will be converted into U.S. dollars at the rate indicated or at any other
rate. Unless otherwise indicated, the translations of pounds sterling into U.S.
dollars have been made at $1.5254 per (Pounds)1.00, the noon buying rate in The
City of New York for cable transfers in pounds sterling as certified for
customs purposes by the Federal Reserve Bank of New York (the "Noon Buying
Rate") on March 31, 1996. See "Exchange Rates" for information regarding the
Noon Buying Rate for the past five fiscal years. On July 8, 1996, the Noon
Buying Rate was $1.553 per (Pounds)1.00.
4
<PAGE>
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by the more detailed
information and financial statements appearing elsewhere in this Prospectus or
incorporated herein by reference. Prospective investors should carefully
consider the factors set forth under the caption "Risk Factors." As used in
this Prospectus, the term (i) "Company" means International CableTel
Incorporated and, except in relation to the Convertible Notes and unless the
context otherwise requires, its consolidated subsidiaries and partnerships
including NTL (as defined below); (ii) "CableTel" means International CableTel
Incorporated and its consolidated subsidiaries and partnerships excluding NTL;
and (iii) "NTL" means NTL Group Limited and, unless the context otherwise
requires, its consolidated subsidiaries.
THE COMPANY
The Company entered the cable/telephony and telecommunications market in the
United Kingdom in 1993 and is the third largest operator of cable/telephony
systems in the United Kingdom in terms of the number of homes in the franchise
areas managed by the Company, its subsidiaries and affiliated joint ventures.
The Company offers customers cable television, residential telephone and
business telecommunications services, thereby generating three sources of
revenue from an integrated, high capacity, high speed, full-service network.
CableTel's network provides a two-way communications pathway which is capable
of delivering new services which may emerge from the convergence of
telecommunications, information services and entertainment. Such new services
include Cable Online, an Internet access service that was launched by the
Company in November 1995 to provide dial-up and back office infrastructure to,
among others, Virgin Net, a joint venture announced in May 1996 that plans to
offer its own brand of interactive services including Internet access. See "The
Company--CableTel."
In May, 1996, CableTel purchased NTL which provides broadcast and broadband
transmission and communications services in the United Kingdom. NTL's core
business is the transmission of television programming for the Independent
Television ("ITV") (Channel 3) companies, Channel 4 and the Welsh Fourth
Channel ("S4C"). NTL has also recently been awarded the contract for the
transmission of the Channel 5 signal for Channel 5 Broadcasting Limited. Under
contracts with those companies, NTL is responsible for operating, monitoring
and maintaining a transmission service. NTL has diversified beyond its core
business and entered into the telecommunications and radio sectors by using a
national infrastructure of over 1,200 transmission sites throughout the United
Kingdom. NTL now provides terrestrial television transmission and independent
radio signal transmission, operates a national broadband microwave
communications network which it uses to provide trunk services to
telecommunications companies, commissions and maintains emergency service radio
systems, leases and manages cell sites for wireless telephony operators,
operates satellite earth stations that uplink video signals to satellites and
designs and builds studio and broadcast facilities. See "The Company--NTL."
5
<PAGE>
THE CONVERTIBLE NOTES
Securities Offered........ $275,000,000 principal amount of 7% Convertible
Subordinated Notes Due 2008.
Maturity.................. June 15, 2008.
Interest Payment Dates.... June 15 and December 15 of each year, commencing
December 15, 1996.
Conversion................ The Convertible Notes, unless previously redeemed,
are convertible at the option of the holder at any
time after 90 days following the date of original
issuance thereof and prior to maturity into shares
of Common Stock at a conversion price of $37.875
per share, subject to adjustment in certain events.
See "Description of the Convertible Notes--
Conversion."
Optional Redemption....... The Convertible Notes may be redeemed, at the
Company's option, in whole or from time to time in
part, on at least 30 but not more than 60 days'
prior notice, at any time on and after June 15,
1999 at the redemption prices set forth herein plus
accrued but unpaid interest and Liquidated Damages,
if any. See "Description of the Convertible Notes--
Optional Redemption."
Subordination............. The Convertible Notes are unsecured obligations of
the Company and are subordinate in right of payment
to all existing and future Senior Debt of the
Company. In addition, the Convertible Notes are
effectively subordinated to all existing and future
liabilities of the Company's subsidiaries,
partnerships and affiliated joint ventures,
including trade payables. On March 31, 1996, after
giving effect to the financing of the acquisition
of NTL, the issuance of the Convertible Notes and
the use of proceeds therefrom, the Company would
have had approximately $942.4 million of Senior
Debt outstanding and the Company's subsidiaries
would have had approximately $594.6 million of
liabilities that effectively rank senior to the
Convertible Notes. The ability of the Company and
its subsidiaries to incur additional indebtedness
and liabilities is not limited by the terms of the
Indenture pursuant to which the Convertible Notes
will be issued. See "Description of the Convertible
Notes--Subordination of Convertible Notes."
Change of Control......... Upon a Change of Control (as defined), holders of
the Convertible Notes will have the right, subject
to certain restrictions and conditions, to require
the Company to repurchase all or any part of their
Convertible Notes at a purchase price equal to 101%
of the principal amount thereof plus accrued and
unpaid interest and Liquidated Damages (as
defined), if any, thereon to the date of the
repurchase. The Company may not have sufficient
funds or the financial resources necessary to
satisfy, or may be precluded by the terms governing
its indebtedness from satisfying, its obligations
to repurchase the Convertible Notes and other debt
that may become repayable upon a Change of Control.
See "Description of the Convertible Notes--
Repurchase at the Option of Holders."
6
<PAGE>
Risk Factors.............. See "Risk Factors" for a discussion of certain
factors that should be considered in evaluating an
investment in the Convertible Notes.
Use of Proceeds........... The Selling Holders will receive all of the net
proceeds from the Convertible Notes sold pursuant
to this Prospectus and the Common Stock issuable
upon conversion thereof sold pursuant to this
Prospectus. The Company will not receive any of the
proceeds from sales by the Selling Holders of the
Convertible Notes or the Common Stock issuable upon
the conversion thereof.
Federal Income Tax There are certain federal income tax consequences
Consequences.............. associated with purchasing, holding and disposing
of the Convertible Notes. See "Certain United
States Federal Tax Considerations."
7
<PAGE>
SUMMARY HISTORICAL AND PRO FORMA CONSOLIDATED FINANCIAL INFORMATION
The summary historical and pro forma consolidated financial information
presented below is derived from the Company's consolidated historical and pro
forma financial statements incorporated herein by reference.
<TABLE>
<CAPTION>
PRO FORMA
AS ADJUSTED PRO FORMA
THREE MONTHS THREE MONTHS ENDED AS ADJUSTED
ENDED MARCH 31, YEAR ENDED YEAR ENDED DECEMBER 31,
MARCH 31, --------------------- DECEMBER 31, ----------------------------
1996(1) 1996 1995 1995(1) 1995 1994 1993
<S> <C> <C> <C> <C> <C> <C> <C>
(IN THOUSANDS, EXCEPT PER SHARE DATA)
INCOME STATEMENT DATA:
Revenues............... $ 62,568 $ 18,434 $ 4,633 $206,331 $ 33,741 $ 13,745 $ 10,078
Costs and expenses
Operating expenses.... 37,578 12,629 3,296 129,105 24,415 7,827 4,441
Selling, general and
administrative
expenses............. 27,271 21,798 10,514 91,118 72,629 27,890 5,042
Depreciation and
amortization......... 20,255 12,190 5,532 61,421 29,823 17,916 6,206
--------- --------- --------- -------- -------- -------- --------
Total costs and
expenses........... 85,104 46,617 19,342 281,644 126,867 53,633 15,689
--------- --------- --------- -------- -------- -------- --------
Operating loss........ (22,536) (28,183) (14,709) (75,313) (93,126) (39,888) (5,611)
Other income (expense)
Interest, dividend and
other income......... 8,103 7,763 3,714 22,231 21,185 18,403 5,182
Interest expense...... (34,482) (24,711) (4,242) (67,543) (28,379) (11,410) (2,950)
Foreign currency
transactions gains
(losses)............. (123) (123) 196 84 84 2,062 (7,052)
--------- --------- --------- -------- -------- -------- --------
Loss before income
taxes and minority
interests............. (49,038) (45,254) (15,041) (120,541) (100,236) (30,833) (10,431)
Income tax benefit
(provision)........... (42) (42) 448 (7,169) 2,477 (1,630) (645)
--------- --------- --------- -------- -------- -------- --------
Loss before minority
interests............. (49,080) (45,296) (14,593) (127,710) (97,759) (32,463) (11,076)
Minority interests..... 2,572 2,572 1,127 6,974 6,974 2,890 --
--------- --------- --------- -------- -------- -------- --------
Net loss............... $(46,508) $(42,724) $(13,466) (120,736) $(90,785) $(29,573) $(11,076)
========= ========= ========= ======== ======== ======== ========
Net loss per common
share(2).............. $ (1.54) $ (1.41) $ (.45) $ (4.00) $ (3.01) $ (.98) $ (.83)
========= ========= ========= ======== ======== ======== ========
Weighted average number
of common shares used
in
computation of net
loss per share(2)..... 30,211 30,211 30,181 30,190 30,190 30,175 13,327
========= ========= ========= ======== ======== ======== ========
Ratio of earnings to
fixed
charges(3)............ -- -- -- -- -- -- --
</TABLE>
<TABLE>
<CAPTION>
AS OF MARCH 31, 1996
--------------------------------------------
PRO FORMA
ACTUAL PRO FORMA (4) AS ADJUSTED (4)(5)
(IN THOUSANDS)
<S> <C> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents..... $ 661,945 $ 675,522 $ 805,609
Working capital............... 548,719 322,900 597,900
Fixed assets, net............. 716,084 868,028 868,028
Total assets.................. 1,592,693 2,054,113 2,184,200
Long-term debt................ 1,134,122 1,271,408 1,546,408
Shareholders' equity.......... 292,377 292,377 292,377
</TABLE>
(Footnotes on following page)
8
<PAGE>
- --------
(1) As adjusted to give pro forma effect to the following events as if each had
occurred at the beginning of the respective periods: (i) the acquisition of
NTL; (ii) the borrowing of approximately (Pounds)200 million pursuant to
the NTL Facilities (as defined. See "Description of Certain Indebtedness")
to finance a portion of the NTL acquisition (see "The Company--NTL--Summary
of the Acquisition") and (iii) the issuance of the Convertible Notes and
the use of net proceeds therefrom to repay approximately (Pounds)60.0
million of the Bridge Facility (as defined) and the Further Payment (as
defined) of up to (Pounds)35.0 million. The pro forma as adjusted
information is presented for illustrative purposes only and is not
necessarily indicative of the operating results that would have occurred if
the foregoing events had occurred at the beginning of the respective
periods or the future operating results of the Company.
(2) After giving retroactive effect to the four-for-three stock split by way of
stock dividend paid in August 1995.
(3) Fixed charges consist of interest expense, including capitalized interest,
amortization of fees related to debt financing and rent expense deemed to
be interest. The fixed charges coverage deficiency amounts to $42.7
million, $13.9 million, $105.4 million, $31.8 million and $10.4 million for
the three months ended March 31, 1996 and 1995 and for the years ended
December 31, 1995, 1994 and 1993, respectively, and pro forma as adjusted
$46.5 million and $125.8 million for the three months ended March 31, 1996
and for the year ended December 31, 1995, respectively.
(4) Giving pro forma effect to the following events as if each had occurred on
March 31, 1996: (i) the acquisition of NTL and (ii) the borrowing of
approximately (Pounds)200 million pursuant to the NTL Facilities. See "The
Company--NTL--Summary of the Acquisition." The pro forma information is
presented for illustrative purposes only and is not necessarily indicative
of the financial position that would have occurred if the acquisition of
NTL had been consummated on March 31, 1996 or the future financial
position of the Company.
(5) As adjusted for the gross proceeds to the Company from the Original
Offering of approximately $275 million (before adjustments for discounts,
commissions and other estimated expenses of the Original Offering) and the
use of the proceeds therefrom to repay approximately (Pounds)60.0 million
falling due under the Bridge Facility and the payment of the Further
Payment of up to (Pounds)35.0 million.
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RISK FACTORS
Prospective investors should consider carefully all of the information set
forth in this Prospectus and, in particular, should evaluate the following
risks before deciding to purchase the Convertible Notes.
SUBORDINATION OF CONVERTIBLE NOTES
The Convertible Notes are subordinated in right of payment to all existing
and future Senior Debt (as defined) of the Company. As of March 31, 1996,
after giving effect to the financing of the acquisition of NTL, the Original
Offering and the use of proceeds therefrom, the Company would have had
approximately $942.4 million of Senior Debt. See "--Potential Adverse
Consequences of Leverage," "--Need for Additional Financing; Proposed Credit
Facilities" and "Description of Convertible Notes--Subordination of
Convertible Notes." In addition, the Convertible Notes are effectively
subordinated to all existing and future indebtedness and other liabilities and
commitments of the Company's subsidiaries. See "--Dependence Upon Cash Flow
from Subsidiaries."
POTENTIAL ADVERSE CONSEQUENCES OF LEVERAGE
The Company is, and, following the consummation of the Original Offering
will continue to be, highly leveraged. At March 31, 1996, after giving effect
to the acquisition of NTL and the financing thereof, the issuance of the
Convertible Notes and the use of the proceeds therefrom, the Company's total
long-term indebtedness would have been approximately $1.5 billion,
representing approximately 84.1% of total capitalization, including the
Company's: (i) $611.8 million accreted value of 11 1/2% Series B Senior
Deferred Coupon Notes Due 2006 (the "11 1/2% Notes"); (ii) $168.6 million
accreted value of 12 3/4% Series A Senior Deferred Coupon Notes Due 2005 (the
"12 3/4% Notes"); (iii) $161.9 million accreted value of 10 7/8% Senior
Deferred Coupon Notes Due 2003 (the "10 7/8% Notes" and, collectively with the
11 1/2% Notes and the 12 3/4% Notes, the "Senior Notes"); and (iv) $191.8
million principal amount of 7 1/4% Convertible Subordinated Notes Due 2005
(the "7 1/4% Convertible Notes"). As the Company's subsidiaries draw down
amounts expected to be available under the Revolving Credit Facility (as
defined), the Proposed Credit Facilities (as defined) and other possible
future financings, the amount of debt outstanding will increase further. The
indentures governing the Convertible Notes, the Senior Notes and the 7 1/4%
Convertible Notes permit the Company and its subsidiaries to incur substantial
additional indebtedness. The ability of the Company and its subsidiaries to
make scheduled payments under present and future indebtedness will depend on,
among other things, the Company's and its subsidiaries' ability to complete
the build out of the franchises on a timely and cost effective basis, the
Company's ability to access the earnings of its subsidiaries (which may be
subject to significant contractual and legal limitations), the future
operating performance of the Company and its subsidiaries and the Company's
ability to refinance its indebtedness when necessary. Each of these factors is
to a large extent subject to economic, financial, competitive, regulatory and
other factors that are beyond the Company's and its subsidiaries' control. See
"--Uncertainty of Construction Progress and Costs" and "--Dependence Upon Cash
Flow from Subsidiaries."
The agreements and debt instruments in respect of the Company's indebtedness
(including the NTL Facilities--see "Description of Certain Indebtedness--The
NTL Facilities") contain, and the Proposed Credit Facilities and other
possible future financings are expected to contain, various covenants which,
among other things, require the Company to maintain certain financial ratios,
restrict or prohibit the payment of dividends and other distributions to the
Company by its subsidiaries, restrict asset sales and dictate the use of
proceeds from the sale of assets. These restrictions, in combination with the
leveraged nature of the Company, could limit the ability of the Company to
respond to market conditions or meet extraordinary capital needs or otherwise
could restrict corporate activities and the ability of the Company's
subsidiaries to make payments to the Company which might otherwise fund
payments due on the Convertible Notes and the Company's other indebtedness.
See "--Dependence Upon Cash Flow from Subsidiaries." There can be no assurance
that such restrictions will not adversely affect the Company's ability to
finance its future operations or capital needs or to engage in other business
activities, such as acquisitions, which may be in the interest of the Company.
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The degree to which the Company is leveraged could have important
consequences to holders of the Convertible Notes, including the following:
(i) increasing the Company's vulnerability to adverse changes in general
economic conditions or increases in prevailing interest rates; (ii) limiting
the Company's ability to obtain additional financing for working capital,
capital expenditures, acquisitions and general corporate purposes, including
the build out of the networks in the franchises; (iii) requiring a substantial
portion of the Company's and its subsidiaries' cash flow from operations to be
dedicated to debt service requirements, thereby reducing the funds available
for dividends, operations and future business opportunities; and (iv)
increasing the Company's and its subsidiaries' exposure to increases in
interest rates given that certain of the Company's and its subsidiaries'
borrowings may be at variable rates of interest. Further, all or a substantial
portion of the indebtedness of the Company and its subsidiaries (including all
amounts outstanding pursuant to the NTL Facilities) is expected to mature
prior to the final maturity of the Convertible Notes. In addition, the Company
may under certain circumstances be obligated to offer to repurchase its
outstanding debt securities (including, without limitation, the Convertible
Notes) prior to maturity and there can be no assurance that the Company will
have the financial resources necessary or otherwise be able to repurchase
those securities and the Convertible Notes in such circumstances.
NEED FOR ADDITIONAL FINANCING; PROPOSED CREDIT FACILITIES
The development, construction and operation of the Company's cable
television and telecommunications network will require substantial capital
investment. The Company believes that, after taking into account CableTel's
proportional ownership of its franchises, the aggregate cost of network
construction from March 31, 1996 through passing 2,090,000 of the total
2,292,000 homes in its franchises in accordance with its regulatory build
schedules (including the license payments in respect of the Northern Ireland
LDL and the Gwent and Glamorgan LDLs) will be approximately (Pounds)1.05
billion (the "Anticipated Funding Requirement"). The Company intends to resume
discussions with commercial banks toward arranging credit facilities (the
"Proposed Credit Facilities") to further fund a portion of such construction
costs and working capital requirements (see "Description of Certain
Indebtedness--The Proposed Credit Facilities"). Based on information currently
available to the Company, the Company estimates that expected sources of funds
including, but not limited to, existing cash on hand, the Proposed Credit
Facilities (or other financings) if obtained and projected cash flow from
operations will be sufficient to fund the Anticipated Funding Requirement.
The information in the preceding paragraph includes projections; in
reviewing such information it should be kept in mind that actual results may
differ materially from those in such projections. These projections were based
on various factors and were derived utilizing numerous assumptions. Important
assumptions and factors that could cause actual results to differ materially
from those in these projections include the Company's ability to continue to
design network routes, install facilities, obtain and maintain any required
government licenses or approvals and finance construction and development, all
in a timely manner, at reasonable costs and on satisfactory terms and
conditions, as well as assumptions about customer acceptance, churn rates,
overall market penetration and competition from providers of alternative
services. Other factors and assumptions not identified above were also
involved in the derivation of these projections, and the failure of such other
assumptions to be realized as well as other factors may also cause actual
results to differ materially from those projected. The Company assumes no
obligation to update these projections to reflect actual funding requirements,
capital expenditures and results, changes in assumptions or changes in other
factors affecting such projections. There can be no assurance that (i) the
Proposed Credit Facilities or any other financings will be obtained (or be
available on acceptable terms); (ii) the Company or its subsidiaries will be
able to access all amounts available under the terms of the Proposed Credit
Facilities or other financings; (iii) actual construction costs will not
exceed the Anticipated Funding Requirement (see "--Uncertainty of Construction
Progress and Costs" below) or that additional financing substantially in
excess of the Anticipated Funding Requirement will not be required; (iv)
conditions precedent to advances under any such credit facility will be
satisfied when funds are required; (v) the Company will not acquire additional
franchises or other new businesses that would require additional capital; (vi)
the Company will be able to generate sufficient cash from operations to meet
any unfunded portion of its capital requirements when required or to satisfy
the conditions under the terms of the Senior Notes or the
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Company's other debt instruments and agreements for the incurrence of
additional debt financing or (vii) the Company's subsidiaries will not incur
losses from their exposure to exchange rate fluctuations or be adversely
affected by interest rate fluctuations. See "--Currency Risk." To the extent
that the Company's subsidiaries determine not to, or are unable to, obtain or
borrow under the Proposed Credit Facilities, the actual amounts required to
complete the Company's planned build out exceed the Anticipated Funding
Requirement or the Company's operating cash flow does not meet expectations,
the Company will require additional debt or equity financing. There can be no
assurance that any such financing will be available on acceptable commercial
terms or at all. The inability of the Company to secure additional financing
could result in a failure to comply with the minimum build milestones set
forth in its licenses and could ultimately lead to the revocation of such
licenses. See "--Requirement to Meet Build Milestones."
In addition to the Anticipated Funding Requirement, significant amounts of
additional funding will be required to complete the acquisition of NTL, pay
principal and interest due under the NTL Facilities and fund related
acquisition costs and the ongoing capital expenditure requirements of NTL's
business and operations. See "--The NTL Acquisition."
The Company will continue to consider strategic acquisitions and
combinations primarily in the United Kingdom, as attractive opportunities
arise. The Company is currently involved in various stages of exploration,
development and negotiation of certain transactions, some of which, if
completed, would be significant and are likely to involve the incurrence of
substantial indebtedness by the Company and its subsidiaries to finance such
transactions. There can be no assurances that such transactions will occur. In
particular, the indentures governing the Company's Senior Notes permit
indebtedness to be incurred to finance acquisitions only if such acquisitions
are acquisitions of either tangible or intangible assets, licenses and
computer software used in connection with a Cable Business (as defined in the
indentures governing the Senior Notes) or certain entities, directly or
indirectly, engaged in a Cable Business if such entities meet certain
qualifying criteria specified in such indentures.
DEPENDENCE UPON CASH FLOW FROM SUBSIDIARIES
The Company is a holding company that conducts its operations through its
direct and indirect wholly-owned subsidiaries and affiliated joint ventures.
As a holding company, the Company holds no significant assets other than its
investments in and advances to its subsidiaries and affiliated joint ventures.
The Company is, therefore, dependent upon its receipt of sufficient funds from
its subsidiaries and affiliated joint ventures to meet its own obligations.
The ability of the Company and its creditors, including holders of the
Convertible Notes, to benefit in the distribution of any assets of any of the
Company's subsidiaries and affiliated joint ventures upon any liquidation of
any such subsidiary or joint venture will be subject to the prior claims of
the subsidiary's or joint venture's creditors, including trade creditors and,
to the extent that such subsidiary or joint venture is not directly owned by
the Company, to the prior claims of any other persons directly or indirectly
owning such subsidiary or joint venture.
The ability of the Company to pay interest on the Convertible Notes or to
repay the Convertible Notes at maturity or otherwise, will be dependent upon
the cash flows of its subsidiaries and the payment of funds by those
subsidiaries to the Company in the form of repayment of loans, dividends or
otherwise. The Company's subsidiaries and joint ventures have no obligation,
contingent or otherwise, to pay amounts due pursuant to the Convertible Notes
or to make funds available for those payments, whether in the form of loans,
dividends or otherwise. In addition, the creditors of the Company's
subsidiaries (including the lenders under the Proposed Credit Facilities) may
impose restrictions on the rights of the Company to receive from its
subsidiaries repayment of, or interest in respect of, intercompany loans and
certain of the Company's subsidiaries may be prevented from paying dividends
or making other distributions to the Company. In particular, the NTL
Facilities prohibit the Purchaser (as defined) from paying dividends to the
Company unless certain cash flow targets are met and, if such targets are met,
require that 50% of all Excess Cash Flow (as defined in the NTL Facilities) of
the Purchaser and its subsidiaries (including the NTL group) must be applied
to prepay principal amounts outstanding under certain of the NTL Facilities.
See "Description of Certain Indebtedness--The NTL Facilities." Therefore, the
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Company's ability to make interest and principal payments when due to holders
of the Convertible Notes or other indebtedness of the Company and the
Company's ability to purchase the Convertible Notes, the 7 1/4% Convertible
Notes, the Senior Notes and other debt that may become repayable or
repurchasable upon a Change of Control or the occurrence of certain other
events is dependent upon the receipt of sufficient funds from its
subsidiaries, which may be restricted by the terms of future indebtedness of
the Company's subsidiaries.
Each of the Company's subsidiaries that is a Delaware corporation may pay
dividends, under the Delaware General Corporation Law (the "DGCL"), only out
of its surplus, or, in the circumstances prescribed by the DGCL, out of its
net profits for the fiscal year in which the dividend is declared and/or the
preceding fiscal year. Each of the Company's subsidiaries that is a United
Kingdom company is, under applicable United Kingdom law, prohibited from
paying dividends unless such payments are made out of profits available for
distribution (which consist of accumulated, realized profits, so far as not
previously utilized by distribution or capitalization, less accumulated,
realized losses, so far as not previously written off in a reduction or
reorganization of capital duly made). Other statutory and general English law
obligations also affect the ability of directors of the Company's subsidiaries
to declare dividends and the ability of the Company's subsidiaries to make
payments to the Company on account of intercompany loans. In addition, the
United Kingdom may impose a withholding tax on payments of interest and
advance corporation tax on distributions (of interest, dividends or otherwise)
by United Kingdom subsidiaries of the Company.
The Convertible Notes are effectively subordinated to all existing and
future indebtedness and other liabilities and commitments of the Company's
subsidiaries, including any borrowings by the Company's subsidiaries under the
NTL Facilities and the Proposed Credit Facilities. As of March 31, 1996, after
giving pro forma effect to the Company's acquisition of NTL, the borrowing of
approximately (Pounds)200 million pursuant to NTL Facilities, the issuance of
the Convertible Notes and the application of the net proceeds therefrom, the
Convertible Notes would have been structurally subordinated to approximately
$594.6 million of liabilities of the Company's subsidiaries. In addition, each
of the indentures governing the Senior Notes permits subsidiaries of the
Company to incur additional Indebtedness to finance the construction and
working capital needs of a Cable Business (as defined therein) and the
acquisition of cable assets or the acquisitions of certain businesses. In
light of the Company's strategy of continued growth, in part through
acquisitions, the Company and its subsidiaries may incur substantial
indebtedness in the future.
Borrowings under the NTL Facilities are, and a substantial portion of the
Company's and its subsidiaries' existing and future indebtedness (including
borrowings under the Proposed Credit Facilities) is expected to be, secured by
liens and other security interests over the assets of the Company's
subsidiaries and the equity interests in the Company's subsidiaries. In
addition, the ability of the Company and its creditors, including holders of
the Convertible Notes, the 7 1/4% Convertible Notes and the Senior Notes, to
benefit from distributions of assets of the Company's subsidiaries may be
limited to the extent that the outstanding shares of any of its subsidiaries
and such subsidiary's assets are pledged to secure other debt of the Company
or its subsidiaries. Any right of the Company to receive assets of any
subsidiary upon such subsidiary's liquidation or reorganization (and the
consequent right of the holders of the Convertible Notes to participate in
those assets) will be structurally subordinated to the claims of that
subsidiary's creditors, except to the extent that the Company is itself
recognized as an unsubordinated creditor of such subsidiary. However, to the
extent that the Company is so recognized, the claims of the Company would
still be subject to any security interests in the assets of such subsidiary
and any liabilities of such subsidiary senior to those held by the Company and
may otherwise be challenged by third parties in a liquidation or
reorganization proceeding. In addition, loan agreements may require, as in the
case of the NTL Facilities, the Company to subordinate its right to repayment
of indebtedness outstanding between it and the borrower under such agreement
or any subsidiary of the Company to the rights of the lenders under the
agreement. In particular the rights of the Company and other subsidiaries to
repayment of principal and interest lent by them to the borrower under the NTL
Facilities have been and will be subordinated to the rights of the lenders
under the NTL Facilities pursuant to subordination agreements with such
lenders.
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The principal fixed assets of the Company's subsidiaries are cable headends,
cable television and telecommunications distribution equipment,
telecommunications switches and customer equipment. The value of a substantial
portion of these fixed assets is derived from their employment in the
Company's and its subsidiaries' cable television and telecommunications
businesses. In the case of NTL, its principal fixed assets are transmission
towers, masts and antennas and the sites on which they are located. These
assets are highly specialized and, taken individually, can be expected to have
limited marketability. Consequently, in the event that secured creditors seek
to realize on the collateral securing debt of the Company's subsidiaries,
these creditors would be likely to seek to sell the business as a going
concern (possibly through a sale of pledged shares of subsidiaries), either in
its entirety, or by franchise or other business unit, in order to maximize the
proceeds realized. The amounts (and the timing of the receipt of any amounts)
available to satisfy the Company's obligations under the Convertible Notes
after any such sale may be adversely affected by provisions of laws favoring
secured creditors.
Therefore, for the reasons referred to in the preceding paragraphs, there
can be no assurance that the Company will be able to receive any cash flow
from its subsidiaries in a timely manner or at all.
THE NTL ACQUISITION
Additional Funding May Be Required. The Company anticipates that substantial
amounts of capital investment will be required in the future in order to
develop and expand NTL's business. The Company estimates, based on the
information currently available to it, that through December 31, 1997, NTL
will require up to approximately (Pounds)50 million in capital beyond that
which NTL is capable of generating from its current operations for interest
expense, capital expenditure and working capital needs. The NTL Facilities
contain a revolving credit facility (the "Revolving Credit Facility") of
(Pounds)25 million which may be used for capital expenditure and working
capital purposes of NTL, subject to satisfaction of certain drawdown
conditions including, in particular, in the case of cash advances (other than
cash advances made by the Purchaser to repay any sums paid pursuant to any
standby letters of credit issued by it in accordance with the terms of the
Revolving Facility) the repayment of a secured loan facility (the "Bridge
Facility") of (Pounds)60 million comprised in the NTL Facilities. The Company
believes that, based on current estimates, NTL's other capital needs for the
foreseeable future will be funded with existing cash on hand of the Company.
However, there can be no assurance that the actual amounts required to develop
NTL's business will not exceed the Company's current estimates, that
conditions precedent to advances under the Revolving Facility will be
satisfied or cash on hand will be available when funds are required.
The cash required for payment of interest and principal related to the
financing will be substantial and may restrict cash availability for other
purposes. See "Description of Certain Indebtedness--The NTL Facilities." While
anticipated cash flow from the combined operations and other sources should be
adequate to make those payments, such demands may limit the funds available
for development and capital expenditures. In addition, the NTL Facilities
prohibit the Purchaser from paying dividends to the Company unless certain
cash flow targets are met and, if such targets are met, require that 50% of
all Excess Cash Flow of the Purchaser and its subsidiaries (including the NTL
group) must be applied to prepay amounts outstanding under the long term
facility of (Pounds)90 million (the "Long Term Facility") comprised in the NTL
Facilities.
Unknown Acquisition Liabilities. The acquisition of NTL is structured as a
share purchase, which may result in the Purchaser having acquired NTL
companies with unknown liabilities. The Company has negotiated and obtained
from NTL's former shareholders certain representations and warranties
concerning contingent liabilities and other obligations of NTL to reduce the
risk that the Company will be held liable for unknown liabilities of NTL.
Approximately (Pounds)35 million of the purchase price for NTL payable in May
1997 (the "Further Payment") is subject to reduction if such representations
and warranties are proved to be untrue or inaccurate. Nevertheless, there may
be circumstances in which the adjustment of the Further Payment does not
provide the Company with protection from contingent or other obligations of
the NTL companies or breaches of
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the representations and warranties, to the extent that they exceed
(Pounds)35 million. The Deed of Adjustment also provides for the Further
Payment to be reduced in accordance with a formula relating to the outcome of
the review by the Office of Telecommunications ("OFTEL") of the price cap
applicable to NTL's regulated businesses (the "Price Cap Review"). If the
final outcome of the Price Cap Review is within the range indicated in OFTEL's
Interim Statement issued in May 1996 (the "Interim Statement"), then the
Further Payment will not be reduced.
Dependence Upon Site Sharing Arrangement. As a result of, among other
factors, a natural shortage of potential transmission sites and the
difficulties in obtaining planning permission for erection of further masts,
the British Broadcasting Corporation (the "BBC") and NTL have made
arrangements to share a large number of sites. Under the present arrangements,
one of the parties (the "Station Owner") is the owner, lessee or licensee of
each site and the other party (the "Sharer") is entitled to request a license
to use certain facilities at that site. Each site license granted pursuant to
the site sharing agreement is for an initial period expiring on December 31,
2005 (subject to title and to the continuation in force of the site sharing
agreement) and provides that, if requested by the Sharer, it will be extended
for further periods. The site sharing agreement and each site license provide
for the Station Owner to be paid a commercial license fee and for the Sharer
to be responsible, in normal circumstances, for the costs of accommodation and
equipment used exclusively by it. These arrangements continue between the BBC
and NTL notwithstanding the acquisition. Either party may terminate the
agreement by 5 years notice in writing to the other expiring on December 31,
2005 or at any date which is a date 10 years or a multiple of 10 years after
December 31, 2005. Although the Company does not anticipate that the site
sharing agreement or the site licenses will be terminated, there can be no
assurance that such a termination will not occur. Termination of the site
sharing arrangements would have a material adverse effect on NTL's business
and would also result in an event of default under the NTL Facilities and the
acceleration of the indebtedness outstanding thereunder. Each such event could
have a material adverse effect on the Company. In particular, an acceleration
of the indebtedness under the NTL Facilities could lead to defaults under the
indentures governing the Convertible Notes, the Senior Notes, the 7 1/4%
Convertible Notes and under the terms of other existing indebtedness of the
Company and its subsidiaries. There can be no assurance that the Company would
have sufficient resources to repay such indebtedness should it be accelerated.
Dependence Upon ITV and Other Contracts. NTL's business is substantially
dependent upon contracts with the ITV contractors, Channel 4 and S4C for the
provision of transmission services. The prices that NTL may charge these
companies for television transmission services is subject to regulation by
OFTEL. See "--Possible Changes in Government Regulation" and "Management's
Discussion and Analysis of Results of Operations and Financial Condition--
Liquidity and Capital Resources--The NTL Acquisition." The contracts with the
ITV contractors, Channel 4 and S4C terminate on December 31, 2002. Although,
historically, the ITV contractors, Channel 4 and S4C have renewed their
contracts with NTL, there can be no assurance that they will do so upon
expiration of the current contracts, that they will not negotiate terms for
NTL's provision of transmission services on a basis less favorable to NTL or
that they would not seek to obtain from third parties a portion of the
transmission services currently provided by NTL.
BBC Privatization. The United Kingdom Government has announced its intention
to privatize the BBC's transmission business upon expiration of the BBC's
Royal Charter in December 1996. Details regarding the privatization are not
yet published. If one or more businesses other than NTL successfully bid for
the BBC's transmission business, there can be no assurance that NTL will not
encounter significant competition for its transmission business from
expiration of NTL's current contracts with the ITV contractors, Channel 4 and
S4C. See "--Dependence Upon ITV and Other Contracts."
General. The benefits of the acquisition of NTL could be less than
anticipated and potential risks could be greater than expected. While the
Company believes the acquisition of NTL will be beneficial to the Company and
its stockholders, there can be no assurance that (1) the expected benefits
will be realized; (2) the potential risks will not occur; or (3) the risks can
be managed without adversely affecting the Company.
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OPERATING LOSSES; LIMITED FINANCIAL HISTORY; DEFICIENCY OF EARNINGS TO FIXED
CHARGES
Although the long distance business of OCOM Corporation ("OCOM") to which
the Company succeeded has realized net income from operations in the past, on
a consolidated basis, the Company has experienced operating losses and net
losses since 1989 (with the exception of 1992). The Company had net income
(loss) for the three months ended March 31, 1996 and 1995 and years ended
December 31, 1995, 1994, 1993 and 1992 of $(42.7 million) and $(13.5 million),
$(90.8 million), $(29.6 million), $(11.1 million) and $1.2 million,
respectively. As of March 31, 1996, the Company's accumulated deficit was
$172.3 million. The development of the Company's business to date has resulted
in significant expenditures and the continued construction and expansion of
its network will require considerable additional expenditures before
significant operating revenues may be generated. Construction and operating
expenditures have resulted in negative cash flow, which is expected to
continue at least until an adequate customer base is established. The Company
also expects to incur substantial additional operating losses, and there can
be no assurance that the Company will achieve or sustain profitability in the
future. Failure to become profitable could adversely affect the Company's
ability to sustain operations, and obtain additional required funds. See "--
Need for Additional Financing; Proposed Credit Facilities." Moreover, such a
failure would adversely affect the Company's ability to pay the required
interest payments on the Company's indebtedness (including, without
limitation, the Convertible Notes).
For the three months ended March 31, 1996 and 1995 and for the years ended
1991, 1993, 1994 and 1995, the Company's earnings were insufficient to cover
fixed charges by approximately $42.7 million and $13.5 million, $0.4 million,
$10.4 million, $31.8 million, and $105.4 million, respectively. The ratio of
earnings to fixed charges for the year 1992 was 81:1. The Company's pro forma
as adjusted earnings for the year ended December 31, 1995 and for the three
months ended March 31, 1996 were inadequate to cover pro forma as adjusted
fixed charges by $125.8 million and $46.5 million, respectively. Fixed charges
consist of interest expense, including capitalized interest, amortization of
fees related to debt financing and rent expense deemed to be interest.
REQUIREMENT TO MEET BUILD MILESTONES
The telecommunications license for each franchise contains specific
construction milestones. Under the terms of its current telecommunications
licenses, from March 31, 1996 until the end of 2003, CableTel is required to
construct cable television systems passing an aggregate of approximately
1,480,000 additional premises (residential and business), including
approximately 178,500 premises in 1996. OFTEL and the Department of Trade and
Industry ("DTI") are the only bodies with the authority to modify the
construction milestones in the licenses other than the Northern Ireland and
Gwent and Glamorgan local delivery operator licenses ("LDLs") (in respect of
which the Independent Television Commission (the "ITC") is the relevant
authority for modifying construction milestones). Based on current network
construction scheduling, the Company believes it will be able to satisfy
CableTel's milestones in the future, but there can be no assurance that such
milestones will be met. In the event that the Company is unable to meet the
construction milestones required by any of its licenses, and is unable to
obtain modifications to the milestones, the relevant license or licenses could
be revoked, which would have a material adverse effect on the Company and
which could affect the continued availability of funding to the Company and
its operating subsidiaries.
UNCERTAINTY OF CONSTRUCTION PROGRESS AND COSTS
At March 31, 1996, construction of CableTel's network had passed
approximately 29% of its final regulatory milestone requirements for all its
franchises (including the Northern Ireland and Gwent and Glamorgan
franchises). Successful construction and development of CableTel's network
will depend on, among other things, CableTel's ability to continue to design
network routes, install facilities, obtain and maintain any required
government licenses or approvals and finance construction and development, all
in a timely manner, at reasonable costs and on satisfactory terms and
conditions. The exact amounts and timing of all of these expenditures are
subject to a variety of factors which may vary greatly by market and be beyond
the control of the Company. Accordingly, there can be no assurance that the
actual amounts of capital expenditures described above will not exceed the
Anticipated Funding Requirement or that additional funding substantially in
excess of the Anticipated Funding Requirement will not be required.
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In building its network, CableTel is generally required by its licenses to
use underground construction, which is more expensive and time consuming than
aerial construction. Mechanized construction methods often cannot be used to
install network infrastructure in CableTel's franchise areas due to existing
underground utility infrastructure. In addition, CableTel is responsible for
restoring the surface area after its underground construction is completed.
Although CableTel has recently been able to negotiate construction contracts
at rates which it believes are competitive relative to the cable industry as a
whole, construction costs could increase significantly over the next few years
as existing contracts expire and as demand for cable construction services
grows due to anticipated increases in the cable industry's overall
construction activity. Accordingly, there can be no assurance that the Company
will be able to construct its network in a timely manner, or at a reasonable
cost.
For a discussion of the risks associated with the Company's Anticipated
Funding Requirement for construction of CableTel's network in its existing
franchises, see "--Need for Additional Financing; Proposed Credit Facilities."
UNCERTAINTY OF CUSTOMER ACCEPTANCE
The cable/telephony and telecommunications industry has a limited operating
history in the United Kingdom. Although initial acceptance of cable/telephony
services provided by the Company has been encouraging, the Company is unable
to predict with certainty how consumer demand for CableTel's services may
develop over time. The Company's future revenue growth depends in large
measure on (i) the development of significant consumer preference for cable
television over other types of in-home entertainment and (ii) customer
acceptance of CableTel as an attractive alternative to its competitors as a
provider of telephone and other telecommunications services. Since December
31, 1994, the Company has, through the acquisition of the Northern Ireland and
Gwent and Glamorgan LDLs increased the total number of homes in its franchises
by almost 50%. The Company's future success will depend on customer acceptance
of its services and its ability to extend CableTel's brand name in these new
franchise areas. See "--Significant Competition." The inability of the Company
to generate demand for its services could have a material adverse effect on
the Company.
To date, unlike other United Kingdom operators, CableTel has not experienced
significant churn in its franchise areas although the Company expects churn
rates to increase. There can be no assurance as to CableTel's future churn
rates. Higher levels of churn could have a material adverse effect on the
financial condition and results of operations of the Company.
SIGNIFICANT COMPETITION
The Company faces significant competition from established and new
competitors in the areas of cable television, residential telephone and
business telecommunications services. The Company believes that competition
will intensify in each of these business areas, particularly business
telecommunications.
Cable Television. CableTel's cable television systems compete with direct
reception over-the-air broadcast television, direct-to-home ("DTH") satellite
services and satellite master antenna systems ("SMATV"). Pay television and
pay-per-view ("PPV") services anticipated to be offered by CableTel will
compete to varying degrees with other communications and entertainment media,
including DTH services, home video, cinema exhibition of feature films, live
theater and newly emerging multimedia services. The Company expects that, in
the future, CableTel may face competition from programming provided by video-
on-demand services, including those that may be provided by public telephone
operators ("PTOs") with national licenses (i.e. national PTOs). The extent of
such competition depends upon, among other factors, the quantity and quality
of the programming offered, the price (including the amount of up-front and
service costs) and, with respect to broadcast services, the quality of the
broadcast signal.
National PTOs such as British Telecommunications plc ("BT") and Mercury
Communications Limited ("Mercury") were restricted from holding licenses to
provide cable/telephony systems until March 31, 1994. Since then, national
PTOs have been allowed to bid for the award of cable licenses in respect of
areas of the
17
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United Kingdom that have not already been licensed. This position results from
regulations promulgated under the Broadcasting Act 1990 and it may be changed
by further regulations which reflect changes in policy of relevant
governmental authorities. Any such change in policy could have a material
adverse effect on the Company. To the Company's knowledge, no national PTO has
applied for a cable license in its own right but certain companies associated
with BT and Mercury hold licenses to provide cable/telephony systems outside
the Company's franchises.
On September 29, 1993, the ITC issued a statement pursuant to which it took
the position (shared by OFTEL and DTI) that BT and the other national PTOs may
provide "video-on-demand" service under their existing licenses. No assurance
can be given that video-on-demand will not provide substantial competition to
the Company within its markets in the future.
In December 1995, the government of the United Kingdom published its
Broadcasting Bill 1995 (the "Broadcasting Bill") which is expected to be
enacted by the end of August 1996. If enacted in its present form, the
Broadcasting Bill will provide for the future regulation of digital
terrestrial television ("DTT") that is expected to provide an additional 18 or
more new terrestrial channels serving between 60% and 90% of the United
Kingdom's population. Some of the channels will be reserved for digital
simultaneous broadcasting by the existing terrestrial broadcasters. The
introduction of DTT, as well as digital satellite television will provide both
additional programming opportunities as well as increased competition for the
Company and its subsidiaries. For example, British Sky Broadcasting Limited
("BSkyB") is proposing to launch a digital satellite service in 1997 either by
itself or in conjunction with other partners including, possibly, BT (see "--
Residential Telephony"). Although customers of cable operators may be able to
receive digital satellite television signals for more than 120 channels from
their cable operator using their existing equipment (subject to capacity
restraints), there can be no assurance that satisfactory (or any) terms of
carriage will be obtained by CableTel for digital satellite programs or
channels.
The full extent to which existing or future competitors using existing or
developing media will compete with cable television systems may not be known
for several years. There can be no assurance, however, that existing, proposed
or as yet undeveloped technologies will not become dominant in the future and
render cable television systems less profitable or even obsolete.
Residential Telephony. The Company competes primarily with BT in providing
telephone services to residential customers. BT, formerly the only major
national PTO in the United Kingdom, has an established market presence, fully
built networks and resources substantially greater than those of the Company.
According to OFTEL, at December 1995, nearly 95% of United Kingdom residential
telephone exchange line customers are customers of BT. The Company's growth in
telecommunications services, therefore, depends upon its ability to convince
BT's customers to switch to the Company's telecommunications services. The
Company believes that price is currently one of the most important factors
influencing the decision of United Kingdom customers to switch to a cable
telecommunications service. BT has, however, introduced significant price
reductions in certain categories of calls and, due to regulatory price
controls, BT is expected to make further reductions in its telecommunications
prices. Accordingly, although the Company intends to remain competitive, in
the future it may be unable to offer residential telephone services at rates
lower than those offered by BT. In such case, the Company may experience a
decline in its average per line residential telecommunications revenues, may
not achieve desired penetration rates and may experience a decline in total
revenues. There can be no assurance that any such decline in revenues or
penetration rates will not adversely affect the financial condition and
results of operations of the Company and its subsidiaries.
In addition to BT, other telecommunications competitors which may have
substantially greater resources than those of the Company could prevent the
Company from increasing its share of the residential telecommunications
market. AT&T Communications (U.K.) Ltd. ("AT&T U.K.") was awarded a national
PTO license in December 1994 and has announced an intention to enter both the
business and residential markets. In addition, IONICA L3 Limited ("IONICA"),
will begin to offer telecommunications services via a fixed radio network in
1996. IONICA announced in November 1995 an arrangement with Scottish Power
18
<PAGE>
Telecommunications Limited ("Scottish Telecom"), a subsidiary of Scottish
Power PLC, whereby Scottish Telecom will provide IONICA's service in Scotland.
Liberty Communications Limited, the U.K.'s other licensed wireless local loop
operator, is expected to launch its residential telephone service in late
1996. In addition, on February 8, 1996, the DTI announced the award of two
licenses to operate radio fixed access services in the 2 GHz band. These new
licenses enable the two licensees, BT and RadioTEL Systems, to provide
telecommunications services to customers living in defined remote rural areas
mainly in Scotland, Wales and Northern Ireland and create potential additional
competition for the Company's residential telephony services in certain remote
rural areas of the Company's Northern Ireland franchise. The Company also
competes with mobile networks such as those provided by Telecom Securicor
Cellular Radio Limited (marketed under the name "Cellnet") (in which BT has a
60% interest) and Vodafone Group Plc, and with personal communications
networks such as those provided by a joint venture between Cable and Wireless
plc and U S WEST, Inc. (marketed under the name "Mercury One-2-One") and
Orange Personal Communications Services Limited (marketed under the name
"Orange"). There can be no assurance that the Company will be able to compete
successfully with BT or such other telecommunications operators.
The Company believes that it has a competitive advantage in the residential
market because of its ability to offer integrated telephone, cable television
("CATV"), telecommunications services (including interactive and on line
services) and dual product packages designed to encourage customers to
subscribe to both services. However, there can be no assurance that this
competitive advantage will continue. Indeed, BT, Mercury and other national
PTOs will be entitled to convey CATV services from 2001 and, subject to a
review by the Director General, possibly from as early as 1998. BSkyB is
currently marketing telecommunications services on behalf of BT, which enables
BSkyB's customers to earn additional discounts on BT's residential
telecommunications volume discount plans. In addition, it is reported from
time to time that BT and BSkyB are discussing the formation of cooperative
arrangements. For example, recent press reports have indicated that the two
companies are in advanced discussions regarding the formation of a joint
venture to promote digital satellite television and interactive services in
the United Kingdom. Given the respective market positions of BT and BSkyB, the
Company believes that, if the two companies successfully combine their
respective marketing strengths, the resulting combination may provide
significant competition to cable operators including CableTel. At present,
however, it remains to be seen whether cooperative arrangements, such as the
proposed joint venture, can be established successfully. Based on recent press
reports, the Company believes that significant issues remain to be resolved
between the parties. The Company cannot currently predict the effect that
competition from joint BT/BSkyB ventures would have on CableTel's business
until further details are available as to how it is proposed that these and
other issues are to be resolved.
Business Telephony. BT also is the Company's principal competitor in
providing business telecommunications services. In addition, the Company
competes with Mercury (a majority owned subsidiary of Cable and Wireless PLC),
Energis Communications Limited ("Energis") (a subsidiary of the National Grid
Company plc), Scottish Telecom in Scotland and with other companies that have
recently been granted telecommunications licenses, such as MFS Communications
Limited. In the future, the Company may compete with additional entrants to
the business telecommunications market, such as AT&T U.K. Competition is based
on price and quality of services and the Company expects price competition to
intensify if Energis and other new market entrants compete aggressively. Most
of these competitors have substantial resources and there can be no assurance
that these or other competitors will not expand their businesses in the
Company's existing markets or that the Company will be able to continue to
compete successfully with such competitors in the business telecommunications
market.
LIMITED ACCESS TO PROGRAMMING
The Company's ability to make a competitive offering of cable television
services is dependent on CableTel's ability to contract for and obtain access
to programming at a reasonable cost. While various sources of programming are
available to cable system operators in the United Kingdom, BSkyB is currently
the most important supplier of cable programming and the exclusive supplier of
certain programming. BSkyB provides the industry with a range of programming,
including the most popular mainstream premium movie channels available in the
United Kingdom and, currently, exclusive English premier league soccer games.
BSkyB also competes with CableTel by operating a DTH satellite service that
provides programming, including
19
<PAGE>
programming that is also offered by CableTel, to approximately 3.6 million
subscribers in the United Kingdom. BSkyB's programming is important in
attracting and retaining cable television subscribers and, in the absence of
more alternative programming sources, BSkyB may be able to set and raise
prices for its programming without significant competitive pricing pressure.
On August 18, 1995, the Office of Fair Trading ("OFT") announced that the
Director General of Fair Trading ("DGFT") had reviewed and approved a revision
by BSkyB of its wholesale price list (industry rate card) for the supply of
programming to cable operators. The revised rate card sets wholesale primary
discounts based upon the cable operator's pay-to-basic ratio and market
penetration. Under the revised rate card, CableTel will pay an additional 13%
on its March 1995 prices, with effect from January 1, 1996. This review was
supplemented by a further review announced in December 1995 by the DGFT of
BSkyB's position in the pay TV market, including issues relating to the supply
of programming and related services at the wholesale level. The DGFT is
expected to respond in July of 1996. No assurance can be given that BSkyB will
not exploit its dominant market position in a manner which may have a material
adverse effect on the Company's operating results.
In addition, BSkyB announced in 1995 the conclusion of programming supply
agreements with the two largest cable operators in the United Kingdom. Under
these agreements, these two cable operators accepted significantly restrictive
provisions in return for more favorable rates than those contained in the new
BSkyB ratecard. BSkyB has, however, undertaken to suspend operation of certain
anti-competitive restrictions contained in these agreements, while the DGFT
considers further whether the agreements warrant investigation by the
Restrictive Practices Court. The Company anticipates that, as these two cable
operators together control approximately 40% of homes under franchise in the
United Kingdom, the consequences of these agreements will make it
substantially less viable for other cable operators (including CableTel) to
reduce their dependence on BSkyB as the principal source of programming supply
by developing, through cooperative ventures among cable operators, their own
PPV services, sports or movie channels and cable-exclusive programming.
CableTel, like many other cable operators, obtains most of its programming
through arrangements with BSkyB and other programming suppliers which are not
reflected in signed written agreements. To date, CableTel has not had a formal
contract with BSkyB, although it has been in discussions with BSkyB for some
time. There can be no assurance that CableTel will be able to enter into a
definitive agreement with BSkyB, that the terms of such definitive agreement
will not be less favorable to CableTel than the current arrangement, or that
BSkyB will continue to supply programming to CableTel on reasonable commercial
terms or at all. Moreover, CableTel has not, to date, entered into written
contracts with many of its other program suppliers. The loss of BSkyB or other
programming, a deterioration of the perceived quality of BSkyB or other
programming, or a material increase in the price that CableTel is required to
pay for BSkyB or other programming could have a material adverse effect on the
Company and its subsidiaries.
Because of this and other factors described in the preceding paragraphs,
there can be no assurance that its current programming will continue to be
available to the Company on acceptable commercial terms, or at all.
POSSIBLE CHANGES IN GOVERNMENT REGULATION
The principal business activities of the Company in the United Kingdom are
regulated and supervised by various governmental bodies, the ITC and OFTEL
under the directions of the Director General and the DTI on behalf of the
Secretary of State for Trade and Industry. Changes in laws, regulations or
governmental policy (or the interpretations of such laws or regulations)
affecting the Company's activities and those of its competitors, such as
licensing requirements, increased price regulation, deregulation of
interconnection arrangements, acceleration of the date (which is scheduled for
2001 but is subject to review in 1998) from which BT, Mercury and other
national PTOs can convey broadcast entertainment services over their existing
national networks or a change in policy allowing more than one cable licensee
in the franchise area could have a material adverse effect on the Company's
financial condition and results of operations. In particular, if there were a
change of government or government policy in the United Kingdom, existing
restrictions on the eligibility of BT, Mercury or certain other national PTOs
to compete with CableTel's CATV business might be removed or significantly
20
<PAGE>
weakened. The United Kingdom's opposition party, the Labour Party, has stated
its intention to review these restrictions if it is elected as the governing
party. A general election is required to be held by May 22, 1997 but may be
called earlier.
A substantial portion of NTL's business is also subject to regulation. In
particular, the prices that NTL may charge the ITV companies, Channel 4 and
S4C for television transmissions services are subject to price controls
imposed by OFTEL, which are being reviewed by the Director General. Based on
the Director General's initial conclusions published in the Interim Statement,
the Company expects that the future revenues NTL receives from providing these
services will be reduced. There is no assurance that the new price controls
resulting from the final conclusions of the Director General's review will not
be reviewed further prior to 2002 or that price controls for the years
following December 31, 2002 will not have a material adverse effect on such
revenues.
As the United Kingdom is a member of the European Union ("EU"), the Company
may be subject to regulatory initiatives of the European Commission ("EC").
Changes promulgated in EU Directives, particularly to the extent that they
require an EU television "production" and "programming" quota which may reduce
the range of programs which can be offered and increase the costs of
purchasing television programming. In addition, EU Directives may introduce
provisions requiring the Company and its subsidiaries to provide access to its
cable network infrastructure to other service providers, which could have a
material adverse effect on its business. Furthermore, as part of the
implementation of the EU Television Standards Directive, the United Kingdom
government has set out in a paper ("The Regulation of Conditional Access for
Digital Television") its approach to the regulation of conditional access for
digital television. The United Kingdom government intends to, among other
things, exclude from all licenses issued under the Telecommunications Act 1984
(the "Telecommunications Act") (including cable operators) the authority to
provide conditional access services for digital programming services and issue
a new class license. Cable operators operating those systems will have to
register with OFTEL. It is proposed that the new license will include detailed
conditions including an obligation to provide these services and a prohibition
on discrimination. A draft statutory instrument, together with a draft class
license, was published for consultation on June 26, 1996.
MANAGEMENT OF GROWTH AND EXPANSION
The Company has experienced rapid growth and development in a relatively
short period of time and will continue to do so to meet its strategic
objectives and regulatory milestones. The management of such growth will
require, among other things, stringent control of construction and other
costs, continued development of the Company's financial and management
controls, increased marketing activities and the training of new personnel.
Failure to manage its rapid growth and development successfully could have a
material adverse effect on the Company's financial condition and operating
results.
DEPENDENCE ON KEY PERSONNEL
The Company's businesses are managed by a small number of key executive
officers, the loss of certain of whom, such as Mr. George S. Blumenthal and
Mr. J. Barclay Knapp, could have a material adverse effect on the Company. The
Company believes that its future success will depend in large part on its
continued ability to attract and retain highly skilled and qualified
personnel. The Company has not entered into written employment contracts or
non-compete agreements with, nor has it obtained life insurance policies
covering, such key executive officers. Certain senior managers of the Company
also serve as members of senior management of other companies in the
telecommunications business.
RAPID TECHNOLOGICAL CHANGES
The telecommunications industry is subject to rapid and significant changes
in technology. While the Company believes that for the foreseeable future
these changes will neither materially affect the continued use of fiber optic,
coaxial or copper cabling technologies nor materially hinder the Company's
ability to acquire
21
<PAGE>
necessary technologies, the effect of technological changes on the businesses
of the Company cannot be predicted.
The Company believes that its advanced network design is sufficiently
flexible to permit it to deliver a wide variety of existing entertainment,
telecommunications and information services and will enable it to offer
anticipated new services in the future without incurring significant
additional construction costs to adapt its existing underground network.
However, the cost of implementation of emerging and future technologies could
be significant and the Company's ability to fund such implementation will
depend on its ability to obtain additional financing. See "--Need for
Additional Financing; Proposed Credit Facilities."
In the future, digital compression techniques may allow terrestrial
broadcasters to offer approximately eight digital channels on a frequency
which currently carries one analog channel. The Company believes that if
digital terrestrial broadcast or digital satellite television services are
introduced successfully in the United Kingdom, at competitive prices, the
Company, as well as its competitors, will be able to increase significantly
the number of channels they are able to offer to their customers. However, the
effect of any emerging and future technological changes on the viability or
competitiveness of the Company's network and services cannot be accurately
predicted.
CURRENCY RISK
To the extent that the Company obtains financing in United States dollars
and incurs expenses in the construction and operation of the Company's
regional systems in the United Kingdom in British pounds sterling, it will
encounter currency exchange rate risks. In addition, the Company's revenues
will be generated primarily in British pounds sterling while its interest and
principal obligations with respect to most of the Company's existing
indebtedness (including, without limitation, the indebtedness represented by
the Senior Notes and the 7 1/4% Convertible Notes and the Convertible Notes)
are, payable in United States dollars. While the Company may consider entering
into transactions to hedge the risk of exchange rate fluctuations, there can
be no assurance that the Company will engage in such transactions, or, if the
Company decides to engage in such transactions, that they will be successful
and that shifts in the currency exchange rates will not have a material
adverse effect on the Company.
FRAUDULENT CONVEYANCE
Under applicable provisions of the federal bankruptcy law or comparable
provisions of state fraudulent transfer law, if the Company, at the time it
incurred indebtedness under the Convertible Notes, (a) incurred such
indebtedness with the intent of hindering, delaying, or defrauding current or
future creditors, or (b)(i) received less than reasonably equivalent value or
fair consideration therefor and (ii)(A) was insolvent or rendered insolvent by
reason of such incurrence, (B) was engaged or about to engage in a business or
transaction for which its remaining assets constituted unreasonably small
capital to carry on such business or (C) intended to incur, or believed that
it would incur, debts beyond its ability to pay such debts as they mature,
then such indebtedness under the Convertible Notes could be voided or
invalidated, or could be subordinated to all other debts of the Company. The
voiding or invalidating of any of such indebtedness of the Company could
result in an event of default with respect to other indebtedness of the
Company, which could result in acceleration of such other indebtedness.
The measures of insolvency for purposes of the foregoing considerations will
vary depending upon the law applied in any such proceeding. Generally,
however, a company will be considered insolvent if the sum of its respective
debts is greater than all such company's property at a fair valuation or if
the present fair saleable value of its assets is less than the amount that
would be required to pay its probable liability on its existing debts
(including contingent liabilities), as they become absolute and mature. The
Company believes that it was not, after giving effect to the issuance of the
Convertible Notes, considered insolvent under any of the foregoing standards.
This belief is based on the Company's analysis of its subsidiaries' cash flow
projections and other
22
<PAGE>
financial information, including pro forma financial statements. There can be
no assurance, however, that a court passing on such questions would agree with
the Company.
INSURANCE COVERAGE
The Company obtains insurance of the type and in the amounts that it
believes are customary in the United Kingdom for similar companies. Consistent
with this practice, the Company does not insure the underground portion of its
cable network. Any catastrophe affecting a significant portion of the
Company's underground cable network could result in substantial uninsured
losses.
ANTI-TAKEOVER MATTERS
Certain provisions of the Indenture and the indentures governing the Senior
Notes and the 7 1/4% Convertible Notes may have the effect of delaying or
preventing transactions involving a Change of Control (as defined) of the
Company, including transactions in which stockholders might otherwise receive
a possible substantial premium for their shares over then current market
prices, and may limit the ability of stockholders to approve transactions that
they may deem to be in their best interest.
A Change of Control would require the Company to make an offer to purchase
all the Convertible Notes, the Senior Notes and the 7 1/4% Convertible Notes,
may require the Company to refinance substantial amounts of its indebtedness
and would impose other significant obligations on the Company. The inability
of the Company to purchase all or some of the Convertible Notes, the Senior
Notes and the 7 1/4% Convertible Notes tendered for purchase, would also
constitute an event of default under the Indenture and the indentures
governing the Senior Notes and the 7 1/4% Convertible Notes, which would have
certain adverse consequences to the Company and holders of the Convertible
Notes.
The Restated Certificate of Incorporation of the Company as currently in
effect contains certain provisions which may have the effect, alone or in
combination with each other or with the existence of authorized but unissued
Common Stock and any series of preferred stock, of precluding or rendering
more difficult a hostile takeover, making it more difficult to remove or
change the composition of the Company's incumbent board of directors and its
officers, being adverse to stockholders who desire to participate in a tender
offer and depriving stockholders of possible opportunities to sell their
shares at temporarily higher prices. See "Description of Capital Stock--
Certain Special Provisions." In particular, the rights issuable pursuant to
the stockholder rights plan of the Company have certain anti-takeover effects
as they will cause substantial dilution to a person or group that acquires a
substantial interest in the Company without the prior approval of the Board of
Directors. The effect of such rights may be to inhibit a change in control of
the Company (including through a third party tender offer at a price which
reflects a premium to then prevailing trading prices) that may be beneficial
to the Company's stockholders. See "Description of Capital Stock--Certain
Special Provisions--Stockholder Rights Plan." Under the Company's Certificate
of Incorporation, holders of Common Stock and holders of the Series A Junior
Participating Preferred Stock (the "Junior Preferred Stock") issued upon
exercise of such rights generally vote as a class, with each share of Common
Stock being entitled to one vote per share and each share of Junior Preferred
Stock being entitled to 100 votes per share. As a result of the provisions of
the Restated Certificate of Incorporation and the ownership of the Company, no
change of control requiring stockholder approval is possible without the
consent of the owners of the Junior Preferred Stock.
RESTRICTIONS ON DIVIDENDS
The indentures governing the Senior Notes impose certain limitations on the
payment of dividends. The Company's ability to pay cash dividends on the
Company's equity securities including the Common Stock and to make other
"Restricted Payments" is limited under the indentures governing the Senior
Notes to the sum of (i) the difference between Cumulative EBITDA (as defined
in the indentures governing the Senior Notes) and 1.5 times Cumulative
Interest Expense (also defined in the indentures governing the Senior Notes)
plus (ii) net proceeds from the sale of capital stock (excluding the proceeds
of the Company's offering of 10 million
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<PAGE>
Common Stock in October 1993). Further, the terms of the NTL Facilities
restrict, and the terms of the Proposed Credit Facilities or other future
indebtedness of the Company's subsidiaries may (subject to the terms of the
indentures governing the Senior Notes) restrict, the ability of certain of the
Company's subsidiaries to distribute earnings to the Company or make other
payments to the Company. See "--Dependence Upon Cash Flow from Subsidiaries"
above. Neither the Company nor its predecessor, OCOM Corporation, has ever
paid cash dividends on its Common Stock. In addition, the payment of any
dividends by the Company in the future will be at the discretion of the
Company's Board of Directors and will depend upon, among other things, future
earnings, operations, capital requirements, the general financial condition of
the Company and its subsidiaries and general business conditions. See
"Dividend Policy" and "Risk Factors--Operating Losses; Limited Financial
History."
LACK OF PUBLIC MARKET FOR CONVERTIBLE NOTES
The Convertible Notes were issued in June 1996 to a limited number of
institutional buyers and are eligible for trading in the Private Offerings
Resales and Trading through Automatic Linkages ("PORTAL") Market. The
Registration Rights Agreement does not obligate the Company to keep the
Registration Statement of which this Prospectus is a part effective after the
third anniversary of the date when the Registration Statement is declared
effective, or, if earlier, the date when all the Convertible Notes and the
Common Stock issuable on conversion thereof covered by the Registration
Statement have been sold pursuant to the Registration Statement. In addition,
the Company is permitted by the terms of the Registration Rights Agreement to
suspend use of this Prospectus during certain periods and in certain
circumstances relating to pending corporate developments and public filings
with the Commission and similar events. The Company does not intend to apply
for listing of the Convertible Notes on any securities exchange or to seek
approval for quotation through any automated quotation system. Accordingly,
there can be no assurance regarding the future development of a market for the
Convertible Notes or the ability of holders of Convertible Notes or the price
at which such holders may be able to sell their Convertible Notes. If any such
market were to develop, the Convertible Notes could trade at prices that may
be substantially lower than the initial offering price. There can be no
assurance as to the development or as to the liquidity of any trading market
that may develop for the Convertible Notes.
There can be no assurance that the market prices for Company's securities
including the Convertible Notes and the Common Stock issuable on conversion
thereof will not be subject to substantial fluctuations. Factors such as
fluctuations in the operating results of the Company, announcements of
technological innovations or events affecting others in the industries in
which the Company operates, changes in governmental legislation or regulation,
currency and exchange rate fluctuations and general economic conditions may
have significant effect on the market prices of its securities, including the
Convertible Notes.
CONSEQUENCES OF FURTHER EQUITY OFFERINGS
The Company could make additional public or private sales of equity
securities. Depending on market conditions and other factors, the effect of
such equity offering could be to cause a dilution with respect to the holders
of the Company's Common Stock.
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USE OF PROCEEDS
The Selling Holders will receive all of the net proceeds from the
Convertible Notes sold pursuant to this Prospectus and the Common Stock
issuable upon conversion thereof sold pursuant to this Prospectus.
The Company will not receive any of the proceeds from sales by the Selling
Holders of the Convertible Notes or the Common Stock issuable upon conversion
thereof.
PRICE RANGE OF COMMON STOCK
The Company's Common Stock is traded on the NNM under the symbol "ICTL."
From August 1, 1991 through October 13, 1993, the Common Stock of OCOM
Corporation, the Company's predecessor, traded on the NNM under the symbol
"OHCO." The following table sets forth, for the periods indicated, the high
and low last sale prices on the NNM for the securities of the Company as
traded during these respective time periods. The prices in the table are
adjusted to reflect a four-for-three stock split effected in August 1995.
<TABLE>
<CAPTION>
LAST SALE PRICE
---------------
HIGH LOW
<S> <C> <C>
1994
First Quarter............................................... $ 19.13 $ 13.31
Second Quarter.............................................. 17.91 13.83
Third Quarter............................................... 24.00 15.19
Fourth Quarter.............................................. 24.75 20.35
1995
First Quarter............................................... 25.13 20.25
Second Quarter.............................................. 26.25 20.63
Third Quarter............................................... 28.31 24.75
Fourth Quarter.............................................. 27.38 23.75
1996
First Quarter............................................... 30.13 22.00
Second Quarter.............................................. 30.00 29.50
Third Quarter (through July 5, 1996)........................
</TABLE>
On July 5, 1996, the last sale price for the Company's Common Stock, as
reported on the NNM, was $29.50. As of July 5, 1996, there were approximately
531 record holders of the Common Stock. This figure does not reflect
beneficial ownership of shares held in nominee name.
25
<PAGE>
DIVIDEND POLICY
Neither the Company nor its predecessor, OCOM Corporation, has ever paid
cash dividends on its Common Stock. Pursuant to the indentures governing the
Senior Notes, certain limitations apply to the payment of cash dividends on
the Company's equity securities and other "restricted payments." See "Risk
Factors--Restrictions on Dividends." The NTL Facilities restrict, and the
Proposed Credit Facilities and the terms of other indebtedness of the
Company's subsidiaries may in the future restrict, the ability of certain of
the Company's subsidiaries to distribute earnings to the Company or make other
payments of funds to the Company. See "Risk Factors--Dependence on Cash Flow
of Subsidiaries" and "--Restrictions on Dividends." In addition, the Company
does not currently intend to pay cash dividends in the foreseeable future on
the Company's Common Stock as it intends to retain earnings to fund
construction of the systems, working capital needs, debt service and the
growth of its businesses.
EXCHANGE RATES
The following table sets forth, for the periods indicated, the Noon Buying
Rate for pounds sterling expressed in U.S. dollars per (Pounds)l.00.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, PERIOD END AVERAGE(1) HIGH LOW
<S> <C> <C> <C> <C>
1988.................................... $1.81 $1.78 $1.91 $1.66
1989.................................... 1.61 1.63 1.82 1.51
1990.................................... 1.93 1.79 1.98 1.59
1991.................................... 1.87 1.76 2.00 1.60
1992.................................... 1.51 1.76 2.00 1.51
1993.................................... 1.48 1.50 1.59 1.42
1994.................................... 1.57 1.53 1.64 1.46
1995.................................... 1.55 1.58 1.64 1.53
Three months ended March 31, 1996....... 1.53 1.53 1.56 1.50
</TABLE>
---------------------
(1) The average of the Noon Buying Rates on the last day of
each month during the relevant period.
RATIO OF EARNINGS TO FIXED CHARGES
For the three months ended March 31, 1996 and 1995 and for the years ended
1991, 1993, 1994 and 1995, the Company's earnings were insufficient to cover
fixed charges by approximately $42.7 million and $13.5 million, $0.4 million,
$10.4 million, $31.8 million, and $105.4 million, respectively. The ratio of
earnings to fixed charges for the year 1992 was 81:1. The Company's pro forma
as adjusted earnings for the year ended December 31, 1995 and for the three
months ended March 31, 1996 were inadequate to cover pro forma as adjusted
fixed charges by $125.8 million and $46.5 million, respectively. Fixed charges
consist of interest expense, including capitalized interest, amortization of
fees related to debt financing and rent expense deemed to be interest.
26
<PAGE>
CAPITALIZATION
The following table sets forth the capitalization of the Company at March
31, 1996 (after giving effect to the increase in the number of authorized
shares of Common Stock from 50 million to 100 million shares, which was
approved by the Company's shareholders on June 4, 1996): (i) on an actual
basis, (ii) on a pro forma basis giving effect to the following events as if
each had occurred on March 31, 1996: (a) the acquisition of NTL and (b) the
borrowing of approximately (Pounds)200 million pursuant to the NTL Facilities
to finance a portion of the NTL purchase price (see "The Company--NTL--Summary
of the Acquisition") and (iii) on a pro forma basis as described in (ii) above
and as adjusted to give effect to the issuance of the Convertible Notes and
application of the net proceeds therefrom to repay approximately (Pounds)60.0
million ($91.5 million) of the Bridge Facility (included under short-term
borrowings below) and the Further Payment of approximately (Pounds)35.0
million ($53.4 million).
<TABLE>
<CAPTION>
AS OF MARCH 31, 1996
-------------------------------------
PRO FORMA
ACTUAL PRO FORMA AS ADJUSTED
(IN THOUSANDS)
<S> <C> <C> <C>
Cash and cash equivalents.............. $ 661,945 $ 675,522 $ 805,609(1)
========== ========== ==========
Short-term borrowings, including cur-
rent portion of long-term debt........ $ 44,351 $ 212,145(2) $ 120,621(2)
========== ========== ==========
Long-term debt (excluding current por-
tion):
The 10 7/8% Notes.................... $ 161,941 $ 161,941 $ 161,941
The 12 3/4% Notes.................... 168,606 168,606 168,606
The 11 1/2% Notes.................... 611,825 611,825 611,825
The 7 1/4% Convertible Notes......... 191,750 191,750 191,750
The Long Term Facility............... -- 137,286 137,286
The Convertible Notes................ -- -- 275,000
---------- ---------- ----------
Total long-term debt............... 1,134,122 1,271,408 1,546,408
Shareholders' equity:
Series preferred stock, $.01 par
value, 2,500,000 shares authorized,
none issued or outstanding.......... -- -- --
Common stock, $.01 par value,
100,000,000 shares authorized,
30,294,000 actual, pro forma, and
pro forma as adjusted issued and
outstanding(3)...................... 303 303 303
Additional paid-in capital........... 464,126 464,126 464,126
Cumulative translation adjustment.... 213 213 213
(Deficit)............................ (172,265) (172,265) (172,265)
---------- ---------- ----------
Total shareholders' equity......... 292,377 292,377 292,377
---------- ---------- ----------
Total capitalization................... $1,426,499 $1,563,785 $1,838,785
========== ========== ==========
</TABLE>
- ---------------------
(1) Before adjustments for discounts, commissions and other estimated expenses
of the Original Offering.
(2) Includes (Pounds)50 million ($76.3 million) outstanding under the short
term facility comprised in the NTL Facilities (the "Short Term Facility")
which is scheduled to be repaid in December 1996 unless certain conditions
are met. If, as the Company expects, such conditions will be met, then the
amounts outstanding under the Short Term Facility will be automatically
converted into loans outstanding under the Long Term Facility.
(3) Does not include an aggregate of 21,920,000 shares of Common Stock,
consisting of (i) 6,649,000 shares of Common Stock subject to options,
(ii) 1,053,000 shares of Common Stock subject to warrants (including
164,000 shares of Common Stock issuable upon exercise of 164,000 warrants
which were issued pursuant to the terms of the solicitation of the
consents of the holders of the 10 7/8% Notes in January 1996); (iii)
6,957,000 shares of Common Stock issuable upon conversion of the 7 1/4%
Convertible Notes; and (iv) 7,261,000 shares of Common Stock issuable upon
conversion of the Convertible Notes.
27
<PAGE>
SELECTED CONSOLIDATED FINANCIAL INFORMATION
The selected consolidated financial information presented below under the
captions Income Statement Data for the years ended December 31, 1995, 1994,
1993, 1992 and 1991 and Balance Sheet Data as of December 31, 1995, 1994,
1993, 1992 and 1991, were derived from Consolidated Financial Statements of
the Company audited by Ernst & Young LLP. The accompanying unaudited interim
financial information as of March 31, 1996 and for the periods ended March 31,
1996 and 1995 include all adjustments (consisting only of normal recurring
accruals) which are, in the opinion of management, necessary for a fair
presentation of the results of operations for such interim periods. Operating
results for the three months ended March 31, 1996 are not necessarily
indicative of the results that may be expected for the year ending December
31, 1996. The following information should be read in conjunction with the
Consolidated Financial Statements incorporated by reference in this
Prospectus.
<TABLE>
<CAPTION>
THREE MONTHS
ENDED MARCH 31, YEAR ENDED DECEMBER 31,
------------------ ---------------------------------------------
1996 1995 1995 1994 1993(1) 1992 1991
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Revenues................ $ 18,434 $ 4,633 $ 33,741 $ 13,745 $ 10,078 $12,220 $7,801
Costs and expenses
Operating expenses..... 12,629 3,296 24,415 7,827 4,441 4,171 3,448
Selling, general and
administrative
expenses............... 21,798 10,514 72,629 27,890 5,042 2,899 1,320
Depreciation and 12,190 5,532 29,823 17,916 6,206 4,495 4,059
amortization........... -------- -------- -------- -------- -------- ------- ------
Total costs and 46,617 19,342 126,867 53,633 15,689 11,565 8,827
expenses............ -------- -------- -------- -------- -------- ------- ------
Operating income
(loss)................ (28,183) (14,709) (93,126) (39,888) (5,611) 655 (1,026)
Other income (expense)
Interest, dividend and
other income........... 7,763 3,714 21,185 18,403 5,182 1,594 604
Interest expense....... (24,711) (4,242) (28,379) (11,410) (2,950) -- --
Foreign currency
transactions gains (123) 196 84 2,062 (7,052) -- --
(losses)............... -------- -------- -------- -------- -------- ------- ------
Income (loss) before
income taxes and
minority interests..... (45,254) (15,041) (100,236) (30,833) (10,431) 2,249 (422)
Income tax benefit (42) 448 2,477 (1,630) (645) (1,028) (504)
(provision)............. -------- -------- -------- -------- -------- ------- ------
Income (loss) before
minority interests...... (45,296) (14,593) (97,759) (32,463) (11,076) 1,221 (926)
Minority interests...... 2,572 1,127 6,974 2,890 -- -- --
-------- -------- -------- -------- -------- ------- ------
Net income (loss)....... $(42,724) $(13,466) $(90,785) $(29,573) $(11,076) $ 1,221 $ (926)
======== ======== ======== ======== ======== ======= ======
Net income (loss) per $ (1.41) $ (.45) $ (3.01) $ (.98) $ (.83) $ .13 $ (.10)
common share(2)........ ======== ======== ======== ======== ======== ======= ======
Weighted average number
of common shares used
in computation of net
income (loss) per share
including common stock 30,211 30,181 30,190 30,175 13,327 9,367 8,833
equivalents(2)......... ======== ======== ======== ======== ======== ======= ======
Ratio of earnings to
fixed charges(3)....... -- -- -- -- -- 81:1 --
</TABLE>
<TABLE>
<CAPTION>
AS OF
MARCH 31, AS OF DECEMBER 31,
--------- ---------------------------------------------
1996 1995 1994 1993(1) 1992 1991
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Cash and cash
equivalents............ $ 661,945 $ 175,283 $294,602 $400,097 $ 9,113 $ 4,571
Working capital......... 548,719 76,128 251,544 410,421 28,750 5,016
Fixed assets, net....... 716,084 639,674 191,725 36,422 14,065 16,104
Total assets............ 1,592,693 1,010,669 664,366 594,976 45,647 43,276
Long-term debt ......... 1,134,122 513,026 143,488 130,553 -- --
Shareholders' equity.... 292,377 339,257 436,534 452,402 43,260 42,034
</TABLE>
- --------
(1) In 1993, the Company acquired certain of its United Kingdom subsidiaries
in exchange for $3.1 million in cash, 5,831,416 shares of common stock,
options to purchase an aggregate of 44,832 shares of common stock and the
assumption of certain liabilities of Insight Communications Company U.K.,
LP. ("Insight U.K."). The aggregate purchase price including expenses was
$127.8 million. In addition, the Company sold 15,333,333 shares of common
stock, receiving proceeds of $290.0 million after expenses, and the
Company issued $212.0 million principal amount of its 10 7/8% Notes,
receiving proceeds of $119.9 million after original issue discount and
expenses.
(2) After giving retroactive effect to the four-for-three stock split by way
of stock dividend paid in August 1995.
(3) Fixed charges consist of interest expense, including capitalized interest,
amortization of fees related to debt financing and rent expense deemed to
be interest. The fixed charges coverage deficiency amounted to $42.7
million, $13.9 million, $105.4 million, $31.8 million, $10.4 million and
$422,000 for the three months ended March 31, 1995 and 1996 and for the
years ended December 31, 1995, 1994, 1993 and 1991, respectively.
The Company did not declare or pay any cash dividends during the years
indicated.
28
<PAGE>
THE COMPANY
The Company entered the cable/telephony and telecommunications market in the
United Kingdom in 1993 and is the third largest operator of cable/telephony
systems in the United Kingdom in terms of the number of homes in the franchise
areas managed by the Company, its subsidiaries and affiliated joint ventures.
The Company offers customers cable television, residential telephone and
business telecommunications services, thereby generating three sources of
revenue from an integrated, high capacity, high speed, full-service network.
The Company's network provides a two way communications pathway which is
capable of delivering new services which may emerge from the convergence of
telecommunications, information services and entertainment.
In May 1996, the Company, through an indirect wholly-owned subsidiary,
acquired NTL. NTL, formerly the engineering division of the Independent
Broadcasting Authority of the United Kingdom (the "IBA"), was formed in 1990
and privatized by the United Kingdom Government in 1991. NTL's core business
is the transmission of television programming for the ITV (Channel 3)
companies, Channel 4 and S4C. NTL has also successfully bid for the
transmission of the Channel 5 signal for Channel 5 Broadcasting Limited. Under
contracts with those companies, NTL is responsible for operating, monitoring
and maintaining a transmission service. Transmission is carried out by means
of a network of transmitters located at over 1,200 transmission sites
throughout England. In addition to its core business, NTL broadcasts signals
for Teletext and independent local radio broadcasters. Since its
privatization, NTL has also diversified into non-regulated telecommunications
transmission via microwave links between its towers, entered the satellite
earthstation business, acquired DTELS Limited ("DTELS"), a company which
installs and services radio systems for emergency services and businesses, and
developed capabilities to install turnkey television facilities in the
international market.
CABLETEL
Based on operating results and experience gained by management in the United
States telecommunications market, CableTel has developed marketing strategies
that it believes will maximize customer subscription rates, customer retention
and operating profitability. These strategies include a focus on geographic
regions with distinct cultural characteristics, which allows CableTel to
tailor its marketing and product offerings to meet local needs and
preferences. As of March 31, 1996, CableTel had constructed its integrated
full-service network past 516,000 homes and had approximately 144,300 revenue
generating units ("RGUs") from its newly constructed integrated full-service
network, which resulted in penetration rates of homes marketed of 29% for
telephone and 29% for CATV. An RGU is one telephone account or one CATV
account; a dual customer counts as two RGUs.
CableTel is developing its franchises in the United Kingdom, where it has
clustered 16 separate franchises into five distinct geographic regions (the
"Regional Areas"). A summary of CableTel's Regional Areas as of March 31, 1996
is outlined below.
<TABLE>
<CAPTION>
HOMES IN
FRANCHISE(1)
----------------------
OWNERSHIP EQUITY
REGIONAL AREA MAJOR CITIES/TOWNS PERCENTAGE TOTAL ADJUSTED
<S> <C> <C> <C> <C>
Central Scotland........ Glasgow 100.0% 499,000 499,000
South Wales(2).......... Cardiff, Newport and Swansea 60.0 540,000(3) 324,000(3)
Suburban London:
Surrey and Hampshire... Guildford and Woking 100.0 136,000 136,000
Hertfordshire and
Bedfordshire.......... Luton and Stevenage 70.0 348,600 244,000
West Yorkshire.......... Huddersfield 100.0 138,400 138,400
Northern Ireland(2)..... Belfast and Londonderry 100.0 428,000(4) 428,000(4)
--------- ---------
FRANCHISE TOTALS...... 2,090,000 1,769,400
========= =========
</TABLE>
- ---------------------
(Footnotes on following page)
29
<PAGE>
- ---------------------
(1) Based on the Company's regulatory milestones which were derived from the
1981 census (being the census statistics at the date each license was
granted).
(2) The Telecommunications Act licenses for the Gwent and Glamorgan LDLs and
the Northern Ireland LDL, (and all other LDLs) are not expected to be
issued until the second quarter of 1996.
(3) Includes the final regulatory build milestone of 230,000 homes in the
Gwent and Glamorgan LDL of the total of 330,000 homes in the LDL.
(4) The final regulatory milestone for the Northern Ireland LDL is 428,000
homes of the total of 530,000 homes in the LDL.
The Company believes that it can maximize its return on its investment in
its integrated full-service network by successfully combining CableTel's
strategies for developing, operating and marketing "last mile" cable/telephony
systems and NTL's national transmission network and expertise in the broadcast
and communications business to provide high-quality voice, data and
communications services throughout the United Kingdom. On November 20, 1995,
CableTel launched its Internet access service, Cable Online, as a national
service throughout the United Kingdom. This service provides access to the
World Wide Web, via the Company's telephone switches, to customers in and
outside its Regional Areas. The Company anticipates that Cable Online will
become CableTel's fourth revenue stream in the near future. On May 13, 1996,
CableTel announced the establishment of the Virgin Net joint venture with
Virgin Communications Limited ("Virgin"). The joint venture is owned 49% by a
CableTel subsidiary and 51% by the Virgin Group and is intended to offer
Internet access and interactive services to United Kingdom consumers and small
office/home office users.
Operating Results
CableTel continues to outperform the cable/telephony industry's overall
customer penetration averages for the United Kingdom telephony and CATV
business. As of March 31, 1996, Company customer RGU penetration in CableTel's
newly constructed dual (telephone and CATV) network was 58% of homes marketed.
As of March 31, 1996, CableTel's penetration was 29% for telephone and 29% for
CATV. By comparison, according to the latest available statistics of the ITC
dated January 1, 1996, United Kingdom cable customer penetration averages 22%
for telephone and 22% for television. At March 31, 1996 CableTel's churn
(subscriber termination) rate was approximately 12.8% per year. Although this
rate is significantly better than estimates of the average United Kingdom
churn rates, the Company expects its churn rate to increase as its customer
base increases.
As of March 31, 1996, CableTel had approximately 191,800 RGUs. The following
table illustrates the number of homes passed, the number of homes released to
marketing and the total number of customers as of March 31, 1996 and December
31, 1995 and 1994 for the dual network constructed by CableTel since 1993:
NEWLY CONSTRUCTED DUAL NETWORK
<TABLE>
<S> <C> <C> <C>
DECEMBER 31 MARCH 31
---------------- 1996
<CAPTION>
1994 1995
<S> <C> <C> <C>
Homes Passed(/1/)................................... 144,000 463,000 516,000
Homes Marketed(/2/)................................. 7,200 176,200 249,500
Total Customers..................................... 2,280 57,700 81,860
Dual.............................................. 1,680 44,630 62,440
Cable-Only........................................ 370 6,620 9,750
Telephone-Only.................................... 230 6,450 9,670
Total RGUs(/3/)..................................... 3,960 102,330 144,300
RGU Penetration..................................... 55% 58% 58%
Cable Penetration................................... 28% 29% 29%
Telephone Penetration............................... 27% 29% 29%
</TABLE>
- ---------------------
(1) "Homes passed" is the expression in common usage in the cable industry as
the measurement of the size of a cabled area, meaning the total number of
residential premises which have the potential to be connected to a cable
system.
(2) Initial sales process completed.
(3) An RGU is one telephone account or one CATV account; a dual customer
counts as two RGUs.
30
<PAGE>
In addition, as of March 31, 1996, CableTel had approximately 47,500 RGUs
from those portions of its network that had been contracted as CATV-only and
inherited by CableTel through acquisitions.
Network Construction
During 1995, the Company constructed its network past more than 319,000
homes in its existing franchise areas. As of March 31, 1996, the Company had
passed more than 601,000 homes, or approximately 29% of its total of 2,090,000
franchise homes. In addition, in 1995 the Company acquired the business and
assets of Metro Cable TV Limited in South Wales and Hertfordshire, which
includes 171,500 homes passed. Due to technological limitations, these
networks provide only CATV service to these 171,500 homes and are not counted
towards any OFTEL build milestones.
As a result of its current build progress and the retrofitting of its CATV-
only networks, the Company expects to complete approximately 57% of its
integrated full-service network in its franchises (including the recently
awarded Northern Ireland and Gwent and Glamorgan franchises) by December 31,
1997, and approximately 94% by December 31, 2000. Through March 31, 1996,
approximately $679.3 million had been invested in the construction of
CableTel's existing network and associated property, plant and equipment.
The following table summarizes CableTel's construction activities as of
March 31, 1996 and the future network construction progress projected by the
Company:
<TABLE>
<CAPTION>
AS OF DECEMBER 31,
---------------------------------------------------------------------------------------------------
1994 1995 1996(1) 1997(1) 1998(1) 1999(1) 2000(1) 2001(1) 2002(1) 2003(1)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Total homes........ 1,432,000 1,432,000 2,090,000 2,090,000 2,090,000 2,090,000 2,090,000 2,090,000 2,090,000 2,090,000
Full-service net-
work
passings.......... 144,000 463,000 771,100 1,191,300 1,525,700 1,797,400 1,964,600 2,027,300 2,090,000 2,090,000
Acquired (cable-
only)
network
passings(2)....... 85,000 85,000 44,000 -- -- -- -- -- -- --
Total homes passed. 229,000 548,000 815,100 1,191,300 1,525,700 1,797,400 1,964,600 2,027,300 2,090,000 2,090,000
Percent of homes... 16% 38% 39% 57% 73% 86% 94% 97% 100% 100%
OFTEL milestone.... 210,500 465,500 779,500 1,124,000 1,445,000 1,714,500 1,909,000 2,024,000 2,082,000 2,090,000
</TABLE>
- ---------------------
(1) The figures presented are based on the Company's projections of its
construction activities; in reviewing such information it should be kept
in mind that actual results may differ materially from those in such
projections. These projections were based on various factors and were
derived utilizing numerous assumptions. Important assumptions and factors
that could cause actual results to differ materially from those in these
projections include the Company's ability to continue to design network
routes, install facilities, obtain and maintain any required government
licenses or approvals and finance construction and development, in a
timely manner, at reasonable costs and on satisfactory terms and
conditions and the absence of weather or labor difficulties. These
assumptions are subject to a variety of factors which may vary greatly by
market and be beyond the control of the Company. See "Risk Factors--
Uncertainty of Construction Progress and Costs." Other factors and
assumptions not identified above were also involved in the derivation of
these projections, and the failure of such other assumptions to be
realized as well as other factors may also cause actual results to differ
materially from those projected.
(2) The Company intends to retrofit these networks to full-service status in
1996 and 1997. The figures presented do not include 171,500 homes of Metro
Cable TV Limited acquired in 1995 which are not subject to OFTEL build
milestones for the reasons stated on the previous page.
NTL
NTL is composed of four business divisions: Network Services, Telecom
Services, Radio Communications, and Nexus International.
Network Services
NTL's Network Services division provides television and radio broadcasters
with broadcast services. This division designs, installs, operates and
maintains new transmitter networks and has a spectrum planning service which
uses NTL software to plan the coverage of television and radio networks. It
operates a national infrastructure in the United Kingdom of over 1,200
transmission sites which deliver broadcast signals for ITV, Channel 4, S4C,
Teletext and many of the United Kingdom's independent radio broadcasters. In
addition, NTL
31
<PAGE>
has recently been awarded a ten-year contract to build the transmission system
and broadcast the signal for Channel 5, the United Kingdom's third independent
television channel. In 1995, NTL's Network Services division had total
revenues of approximately (Pounds)72.1 million or approximately 66% of NTL's
total revenues.
On May 23, 1996 the Director General of OFTEL published his initial
conclusions of his review of the price control for the television transmission
services provided by NTL to the ITV companies, Channel 4 and S4C. The total
revenues receivable by NTL for such services (the "new Po revenues") in 1996
are expected to be either (Pounds)56.4 million if the Channel 3 companies
accept certain contractual conditions or (Pounds)57.4 million if they do not.
These revenues are approximately 40% to 45% of NTL's total anticipated
revenues for 1996. If the final outcome of the Director General's review
results in price controls within the range indicated in the Interim Statement
then the total amount of such new Po revenues will be (Pounds)53.4 million in
1997 and, thereafter through 2002, will be reduced annually by, at worst, the
Retail Prices Index ("RPI") minus 4.3%. There is no assurance that these price
controls will not be reviewed again by OFTEL prior to 2002 or that price
controls for the years following December 31, 2002 will not have a material
adverse effect on the revenues NTL receives from the ITV companies, Channel 4
and S4C.
Telecom Services
The Telecom Services division includes NTL's telecommunications and
satellite services groups. The Telecom Services division builds and operates
digital networks for customers covering capacities of 2 Mbit/sec. to 155
Mbit/sec., and provides managed bandwidth for video, audio, voice and data
signals to various regions of the United Kingdom. The network infrastructures
are separate from those of BT and Mercury and are capable of delivering
national long distance services in the United Kingdom. NTL also offers a range
of satellite uplinking services including uplink for a variety of
entertainment channels to a number of satellites including ASTRA 1C, Intelset,
Eutelsat and Orion, and an international gateway service, which is capable of
providing long distance and corporate communications. NTL provides connections
to a number of satellites for clients requiring video, digital audio and data
services. In 1995, the Telecom Services division had total revenues of
approximately (Pounds)6.6 million or approximately 6% of NTL's total revenues.
Radio Communications
NTL's Radio Communications division ("RadioComms") offers the provision of
infrastructure and support services to customers with "mission critical"
communication needs. RadioComms is involved in two main activities--mobile
communications maintenance support and facilities leasing. RadioComms includes
the business operations of DTELS, the emergency services communications
business that NTL acquired from the Home Office of the United Kingdom
Government in 1994. In addition to network maintenance, NTL provides a range
of installation and commissioning services for new network design and build
projects. NTL has recently been engaged by Ericsson Telecommunications Ltd. to
assist in the design, planning and procuring of mobile radio sites for the
Mercury One-2-One mobile telephone network in the United Kingdom. In 1995,
RadioComms had total revenues of approximately (Pounds)28.7 million or
approximately 26% of NTL's total revenues.
Nexus
Nexus is NTL's broadcasting systems design division, specializing in
services associated with the design and construction of radio and television
studio centers and technical facilities. These services include installation,
commissioning, equipment procurement, training and consultancy for projects
ranging from production and post production studio facilities to full turnkey
systems involving transmitter network planning and installation. In 1995,
Nexus had total revenues of approximately (Pounds)2.0 million or approximately
2% of NTL's total revenues.
FINANCING STRATEGY
The Company expects that significant additional capital expenditures will be
required to construct the remaining portions of CableTel's integrated full-
service network. The Company believes that, after taking into account its
proportional ownership of its franchises, the aggregate cost of network
construction from March 31,
32
<PAGE>
1996 through passing 2,090,000 of the total 2,292,000 homes in its franchises
in accordance with its regulatory build schedules (including the license
payments in respect of the Northern Ireland local delivery service license LDL
and the Gwent and Glamorgan LDLs) will be approximately (Pounds)1.05 billion
(the "Anticipated Funding Requirement"). Based on information currently
available to the Company, the Company estimates that expected sources of funds
including, but not limited to, existing cash on hand, the Proposed Credit
Facilities (as defined) (or other financings, if obtained) and projected cash
flow from operations will be sufficient to fund the Anticipated Funding
Requirement. There is no assurance that actual results will not differ
materially from such estimates and projections. See "Risk Factors--Need for
Additional Financing; Proposed Credit Facilities."
Approximately (Pounds)200 million of the Initial Payment (as defined) for
NTL was financed by secured bank loans (the "NTL Facilities") arranged by
Chase Investment Bank Limited (the "Arranger"). See "The Company--NTL--Summary
of the Acquisition" and "Description of Certain Indebtedness--The NTL
Facilities." The Company plans to finance the Further Payment (as defined) and
principal amounts falling due under the NTL Facilities on or before December
31, 1996 with a combination of the net proceeds of the Original Offering and
cash on hand to the Company available for that purpose. Significant amounts of
further funding may be required to finance NTL's anticipated future capital
expenditure requirements and debt service. See "Risk Factors--The NTL
Acquisition."
SUMMARY OF THE ACQUISITION OF NTL
The following summary of the terms of the acquisition of NTL and the
financing of that acquisition does not purport to be complete and is qualified
in its entirety by reference to the Acquisition Agreements (as defined below)
and the NTL Facilities Agreements (as defined below), copies of which have
been filed with the Commission as exhibits to the Company's Registration
Statement on Form S-4 (File No. 333-1010) filed with the Commission on April
16, 1996.
On May 9, 1996, an indirect wholly owned English subsidiary of the Company
(the "Purchaser") purchased all the issued shares of NTL pursuant to an offer
(the "NTL Offer") to all the NTL shareholders and optionholders made on May 8,
1996 in accordance with a deed of irrevocable undertaking (the "Undertaking")
dated March 28, 1996, between the Company, the Purchaser and the directors and
institutional shareholders of NTL.
Pursuant to the Undertaking, the NTL Offer and a deed of adjustment (the
"Deed of Adjustment"), the Purchaser paid the initial payment of approximately
(Pounds)204 million (the "Initial Payment") in cash at closing, and agreed to
pay the Further Payment approximately (Pounds)35 million, subject to reduction
in accordance with the Deed of Adjustment), on or before the first anniversary
of the closing of the acquisition. The Initial Payment was comprised of a
payment of approximately (Pounds)157 million to NTL's shareholders and
optionholders and payments of approximately (Pounds)46.7 million to repay
NTL's bank indebtedness such that NTL was acquired free from existing bank
indebtedness.
In addition to the Initial Payment and Further Payment, the Purchaser is
required to pay (Pounds)17.1 million (the "ACT Payment"), representing the
estimated recoverable advance corporation tax previously paid by NTL, to the
former NTL shareholders in October 1996. The ACT Payment corresponds to the
amount of that advance corporation tax that is expected to be available for
set off against NTL's liability for mainstream corporation tax for the period
ended December 31, 1995 or reclaimed in respect of prior periods. The
Purchaser's obligation to pay the ACT Payment is not, however, conditioned
upon NTL's receipt of a tax credit of (Pounds)17.1 million or on the ability
of NTL to set off (Pounds)17.1 million of advance corporation tax. The
Purchaser has also assigned (to a trustee for the former NTL shareholders)
NTL's rights to receive up to approximately (Pounds)12.5 million retained in
an escrow account as security for claims against warranties given by NTL in
respect of its sale of its Advanced Products Division in October 1995. The
Company has guaranteed the Purchaser's obligations under the Undertaking, the
NTL Offer and the Deed of Adjustment (collectively the "Acquisition
Agreements").
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<PAGE>
The Initial Payment was financed principally by bank loans under the terms
of two secured loan facilities agreements (the "NTL Facilities Agreements")
dated March 28, 1996 between the Purchaser, the Arranger and The Chase
Manhattan Bank, N.A., as agent. Up to (Pounds)165 million is available
pursuant to senior secured loan facilities (the "A Facilities") and comprised
of (i) the Short Term Facility (of (Pounds)50 million), (ii) the Long Term
Facility (of (Pounds)90 million) (together with the Short Term Facility, the
"Term Loan Facilities"), and (iii) the Revolving Facility (of up to (Pounds)25
million). The Term Loan Facilities were used to finance a portion of the
Initial Payment and to refinance monies used to pay a portion of the Initial
Payment including related acquisition expenses. The Revolving Facility is
available until December 31, 1997 for capital expenditure and working capital
purposes of NTL's group. Up to (Pounds)2 million of the Revolving Facility is
available by way of standby letter of credits to guarantee overdraft and other
working capital facilities made available by any clearing bank of the
Purchaser. See "Description of Certain Indebtedness--the NTL Facilities--the A
Facilities."
The Chase Manhattan Bank, N.A. also made available to the Purchaser
(Pounds)60 million under the Bridge Facility which was used to finance most of
the remainder of the Initial Payment and acquisition costs and expenses. The
Bridge Facility is secured by guarantees from the Company, OCOM Corporation,
OCOM Sub I, Inc., OCOM Sub III, Inc., CableTel UK Group, Inc., CableTel (UK)
Limited (the "ICTL Guarantees"), NTL and certain of its subsidiaries, and by
second ranking fixed and floating charges over the present and future assets
of the Purchaser (subject to certain exceptions), NTL and certain of its
subsidiaries, subject to certain subordination arrangements. The Bridge
Facility must be repaid in full by December 31, 1996. The ICTL Guarantees
require that (Pounds)62.5 million be retained in an interest-bearing deposit
account with the lender until the Bridge Facility is repaid. See "Description
of Certain Indebtedness--The NTL Facilities--The Bridge Facility."
The Company is a Delaware corporation formed in April 1993. The Company's
principal executive office in the United States is located at 110 East 59th
Street, 26th Floor, New York, New York 10022 (telephone number: (212) 371-
3714).
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DESCRIPTION OF THE CONVERTIBLE NOTES
GENERAL
The Convertible Notes were issued pursuant to an Indenture dated as of June
12, 1996 (the "Indenture"), between the Company and Chemical Bank, as trustee
(the "Trustee"). Copies of the Indenture and the Registration Rights Agreement
have been filed as exhibits to the Registration Statement of which this
Prospectus is a part. The following summary of certain provisions of the
Convertible Notes, the Indenture and the Registration Rights Agreement does
not purport to be complete and is qualified in its entirety by reference to
the provisions of the Convertible Notes, the Indenture and the Registration
Rights Agreement, including the definitions therein of certain terms used
below. The definitions of certain terms used in the following summary are set
forth below under "--Certain Definitions."
The Convertible Notes are unsecured obligations of the Company, subordinated
in right of payment to all existing and future Senior Debt of the Company as
described under "--Subordination of Convertible Notes" and convertible into
Common Stock as described "--Conversion." The Indenture does not contain any
financial covenants or restrictions on the payment of dividends, the
incurrence of Senior Debt or issuance or repurchase of securities of the
Company. The Indenture contains no covenants or other provisions to afford
protection to holders of the Convertible Notes in the event of a highly
leveraged transaction or a change in control of the Company except to the
extent described under "--Repurchase at the Option of Holders."
The operations of the Company are conducted through its subsidiaries,
partnerships and joint ventures and, therefore, the Company is dependent upon
the cash flow of its subsidiaries, partnerships and joint ventures to meet its
obligations, including its obligations under the Convertible Notes. As a
result, the Convertible Notes are effectively subordinated to all existing and
future indebtedness and other liabilities and commitments of such
Subsidiaries.
PRINCIPAL, MATURITY AND INTEREST
The Convertible Notes are limited to $275,000,000 aggregate principal
amount. The Convertible Notes bear interest from June 12, 1996, at the rate
per annum set forth on the cover page of this Prospectus and will mature on
June 15, 2008.
Interest on the Convertible Notes are payable semiannually on June 15 and
December 15 of each year (each an "Interest Payment Date"), commencing on
December 15, 1996, to holders of record at the close of business on June 1 or
December 1 (each a "Regular Record Date") immediately preceding such Interest
Payment Date. Interest will be computed on the basis of a 360-day year
comprised of twelve 30-day months.
Interest on the Convertible Notes accrues from the most recent date to which
interest has been paid or, if no interest has been paid, from June 12, 1996.
The Convertible Notes are payable both as to principal interest and
Liquidated Damages, if any, at the office or agency of the Company maintained
for such purpose within the City and State of New York or, at the option of
the Company, payment of interest may be made by check mailed to the holders of
the Convertible Notes at their respective addresses set forth in the register
of holders of Convertible Notes, provided that a holder of Convertible Notes
with an aggregate principal amount in excess of $5,000,000 will be paid by
wire transfer in immediately available funds at the election of such holder if
such holder provides the Company with wire transfer instructions in writing.
Until otherwise designated by the Company, the Company's office or agency in
New York will be the office of the Trustee maintained for such purpose. The
Convertible Notes have been issued in registered form, without coupons, and in
denominations of $1,000 and integral multiples thereof.
OPTIONAL REDEMPTION
Except as referred to herein under "--Optional Tax Redemption," the
Convertible Notes will not be subject to redemption prior to June 15, 1999 and
will be redeemable on such date and thereafter at the option of the
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Company, in whole or in part (in any integral multiple of $1,000), upon not
less than 30 nor more than 60 days prior notice at the following redemption
prices (expressed as percentages of the principal amount set forth below), if
redeemed during the 12-month period beginning June 15 of the years indicated:
<TABLE>
<CAPTION>
REDEMPTION
YEAR PRICE
---- ----------
<S> <C>
1999........................................................... 104.9%
2000........................................................... 104.2
2001........................................................... 103.5
2002........................................................... 102.8
2003........................................................... 102.1
2004........................................................... 101.4
2005........................................................... 100.7
2006 and thereafter............................................ 100.0
</TABLE>
in each case together with accrued but unpaid interest and Liquidated Damages,
if any, to the redemption date (subject to the right of holders of record on
the relevant record date to receive interest due on an interest payment date).
If less than all the Convertible Notes are to be redeemed, the Trustee will
select the Convertible Notes to be redeemed by lot, pro rata or by such other
method as the Company shall deem fair and equitable. On or after the
redemption date, interest and Liquidated Damages, if any, will cease to accrue
on the Convertible Notes, or portion thereof, called for redemption. See "--
Registration Rights."
OPTIONAL TAX REDEMPTION
The Convertible Notes may be redeemed at the option of the Company, in whole
but not in part, upon not less than 30 nor more than 60 days notice, at any
time at a redemption price equal to the principal amount thereof plus accrued
and unpaid interest to the date fixed for redemption if after the date on
which the provisions described under "--Additional Amounts" become applicable
(the "Relevant Date") there has occurred any change in or amendment to the
laws (or any regulations or official rulings promulgated thereunder) of the
United Kingdom (or any political subdivision or taxing authority thereof or
therein), or any change in or amendment to the official application or
interpretation of such laws, regulations or rulings (a "Change in Tax Law")
which becomes effective after the Relevant Date, as a result of which the
Company is or would be so required on the next succeeding Interest Payment
Date to pay Additional Amounts with respect to the Convertible Notes with
respect to withholding taxes imposed by the United Kingdom (or any political
subdivision or taxing authority thereof or therein) (a "U.K. Withholding Tax")
and such U.K. Withholding Tax is imposed at a rate that exceeds the rate (if
any) at which U.K. Withholding Tax was imposed on the Relevant Date, provided,
however, that (i) this paragraph shall not apply to the extent that, at the
Relevant Date it was known or would have been known had professional advice of
a nationally recognized accounting firm in the United Kingdom been sought,
that a Change in Tax Law in the United Kingdom was to occur after the Relevant
Date, (ii) no such notice of redemption may be given earlier than 90 days
prior to the earliest date on which the Company would be obliged to pay such
Additional Amounts were a payment in respect of the Convertible Notes then
due, (iii) at the time such notice of redemption is given, such obligation to
pay such Additional Amount remains in effect and (iv) the payment of such
Additional Amounts cannot be avoided by the use of any reasonable measures
available to the Company.
The Convertible Notes may also be redeemed, in whole but not in part, at any
time at a redemption price equal to the principal amount thereof plus accrued
and unpaid interest and Liquidated Damages, if any, to the date fixed for
redemption if the person formed after the Relevant Date by a consolidation,
amalgamation, reorganization or reconstruction (or other similar arrangement)
of the Company or the person into which the Company is merged after the
Relevant Date or to which the Company conveys, transfers or leases its
properties and assets after the Relevant Date substantially as an entirety
(collectively, a "Subsequent Consolidation") is required, as a consequence of
such Subsequent Consolidation and as a consequence of a Change in Tax Law in
the United Kingdom occurring after the date of such Subsequent Consolidation
to pay Additional Amounts with
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<PAGE>
respect to U.K. Withholding Tax on the Convertible Notes and such U.K.
Withholding Tax is imposed at a rate that exceeds the rate (if any) at which
U.K. Withholding Tax was or would have been imposed on the date of such
Subsequent Consolidation, provided, however, that this paragraph shall not
apply to the extent that, at the date of such Subsequent Consolidation it was
known or would have been known had professional advice of a nationally
recognized accounting firm in the United Kingdom been sought, that a Change in
Tax Law in the United Kingdom was to occur after such date. The Company will
also pay, or make available for payment, to holders on the redemption date any
Additional Amounts (as described, but subject to the exceptions referred to,
under "Additional Amounts") resulting from the payment of such redemption
price.
MANDATORY REDEMPTION
Except as set forth below under "Repurchase at the Option of Holders," the
Company is not required to make mandatory redemption or sinking fund payments
with respect to the Convertible Notes.
REPURCHASE AT THE OPTION OF HOLDERS
Upon the occurrence of a Change of Control, each holder of Convertible Notes
shall have the right to require the Company to repurchase all or any part
(equal to $1,000 or an integral multiple thereof) of such holder's Convertible
Notes pursuant to the offer described below (the "Change of Control Offer") at
a purchase price equal to 101% of the principal amount thereof, plus accrued
and unpaid interest and Liquidated Damages, if any, thereon to the Change of
Control Payment Date (the "Change of Control Payment"). Within 40 days
following any Change of Control, the Company shall mail a notice to each
holder stating: (1) that the Change of Control Offer is being made pursuant to
the covenant entitled "Change of Control" and that all Convertible Notes
tendered will be accepted for payment; (2) the purchase price and the purchase
date, which shall be no earlier than 30 days nor later than 40 days from the
date such notice is mailed (the "Change of Control Payment Date"); (3) that
any Convertible Notes not tendered will continue to accrue interest; (4) that,
unless the Company defaults in the payment of the Change of Control Payment,
all Convertible Notes accepted for payment pursuant to the Change of Control
Offer shall cease to accrue interest after the Change of Control Payment Date;
(5) that holders electing to have any Convertible Notes purchased pursuant to
a Change of Control Offer will be required to surrender the Convertible Notes,
with the form entitled "Option of Holder to Elect Purchase" on the reverse of
the Convertible Notes completed, to the paying agent appointed by the Company
(the "Paying Agent") at the address specified in the notice prior to the close
of business on the third Business Day (as defined in the Indenture) preceding
the Change of Control Payment Date; (6) that holders will be entitled to
withdraw their election if the Paying Agent receives, not later than the close
of business on the second Business Day preceding the Change of Control Payment
Date, a telegram, telex, facsimile transmission or letter setting forth the
name of the holder, the principal amount of Convertible Notes delivered for
purchase, and a statement that such holder is withdrawing his election to have
such Convertible Notes purchased; and (7) that holders whose Convertible Notes
are being purchased only in part will be issued new Convertible Notes equal in
principal amount to the unpurchased portion of the Convertible Notes
surrendered, which unpurchased portion must be equal to $1,000 in principal
amount or an integral multiple thereof.
The Company will comply with the requirements of Rules 13e-4 and 14e-1 under
the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and any
other securities laws and regulations thereunder to the extent such laws and
regulations are applicable in connection with the repurchase of the
Convertible Notes in connection with a Change of Control.
On the Change of Control Payment Date, the Company will, to the extent
lawful, (1) accept for payment Convertible Notes or portions thereof tendered
pursuant to the Change of Control Offer, (2) deposit with the Paying Agent an
amount equal to the Change of Control Payment in respect of all Convertible
Notes or portions thereof so tendered and (3) deliver or cause to be delivered
to the Trustee the Convertible Notes so accepted together with an Officers'
Certificate stating the Convertible Notes or portions thereof tendered to the
Company. The Paying Agent shall promptly mail to each holder of Convertible
Notes so accepted payment in an amount
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<PAGE>
equal to the purchase price for such Convertible Notes, and the Trustee shall
promptly authenticate and mail to each holder a new Convertible Note equal in
principal amount to any unpurchased portion of the Convertible Notes
surrendered, if any; provided that each such new Convertible Note shall be in
a principal amount of $1,000 or an integral multiple thereof. The Company will
publicly announce the results of the Change of Control Offer on or as soon as
practicable after the Change of Control Payment Date.
Except as described above with respect to a Change of Control, the Indenture
does not contain any other provisions that permit the holders of the
Convertible Notes to require that the Company repurchase or redeem the
Convertible Notes in the event of a takeover, recapitalization or similar
restructuring. Although the Indenture contains several covenants, including
the provision described under "--Merger, Consolidation or Sale of Assets"
below, the provisions of the Indenture may not necessarily afford holders of
the Convertible Notes protection in the event of a highly leveraged
transaction, reorganization, restructuring, merger or similar transaction
involving the Company that may adversely affect the holders of the Convertible
Notes.
The Change of Control purchase feature of the Convertible Notes may in
certain circumstances make more difficult or discourage a takeover of the
Company, and, thus, the removal of incumbent management. The Change of Control
purchase feature, however, is not the result of management's knowledge of any
specific effort to accumulate the Company's stock or to obtain control of the
Company by means of a merger, tender offer, solicitation or otherwise, or part
of a plan by management to adopt a series of antitakeover provisions. Instead,
the Change of Control purchase feature is a result of negotiations between the
Company and Donaldson, Lufkin & Jenrette Securities Corporation and Salomon
Brothers Inc, as the initial purchasers (the "Initial Purchasers"). Management
has no present intention to engage in a transaction involving a Change of
Control, although it is possible that the Company would decide to do so in the
future. Subject to the limitations discussed below, the Company could, in the
future, enter into certain transactions, including acquisitions, refinancings
or other recapitalizations, that would not constitute a Change of Control
under the Indenture, but that could increase the amount of indebtedness
outstanding at such time or otherwise affect the Company's capital structure
or credit ratings.
The Company has outstanding $191,750,000 aggregate principal amount of its 7
1/4% Convertible Notes that rank pari passu in right of payment with the
Convertible Notes and which also have a Change of Control purchase feature.
Each holder of Senior Notes has the right to require the Company to repurchase
all or any part of the Senior Notes upon a Change of Control. See "Description
of Certain Indebtedness." The Senior Notes which rank senior in right of
payment to the Convertible Notes, will represent on maturity an aggregate
principal amount outstanding of $1,539,803,500. No assurance can be given that
the Company will have sufficient funds to satisfy its obligations to
repurchase the Convertible Notes, the 7 1/4% Convertible Notes, the Senior
Notes and other debt that may become repayable or repurchasable upon a Change
of Control. The Company's ability to pay cash to the holders of Convertible
Notes pursuant to a Change of Control Offer may be restricted by the
provisions of the indentures governing the Senior Notes or limited by the
Company's then existing financial resources. See "Risk Factors--Potential
Adverse Consequences of Leverage" and "--Dependence Upon Cash Flow from
Subsidiaries."
Credit agreements or other agreements relating to indebtedness of the
Company may contain prohibitions or restrictions on the Company's ability to
effect a Change of Control Payment. In the event a Change of Control occurs at
a time when such prohibitions or restrictions are in effect, the Company could
seek the consent of its lenders to the purchase of Convertible Notes or could
attempt to refinance the borrowings that contain such prohibition. If the
Company does not obtain such a consent or repay such borrowings, the Company
will be effectively prohibited from purchasing Convertible Notes. In such
case, the Company's failure to purchase tendered Convertible Notes would
constitute an Event of Default under the Indenture. Moreover, the events that
constitute a Change of Control under the Indenture may also constitute events
of default under future debt instruments or credit agreements of the Company
or the Company's subsidiaries (including the Proposed Credit Facilities). Such
events of default may permit the lenders under such debt instruments or credit
agreements to accelerate the debt and, if such debt is not paid or
repurchased, to enforce their security interests in what may be all or
substantially all of the assets of the Company's subsidiaries. Any such
enforcement may limit the Company's ability to raise cash to repay or
repurchase the Convertible Notes.
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<PAGE>
For the reasons described in the two immediately preceding paragraphs, there
can be no assurance that the Company will be able to repurchase the
Convertible Notes upon a Change of Control.
The Board of Directors of the Company may not, by itself, waive or modify
the Change of Control provisions of the Indenture. All the provisions of the
Indenture, including the Change of Control provision, may only be waived or
modified pursuant to the provisions described under "--Amendment, Supplement
and Waiver" below.
"Change of Control" means (i) the sale, lease or transfer of all or
substantially all of the assets of the Company 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 any Permitted
Holder), (ii) the liquidation or dissolution of the Company, (iii) any
"person" or "group" (within the meaning of Sections 13(d) 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 any Permitted Holder, becomes the "beneficial owner" (as defined in
Rule 13d-3 under the Exchange Act) of more than 35% of the total voting power
of all classes of the voting stock of the Company and/or warrants or options
to acquire such voting stock, calculated on a fully diluted basis, or (iv)
during any period of two consecutive years, individuals who at the beginning
of such period constituted the Company's Board of Directors (together with any
new directors whose election or appointment by such board or whose nomination
for election by the shareholders of the Company was approved by a vote of 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.
It is not intended that the Change of Control Offer will be made in the
event the Company enters into a transaction with management or their
affiliates. The definition of Change of Control includes a phrase relating to
the sale, lease, transfer, conveyance or other disposition of "all or
substantially all" of the Company's assets. Although there is a developing
body of case law interpreting the phrase "substantially all," there is no
precise established definition of the phrase under applicable law.
Accordingly, the ability of a holder of Convertible Notes to require the
Company to repurchase such Convertible Notes as a result of a sale, lease,
transfer, conveyance or other disposition of less than all of the assets of
the Company and its Subsidiaries to another person may be uncertain.
"Permitted Designee" means (i) a spouse or a child of a Permitted Holder,
(ii) trusts for the benefit of a Permitted Holder or a spouse or child of a
Permitted Holder, (iii) in the event of the death or incompetence
of a Permitted Holder, his estate, heirs, executor, administrator, committee
or other personal representative or (iv) any person so long as a Permitted
Holder owns at least 50% of the voting power of all classes of the voting
stock of such person.
"Permitted Holders" means George S. Blumenthal, J. Barclay Knapp and their
Permitted Designees.
SELECTION AND NOTICE
If less than all of the Convertible Notes are to be redeemed at any time,
selection of Convertible Notes for redemption will be made by the Trustee in
compliance with the requirements of the principal national securities
exchange, if any, on which the Convertible Notes are listed, or, if the
Convertible Notes are not so listed, on a pro rata basis, by lot or by such
method as the Trustee shall deem fair and appropriate, provided that no
Convertible Notes of $1,000 or less shall be redeemed in part. Notice of
redemption shall be mailed by first class mail at least 30 but not more than
60 days before the redemption date to each holder of Convertible Notes to be
redeemed at its registered address. If any Convertible Note is to be redeemed
in part only, the notice of redemption that relates to such Convertible Note
shall state the portion of the principal amount thereof to be redeemed. A new
Convertible Note in principal amount equal to the unredeemed portion thereof
will be issued in the name of the holder thereof upon cancellation of the
original Convertible Note. On and after the redemption date, interest ceases
to accrue on Convertible Notes or portions of them called for redemption.
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<PAGE>
CONVERSION
The holder of any Convertible Note has the right, exercisable at any time
after 90 days following the date of original issuance thereof and prior to
maturity, to convert the principal amount thereof (or any portion thereof that
is an integral multiple of $1,000) into shares of Common Stock at the
conversion price set forth on the cover page of this Prospectus, subject to
adjustment as described below (the "Conversion Price"), except that if a
Convertible Note is called for redemption, the conversion right will terminate
at the close of business on the business day immediately preceding the date
fixed for redemption. Upon conversion, no adjustment or payment will be made
for interest, but if any holder surrenders a Convertible Note for conversion
after the close of business on the record date for the payment of an
installment of interest and prior to the opening of business on the next
interest payment date, then, notwithstanding such conversion, the interest
payable on such interest payment date will be paid to the registered holder of
such Convertible Note on such record date. In such event, such Convertible
Note, when surrendered for conversion, need not be accompanied by payment of
an amount equal to the interest payable on such interest payment date on the
portion so converted. No fractional shares will be issued upon conversion but
a cash adjustment will be made for any fractional interest.
The Conversion Price is subject to adjustment upon the occurrence of certain
events, including (i) the issuance of shares of Common Stock as a dividend or
distribution on the Common Stock; (ii) the subdivision or combination of the
outstanding Common Stock; (iii) the issuance to substantially all holders of
Common Stock of rights or warrants to subscribe for or purchase Common Stock
(or securities convertible into Common Stock) at a price per share less than
the then current market price per share, as defined; (iv) the distribution of
shares of capital stock of the Company (other than Common Stock), evidences of
indebtedness or other assets (excluding dividends in cash, except as described
in clause (v) below) to all holders of Common Stock; (v) the distribution, by
dividend or otherwise, of cash to all holders of Common Stock in an aggregate
amount that, together with the aggregate of any other distributions of cash
that did not trigger a Conversion Price adjustment to all holders of its
Common Stock within the 12 months preceding the date fixed for determining the
stockholders entitled to such distribution and all Excess Payments (as defined
in the Indenture) in respect of each tender offer or other negotiated
transaction by the Company or any of its Subsidiaries for Common Stock
concluded within the preceding 12 months not triggering a conversion price
adjustment, exceeds 10% of the product of the current market price per share
(determined as set forth below) on the date fixed for the determination of
stockholders entitled to receive such distribution times the number of shares
of Common Stock outstanding on such date; (vi) payment of an Excess Payment in
respect of a tender offer or other negotiated transaction by the Company or
any of its subsidiaries for Common Stock, if the aggregate amount of such
Excess Payment, together with the aggregate amount of cash distributions made
within the preceding 12 months not triggering a conversion price adjustment
and all Excess Payments in respect of each tender offer or other negotiated
transaction by the Company or any of its subsidiaries for Common Stock
concluded within the preceding 12 months not triggering a conversion price
adjustment, exceeds 10% of the product of the current market price per share
on the expiration of such tender offer times the number of shares of Common
Stock outstanding on such date; and (vii) the distribution to substantially
all holders of Common Stock of rights or warrants to subscribe for securities
(other than those referred to in clause (iii) above). In the event of a
distribution to substantially all holders of Common Stock of rights to
subscribe for additional shares of the Company's capital stock (other than
those referred to in clause (iii) above), the Company may, instead of making
any adjustment in the Conversion Price, make proper provision so that each
holder of a Convertible Note who converts such Convertible Note after the
record date for such distribution and prior to the expiration or redemption of
such rights shall be entitled to receive upon such conversion, in addition to
shares of Common Stock, an appropriate number of such rights. No adjustment of
the Conversion Price will be made until cumulative adjustments amount to one
percent or more of the Conversion Price as last adjusted.
If the Company reclassifies or changes its outstanding Common Stock, or
consolidates with or merges into or transfers or leases all or substantially
all its assets to any person, or is a party to a merger that reclassifies or
changes its outstanding Common Stock, the Convertible Notes will become
convertible into the kind and amount of securities, cash or other assets which
the holders of the Convertible Notes would have owned immediately after the
transaction if the holders had converted the Convertible Notes immediately
before the effective date of the transaction.
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The Indenture also provides that if rights, warrants or options expire
unexercised the Conversion Price shall be readjusted to take into account the
actual number of such warrants, rights or options which were exercised.
In the Indenture, the "current market price" per share of Common Stock on
any date shall be deemed to be the average of the Daily Market Prices (as
defined in the Indenture) for the shorter of (i) 30 consecutive business days
ending on the last full trading day on the exchange or market referred to in
determining such Daily Market Prices prior to the time of determination (as
defined in the Indenture) or (ii) the period commencing on the date next
succeeding the first public announcement of the issuance of such rights or
warrants or such distribution through such last full trading day prior to the
time of determination.
"Excess Payment" means the excess of (A) the aggregate of the cash and value
of other consideration paid by the Company or any of its Subsidiaries with
respect to the shares acquired in the tender offer or other negotiated
transaction over (B) the market value of such acquired shares after giving
effect to the completion of the tender offer or other negotiated transaction.
The Company is permitted to make such reductions in the Conversion Price as
it, in its discretion, determines to be advisable in order that any stock
dividend, subdivision of shares, distribution or rights to purchase stock or
securities or distribution of securities convertible into or exchangeable for
stock made by the Company to its stockholders will not be taxable to the
recipients.
SUBORDINATION OF CONVERTIBLE NOTES
The Convertible Notes are subordinate in right of payment to all existing
and future Senior Debt. The Indenture does not restrict the amount of Senior
Debt or other Indebtedness of the Company or any Subsidiary of the Company. On
March 31, 1996, after giving effect to the financing of the acquisition of
NTL, the Offering and the use of proceeds therefrom, the Company had
approximately $942.4 million of Senior Debt outstanding (all of which is
comprised of the accreted value of Senior Notes, the aggregate principal
amount at maturity of which is approximately $1.54 billion).
The payment of the principal of, interest on or any other amounts due on the
Convertible Notes are subordinated in right of payment to the prior payment in
full of all Senior Debt of the Company. No payment on account of principal of,
redemption of, interest on or any other amounts due on the Convertible Notes,
including, without limitation, any payments on the Change of Control Offer,
and no redemption, purchase or other acquisition of the Convertible Notes may
be made unless (i) full payment of amounts then due on all Senior Debt have
been made or duly provided for pursuant to the terms of the instrument
governing such Senior Debt, and (ii) at the time for, or immediately after
giving effect to, any such payment, redemption, purchase or other acquisition,
there shall not exist under any Senior Debt or any agreement pursuant to which
any Senior Debt has been issued, any default which shall not have been cured
or waived and which shall have resulted in the full amount of such Senior Debt
being declared due and payable. In addition, the Indenture will provide that
if any of the holders of any issue of Senior Debt notify (the "Payment
Blockage Notice") the Company and the Trustee that a default has occurred
giving the holders of such Senior Debt the right to accelerate the maturity
thereof, no payment on account of principal, redemption, interest, Liquidated
Damages, if any, or any other amounts due on the Convertible Notes and no
purchase, redemption or other acquisition of the Convertible Notes will be
made for the period (the "Payment Blockage Period") commencing on the date
notice is received and ending on the earlier of (A) the date on which such
event of default shall have been cured or waived or (B) 180 days from the date
notice is received. Notwithstanding the foregoing, only one Payment Blockage
Notice with respect to the same event of default or any other events of
default existing and known to the person giving such notice at the time of
such notice on the same issue of Senior Debt may be given during any period of
360 consecutive days unless such event of default or such other events of
default have been cured or waived for a period of not less than 90 consecutive
days. No new Payment Blockage Period may be commenced by the holders of Senior
Debt during any period of 360 consecutive days unless all events of default
which triggered the preceding Payment Blockage Period have been cured or
waived.
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Upon any distribution of its assets in connection with any dissolution,
winding-up, liquidation or reorganization of the Company or acceleration of
the principal amount due on the Convertible Notes because of an Event of
Default, all Senior Debt must be paid in full before the holders of the
Convertible Notes are entitled to any payments whatsoever.
As a result of these subordination provisions, in the event of the Company's
insolvency, holders of the Convertible Notes may recover ratably less than
general creditors of the Company.
If payment of the Convertible Notes is accelerated because of an Event of
Default, the Company or the Trustee shall promptly notify the holders of
Senior Debt or the trustee(s) for such Senior Debt of the acceleration. The
Company may not pay the Convertible Notes until five days after such holders
or trustee(s) of Senior Debt receive notice of such acceleration and,
thereafter, may pay the Convertible Notes only if the subordination provisions
of the Indenture otherwise permit payment at that time.
The Convertible Notes are obligations exclusively of the Company. Since the
operations of the Company are conducted through Subsidiaries, the cash flow
and the consequent ability to service debt, including the Convertible Notes,
of the Company, are dependent upon the earnings of its Subsidiaries and the
distribution of those earnings to, or upon loans or other payments of funds by
those Subsidiaries to, the Company. The payment of dividends and the making of
loans and advances to the Company by its Subsidiaries may be subject to
statutory or contractual restrictions, are dependent upon the earnings of
those Subsidiaries and are subject to various business considerations.
Any right of the Company to receive assets of any of its Subsidiaries upon
their liquidation or reorganization (and the consequent right of the holders
of the Convertible Notes to participate in those assets) will be effectively
subordinated to the claims of that Subsidiary's creditors (including trade
creditors), except to the extent that the Company is itself recognized as a
creditor of such Subsidiary, in which case the claims of the Company would
still be subordinate to any security interests in the assets of such
Subsidiary and any indebtedness of such Subsidiary senior to that held by the
Company.
As of March 31, 1996, after giving pro forma effect to the acquisition of
NTL, the financing of that acquisition, the issuance of the Convertible Notes
and the use of the proceeds therefrom, the Company had approximately $942.4
million of indebtedness outstanding that would have constituted Senior Debt
(excluding liabilities of a type not required to be reflected as a liability
on the balance sheet of the Company in accordance with GAAP) and approximately
$594.6 million of indebtedness outstanding and other obligations of
Subsidiaries of the Company (excluding intercompany liabilities and
liabilities of a type not required to be reflected as a liability on the
balance sheet of such subsidiaries in accordance with GAAP) as to which the
Convertible Notes would have been structurally subordinated. The Indenture
does not limit the amount of additional indebtedness, including Senior Debt,
which the Company can create, incur, assume or guarantee, nor does the
Indenture limit the amount of indebtedness and other liabilities which any
Subsidiary can create, incur, assume or guarantee.
In the event that, notwithstanding the foregoing, the Trustee or any holder
of Convertible Notes receives any payment or distribution of assets of the
Company of any kind in contravention of any of the terms of the Indenture,
whether in cash, property or securities, including, without limitation by way
of set-off or otherwise, in respect of the Convertible Notes before all Senior
Debt is paid in full, then such payment or distribution will be held by the
recipient in trust for the benefit of holders of Senior Debt, and will be
immediately paid over or delivered to the holders of Senior Debt or their
representative or representatives to the extent necessary to make payment in
full of all Senior Debt remaining unpaid, after giving effect to any
concurrent payment or distribution, or provision therefor, to or for the
holders of Senior Debt.
MERGER, CONSOLIDATION OR SALE OF ASSETS
The Indenture provides that the Company may not consolidate or merge with or
into (whether or not the Company is the surviving corporation), or sell,
assign, transfer, lease, convey or otherwise dispose of all or
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substantially all of its properties or assets in one or more related
transactions to another corporation, person or entity unless (i) the Company
is the surviving corporation or the entity or the person formed by or
surviving any such consolidation or merger (if other than the Company) or to
which such sale, assignment, transfer, lease, conveyance or other disposition
shall have been made is a corporation organized or existing under the laws of
England and Wales or of the United States, any state thereof or the District
of Columbia; (ii) the entity or person formed by or surviving any such
consolidation or merger (if other than the Company) or the entity or person to
which such sale, assignment, transfer, lease, conveyance or other disposition
will have been made assumes all the Obligations (including the due and
punctual payment of Additional Amounts (as defined in the Indenture) if the
surviving corporation is a corporation organized or existing under the laws of
England and Wales) of the Company under the Convertible Notes and the
Indenture; pursuant to a supplemental indenture in a form reasonably
satisfactory to the Trustee; (iii) immediately after such transaction no
Default or Event of Default exists; (iv) the Company or any entity or person
formed by or surviving any such consolidation or merger or to which such sale,
assignment, transfer, lease, conveyance or other disposition will have been
made will have a ratio of Indebtedness to Annualized Pro Forma earnings before
interest, taxes, depreciation and amortization ("EBITDA") equal to or less
than the ratio of Indebtedness to Annualized Pro Forma EBITDA of the Company
immediately preceding the transaction; provided, however, that, if the ratio
of Indebtedness to Annualized Pro Forma EBITDA of the Company immediately
preceding such transaction is 6:1 or less, then the ratio of Indebtedness to
Annualized Pro Forma EBITDA of the Company may be .5 greater than such ratio
immediately preceding such transaction; and (v) such transaction would not
result in the loss of any material authorization or Material License of the
Company or its Subsidiaries.
ADDITIONAL AMOUNTS
The following provisions of this paragraph will apply only in the event that
the Company becomes, or a successor to the Company is, a corporation organized
or existing under the laws of England and Wales. All payments made by the
Company on the Convertible Notes will be made without deduction or
withholding, for or on account of, any and all present or future taxes,
duties, assessments, or governmental charges of whatever nature unless the
deduction or withholding of such taxes, duties, assessments or governmental
charges is then required by law. If any deduction or withholding for or on
account of any present or future taxes, assessments or other governmental
charges of the United Kingdom (or any political subdivision or taxing
authority thereof or therein) shall at any time be required in respect of any
amounts to be paid by the Company under the Convertible Notes, the Company
will pay or cause to be paid such additional amounts ("Additional Amounts") as
may be necessary in order that the net amounts received by a holder of a
Convertible Note after such deduction or withholding shall be not less than
the amounts specified in such Convertible Note to which such holder is
entitled; provided, however, that the Company shall not be required to make
any payment of Additional Amounts for or on account of:
(a) any tax, assessment or other governmental charge to the extent such
tax, assessment or other governmental charge would not have been imposed
but for (i) the existence of any present or former connection between such
holder (or between a fiduciary, settlor, beneficiary, member or shareholder
of, or possessor of a power over, such holder, if such holder is an estate,
nominee, trust, partnership or corporation), other than the holding of a
Convertible Note or the receipt of amounts payable in respect of a
Convertible Note and the United Kingdom or any political subdivision or
taxing authority thereof or therein, including, without limitation, such
holder (or such fiduciary, settlor, beneficiary, member, shareholder or
possessor) being or having been a citizen or resident thereof or being or
having been present or engaged in trade or business therein or having or
having had a permanent establishment therein or (ii) the presentation of a
Convertible Note (where presentation is required) for payment on a date
more than 30 days after the date on which such payment became due and
payable or the date on which payment thereof is duly provided for,
whichever occurs later, except to the extent that the holder would have
been entitled to Additional Amounts had the Convertible Note been presented
on the last day of such period of 30 days;
(b) any tax, assessment or other governmental charge that is imposed or
withheld by reason of the failure to comply by the holder of a Convertible
Note, or, if different, the beneficial owner of the interest payable on a
Convertible Note, with a timely request of the Company addressed to such
holder or beneficial owner to provide information, documents or other
evidence concerning the nationality, residence, identity
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or connection with the taxing jurisdiction of such holder or beneficial
owner which is required or imposed by a statute, regulation or
administrative practice of the taxing jurisdiction a precondition to
exemption from all or part of such tax, assessment or governmental charge;
(c) any estate, inheritance, gift, sales, transfer, personal property or
similar tax, assessment or other governmental charge;
(d) any tax, assessment or other governmental charge which is collectible
otherwise than by withholding from payments of principal amount at
maturity, redemption amount, Change of Control Payment, interest with
respect to a Convertible Note or withholding from the proceeds of a sale or
exchange of a Convertible Note;
(e) any tax, assessment or other governmental charge required to be
withheld by any Paying Agent from any payment or principal amount at
maturity, redemption amount, Change of Control Payment, interest, if any,
with respect to a Convertible Note, if such payment can be made without
such withholding by any other Paying Agent located inside the United
States;
(f) any tax, assessment or other governmental charge imposed on a holder
that is not the beneficial owner of a Convertible Note to the extent that
the beneficial owner would not have been entitled to the payment of any
such Additional Amounts had the beneficial owner directly held such
Convertible Note;
(g) any combination of items (a), (b), (c), (d), (e) and (f) above;
nor shall Additional Amounts be paid with respect to any payment of the
principal of, or any interest on, any Convertible Note to any holder who is a
fiduciary or partnership or other than the sole beneficial owner of such
payment to the extent that a beneficiary or settlor would not have been
entitled to any Additional Amounts had such beneficiary or settlor been the
holder of such Convertible Note. All references to interest on the Convertible
Notes in the Indenture or the Convertible Notes include any Additional Amounts
payable to the Company pursuant to this paragraph.
REPORTS
Whether or not required by the rules and regulations of the Commission, so
long as any Convertible Notes are outstanding, the Company will file with the
Commission and furnish to the holders of Convertible Notes all quarterly and
annual financial information required to be contained in a filing with the
Commission on Forms 10-Q and 10-K (or the equivalent thereof in the event the
Company becomes a corporation organized under the laws of England and Wales),
including a "Management's Discussion and Analysis of Results of Operations and
Financial Condition" and, with respect to the annual information only, a
report thereon by the Company's independent auditors.
EVENTS OF DEFAULT AND REMEDIES
The Indenture provides that each of the following constitutes an Event of
Default: (i) default for 30 days in the payment when due of interest (and
Additional Amounts, if applicable) on the Convertible Notes; (ii) default in
payment when due of principal on the Convertible Notes; (iii) failure by the
Company to comply with the provisions described under "Change of Control";
(iv) failure by the Company for 60 days after notice to comply with certain
other covenants and agreements contained in the Indenture or the Convertible
Notes; (v) default under any mortgage, indenture or instrument under which
there may be issued or by which there may be secured or evidenced any
Indebtedness for money borrowed by the Company or any of its Subsidiaries (or
the payment of which is guaranteed by the Company or any of its Subsidiaries),
whether such Indebtedness or guarantee now exists, or is created after the
Issuance Date, which default (a) is caused by a failure to pay when due
principal or interest on such Indebtedness within the grace period provided in
such Indebtedness (which failure continues beyond any applicable grace period)
(a "Payment Default") or (b) results in the acceleration of such Indebtedness
prior to its express maturity and, in each case, the principal amount of any
such Indebtedness, together with the principal amount of any other such
Indebtedness under which there has been a Payment Default
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or the maturity of which has been so accelerated, aggregates $5 million or
more; (vi) failure by the Company or any Subsidiary of the Company to pay
final judgments (other than any judgment as to which a reputable insurance
company has accepted full liability) aggregating in excess of $5 million,
which judgments are not stayed within 60 days after their entry; (vii) certain
events of bankruptcy or insolvency with respect to the Company or any of its
Material Subsidiaries; and (viii) the revocation of a Material License.
If any Event of Default occurs and is continuing, the Trustee or the holders
of at least 25% in principal amount of the then outstanding Convertible Notes
may declare all the Convertible Notes to be due and payable immediately,
subject to the provisions limiting payment described in "--Subordination of
Convertible Notes." Notwithstanding the foregoing, in the case of an Event of
Default arising from certain events of bankruptcy or insolvency, with respect
to the Company or any Material Subsidiary, all outstanding Convertible Notes
will become due and payable without further action or notice. Holders of the
Convertible Notes may not enforce the Indenture or the Convertible Notes
except as provided in the Indenture. Subject to certain limitations, holders
of a majority in principal amount of the then outstanding Convertible Notes
may direct the Trustee in its exercise of any trust or power. The Trustee may
withhold from holders of the Convertible Notes notice of any continuing
Default or Event of Default (except a Default or Event of Default relating to
the payment of principal or interest or Liquidated Damages, if any) if it
determines that withholding notice is in their interest.
The holders of a majority in aggregate principal amount of the Convertible
Notes then outstanding by notice to the Trustee may on behalf of the holders
of all of the Convertible Notes waive any existing Default or Event of Default
and its consequences under the Indenture except a continuing Default or Event
of Default in the payment of interest on, or the principal of, the Convertible
Notes.
The Company is required to deliver to the Trustee annually a statement
regarding compliance with the Indenture, and the Company is required, upon
becoming aware of any Default or Event of Default, to deliver to the Trustee a
statement specifying such Default or Event of Default.
NO PERSONAL LIABILITY OF DIRECTORS, OFFICERS, EMPLOYEES AND SHAREHOLDERS
No director, officer, employee, incorporator or shareholder of the Company,
as such, shall have any liability for any Obligations of the Company under the
Convertible Notes or the Indenture or for any claim based on, in respect of,
or by reason of, such Obligations or their creation. Each holder of the
Convertible Notes by accepting a Convertible Note waives and releases all such
liability. The waiver and release are part of the consideration for issuance
of the Convertible Notes. Such waiver may not be effective to waive
liabilities under the federal securities laws and it is the view of the
Commission that such a waiver is against public policy.
REGISTRATION RIGHTS
Pursuant to the Registration Rights Agreement, the Company has agreed for
the benefit of the holders of the Convertible Notes, that (i) it would, at its
cost, within 45 days after the closing of the sale of the Convertible Notes
(the "Closing"), file a shelf registration statement (the "Shelf Registration
Statement") with the Commission with respect to resales of the Convertible
Notes and the Common Stock issuable upon conversion thereof, (ii) it would use
its best efforts to cause such Shelf Registration Statement to be declared
effective by the Commission within 120 days after the Closing, and (iii) it
would use its best efforts to keep such Shelf Registration Statement
continuously effective under the Securities Act until, subject to certain
exceptions specified in the Registration Rights Agreement, the third
anniversary of the date of the Closing. The Company will be permitted to
suspend use of this Prospectus that is part of the Shelf Registration
Statement during certain periods of time and in certain circumstances relating
to pending corporate developments and public filings with the Commission and
similar events. If (a) the Company fails to file the Shelf Registration
Statement required by the Registration Rights Agreement on or before the date
specified for such filing, (b) such Shelf Registration Statement is not
declared effective by the Commission on or prior to the date specified for
such effectiveness (the "Effectiveness Target Date") or (c) the Shelf
Registration Statement is declared effective but thereafter ceases to be
effective or usable in connection with resales of Transfer Restricted
Securities (as defined below)
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during the periods specified in the Registration Rights Agreement (each such
event referred to in clauses (a) through (c) above, a "Registration Default"),
then the Company will pay liquidated damages ("Liquidated Damages") to each
holder of Convertible Notes, with respect to the first 90-day period
immediately following the occurrence of such Registration Default in an amount
equal to $.05 per week per $1,000 aggregate principal amount of the
Convertible Notes held by such holder. The amount of the Liquidated Damages
will increase by an additional $.05 per week per $1,000 aggregate principal
amount of the Convertible Notes held by each holder with respect to each
subsequent 90-day period until all Registration Defaults have been cured, up
to a maximum amount of Liquidated Damages of $.50 per week per $1,000
aggregate principal amount of the Convertible Notes held by each holder. All
accrued Liquidated Damages will be paid by the Company on each interest
payment date in cash. Such payment will be made to the holder of the Global
Notes (as defined) by wire transfer of immediately available funds or by
federal funds check and to holders of Certificated Securities (as defined), if
any, by wire transfer to the accounts specified by them or by mailing checks
to their registered addresses if no such accounts have been specified.
Following the cure of all Registration Defaults, the accrual of Liquidated
Damages will cease.
For purposes of the foregoing, "Transfer Restricted Securities" means each
Convertible Note and the Common Stock issuable upon conversion thereof until
(i) the date on which such Convertible Note or the Common Stock issuable upon
conversion thereof has been effectively registered under the Securities Act
and disposed of in accordance with the Shelf Registration Statement, (ii) the
date on which such Convertible Note or the Common Stock issuable upon
conversion thereof is distributed to the public pursuant to Rule 144 under the
Securities Act (or any similar provision then in effect) or is saleable
pursuant to Rule 144(k) under the Act or (iii) the date on which such
Convertible Note or the Common Stock issuable upon the conversion thereof
ceases to be outstanding.
Holders of Convertible Notes will be required to deliver information to be
used in connection with the Shelf Registration Statement of which this
Prospectus is a part and to provide comments on such Registration Statement
within the time periods set forth in the Registration Rights Agreement in
order to have their Convertible Notes or the Common Stock issuable upon
exercise thereof included in the Shelf Registration Statement and benefit from
the provisions regarding Liquidated Damages set forth above.
BOOK-ENTRY; DELIVERY AND FORM; GLOBAL NOTES
The description of book-entry procedures in this Prospectus includes
summaries of certain rules and operating procedures of DTC that affect
transfers of interest in the global certificate or certificates issued in
connection with sales of Convertible Notes made pursuant to this Prospectus.
The Convertible Notes sold pursuant to this Prospectus will be represented
by one or more fully registered global notes (each, a "Global Note") as well
as Convertible Notes in definitive form and will be deposited upon issuance
with, or on behalf of, the Depository Trust Company ("DTC") and registered in
the name of DTC or its nominee (the "Global Note Registered Owner") or will
remain in the custody of the Trustee pursuant to a FAST Balance Certificate
Agreement between DTC and the Trustee. Except as set forth below, the Global
Note may be transferred, in whole and not in part, only to another nominee of
DTC or to a successor of DTC or its nominee.
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 Uniform Commercial Code as in effect in the State of New York
and a "clearing agency" registered pursuant to provisions of Section 17A of
the Exchange Act. DTC was created to hold securities for its participants'
organizations (collectively, the "Participants") and to facilitate the
clearance and settlement of transactions in those securities between
Participants through electronic computerized book-entry changes in accounts of
its Participants, thereby eliminating the need for physical movement of
securities certificates. The Participants include securities brokers and
dealers, banks, trust companies, clearing corporations and certain other
organizations. DTC is owned by a number of its Participants and by the New
York Stock Exchange, Inc., the American Stock Exchange, Inc., and the National
Association of Securities Dealers,
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Inc. Access to DTC's system is also available to other entities such as banks,
brokers, dealers and trust companies that clear through or maintain a
custodial relationship with a Participant, either directly or indirectly
(collectively, the "Indirect Participants"). Persons who are not Participants
may beneficially own securities held by or on behalf of DTC only through the
Participants or the Indirect Participants. The ownership interest and transfer
of ownership interest of each actual purchaser of each security held by or on
behalf of DTC are recorded on the records of the Participants and Indirect
Participants.
Purchases of Convertible Notes within the DTC system must be made by or
through Participants. Pursuant to procedures established by DTC, (i) upon
deposit of the Global Note, DTC will credit the accounts of Participants with
portions of the principal amount of the Global Note and (ii) ownership of such
interests in the Global Note will be shown on, and the transfer of ownership
thereof will be effected only through, records maintained by DTC (with respect
to the Participants) or by the Participants and the Indirect Participants
(with respect to other owners of beneficial interests in the Global Note). The
laws of some states require that certain persons take physical delivery in
definitive form of securities that they own. Consequently, the ability to
transfer Convertible Notes will be limited to that extent.
DTC has no knowledge of the actual beneficial owners of the Convertible
Notes; DTC's records reflect only the identity of the Participants to whose
accounts such Convertible Notes are credited, which may or may not be the
beneficial owners. The Participants and Indirect Participants will remain
responsible for keeping account of their holdings on behalf of their
customers.
Except as described below, owners of interests in the Global Note will not
have Convertible Notes registered in their names, will not receive physical
delivery of Convertible Notes in definitive form and will not be considered
the registered owners thereof under the Indenture for any purpose.
None of the Company, the Trustee, nor any agent of the Company or the
Trustee will have any responsibility or liability for (i) any aspect of DTC's
records or any Participant's records relating to or payments made on account
of beneficial ownership interests in the Global Note, or for maintaining,
supervising or reviewing any of DTC's records or any Participant's records
relating to the beneficial ownership interests in the Global Note or (ii) any
other matter relating to the actions and practices of DTC's or any of its
Participants.
Payments in respect of the principal of, premium, if any, and interest on
any Convertible Notes registered in the name of the Global Note Registered
Owner on any relevant record date will be payable by the Trustee to the Global
Note Registered Owner in its capacity as the registered holder under the
Indenture. Under the terms of the Indenture, the Company and the Trustee will
treat the person in whose names the Convertible Notes, including the Global
Note, are registered as the owners thereof for the purpose of receiving such
payments and for any and all other purposes whatsoever. Consequently, neither
the Company, the Trustee, nor any agent of the Company or the Trustee has or
will have any responsibility or liability for the payment of such amounts to
beneficial owners of the Convertible Notes or for any other matter relating to
actions or practices of DTC or any of its Participants. The Company
understands that DTC's current practice, upon receipt of any payment in
respect of securities such as the Convertible Notes (including principal and
interest), is to credit the accounts of the relevant Participants with the
payment on the payment date, in amounts proportionate to their respective
holdings in principal amount of beneficial interests in the relevant security
as shown on the records of DTC (unless DTC has reason to believe it will not
receive payment on such payment date). Payments by the Participants and the
Indirect Participants to the beneficial owners of Convertible Notes will be
governed by standing instructions and customary practices and will be the
responsibility of Participants or the Indirect Participants, and the
beneficial owners and not the responsibility of the DTC, the Trustee or the
Company. Neither the Company nor the Trustee will be liable for any delay by
DTC or any of its Participants in identifying the beneficial owners of the
Convertible Notes, and the Company and the Trustee may conclusively rely on
and will be protected in relying on instructions from the Global Note
Registered Owner for all purposes.
So long as DTC, or its nominee, is the registered owner or holder of a
Global Note, DTC or such nominee, as the case may be, will be considered the
sole owner or holder of the Convertible Notes represented by such
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Global Note for all purposes under the Indenture and the Convertible Notes. No
beneficial owner of an interest in a Global Note will be able to transfer the
interest except in accordance with DTC's applicable procedures, in addition to
those provided for under the Indenture.
Transfers between Participants in DTC will be effected in the ordinary way
in accordance with DTC rules. If a holder requires physical delivery of a
certificated note for any reason, including to sell Convertible Notes to
persons in jurisdictions which require such delivery of such Convertible Notes
or to pledge such Convertible Notes, such holder must transfer its interest in
a Global Note in accordance with the normal procedures of DTC and the
procedures set forth in the Indenture.
The Company expects that DTC will take any action permitted to be taken by a
holder of Convertible Notes (including the presentation of Convertible Notes
for exchange as described below) only at the direction of one or more
Participants to whose account the DTC interests in a Global Note is credited
and only in respect of such portion of the aggregate principal amount of the
Convertible Notes as to which such Participant or Participants has or have
given such direction.
Although the Company expects that DTC will agree to the foregoing procedures
in order to facilitate transfers of interests in a Global Note among
participants of DTC, it is under no obligation to perform or continue to
perform such procedures, and such procedures may be discontinued at any time.
Neither the Company nor the Trustee will have any responsibility for the
performance by DTC or its participants or indirect participants of their
respective obligations under the rules and procedures governing their
operations.
If DTC is at any time unwilling or unable to continue as a depositary for a
Global Note and a successor depositary is not appointed by the Company within
90 days, the Company will issue definitive certificated Convertible Notes in
exchange for a Global Note.
Such definitive certificated Convertible Notes shall be registered in names
of the owners of the beneficial interests in the Global Note as provided by
the Participants. Convertible Notes issued in definitive certificated form
will be fully registered, without coupons, in minimum denominations of $1,000
and integral multiples of $1,000 above that amount. Upon issuance of
Convertible Notes in definitive certificated form, the Trustee is required to
register the Convertible Notes in the name of, and cause the Convertible Notes
to be delivered to, the person or persons (or the nominee thereof) identified
as the beneficial owner as DTC shall direct.
Convertible Notes in definitive form will be issued upon the resale, pledge
or other transfer of Notes to any person or entity that does not participate
in DTC.
The information in this section concerning DTC and DTC's book-entry system
has been obtained from sources that the Company believes to be reliable, but
the Company takes no responsibility for the accuracy thereof.
CERTIFICATED SECURITIES
Subject to certain conditions, any person having a beneficial interest in
the Global Notes may, upon request to the Trustee, exchange such beneficial
interest for Convertible Notes evidenced by registered, definitive
certificates ("Certificated Securities"). Upon any such issuance, the Trustee
is required to register such Certificated Securities in the name of, and cause
the same to be delivered to, such person or persons (or the nominee of any
thereof). In addition, if (i) the Company notifies the Trustee in writing that
DTC is no longer willing or able to act as a depositary and the Company is
unable to locate a qualified successor within 90 days or (ii) the Company, at
its option, notifies the Trustee in writing that it elects to cause the
issuance of Convertible Notes in the form of Certificated Securities under the
Indenture, then, upon surrender by the holder of the Global Notes of its
Global Notes, Convertible Notes in such form will be issued to each person
that the holder of the Global Notes and DTC identify as being the beneficial
owner of the related Convertible Notes.
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Neither the Company nor the Trustee will be liable for any delay by the
holder of the Global Notes or DTC in identifying the beneficial owners of
Convertible Notes and the Company and the Trustee may conclusively rely on,
and will be protected in relying on, instructions from the holder of the
Global Notes or DTC for all purposes.
TRANSFER AND EXCHANGE
A holder may transfer or exchange Convertible Notes in accordance with the
Indenture. The Registrar (initially, the Trustee) and the Trustee may require
a holder, among other things, to furnish appropriate endorsements and transfer
documents and the Company may require a holder to pay any taxes and fees
required by law or permitted by the Indenture. The Company is not required to
transfer or exchange any Convertible Note selected for redemption. Also, the
Company is not required to transfer or exchange any Convertible Note for a
period of 15 days before a selection of Convertible Notes to be redeemed.
The registered holder of a Convertible Note will be treated as the owner of
it for all purposes.
AMENDMENT, SUPPLEMENT AND WAIVER
Except as provided in the next two succeeding paragraphs, the Indenture or
the Convertible Notes may be amended or supplemented with the consent of the
holders of at least a majority in principal amount of the then outstanding
Convertible Notes (including consents obtained in connection with a tender
offer or exchange offer for Convertible Notes), and any existing default or
compliance with any provision of the Indenture or the Convertible Notes may be
waived with the consent of the holders of a majority in principal amount of
the then outstanding Convertible Notes (including consents obtained in
connection with a tender offer or exchange offer for Convertible Notes).
Without the consent of each holder affected, an amendment or waiver may not
(with respect to any Convertible Notes held by a nonconsenting holder of
Convertible Notes) (i) reduce the principal amount of Convertible Notes whose
holders must consent to an amendment, supplement or waiver, (ii) reduce the
principal of or change the fixed maturity of any Convertible Note or alter the
provisions with respect to the redemption of the Convertible Notes, (iii)
reduce the rate of or change the time for payment of interest on any
Convertible Note, (iv) waive a default in the payment of principal of or
interest or Liquidated Damages, if any, on any Convertible Notes (except a
rescission of acceleration of the Convertible Notes by the holders of at least
a majority in aggregate principal amount of the Convertible Notes and a waiver
of the payment default that resulted from such acceleration), (v) make any
Convertible Note payable in money other than that stated in the Convertible
Notes, (vi) make any change in the provisions of the Indenture relating to
waivers of past Defaults or the rights of holders of Convertible Notes to
receive payments of principal of or interest or Liquidated Damages, if any, on
the Convertible Notes, (vii) waive a redemption payment with respect to any
Convertible Note, (viii) impair the right to convert the Convertible Notes
into Common Stock, (ix) modify the conversion or subordination provisions of
the Indenture in a manner adverse to the holders of the Convertible Notes or
(x) make any change in the foregoing amendment and waiver provisions.
Notwithstanding the foregoing, without the consent of any holder of
Convertible Notes, the Company and the Trustee may amend or supplement the
Indenture or the Convertible Notes to cure any ambiguity, defect or
inconsistency, to provide for uncertificated Convertible Notes in addition to
or in place of certificated Convertible Notes, to provide for the assumption
of the Company's obligations to holders of the Convertible Notes 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 Convertible Notes or that
does not adversely affect the legal rights under the Indenture of any such
holder, or to comply with requirements of the Commission in order to maintain
the qualification of the Indenture under the Trust Indenture Act of 1939.
CONCERNING THE TRUSTEE
The Indenture contains certain limitations on the rights of the Trustee,
should it become a creditor of the Company, to obtain payment of claims in
certain cases, or to realize on certain property received in respect of
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any such claim as security or otherwise. The Trustee will be permitted to
engage in other transactions; however, if it acquires any conflicting interest
it must eliminate such conflict within 90 days, apply to the Commission for
permission to continue or resign.
The holders of a majority in principal amount of the then outstanding
Convertible Notes will have the right to direct the time, method and place of
conducting any proceeding for exercising any remedy available to the Trustee,
subject to certain exceptions. The Indenture provides that, in case an Event
of Default shall occur (which shall not have been cured), the Trustee will be
required, in the exercise of its power, to use the degree of care of a prudent
man in the conduct of his own affairs. Subject to such provisions, the Trustee
will be under no obligation to exercise any of its rights or powers under the
Indenture at the request of any holder of Convertible Notes, unless such
holder shall have offered to the Trustee security and indemnity satisfactory
to it against any loss, liability or expense.
ADDITIONAL INFORMATION
Anyone who receives this Prospectus may obtain a copy of the Indenture and
Registration Rights Agreement without charge by writing to the Company, 110
East 59th Street, New York, New York 10022, Attention: Richard J. Lubasch,
Esq., Senior Vice President, General Counsel and Secretary.
CERTAIN DEFINITIONS
Set forth below are certain defined terms used in the Indenture. Reference
is made to the Indenture for a full disclosure of all such terms, as well as
any other capitalized terms used herein for which no definition is provided.
"Annualized Pro Forma EBITDA" means, with respect to any person, such
person's Pro Forma EBITDA for the latest fiscal quarter multiplied by four.
"Capital Stock" means any and all shares, interests, participations, rights
or other equivalents (however designated) of corporate stock, including,
without limitation, partnership interests.
"Consolidated Interest Expense" means, for any person, for any period, the
amount of interest in respect of Indebtedness (including amortization of
original issue discount, amortization of debt issuance costs, and noncash
interest payments on any Indebtedness and the interest portion of any deferred
payment obligation and after taking into account the effect of elections made
under any Interest Rate Agreement, however denominated, with respect to such
Indebtedness), the amount of Redeemable Dividends, Restricted Subsidiary
Preferred Stock Dividends and the interest component of rentals in respect of
any capital lease obligation paid, in each case whether accrued or scheduled
to be paid or accrued by such person and its Subsidiaries (other than Non-
Restricted Subsidiaries) during such period to the extent such amounts were
deducted in computing Consolidated Net Income, determined on a consolidated
basis in accordance with GAAP. For purposes of this definition, interest on a
capital lease obligation shall be deemed to accrue at an interest rate
reasonably determined by such person to be the rate of interest implicit in
such capital lease obligation in accordance with GAAP consistently applied.
"Consolidated Net Income" means, with respect to any person for any period,
the aggregate of the Net Income of such person and its Subsidiaries (other
than Non-Restricted Subsidiaries) for such period, on a consolidated basis,
determined in accordance with GAAP; provided that (i) the Net Income of any
person that is not a Subsidiary or that is accounted for by the equity method
of accounting shall be included only to the extent of the amount of dividends
or distributions paid to the referent person or a Wholly Owned Subsidiary,
(ii) the Net Income of any person that is a Subsidiary (other than a
Subsidiary of which at least 80% of the Capital Stock having ordinary voting
power for the election of directors or other governing body of such Subsidiary
is owned by the referent person directly or indirectly through one or more
Subsidiaries) shall be included only to the extent of the amount of dividends
or distributions paid to the referent person or a Wholly Owned Subsidiary,
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(iii) the Net Income of any person acquired in a pooling of interests
transaction for any period prior to the date of such acquisition shall be
excluded and (iv) the cumulative effect of a change in accounting principles
shall be excluded.
"7 1/4% Convertible Notes" means the Company's 7 1/4% Convertible Notes Due
2005 outstanding at any given time.
"Default" means any event that is or, with the passage of time or the giving
of notice or both, would be an Event of Default.
"Disqualified Stock" means any Capital Stock which, by its terms (or by the
terms of any security into which it is convertible or for which it is
exchangeable), or upon the happening of any event, matures or is mandatorily
redeemable, pursuant to a sinking fund obligation or otherwise, or redeemable
at the option of the holder thereof, in whole or in part, on or prior to the
date on which the Convertible Notes mature.
"EBITDA" means, for any person, for any period, an amount equal to (a) the
sum of (i) Consolidated Net Income for such period (exclusive of any gain or
loss realized in such period upon an Asset Sale), plus (ii) the provision for
taxes for such period based on income or profits to the extent such income or
profits were included in computing Consolidated Net Income and any provision
for taxes utilized in computing net loss under clause (i) hereof, plus (iii)
Consolidated Interest Expense for such period, plus (iv) depreciation for such
period on a
consolidated basis, plus (v) amortization of intangibles for such period on a
consolidated basis, plus (vi) any other noncash item reducing Consolidated Net
Income for such period, minus (b) all noncash items increasing Consolidated
Net Income for such period, all for such person and its Subsidiaries
determined in accordance with GAAP consistently applied.
"Exchange Rate Contract" means, with respect to any person, any currency
swap agreements, forward exchange rate agreements, foreign currency futures or
options, exchange rate collar agreements, exchange rate insurance and other
agreements or arrangements, or combination thereof, designed to provide
protection against fluctuations in currency exchange rates. An Exchange Rate
Contract may also include an Interest Rate Agreement.
"GAAP" means generally accepted accounting principles set forth in the
opinions and pronouncements of the Accounting Principles Board of the American
Institute of Certified Public Accountants and statements and pronouncements of
the Financial Accounting Standards Board or in such other statements by such
other entity as approved by a significant segment of the accounting
profession, which are in effect on the Issuance Date.
"Guarantee" means a guarantee (other than by endorsement of negotiable
instruments for collection in the ordinary course of business), direct or
indirect, in any manner (including, without limitation, letters of credit and
reimbursement agreements in respect thereof), of all or any part of any
Indebtedness.
"Indebtedness" means, with respect to any person, any indebtedness of such
person, whether or not contingent, in respect of borrowed money or evidenced
by bonds, notes, debentures or similar instruments or letters of credit (or
reimbursement agreements in respect thereof) or representing the balance
deferred and unpaid of the purchase price of any property (including pursuant
to capital leases and sale-and-leaseback transactions) or representing any
hedging obligations under an Exchange Rate Contract or an Interest Rate
Agreement, except any such balance that constitutes an accrued expense or
trade payable, if and to the extent any of the foregoing indebtedness (other
than obligations under an Exchange Rate Contract or an Interest Rate
Agreement) would appear as a liability upon a balance sheet of such person
prepared in accordance with GAAP, and also includes, to the extent not
otherwise included, the Guarantee of items which would be included within this
definition.
"Interest Rate Agreement" means, for any person, any interest rate swap
agreement, interest rate cap agreement, interest rate collar agreement or
other similar agreement designed to protect the party indicated therein
against fluctuations in interest rates.
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"Issuance Date" means the date on which the Convertible Notes are first
authenticated and issued.
"Material License" means a license to operate a cable or telephone system
held by the Company or any of its Subsidiaries which system at the time of
determination covers a number of Net Households which equals or exceeds 5% of
the aggregate number of Net Households covered by all of the licenses to
operate cable or telephone systems held by the Company and its Subsidiaries at
such time.
"Material Subsidiary" means (i) OCOM, OCOM Sub I, Inc., CableTel UK Group,
Inc. (formerly known as OCOM Sub II, Inc.), OCOM Sub III, Inc., CableTel
Surrey and Hampshire Limited (formerly known as CableTel Surrey Limited),
CableTel Cardiff Limited, CableTel Glasgow, CableTel Newport,
CableTel Kirklees and NTL Group Limited and (ii) any other Subsidiary of the
Company which is a "significant subsidiary" as defined in Rule 1-02(v) of
Regulation S-X under the Securities Act and the Exchange Act (as such
Regulation is in effect on the date hereof).
"Net Households" means the product of (i) the number of households covered
by a cable license in the United Kingdom and (ii) the percentage of the entity
holding such license which is owned directly or indirectly by the Company.
"Net Income" means, with respect to any person for a specific period, the
net income (loss) of such person during such period, determined in accordance
with GAAP, excluding, however, any gain (but not loss) during such period,
together with any related provision for taxes on such gain (but not loss),
realized during such period in connection with any Asset Sale (as defined in
the Indenture) (including, without limitation, dispositions
pursuant to sale-and-leaseback transactions), and excluding any extraordinary
gain (but not loss) during such period, together with any related provision
for taxes on such extraordinary gain (but not loss).
"10 7/8% Notes" means the Company's 10 7/8% Senior Deferred Coupon Notes Due
2003 outstanding at any given time.
"12 3/4% Notes" means the Company's 12 3/4% Series A Senior Deferred Coupon
Notes Due 2005 outstanding at any given time.
"11 1/2% Notes" means the Company's 11 1/2% Series B Senior Deferred Coupon
Notes Due 2006 outstanding at any given time.
"Obligations" means any principal, interest, penalties, fees,
indemnifications, reimbursements, damages and other liabilities payable under
the documentation governing any Indebtedness.
"Pro Forma EBITDA" means for any person, for any period, the EBITDA of such
person as determined on a consolidated basis in accordance with GAAP
consistently applied after giving effect to the following: (i) if, during or
after such period, such person or any of its Subsidiaries shall have made any
Asset Sale, Pro Forma EBITDA of such person and its Subsidiaries for such
period shall be reduced by an amount equal to the Pro Forma EBITDA (if
positive) directly attributable to the assets which are the subject of such
Asset Sale for the period or increased by an amount equal to the Pro Forma
EBITDA (if negative) directly attributable thereto for such period and (ii)
if, during or after such period, such person or any of its Subsidiaries
completes an acquisition of any person or business which immediately after
such acquisition is a Subsidiary of such person or whose assets are held
directly by such person or a Subsidiary of such person, Pro Forma EBITDA shall
be computed so as to give pro forma effect to the acquisition of such person
or business; and provided further that, with respect to the Company, all of
the foregoing references to "Subsidiary" or "Subsidiaries" shall be deemed to
refer only to a "Restricted Subsidiary" or "Restricted Subsidiaries" of the
Company.
"Redeemable Dividend" means, for any dividend with regard to Disqualified
Stock, the quotient of the dividend divided by the difference between one and
the maximum statutory federal income tax rate (expressed as a decimal number
between 1 and 0) then applicable to the issuer of such Disqualified Stock.
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"Restricted Subsidiary" means any Subsidiary of the Company which is not a
Non-Restricted Subsidiary.
"Restricted Subsidiary Preferred Stock Dividend" means, for any dividend
with regard to preferred stock of a Restricted Subsidiary, the quotient of the
dividend divided by the difference between one and the maximum statutory
federal income tax rate (expressed as a decimal number between 1 and 0) then
applicable to the issuer of such preferred stock.
"Senior Debt" means the principal of, interest on and other amounts due on
(i) Indebtedness of the Company, whether outstanding on the date of the
Indenture or thereafter created, incurred, assumed or guaranteed by the
Company, for money borrowed from banks or other financial institutions; (ii)
Indebtedness of the Company, whether outstanding on the date of the Indenture
or thereafter created, incurred, assumed or guaranteed by the Company in
compliance with the Indenture, including, without limitation, the Senior
Notes; and (iii) Indebtedness of the Company under interest rate swaps, caps
or similar hedging agreements and foreign exchange contracts, currency swaps
or similar agreements; unless, in the instrument creating or evidencing or
pursuant to which Indebtedness under (i) or (ii) is outstanding, it is
expressly provided that such Indebtedness is not senior in right of payment to
the Convertible Notes. Senior Debt includes, with respect to the obligations
described in clauses (i) and (ii) above, interest accruing, pursuant to the
terms of such Senior Debt, on or after the filing of any petition in
bankruptcy or for reorganization relating to the Company, whether or not post-
filing interest is allowed in such proceeding, at the rate specified in the
instrument governing the relevant obligation. Notwithstanding anything to the
contrary in the foregoing, Senior Debt shall not include: (a) Indebtedness of
or amounts owed by the Company for compensation to employees, or for goods or
materials purchased in the ordinary course of business, or for services; or
(b) Indebtedness of the Company to a Subsidiary of the Company.
"Senior Notes" means the 10 7/8% Notes, the 12 3/4% Notes and the 11 1/2%
Notes.
"Subsidiary" means any corporation, association or other business entity of
which more than 50% of the total voting power of shares of Capital Stock
entitled (without regard to the occurrence of any contingency) to vote in the
election of directors, managers or trustees thereof is at the time owned or
controlled, directly or indirectly, by any person or one or more of the other
Subsidiaries of that person or a combination thereof.
"Wholly Owned Subsidiary" means, at any time, a Restricted Subsidiary all of
the Capital Stock of which (except directors' qualifying shares) is at the
time owned directly or indirectly by the Company.
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DESCRIPTION OF CAPITAL STOCK
The following summary description of the capital stock of the Company does
not purport to be complete and is qualified in its entirety by reference to
the Company's Restated Certificate of Incorporation (the "Charter"), a copy of
which is filed as an exhibit hereto, and to the Company's By-laws and the
Rights Agreement (as defined), copies of which have been filed as exhibits to
the Registration Statement on Form S-1 (File No. 33-63570), filed with the
Commission on October 6, 1993. Each of the foregoing may be obtained as
described under "Available Information."
AUTHORIZED CAPITAL STOCK
The authorized capital stock of the Company consists of 102,500,000 shares,
of which 2,500,000 are shares of preferred stock, par value $.01 per share
(the "Preferred Stock"), and 100,000,000 are shares of Common Stock.
As of June 30, 1996 there were 30,591,800 shares of Common Stock
outstanding. As of June 30, 1996 approximately 6,957,000 additional shares of
Common Stock were reserved for issuance upon the conversion of CableTel's
7 1/4% Convertible Notes Due 2005 into Common Stock, approximately 7,261,000
additional shares of Common Stock were reserved for issuance upon the
conversion of the Convertible Notes, approximately 6,666,000 additional shares
of Common Stock were reserved for issuance upon exercise of options and
approximately 1,011,000 additional shares of Common Stock were reserved for
issuance upon exercise of warrants.
No shares of Preferred Stock have been issued, although one million shares
of Series A Junior Participating Preferred Stock have been designated and
reserved for issuance in connection with a Rights Agreement, dated as of
October 13, 1993 (the "Rights Agreement"), between the Company and Continental
Stock Transfer & Trust Company, as rights agent (the "Rights Agent").
COMMON STOCK
The Common Stock is traded on the NNM under the symbol "ICTL." All issued
and outstanding shares of Common Stock are fully paid and nonassessable, and
the holders thereof do not have preemptive rights.
Subject to Delaware law and the Charter, all shares of Common Stock
participate equally in dividends payable to holders of Common Stock when, as
and if declared by the Board of Directors. In the event of liquidation,
dissolution or winding up of the Company, the holders of Common Stock are
entitled to share rateably in all assets remaining after the payment of
liabilities and preferred distribution to any class of preferred stock. Each
share of Common Stock has one vote per share on all matters submitted to a
vote of the Company stockholders and do not have cumulative voting rights in
the election of directors.
PREFERRED STOCK
The Board of Directors is authorized to provide for the issuance of shares
of Preferred Stock in one or more series, and to fix for each such series such
voting powers, full or limited, or no voting powers, and such preferences and
relative, participating, optional or other special rights, and qualifications,
limitations or restrictions thereof, as are stated in a resolution or
resolutions adopted by the Board of Directors providing for the issue of such
series and as are permitted by the DGCL.
TRANSFER AGENT AND REGISTRAR
The transfer agent and registrar for the Common Stock is Continental Stock
Transfer & Trust Company.
CERTAIN SPECIAL PROVISIONS
The Charter of the Company as currently in effect contains the provisions
described below. Such charter provisions may have the effect, alone or in
combination with each other or with the existence of authorized but
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unissued Common Stock and any series of Preferred Stock, of precluding or
rendering more difficult a hostile takeover making it more difficult to remove
or change the composition of the Company's incumbent board of directors and
its officers, being adverse to stockholders who desire to participate in a
tender offer and depriving stockholders of possible opportunities to sell
their shares at temporarily higher prices.
Classified Board and Filling of Vacancies on the Board of Directors. The
Charter provides that the directors shall be divided into three classes, each
of which shall serve a staggered three-year term, and that vacancies on the
Board of Directors that may occur between annual meetings may be filled by the
Board of Directors. In addition, this provision specifies that any director
elected to fill a vacancy on the Board will serve for the balance of the term
of the replaced director.
Removal of Directors. The Charter provides that directors can be removed
only by the stockholders for cause and then only by the affirmative vote of
the holders of not less than two-thirds of the combined voting power of the
Company.
Voting Requirement for Certain Business Combinations. The Charter also
provides that, in addition to any affirmative vote required by law, the
affirmative vote of holders of two-thirds of the voting power of the Company
shall be necessary to approve any "Business Combination" (as defined) proposed
by an "Interested Stockholder" or any affiliate of an Interested Stockholder
(as defined). The additional voting requirements will not apply, however, if:
(i) the Business Combination was approved by not less than a majority of the
Continuing Directors (as defined) or (ii) a series of conditions are satisfied
requiring (in summary) (a) that the consideration to be paid to the Company's
stockholders in the Business Combination must be at least equal to the higher
of (i) the highest per-share price paid by the Interested Stockholder in
acquiring any shares of Common Stock during the two years prior to the
announcement date of the Business Combination or in the transaction in which
it became an Interested Stockholder (the "Determination Date"), whichever is
higher or (ii) the fair market value per share of Common Stock on the
announcement date or Determination Date, whichever is higher, in either case
appropriately adjusted for any stock dividend, stock split, combination of
shares or similar event (non-cash consideration is treated similarly) and (b)
certain "procedural" requirements are complied with, such as the solicitation
of proxies pursuant to the rules of the Securities and Exchange Commission and
no decrease in regular dividends (if any) after the interested Stockholder
became an Interested Stockholder (except as approved by a majority of the
Continuing Directors).
An "Interested Stockholder" is defined as anyone who is the beneficial owner
of more than 15% of the voting power of the voting stock, other than the
Company and any employee stock plans sponsored by the Company, and includes
any person who is an assignee of or has succeeded to any shares of voting
stock in a transaction not involving a public offering that were at any time
within the prior two-year period beneficially owned by an Interested
Stockholder. The term "beneficial owner" includes persons directly and
indirectly owning or having the right to acquire or vote the stock. Interested
Stockholders participate fully in all stockholder voting.
A "Business Combination" includes the following transactions: (a) merger or
consolidation of the Company or any subsidiary with an Interested Stockholder
or with any other corporation or entity which is, or after such merger or
consolidation would be, an affiliate of an Interested Stockholder; (b) the
sale or other disposition by the Company or a subsidiary of assets having a
fair market value of $5,000,000 or more if an Interested Stockholder (or an
affiliate thereof) is a party to the transaction; (c) the adoption of any plan
or proposal for the liquidation or dissolution of the Company or for any
amendment to the Company's By-laws (or an affiliate thereof); or (d) any
reclassification of securities, recapitalization, merger with a subsidiary, or
other transaction which has the effect, directly or indirectly, of increasing
the proportionate share of any class of the outstanding stock (or securities
convertible into stock) of the Company or a subsidiary owned by an Interested
Stockholder (or an affiliate thereof). Determinations of the fair market value
of non-cash consideration are made by a majority of the Continuing Directors.
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The term "Continuing Directors" means any member of the Board of Directors
of the Corporation, while such person is a member of the Board of Directors,
who is not an affiliate or representative of the Interested Stockholder and
was a member of the Board of Directors prior to the time that the Interested
Stockholder became an Interested Stockholder, and any successor of a
Continuing Director while such successor is a member of the Board of
Directors, who is not an affiliate or associate or representative of the
Interested Stockholder and is recommended or elected to succeed the Continuing
Director by a majority of Continuing Directors.
Voting Requirements for Certain Amendments to the Restated Certificate of
Incorporation. The Charter provides that the provisions set forth in the
Charter relating to the Business Combinations described above may not be
repealed or amended in any respect, unless such action is approved by the
affirmative vote of the holders or not less than two-thirds of the voting
power of the Company. The requirement of an increased stockholder vote is
designed to prevent a stockholder who controls a majority of the voting power
of CableTel from avoiding the requirements of the provisions discussed above
by simply amending or repealing such provisions.
Stockholder Rights Plan. The following description of the Rights Agreement
is qualified in its entirety by reference to the Rights Agreement, a copy of
which may be obtained as described under "Available Information."
On August 27, 1993, the Board of Directors adopted the Rights Agreement. The
Rights Agreement provides that one right (a "Right") will be issued with each
share of the Common Stock issued (whether originally issued or from the
Company's treasury) on or after the date of the Merger and prior to the Rights
Distribution Date (as hereinafter defined). The Rights are not exercisable
until the Rights Distribution Date and will expire at the close of business on
the date which is 10 years from the date of the Merger unless previously
redeemed by the Company as described below. When exercisable, each Right
entitles the owner to purchase from the Company one one-hundredth of a share
of Series A Junior Participating Preferred Stock at a purchase price of
$100.00.
Except as described below, the Rights will be evidenced by the Common Stock
certificates. The Rights will separate from the Common Stock and a "Rights
Distribution Date" will occur upon the earlier of (i) 10 days following a
public announcement that a person or group of affiliated or associated persons
(an "Acquiring Person") has acquired, or obtained the right to acquire,
beneficial ownership of 15 percent or more of the outstanding shares of the
Company Common Stock (the "Stock Acquisition Date") and (ii) 10 business days
following the commencement of a tender offer or exchange offer that would
result in a person or group becoming an Acquiring Person. The Rights Agreement
exempts Insight U.K. and its partners (including Sidney R. Knafel) from the
definition of Acquiring Person provided Insight U.S. or such partners, as the
case may be, do not acquire additional shares of Common Stock.
After the Rights Distribution Date, Rights certificates will be mailed to
holders of record of the Common Stock as of the Rights Distribution Date and
thereafter the separate Rights certificates alone will represent the Rights.
The Series A Junior Participating Preferred Stock issuable upon exercise of
the Rights will be entitled to a minimum preferential quarterly dividend
payment of $.01 per share and will be entitled to an aggregate dividend of 100
times the dividend, if any, declared per share of Common Stock other than one
payable in Common Stock. In the event of liquidation, the holders of the
Series A Junior Participating Preferred Stock will be entitled to a minimum
preferential liquidation payment of $1 per share plus accrued and unpaid
dividends and will be entitled to an aggregate payment of 100 times the
payment made per share of the Common Stock. Each share of Series A Junior
Participating Preferred Stock will have 100 votes and will vote together with
the Common Stock. In the event of any merger, consolidation or other
transaction in which shares of the Common Stock are changed or exchanged, each
share of Series A Junior Participating Preferred Stock will be entitled to
receive 100 times the amount received per share of the Company Common Stock.
These rights are protected by customary antidilution provisions. Because of
the nature of the Series A Junior Participating Preferred Stock's dividend,
liquidation and
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voting rights, the value of one one-hundredth of a share of Series A Junior
Participating Preferred Stock purchasable upon exercise of each Right should
approximate the value of one share of the Common Stock.
In the event that a person becomes an Acquiring Person (except pursuant to a
tender offer or an exchange offer for all outstanding shares of Common Stock
at a price and on terms determined by at least a majority of the members of
the Board of Directors who are not officers of the Company and who are not
representatives, nominees, affiliates or associates of an Acquiring Person, to
be (i) at a price which is fair to the Company stockholders and (ii) otherwise
in the best interests of the Company and its stockholders (a "Qualifying
Offer")), each holder of a Right will thereafter have the right to receive,
upon the exercise thereof at the then current exercise price, the Common Stock
(or, in certain circumstances, cash, property or other securities of the
Company) having a value equal to two times the exercise price of the Right.
Notwithstanding any of the foregoing, following the occurrence of any such
event, all Rights that are, or (under certain circumstances specified in the
Rights Agreement) were beneficially owned by any Acquiring Person (or certain
related parties) will be null and void. However, Rights are not exercisable
following the occurrence of the event set forth above until such time as the
Rights are no longer redeemable by the Company as set forth below.
In the event that, at any time following the Stock Acquisition Date, (i) the
Company is acquired in a merger or other business combination transaction in
which the Company is not the surviving corporation or the Common Stock is
changed or exchanged (other than a merger which follows a Qualifying Offer and
satisfies certain other requirements) or (ii) 50 percent or more of the
Company's assets, cash flow or earning power is sold or transferred, each
holder of a Right (except Rights which previously have been voided as set
forth above) shall thereafter have the right to receive, upon the exercise
thereof at the then current exercise price, common stock of the acquiring
company having a value equal to two times the exercise price of the Right.
At any time until 10 days following the Stock Acquisition Date, the Company
may redeem the Rights in whole, but not in part, at a price of $.01 per Right.
Immediately upon the action of the Board of Directors ordering redemption of
the Rights, the Rights will terminate and the only right of the holders of the
Rights will be to receive the $.01 redemption price.
Until a Right is exercised, the holder thereof, as such, shall have no
rights as a stockholder of the Company, including without limitation, the
right to vote or to receive dividends. While the distribution of the Rights
will not be taxable to stockholders or to the Company, stockholders may,
depending upon the circumstances, recognize taxable income in the event that
the Rights become exercisable for the Common Stock (or other consideration) or
for common stock of the acquiring company as set forth above.
Other than those provisions relating to the principal terms of the Rights,
any of the provisions of the Rights Agreement may be amended by the Board of
Directors prior to the Rights Distribution Date. After the Rights Distribution
Date, the provisions of the Rights Agreement may be amended by the Board of
Directors in order to cure any ambiguity, to make changes which do not
adversely affect the interests of holders of Rights (excluding the interests
of any Acquiring Person) or to shorten or lengthen any time period under the
Rights Agreement, provided that no amendment to adjust the time period
governing redemption shall be made at such time as the Rights are not
redeemable.
The Rights have certain anti-takeover effects as they will cause substantial
dilution to a person or group that acquires a substantial interest in the
Company without the prior approval of the Board of Directors. The effect of
the Rights may be to inhibit a change in control of the Company (including
through a third party tender offer at a price which reflects a premium to then
prevailing trading prices) that may be beneficial to the Company's
stockholders.
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DESCRIPTION OF CERTAIN INDEBTEDNESS
Each of the following summaries of existing debt instruments of the Company
does not purport to be complete and is subject to, and is qualified in its
entirety by reference to, all the provisions of each such debt instrument.
Capitalized terms used and not defined below have the meanings set forth in
such debt instruments.
THE 10 7/8% NOTES
In October 1993, the Company issued its 10 7/8% Notes at a discount to their
aggregate principal amount to generate gross proceeds to the Company of
approximately $125 million. The 10 7/8% Notes accrued at a rate of 10 7/8%
compounded semi-annually to an aggregate principal amount of $212 million by
October 15, 1998. Interest does not accrue on the 10 7/8% Notes prior to
October 15, 1998. Thereafter, the 10 7/8% Notes accrete interest in cash at
the rate of 10 7/8% per annum on the principal amount and will be payable
semiannually on October 15 and April 15, commencing on April 15, 1999 to
holders of record on the immediately preceding October 1 and April 1. The 10
7/8% Notes mature on October 15, 2003. Except as described below, the 10 7/8%
Notes will not be redeemable prior to October 15, 1998. Thereafter, the 10
7/8% Notes will be redeemable, in whole or in part, at the option of the
Company, at the redemption prices set forth in the indenture pursuant to which
the 10 7/8% Notes were issued (the "10 7/8% Notes Indenture"), plus accrued
and unpaid interest to the date of redemption. In the event of a Change in
Control (as defined in the 10 7/8% Notes Indenture), each holder of 10 7/8%
Notes will have the right to require the Company to repurchase its 10 7/8%
Notes at a purchase price equal to 101% of the Accreted Value thereof on any
purchase date prior to October 15, 1998, or 101% of the principal amount
thereof plus accrued and unpaid interest to any purchase date on or after
October 15, 1998. Subject to certain conditions, the Company will be obligated
to offer to purchase the 10 7/8% Notes with the Excess Proceeds of certain
Asset Sales at a redemption price of 100% of the Accreted Value or, as the
case may be, principal amount thereof plus accrued and unpaid interest. The 10
7/8% Note Indenture contains certain restrictions with respect to, among other
things, the payment of dividends, the repurchase of stock and the making of
certain other Restricted Payments, the incurrence of additional Indebtedness,
the creation of certain Liens, certain Assets Sales, transactions with
subsidiaries and other Affiliates and mergers and consolidations.
In January, 1996, the Company received the necessary consents of registered
holders of the 10 7/8% Notes to amend the 10 7/8% Notes Indenture so as to
allow the Company and its subsidiaries to take certain actions that were
previously prohibited under the 10 7/8% Notes Indenture, particularly
regarding the financing of the Company's and its subsidiaries' business and
future acquisitions. In addition, the amendment eliminated some, but not all,
of certain differences between the covenants in the 10 7/8% Notes Indenture
and the existing 12 3/4% Notes Indenture. On January 23, 1996, the Company and
Chemical Bank, as Trustee, executed a first supplemental indenture to effect
such amendment.
THE 12 3/4% NOTES
In April 1995, concurrently with the offering of the 7 1/4% Convertible
Notes summarized below, the Company issued $277,803,500 aggregate principal
amount at maturity of its 12 3/4% Senior Deferred Coupon Notes Due 2005 (the
"Old 12 3/4% Notes") at a discount to their aggregate principal amount to
generate gross proceeds to the Company of approximately $150,000,000. The Old
12 3/4% Notes were issued and sold in a transaction exempt from the
registration requirement of the Securities Act pursuant to Rule 144A under the
Securities Act or in transactions complying with Regulation S under the
Securities Act. On August 18, 1995 the Company issued $277,803,500 aggregate
principal amount at maturity of the 12 3/4% Series A Senior Deferred Coupon
Notes Due 2005 (the "12 3/4% Notes") in exchange for the Old 12 3/4% Notes
pursuant to the Indenture. The terms of the 12 3/4% Notes are identical in all
material respects to the Old 12 3/4% Notes except for certain transfer
restrictions and registration rights applicable to the Old 12 3/4% Notes. The
Old 12 3/4% Notes were cancelled on August 18, 1995 on consummation of the
exchange offer which was made pursuant to the Company's Prospectus dated July
18, 1995, forming part of the Registration Statement on Form S-4 (File No. 33-
92794) filed with the Commission on May 26, 1995.
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The 12 3/4% Notes accrete at a rate of 12 3/4% computed on a semiannual bond
equivalent basis to an aggregate principal amount at maturity of $277,803,500.
Cash interest on the 12 3/4% Notes does not accrue until prior to April 15,
2000. Thereafter, the 12 3/4% Notes accrue interest in cash at the rate of 12
3/4% per annum on the principal amount and will be payable semiannually on
April 15 and October 15 of each year, commencing October 15, 2000 to holders
of record on the immediately preceding April 1, and October 1. The 12 3/4%
Notes mature on April 15, 2005. The 12 3/4% Notes will be redeemable, at the
option of the Company at any time, in whole or in part, on or after April 15,
2000 at the redemption prices set forth in the indenture pursuant to which the
12 3/4% Notes were issued (the "12 3/4% Notes Indenture"), plus any unpaid
interest, if any, to the date of redemption. The 12 3/4% Notes may also be
redeemed at the option of the Company in whole but not in part in certain
circumstances where Additional Amounts (as defined in the 12 3/4% Notes
Indenture) are payable under the 12 3/4% Notes. In such circumstances the 12
3/4% Notes to be repurchased must be repurchased at 100% of Accreted Value or,
as the case may be, principal amount thereof. Upon a Change of Control (as
defined in the 12 3/4% Notes Indenture), holders of the 12 3/4% Notes will
have the right to require the Company to repurchase all or any part of the 12
3/4% Notes at a repurchase price equal to 101% of the Accreted Value thereof
plus accrued and unpaid interest, if any. Subject to certain conditions, the
Company will be obligated to offer to purchase the 12 3/4% Notes and other
Qualified Senior Notes (as defined in the 12 3/4% Notes Indenture) with the
Excess Proceeds of certain Asset Sales at a redemption price of 100% of the
Accreted Value or, as the case may be, principal amount thereof plus accrued
and unpaid interest. The 12 3/4% Notes Indenture contains certain restrictions
with respect to, among other things, the payment of dividends, the repurchase
of stock and the making of certain other Restricted Payments, the incurrence
of additional Indebtedness, the creation of certain Liens, certain Asset
Sales, transactions with Subsidiaries and other Affiliates and mergers and
consolidations.
The 12 3/4% Notes are senior unsecured obligations of the Company ranking
pari passu in right of payment of principal and interest with all other
existing and future senior unsecured obligations of the Company and rank
senior to all other existing and future subordinated debt of the Company,
including, without limitation, the Convertible Notes and the 7 1/4%
Convertible Notes.
The Company has recently obtained the necessary consents of the registered
holders of the 12 3/4% Notes to certain proposed amendments to the 12 3/4%
Notes Indenture. On January 22, 1996, the Company and Chemical Bank, as
Trustee, executed a first supplemental indenture to effect those amendments.
In general, the amendments modify the 12 3/4% Notes Indenture by amending the
covenant entitled "Limitations on Dividend and Other Payment Restrictions
Affecting Subsidiaries" and other provisions to facilitate the arrangement of
the Proposed Credit Facilities and other financings and make certain
conforming and other changes to the 12 3/4% Notes Indenture.
THE 11 1/2% NOTES
In January 1996, the Company issued $1,050,000,000 aggregate principal
amount at maturity of its 11 1/2% Series A Senior Deferred Coupon Notes Due
2006 (the "Old 11 1/2% Notes") at a discount to their aggregate principal
amount to generate gross proceeds to the Company of approximately
$600,127,500. The Old 11 1/2% Notes were issued and sold in a transaction
exempt from the registration requirement of the Securities Act pursuant to
Rule 144A under the Securities Act. On May 23, 1996 the Company issued
$1,050,000,000 aggregate principal amount at maturity of the 11 1/2% Series B
Senior Deferred Coupon Notes Due 2006 (the "11 1/2% Notes") in exchange for
the Old 11 1/2% Notes pursuant to the Indenture. The terms of the 11 1/2%
Notes are identical in all material respects to the Old 11 1/2% Notes except
for certain transfer restrictions and registration rights applicable to the
Old 11 1/2% Notes. The Old 11 1/2% Notes tendered for exchange were cancelled
on May 23, 1996 on consummation of the exchange offer made pursuant to the
Company's Prospectus dated April 22, 1996, forming part of the Company's
Registration Statement on Form S-4 (File No. 333-1010) filed with the
Commission on April 16, 1996.
The 11 1/2% Notes accrete at a rate of 11 1/2% computed on a semiannual bond
equivalent basis to an aggregate principal amount at maturity of
$1,050,000,000. Cash interest on the 11 1/2% Notes does not accrue until
February 1, 2001. Thereafter, the 11 1/2% Notes accrue interest in cash at the
rate of 11 1/2% per annum on
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the principal amount and will be payable semiannually on February 1 and August
1 of each year, commencing August 1, 2001 to holders of record on the
immediately preceding January 15, and July 15. The 11 1/2% Notes mature on
February 1, 2006. The 11 1/2% Notes will be redeemable, at the option of the
Company at any time, in whole or in part, on or after February 1, 2001 at the
redemption prices set forth in the indenture pursuant to which the 11 1/2%
Notes were issued (the "11 1/2% Notes Indenture"), plus any accrued unpaid
interest to the date of redemption. The 11 1/2% Notes may also be redeemed at
the option of the Company in whole but not in certain circumstances where
"Additional Amounts" (as defined in the 11 1/2% Notes Indenture) are payable
under the 11 1/2% Notes. In such circumstances, the 11 1/2% Notes to be
repurchased must be repurchased at 100% of Accreted Value or, as the case may
be, principal amount thereof plus accrued and unpaid interest. Upon a Change
of Control (as defined in the 11 1/2% Notes Indenture), holders of the 11 1/2%
Notes will have the right to require the Company to repurchase all or any part
of the 11 1/2% Notes at a repurchase price equal to 101% of the Accreted Value
or, as the case may be, principal amount thereof plus accrued and unpaid
interest, if any. Subject to certain conditions, the Company will be obligated
to offer to purchase the 11 1/2% Notes and other Qualified Senior Notes (as
defined in the 11 1/2% Notes Indenture) with the Excess Proceeds of certain
Asset Sales at a redemption price of 100% of the Accreted Value or, as the
case may be, principal amount thereof plus accrued and unpaid interest, if
any. The 11 1/2% Notes Indenture contains certain restrictions with respect
to, among other things, the payment of dividends, the repurchase of stock and
the making of certain other Restricted Payments, the incurrence of additional
Indebtedness, the creation of certain Liens, certain sales of assets,
transactions with Subsidiaries and other Affiliates and mergers and
consolidations.
The 11 1/2% Notes are senior unsecured obligations of the Company ranking
pari passu in right of payment of principal and interest with all other
existing and future senior unsecured obligations of the Company and rank
senior to all other existing and future subordinated debt of the Company,
including, without limitation, the Convertible Notes and the 7 1/4%
Convertible Notes.
THE 7 1/4% CONVERTIBLE NOTES
In April 1995, concurrently with the original offering of the 12 3/4% Notes
and in May 1995 the Company issued and sold an aggregate principal amount of
$191,750,000 of its 7 1/4% Convertible Notes Due 2005 in transactions exempt
from, or not subject to, the registration requirements of the Securities Act.
Cash interest on the 7 1/4% Convertible Notes will be paid semiannually on
April 15 and October 15 of each year, commencing October 15, 1995. The 7 1/4%
Convertible Notes will mature on April 15, 2005. The 7 1/4% Convertible Notes
are convertible at the option of the holder thereof at any time after 90 days
following the date of the original issuance thereof and prior to maturity,
unless previously redeemed, into shares of Common Stock of the Company, at a
conversion price of $27.56 per share (as adjusted for the four-for-three stock
split by way of dividend paid in August 1995), subject to further adjustment
in certain events. The 7 1/4% Convertible Notes are redeemable, in whole or in
part, at the option of the Company, at any time on or after April 15, 1998, at
the redemption prices set forth in the indenture pursuant to which the 7 1/4%
Convertible Notes were issued (the "7 1/4% Convertible Notes Indenture"). Upon
a Change of Control (as defined in the 7 1/4% Convertible Notes Indenture)
holders of the 7 1/4% Convertible Notes will have the right to require the
Company to purchase all or any part of the 7 1/4% Convertible Notes at a
purchase price equal to 101% of the principal amount thereof and any accrued
and unpaid interest to the date of purchase. The 7 1/4% Convertible Notes
Indenture contains certain restrictions with respect to, among other things,
certain Asset Sales, payment of Additional Amounts and mergers and
consolidations.
The 7 1/4% Convertible Notes are unsecured obligations of the Company,
subordinated in right of payment to all existing and future Senior Debt of the
Company (as defined in the 7 1/4% Convertible Notes Indenture) including,
without limitation, the 10 7/8% Notes, the 12 3/4% Notes and the 11 1/2%
Notes.
The 7 1/4% Convertible Notes were issued and sold in a transactions exempt
from the registration requirement of the Securities Act pursuant to Rule 144A
under the Securities Act or in transactions complying with Regulation S under
the Securities Act. On July 18, 1995 the Commission declared effective the
Company's shelf registration statement relating to the resale of the 7 1/4%
Convertible Notes and the Common Stock issuable upon conversion thereof by the
holders thereof.
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THE NTL FACILITIES
The following summaries do not purport to be complete and are qualified in
their entirety by reference to the agreements described herein, copies of
which have been filed with the Commission as exhibits to the Company's
Registration Statement on Form S-4 (File No. 333-1010) filed with the
Commission on April 16, 1996.
THE A FACILITIES
General. On March 28, 1996, the Purchaser entered into an agreement (the "A
Facilities") with Chase Investment Bank Limited as arranger of a syndicate of
lenders (the "Lenders") and The Chase Manhattan Bank, N.A. (the "Facility
Agent"), pursuant to which the Lenders agreed, subject to the terms thereof,
to lend the Purchaser up to (Pounds)165 million aggregate principal amount.
The A Facilities are comprised of the Short Term Facility (of (Pounds)50
million), the Long Term Facility (of (Pounds)90 million) (collectively, the
"Term Loan Facilities" and any loans thereunder, the "Term Loans") and the
Revolving Credit Facility (of up to (Pounds)25 million). The Term Loan
Facilities are available to finance the acquisition of NTL and to refinance
monies used to pay a portion of the Initial Payment including acquisition
costs and expenses; the Revolving Credit Facility may be used to finance
capital expenditure and working capital requirements of NTL. Up to (Pounds)2
million is available under the Revolving Credit Facility by way of stand by
letters of credit to guarantee overdraft and other working capital facilities
made available by any clearing bank to the Purchaser. The Revolving Credit
Facility is subject to certain drawdown conditions including, in particular,
the receipt of matching subordinated debt or equity from the Company or any of
its subsidiaries or any other person (other than a member of the Purchaser
group) and, in the case of cash advances (other than cash advances made by the
Purchaser to repay any sums paid by The Chase Manhattan Bank, N.A. pursuant to
any standby letters of credit issued by it in accordance with terms of the A
Facilities), the repayment of the Bridge Facility.
Repayment and Interest. Any amounts outstanding under the Revolving Credit
Facility on December 31, 1997 (the end of the availability period) will be
converted to Term Loans. The Short Term Facility is repayable in full on
December 31, 1996 unless certain conditions (described below) are fulfilled on
or prior to that date, in which case the amounts outstanding under the Short
Term Facility will be automatically converted into, and shall be deemed to be,
amounts outstanding under the Long Term Facility. If the OFTEL Price Cap
Review is determined on or before December 31, 1996, an amount of the Short
Term Facility may become repayable in accordance with a formula designed to
estimate the net present value of any resulting reduction in regulated
revenues over the period 1997 to 2002 (provided such value is no less than
(Pounds)1,000,000 (the "Reduction Amount")). The balance of the Short Term
Facility would then be converted into, and be deemed to be, a Term Loan
repayable in accordance with the Long Term Facility. If the determination is
after December 31, 1996, the whole of the Short Term Loan would be so
converted into a Term Loan under the Long Term Facility. However, in that
case, the Purchaser would be obliged to prepay an amount of the Term Loan
equal to the Reduction Amount (provided such amount is not less than
(Pounds)1,000,000) following determination of the OFTEL Price Cap Review.
Based on the Interim Statement published by OFTEL in May 1996, the Company
expects that the whole of the Short Term Facility will be so converted and
that the Purchaser will not thereafter be required to prepay any amount of the
Term Loan linked to the Reduction Amount.
The Company has given certain undertakings in relation to the funding of the
Reduction Amount and the Further Payment. Under these undertakings, the
Company would be obligated to fund by way of equity or subordinated debt the
Reduction Amount if the OFTEL Price Cap Review is determined on or before
December 31, 1996. The Company is also obligated to provide further funds by
way of equity or subordinated debt up to (Pounds)35 million by no later than
the first anniversary of the date of completion of the acquisition. The
undertaking in relation to the Further Payment is subject to certain
reductions.
All amounts outstanding under the Long Term Facility must be repaid at the
rate of a quarter of: (i) 5% of the amounts outstanding on each quarterly
payment date during 1998; (ii) 20% of the amounts outstanding on each
quarterly payment date during 1999; (iii) 22% of the amounts outstanding on
each quarterly payment date
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during 2000; (iv) 25% of the amounts outstanding on each quarterly payment
date during 2001; and (v) 28% of the amounts outstanding on each quarterly
payment date during 2002.
Loans under the A Facilities bear interest at an annual rate equal to LIBOR
plus a margin that varies from 0.75% per annum to 1.75% per annum, based on
certain financial ratios of the Purchaser and certain of its subsidiaries.
The A Facilities require that amounts outstanding thereunder be prepaid and
the commitment of its Lenders thereunder be reduced in certain circumstances.
In particular, the A Facilities require that 50% of any Excess Cash Flow (as
defined in the A Facilities) of the Purchaser and its subsidiaries shall be
applied to prepay amounts outstanding under the Term Loan Facility. The
Purchaser may prepay the Term Loan Facilities any time subject to certain
notice requirements and reimbursing the Lenders for any funding losses and
certain breakage costs.
Security. All principal, interest and other obligations of the Purchaser in
respect of loans under the A Facilities will be secured by, among other
things, guarantees given by NTL and certain of its subsidiaries and first
ranking fixed and floating charges over present and future assets (subject to
certain exceptions) of the Purchaser, NTL and certain of its subsidiaries. The
A Facilities do not, therefore, provide for the Lenders to have recourse to
the assets of the Company other than the assets of the Purchaser and its
subsidiaries including without limitation, an unsecured right of the Purchaser
against the Company under the undertaking relating to the Further Payment
referred to above under "--Repayment and Interest" and the rights of the
Lenders under the Short Term Facility pursuant to the undertaking of the
Company relating to the Reduction Amount payable pursuant to the Short Term
Facility. Based on the Interim Statement, however, the Company believes that
no Reduction Amount will become payable pursuant to the Short Term Facility.
See "--Repayment and Interest."
Covenants. The A Facilities contain various financial and other covenants,
including covenants with respect to the Purchaser and certain of its
subsidiaries relating to minimum total debt to Operating Cash Flow (as defined
in the "A Facilities"), fixed charge coverage, net worth and pro-forma debt
service ratios. The A Facilities also include covenants which restrict the
ability of the Purchaser to pay dividends or make other distributions to its
shareholders to 50% of Excess Cash Flow, provided no event of default or
potential event of default has occurred or remains unremedied. The covenants
further include other customary restrictions for facilities of this nature
including a requirement for all amounts invested by the Company or any of its
subsidiaries in the Purchaser's group to be subordinated on the terms of
subordination agreements to the claims of the A Facilities' and B Facilities'
Lenders. The Purchaser's ability to borrow under the A Facilities is subject
to, among other things, its compliance with such covenants and the failure to
comply with such covenants could result in all amounts under the A Facilities
becoming immediately due and payable.
Conditions Precedent. The Purchaser's ability to draw under the Revolving
Credit Facility is subject to the satisfaction of certain conditions precedent
including, among other things, no breach of representation, no event of
default or potential event of default by certain members of the Purchaser's
group. In addition, subject to certain exceptions, cash advances under the
Revolving Credit Facility may not be drawn-down until the Bridge Facility has
been repaid in full and matching funding has been obtained by the Purchaser in
the form of equity or subordinated debt.
Events of Default. The A Facilities contain various events of default for,
among other things, non-payment of amounts due under the facilities, breach of
covenants or representations, cross default to certain other indebtedness,
breach of the covenants regarding the financial condition of the Purchaser and
certain of its subsidiaries, termination of the BBC site sharing license
agreements and certain material commercial contracts, or failure by the
Company to comply with its undertakings to the Lenders and the Purchaser. The
occurrence of any event of default could result in all amounts outstanding
under the A Facilities becoming immediately due and payable.
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THE BRIDGE FACILITY
General. Contemporaneously with its execution of the A Facilities, the
Purchaser entered into an agreement (the "Bridge Facility") with The Chase
Manhattan Bank, N.A. (the "Bank"), pursuant to which the Bank agreed to lend
to the Purchaser up to (Pounds)60 million aggregate principal amount under a
secured term loan facility. The proceeds of the Bridge Facility were primarily
to be used to finance a portion of the NTL acquisition and associated
expenses.
Availability, Repayment and Interest. All amounts outstanding under the
Bridge Facility must be repaid on or before December 31, 1996. Loans under
Facility B bear interest at an annual rate equal to LIBOR plus a margin of 3%,
which margin shall be increased by an additional 1.25% on each of the
"Applicable Margin Step-Up Dates" falling three, four, five, six and seven
months after the advance of any loans under the Bridge Facility. The Purchaser
may repay all, but not less than all, of the amount outstanding under the
Bridge Facility at any time without penalty.
Security. All principal, interest and other obligations of the Purchaser in
respect of loans under the B Facility are secured by, among other things,
second ranking fixed and floating charges over the present and future assets
of the Purchaser subject to certain exceptions and NTL and certain of its
subsidiaries.
All principal, interest and other obligations of the Purchaser in respect of
the Bridge Facility are guaranteed jointly and severally by the Company, OCOM
Corporation, OCOM Sub I, Inc., OCOM Sub III, Inc., CableTel UK Group, Inc. and
CableTel (UK) Limited (the "ICTL Guarantees") NTL and certain of its
subsidiaries. The ICTL Guarantees require that the guarantors of the Bridge
Facility ensure that CableTel (UK) Limited opens and maintains with the Bank
an account with a deposit balance equal to (Pounds)62.5 million (the
"Deposits").
Covenants. The Bridge Facility contains covenants similar to those of the A
Facilities.
Events of Default. The Bridge Facility contains, in addition to events of
default similar to those of the A Facilities, an event of default for
withdrawal of the Deposits other than upon repayment of the Bridge Facility
in full.
THE PROPOSED CREDIT FACILITIES
The Company intends to resume discussions with commercial banks regarding
the arrangement of the Proposed Credit Facilities. The arrangement of the
Proposed Credit Facilities is subject to the satisfaction of a number of
significant conditions, including, among other things, (i) reaching an
agreement in principle regarding the terms of the Proposed Credit Facilities,
(ii) the banks' credit committee approval, (iii) the negotiation and execution
of definitive credit agreements and related documents satisfactory to the
Company and the banks, (iv) the completion of due diligence satisfactory to
the Arrangers and (v) nothing occurring or arising which might adversely
affect the banks' ability to syndicate the Proposed Credit Facilities. The
Company can give no assurance that any such conditions will be satisfied or
that the Proposed Credit Facilities will be entered into.
The Company expects that the Proposed Credit Facilities will contain various
covenants, including financial covenants restricting changes of control (or
making such an event an event of default) and limiting various other
activities that the borrowing group may otherwise engage in, in particular,
restricting the payment of dividends or distributions by the borrowing group
to the Company and its other Subsidiaries if an event of default under the
Proposed Credit Facilities has occurred and continuing and restructuring the
payments of such dividends out of excess cash flow. Indebtedness under each of
the Proposed Credit Facilities is expected to be incurred by each member of
the relevant borrowing group and to be secured and guaranteed in a manner to
be agreed with the banks.
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CERTAIN UNITED STATES FEDERAL TAX CONSIDERATIONS
The following is a discussion of certain anticipated U.S. federal income tax
consequences of the purchase, ownership and disposition of the Convertible
Notes (or Common Stock of the Company acquired upon conversion of a
Convertible Note) as of the date hereof. It deals only with Convertible Notes
held as capital assets by holders, and does not deal with special situations
including those that may apply to a particular holder such as exempt
organizations, dealers in securities, financial institutions, insurance
companies or certain "straddle" or hedging transactions. The federal income
tax considerations set forth below are based upon the Internal Revenue Code of
1986, as amended (the "Code") and Treasury Regulations, rulings and judicial
decisions thereunder as of the date hereof, and such authorities may be
repealed, revoked or modified (possibly retroactively) so as to result in
federal income tax consequences different from those discussed below. As used
herein, the term "U.S. Holder" means a beneficial owner of a Convertible Note
(or Common Stock of the Company acquired upon conversion of a Convertible
Note) that is for United States federal income tax purposes (i) 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 or of any
political subdivision thereof, or (iii) an estate or trust the income of which
is subject to United States federal income taxation regardless of its source.
As used herein, the term "Non-U.S. Holder" means a beneficial owner of a
Convertible Note (or Common Stock of the Company acquired upon conversion of a
Convertible Note) that is not a U.S. Holder. PERSONS CONSIDERING PURCHASING
CONVERTIBLE NOTES SHOULD CONSULT THEIR TAX ADVISORS REGARDING THE PARTICULAR
TAX CONSEQUENCES OF PURCHASING, HOLDING AND DISPOSING OF THE CONVERTIBLE NOTES
OR COMMON STOCK OF THE COMPANY, INCLUDING THE TAX CONSEQUENCES ARISING UNDER
ANY STATE, LOCAL OR FOREIGN LAWS.
U.S. HOLDERS
Interest. In general, interest on a Convertible Note will be taxable to a
U.S. Holder as ordinary interest income in accordance with the U.S. Holder's
method of accounting for federal income tax purposes.
Sale, Exchange or Redemption. A U.S. Holder will recognize gain or loss on
the sale, redemption or other taxable disposition of a Convertible Note in an
amount equal to the difference between the U.S. Holder's adjusted tax basis in
the Convertible Note and the amount received therefor (other than amounts
attributable to accrued and unpaid interest on the Convertible Notes, which
will be treated as interest for federal income tax purposes). Subject to the
following discussion of market discount, gain or loss recognized on the sale,
redemption or other taxable disposition of a Convertible Note generally will
be long-term capital gain or loss if the Convertible Note was held for more
than one year.
Market Discount. If a U.S. Holder acquires a Convertible Note subsequent to
its original issuance and the Convertible Note's stated redemption price at
maturity (in general, its outstanding principal amount) exceeds by more than a
de minimis amount the U.S. Holder's initial tax basis in the Convertible Note,
the U.S. Holder will be treated as having acquired the Convertible Note at a
"market discount" equal to such excess. In general, any gain recognized by a
U.S. Holder upon the disposition of a Convertible Note having market discount
will be treated as ordinary income to the extent of the market discount that
accrued through the date of disposition. Market discount generally accrues on
a straight-line basis over the remaining term of a Convertible Note except
that, at the election of the U.S. Holder, market discount will accrue on a
constant yield basis. A U.S. Holder may elect to include any market discount
in income currently as it accrues (either on a straight-line basis or, if the
U.S. Holder so elects, on a constant yield basis) rather than upon disposition
of the Convertible Note, and any amounts so included would increase the U.S.
Holder's adjusted tax basis in the Convertible Note. An election to include
market discount in income currently will apply to all market discount bonds
acquired by the U.S. Holder on or after the beginning of the first taxable
year to which the election applies and such election (as well as the election
to accrue market discount on a constant yield method) is irrevocable without
the consent of the Internal Revenue Service.
It is anticipated that U.S. Treasury Regulations will be issued that will
provide that, upon the conversion of a Convertible Note having market
discount, a U.S. Holder will not be required to include any amount in income
64
<PAGE>
with respect to accrued market discount not previously included in income as
of the date of conversion (except to the extent attributable to cash received
in lieu of fractional shares, as described in "Conversion of the Notes" below)
but such accrued market discount will carry over to the Common Stock received
on conversion and will be treated as ordinary income to the U.S. Holder upon
the subsequent disposition of the Common Stock.
A U.S. Holder who acquires a Convertible Note at a market discount may be
required to defer the deduction of all or a portion of any interest paid or
accrued on any indebtedness incurred or continued to purchase or carry the
Convertible Note until the market discount is recognized upon a subsequent
disposition of the Convertible Note. Such deferral is not required, however,
if the U.S. Holder elects to include accrued market discount in income
currently (as described above).
Bond Premium. If a U.S. Holder's initial tax basis in a Convertible Note
exceeds the stated redemption price at maturity of the Convertible Note, the
U.S. Holder will be treated as having acquired the Convertible Note with "bond
premium" equal to such excess. In no case, however, shall bond premium include
any amount attributable to the conversion feature of a Convertible Note. In
general, the U.S. Holder may elect to amortize any bond premium, using a
constant yield method, over the remaining term of the Convertible Note.
However, because the Convertible Notes may be redeemed at the option of the
Company at a price in excess of their principal amount, a U.S. Holder may be
required to amortize any bond premium based on the earlier call date and the
call price payable at that time and thus defer a portion of the amortization.
The amount of bond premium amortized by an electing U.S. Holder during a
year will generally reduce the amount required to be included in the U.S.
Holder's income during the year with respect to interest on the Convertible
Note and will reduce the U.S. Holder's adjusted tax basis in the Convertible
Note. An election to amortize bond premium will apply to all bonds (other than
bonds the interest on which is excludable from gross income) held by the U.S.
Holder at the beginning of the first taxable year to which the election
applies or thereafter acquired by the U.S. Holder, and is irrevocable without
the consent of the Internal Revenue Service.
Conversion of the Notes. A U.S. Holder will not recognize gain or loss upon
conversion of the Convertible Notes solely into Common Stock, except to the
extent of cash received in lieu of fractional shares of Common Stock. The U.S.
Holder's tax basis in shares of Common Stock received upon conversion will be
the same as the U.S. Holder's adjusted tax basis of the Convertible Notes
exchanged at the time of conversion (reduced by the adjusted tax basis of any
fractional share for which the U.S. Holder receives a cash payment from the
Company), and the holding period of the Common Stock received in the
conversion will include the holding period of the Convertible Notes that were
converted.
Adjustments to Conversion Price. The Conversion Price of the Convertible
Notes is subject to adjustment under certain circumstances. Under Section 305
of the Code and the Treasury Regulations issued thereunder, adjustments or the
failure to make such adjustments to the Conversion Price of the Convertible
Notes may result in a taxable constructive distribution to the U.S. Holders of
Convertible Notes, resulting in ordinary income (subject to a possible
dividends received deduction in the case of corporate U.S. Holders) to the
extent of the Company's current and/or accumulated earnings and profits if,
and to the extent that, certain adjustments in the Conversion Price that may
occur in limited circumstances (particularly an adjustment to reflect a
taxable dividend to U.S. Holders of Common Stock of the Company) increase the
proportionate interest of a U.S. Holder of a Convertible Note convertible into
fully diluted Common Stock, whether or not the U.S. Holders ever convert the
Convertible Notes. Generally, a U.S. Holder's tax basis in a Convertible Note
will be increased by the amount of any such constructive dividend.
NON-U.S. HOLDERS
Under present United States federal income and estate tax law, assuming
certain certification requirements are met (which include identification of
the beneficial owner of a Convertible Note), and subject to the discussion of
backup withholding below:
(a) Payments of interest on a Convertible Note to any Non-U.S. Holder
will generally not be subject to United States federal income or
withholding tax, provided that (1) the holder is not (i) a direct or
indirect
65
<PAGE>
owner of 10% or more of the total voting power of all voting stock of the
Company, (ii) a controlled foreign corporation related to the Company,
(iii) a bank receiving interest pursuant to a loan agreement entered into
in the ordinary course of its trade or business or (iv) a foreign tax-
exempt organization or a foreign private foundation for United States
federal income tax purposes, (2) such interest payments are not effectively
connected with the conduct of a trade or business within the United States
by the Non-U.S. Holder ("Effectively Connected") and (3) the holder of the
Convertible Notes certifies, under penalties of perjury, as to its status
as a Non-U.S. Holder and provides its name and address.
(b) 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 a Convertible Note or Common Stock (including the receipt of
cash in lieu of fractional shares upon conversion of a Convertible Note
into Common Stock) unless (1) the gain is Effectively Connected, (2) in the
case of a Non-U.S. Holder who is a nonresident alien individual and holds
the Convertible Note or Common Stock as a capital asset, such holder is
present in the United States for 183 days or more in the taxable year of
disposition and certain other requirements are met, or (3) the Company was,
is or becomes a "United States real property holding corporation" for
United States federal income tax purposes and certain other requirements
are met.
(c) If interest on a Convertible Note is exempt from withholding of
United States federal income tax under the rules described in clause (a)
above, the Convertible Note will generally not be included in the estate of
a deceased Non-U.S. Holder for United States federal estate tax purposes.
(d) A Non-U.S. Holder will generally not be subject to United States
federal income tax on the conversion of a Convertible Note solely into
Common Stock of the Company (except as described in clause (b) above with
respect to the receipt of cash in lieu of fractional shares by certain
holders upon conversion of a Convertible Note).
(e) Dividends paid on Common Stock of the Company to a Non-U.S. Holder
will generally be subject to withholding of United States federal income
tax at the rate of 30% (or a lower rate prescribed by an applicable
treaty), unless such dividends are Effectively Connected.
(f) Common Stock of the Company owned by an individual who is neither a
citizen nor a resident (as defined for United States federal estate tax
purposes) of the United States at the date of death will generally be
included in such individual's estate for United States federal estate tax
purposes.
Income (including interest on a Convertible Note and dividends on Common
Stock of the Company as the case may be) and capital gain on the sale or other
taxable disposition of a Convertible Note or Common Stock that is Effectively
Connected generally will not be subject to withholding, but may be subject to
United States federal income tax at rates applicable to U.S. citizens,
resident aliens and U.S. corporations (and, in the case of corporate holders,
such income and gain may also be subject to the United States branch profits
tax which is generally imposed on a foreign corporation on the repatriation
from the United States of earnings and profits that are Effectively
Connected).
An applicable income tax treaty may, however, change these rules. A Non-U.S.
Holder may be required to satisfy certain certification and other requirements
in order to claim treaty benefits or otherwise obtain any reduction of or
exemption from United States federal income or withholding tax under the
foregoing rules. In addition, a Non-U.S. Holder may be required to furnish
certain information to the Internal Revenue Service (including filing an
application for an Internal Revenue Service Individual Taxpayer Identification
Number, i.e., a Form W-7) in order to obtain a refund or credit for any
amounts withheld or paid in excess of such holder's United States federal
income tax liability.
BACKUP WITHHOLDING AND INFORMATION REPORTING
The Company or its designated paying agent (the "payor") will, where
required, report to holders of Convertible Notes (or Common Stock) and the
Internal Revenue Service the amount of any interest paid on the Convertible
Notes (or dividends paid with respect to the Common Stock or other reportable
payments) in each calendar year and the amount of tax, if any, withheld with
respect to such payments. The information may also be made available to the
tax authorities of the country in which a Non-U.S. Holder resides.
66
<PAGE>
Under current United States federal income tax law, a 31% backup withholding
tax is required with respect to certain interest, dividends and principal
payments made to, and to the proceeds of sales before maturity by, certain
U.S. Holders if such persons fail to furnish their taxpayer identification
numbers and other information.
Interest payments on a Convertible Note to a Non-U.S. Holder will not be
subject to information reporting requirements and backup withholding tax if
either the requisite certification, as described above, has been received or
an exemption has otherwise been established, provided that the payor does not
have actual knowledge that the holder is a U.S. Holder or that the conditions
of any other exemption are not in fact satisfied.
Payment by or through a United States office of a broker of the proceeds on
disposition of a Convertible Note or Common Stock will be subject to both
backup withholding tax and information reporting requirements, unless the Non-
U.S. Holder certifies under penalties of perjury as to its name, address and
status as a Non-U.S. Holder or otherwise establishes an exemption. Information
reporting requirements (but not backup withholding tax) will also apply to a
payment of the proceeds on disposition of a Convertible Note or Common Stock
by or through a foreign office of a United States broker, or foreign brokers
with certain relationships to the United States, unless the broker has
documentary evidence in its records that the holder is a Non-U.S. Holder and
certain other conditions are met or the holder otherwise establishes an
exemption.
Information reporting requirements and backup withholding tax will generally
not apply to dividends paid on Common Stock of the Company to a Non-U.S.
Holder at an address outside the United States, unless the payor has knowledge
that the holder is a U.S. Holder. Dividends paid to a Non-U.S. Holder at an
address within the United States may be subject to backup withholding tax if
the Non-U.S. Holder fails to establish that it is entitled to an exemption or
to provide a correct taxpayer identification number and other information to
the payor.
Backup withholding is not an additional tax. Any amounts withheld under the
backup withholding rules will be refunded or credited against the holder's
United States federal income tax liability, provided that the required
information is furnished to the Internal Revenue Service as discussed above.
These backup withholding and information reporting rules are under review by
the United States Treasury, and their application to the Convertible Notes and
the Common Stock could be changed in the future.
THE PRECEDING DISCUSSION OF CERTAIN UNITED STATES FEDERAL INCOME TAX
CONSEQUENCES IS FOR GENERAL INFORMATION ONLY AND IS NOT TAX ADVICE.
ACCORDINGLY, EACH INVESTOR SHOULD CONSULT ITS OWN TAX ADVISER AS TO PARTICULAR
TAX CONSEQUENCES TO IT OF PURCHASING, HOLDING, AND DISPOSING OF THE
CONVERTIBLE NOTES AND THE COMMON STOCK OF THE COMPANY, INCLUDING THE
APPLICABILITY AND EFFECT OF ANY STATE, LOCAL OR FOREIGN TAX LAWS, AND OF ANY
PROPOSED CHANGES IN APPLICABLE LAWS.
67
<PAGE>
SELLING HOLDERS
The Convertible Notes were originally issued by the Company and sold by the
Initial Purchasers in a transaction exempt from the registration requirements
of the Securities Act, to persons reasonably believed by such Initial
Purchaser to be "qualified institutional buyers" (as defined in Rule 144A
under the Securities Act) or in transactions complying with the provisions of
Regulation S under the Securities Act. The Selling Holders (which term
includes their transferees, pledgees, donees or their successors) may from
time to time offer and sell pursuant to this Prospectus any or all of the
Convertible Notes and Common Stock issued upon conversion of the Convertible
Notes.
The following table sets forth information, as of , 1996 with respect
to the Selling Holders and the respective principal amounts of Convertible
Notes beneficially owned by each Selling Holder that may be offered pursuant
to this Prospectus. Such information has been obtained from the Selling
Holders. None of the Selling Holders has, or within the past three years has
had, any position, office or other material relationship with the Company or
any of its predecessors or affiliates, except as noted below. Because the
Selling Holders may offer all or some portion of the Convertible Notes or the
Common Stock issuable upon conversion thereof pursuant to this Prospectus, no
estimate can be given as to the amount of the Convertible Notes or the Common
Stock issuable upon conversion thereof that will be held by the Selling
Holders upon termination of any such sales. In addition, the Selling Holders
identified below may have sold, transferred or otherwise disposed of all or a
portion of Their Convertible Notes since , 1996 in transactions exempt
from the registration requirements of the Securities Act.
<TABLE>
<CAPTION>
PRINCIPAL AMOUNT
SELLING HOLDER OF CONVERTIBLE NOTES
-------------- --------------------
<S> <C>
.............................................
.............................................
.............................................
.............................................
.............................................
.............................................
.............................................
.............................................
.............................................
------------
Total............................................ $275,000,000
============
</TABLE>
PLAN OF DISTRIBUTION
The Convertible Notes and Common Stock offered hereby may be sold from time
to time to purchasers directly by the Selling Holders. Alternatively, the
Selling Holders may from time to time offer the Convertible Notes and Common
Stock to or through underwriters, broker/dealers or agents, who may receive
compensation in the form of underwriting discounts, concessions or commissions
from the Selling Holders or the purchasers of Convertible Notes and Common
Stock for whom they may act as agents. The Selling Holders and any
underwriters, broker/dealers or agents that participate in the distribution of
Convertible Notes and Common Stock may be deemed to be "underwriters" within
the meaning of the Securities Act and any profit on the sale of Convertible
Notes and Common Stock by them and any discounts, commissions, concessions or
other compensation received by any such underwriter, broker/dealer or agent
may be deemed to be underwriting discounts and commissions under the
Securities Act.
The Convertible Notes and Common Stock issuable upon conversion thereof may
be sold by the Selling Holder from time to time, in one or more transactions
at fixed prices, at prevailing market prices at the time of sale, at varying
prices determined at the time of sale or at negotiated prices. Such prices
will be determined by
68
<PAGE>
the Selling Holders. The sale of the Convertible Notes and the Common Stock
issuable upon conversion thereof may be effected in transactions (which may
involve crosses or block transactions) on any national securities exchange or
quotation service on which the Convertible Notes or the Common Stock may be
listed or quoted at the time of sale, (ii) in the over-the-counter market,
(iii) in transactions otherwise than on such exchanges or in the over-the-
counter market or (iv) through the writing of options. At the time a
particular offering of the Convertible Notes or the Common Stock is made, if
required, a prospectus supplement will be distributed which will set forth the
names of the Selling Holders, the aggregate amount and type of Convertible
Notes and Common Stock being offered, the number of such securities owned
prior to and after the completion of any such offering, and, to the extent
required, the terms of the offering, including the name or names of any
underwriters, broker/dealers or agents, any discounts, commissions and other
terms constituting compensation from the Selling Holders and any discounts,
commissions or concessions allowed or reallowed or paid to broker/dealers.
To comply with the securities laws of certain jurisdictions, if applicable,
the Convertible Notes and Common Stock will be offered or sold in such
jurisdictions only through registered or licensed brokers or dealers. In
addition, in certain jurisdictions the Convertible Notes and Common Stock may
not be offered or sold unless they have been registered or qualified for sale
in such jurisdictions or any exemption from registration or qualification is
available and is complied with.
Under applicable rules and regulations under the Exchange Act, any person
engaged in a distribution of the Convertible Notes or the shares of Common
Stock issuable upon conversion thereof may be limited in its ability to engage
in market activities with respect to such Convertible Notes or the shares of
Common Stock issuable upon conversion thereof. In addition and without
limiting the foregoing, each Selling Holder will be subject to applicable
provisions of the Exchange Act and the rules and regulations thereunder, which
provisions may limit the timing of purchases and sales of any of the
Convertible Notes and shares of Common Stock issuable upon conversion thereof
by the Selling Holders. All of the foregoing may affect the marketability of
the Convertible Notes and shares of Common Stock issuable upon conversion
thereof.
All expenses of the registration of the Convertible Notes and Common Stock
pursuant to the Registration Rights Agreement will be paid by the Company,
including, without limitation, Commission filing fees and expenses of
compliance with state securities or "blue sky" laws; provided, however, that
the Selling Holders will pay all underwriting discounts and selling
commissions, if any. The Selling Holders will be indemnified by the Company
against certain civil liabilities, including certain liabilities under the
Securities Act, or will be entitled to contribution in connection therewith.
The Company will be indemnified by the Selling Holders against certain civil
liabilities, including certain liabilities under the Securities Act, or will
be entitled to contribution in connection therewith.
LEGAL MATTERS
The validity of the Convertible Notes will be passed upon for the Company by
Skadden, Arps, Slate, Meagher & Flom, New York, New York, special counsel to
the Company.
EXPERTS
The consolidated financial statements of International CableTel Incorporated
included in its Annual Report (on Form 10-K) for the year ended December 31,
1995 have been audited by Ernst & Young LLP, independent auditors, as set
forth in their report thereon included therein and incorporated herein by
reference. Such consolidated financial statements are incorporated herein by
reference in reliance upon such report given upon the authority of such firm
as experts in accounting and auditing.
The consolidated financial statements of NTL Group Limited at December 31,
1995 and 1994, and for each of the years then ended appearing in International
CableTel Incorporated's Current Report (on Form 8-KA) dated May 9, 1996 have
been audited by Ernst & Young, independent auditors as set forth in their
report thereon included therein and incorporated herein by reference. Such
consolidated financial statements are incorporated herein by reference in
reliance upon such report given upon the authority of such firm as experts in
accounting and auditing.
69
<PAGE>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
NO DEALER, SALESPERSON OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS
PROSPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT
BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY OR ANY OF ITS AGENTS.
NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL UN-
DER ANY CIRCUMSTANCES CREATE ANY IMPLICATION THAT THERE HAS BEEN NO CHANGE IN
THE AFFAIRS OF THE COMPANY SINCE THE DATE AS OF WHICH INFORMATION IS GIVEN IN
THIS PROSPECTUS. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER OR SOLICITATION
BY ANYONE IN ANY JURISDICTION IN WHICH SUCH OFFER OR SOLICITATION IS NOT AU-
THORIZED OR IN WHICH THE PERSON MAKING SUCH OFFER OR SOLICITATIONS IS NOT
QUALIFIED TO DO SO OR TO ANYONE TO WHOM IT IS UNLAWFUL TO MAKE SUCH SOLICITA-
TION.
------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
Available Information...................................................... 3
Incorporation of Certain Documents by Reference............................ 3
Prospectus Summary......................................................... 5
Risk Factors............................................................... 10
Use of Proceeds............................................................ 25
Price Range of Common Stock................................................ 25
Dividend Policy............................................................ 26
Exchange Rates............................................................. 26
Ratio of Earnings to Fixed Charges......................................... 26
Capitalization............................................................. 27
Selected Consolidated Financial Information................................ 28
The Company................................................................ 29
Description of Convertible Notes........................................... 35
Description of Capital Stock............................................... 54
Description of Certain Indebtedness........................................ 58
Certain United States Federal Tax Considerations........................... 64
Selling Holders............................................................ 68
Plan of Distribution....................................................... 68
Legal Matters.............................................................. 69
Experts.................................................................... 69
Glossary................................................................... A-1
</TABLE>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
$275,000,000
[ICT LOGO]
7% CONVERTIBLE SUBORDINATED NOTES DUE 2008
----------------
PROSPECTUS
----------------
DATED , 1996
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN THE PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following is an itemization of all expenses (subject to future
contingencies) incurred or expected to be incurred by the Company in
connection with the Offering.
<TABLE>
<S> <C>
SEC registration fee.......................................... $94,827.59
Legal fees and expenses.......................................
Accounting fees and expenses..................................
Printing and engraving fees...................................
Trustee fees..................................................
Miscellaneous expenses........................................
----------
Total.....................................................
==========
</TABLE>
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS
As permitted by Section 102 of the Delaware General Corporation Law (the
"DGCL"), the Company's Restated Certificate of Incorporation eliminates a
director's personal liability for monetary damages to the Company and its
stockholders arising from a breach or alleged breach of a director's fiduciary
duty except for liability under Section 174 of the DGCL or liability for a
breach of the director's duty of loyalty to the Company or its stockholders,
for acts or omissions not in good faith or which involve intentional
misconduct or a knowing violation of law or for any transaction in which the
director derived an improper personal benefit. The effect of this provision in
the certificate of incorporation is to eliminate the rights of the Company and
its stockholders (through stockholders, derivative suits on behalf of the
Company) to recover monetary damages against a director for breach of
fiduciary duty as a director (including breaches resulting from negligent or
grossly negligent behavior) except in the situations described above.
The Company's By-laws provide that directors and officers of the Company
shall be indemnified against liabilities arising from their service as
directors and officers to the full extent permitted by law. Section 145 of the
DGCL empowers a corporation to indemnify any person who was or is a party or
is threatened to be made a party to any threatened, pending or completed
action, suit or proceeding, whether civil, criminal, administrative or
investigative (other than an action by or in the right of the corporation) by
reason of the fact that he is or was a director, officer, employee or agent of
the corporation or is or was serving at the request of the corporation as a
director, officer, employee or agent of another corporation, partnership,
joint venture, trust or other enterprise, against expenses (including
attorney's fees), judgments, fines and amounts paid in settlement actually and
reasonably incurred by him in connection with such action, suit or proceeding
if he acted in good faith and in a manner he reasonably believed to be in, or
not opposed to, the best interests of the corporation, and, with respect to
any criminal action or proceeding, had no reasonable cause to believe his
conduct was unlawful.
Section 145 also empowers a corporation to indemnify any person who was or
is a party or is threatened to be made a party to any threatened, pending or
completed action or suit by or in the right of the corporation to procure a
judgment in its favor by reason of the fact that such person acted in any of
the capacities set forth above, against expenses (including attorneys' fees)
actually and reasonably incurred by him in connection with the defense or
settlement of such action or suit if he acted under similar standards, except
that no indemnification may be made in respect of any claim, issue or matter
as to which such person shall have been adjudged to be liable to the
corporation unless, and only to the extent that, the Court of Chancery or the
court in which such action was brought shall determine that despite the
adjudication of liability such person is fairly and reasonably entitled to
indemnity for such expenses which the court shall deem proper.
Section 145 further provides that to the extent that a director or officer
of a corporation has been successful in the defense of any action, suit or
proceeding referred to above or in the defense of any claim, issue or matter
II-1
<PAGE>
therein, he shall be indemnified against expenses (including attorneys' fees)
actually and reasonably incurred by him in connection therewith; that
indemnification provided for by Section 145 shall not be deemed exclusive of
any other rights to which the indemnified party may be entitled; and that the
corporation is empowered to purchase and maintain insurance on behalf of a
director or officer of the corporation against any liability asserted against
him and incurred by him in any such capacity, or arising out of his status as
such, whether or not the corporation would have the power to indemnify him
against such liabilities under Section 145.
The Company has entered into a director and officer indemnity agreement
("Indemnity Agreement") with each officer and director of the Company (an
"Indemnitee"). Under the By-laws and these Indemnity Agreements, the Company
must indemnify an Indemnitee to the fullest extent permitted by the DGCL for
losses and expenses incurred in connection with actions in which the
Indemnitee is involved by reason of having been a director or officer of the
Company. The Company is also obligated to advance expenses an Indemnitee may
incur in connection with such actions before any resolution of the action.
ITEM 16. EXHIBITS.
The following exhibits are filed as part of this Registration Statement.
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
------- -----------
<C> <S>
1.1. Purchase Agreement, dated June 6, 1996, by and among the Registrant
and Donaldson, Lufkin & Jenrette Securities Corporation and Salomon
Brothers Inc
2.1. Amended and Restated Agreement of Reorganization and Plan of Merger
Agreement, dated as of May 28, 1993, by and between the Company and
OCOM(1)
2.2. Deed of Irrevocable Undertaking dated March 28, 1996 by and among
Addroute Limited, certain shareholders in the NTL Group Limited, NTL
Group Limited and International CableTel Incorporated(2)
2.3. Form of Offer Document dated March 28, 1996, of Addroute Limited for
NTL Group Limited(2)
2.4. Deed of Adjustment dated March 28, 1996, by and among Addroute Limited
and Mercury Asset Management plc.(2)
3.1. Restated Certificate of Incorporation of the Company, as amended by
Certificate of Amendment, dated June 5, 1996
4.1. Registration Rights Agreement, dated as of June 12, 1996, by and among
the Company, Donaldson, Lufkin & Jenrette Securities Corporation and
Salomon Brothers Inc, with respect to the 7% Convertible Subordinated
Notes
4.2. Indenture, dated as of June 12, 1996, by and among the Company and
Chemical Bank, as Trustee, with respect to the Convertible Notes
4.3. Form of Note (included in Exhibit 4.2)
5.1. Opinion of Skadden, Arps, Slate, Meagher & Flom as to the legality of
the securities being registered hereby*
12.1. Computation of Ratio of Earnings to Fixed Charges
23.1. Consent of Ernst & Young LLP
23.2. Consent of Ernst & Young
23.3. Consent of Skadden, Arps, Slate, Meagher & Flom (included in Exhibit
5.1)*
24. Powers of Attorney (included in the signature pages to the
Registration Statement)
25.1. Form T-1 Statement of Eligibility and Qualification of Trustee
</TABLE>
- --------
(1) Incorporated by reference from the Registrant's Registration Statement on
Form S-1, File No. 33-63570.
(2) Incorporated by reference from Amendment No. 2 to the Registrant's
Registration Statement on Form S-4, File No. 333-1010.
* To be filed by amendment.
II-2
<PAGE>
ITEM 17. UNDERTAKINGS.
The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act, each filing of the
registrant's annual report pursuant to Section 13(a) or 15(d) of the Exchange
Act (and, where applicable, each filing of an employee benefit plan's annual
report pursuant to Section 15(d) of the Exchange Act) that is incorporated by
reference in the registration statement shall be deemed to be a new
registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial
bona fide offering thereof.
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers and controlling persons of the
registrant pursuant to the foregoing provisions, or otherwise, the registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Securities
Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
registrant of expenses incurred or paid by a director, officer or controlling
person of the registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the registrant will, unless
in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the
Securities Act and will be governed by the final adjudication of such issue.
The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this Registration Statement (i) to include any
prospectus required by Section 10(a)(3) of the Securities Act, (ii) to
reflect in the prospectus any facts or events arising after the effective
date of the Registration Statement (or the most recent post-effective
amendment thereof) which, individually or in the aggregate, represent a
fundamental change in the information set forth in the Registration
Statement, and (iii) to include any material information with respect to
the plan of distribution not previously disclosed in the Registration
Statement or any material change to such information in the Registration
Statement.
(2) That for the purpose of determining any liability under the
Securities Act, each such post-effective amendment shall be deemed to be a
new registration statement relating to the securities offered therein, and
the offering of such securities at that time shall be deemed to be the
initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.
The undersigned registrant hereby undertakes to respond to requests for
information that is incorporated by reference into the prospectus pursuant to
Item 4, 10(b), 11, or 13 of this form, within one business day of receipt of
such request, and to send the incorporated documents by first class mail or
other equally prompt means. This includes information contained in documents
filed subsequent to the effective date of the registration statement through
the date of responding to the request.
The undersigned registrant hereby undertakes to supply by means of a post-
effective amendment all information concerning a transaction, and the company
being acquired involved therein, that was not the subject of and included in
the registration statement when it became effective.
The undersigned Registrant hereby undertakes to file an application for the
purpose of determining the eligibility of the trustee to act under subsection
(a) of section 310 of the Trust Indenture Act in accordance with the rules and
regulations prescribed by the Commission under section 305(b)(2) of the Trust
Indenture Act.
II-3
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THE REGISTRANT
CERTIFIES THAT IT HAS REASONABLE GROUNDS TO BELIEVE THAT IT MEETS ALL OF THE
REQUIREMENTS FOR FILING ON FORM S-3 AND HAS DULY AUTHORIZED THIS REGISTRATION
STATEMENT TO BE SIGNED ON ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY
AUTHORIZED, IN THE CITY OF NEW YORK, STATE OF NEW YORK, ON THE 10TH DAY OF
JULY, 1996.
International Cabletel Incorporated
/s/ Richard J. Lubasch
By: _________________________________
RICHARD J. LUBASCH SENIOR VICE
PRESIDENT--GENERAL
COUNSEL AND SECRETARY
POWER OF ATTORNEY
Each person whose signature appears below hereby authorizes Richard J.
Lubasch, George S. Blumenthal, J. Barclay Knapp and Gregg Gorelick and each
and any one of them, as attorneys-in-fact and agents, with full powers of
substitution, to sign on his or her behalf, individually and in the capacities
stated below, and to file any and all amendments (including post-effective
amendments) to this Registration Statement with the Securities and Exchange
Commission, granting to said attorney-in-fact and agents full power and
authority to perform any other act on behalf of the undersigned required to be
done in the premises.
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS REGISTRATION
STATEMENT HAS BEEN SIGNED BY THE FOLLOWING PERSONS IN THE CAPACITIES AND ON
THE DATES INDICATED.
SIGNATURE TITLE DATE
/s/ George S. Blumenthal Chairman of the July 3, 1996
- ------------------------------------- Board, Chief
GEORGE S. BLUMENTHAL Executive Officer
and Treasurer
(Chief Executive
Officer)
/s/ J. Barclay Knapp President, Chief July 10, 1996
- ------------------------------------- Operating and
J. BARCLAY KNAPP Financial Officer
and Director (Chief
Financial Officer)
/s/ Gregg Gorelick Vice President-- July 10, 1996
- ------------------------------------- Controller (Chief
GREGG GORELICK Accounting Officer)
/s/ Sidney R. Knafel Director July 10, 1996
- -------------------------------------
SIDNEY R. KNAFEL
/s/ Ted H. McCourtney Director July 8, 1996
- -------------------------------------
TED H. MCCOURTNEY
Director , 1996
- -------------------------------------
DEL MINTZ
/s/ Alan J. Patricof Director July 3, 1996
- -------------------------------------
ALAN J. PATRICOF
/s/ Warren Potash Director July 3, 1996
- -------------------------------------
WARREN POTASH
/s/ Michael S. Willner Director July 10, 1996
- -------------------------------------
MICHAEL S. WILLNER
II-4
<PAGE>
EXHIBIT C
Form of Registration Right Agreements
<PAGE>
================================================================================
$275,000,000
7% CONVERTIBLE SUBORDINATED NOTES DUE 2008
REGISTRATION RIGHTS AGREEMENT
Dated as of June 12, 1996
by and among
INTERNATIONAL CABLETEL INCORPORATED
and
DONALDSON, LUFKIN & JENRETTE SECURITIES CORPORATION
SALOMON BROTHERS INC
================================================================================
<PAGE>
EXHIBIT 1.1
Execution Copy
================================================================================
INTERNATIONAL CABLETEL INCORPORATED
--------------------------
7% Convertible Subordinated Notes Due 2008
Purchase Agreement
June 6, 1996
---------------------------
Donaldson, Lufkin & Jenrette
Securities Corporation
Salomon Brothers Inc
================================================================================
<PAGE>
INTERNATIONAL CABLETEL INCORPORATED
$275,000,000
7% CONVERTIBLE SUBORDINATED NOTES DUE 2008
PURCHASE AGREEMENT
New York, New York
June 6, 1996
Donaldson, Lufkin & Jenrette
Securities Corporation
Salomon Brothers Inc
c/o Donaldson, Lufkin & Jenrette
Securities Corporation
227 Park Avenue
New York, New York 10172
Ladies and Gentlemen:
International CableTel Incorporated, a Delaware corporation (the
"Company"), proposes to issue and sell to Donaldson, Lufkin & Jenrette
-------
Securities Corporation and Salomon Brothers Inc (together, the "Initial
-------
Purchasers"), $275,000,000 principal amount of its 7% Convertible Subordinated
- ----------
Notes Due 2008 (the "Firm Convertible Notes"). The Company also proposes to
----------------------
issue and sell to the Initial Purchasers not more than an additional $41,250,000
principal amount of its 7% Convertible Subordinated Notes Due 2008 (the
"Additional Convertible Notes" and, together with the Firm Convertible Notes,
- -----------------------------
the "Convertible Notes"), if requested by the Initial Purchasers as provided in
-----------------
Section 2 hereof. The Convertible Notes are convertible at the option of the
holder thereof at any time after 90 days following the date of original issuance
thereof and prior to maturity, unless previously redeemed, into shares of the
Company's common stock, par value $.01 (the "Common Stock"), at a conversion
------------
price of $37.875 per share, subject to adjustment in certain events. The
Convertible Notes and the Common Stock issuable upon conversion thereof are
hereinafter referred to as the "Securities." The Convertible Notes are to be
----------
issued under an indenture (the "Indenture"), to be dated as of June 12, 1996,
---------
between the Company and Chemical Bank, as trustee (the "Trustee"). Capitalized
-------
2
<PAGE>
terms used herein and not otherwise defined shall have the meaning assigned to
them in the Indenture.
The sale of the Securities to the Initial Purchasers will be made without
registration of the Securities under the Securities Act of 1933, as amended (the
"Securities Act"), in reliance upon exemptions from the registration
--------------
requirements of the Securities Act. The Initial Purchasers have advised the
Company that the Initial Purchasers will offer and sell the Securities purchased
by them hereunder in accordance with Section 4 hereof as soon as the Initial
Purchasers deem advisable after the execution and delivery of this Agreement.
In connection with the sale of the Securities, the Company has prepared a
preliminary offering memorandum, dated May 23, 1996 (the "Preliminary Offering
--------------------
Memorandum"), and a final offering memorandum, dated June 7, 1996 (the "Final
- ---------- -----
Offering Memorandum"). Each of the Preliminary Offering Memorandum and the
- -------------------
Final Offering Memorandum sets forth certain information concerning the Company
and the Securities. The Company hereby confirms that it has authorized the use
of the Preliminary Offering Memorandum and the Final Offering Memorandum, and
any amendment or supplement thereto, in connection with the offer and sale of
the Securities by the Initial Purchasers. Unless stated to the contrary, all
references herein to the Final Offering Memorandum are to the Final Offering
Memorandum at the Execution Time (as defined below) and are not meant to include
any amendment or supplement, or any information incorporated by reference
therein, subsequent to the Execution Time.
The holders of the Securities will be entitled to the benefits of a
registration rights agreement, to be dated as of June 12, 1996, between the
Company and the Initial Purchasers (the "Registration Rights Agreement") a form
-----------------------------
of which is attached hereto as Exhibit C.
1. Representations and Warranties. The Company represents and warrants to
------------------------------
each Initial Purchaser as set forth below in this Section 1.
(a) The Preliminary Offering Memorandum, at the date thereof, did not
contain any untrue statement of a material fact or omit to state any material
fact (other than pricing terms and other financial terms intentionally left
blank) necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading. The Final Offering
Memorandum, at the date hereof, does not, and at the Closing Date (as defined
below) will not (and any amendment or supplement thereto, at the date thereof
and at the Closing Date, will not), contain any untrue statement of a material
fact or omit to state any material fact necessary to make the statements
therein, in the light of the circumstances under which they were made, not
misleading; provided, however, that the Company makes no representation or
-------- -------
warranty as to the information contained in or omitted from the Preliminary
Offering Memorandum or the Final Offering Memorandum, or any amendment or
supplement thereto, in reliance upon and in conformity with information
furnished in writing to the Company by or on behalf of the Initial Purchasers
specifically for inclusion therein.
3
<PAGE>
(b) Neither the Company, nor any of its Affiliates, (as defined in Rule
501(b) of Regulation D under the Securities Act ("Regulation D")), nor any
person acting on its or their behalf has, directly or indirectly, made offers or
sales of any security, or solicited offers to buy any security, under
circumstances that would require the registration of the Securities under the
Securities Act.
(c) No securities of the same class as the Convertible Notes have been
issued and sold by the Company within the six-month period immediately prior to
the date hereof.
(d) Neither the Company, nor any of its Affiliates, nor any person acting
on its or their behalf has engaged in any form of general solicitation or
general advertising (within the meaning of Regulation D) in connection with any
offer or sale of the Securities in the United States.
(e) None of the Company, nor any of its Affiliates, nor any person acting
on its or their behalf has engaged or will engage in any directed selling
efforts within the meaning of Regulations S with respect to the Securities, and
each of them has complied with the offering restriction requirements of
Regulation S under the Securities Act in connection with the offering of the
Securities outside the United States.
(f) The Securities satisfy the eligibility requirements of Rule 144A(d)(3)
under the Securities Act.
(g) The Company has agreed to permit the Securities to be designated PORTAL
eligible securities, will pay the requisite fees related thereto and has been
advised by the National Association of Securities Dealers, Inc. PORTAL Market
("PORTAL") that the Securities have been designated PORTAL eligible securities
in accordance with the rules and regulations of the National Association of
Securities Dealers, Inc.
(h) The Company is not an "investment company" within the meaning of the
Investment Company Act of 1940, as amended (the "Investment Company Act"),
----------------------
without taking account of any exemption arising out of the number of holders of
the Company's securities.
(i) The Company and each of its subsidiaries has been duly incorporated, is
validly existing as a corporation in good standing (or the local equivalent
thereof, if any) under the laws of its jurisdiction of incorporation and has the
corporate power and authority to carry on its business as it is currently being
conducted and to own, lease and operate its properties, in each case, as
described in the Preliminary Offering Memorandum and the Final Offering
Memorandum, and each is duly qualified and in good standing as a foreign
corporation authorized to do business in each jurisdiction in which the nature
of its business or its ownership or leasing of property requires such
qualification, except where the failure to be so qualified or in good standing
would not have a material adverse
4
<PAGE>
effect on the business, financial condition or results of operations of the
Company and its subsidiaries, taken as a whole.
(j) Neither the Company nor any of its subsidiaries is in violation of its
respective certificate of incorporation or by-laws or other governing documents
or is in default in the performance of any obligation, agreement or condition
contained in any bond, debenture, note or any other evidence of indebtedness or
in any indenture, material agreement or material instrument to which the Company
or any of its Material Subsidiaries (as defined in the Indenture) is a party or
by which it or any of its Material Subsidiaries is bound or to which any of its
properties is subject or, except as referred to in the Preliminary Offering
Memorandum or the Final Offering Memorandum, is in violation of any law,
statute, rule regulation, judgment or court decree applicable to the Company or
any of its Material Subsidiaries (including any laws, statutes, rules or
regulations promulgated by the Independent Television Commission ("ITC"), the
---
Office of Telecommunications ("OFTEL") and the Department of Trade and Industry
-----
("DTI")), nor has any event occurred which with notice or lapse of time or both
---
would constitute such a violation or default, except in each case, which would
not have a material adverse effect on the business, financial condition or
results of operations of the Company and its subsidiaries, taken as a whole.
(k) The Company has all requisite corporate power and authority to execute,
deliver and perform its obligations under this Agreement, the Indenture and the
Registration Rights Agreement and to issue, sell and deliver the Convertible
Notes as provided herein and therein.
(l) This Agreement has been duly and validly authorized, executed and
delivered by the Company.
(m) The Indenture has been duly and validly authorized by the Company and,
when duly executed and delivered by the Company, will be the legal, valid and
binding obligation of the Company, enforceable against the Company in accordance
with its terms except as the enforceability thereof may be limited (1) by the
effect of (x) bankruptcy, insolvency, reorganization, moratorium or other
similar laws now or hereafter in effect relating to or affecting the rights and
remedies of creditors and (y) general principles of equity, whether enforcement
is considered in a proceeding in equity or at law, and the discretion of the
court before which any proceedings therefor may be brought and (2) to the extent
that the waiver contained in Section 4.04 of the Indenture may be unenforceable.
(n) The Convertible Notes have been duly and validly authorized for
issuance by the Company and, when issued and authenticated in accordance with
the terms of the Indenture and delivered to and paid for by the Initial
Purchasers in accordance with the terms of this Agreement, will be the legal,
valid and binding obligations of the Company, enforceable against the Company in
accordance with their terms and entitled to the benefits
5
<PAGE>
of the Indenture except as the enforceability thereof may be limited (1) by the
effect of (x) bankruptcy, insolvency, reorganization, moratorium or other
similar laws now or hereafter in effect relating to or affecting the rights and
remedies of creditors and (y) general principles of equity, whether enforcement
is considered in a proceeding in equity or at law, and the discretion of the
court before which any proceedings therefor may be brought and (2) to the extent
that the waiver contained in Section 4.04 of the Indenture may be deemed
unenforceable.
(o) The Convertible Notes are convertible into Common Stock in accordance
with the terms of the Indenture; the shares of Common Stock initially issuable
upon conversion of the Convertible Notes have been duly authorized and reserved
for issuance upon such conversion and, when issued upon such conversion, will be
validly issued, fully paid and nonassessable and will conform to the description
thereof contained in the Final Offering Memorandum; the Company has the
authorized and outstanding capital stock as set forth in the Final Offering
Memorandum; and the stockholders of the Company have no preemptive rights with
respect to the Convertible Notes or the Common Stock issuable upon conversion of
the Convertible Notes.
(p) The Registration Rights Agreement has been duly and validly authorized
by the Company and, when duly executed and delivered by the Company, will be the
legal, valid and binding obligation of the Company, enforceable against the
Company in accordance with its terms except as the enforceability thereof may be
limited by the effect of (x) bankruptcy, insolvency, reorganization, moratorium
or other similar laws now or hereafter in effect relating to or affecting the
rights and remedies of creditors and (y) general principles of equity, whether
enforcement is considered in a proceeding in equity or at law, and the
discretion of the court before which any proceedings therefor may be brought.
(q) The (i) issuance and sale of the Securities by the Company, (ii)
execution, delivery and performance of this Agreement, the Indenture and the
Registration Rights Agreement, (iii) compliance by the Company with all the
provisions hereof and with the provisions of the Indenture and the Registration
Rights Agreement and (iv) the consummation of the transactions contemplated
hereby and by the Indenture and the Registration Rights Agreement will not
conflict with, or constitute a breach or a violation of any of the terms or
provisions of, or a default under, the certificate of incorporation or by-laws
or other governing documents of the Company or any of its subsidiaries, or
debenture, note or any other evidence of indebtedness or any indenture, material
agreement, or material instrument to which it or any of its subsidiaries is a
party or by which it or any of its subsidiaries is bound or to which any of
their respective properties is subject or any law, statute, rule regulation,
judgment or decree applicable to the Company or any of its subsidiaries
(including any laws, statutes, rules or regulations promulgated by ITC, OFTEL
and DTI).
6
<PAGE>
(r) The consolidated financial statements of the Company and its
subsidiaries and the consolidated financial statements of NTL and its
subsidiaries present fairly in all material respects the financial position and
results of operations of the Company and its subsidiaries and NTL and its
subsidiaries, respectively at the respective dates and for the respective
periods indicated. Such financial statements have been prepared in accordance
with generally accepted accounting principles applied on a consistent basis
throughout the periods presented except as described in the Preliminary Offering
Memorandum and the Final Offering Memorandum and except that the unaudited
interim financial statements are subject to normal year end adjustments. The
selected financial data included in the Preliminary Offering Memorandum and the
Final Offering Memorandum present fairly the information shown therein and have
been prepared on a basis consistent with that of the financial statements
included in the Preliminary Offering Memorandum and the Final Offering
Memorandum.
(s) The Company is subject to and in full compliance with the reporting
requirements of Section 13 or Section 15(d) of the Exchange Act.
(t) The Company is not required to deliver the information specified in
Rule 144A(d)(4) in connection with the resale by the Initial Purchasers of the
Securities as set forth in Section 4 hereof.
(u) The Company has not paid or agreed to pay to any person any
compensation for soliciting another to purchase any securities of the Company
(except as contemplated by this Agreement).
(v) The information provided by the Company pursuant to Section 5(g) hereof
will not, at the date thereof, contain any untrue statement of a material fact
or omit to state any material fact necessary to make the statements therein, in
the light of the circumstances under which they were made, not misleading.
(w) It is not necessary in connection with the offer, sale and delivery of
the Securities in the manner contemplated by this Agreement and the Final
Offering Memorandum to register the Securities under the Act or to qualify the
Indenture under the Trust Indenture Act of 1939, as amended (the "Trust
-----
Indenture Act").
- -------------
(x) Set forth on Exhibit A hereto is a list of each employee pension or
benefit plan with respect to which the Company or any corporation considered an
affiliate of the Company within the meaning of Section 407(d)(7) of ERISA is a
party in interest or disqualified person. The execution and delivery of this
Agreement, the Indenture and the Registration Rights Agreement and the resale by
the Initial Purchasers of the Securities to certain purchasers as set forth in
Section 4 hereof will not involve any prohibited transaction within the meaning
of Section 406 of ERISA or Section 4975 of the Code. The representation made by
the Company in the preceding sentence is made in reliance upon and subject to
the accuracy of, and compliance with, the representations and covenants
7
<PAGE>
made or deemed made by the purchasers of the Securities as set forth in the
Final Offering Memorandum under the Section entitled "Notice to Investors."
2. Purchase and Sale. (a) Subject to the terms and conditions and in
-----------------
reliance upon the representations and warranties herein set forth, the Company
agrees to sell to each Initial Purchaser, and each Initial Purchaser agrees,
severally and not jointly, to purchase from the Company, at a purchase price of
97.25% of the aggregate principal amount at maturity thereof, plus any accrued
interest, if any, from the Closing Date, the principal amount of Firm
Convertible Notes set forth opposite such Initial Purchaser's name in Schedule I
hereto.
(b) Subject to the terms and conditions and in reliance upon the
representations and warranties herein set forth, the Company hereby grants to
the Initial Purchasers the right to purchase at the Initial Purchasers' election
on the Option Closing Date (as hereinafter defined) up to $41,250,000 in
principal amount of the Additional Convertible Notes. Additional Convertible
Notes may be purchased by the Initial Purchasers solely for the purpose of
covering over-allotments made in connection with the sale of the Firm
Convertible Notes. The Initial Purchasers may exercise their right to purchase
Additional Convertible Notes in whole or in part from time to time by giving
written notice thereof (each, an "Exercise Notice") to the Company at any time
---------------
(but not more than once) within 30 days after the date of this Agreement.
Donaldson, Lufkin & Jenrette Securities Corporation shall give any such Exercise
Notice on behalf of the Initial Purchasers and such notice shall specify the
aggregate principal amount of Additional Convertible Notes to be purchased
pursuant to such exercise and the date for payment and delivery thereof. The
date specified in any such notice shall be a business day (i) no earlier than
the Closing Date (as hereinafter defined), (ii) no later than ten business days
after such notice has been given and (iii) no earlier than two business days
after such notice has been given. If any Additional Convertible Notes are to be
purchased, each Initial Purchaser, severally and not jointly, agrees to purchase
from the Company the number of Additional Convertible Notes which bears the same
proportion to the total number of Additional Convertible Notes to be purchased
from the Company as the number of Firm Convertible Notes set forth opposite the
name of such Initial Purchaser in Schedule I bears to the total number of Firm
Convertible Notes.
3. Delivery and Payment. Delivery of and payment for the Firm Convertible
--------------------
Notes shall be made at 10:00 AM, New York City time, on June 12, 1996, or such
later date as the Initial Purchasers and the Company may agree or as provided in
Section 9 hereof (such date and time of delivery and payment for the Firm
Convertible Notes being herein called the "Closing Date").
------------
Delivery of the Convertible Notes shall be made to the Initial Purchasers
against payment by the Initial Purchasers of the purchase price thereof to or
upon the order of the Company by wire transfer in same-day funds to a U.S.
dollar account designated by the Company or such other manner of payment as may
be designated by the Company and agreed to by the Initial Purchasers not less
than two business days prior to the Closing Date or the Option Closing
8
<PAGE>
Date, as the case may be. Delivery of the Firm Convertible Notes and the
Additional Convertible Notes, as the case may be, shall be made at such location
as the Initial Purchasers shall reasonably designate at least one business day
in advance of the Closing Date or the Option Closing Date, as the case may be
and payment for the Firm Convertible Notes and the Additional Convertible Notes,
as the case may be, shall be made at the office of Latham & Watkins ("Counsel
-------
for the Initial Purchasers"), 885 Third Avenue, Suite 1000, New York, New York.
- --------------------------
Certificates for the Firm Convertible Notes and the Additional Convertible
Notes, as the case may be, shall be registered in such names and in such
denominations as the Initial Purchasers may request not less than two full
business days in advance of the Closing Date or the Option Closing Date, as the
case may be.
The Company agrees to have the Firm Convertible Notes and the Additional
Convertible Notes, as the case may be, available for inspection, checking and
packaging by the Initial Purchasers in New York, New York, not later than 1:00
PM on the business day prior to the Closing Date or an Option Closing Date, as
the case may be.
On the Option Closing Date, the Company will deliver to the Initial
Purchasers, and the obligation of the Initial Purchasers to purchase the
Additional Convertible Notes shall be conditioned upon receipt of, supplemental
opinions, certificates and letters confirming as of such date the opinions,
certificates and letters delivered on the Closing Date pursuant to Section 6
hereof.
4. Offering of Securities. Each Initial Purchaser (i) acknowledges that
----------------------
the Securities have not been registered under the Securities Act and may not be
offered or sold except pursuant to an exemption from, or in a transaction not
subject to, the registration requirements of the Securities Act or pursuant to
an effective registration statement under the Securities Act and (ii) severally
and not jointly, represents and warrants to and agrees with the Company that:
(a) It has not offered or sold, and will not offer or sell, any Securities
except (i) to those it reasonably believes to be qualified institutional buyers
(as defined in Rule 144A under the Securities Act) and that, in connection with
each such sale, it has taken or will take reasonable steps to ensure that the
purchaser of such Securities is aware that such sale is being made in reliance
on Rule 144A, (ii) to other institutional "Accredited Investors" (as defined in
Rule 501(a)(1),(2), (3) or (7) of Regulation D) who provide to it and to the
Company a letter in the form of Annex B to the Offering Memorandum or (iii) to
non-U.S. persons in accordance with Regulation S of the Securities Act and in
compliance with the representations, warranties and agreements in this Section 4
who provide to it and to the Company a letter in the form of Exhibit D hereto
(all such persons referred to in clauses (i), (ii) and (iii) are hereinafter
collectively referred to as "Eligible Purchasers").
-------------------
(b) Neither it, nor its Affiliates, nor any person acting on its behalf has
made or will make offers or sales of the Securities in the United States by
means of any form of general solicitation or general advertising (within the
meaning of Regulation D) in the
9
<PAGE>
United States, except pursuant to a registered public offering as provided in
the Registration Rights Agreement.
(c) No Initial Purchaser or any of their respective Affiliates, nor any
person acting on its or their behalf will, directly or indirectly, make offers
or sales of any security, or solicit offers to buy any security, under
circumstances that would require the registration of the Securities under the
Securities Act.
(d) No Initial Purchaser or any of their respective Affiliates, nor any
person acting on its or their behalf will engage in any directed selling efforts
with respect to the Securities, except pursuant to a registered public offering
as provided in the Registration Rights Agreement.
(e) (i) No Initial Purchaser has offered or sold, and no Initial Purchaser
will offer or sell any Securities to persons in the United Kingdom prior to the
expiry of the period of six months from the issue date of the Securities, except
to persons whose ordinary activities involve them in acquiring, holding,
managing or disposing of investments (as principal or agent) for the purposes of
their businesses or otherwise in circumstances which have not resulted and will
not result in an offer to the public in the United Kingdom within the meaning of
the Public Offers of Securities Regulations 1995, (ii) each Initial Purchaser
has complied and will comply with all applicable provisions of the Financial
Services Act 1986 with respect to anything done by it in relation to the
Securities in, from or otherwise involving the United Kingdom, and (iii) each
Initial Purchaser has only issued or passed on and will only issue or pass on in
the United Kingdom any document received by it in connection with the issue of
the Securities to a person who is of a kind described in Article 11(3) of the
Financial Services Act 1986 (Investment Advertisements) (Exemptions) Order 1995
or is a person to whom the document may otherwise lawfully be issued or passed
on.
(f) No action has been or will be taken by the Company or any other person
that would permit the public offering or sale of the Securities or the
possession or distribution of the Preliminary Offering Memorandum or the Final
Offering Memorandum or any other offering or publicity material relating to the
Securities in any jurisdiction where action for that purpose is required. The
Company shall have no responsibility with respect to the rights of any person to
offer or sell Securities or to distribute the Preliminary Offering Memorandum or
the Final Offering Memorandum or any other offering material relating to the
Securities in any jurisdiction. Accordingly, no Initial Purchaser shall offer,
sell or deliver any Securities, or distribute the Preliminary Offering
Memorandum or the Final Offering Memorandum or any other offering or publicity
material relating to the Securities, in any jurisdiction except in compliance
with all applicable laws and regulations of that jurisdiction. Each Initial
Purchaser shall obtain any consent, approval or authorization required for it to
offer or sell Securities, or to distribute the Preliminary Offering Memorandum
or the Final Offering Memorandum or any other offering or publicity material
relating to the Securities under the laws or regulations of any jurisdiction
10
<PAGE>
where it proposes to make offers or sales of Securities, or to distribute the
Preliminary Offering Memorandum or the Final Offering Memorandum or any other
offering material relating to the Securities, in each case at its own expense,
except for the reasonable fees and disbursements of the Initial Purchasers'
counsel relating to the registration or qualification of the Securities for
offer and sale under the securities or Blue Sky laws of the several states of
the United States.
(g) Each of the Initial Purchasers are participating organizations in the
Depository Trust Company ("DTC").
---
(h) The Securities have not been and will not be registered under the
Securities Act and may not be offered or sold within the United States or to, or
for the account or benefit of, U.S. persons except in accordance with Regulation
S under the Securities Act or pursuant to an exemption from the registration
requirements of the Act. Each of the Initial Purchasers represents that it has
not offered, sold or delivered the Securities, and will not offer, sell or
deliver the Securities (i) as part of its distribution at any time or (ii)
otherwise until 40 days after the later of the commencement of the offering and
the Closing Date, within the United States or to, or for the account or benefit
of, U.S. persons, except in accordance with Rule 903 of Regulation S or Rule
144A under the Act, to Accredited Institutional Investors in accordance with
Section 4(a). Accordingly, each Initial Purchaser agrees that neither it, its
Affiliates nor any persons acting on its or their behalf has engaged or will
engage in any directed selling efforts within the meaning of Rule 901(b) of
Regulation S with respect to the Securities, and it, its Affiliates and all
persons acting on its or their behalf have complied and will comply with the
offering restrictions requirements of Regulation S.
(i) Each of the Initial Purchasers represents and agrees that the
Securities offered and sold in reliance on Regulation S have been and will be
offered and sold only in offshore transactions and that such securities have
been and will be represented upon issuance by a global security that may not be
exchanged for definitive securities until the expiration of the Restricted
Period (as defined in Rule 902(m) of Regulation S) and only upon certification
of beneficial ownership of the securities by a non-U.S. person or a U.S. person
who purchased such securities in a transaction that was exempt from the
registration requirements of the Act.
(j) Each of the Initial Purchasers agrees that, at or prior to confirmation
of a sale of Securities (other than a sale in accordance with Section 4(a), it
will have sent to each distributor, dealer or person receiving a selling
concession, fee or other remuneration that purchases Securities from it during
the Restricted Period a confirmation or notice to substantially the following
effect:
"The Securities covered hereby have not been registered under the U.S.
Securities Act of 1933, as amended (the "Securities Act") and may not be
--------------
offered and sold within the United States or to, or for the account or
benefit
11
<PAGE>
of, U.S. persons (i) as part of their distribution at any time or (ii)
otherwise until 40 days after the later of the commencement of the offering
and the date of closing of the offering, except in either case in
accordance with Regulation S (or Rule 144A if available) under the
Securities Act. Terms used above have the meaning given to them by
Regulation S."
Each of the Initial Purchasers further agrees that it has not entered and
will not enter into any contractual arrangement with respect to the distribution
or delivery of the Securities, except with its Affiliates or with the prior
written consent of the Company.
(k) Each of the Initial Purchaser agrees not to cause any advertisement of
the Securities to be published in any newspaper or periodical or posted in any
public place and not to issue any circular relating to the Securities, except
such advertisements that include the statements required by Regulation S.
Terms used in this Section 4 that have meanings assigned to them in Regulation S
are used herein as so defined.
5. Agreements. The Company agrees with each Initial Purchaser that:
----------
(a) The Company will furnish to each Initial Purchaser and to Counsel for
the Initial Purchasers, without charge, during the period referred to in
paragraph (b) below, as many copies of the Final Offering Memorandum and any
amendments and supplements thereto as each Initial Purchaser may reasonably
request. The Company will pay the expenses of printing or other production of
all documents relating to the offering.
(b) At any time prior to the completion of the sale of the Securities by
the Initial Purchasers, the Company will not amend or supplement the Final
Offering Memorandum if the Initial Purchasers reasonably object to such
amendment or supplement within two business days after receiving a copy thereof,
and if at any time prior to the completion of the sale of the Securities by the
Initial Purchasers, any event occurs as a result of which the Final Offering
Memorandum, as then amended or supplemented, would include any untrue statement
of a material fact or omit to state any material fact necessary to make the
statements therein, in the light of the circumstances under which they were
made, not misleading, or if it should be necessary to amend or supplement the
Final Offering Memorandum to comply with applicable law, the Company will
promptly notify the Initial Purchasers of the same, will prepare and provide to
the Initial Purchasers the proposed amendment or supplement which will correct
such statement or omission or effect such compliance and will not publish such
amendment or supplement if the Initial Purchasers reasonably object to the
publication of such amendment or supplement within two business days after
receiving a copy thereof.
(c) The Company will arrange for the qualification of the Securities for
sale by the Initial Purchasers under the laws of such jurisdictions, if any, as
the Initial Purchasers may reasonably designate in writing prior to the date of
this Agreement and will maintain
12
<PAGE>
such qualifications in effect so long as reasonably required for the
distribution of the Securities, provided, however, that the Company shall not be
-------- -------
required in connection therewith to qualify to do business in any jurisdiction
where it is not now so qualified or to take any action which would subject it to
general or unlimited service of process or taxation in any jurisdiction where it
is not now so subject. The Company will promptly advise the Initial Purchasers
of the receipt by the Company of any notification with respect to the suspension
of the qualification of the Securities for sale in any jurisdiction or the
initiation or threatening of any proceeding for such purpose.
(d) The Company will not, and will not permit any of its Affiliates to,
resell any Securities that have been acquired by any of them.
(e) Neither the Company, nor any of its Affiliates, nor any person acting
on its or their behalf will, directly or indirectly, make offers or sales of any
security, or solicit offers to buy any security, under circumstances that would
require the registration of the Securities under the Securities Act.
(f) Neither the Company, nor any of its Affiliates, nor any person acting
on its or their behalf will engage in any form of general solicitation or
general advertising (within the meaning of Regulation D) in connection with any
offer or sale of the Securities in the United States, except pursuant to a
registered public offering as provided in the Registration Agreement.
(g) So long as any of the Securities are "restricted securities" within the
meaning of Rule 144(a)(3) under the Securities Act, the Company will, during any
period in which it is not subject to and in compliance with Section 13 or 15(d)
of the Exchange Act, provide to each holder of such restricted securities and to
each prospective purchaser (as designated by such holder) of such restricted
securities, upon the request of such holder or prospective purchaser, any
information required to be provided by Rule 144A(d)(4) under the Securities Act.
This covenant is intended to be for the benefit of the holders, and the
prospective purchasers designated by such holders, from time to time of such
restricted securities.
(h) Neither the Company, nor any of its Affiliates, nor any person acting
on its or their behalf will engage in any directed selling efforts with respect
to the Securities, except pursuant to a registered public offering as provided
in the Registration Rights Agreement, and each of them will comply with the
offering restrictions requirement of Regulation S. Terms used in this paragraph
have the meanings given to them by Regulation S.
(i) The Company will cooperate with the Initial Purchasers and use its best
efforts to permit the Securities to be eligible for clearance and settlement
through The Depository Trust Company and, with respect to any Securities sold in
accordance with
13
<PAGE>
Regulation S under the Securities Act, the Cedel Bank, societe anonyme ("Cedel
-----
Bank") and the Euroclear System ("Euroclear").
- ---- ---------
(j) The Company will not, until 90 days following the date of this
Agreement, without the prior written consent of the Initial Purchasers, issue,
sell or otherwise dispose of any Common Stock or any securities convertible into
or exchangeable or exercisable for Common Stock, except the Company may issue
Common Stock (a) upon the exercise of (i) outstanding stock options or warrants
or (ii) stock options issued pursuant to existing stock option plans and
employee benefit schemes and (b) in connection with the acquisition by the
Company, its subsidiaries or any of its Affiliates of the minority interests
held by third parties in certain of its subsidiaries or Affiliates.
(k) Whether or not the transactions contemplated by this Agreement are
consummated or this Agreement becomes effective or is terminated, to pay all
costs, expenses, fees and taxes incident to and in connection with: (i) the
preparation, printing, filing and distribution of the Preliminary Offering
Memorandum and the Final Offering Memorandum (including, without limitation,
financial statements and supplements thereto), (ii) the preparation, printing
(including, without limitation, word processing and duplication costs) and
delivery of this Agreement, the Registration Rights Agreement and the Indenture,
all preliminary and final Blue Sky Memoranda and all other agreements,
memoranda, correspondence and other documents printed and delivered in
connection herewith and with the sale of the Securities by the Initial
Purchasers to certain purchasers as set forth in Section 4 above, (iii) the
issuance and delivery of the Securities, (iv) the registration or qualification
of the Securities for offer and sale under the securities or Blue Sky laws of
the several states (including, without limitation, the reasonable fees and
disbursements of the Initial Purchasers' counsel relating to such registration
or qualification), (v) the preparation of certificates for the Securities
(including, without limitation, printing and engraving thereof), (vi) the fees,
disbursements and expenses of the Company's counsel and accountants, (vii) all
expenses and listing fees in connection with the application for quotation of
the Securities on PORTAL, (viii) all fees and expenses (including fees and
expenses of counsel) of the Company in connection with approval of the
Securities by DTC for "book-entry" transfer and eligibility of settlement of
transactions in the Securities sold in accordance with Regulation S through
Euroclear and Cedel Bank and (ix) the performance by the Company of its other
obligations under this Agreement.
6. Conditions to the Obligations of the Initial Purchasers. The
-------------------------------------------------------
obligations of the Initial Purchasers to purchase the Securities shall be
subject to the accuracy of the representations and warranties on the part of the
Company contained herein at the date and time that this Agreement is executed
and delivered by the parties hereto (the "Execution Time"), the Closing Date and
--------------
any settlement date pursuant to Section 3 hereof, to the accuracy of the
statements of the Company made in any certificates pursuant to the provisions
hereof, to the performance by the Company of its obligations hereunder and to
the following additional conditions:
14
<PAGE>
(a) The Company shall have furnished to the Initial Purchasers the opinion
of Richard J. Lubasch, Senior Vice President, General Counsel and Secretary of
the Company, dated the Closing Date to the effect that:
(i) each of the Company and OCOM Corporation, OCOM Sub I, Inc., CableTel UK
Group, Inc. (formerly known as OCOM Sub II, Inc.), OCOM Sub III, Inc., and any
other subsidiary of the Company which is a "significant subsidiary" as defined
in Rule 1-02(w) of Regulation S-X under the Securities Act and is incorporated
under the laws of the State of Delaware (individually, a "Subsidiary" and
collectively, the "Subsidiaries") has been duly incorporated and is validly
existing as a corporation and is in good standing under the laws of the State of
Delaware with full corporate power and authority to own its properties and
conduct its business as described in the Final Offering Memorandum, and is duly
qualified to do business as a foreign corporation and is in good standing under
the laws of each jurisdiction which requires such qualification where failure so
to qualify would have a material adverse effect on the Company and its
subsidiaries taken as a whole;
(ii) all the outstanding shares of capital stock of each Subsidiary have
been duly authorized and validly issued and are fully paid and nonassessable,
and, except as otherwise set forth in the Final Offering Memorandum, all of the
outstanding shares of capital stock of the Subsidiaries are owned by the Company
either directly or through wholly owned subsidiaries free and clear of any
perfected security interest and, to the knowledge of such counsel, after due
inquiry, any other security interests, claims, liens or encumbrances;
(iii) the Company's authorized equity capitalization is as set forth in
the Final Offering Memorandum and the Convertible Notes, when executed and
authenticated by the Trustee in accordance with the terms of the Indenture and
delivered to, or paid for by, the Initial Purchasers in accordance with the
terms of this Agreement, will conform in all material respects to the
description thereof contained in the Final Offering Memorandum;
(iv) the Indenture has been duly authorized, executed and delivered by the
Company and, assuming due authorization, execution and delivery by the Trustee,
constitutes a valid and legally binding obligation of the Company enforceable
against the Company in accordance with its terms except as the enforceability
thereof may be limited (1) by the effect of (x) bankruptcy, insolvency,
reorganization, moratorium or other similar laws now or hereafter in effect
relating to or affecting the rights and remedies of creditors and (y) general
principles of equity, whether enforcement is considered in a proceeding in
equity or at law, and the discretion of the court before which any proceedings
therefor may be brought and (2) to the extent that the waiver contained in
Section 4.04 of the Indenture may be deemed unenforceable;
15
<PAGE>
(v) the Registration Rights Agreement has been duly authorized,
executed and delivered by the Company, and constitutes a valid and legally
binding obligation of the Company enforceable against the Company in accordance
with its terms except as the enforceability thereof may be limited by the effect
of (x) bankruptcy, insolvency, reorganization, moratorium or other similar laws
now or hereafter in effect relating to or affecting the rights and remedies of
creditors and (y) general principles of equity, whether enforcement is
considered in a proceeding in equity or at law, and the discretion of the court
before which any proceedings therefor may be brought;
(vi) the Convertible Notes have been duly authorized by the Company and,
when issued and authenticated in accordance with the provisions of the Indenture
and delivered to and paid for by the Initial Purchasers pursuant to this
Agreement, will constitute valid and legally binding obligations of the Company
entitled to the benefits of the Indenture except as the enforceability thereof
may be limited (1) by the effect of (x) bankruptcy, insolvency, reorganization,
moratorium or other similar laws now or hereafter in effect relating to or
affecting the rights and remedies of creditors and (y) general principles of
equity, whether enforcement is considered in a proceeding in equity or at law,
and the discretion of the court before which any proceedings therefor may be
brought and (2) to the extent that the waiver contained in Section 4.04 of the
Indenture may be deemed unenforceable.
(vii) the shares of Common Stock initially issuable upon conversion of
the Convertible Notes in accordance with the Indenture have been duly authorized
and reserved for issuance upon such conversion and, when issued upon such
conversion, will be validly issued by the Company, fully paid and nonassessable;
and the stockholders of the Company have no preemptive rights under the
Company's Restated Certificate of Incorporation, as amended by a Certificate of
Amendment filed on June 5, 1996, as approved by resolution of the stockholders
of the Company on June 4, 1996 (the "Amended Charter") or the documents listed
---------------
on Exhibit B hereto with respect to the Convertible Notes or the Common Stock
issuable upon conversion of the Convertible Notes.
(viii) the statements made in the Final Offering Memorandum under the
heading "Description of the Convertible Notes," insofar as they purport to
constitute a summary of legal matters, documents or proceedings referred to
therein (and assuming that the documents referred to therein are governed by the
law of New York or Delaware) fairly present such legal matters, documents and
proceedings in all material respects;
(ix) this Agreement has been duly authorized, executed and delivered by the
Company;
16
<PAGE>
(x) no consent, approval, authorization or order of any Delaware, New
York or United States federal court or governmental agency or body is required
for the consummation of the transactions contemplated herein, except such as may
be required under the blue sky or securities laws of any jurisdiction in
connection with the purchase and sale of the Convertible Notes by the Initial
Purchasers (as to which counsel need express no opinion) and such other
approvals (specified in such opinion) as have been obtained;
(xi) neither the issue and sale of the Convertible Notes by the Company,
the execution and delivery of the Indenture, the Registration Rights Agreement
and this Agreement by the Company nor the fulfillment of the terms hereof or
thereof will (a) conflict with the Amended Charter or by-laws of the Company,
(b) result in any violation of the General Corporation Law of the State of
Delaware, the laws of the State of New York or the federal laws of the United
States (the "Requirements of Law") or (c) constitute a breach of or an event of
-------------------
default under the terms of any indenture or other agreement to which the Company
or any of its subsidiaries is a party or bound which is listed on Exhibit B
hereto (except that such counsel need not express an opinion as to any covenant,
restriction or provision of any such agreement with respect to financial
covenants, ratios or tests or any aspect of the financial condition or results
of operations of the Company or any of its subsidiaries) and such counsel may
assume that all such agreements or instruments are governed by the law of New
York or Delaware) or any judgment, order or decree known to such counsel to be
applicable to the Company or any of its subsidiaries of any court, regulatory
body, administrative agency, governmental body or arbitrator (collectively, the
"Orders") of the United States or the States of New York or Delaware having
jurisdiction over the Company or any of its subsidiaries which conflict, breach
or default will have a material adverse effect on the condition (financial or
otherwise), earnings, business or properties of the Company and its subsidiaries
taken as a whole or the transactions contemplated by this Agreement; provided,
--------
however, that such counsel's opinion expressed in this paragraph may be based on
- -------
such counsel's review of those Requirements of Law which, in such counsel's
experience, are normally applicable to transactions of the type provided for in
this Agreement, but without having made any special investigation concerning any
other Requirements of Law, and those Orders specifically identified to such
counsel by the Company as being Orders to which it is subject; provided,
--------
however, that such counsel need express no opinion with respect to any state
- -------
securities or blue sky;
(xii) assuming (1) the accuracy of the representations and warranties
of the Company set forth in Section 1 of this Agreement (including all exhibits
hereto), (2) the due performance by the Company of the agreements set forth in
Section 5 of this Agreement and the due performance by the Initial Purchasers of
the agreements set forth in Section 4 of this Agreement, (3) compliance by the
Initial Purchasers with the offering and transfer procedures and restrictions
described elsewhere in this Agreement and in the Final Offering Memorandum, (4)
the accuracy of the representations made in accordance with the Purchase
17
<PAGE>
Agreement and the Final Offering Memorandum of the purchasers to whom the
Initial Purchasers initially resell Convertible Notes and (5) that purchasers to
whom the Initial Purchasers initially resell Convertible Notes receive a copy of
the Final Offering Memorandum, neither the registration of the Convertible Notes
under the Securities Act, nor the qualification of the Indenture under the Trust
Indenture Act of 1939, as amended, with respect thereto, is required for the
offer, sale and initial resale of the Convertible Notes in the manner
contemplated by this Agreement and the Final Offering Memorandum, it being
understood that such counsel expresses no opinion as to any subsequent resale of
any Convertible Notes or sales of the Common Stock following the initial
issuance thereof upon conversion of the Convertible Notes (and such counsel may
note that the shares of Common Stock issuable upon conversion of the Convertible
Notes are not eligible for resale pursuant to Rule 144A under the Securities
Act); and
(xiii) the Company is not required to be registered as an "investment
company" within the meaning of the Investment Company Act, without taking
account of any exemption arising out of the number of holders of the Company's
securities.
Such counsel shall also state that, in the course of preparation by
the Company of the Final Offering Memorandum, such counsel has participated in
conferences with directors, officers and other representatives of the Company,
representatives of the independent public accountants for the Company,
representatives of the Initial Purchasers and representatives of Counsel for the
Initial Purchasers, at which conferences the contents of the Final Offering
Memorandum and related matters were discussed and, although such counsel is not
passing upon and does not assume any responsibility for the accuracy,
completeness or fairness of the statements contained in the Final Offering
Memorandum, and have made no independent check or verification thereof (except
as stated in paragraph (vii) hereof), on the basis of the foregoing, no facts
have come to such counsel's attention which have caused such counsel to believe
that at the Execution Time and as of the Closing Date the Final Offering
Memorandum contained or contains an untrue statement of a material fact or
omitted or omits to state a material fact necessary in order to make the
statements therein, in the light of the circumstances under which they were
made, not misleading (it being understood that such counsel need express no
opinion or belief with respect to the financial statements and the notes related
thereto and other financial, statistical and accounting data included in or
excluded from the Final Offering Memorandum).
Such opinion may be limited to the General Corporation Law of the
State of Delaware and the laws of the State of New York and the federal laws of
the United States. In rendering such opinion, such counsel may rely as to
matters involving the application of laws of any jurisdiction other than the
State of New York, the State of Delaware or the United States, to the extent
such counsel deems proper and specified in such opinion, upon the opinion of
other counsel who are satisfactory to Counsel for the Initial Purchasers.
18
<PAGE>
All references in this Section 6(a) to the Final Offering Memorandum
shall be deemed to include any amendment or supplement thereto at the Closing
Date.
(b) The Company shall have furnished to the Initial Purchasers the opinion
of Skadden, Arps, Slate, Meagher & Flom, counsel for the Company, dated the
Closing Date, to the effect that:
(i) each of the Company and OCOM Corporation, OCOM Sub I, Inc., CableTel UK
Group, Inc. (formerly known as OCOM Sub II, Inc.) and OCOM Sub III, Inc.
(individually, a "Delaware Subsidiary" and collectively, the "Delaware
------------------- --------
Subsidiaries") has been duly incorporated and is validly existing as a
- ------------
corporation and is in good standing under the laws of the State of Delaware;
(ii) the Indenture has been duly authorized, executed and delivered by the
Company and, assuming due authorization, execution and delivery by the Trustee,
constitutes a valid and legally binding obligation enforceable against the
Company in accordance with its terms except as the enforceability thereof may be
limited (1) by the effect of (x) bankruptcy, insolvency, reorganization,
moratorium or other similar laws now or hereafter in effect relating to or
affecting the rights and remedies of creditors and (y) general principles of
equity, whether enforcement is considered in a proceeding in equity or at law,
and the discretion of the court before which any proceedings therefor may be
brought and (2) to the extent that the waiver contained in Section 4.04 of the
Indenture may be deemed unenforceable;
(iii) the Convertible Notes have been duly authorized by the Company
and, when issued and authenticated in accordance with the provisions of the
Indenture and delivered to and paid for by the Initial Purchasers pursuant to
this Agreement, will constitute valid and legally binding obligations of the
Company entitled to the benefits of the Indenture except as the enforceability
thereof may be limited (1) by the effect of (x) bankruptcy, insolvency,
reorganization, moratorium or other similar laws now or hereafter in effect
relating to or affecting the rights and remedies of creditors and (y) general
principles of equity, whether enforcement is considered in a proceeding in
equity or at law, and the discretion of the court before which any proceedings
therefor may be brought and (2) to the extent that the waiver contained in
Section 4.04 of the Indenture may be deemed unenforceable;
(iv) the shares of Common Stock initially issuable upon conversion of the
Convertible Notes in accordance with the terms of the Indenture have been duly
authorized and reserved for issuance upon such conversion and, when issued upon
such conversion, will be validly issued by the Company, fully paid and
nonassessable and the stockholders of the Company have no preemptive rights
under the Amended Charter or the documents listed on Exhibit B hereto with
19
<PAGE>
respect to the Convertible Notes or the Common Stock issuable upon conversion of
the Convertible Notes.
(v) the Registration Rights Agreement has been duly authorized by the
Company and constitutes a valid and legally binding obligation of the Company
enforceable against the Company in accordance with its terms, except as the
enforceability thereof may be limited by the effect of (x) bankruptcy,
insolvency, reorganization, moratorium or other similar laws now or hereafter in
effect relating to or affecting the rights and remedies of creditors and (y)
general principles of equity, whether enforcement is considered in a proceeding
in equity or at law, and the discretion of the court before which any
proceedings therefor may be brought;
(vi) the statements made in the Final Offering Memorandum under the heading
"Description of the Convertible Notes," insofar as they constitute summaries of
matters of law or summaries of the provisions of the Indenture and the
Convertible Notes, fairly present such matters and provisions in all material
respects;
(vii) this Agreement has been duly authorized, executed and delivered
by the Company;
(viii) the statements made in the Final Offering Memorandum under the
heading "Certain Federal Income Tax Considerations," insofar as they purport to
constitute statements of law or legal conclusions, have been reviewed by such
counsel and fairly present information disclosed therein in all material
respects;
(ix) neither the issue and sale of the Convertible Notes by the Company,
the execution and delivery of the Indenture, the Registration Rights Agreement
and this Agreement by the Company, nor consummation by the Company of the
transactions contemplated thereby will (a) conflict with the Amended Charter or
by-laws of the Company, (b) result in any violation of the General Corporation
Law of the State of Delaware, the laws of the State of New York or the federal
laws of the United States (the "Requirements of Law") or (c) constitute a breach
-------------------
of or a default under the terms of any indenture or other agreement to which the
Company or any of its Subsidiaries is a party or bound which is listed on
Exhibit B hereto (except that such counsel need not express an opinion as to any
covenant, restriction or provision of any such agreement with respect to
financial covenants, ratios or tests or any aspect of the financial condition or
results of operations of the Company or any of its subsidiaries and such counsel
may assume that all such agreements or instruments are governed by the law of
New York or Delaware) or any judgment, order or decree known to such counsel to
be applicable to the Company or any of its subsidiaries of any court, regulatory
body, administrative agency, governmental body or arbitrator (collectively, the
"Orders") of the United States or the States of Delaware or New York having
jurisdiction over the
20
<PAGE>
Company or any of its subsidiaries; provided, however, that such counsel's
-------- -------
opinion expressed in this paragraph may be based on such counsel's review of
those Requirements of Law which, in such counsel's experience, are normally
applicable to transactions of the type provided for in this Agreement, but
without having made any special investigation concerning any other Requirements
of Law, and those Orders specifically identified to such counsel by the Company
as being Orders to which it is subject; provided, however, that such counsel
-------- -------
need express no opinion in this paragraph with respect to any federal or state
securities laws or blue sky laws or the matters on which opinions are rendered
in (x) below; and
(x) assuming (1) the accuracy of the representations and warranties of the
Company set forth in Section 1 of this Agreement (including all exhibits
hereto), (2) the due performance by the Company of the agreements set forth in
Section 5 of this Agreement and the due performance by the Initial Purchasers of
the agreements set forth in Section 4 of this Agreement, (3) compliance by the
Initial Purchasers with the offering and transfer procedures and restrictions
described elsewhere in this Agreement and in the Final Offering Memorandum, (4)
the accuracy of the representations made in accordance with the Purchase
Agreement and the Final Offering Memorandum of the purchasers to whom the
Initial Purchasers initially resell Convertible Notes and (5) that the
purchasers to whom the Initial Purchasers initially resell Convertible Notes
receive a copy of the Final Offering Memorandum, neither the registration of the
Convertible Notes under the Securities Act, nor the qualification of the
Indenture under the Trust Indenture Act of 1939, as amended, with respect
thereto, is required for the offer, sale and initial resale of the Convertible
Notes in the manner contemplated by this Agreement and the Final Offering
Memorandum, it being understood that such counsel expresses no opinion as to any
subsequent resale of any Convertible Note or sales of the Common Stock following
the initial issuance thereof upon conversion of the Convertible Notes (and such
counsel may note that the shares of Common Stock issuable upon conversion of the
Convertible Notes are not eligible for resale pursuant to Rule 144A under the
Securities Act); and
Such counsel shall also state that, in the course of preparation by
the Company of the Final Offering Memorandum, such counsel has participated in
conferences with directors, officers and other representatives of the Company,
representatives of the independent public accountants for the Company,
representatives of the Initial Purchasers and representatives of Counsel for the
Initial Purchasers, at which conferences the contents of the Final Offering
Memorandum and related matters were discussed and, although such counsel is not
passing upon and does not assume any responsibility for, the accuracy,
completeness or fairness of the statements contained in the Final Offering
Memorandum and have made no independent check or verification thereof, on the
basis of the foregoing (except as stated in paragraph (vii) hereof) no facts
have come to such counsel's attention which have caused such counsel to believe
that at the Execution Time and as of the Closing Date the Final Offering
Memorandum contained or contains an untrue statement of a material fact or
omitted or omits to state a material fact necessary in
21
<PAGE>
order to make the statements therein, in the light of the circumstances under
which they were made, not misleading (it being understood that such counsel need
express no opinion or belief with respect to the financial statements and the
notes related thereto and other financial, statistical and accounting data
included in or excluded from the Final Offering Memorandum).
Such opinion may be limited to the General Corporation Law of the
State of Delaware and the laws of the State of New York and the federal laws of
the United States. In rendering such opinion, such counsel may rely as to
matters involving the application of laws of any jurisdiction other than the
State of New York, the State of Delaware or the United States, to the extent
they deem proper and specified in such opinion, upon the opinion of other
counsel who are satisfactory to Counsel for the Initial Purchasers.
All references in this Section 6(b) to the Final Offering Memorandum
shall be deemed to include any amendment or supplement thereto at the Closing
Date.
(c) The Company shall have furnished to the Initial Purchasers the opinion
of Ashurst Morris Crisp, English solicitors to the Company, dated the Closing
Date, in the form previously approved by counsel to the Initial Purchasers.
(d) The Initial Purchasers shall have received from Latham & Watkins,
Counsel for the Initial Purchasers, such opinion or opinions, dated the Closing
Date, with respect to the issuance and sale of the Securities, the Final
Offering Memorandum (as amended or supplemented at the Closing Date) and other
related matters as the Initial Purchasers may reasonably require, and the
Company shall have furnished to such counsel such documents as they request for
the purpose of enabling them to pass upon such matters.
(e) The Company shall have furnished to the Initial Purchasers a
certificate of the Company, signed by the Chairman of the Board or the President
and the principal financial or accounting officer of the Company, dated the
Closing Date, to the effect that the signers of such certificate have carefully
examined the Final Offering Memorandum, any amendment or supplement to the Final
Offering Memorandum and this Agreement and that:
(i) the representations and warranties of the Company in this Agreement are
true and correct in all material respects on and as of the Closing Date with the
same effect as if made on the Closing Date, and the Company has complied with
all the agreements and satisfied all the conditions on its part to be performed
or satisfied hereunder at or prior to the Closing Date; and
(ii) since the date of the most recent financial statements included in the
Final Offering Memorandum, there has been no adverse change in the condition
(financial or other), earnings, business or properties of the Company and its
subsidiaries, which is material to the Company and its subsidiaries taken as a
whole whether or not arising from transactions in the ordinary course of
business,
22
<PAGE>
except as set forth in or contemplated by the Final Offering Memorandum
(exclusive of any amendment or supplement thereto).
(f) At the Execution Time and at the Closing Date, Ernst & Young LLP shall
have furnished to the Representatives a letter or letters, dated respectively as
of the Execution Time and as of the Closing Date, in form and substance
satisfactory to the Representatives, confirming that they are independent
accountants within the meaning of the Rules of Conduct of the American Institute
of Certified Public Accountants and stating in effect that:
(i) they have audited the consolidated balance sheets of the Company and
its subsidiaries as of December 31, 1994 and 1995, and the consolidated
statements of operations, shareholders' equity and cash flows for each of the
three years in the period ended December 31, 1995, all included in the Final
Offering Memorandum;
(ii) they have read the 1996 minutes of meetings of the shareholders and
the Board of Directors and other committees of the Company and its subsidiaries
as set forth in the minute books through June 3, 1996, and have inquired of
certain officials of the Company who have responsibility for financial and
accounting matters;
(iii) with respect to the three-month periods ended March 31, 1995 and
1996, (X) they have (1) performed the procedures specified by the American
Institute of Certified Public Accountants for review of interim financial
information as described in SAS No. 71, Interim Financial Information, on the
unaudited condensed consolidated financial statements of the Company and its
subsidiaries (the "Unaudited Financials") included in the Final Offering
--------------------
Memorandum and (2) inquired of certain officials of the Company who have
responsibility for financial and accounting matters whether the Unaudited
Financials are stated on a basis substantially consistent with that of the
audited consolidated financial statements of the Company and its subsidiaries
included in the Final Offering Memorandum and (Y) as a result of the procedures
performed in (X) above, nothing came to their attention that caused them to
believe that (1) any modifications should be made to such Unaudited Financials
for them to be in conformity with generally accepted accounting principles and
(2) such Unaudited Financials are not stated on a basis substantially consistent
with that of the audited consolidated financial statements of the Company and
its subsidiaries included in the Final Offering Memorandum.
(iv) with respect to the period subsequent to March 31, 1996, management of
the Company has informed them that there were not any changes at a specified
date not more than five business days prior to the date of the letter, in the
long-term debt of the Company and its subsidiaries or decreases in the capital
stock of
23
<PAGE>
the Company as compared with the amounts shown on the March 31, 1996, condensed
consolidated balance sheet referred to above, except in all instances for
changes, decreases or increases set forth in such letter, in which case the
letter shall be accompanied by an explanation by the Company as to the
significance thereof unless said explanation is not deemed necessary by the
Initial Purchasers; and
(v) they have performed certain other specified procedures as a result of
which they determined that certain information of accounting, financial or
statistical nature (which is limited to accounting, financial or statistical
information derived from the general accounting records of the Company and its
subsidiaries) set forth in the Final Offering Memorandum, including certain
information set forth under the captions "Offering Memorandum Summary"; "Summary
Consolidated Financial Information"; "Risk Factors"; "Use of Proceeds";
"Capitalization"; "Selected Consolidated Financial Information"; "Management's
Discussion and Analysis of Results of Operations and Financial Condition";
"Business"; "Management"; and "Description of Certain Indebtedness -- The 10%
Notes," "-- The 12 3/4% Notes," "-- The 11 1/2% Notes" and "-- The 7 1/4%
Convertible Notes" in the Final Offering Memorandum, agrees with the accounting
records of the Company and its subsidiaries, excluding any questions of legal
interpretation.
References to the Final Offering Memorandum in this paragraph (f)
include any amendment or supplement thereof or thereto at the date of the
letter.
(g) Subsequent to the Execution Time or, if earlier, the dates as of which
information is given in the Final Offering Memorandum, there shall not have been
(i) any change or decrease specified in the letter or letters referred to in
paragraph (f) of this Section 6 or (ii) any change, or any development involving
a prospective change, in or affecting the business or properties of the Company
and its subsidiaries the effect of which, in any case referred to in clause
(iii) above, is, in the judgment of the Initial Purchasers, so material and
adverse as to make it impractical or inadvisable to market the Securities as
contemplated by the Final Offering Memorandum.
(h) Subsequent to the Execution Time, there shall not have been any
decrease in the rating of any of the Company's debt securities by any
"nationally recognized statistical rating organization" (as defined for purposes
of Rule 436(g) under the Securities Act) or any notice given of any intended or
potential decrease in any such rating or of a possible change in any such rating
that does not indicate the direction of the possible change.
(i) Prior to the Closing Date, the Company shall have furnished to the
Initial Purchasers such further information, certificates and documents as the
Initial Purchasers may reasonably request.
24
<PAGE>
(j) On or prior to the Closing Date, the Registration Rights Agreement
shall have been executed substantially in the form hereto delivered to you and
shall have been delivered to you and the Trustee.
(k) On the Closing Date, Donaldson, Lufkin & Jenrette Securities
Corporation, on behalf of the Initial Purchasers, shall have furnished to the
Company a list of the names and addresses of purchasers to whom the Initial
Purchasers shall have initially resold the Convertible Notes in accordance with
the terms of this Agreement and the respective principal amounts of the
Convertible Notes purchased by each such purchaser. The Company undertakes to
use such list only for the purpose of furnishing the information required by
Item 507 of Regulation S-K in a shelf registration statement filed pursuant to
the Registration Rights Agreement.
If any of the conditions specified in this Section 6 shall not have
been fulfilled in all material respects when and as provided in this Agreement,
or if any of the opinions and certificates mentioned above or elsewhere in this
Agreement shall not be in all material respects reasonably satisfactory in form
and substance to the Initial Purchasers and Counsel for the Initial Purchasers,
this Agreement and all obligations of the Initial Purchasers hereunder may be
canceled at, or at any time prior to, the Closing Date by the Initial
Purchasers. Notice of such cancellation shall be given to the Company in
writing or by telephone or facsimile confirmed in writing.
The documents required to be delivered by this Section 6 will be
delivered at the office of Latham & Watkins, counsel for the Initial Purchasers,
at 885 Third Avenue, Suite 1000, New York, New York, on the Closing Date.
7. Reimbursement of Expenses. If the sale of the Securities
-------------------------
provided for herein is not consummated because any condition to the obligations
of the Initial Purchasers set forth in Section 6 hereof is not satisfied,
because of any termination pursuant to Section 10 hereof or because of any
refusal, inability or failure on the part of the Company to perform any
agreement herein or comply with any provision hereof other than by reason of a
default by any of the Initial Purchasers in payment for the Securities on the
Closing Date, the Company will reimburse the Initial Purchasers severally upon
demand for all reasonable out-of-pocket expenses (including reasonable fees and
disbursements of counsel) that shall have been incurred by them in connection
with the proposed purchase and sale of the Securities against appropriate
receipts therefor.
8. Indemnification and Contribution. (a) The Company agrees to
--------------------------------
indemnify and hold harmless each Initial Purchaser, each person who controls any
Initial Purchaser within the meaning of either Section 15 of the Securities Act
or Section 20 of the Exchange Act and the respective officers, directors,
partners, employees, representatives and agents of such Initial Purchaser or
controlling person thereof against any and all losses, claims, damages or
liabilities, joint or several, to which they or any of them may become subject
under the Securities Act, the Exchange Act or other Federal or state statutory
law or regulation, at common law or otherwise, insofar as such losses, claims,
damages or liabilities (or actions in respect thereof) arise out of or are based
upon any untrue statement or alleged untrue statement of a material fact
contained in
25
<PAGE>
the Preliminary Offering Memorandum, the Final Offering Memorandum, or in any
amendment thereof or supplement thereto, or arise out of or are based upon the
omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading, and agrees to
reimburse each such indemnified party, as incurred, for any legal or other
expenses reasonably incurred by them in connection with investigating or
defending any such loss, claim, damage, liability or action; provided, however,
-----------------
that the Company will not be liable in any such case to the extent that any such
loss, claim, damage or liability arises out of or is based upon any such untrue
statement or alleged untrue statement or omission or alleged omission made in
the Preliminary Offering Memorandum, the Final Offering Memorandum or any
information provided by the Company to any holder or prospective purchaser of
Securities pursuant to paragraph 5(g) hereof, or in any amendment thereof or
supplement thereto, in reliance upon and in conformity with written information
relating to any Initial Purchaser furnished to the Company by or on behalf of
any Initial Purchaser through the Representatives specifically for inclusion
therein. This indemnity agreement will be in addition to any liability which
the Company may otherwise have.
(b) Each Initial Purchaser, severally and not jointly, agrees to
indemnify and hold harmless the Company, its directors, its officers, and each
person who controls the Company within the meaning of either Section 15 of the
Securities Act or Section 20 of the Exchange Act, to the same extent as the
foregoing indemnity from the Company to each Initial Purchaser, but only with
reference to written information relating to such Initial Purchaser furnished to
the Company by or on behalf of such Initial Purchaser specifically for inclusion
in the Preliminary Offering Memorandum or the Final Offering Memorandum (or in
any amendment or supplement thereto). This indemnity agreement will be in
addition to any liability which any Initial Purchaser may otherwise have. The
Company acknowledges that the statements set forth in the last paragraph of the
cover page and the fifth and sixth paragraphs and the third and fourth sentences
in the tenth paragraph under the heading "Plan of Distribution" in the
Preliminary Offering Memorandum and the Final Offering Memorandum constitute the
only information furnished in writing by or on behalf of the Initial Purchasers
for inclusion in the Preliminary Offering Memorandum or the Final Offering
Memorandum (or in any amendment or supplement thereto).
(c) Promptly after receipt by an indemnified party under this Section
8 of notice of the commencement of any action, such indemnified party will, if a
claim in respect thereof is to be made against the indemnifying party under this
Section 8, notify the indemnifying party in writing of the commencement thereof;
but the failure so to notify the indemnifying party (i) will not relieve it from
liability under paragraph (a) or (b) above unless and to the extent it did not
otherwise learn of such action and such failure results in the forfeiture by the
indemnifying party of substantial rights and defenses and (ii) will not, in any
event, relieve the indemnifying party from any obligations to any indemnified
party other than the indemnification obligation provided in paragraph (a) or (b)
above. The indemnifying party shall be entitled to appoint counsel of the
indemnifying party's choice at the indemnifying party's expense to represent the
indemnified party in any action for which indemnification is sought (in which
case the indemnifying party shall not thereafter be responsible for the fees and
expenses of any separate counsel retained by the indemnified party or parties
except as set forth below); provided, however, that such counsel shall
-------- -------
26
<PAGE>
be reasonably satisfactory to the indemnified party. Notwithstanding the
indemnifying party's election to appoint counsel to represent the indemnified
party in an action, the indemnified party shall have the right to employ
separate counsel (including local counsel), and the indemnifying party shall
bear the reasonable fees, costs and expenses of such separate counsel if (i) the
indemnifying party shall authorize the indemnified party in writing to employ
separate counsel at the expense of the indemnifying party, (ii) the use of
counsel chosen by the indemnifying party to represent the indemnified party
would present such counsel with a conflict of interest, (iii) the indemnifying
party shall not have employed counsel satisfactory to the indemnified party to
represent the indemnified party within a reasonable time after notice of the
institution of such action and (iv) the named parties of any such action
(including any impleaded parties) include both the indemnified party and the
indemnifying party and the indemnified party shall have reasonably concluded
based upon the advice of such counsel (with a copy to the indemnifying party)
that there may be legal defenses available to it and/or other indemnified
parties which are different from or additional to those available to the
indemnifying party (in which case the indemnifying party shall not have the
right to assume the defense of such action on behalf of such indemnified party,
it being understood, however, that the indemnifying party shall not, in
connection with any one such action or separate but substantially similar or
related actions in the same jurisdiction arising out of the same general
allegations or circumstances, be liable for the fees and expenses of more than
one separate firm of attorneys (in addition to any local counsel) for all such
indemnified parties, which firm shall be designated in writing by the
indemnified party, and that all such reasonable fees and expenses shall be
reimbursed as they are incurred upon written request and presentation of
satisfactory invoices). An indemnifying party will not, without the prior
written consent of the indemnified parties, settle or compromise or consent to
the entry of any judgment with respect to any pending or threatened claim,
action, suit or proceeding in respect of which indemnification or contribution
may be sought hereunder (whether or not the indemnified parties are actual or
potential parties to such claim or action) unless such settlement, compromise or
consent includes an unconditional release of each indemnified party from all
liability arising out of such claim, action, suit or proceeding.
(d) In the event that the indemnity provided in paragraph (a) or (b)
of this Section 8 is unavailable to or insufficient to hold harmless an
indemnified party for any reason, the Company and the Initial Purchasers agree
to contribute to the aggregate losses, claims, damages and liabilities
(including legal or other expenses reasonably incurred in connection with
investigating or defending same) (collectively "Losses") to which the Company
and one or more of the Initial Purchasers may be subject in such proportion as
is appropriate to reflect the relative benefits received by the Company and by
the Initial Purchasers from the offering of the Securities; provided, however,
-------- -------
that in no case shall any Initial Purchaser (except as may be provided in any
agreement among the Initial Purchasers relating to the offering of the
Securities) be responsible for any amount in excess of the purchase discount or
commission applicable to the Securities purchased by such Initial Purchaser
hereunder. If the allocation provided by the immediately preceding sentence is
unavailable for any reason, the Company and the Initial Purchasers shall
contribute in such proportion as is appropriate to reflect not only such
relative benefits but also the relative fault of the Company and of the Initial
Purchasers in connection with the statements or omissions which resulted in such
Losses as well as any other relevant equitable considerations.
27
<PAGE>
Benefits received by the Company shall be deemed to be equal to the total net
proceeds from the offering (before deducting expenses), and benefits received by
the Initial Purchasers shall be deemed to be equal to the total purchase
discounts and commissions received by the Initial Purchasers from the Company in
connection with the purchase of the Securities hereunder. Relative fault shall
be determined by reference to whether any alleged untrue statement or omission
relates to information provided by the Company or the Initial Purchasers. The
Company and the Initial Purchasers agree that it would not be just and equitable
if contribution were determined by pro rata allocation or any other method of
allocation which does not take account of the equitable considerations referred
to above. Notwithstanding the provisions of this paragraph (d), no person
guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of
the Securities Act) shall be entitled to contribution from any person who was
not guilty of such fraudulent misrepresentation. For purposes of this Section
8, each person who controls an Initial Purchaser within the meaning of either
the Securities Act or the Exchange Act and each director, officer, employee and
agent of an Initial Purchaser shall have the same rights to contribution as such
Initial Purchaser, and each person who controls the Company within the meaning
of either the Securities Act or the Exchange Act and each officer, director,
employee and agent of the Company shall have the same rights to contribution as
the Company, subject in each case to the applicable terms and conditions of this
paragraph (d).
9. Default by an Initial Purchaser. If one of the Initial
-------------------------------
Purchasers shall fail to purchase and pay for any of the Securities agreed to be
purchased by such Initial Purchaser hereunder and such failure to purchase shall
constitute a default in the performance of its or their obligations under this
Agreement, the remaining Initial Purchaser shall be obligated severally to take
up and pay for the Securities which the defaulting Initial Purchaser agreed but
failed to purchase; provided, however, that in the event that the aggregate
-------- -------
principal amount of Securities which the defaulting Initial Purchaser agreed but
failed to purchase shall exceed 10% of the aggregate principal amount of
Securities set forth in Schedule I hereto, the remaining Initial Purchaser shall
have the right to purchase all, but shall not be under any obligation to
purchase any, of the Securities, and if such non-defaulting Initial Purchaser
does not purchase all the Securities, this Agreement will terminate without
liability to any non-defaulting Initial Purchaser or the Company. In the event
of a default by any Initial Purchaser as set forth in this Section 9, the
Closing Date or the Option Closing Date, as the case may be shall be postponed
for such period, not exceeding seven days, as the remaining Initial Purchaser
shall determine in order that the required changes in the Final Offering
Memorandum or in any other documents or arrangements may be effected. Nothing
contained in this Agreement shall relieve any defaulting Initial Purchaser of
its liability, if any, to the Company or any non-defaulting Initial Purchaser
for damages occasioned by its default hereunder.
10. Termination. This Agreement shall be subject to termination in
-----------
the absolute discretion of the Initial Purchasers, by notice given to the
Company prior to delivery of and payment for the Securities, if prior to such
time (i) trading in any of the Company's securities shall have been suspended by
the Commission or by the National Association of Securities Dealers, Inc. or
trading in securities generally on the New York Stock Exchange or The Nasdaq
Stock Market's National Market (the "NNM") shall have been materially suspended
---
or materially
28
<PAGE>
limited (except such limitations on such trading in effect as of the Execution
Time) or minimum prices shall have been established on either such exchange or
the NNM, (ii) a banking moratorium shall have been declared either by Federal or
New York State authorities or (iii) there shall have occurred any outbreak or
escalation of hostilities, declaration by the United States of a national
emergency or war or other calamity or crisis the effect of which on financial
markets in the United States is such as to make it, in the judgment of the
Initial Purchasers, impracticable or inadvisable to proceed with the offering or
delivery of the Securities as contemplated by the Final Offering Memorandum.
11. Representations and Indemnities to Survive. The respective
------------------------------------------
agreements, representations, warranties, indemnities and other statements of the
Company or its officers and of the Initial Purchasers set forth in or made
pursuant to this Agreement will remain in full force and effect, regardless of
any investigation made by or on behalf of the Initial Purchasers or the Company
or any of the officers, directors or controlling persons referred to in Section
8 hereof, and will survive delivery of and payment for the Securities. The
provisions of Sections 7 and 8 hereof shall survive the termination or
cancellation of this Agreement.
12. Notices. All communications hereunder will be in writing and
-------
effective only on receipt, and, if sent to the Initial Purchasers, will be
mailed, delivered or sent by facsimile (212-892-7272) and confirmed to them,
care of Donaldson, Lufkin & Jenrette Securities Corporation, 277 Park Avenue,
New York, New York 10172; or, if sent to the Company, will be mailed, delivered
or sent by facsimile (212-906-8497) and confirmed to it at 110 East 59th Street,
26th Floor, New York, New York 10022, attention: General Counsel.
13. Successors. This Agreement will inure to the benefit of and be
----------
binding upon the parties hereto and their respective successors and the officers
and directors and controlling persons referred to in Section 8 hereof, and,
except as expressly set forth in Section 5(g) hereof, no other person will have
any right or obligation hereunder.
14. Applicable Law. This Agreement will be governed by and construed
--------------
in accordance with the internal laws of the State of New York.
15. Business Day. For purposes of this Agreement, "business day"
------------
means each Monday, Tuesday, Wednesday, Thursday and Friday that is not a day on
which banking institutions in The City of New York, New York are authorized not
to open or are not obligated by law, executive order or regulation to open.
16. Currency. Each reference in this Agreement to U.S. dollars (the
--------
"relevant currency") is of the essence. To the fullest extent permitted by law,
-----------------
the obligation of the Company in respect of any amount due under this Agreement
will, notwithstanding any payment in any other currency (whether pursuant to a
judgment or otherwise), be discharged only to the extent of the amount in the
relevant currency that the party entitled to receive such payment may, in
accordance with its normal procedures, purchase with the sum paid in such other
currency (after any premium and costs of exchange) on the business day
immediately following the day on
29
<PAGE>
which such party receives such payment. If the amount in the relevant currency
that may be so purchased for any reason falls short of the amount originally
due, the Company will pay such additional amounts, in the relevant currency, as
may be necessary to compensate for the shortfall. Any obligation of the Company
not discharged by such payment will, to the fullest extent permitted by
applicable law, be due as a separate and independent obligation and, until
discharged as provided herein, will continue in full force and effect.
17. Counterparts. This Agreement may be executed in one or more
------------
counterparts, each of which will be deemed to be an original, but all such
counterparts will together constitute one and the same instrument.
* * *
30
<PAGE>
If the foregoing is in accordance with your understanding of our
agreement, please sign and return to us the enclosed duplicate hereof, whereupon
this Agreement and your acceptance shall represent a binding agreement between
the Company and the Initial Purchasers.
Very truly yours,
International CableTel Incorporated
By: /s/
---------------------------------------
Name:
Title:
The foregoing Agreement is hereby
confirmed and accepted as of the
date first above written.
Donaldson, Lufkin & Jenrette
Securities Corporation
Salomon Brothers Inc
By: Donaldson, Lufkin & Jenrette Securities Corporation
By: /s/
---------------------------------------
Name:
Title:
For themselves and the other
Initial Purchaser named in
the foregoing Agreement
<PAGE>
SCHEDULE I
<TABLE>
<CAPTION>
Principal Amount
At Maturity
of Securities
Initial Purchasers to be Purchased
- ------------------ ---------------
<S> <C>
Donaldson, Lufkin & Jenrette.. $137,500,000
Salomon Brothers Inc.......... 137,500,000
Total........................ $275,000,000
============
</TABLE>
<PAGE>
EXHIBIT A
List of Employee Pension or Benefit Plans
None
<PAGE>
EXHIBIT B
Applicable Contracts
1. Amended and Restated Agreement of Reorganization and Plan of
Merger, dated as of May 28, 1993, among the Company, OCOM Corporation and
CableTel Merger, Inc.
2. Rights Agreement entered into by the Company and Continental Stock
Transfer & Trust Company.
3. Indenture dated as of October 1, 1993 between the Company and the
Trustee as amended by a First Supplemental Indenture dated as of January 23,
1996.
4. Indenture dated as of April 20, 1995 between the Company and the
Trustee governing the Company's 12 3/4% Senior Deferred Coupon Notes Due 2005 as
amended by a First Supplemental Indenture dated as of January 22, 1996 between
the Company and the Trustee.
5. Indenture, dated as of April 20, 1995, between the Company and the
Trustee governing the Company's 7.5% Convertible Subordinated Notes Due 2005.
6. Warrants to Purchase Common Stock issued by the Company to various
persons in the form included as an exhibit to the Company's Annual Report on
Form 10-K for the year ended December 31, 1994.
7. International CableTel, Inc. 1993 Stock Option Plan.
8. International CableTel, Inc. 1993 Non-Employee Director Stock
Option Plan.
9. OCOM Corporation 1991 Stock Option Plan.
10. Consulting Agreement between the Company and Insight
Communications Company, L.P.
11. Non-Competition Agreements between the Company and various
persons in the form included as an exhibit to the Company's Annual Report on
Form 10-K for the year ended December 31, 1994.
<PAGE>
This Registration Rights Agreement (this "Agreement") is made and entered
into as of June 12, 1996 by and among International CableTel Incorporated, a
Delaware corporation (the "Company"), and Donaldson, Lufkin & Jenrette
Securities Corporation and Salomon Brothers Inc, as initial purchasers (the
"Initial Purchasers"). The Company proposes to issue and sell to the Initial
Purchasers (the "Initial Firm Placement") $275,000,000 aggregate principal
amount of its 7 % Convertible Subordinated Notes Due 2008 (the "Firm Convertible
Notes"). The Company also proposes to issue and sell to the Initial Purchasers
(the "Initial Additional Placement" and, together with the Initial Firm
----------------------------
Placement, the "Initial Placement") not more than an additional $41,250,000
-----------------
principal amount of its 7% Convertible Subordinated Notes Due 2008 (the
"Additional Convertible Notes" and, together with the Firm Convertible Notes,
- -----------------------------
the "Convertible Notes"), if requested by the Initial Purchasers as provided in
-----------------
Section 2 of the Purchase Agreement (as defined below). As an inducement to the
Initial Purchasers to enter into the purchase agreement, dated as of June 6,
1996 (the "Purchase Agreement"), and in satisfaction of a condition to the
Initial Purchasers' obligations thereunder, the Company agrees with the Initial
Purchasers, (i) for the benefit of the Initial Purchasers and (ii) for the
benefit of the holders from time to time of the Convertible Notes whose names
appear in the register maintained by the Registrar in accordance with the
provisions of the Indenture (as defined in Section 1 hereof) (including the
Initial Purchasers) (each of the foregoing a "Holder" and together the
"Holders"), as follows:
1. Definitions. Capitalized terms used herein without definition shall
-----------
have their respective meanings set forth in the Purchase Agreement. As used in
this Agreement, the following capitalized defined terms shall have the following
meanings:
"Act" means the Securities Act of 1933, as amended from time to time, and
the rules and regulations of the Commission promulgated thereunder.
"Affiliate" of any specified person means any other person which, directly
or indirectly, is in control of, is controlled by, or is under common control
with, such specified person. For purposes of this definition, control of a
person means the power, direct or indirect, to direct or cause the direction of
the management and policies of such person whether by contract or otherwise; and
the terms "controlling" and "controlled" have meanings correlative to the
foregoing.
"Closing Date" has the meaning set forth in the Purchase Agreement.
"Convertible Notes" has the meaning set forth in the preamble hereto.
"Commission" means the Securities and Exchange Commission.
"Effectiveness Target Date" has the meaning set forth in Section 4 hereto.
"Exchange Act" means the Securities Exchange Act of 1934, as amended from
time to time, and the rules and regulations of the Commission promulgated
thereunder.
"Final Offering Memorandum" has the meaning set forth in the Purchase
Agreement.
"Holder" has the meaning set forth in the preamble hereto.
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"Indenture" means the Indenture relating to the Convertible Notes dated as
of June 12, 1996, between the Company and Chemical Bank, as trustee, as the same
may be amended from time to time in accordance with the terms thereof.
"Initial Placement" has the meaning set forth in the preamble hereto.
"Majority Holders" means the Holders of a majority of the aggregate
principal amount of securities registered under a Shelf Registration Statement.
"Prospectus" means the prospectus included in any Shelf Registration
Statement (including, without limitation, a prospectus that discloses
information previously omitted from a prospectus filed as part of an effective
registration statement in reliance upon Rule 430A under the Act), as amended or
supplemented by any prospectus supplement, with respect to the terms of the
offering of any portion of Transfer Restricted Securities, covered by such Shelf
Registration Statement, and all amendments and supplements to the Prospectus,
including post-effective amendments.
"Registration Default" has the meaning set forth in Section 4 hereto.
"Shelf Registration" means a registration effected pursuant to Section 3
hereof.
"Shelf Registration Period" has the meaning set forth in Section 3(b)
hereof.
"Shelf Registration Statement" means a "shelf" registration statement of
the Company pursuant to the provisions of Section 3 hereof which covers some or
all of the Transfer Restricted Securities as applicable, on an appropriate form
under Rule 415 under the Act, or any similar rule that may be adopted by the
Commission, amendments and supplements to such registration statement, including
post-effective amendments, in each case including the Prospectus contained
therein, all exhibits thereto and all material incorporated by reference
therein.
"Supplement Delay Period" means any period commencing on the date of
receipt by a Holder of Transfer Restricted Securities of any notice from the
Company of the existence of any fact or event of the kind described in Section
5(b)(2) hereof and ending on the date of receipt by such Holder of an amended or
supplemented Shelf Registration Statement or Prospectus, as contemplated by
Section 5(h) hereof, or the receipt by such Holder of written notice from the
Company (the "Advice") that the use of the Prospectus may be resumed, and
receipt of copies of any additional or supplemental filings that are
incorporated by reference in the Prospectus.
"Transfer Restricted Securities" means each Convertible Note and the
Common Stock issuable upon conversion thereof until (i) the date on which such
Convertible Note or the Common Stock issuable upon conversion thereof has been
effectively registered under the Securities Act and disposed of in accordance
with the Shelf Registration Statement, (ii) the date on which such Convertible
Note or the Common Stock issuable upon conversion thereof is distributed to the
public pursuant to Rule 144 under the Act (or any similar provision then in
effect) or is saleable pursuant to Rule 144(k) under the Act or (iii) the date
on which such Convertible Note is converted into Common Stock in accordance with
the terms and provisions of the Indenture or otherwise ceases to be outstanding.
"Trustee" means the trustee with respect to the Convertible Notes under
the Indenture.
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"Underwritten Offering" means a registration in which securities of the
Company are sold to an underwriter for reoffering to the public.
2. (a) Securities Subject to This Agreement. The securities entitled to
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the benefits of this Agreement are the Transfer Restricted Securities.
(b) No Holder may participate in any Underwritten Offering hereunder of
Transfer Restricted Securities. The parties hereto agree that the Transfer
Restricted Securities shall not be sold in any Underwritten Offering and the
Company shall in no event be required to cooperate with or pay for any
Underwritten Offering.
3. Shelf Registration. (a) The Company shall, within 45 days after
------------------
Closing Date, file with the Commission and thereafter shall use its best efforts
to cause to be declared effective under the Act by the 120th day (plus any
additional days allowed as a result of a Supplement Delay Period) after the
Closing Date, a Shelf Registration Statement relating to the offer and sale of
the Transfer Restricted Securities by the Holders from time to time in
accordance with the methods of distribution elected by such Holders and set
forth in such Shelf Registration Statement.
(b) Subject to the commencement of any Supplement Delay Period, the
Company shall use its best efforts to keep the Shelf Registration Statement
continuously effective in order to permit the Prospectus forming part thereof to
be usable by Holders for a period of three years from the Closing Date or such
shorter period that will terminate when (i) all the Transfer Restricted
Securities covered by the Shelf Registration Statement have been sold pursuant
to the Shelf Registration Statement, (ii) the date on which, in the opinion of
counsel to the Company, all of the Transfer Restricted Securities then held by
the Holders may be sold by such Holders in the public United States securities
markets without the continued effectiveness of the Shelf Registration Statement
or (iii) the date on which there ceases to be outstanding any Transfer
Restricted Securities (in any such case, such period being called the "Shelf
Registration Period"). The Company shall be deemed not to have used its best
efforts to keep the Shelf Registration Statement effective during the requisite
period if it voluntarily takes any action that would result in Holders of
Transfer Restricted Securities covered thereby not being able to offer and sell
such securities during that period, unless (i) such action is required by
applicable law, (ii) such action is taken by the Company in good faith and for
valid business reasons (not including avoidance of the Company's obligations
hereunder), including the acquisition or divestiture of assets, so long as the
Company promptly thereafter complies with the requirements of Section 5(j)
hereof, if applicable or (iii) such action is taken because of any fact or
circumstance giving rise to a Supplement Delay Period.
4. Liquidated Damages. Subject to Section 5(l), if (a) the Company fails
------------------
to file the Shelf Registration Statement required by Section 3 of this Agreement
on or before the date specified for such filing under Section 3(a) hereof, (b)
such Shelf Registration Statement is not declared effective by the Commission on
or prior to the date specified for such effectiveness (the "Effectiveness Target
Date") or (c) the Shelf Registration Statement is declared effective but
thereafter ceases to be continuously effective or usable in connection with
resales of Transfer Restricted Securities during the Shelf Registration Period
(each such event referred to in clauses (a) through (c) above a "Registration
Default"), then the Company will pay Liquidated Damages to each Holder of
Transfer Restricted Securities, with respect to the first 90-day period
immediately following the occurrence of such Registration Default in an amount
equal to $.05 per week per $1,000 aggregate principal amount of the Transfer
Restricted Securities held by such Holder.
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<PAGE>
The amount of the Liquidated Damages will increase by an additional $.05 per
week per $1,000 aggregate principal amount of the Transfer Restricted Securities
held by each Holder with respect to each subsequent 90-day period until all
Registration Defaults have been cured, up to a maximum amount of Liquidated
Damages of $.50 per week per $1,000 aggregate principal amount of the Transfer
Restricted Securities held by each Holder. All accrued Liquidated Damages will
be paid by the Company on each interest payment date in cash. Such payment will
be made to the Holder of the Global Notes by wire transfer of immediately
available funds or by federal funds check and to Holders of Transfer Restricted
Securities represented by Certificated Notes, if any, by wire transfer to the
accounts specified by them or by mailing checks to their registered addresses if
no such accounts have been specified. Following the cure of all Registration
Defaults, the accrual of Liquidated Damages will cease.
5. Registration Procedures. In connection with any Shelf Registration
-----------------------
Statement the following provisions shall apply:
(a) The Company shall ensure that (i) any Shelf Registration Statement and
any amendment thereto and any Prospectus forming part thereof and any
amendment or supplement thereto complies in all material respects with the
Act and the rules and regulations thereunder, (ii) any Shelf Registration
Statement and any amendment thereto does not, when it becomes effective,
contain an untrue statement of a material fact or omit to state a material
fact required to be stated therein or necessary to make the statements
therein not misleading and (iii) any Prospectus forming part of any
Registration Statement, and any amendment or supplement to such Prospectus,
does not include an untrue statement of a material fact or omit to state a
material fact necessary in order to make the statements, in the light of the
circumstances under which they were made, not misleading.
(b) (1) The Company shall advise the Initial Purchasers and the Holders
of Transfer Restricted Securities named in the Shelf Registration Statement,
which have provided in writing to the Company a telephone or facsimile number
and address for notices, and, if requested by the Initial Purchasers or any
such Holder, confirm such advice in writing, when a Shelf Registration
Statement and any amendment thereto has been filed with the Commission and
when the Shelf Registration Statement or any post-effective amendment thereto
has become effective.
(2) The Company shall advise the Initial Purchasers and the Holders of
Transfer Restricted Securities named in the Shelf Registration Statement
which has provided in writing to the Company a telephone or facsimile number
and address for notices, and, if requested by the Initial Purchasers, confirm
such advice in writing:
(i) of any request by the Commission for amendments or supplements
to the Registration Statement or the Prospectus included therein or for
additional information;
(ii) of the initiation by the Commission of proceedings relating to
a stop order suspending the effectiveness of the Shelf Registration
Statement;
(iii) of the issuance by the Commission of any stop order suspending
the effectiveness of the Shelf Registration Statement;
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<PAGE>
(iv) of the receipt by the Company of any notification with respect
to the suspension of the qualification of the securities included therein
for sale in any jurisdiction or the initiation or threatening of any
proceeding for such purpose; and
(v) of the existence of any fact and the happening of any event
(including, without limitation, pending negotiations relating to, or the
consummation of, a transaction or the occurrence of any event which would
require additional disclosure of material non-public information by the
Company in the Shelf Registration Statement as to which the Company has a
bona fide business purpose for preserving confidential or which renders
the Company unable to comply with Commission requirements) that, in the
opinion of the Company, makes untrue any statement of a material fact made
in its Shelf Registration Statement, the Prospectus or any amendment or
supplement thereto or any document incorporated by reference therein or
requires the making of any changes in the Shelf Registration Statement or
the Prospectus so that, as of such date, the statements therein are not
misleading and do not omit to state a material fact required to be stated
therein or necessary to make the statements therein (in the case of the
Prospectus, in light of the circumstances under which they were made) not
misleading.
Such advice may be accompanied by an instruction to suspend the use of the
Prospectus until the requisite changes have been made.
(c) The Company shall use its best efforts to obtain the withdrawal of any
order suspending the effectiveness of the Shelf Registration Statement at the
earliest possible time.
(d) The Company shall use its best efforts to furnish to each selling
Holder named in the Shelf Registration Statement who so requests in writing
and who has provided to the Company with an address for notices, without
charge, at least one conformed copy of such Shelf Registration Statement and
any post-effective amendment thereto, including financial statements and, if
the Holder so requests in writing, all exhibits and schedules (including
those incorporated by reference).
(e) The Company shall, during the Shelf Registration Period, deliver to
each Holder of Transfer Restricted Securities named in the Shelf Registration
Statement and who has provided to the Company with an address for notices,
without charge, as many copies of the Prospectus (including each preliminary
Prospectus) included in such Shelf Registration Statement and any amendment
or supplement thereto as such Holder may reasonably request; and, subject to
any notice by the Company in accordance with Section 6(b), the Company
consents to the use of the Prospectus or any amendment or supplement thereto
by each of the selling Holders for the purposes of offering and resale of the
Transfer Restricted Securities covered by the Prospectus in accordance with
the Act or the applicable regulations promulgated under the Act.
(f) Prior to the offering of Transfer Restricted Securities pursuant to
the Shelf Registration Statement, the Company shall register or qualify or
cooperate with the Holders of Transfer Restricted Securities named therein
and their respective counsel in connection with the registration or
qualification of such Transfer Restricted Securities for offer and sale under
the securities or blue sky laws of such jurisdictions of the United States as
any such Holders reasonably request in writing not later than the date that
is five Business Days prior to the Effectiveness Target Date; provided,
however, that the Company will not be required to qualify generally to do
business in any jurisdiction
5
<PAGE>
where it is not then so qualified or to take any action which would subject
it to general service of process or to taxation in any such jurisdiction
where it is not then so subject.
(g) The Company shall endeavor to cooperate with the Holders of Transfer
Restricted Securities to facilitate the timely preparation and delivery of
certificates representing Transfer Restricted Securities to be sold pursuant
to the Shelf Registration Statement free of any restrictive legends and in
such denominations and registered in such names as Holders may request in
writing at least two Business Days prior to sales of securities pursuant to
such Shelf Registration Statement.
(h) Upon the occurrence of any event contemplated by paragraph (b)(2)(v)
hereof, the Company shall promptly prepare a post-effective amendment to the
Shelf Registration Statement or an amendment or supplement to the related
Prospectus or any document incorporated therein by reference or file any
other required document so that as thereafter delivered to purchasers of the
Transfer Restricted Securities covered thereby, the Prospectus will not
include an untrue statement of a material fact or omit to state any material
fact necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading provided that, in
the event of a material business transaction (including, without limitation,
pending negotiations relating to such a transaction) which would, in the
opinion of counsel to the Company, require disclosure by the Company in the
Shelf Registration Statement of material non-public information which the
Company has a bona fide business purpose for not disclosing, then for so long
as such circumstance exist, the Company shall not be required to prepare and
file a supplement or post-effective amendment hereunder.
(i) Not later than the effective date of any such Shelf Registration
Statement hereunder, the Company shall cause to be provided a CUSIP number
for the Convertible Notes registered under such Shelf Registration Statement,
and provide the Trustee with printed certificates for such Convertible Notes
where necessary, in a form eligible for deposit with The Depository Trust
Company.
(j) The Company shall use its best efforts to comply with all applicable
rules and regulations of the Commission and shall make generally available to
its security holders in a regular filing on Form 10Q or Form 10K an earnings
statement satisfying the provisions of Rule 158 (which need not be audited)
for the twelve-month period commencing after effectiveness of the Shelf
Registration Statement.
(k) The Company shall cause the Indenture to be qualified under the Trust
Indenture Act in a timely manner.
(l) The Company may require each Holder of Transfer Restricted Securities
to be sold pursuant to the Shelf Registration Statement to furnish to the
Company within 20 Business Days after written request for such information
has been made by the Company, such information regarding the Holder and the
distribution of such securities as the Company may from time to time
reasonably require for inclusion in such Shelf Registration Statement and
such other information as may be necessary or advisable in the reasonable
opinion of the Company and its counsel, in connection with such Shelf
Registration Statement. No Holder of Transfer Restricted Securities shall be
entitled to the benefit of any Liquidated Damages under Section 4 of this
Agreement or be entitled to use the Prospectus unless and until such Holder
shall have furnished the information required by this Section 5(l) and all
such information required to be disclosed in order to make the information
previously furnished to the Company by such Holder not materially misleading.
6
<PAGE>
(m) The Company shall, if requested, promptly incorporate in the Shelf
Registration Statement or Prospectus, if necessary, pursuant to a supplement
or post-effective amendment to the Shelf Registration Statement, such
information as the Majority Holders reasonably request to have included
therein and shall make all required filings of such Prospectus supplement or
post-effective amendment as soon as practicable after the Company is notified
of the matters to be incorporated in such Prospectus supplement or post-
effective amendment; provided however, that the Company shall not be required
to take any action pursuant to this Section 5(m) that would, in the opinion
of counsel for the Company, violate applicable law or to include information
the disclosure of which at the time would have an adverse effect on the
business or operations of the Company and/or its subsidiaries, as determined
in good faith by the Company.
(n) In the case of the Shelf Registration Statement, the Company shall
take all reasonably appropriate actions in order to expedite or facilitate
the registration of the Transfer Restricted Securities.
(o) The Company shall upon receipt of a reasonable request in writing
therefor (i) make reasonably available at reasonable times prior to the
Effectiveness Target Date for inspection by the Holders of Transfer
Restricted Securities to be registered thereunder and any attorney,
accountant or other agent retained by the Holders, at the office where
normally kept during normal business hours, all financial and other records,
pertinent corporate documents and properties of the Company and its
subsidiaries, and cause the Company's officers, directors and employees to
supply all relevant information reasonably requested by the Holders,
attorney, accountant or other agent in connection with the Shelf Registration
Statement as is customary for similar due diligence examinations; provided,
however, that such persons shall first agree in writing with the Company that
any information that is designated in writing by the Company, in good faith,
as confidential at the time of delivery of such information shall be kept
confidential by such person, unless such disclosure is made in connection
with a court proceeding or required by law, or such information becomes
available to the public generally or through a third party without an
accompanying obligation of confidentiality; (ii) obtain opinions of counsel
to the Company and updates thereof (which counsel, if different from counsel
to the Company referred to in the Purchase Agreement, shall be reasonably
satisfactory to the Majority Holders of Transfer Restricted Securities to be
registered thereunder, if any) addressed to each selling Holder covering such
matters (in form, scope and substance) as those matters set forth in Section
6(a), (b), and (c) of the Purchase Agreement; (iii) obtain "cold comfort"
letters (or, in the case of any person that does not satisfy the conditions
for receipt of a "cold comfort" letter specified in Statement on Auditing
Standards No. 72, an "agreed-upon procedures letter") and updates thereof
from the independent certified public accountants of the Company (and, if
necessary, any other independent certified public accountants of any
subsidiary of the Company or of any business acquired by the Company for
which financial statements and financial data are, or are required to be,
included in the Registration Statement), addressed where reasonably
practicable to each selling Holder of Transfer Restricted Securities
registered thereunder, if any, in customary form and covering matters of the
type customarily covered in "cold comfort" letters in connection with primary
underwritten offerings; and (iv) deliver such documents and certificates as
may be reasonably requested by the Majority Holders including those to
evidence compliance with Section 5(h). The foregoing actions set forth in
clauses (ii), (iii), (iv) and (v) of this Section 5(o) shall, if reasonably
requested by the Majority Holders be performed at the effectiveness of such
Shelf Registration Statement and each post-effective amendment thereto.
7
<PAGE>
(p) The Company may offer securities of the Company other than the
Convertible Notes under the Shelf Registration Statement, except where such
offer would conflict with the terms of the Purchase Agreement.
6. Holders' Agreements. Each Holder of Transfer Restricted Securities, by
-------------------
the acquisition of such Transfer Restricted Securities, as the case may be,
agrees:
(a) To furnish the information required to be furnished pursuant to
Section 5(l) hereof within the time period set forth therein.
(b) That upon receipt of a notice of the commencement of a Supplement
Delay Period, it will keep the fact of such notice confidential, forthwith
discontinue disposition of its Transfer Restricted Securities, as the case
may be, pursuant to the Shelf Registration Statement, and will not deliver
any Prospectus forming a part thereof until receipt of the amended or
supplemented Shelf Registration Statement or Prospectus, as applicable, as
contemplated by Section 5(h) hereof, or until receipt of the Advice. If a
Supplement Delay Period should occur, the Shelf Registration Period, shall be
extended by the number of days of which the Supplement Delay Period is
comprised; provided that the Shelf Registration Period shall not be extended
if the Company has received an opinion of counsel (which counsel, if
different from counsel to the Company referred to in Section 6 (a) and (b) of
the Purchase Agreement, shall be reasonably satisfactory to the Majority
Holders of the Transfer Restricted Securities named in the Shelf Registration
Period) to the effect that the Transfer Restricted Securities can be freely
tradeable without the continued effectiveness of the Shelf Registration
Statement.
(c) If so directed by the Company in a notice of the commencement of a
Supplement Delay Period, each Holder of Transfer Restricted Securities, as
the case may be, will deliver to the Company (at the Company's expense) all
copies, other than permanent file copies then in such Holder's possession, of
the Prospectus covering the Transfer Restricted Securities, as the case may
be.
(d) Sales of such Transfer Restricted Securities pursuant to a Shelf
Registration Statement shall only be made in the manner set forth in such
currently effective Shelf Registration Statement.
7. Registration Expenses. The Company shall bear all expenses incurred in
---------------------
connection with the performance of its obligations under Sections 2, 3, 4 and 5
hereof and will reimburse the Holders for the reasonable fees and disbursements
of one firm or counsel designated by the Majority Holders to act as counsel for
the Holders in connection therewith. Notwithstanding the foregoing or anything
in this Agreement to the contrary, each Holder shall pay all underwriting
discounts and commission of any underwriters with respect to any Transfer
Restricted Securities sold by it.
8. Indemnification and Contribution. (a) In connection with the Shelf
--------------------------------
Registration Statement, the Company agrees to indemnify and hold harmless each
Holder of Transfer Restricted Securities covered thereby (including each Initial
Purchaser), the directors, officers, employees and agents of each such Holder
and each person who controls any such Holder within the meaning of either
Section 15 of the Act or Section 20 of the Exchange Act against any and all
losses, claims, damages or liabilities, joint or several, to which they or any
of them may become subject under the Act, the Exchange Act or other Federal or
state statutory law or regulation, at common law or otherwise, insofar as such
losses, claims, damages or liabilities (or actions in respect thereof) arise out
of or are based upon any untrue statement or alleged untrue statement of a
material fact contained in the Shelf Registration Statement as originally filed
8
<PAGE>
or in any amendment thereof, or in any preliminary Prospectus or Prospectus, or
in any amendment thereof or supplement thereto, or arise out of or are based
upon the omission or alleged omission to state therein a material fact required
to be stated therein or necessary to make the statements therein not misleading,
and agrees to reimburse each such indemnified party, as incurred, for any legal
or other expenses reasonably incurred by them in connection with investigating
or defending any such loss, claim, damage, liability or action; provided,
however, that (i) the Company will not be liable in any case to the extent that
any such loss, claim, damage or liability arises out of or is based upon any
such untrue statement or alleged untrue statement or omission or alleged
omission made therein in reliance upon and in conformity with written
information furnished to the Company by or on behalf of any such Holder
specifically for inclusion therein and (ii) the Company shall not be liable to
any indemnified party under this indemnity agreement with respect to the Shelf
Registration Statement or Prospectus to the extent that any such loss, claim,
damage or liability of such indemnified party results solely from an untrue
statement of a material fact contained in, or the omission of a material fact
from, the Shelf Registration Statement or Prospectus which untrue statement or
omission was corrected in an amended or supplemented Shelf Registration
Statement or Prospectus, if the person alleging such loss, claim, damage or
liability was not sent or given, at or prior to the written confirmation of such
sale, a copy of the amended or supplemented Registration Statement or Prospectus
if the Company had previously furnished copies thereof to such indemnified party
and if delivery of a prospectus is required by the Act and was not so made.
This indemnity agreement will be in addition to any liability which the Company
may otherwise have.
The Company also agrees to indemnify or contribute to Losses of, as
provided in Section 8(d), any underwriters of Convertible Notes registered under
the Shelf Registration Statement, their officers and directors and each person
who controls such underwriters on substantially the same basis as that of the
indemnification of the Initial Purchaser and the selling Holders provided in
this Section 6(a) and shall, if requested by any Holder, enter into an
underwriting agreement reflecting such agreement, as provided in Section 5(q)
hereof.
(b) Each Holder of Transfer Restricted Securities covered by the Shelf
Registration Statement (including each Initial Purchaser) severally agrees to
indemnify and hold harmless (i) the Company, (ii) each of its directors, (iii)
each of its officers who signs such Registration Statement and (iv) each person
who controls the Company within the meaning of either the Act or the Exchange
Act to the same extent as the foregoing indemnity from the Company to each such
Holder, but only with reference to written information relating to such Holder
furnished to the Company by or on behalf of such Holder specifically for
inclusion in the documents referred to in the foregoing indemnity. This
indemnity agreement will be in addition to any liability which any such Holder
may otherwise have.
(c) Promptly after receipt by an indemnified party under this Section 8 or
notice of the commencement of any action, such indemnified party will, if a
claim in respect thereof is to be made against the indemnifying party under this
Section 8, notify the indemnifying party in writing of the commencement thereof;
but the failure so to notify the indemnifying party (i) will not relieve it from
liability under paragraph (a) or (b) above unless and to the extent it did not
otherwise learn of such action and such failure results in the forfeiture by the
indemnifying party of substantial rights and defenses and (ii) will not, in any
event, relieve the indemnifying party from any obligations to any indemnified
party other than the indemnification obligation provided in paragraph (a) or (b)
above. The indemnifying party shall be entitled to appoint counsel of the
indemnifying party's choice at the indemnifying party's expense to represent the
indemnified party in any action for which indemnification is sought (in which
case the indemnifying party shall not thereafter be responsible for the fees and
expenses of any separate counsel
9
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retained by the indemnified party or parties except as set forth below);
provided, however, that such counsel shall be reasonably satisfactory to the
indemnified party. Notwithstanding the indemnifying party's election to appoint
counsel to represent the indemnified party in an action, the indemnified party
shall have the right to employ separate counsel (including local counsel), and
the indemnifying party shall bear the reasonable fees, costs and expenses of
such separate counsel (and local counsel) if (i) the use of counsel chosen by
the indemnifying party to represent the indemnified party would present such
counsel with a conflict of interest, (ii) the actual or potential defendants in,
or targets of, any such action include both the indemnified party and the
indemnifying party and the indemnified party shall have reasonably concluded
that there may be legal defenses available to it and/or other indemnified
parties which are different from or additional to those available to the
indemnifying party, (iii) the indemnifying party shall not have employed counsel
satisfactory to the indemnified party to represent the indemnified party within
a reasonable time after notice of the institution of such action or (iv) the
indemnifying party shall authorize the indemnified party to employ separate
counsel at the expense of the indemnifying party. An indemnifying party will
not, without the prior written consent of the indemnified parties, settle or
compromise or consent to the entry of any judgment with respect to any pending
or threatened claim, action, suit or proceeding in respect of which
indemnification or contribution may be sought hereunder (whether or not the
indemnified parties are actual or potential parties to such claim or action)
unless such settlement, compromise or consent includes an unconditional release
of each indemnified party from all liability arising out of such claim, action,
suit or proceeding.
(d) In the event that the indemnity provided in paragraph (a) or (b) of
this Section 8 is unavailable to or insufficient to hold harmless an indemnified
party for any reason, then each applicable indemnifying party, in lieu of
indemnifying such indemnified party, shall have a joint and several obligation
to contribute to the aggregate losses, claims, damages and liabilities
(including legal or other expenses reasonably incurred in connection with
investigating or defending same) (collectively "Losses") to which such
indemnified party may be subject in such proportion as is appropriate to reflect
the relative benefits received by such indemnifying party, on the one hand, and
such indemnified party, on the other hand, from the Initial Placement and the
Shelf Registration Statement which resulted in such Losses; provided, however,
that in no case shall any Initial Purchaser or any subsequent Holder of any
Convertible Notes be responsible, in the aggregate, for any amount in excess of
the purchase discount or commission applicable to such Convertible Notes, as set
forth on the cover page of the Final Offering Memorandum, nor shall any
underwriter be responsible for any amount in excess of the underwriting discount
or commission applicable to the securities purchased by such underwriter under
the Shelf Registration Statement which resulted in such Losses. If the
allocation provided by the immediately preceding sentence is unavailable for any
reason, the indemnifying party and the indemnified party shall contribute in
such proportion as is appropriate to reflect not only such relative benefits but
also the relative fault of such indemnifying party, on the one hand, and such
indemnified party, on the other hand, in connection with the statements or
omissions which resulted in such Losses as well as any other relevant equitable
considerations. Benefits received by the Company shall be deemed to be equal to
the sum of (x) the total net proceeds from the Initial Placement (before
deducting expenses) as set forth on the cover page of the Final Offering
Memorandum and (y) the total amount of additional interest which the Company was
not required to pay as a result of registering the securities covered by the
Shelf Registration Statement which resulted in such Losses. Benefits received
by the Initial Purchasers shall be deemed to be equal to the total purchase
discounts and commissions as set forth on the cover page of the Final Offering
Memorandum, and benefits received by any other Holders shall be deemed to be
equal to the value of receiving Convertible Notes, as applicable, registered
under the Act. Benefits received by any underwriter shall be deemed to be equal
to the total underwriting discounts and commissions, as set forth on the cover
page of the Prospectus
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forming a part of the Shelf Registration Statement which resulted in such
Losses. Relative fault shall be determined by reference to whether any alleged
untrue statement or omission relates to information provided by the indemnifying
party, on the one hand, or by the indemnified party, on the other hand. The
parties agree that it would not be just and equitable if contribution were
determined by pro rata allocation or any other method of allocation which does
not take account of the equitable considerations referred to above.
Notwithstanding the provisions of this paragraph (d), no person guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of the Act)
shall be entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation. For purposes of this Section 8, each person who
controls a Holder within the meaning of the Act and each director, officer,
employee and agent of such Holder shall have the same rights to contribution as
such Holder, and each person who controls the Company within the meaning of the
Act, each officer of the Company who shall have signed the Shelf Registration
Statement and each director of the Company shall have the same rights to
contribution as the Company, subject in each case to the applicable terms and
conditions of this paragraph (d).
(e) The provisions of this Section 8 will remain in full force and effect,
regardless of any investigation made by or on behalf of any Holder or the
Company or any of the officers, directors or controlling persons referred to in
Section 8 hereof, and will survive the sale by a Holder of Transfer Restricted
Securities.
9. Miscellaneous.
-------------
(a) No Inconsistent Agreements. The Company has not, as of the date
--------------------------
hereof, entered into, nor shall it, on or after the date hereof, enter into, any
agreement with respect to its securities that is inconsistent with the rights
granted to the Holders herein or otherwise conflicts with the provisions hereof.
(b) Amendments and Waivers. The provisions of this Agreement, including
----------------------
the provisions of this sentence, may not be amended, qualified, modified or
supplemented, and waivers or consents to departures from the provisions hereof
may not be given, unless the Company has obtained the written consent of the
Holders of at least a majority of the then outstanding aggregate principal
amount of Convertible Notes; provided that, with respect to any matter that
directly or indirectly affects the rights of any Initial Purchaser hereunder,
the Company shall obtain the written consent of each such Initial Purchaser
against which such amendment, qualification, supplement, waiver or consent is to
be effective. Notwithstanding the foregoing (except the foregoing proviso), a
waiver or consent to departure from the provisions hereof with respect to a
matter that relates exclusively to the rights of Holders whose securities are
being sold pursuant to a Shelf Registration Statement and that does not directly
or indirectly affect the rights of other Holders may be given by the Majority
Holders, determined on the basis of Convertible Notes being sold rather than
registered under such Shelf Registration Statement.
(c) Notices. All notices and other communications provided for or
-------
permitted hereunder shall be made in writing by hand-delivery, first-class mail,
telex, telecopier, or air courier guaranteeing overnight delivery:
(1) if to a Holder, at the most current address given by such Holder to
the Company in accordance with the provisions of this Section 9(c), which
address initially is, with respect to each Holder, the address of such
Holder maintained by the registrar under the Indenture, as the case may
be, with a copy in like manner to Donaldson, Lufkin & Jenrette Securities
Corporation;
11
<PAGE>
(2) if to the Initial Purchasers, initially at the respective addresses
set forth in the Purchase Agreement; and
(3) if to the Company, initially at its address set forth in the
Purchase Agreement.
All such notices and communications shall be deemed to have been duly
given when received.
The Initial Purchasers or the Company by notice to the other may designate
additional or different addresses for subsequent notices or communications.
(d) Successors and Assigns. This Agreement shall inure to the benefit of
----------------------
and be binding upon the successors and assigns of each of the parties hereto,
including, without the need for an express assignment or any consent by the
Company thereto, subsequent Holders of Convertible Notes. The Company hereby
agrees to extend the benefits of this Agreement to any Holder of Convertible
Notes and any such Holder may specifically enforce the provisions of this
Agreement as if an original party hereto.
(e) Counterparts. This agreement may be executed in any number of
------------
counterparts and by the parties hereto in separate counterparts, each of which
when so executed shall be deemed to be an original and all of which taken
together shall constitute one and the same agreement.
(f) Headings. The headings in this agreement are for convenience of
--------
reference only and shall not limit or otherwise affect the meaning hereof.
(g) Governing Law. This agreement shall be governed by and construed in
-------------
accordance with the internal laws of the State of New York applicable to
agreements made and to be performed in said State (without reference to the
conflict of law rules thereof).
(h) Severability. In the event that any one of more of the provisions
------------
contained herein, or the application thereof in any circumstances, is held
invalid, illegal or unenforceable in any respect for any reason, the validity,
legality and enforceability of any such provision in every other respect and of
the remaining provisions hereof shall not be in any way impaired or affected
thereby, it being intended that all of the rights and privileges of the parties
shall be enforceable to the fullest extent permitted by law.
(i) Convertible Notes Held by the Company, etc. Whenever the consent or
------------------------------------------
approval of Holders of a specified percentage of principal amount of Convertible
Notes is required hereunder, Convertible Notes held by the Company or its
Affiliates (other than subsequent Holders of Convertible Notes if such
subsequent Holders are deemed to be Affiliates solely by reason of their
holdings of such Convertible Notes) shall not be counted in determining whether
such consent or approval was given by the Holders of such required percentage.
[Signature Page Follows]
12
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first written above.
INTERNATIONAL CABLETEL INCORPORATED
By:_______________________________
Name:
Title:
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
SALOMON BROTHERS INC
By: DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
By:_______________________________
Name:
Title:
13
<PAGE>
EXHIBIT D
Form or Regulation S Purchaser Representation Letter
We are delivering this letter in connection with an offering of
$275,000,000 aggregate principal amount of 7% Convertible Subordinated Notes Due
2008 (the "Convertible Notes") (or up to an additional $41,250,000 aggregate
principal amount of Convertible Notes if Donaldson, Lufkin & Jenrette Securities
Corporation and Salomon Brothers Inc (the "Initial Purchasers") exercise their
over-allotment option in full) of International CableTel Incorporated, a
Delaware corporation (the "Company"), all as described in the Offering
Memorandum (the "Offering Memorandum") relating to the offering.
We hereby confirm that:
(1) the offer of the Convertible Notes by the Initial Purchasers to us
was not made within the United States or to a "U.S. person" (as defined in the
United States Securities Act of 1933, as amended (the "Securities Act")) and the
sale to us by the Initial Purchasers was not pre-arranged with a buyer in the
United States;
(2) we understand that we are purchasing the Convertible Notes in
accordance with Regulation S under the Securities Act and, as such, the
Convertible Notes purchased by us will be subject to the 40-day restricted
period referred to in Rule 903(c)(3) of Regulation S under the Securities Act
(the "40-day restricted period");
(3) we understand that the Convertible Notes are being offered in a
transaction not involving any public offering within the meaning of the
Securities Act and that the Convertible Notes have not been registered under the
Securities Act, and we agree, during the 40-day restricted period, that such
Convertible Notes may be offered, resold, pledged or otherwise transferred only
(i)(a) to a person whom we reasonably believe to be a qualified institutional
buyer (as defined in Rule 144A under the Securities Act) in a transaction
meeting the requirements of Rule 144A or (b) in accordance with another
exemption from the registration requirements of the Securities Act (and based
upon an opinion of counsel if the Company so requests) and (ii) in accordance
with all applicable securities laws of any state of the United States or any
other applicable jurisdiction.
(4) we have not, in the United States, engaged in, and prior to the
expiration of the 40-day restricted period provided for in Rule 903 of
Regulation S will not engage in, any short selling of any equity security issued
by the Company (including, without limitation, the Common Stock) or any hedging
transaction with respect to any such equity security, including without
limitation put, call or other option transactions, option writing and equity
swaps;
(5) the transaction is not part of a plan or scheme to evade the
registration requirements of the Securities Act;
<PAGE>
(6) we have received a copy of the Offering Memorandum and
acknowledge that we have had access to such financial and other information, and
have been afforded the opportunity to ask such questions of representatives of
the Company and receive answers thereto, as we deem necessary to verify the
accuracy of, or to supplement the information therein, or otherwise in
connection with our decision to purchase Convertible Notes; and
(7) we agree to give each person to whom we transfer the Convertible
Notes notice of the restrictions on transfer of the Convertible Notes set forth
in the Offering Memorandum.
We understand that the Company or its designee (including the
registrar and transfer agent for the Convertible Notes) will not be required to
accept for registration of transfer any Convertible Notes or any shares of
Common Stock issued upon conversion thereof, except upon presentation of
evidence satisfactory to the Company or its designee that the foregoing
restrictions on transfer have been complied with. We further understand that
the Convertible Notes purchased by us will be in the form of global certificate
deposited with, or on behalf of, the Depositary Trust Company ("DTC") and
registered in its name or in the name of Cede & Co., its nominee. We further
understand that Cedel Bank, S.A. or the Euroclear System will hold a beneficial
interest in the Convertible Notes purchased by us through its depository, which
in turn will hold such beneficial interest in our account in such depositary's
name on the books of DTC.
You, the Company and any such designee are entitled to rely upon this
letter and are irrevocably authorized to produce this letter or a copy hereof to
any interested party in any administrative or legal proceedings or official
inquiry with respect to the matters covered hereby. Terms used in this
certificate have the meanings set forth in Regulation S.
THIS LETTER SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH,
THE LAWS OF THE STATE OF NEW YORK.
____________________________________
(Name of Purchaser)
By:_________________________________
Name:
Title:
Address:
<PAGE>
STATE OF DELAWARE
SECRETARY OF STATE
DIVISION OF CORPORATIONS
FILED 01:20 PM 10/13/1993
932865225 - 2331497
EXHIBIT 3.1
RESTATED CERTIFICATE OF INCORPORATION
OF
INTERNATIONAL CABLETEL INCORPORATED
The undersigned, J. Barclay Knapp and Richard J. Lubasch certify that
they are the President and Secretary, respectively, of International CableTel
Incorporated, a corporation organized and existing under the laws of the State
of Delaware (the "Corporation"), and do hereby certify as follows:
(1) The name of the Corporation is International CableTel Incorporated.
(2) The name under which the Corporation was originally incorporated was
"CCI/Insight CableTel, Inc.," and the original Certificate of Incorporation was
filed with the Secretary of State of the State of Delaware on April 2, 1993.
(3) This Restated Certificate of Incorporation was duly adopted by
stockholder written consent in accordance with Sections 228, 242 and 245 of the
General Corporation Law of the State of Delaware.
(4) The text of the Certificate of Incorporation as amended hereby is
restated to read in its entirely as follows:
FIRST: The name of the Corporation is International CableTel
-----
Incorporated (hereinafter the "Corporation").
SECOND: The address of the registered office of the Corporation in the
------
State of Delaware is 32 Loockerman Square, Suite L-100, in the City of Dover,
County of Kent. The name of its registered agent at that address is The
Prentice-Hall Corporation System, Inc.
THIRD: The purpose of the Corporation is to engage in any lawful act or
-----
activity for which a corporation may be organized under the General Corporation
Law of the State of Delaware as set forth in Title 8 of the Delaware Code (the
"GCL").
<PAGE>
FOURTH: A. Authorized Capital. The total number of shares of stock which
------ ------------------
the Corporation shall have the authority to issue is 52,500,000 consisting of
50,000,000 shares of common stock, par value $0.01 per share (the "Common
Stock"), and 2,500,000 shares of preferred stock, par value $0.01 per share (the
"Preferred Stock").
B. Designation of Series. Shares of the Preferred Stock of the
---------------------
Corporation may be issued from time to time in one or more classes or series,
each of which class or series shall have such distinctive designation or title
as shall be fixed by the Board of Directors of the Corporation (the "Board of
Directors") prior to the issuance of any shares thereof. Each such class or
series of Preferred Stock shall have such voting powers, full or limited, or no
voting powers, and such preferences and relative, participating, optional or
other special rights and such qualifications, limitations or restrictions
thereof, as shall be stated in such resolution or resolutions providing for the
issue of such class or series of Preferred Stock as may be adopted from time to
time by the Board of Directors prior to the issuance of any shares thereof
pursuant to the authority hereby expressly vested in it, all in accordance with
the laws of the State of Delaware.
C. Series A Junior Participating Preferred Stock.
---------------------------------------------
Section 1. Designation and Amount. The shares of this series
----------------------
shall be designated as "Series A Junior Participating Preferred Stock" and the
number of shares constituting such series shall be 1,000,000.
Section 2. Dividends and Distributions.
---------------------------
(A) Subject to the prior and superior rights of the holders of any
shares of any series of Preferred Stock ranking prior and superior to the shares
of Series A Junior Participating Preferred Stock with respect to dividends, the
holders of shares of Series A Junior Participating Preferred Stock shall be
entitled to receive, when, as and if declared by the Board of Directors out of
funds legally available for the purpose, quarterly dividends payable in cash on
the fifteenth day of March, June, September and December in each year (each such
date being referred to herein as a "Quarterly Dividend Payment
2
<PAGE>
Date"), commencing on the first Quarterly Dividend Payment Date after the first
issuance of a share or fraction of a share of Series A Junior Participating
Preferred Stock, in an amount per share (rounded to the nearest cent) equal to
the greater of (a) $.01 or (b) subject to the provision for adjustment
hereinafter set forth, 100 times the aggregate per share amount of all cash
dividends, and 100 times the aggregate per share amount (payable in kind) of all
non-cash dividends or other distributions other than a dividend payable in
shares of Common Stock or a subdivision of the outstanding shares of Common
Stock (by reclassification or otherwise), declared on the Common Stock since the
immediately preceding Quarterly Dividend Payment Date, or, with respect to the
first Quarterly Dividend Payment Date, since the first issuance of any share or
fraction of a share of Series A Junior Participating Preferred Stock. In the
event the Corporation shall at any time after September 1, 1993 (the "Rights
Declaration Date") (i) declare any dividend on Common Stock payable in shares of
Common Stock, (ii) subdivide the outstanding Common Stock, or (iii) combine the
outstanding Common Stock into a smaller number of shares, then in each such case
the amount to which holders of shares of Series A Junior Participating Preferred
Stock were entitled immediately prior to such event under clause (b) of the
preceding sentence shall be adjusted by multiplying such amount by a fraction of
the numerator of which is the number of shares of Common Stock outstanding
immediately after such event and the denominator of which is the number of
shares of Common Stock that were outstanding immediately prior to such event.
(B) The Corporation shall declare a dividend or distribution on the
Series A Junior Participating Preferred Stock as provided in paragraph (A) above
immediately after it declares a dividend or distribution on the Common Stock
(other than a dividend payable in shares of Common Stock); provided that, in the
event no dividend or distribution shall have been declared on the Common Stock
during the period between any Quarterly Dividend Payment Date and the next
subsequent Quarterly Dividend Payment Date, a dividend of $.01 per share on the
Series A Junior Participating Preferred Stock shall nevertheless be payable on
such subsequent Quarterly Dividend Payment Date.
(C) Dividends shall begin to accrue and be cumulative on outstanding
shares of Series A Junior Par-
3
<PAGE>
ticipating Preferred Stock from the Quarterly Dividend Payment Date next
preceding the date of issue of such shares of Series A Junior Participating
Preferred Stock, unless the date of issue of such shares is prior to the record
date for the first Quarterly Dividend Payment Date, in which case dividends on
such shares shall begin to accrue from the date of issue of such shares, or
unless the date of issue is a Quarterly Dividend Payment Date or is a date after
the record date for the determination of holders of shares of Series A Junior
Participating Preferred Stock entitled to receive a quarterly dividend and
before such Quarterly Dividend Payment Date, in either of which events such
dividends shall begin to accrue and be cumulative from such Quarterly Dividend
Payment Date. Accrued but unpaid dividends shall not bear interest. Dividends
paid on the shares of Series A Junior Participating Preferred Stock in an amount
less than the total amount of such dividends at the time accrued and payable on
such shares shall be allocated pro rata on a share-by-share basis among all
such shares at the time outstanding. The Board of Directors may fix a record
date for the determination of holders of shares of Series A Junior Participating
Preferred Stock entitled to receive payment of a dividend or distribution
declared thereon, which record date shall be no more than 30 days prior to the
date fixed for the payment thereof.
Section 3. Voting Rights. The holders of shares of Series A Junior
--------------
Participating Preferred Stock shall have the following voting rights:
(A) Subject to the provision for adjustment hereinafter set forth, each
share of Series A Junior Participating Preferred Stock shall entitle the holder
thereof to 100 votes on all matters submitted to a vote of the stockholders of
the Corporation. In the event the Corporation shall at any time after the Rights
Declaration Date (i) declare any dividend on Common Stock payable in shares of
Common Stock, (ii) subdivide the outstanding Common Stock, or (iii) combine the
outstanding Common Stock into a smaller number of shares, then in each such case
the number of votes per share to which holders of shares of Series A Junior
Participating Preferred Stock were entitled immediately prior to such event
shall be adjusted by multiplying such number by a fraction the numerator of
which is the number of shares of Common Stock outstanding immediately after such
event and the denominator of which is the number of shares of
4
<PAGE>
Common Stock that were outstanding immediately prior to such event.
(B) Except as otherwise provided herein or by law, the holders of
shares of Series A Junior Participating Preferred Stock and the holders of
shares of Common Stock shall vote together as one class on all matters submitted
to a vote of stockholders of the Corporation.
(C)(i) If at any time dividends on any Series A Junior Participating
Preferred Stock shall be in arrears in an amount equal to six (6) quarterly
dividends thereon, the occurrence of such contingency shall mark the beginning
of a period (herein called a "default period") which shall extend until such
time when all accrued and unpaid dividends for all previous quarterly dividend
periods and for the current quarterly dividend on all shares of Series A Junior
Participating Preferred Stock then outstanding shall have been declared and paid
or set apart for payment. During each default period, all holders of Preferred
Stock (including holders of the Series A Junior Participating Preferred Stock)
with dividends in arrears in an amount equal to six (6) quarterly dividends
thereon, voting as a class, irrespective of series, shall have the right to
elect two (2) Directors.
(ii) During any default period, such voting right of the holders of
Series A Junior Participating Preferred Stock may be exercised initially at a
special meeting called pursuant to subparagraph (iii) of this Section 3(C) or at
any annual meeting of stockholders, and thereafter at annual meetings of
stockholders, provided that neither such voting right nor the right of the
holders of any other series of Preferred Stock, if any, to increase, in certain
cases, the authorized number of Directors shall be exercised unless the holders
of ten percent (10%) in number of shares of Preferred Stock outstanding shall be
present in person or by proxy. The absence of a quorum of the holders of
Common Stock shall not affect the exercise by the holders of Preferred Stock of
such voting right. At any meeting at which the holders of Preferred Stock shall
exercise such voting right initially during an existing default period, they
shall have the right, voting as a class, to elect Directors to fill such
vacancies, if any, in the Board of Directors as may then exist up to two (2)
Directors or, if such right is exercised at an annual meeting, to elect two (2)
Directors. If the number which may be so elected at any
5
<PAGE>
special meeting does not amount to the required number, the holders of the
Preferred Stock shall have the right to make such increase in the number of
Directors as shall be necessary to permit the election by them of the required
number. After the holders of the Preferred Stock shall have exercised their
right to elect Directors in any default period and during the continuance of
such period, the number of Directors shall not be increased or decreased except
by vote of the holders of Preferred Stock as herein provided or pursuant to the
rights of any equity securities ranking senior to or pari passu with the
----------
Series A Junior Participating Preferred Stock.
(iii) Unless the holders of Preferred Stock shall, during an existing
default period, have previously exercised their right to elect Directors, the
Board of Directors may order, or any stockholder or stockholders owning in the
aggregate not less than ten percent (10%) of the total number of shares of
Preferred Stock outstanding, irrespective of series, may request, the calling of
special meeting of the holders of Preferred Stock, which meeting shall thereupon
be called by the President, a Vice-President or the Secretary of the
Corporation. Notice of such meeting and of any annual meeting at which holders
of Preferred Stock are entitled to vote pursuant to this paragraph (C)(iii)
shall be given to each holder of record of Preferred Stock by mailing a copy of
such notice to him at his last address as the same appears on the books of the
Corporation. Such meeting shall be called for a time not earlier than 20 days
and not later than 60 days after such order or request or in default of the
calling of such meeting within 60 days after such order or request, such meeting
may be called on a similar notice by any stockholder or stockholders owning in
the aggregate not less than ten percent (10%) of the total number of shares of
Preferred Stock outstanding. Notwithstanding the provisions of this paragraph
(C)(iii), no such special meeting shall be called during the period within 60
days immediately preceding the date fixed for the next annual meeting of the
stockholders.
(iv) In any default period, the holders of Common Stock, and other
classes of stock of the Corporation if applicable, shall continue to be entitled
to elect the whole number of Directors until the holders of Preferred Stock
shall have exercised their right to elect two (2) Directors voting as a class,
after the exercise of which right (x) the Directors so elected by the hold-
6
<PAGE>
ers of Preferred Stock shall continue in office until their successors shall
have been elected by such holders or until the expiration of the default period,
and (y) any vacancy in the Board of Directors may (except as provided in
paragraph (C) (ii) of this Section 3) be filled by vote of a majority of the
remaining Directors theretofore elected by the holders of the class of stock
which elected the Director whose office shall have become vacant. References in
this paragraph (C) to Directors elected by the holders of a particular class of
stock shall include Directors elected by such Directors to fill vacancies as
provided in clause (y) of the foregoing sentence.
(v) Immediately upon the expiration of a default period, (x) the right
of the holders of Preferred Stock as a class to elect Directors shall cease, (y)
the term of any Directors elected by the holders of Preferred Stock as a class
shall terminate, and (z) the number of Directors shall be such number as may be
provided for in the certificate of incorporation or by-laws irrespective of any
increase made pursuant to the provisions of paragraph (C)(ii) of this Section 3
(such number being subject, however, to change thereafter in any manner provided
by law or in the certificate of incorporation or by-laws). Any vacancies in the
Board of Directors effected by the provisions of clauses (y) and (z) in the
preceding sentence may be filled by a majority of the remaining Directors.
(D) Except as set forth herein, holders of Series A Junior
Participating Preferred Stock shall have no special voting rights and their
consent shall no be required (except to the extent they are entitled to vote
with holders of Common Stock as set forth herein) for taking any corporate
action.
Section 4. Certain Restrictions.
--------------------
(A) Whenever quarterly dividends or other dividends or distributions
payable on the Series A Junior Participating Preferred Stock as provided in
Section 2 are in arrests, thereafter and until all accrued and unpaid dividends
and distributions, whether or not declared, on shares of Series A Junior
Participating Preferred Stock outstanding shall have been paid in full, the
Corporation shall not
7
<PAGE>
(i) declare or pay dividends on, make any other distributions
on, or redeem or purchase or otherwise acquire for consideration any
shares of stock ranking junior (either as to dividends or upon
liquidation, dissolution or winding up) to the Series A Junior
Participating Preferred Stock;
(ii) declare or pay dividends on or make other distributions on
any shares of stock ranking on a parity (either as to dividends or upon
liquidation, dissolution or winding up) with the Series A Junior
Participating Preferred Stock, except dividends paid ratably on the
Series A Junior Participating Preferred Stock and all such parity stock
on which dividends are payable or in errears in proportion to the total
amounts to which the holders of all such shares are then entitled;
(iii) redeem or purchase or otherwise acquire for consideration
shares of any stock ranking on a parity (either as to dividends or upon
liquidation, dissolution or winding up) with the Series A Junior
Participating Preferred Stock, provided that the Corporation may at any
time redeem, purchase or otherwise acquire shares of any such parity
stock in exchange for shares of any stock of the Corporation ranking
junior (either as to dividends or upon dissolution, liquidation or
winding up) to the Series A Junior Participation Preferred Stock;
(iv) purchase or otherwise acquire for consideration any shares
of Series A Junior Participating Preferred Stock, or any shares of stock
ranking on a parity with the Series A Junior Participating Preferred
Stock, except in accordance with a purchase offer made in writing or by
publication (as determined by the Board of Directors) to all holders of
such shares upon such terms as the Board of Directors, after
consideration of the respective annual dividend rates and other relative
rights and preferences of the respective series and classes, shall
determine in good faith will
8
<PAGE>
result in fair and equitable treatment among the respective series or
classes.
(B) The Corporation shall not permit any subsidiary of the Corporation to
purchase or otherwise acquire for consideration any shares of stock of the
Corporation unless the Corporation could, under paragraph (A) of this Section 4,
purchase or otherwise acquire such shares at such time and in such manner.
Section 5. Reacquired Shares. Any shares of Series A Junior Participating
-----------------
Preferred Stock purchased or otherwise acquired by the Corporation in any manner
whatsoever shall be retired and cancelled promptly after the acquisition
thereof. All such shares shall upon their cancellation become authorized but
unissued shares of Preferred Stock and may be reissued as part of a new series
of Preferred Stock to be created by resolution or resolutions of the Board of
Directors, subject to the conditions and restrictions on issuance set forth
herein.
Section 6. Liquidation, Dissolution or Winding Up.
--------------------------------------
(A) Upon any liquidation (voluntary or otherwise), dissolution or winding
up of the Corporation, no distribution shall be made to the holders of shares of
stock ranking junior (either as to dividends or upon liquidation, dissolution or
winding up) to the Series A Junior Participating Preferred Stock unless, prior
thereto, the holders of shares of Series A Junior Participation Preferred Stock
shall have received $1 per share, plus an amount equal to accrued and unpaid
dividends and distributions thereon, whether or not declared, to the date of
such payment (the "Series A Liquidation Preference"). Following the payment of
the full amount of the Series A Liquidation Preference, no additional
distributions shall be made to the holders of shares of Series A Junior
Participating Preferred Stock unless, prior thereto, the holders of shares of
Common Stock shall have received an amount per share (the "Common Adjustment")
equal to the quotient obtained by dividing (i) the Series A Liquidation
Preference by (ii) 100 (as appropriately adjusted as set forth in subparagraph C
below to reflect such events as stock splits, stock dividends and
recapitalizations with respect to the Common Stock) (such number in clause (ii),
the "Adjustments Number"). Following the payment of the full amount of the
Series A Liquida-
9
<PAGE>
tion Preference and the Common Adjustment in respect of all outstanding shares
of Series A Junior Participating Preferred Stock and Common Stock, respectively,
holders of Series A Junior Participating Preferred Stock and holders of shares
of Common Stock shall receive their ratable and proportionate share of the
remaining assets to be distributed in the ratio of the Adjustment Number to 1
with respect to such Preferred Stock and Common Stock, on a per share basis,
respectively.
(B) In the event, however, that there are not sufficient assets available
to permit payment in full of the Series A Liquidation Preference and the
liquidation preferences of all other series of preferred stock, if any, which
rank on a parity with the Series A Junior Participating Preferred Stock, then
such remaining assets shall be distributed ratably to the holders of such parity
shares in proportion to their respective liquidation preferences. In the event,
however, that there are not sufficient assets available to permit payment in
full of the Common Adjustment, then such remaining assets shall be distributed
ratably to the holders of Common Stock.
(C) In the event the Corporation shall at any time after the Rights
Declaration Date (i) declare any dividend on Common Stock payable in shares of
Common Stock, (ii) subdivide the outstanding Common Stock, or (iii) combine the
outstanding Common Stock into a smaller number of shares, then in each such case
the Adjustment Number in effect immediately prior to such event shall be
adjusted by multiplying such Adjustment Number by a fraction the numerator of
which is the number of shares of Common Stock outstanding immediately after such
event and the denominator of which is the number of shares of Common Stock that
were outstanding immediately prior to such event.
Section 7. Consolidation, Merger, etc. In case the Corporation shall enter
--------------------------
into any consolidation, merger, combination or other transaction in which the
shares of Common Stock are exchanged for or changed into other stock or
securities, cash and/or any other property, then in any such case the shares of
Series A Junior Participating Preferred Stock shall at the same time be
similarly exchanged or changed in an amount per share (subject to the provision
for adjustment hereinafter set forth) equal to 100 times the aggregate amount
of stock, securities, cash and/or any other property (payable in
10
<PAGE>
kind), as the case may be, into which or for which each share of Common Stock is
changed or exchanged. In the event the Corporation shall at any time after the
Rights Declaration Date (i) declare any dividend on Common Stock payable in
shares of Common Stock, (ii) subdivide the outstanding Common Stock, or (iii)
combine the outstanding Common Stock into a smaller number of shares, then in
each such case the amount set forth in the preceding sentence with respect to
the exchange or change of shares of Series A Junior Participating Preferred
Stock shall be adjusted by multiplying such amount by a fraction the numerator
of which is the number of shares of Common Stock outstanding immediately after
such event and the denominator of which is the number of shares of Common Stock
that were outstanding immediately prior to such event.
Section 8. No Redemption. The shares of Series A Junior Participating
-------------
Preferred Stock shall not be redeemable.
Section 9. Ranking. The Series A Junior Participating Preferred Stock shall
-------
rank junior to all other series of the Corporation's Preferred Stock as to the
payment of dividends and the distribution of assets, unless the terms of any
such series shall provide otherwise.
Section 10. Amendment. The Restated Certificate of Incorporation of the
---------
Corporation shall not be further amended in any manner which would materially
alter or change the powers, preferences or special rights of the Series A Junior
Participating Preferred Stock so as to affect them adversely without the
affirmative vote of the holders of a majority or more of the outstanding shares
of Series A Junior Participating Preferred Stock, voting separately as a class.
Section 11. Fractional Shares. Series A Junior Participating Preferred
-----------------
Stock may be issued in fractions of a share which shall entitle the holder, in
proportion to such holders fractional shares, to exercise voting rights,
receive dividends, participate in distributions and to have the benefit of all
other rights of holders of Series A Junior Participating Preferred Stock.
FIFTH: The business and affairs of the Corporation shall be managed by or
under the direction of the
11
<PAGE>
Board of Directors. The number of directors of the Corporation shall be as from
time to time fixed by, or in the manner provided in, the By-Laws of the
Corporation. The directors shall be divided into three classes, designated Class
I, Class II and Class III. Each class shall consist, as nearly as may be
possible, of one-third of the total number of directors constituting the entire
Board of Directors. The term of the initial Class I directors shall terminate on
the date of the 1994 annual meeting of stockholders; the term of the initial
Class II directors shall terminate on the date of the 1995 annual meeting of
stockholders and the terms of the initial Class III directors shall terminate on
the date of the 1996 annual meeting of stockholders. At each annual meeting of
stockholders beginning in 1994, successors to the class of directors whose terms
expires at that annual meeting shall be elected for a three-year term. If the
number of directors is changed, any increase or decrease shall be apportioned
among the classes so as to maintain the number of directors in each class as
nearly equal as possible, and any additional directors of any class elected to
fill a vacancy resulting from an increase in such class shall hold office for a
term that shall coincide with the remaining term of that class, but in no case
will a decrease in the number of directors shorten the term of any incumbent
director. A director shall hold office until the annual meeting for the year in
which his term expires and until his successor shall be elected and shall
qualify, subject, however, to prior death, resignation, retirement,
disqualification or removal from office. Any vacancy on the Board of Directors,
howsoever resulting, may be filled by a majority of the directors then in
office, even if less than a quorum, or by a sole remaining director. Any
director elected to fill a vacancy shall hold office for a term that shall
coincide with the term of the class to which such director shall have been
elected.
Notwithstanding the foregoing, whenever the holders of any one or more
classes or series of Preferred Stock issued by the Corporation shall have the
right, voting separately by class or series, to elect directors at an annual or
special meeting of stockholders, the election, term of office, filling of
vacancies and other features of such directorships shall be governed by the
terms of this Certificate of Incorporation or the resolution or resolutions
adopted by the Board of Directors pursuant to Article FOURTH applicable thereto,
and such
12
<PAGE>
directors so elected shall not be divided into classes pursuant to this Article
FIFTH unless expressly provided by such terms.
SIXTH: Subject to the rights, if any, of the holders of shares of
------
Preferred Stock then outstanding, any or all of the directors of the Corporation
may be removed from office at any time, but only for cause and only by the
affirmative vote of the holders of two-thirds (66 2/3%) of the outstanding
shares of the Corporation then entitled to vote generally in the election of
directors, considered for purposes of this Article SIXTH as one class.
SEVENTH: Any action required or permitted to be taken at any annual or
--------
special meeting of stockholders may be taken only upon the vote of the
stockholders at an annual or special meeting duly noticed and called, as
provided in the By-laws of the Corporation, and may not be taken by a written
consent of the stockholders pursuant to the GCL.
EIGHTH: Special meetings of the stockholders of the Corporation for any
-------
purpose or purposes may be called at any time by the Board of Directors, the
Chairman of the Board of Directors or the President. Special meetings of the
stockholders of the Corporation may not be called by any other person or
persons.
NINTH:
------
A. In addition to any affirmative vote required by law or this
Certificate of Incorporation or the By-laws of the Corporation, and except as
otherwise expressly provided in Section B of this Article NINTH, a Business
Combination (as hereinafter defined) with, or proposed by or on behalf of, any
Interested Stockholder (as hereinafter defined) or any Affiliate or Associate
(as hereinafter defined) of any Interested Stockholder or any person who
thereafter would be an Affiliate or Associate of such Interested Stockholder
shall require the affirmative vote of not less than sixty-six and two-thirds
percent (66-2/3%) of the votes entitled to be cast by the holders of all the
then outstanding shares of Voting Stock (as hereinafter defined), voting
together as a single class, excluding Voting Stock beneficially owned by any
Interested Stockholder or any Affiliate or Associate of such Interested
Stockholder. Such affirmative
13
<PAGE>
vote shall be required notwithstanding the fact that no vote may be required,
or that a lesser percentage or separate class vote may be specified, by law or
in any agreement with any national securities exchange or otherwise.
B. The provisions of Section A of this Article NINTH shall not be
applicable to any particular Business Combination, and such Business Combination
shall require only such affirmative vote, if any, as is required by law or any
other provision of this Certificate of Incorporation or the By-laws of the
Corporation, if all of the conditions specified in either of the following
Paragraphs 1 or 2 are met:
1. The Business Combination shall have been approved by a majority of the
Continuing Directors (as hereinafter defined).
2. All of the following conditions shall have been met:
a. the aggregate amount of the cash and the Fair Market Value (as
hereinafter defined) as of the date of the consummation of the Business
Combination of consideration other than cash to be received per share by holders
of Common Stock in such Business Combination shall be at least equal to the
highest amount determined under clauses (i) and (ii) below:
(i) (if applicable) the highest per share price (including any
brokerage commissions, transfer taxes and soliciting dealers' fees) paid
by or on behalf of the Interested Stockholder for any share of Common
Stock in connection with the acquisition by the Interested Stockholder
of beneficial ownership of shares of Common Stock acquired by it (x)
within the two-year period immediately prior to the first public
announcement of the proposed Business Combination (the "Announcement
Date") or (y) in the transaction in which it became an Interested
Stockholder, whichever is higher, in either case as adjusted for any
subsequent stock split, stock dividend, subdivision or reclassification
with respect to the Common Stock; and
14
<PAGE>
(ii) the Fair Market Value per share of Common Stock on
the Announcement Date or on the date on which the Interested Stockholder
became an Interested Stockholder (the "Determination Date"), whichever
is higher, as adjusted for any subsequent stock split, stock dividend,
subdivision or reclassification with respect to the Common Stock.
b. The aggregate amount of cash and the Fair Market Value as of the
Date of the consummation of the Business Combination, of consideration other
than cash to be received per share by holders of shares of any class or series
of outstanding Capital Stock (as hereinafter defined), other than Common Stock,
shall be at least equal to the highest amount determined under clauses (i), (ii)
and (iii) below):
(i) (if applicable) the highest per share price (including any
brokerage commissions, transfer taxes and soliciting dealers' fees) paid
by or on behalf of the Interested Stockholder for any share of such
class or series of Capital Stock in connection with the acquisition by
the Interested Stockholder of beneficial ownership of shares of such
class or series of Capital Stock (x) within the two-year period
immediately prior to the Announcement Date or (y) in the transaction in
which it became an Interested Stockholder, whichever is higher, in
either case as adjusted for any subsequent stock split, stock dividend,
subdivision or reclassification with respect to such class or series of
Capital Stock;
(ii) the Fair Market Value per share of such class or series of
Capital Stock on the Announcement Date or on the Determination Date,
whichever is higher, as adjusted for any subsequent stock split, stock
dividend, subdivision or reclassification with respect to such class or
series of Capital Stock; and
(iii) (if applicable) the highest preferential amount per share
to which the holders of shares of such class or series of Capital Stock
would be entitled in the event of any voluntary or involuntary
liquidation, dis-
15
<PAGE>
solution or winding up of the affairs of the Corporation regardless of
whether the Business Combination to be consummated constitutes such an
event.
The provisions of this Paragraph 2 shall be required to be met with respect to
every class or series of outstanding Capital Stock, whether or not the
Interested Stockholder has previously acquired beneficial ownership of any
shares of a particular class or series of Capital Stock.
c. The consideration to be received by holders of a particular class or
series of outstanding Capital Stock shall be in cash or in the same form as
previously has been paid by or on behalf of the Interested Stockholder in
connection with its direct or indirect acquisition of beneficial ownership of
shares of such class or series of Capital Stock. If the consideration so paid
for shares of any class or series of Capital Stock varied as to form, the form
of consideration for such class or series of Capital Stock shall be either cash
or the form used to acquire beneficial ownership of the largest number of shares
of such class or series of Capital Stock previously acquired by the Interested
Stockholder.
d. After the Determination Date and prior to the consummation of such
Business Combination: (i) except as approved by a majority of the Continuing
Directors, there shall have been no failure to declare and pay at the regular
date therefor any full quarterly dividends (whether or no cumulative) payable in
accordance with the terms of any outstanding Capital Stock; (ii) there shall
have been no reduction in the annual rate of dividends paid on the Common Stock
(except as necessary to reflect any stock split, stock dividend or subdivision
of the Common Stock), except as approved by a majority of the Continuing
Directors; (iii) there shall have an increase in the annual rate of dividends
paid on the Common Stock as necessary to reflect any reclassification (including
any reverse stock split), recapitalization, reorganization or any similar
transaction that has the effect of reducing the number of outstanding shares of
Common Stock, unless the failure so to increase such annual rate is approved by
a majority of the Continuing Directors; and (iv) such Interested Stockholder
shall not have become the beneficial owner of any additional shares of Capital
Stock except as part of the transaction that
16
<PAGE>
results in such Interested Stockholder becoming an Interested Stockholder and
except in a transaction that, after giving affect thereto, would not result in
any increase in the Interested Stockholder's percentage beneficial ownership of
any class or series of Capital Stock.
e. A proxy or information statement describing the proposed Business
Combination and complying with the requirements of the Securities Exchange Act
of 1934, as amended, and the rules and regulations thereunder (the "Act") (or
any subsequent provisions replacing such Act, rules or regulations) shall be
mailed to all stockholders of the Corporation at least 30 days prior to the
consummation of such Business Combination (whether or not such proxy or
information statement is required to be mailed pursuant to such Act or
subsequent provisions). The proxy or information statement shall contain on the
first page thereof, in a prominent place, any statement as to the advisability
(or inadvisability) of the Business Combination that the Continuing Directors,
or any of them, may choose to make and, if deemed advisable by a majoruty of the
Continuing Directors, an opinion of an investment banking firm selected by a
majority of the Continuing Directors as to the fairness (or unfairness) of the
terms of the Business Combination from a financial point of view to the holders
of the outstanding shares of Capital Stock other than the Interested Stockholder
and its Affiliates or Associates, such investment banking firm to be paid a
reasonable fee for its services by the Corporation.
f. Such Interested Stockholder shall not have made any major change in
the Corporation's business or equity capital structure without the approval of a
majority of the Continuing Directors.
C. The following definitions shall apply with respect to this Article
NINTH:
1. The term "Business Combination" shall mean:
a. any merger or consolidation of the Corporation or any Subsidiary (as
herinafter defined) with (i) any Interested Stockholder or (ii) any other
company (whether or not itself an Interested Stockholder) which is or after such
merger or consolidation would be an Affiliate or Associate of an Interested
Stockholder; or
17
<PAGE>
b. any sale, lease, exchange, mortgage, pledge, transfer or other
disposition or security arrangement, investment, loan, advance, guarantee,
agreement to purchase, agreement to pay, extension of credit, joint venture
participation or other arrangement (in one transaction or a series of
transactions) with or for the benefit of any Interested Stockholder or any
Affiliate or Associate of any Interested Stockholder involving any assets,
securities or commitments of the Corporation, any Subsidairy or any Interested
Stockholder or any Affiliate or Associate of any Interested Stockholder (except
for any arrangement, whether as employee, consultant or otherwise, other than as
a director, pursuant to which any Interested Stockholder or any Affiliate or
Associate thereof shall, directly or indirectly, have any control over or
responsibility for the management of any aspect of the business or affairs of
the Corporation, with respect to which arrangements the value tests set forth
below shall not apply), together with all other such arrangements (including all
contemplated future events), has an aggregate Fair Market Value and/or involves
aggregate commitments of $5,000,000 or more or constitutes more than 5 percent
of the book value of the total assets (in the case of transactions involving
assets or commitments other than capital stock) or 5 percent of the
stockholders' equity (in the case of transactions in capital stock) of the
entity in question (the "Substantial Part"), as reflected in the most recent
fiscal year end consolidated balance sheet of such entity existing at the time
the stockholders of the Corporation would be required to approve or authorize
the Business Combination involving the assets, securities and/or commitments
constituting any Substantial Part; or
c. the adoption of any plan or proposal for the liquidation or
dissolution of the Corporation or for any amendment ot the Corporation's
By-laws;or
d. any reclassification of securities (including any reverse stock
split), or recapitalization of the Corporation, or any merger or consolidation
of the Corporation with any of its Subsidiaries or any other transaction
(whether or not with or into or otherwise involving an Interested Stockholder)
that has the effect, directly or indirectly, of increasing the proportionate
share of any class or series of Capital Stock, or any securities convertible
into Capital Stock, or into equity securities of any Subsidiary, that is
beneficially owned by any
18
<PAGE>
Interested Stockholder or any Affiliate or Associate of any Interested
Stockholder; or
e. any agreement, contract or other arrangement providing for any one
or more of the actions specified in the foregoing clauses (a) to (d).
2. The term "Capital Stock" shall mean all capital stock of the
Corporation Authorized to be issued from time to time under Article FOURTH of
this Certificate of Incorporation, and the term "Voting Stock" shall mean all
Capital Stock which by its terms may be voted on all matters submitted to
stockholders of the Corporation generally.
3. The term "person" shall mean any individual, firm, company or other
entity and shall include any group comprised of any person and any other person
with whom such person or any Affiliate or Associate of such person has any
agreement, arrangement or understanding, directly or indirectly, for the
purpose of acquiring, holding, voting or disposing of Capital Stock.
4. The term "Interersted Stockholder" shall mean any person (other
than the Corporation or any Subsidiary and other than any profit-sharing,
employee stock ownership or other employee benefit plan of the Corporation or
any Subsidiary or any trustee of or fiduciary with respect to any such plan when
acting in such capacity who (a) is or has announced or publicly disclosed a plan
or intention to become the beneficial owner of Voting Stock representing fifteen
percent (15%) or more of the votes entitled to be cast by the holders of all
then outstanding shares of Voting Stock; or (b) is an Affiliate or Associate of
the Corporation and at any time within the two-year period immediately prior to
the date in question was the beneficial owner of Voting Stock representing
fifteen percent (15%) or more of the votes entitled to be cast by the holders of
all then outstanding shares of Voting Stock.
5. A person shall be a "beneficial owner" if aby Voting Stock: (a0
which such person or any of its Affiliates or Associates beneficially owns,
directly or indirectly; (b) which such person or any of its Affiliates or
Associates has, directly or indirectly, (i) the right to acquire (whether such
right is exercisable immediately or subject only to the passage to time),
pursuant
19
<PAGE>
to any agreement, arrangement or understanding or upon the exercise of
conversion rights, exchange rights, warrants or options, or otherwise, or (ii)
the right to vote pursuant to any agreement, arrangement or understanding; or
(c) which is beneficially owned, directly or indirectly, by any other person
with which such person or any of its Affiliates or Associates has any agreement,
arrangement or understanding for the purpose of acquiring, holding, voting or
disposing of any shares of Capital Stock. For the purposes of determining
whether a person is an Interested Stockholder pursuant to Paragraph 4 of this
Section C, the number of shares of Capital Stock deemed to be outstanding shall
include shares deemed beneficially owned by such person through application of
this Paragraph 5 of Section C, but shall not include any other shares of Capital
Stock that may be issuable pursuant to an agreement, arrangement or
understanding, or upon exercise of conversion rights, warrants or options, or
otherwise.
6. The terms "Affiliate" or Associate" shall have the respective
meanings ascribed to such terms in Rule 12b-2 of the General Rules and
Regulations under the Act, as in effect on April 2, 1993 (the term "registrant"
in said Rule 12b-2 meaning in this case the Corporation).
7. "Subsidiary" means any company of which a majority of any class of
equity security is beneficially owned by the Corporation; provided, however,
that for the purposes of the definition of Interested Stockholder set forth in
Paragraph 4 of this Section C, the term "Subsidiary" shall mean only a company
of which a majority of each class of equity security is beneficially owned by
the Corporation.
8. The term "Continuing Director" means any member of the Board of
Directors of the Corporation, while such person is a member of the Board of
Directors, who is not an Affiliate or Associate or representative of the
Interested Stockholder and was a member of the Board of Directors prior to the
time that the Interested Stockholder became an Interested Stockholder, and any
successor of a Continuing Director while such successor is a member of the
Board of Directors, who is not an Affiliate or Associate or representative of
the Interested Stockholder and is recommended or elected to succeed the
Continuing Director by a majority of Continuing Directors.
20
<PAGE>
9. The term "Fair Market Value" means: (a) in the case of cash, the
amount of such cash; (b) in the case of stock, the highest closing sale price
during the 30-day period immediately preceding the date in question of a share
of such stock on the Composite Tape for New York Stock Exchange-Listed Stocks,
or, if such stock is not quoted on the Composite Tape, on the New York Stock
Exchange, or, if such stock is not listed on such Exchange, on the principal
United States securities exchange registered under the Act on which such stock
is listed or, if such stock is not listed on any such exchange, the highest
closing bid quotation with respect to a share of such stock during the 30-day
period preceding the date in question on the National Association of Securities
Dealers, Inc. Automated Quotations System, in the pink sheets of the National
Quotation Bureau of any similar system than in use, or if no such quotations are
available, the fair market value on the date in question of a share of such
stock as determined by a majority of the Continuing Directors in good faith; and
(c) in the case of property other than cash or stock, the fair market value of
such property on the date in question as determined in good faith by a majority
of the Continuing Directors.
10. Is the event of any Business Combination in which the Corporation
survives, the phrase "consideration other than cash to be received" as used in
Paragraphs 2.a. and 2.b. of Section B of this Article NINTH shall include the
shares of Common Stock and/or the shares of any other class or series of Capital
Stock retained by the holders of such shares.
D. A majority of the Continuing Directors shall have the power and duty
to determine for the purpose of the Article NINTH, on the basis of information
known to them after reasonable inquiry, all questions arising under this Article
NINTH, including, without limitation, (a) whether a person is an Interested
Stockholder, (b) the number of shares of Capital Stock or other securities
beneficially owned by any person, (c) whether a person is an Affiliate or
Associate of another, (d) whether a Proposed Action (as hereinafter defined) is
with, or proposed by, or on behalf of an Interested Stockholder or an Affiliate
or Associate of an Interested Stockholder, (e) whether the assets that are the
subject of any Business Combination have, or the consideration to be received
for the issuance or transfer of securities by
21
<PAGE>
the Corporation or any Subsidiary in any Business Combination has, an aggregate
Fair Market Value of $5,000,000 or more and (f) whether the assets or securities
that are the subject of any Business Combination constitute a Substantial Part.
Any such determination made in good faith shall be binding and conclusive on
all parties. The good faith determination of a majority of the Continuing
Directors on such matters shall be conclusive and binding for all purposes of
this Article NINTH.
E. Nothing contained in this Article NINTH shall be construed to relieve
any Interested Stockholder from any fiduciary obligation imposed by law.
F. The fact that any Business Combination complies with the provisions of
Section B of this Article NINTH shall not be construed to impose any fiduciary
duty, obligation or responsibility on the Board of Directors, or any member
thereof, to approve such Business Combination or recommend its adoption
or approval to the stockholders of the Corporation, nor shall such compliance
limit, prohibit or otherwise restrict in any manner the Board of Directors, or
any member thereof, with respect to evaluations of or actions and responses
taken with respect to such Business Combination.
G. For the purposes of this Article NINTH, a Business Combination or any
proposal to amend, repeal or adopt any provision of this Certificate of
Incorporation inconsistent with this Article NINTH (collectively, "Proposed
Action") is presumed to have been proposed by, or on behalf of, an Interested
Stockholder or an Affiliate or Associate of an Interested Stockholder or a
person who thereafter would become such if (1) after the Interested Stockholder
became such, the Proposed Action is proposed following the election of any
director of the Corporation who with respect to such Interested Stockholder,
would not qualify to serve as a Continuing Director or (2) such Interested
Stockholder, Affiliate, Associate or person votes for or consents to the
adoption of any such Proposed Action, unless as to such Interested Stockholder,
Affiliate, Associate or person a majority of the Continuing Directors makes
a good faith determination that such Proposed Action is not proposed by or on
behalf of such Interested Stockholder, Affiliate, Associate or person, based
on information known to them after reasonable inquiry.
22
<PAGE>
H. Notwithstanding any other provisions of this Certificate of
Incorporation or the By-laws of the Corporation (and notwithstanding the fact
that a lesser percentage or separate class vote may be specified by law, this
Certificate of Incorporation or the By-laws of the Corporation), any proposal to
amend, repeal or adopt any provision of this Certificate of Incorporation
inconsistent with this Article NINTH which is proposed by or on behalf of an
Interested Stockholder or an Affiliate or Associate of an Interested Stockholder
shall require the affirmative vote of the holders of not less than sixty-six and
two-thirds percent (66-2/3%) of the votes entitled to be cast by the holders of
all the then outstanding shares of Voting Stock, voting together as a single
class, excluding Voting Stock beneficially owned by such Interested
Stockholder; provided, however, that this Section H shall not apply to, and
such sixty-six and two-thirds percent (66-2/3%) vote shall not be required for,
any amendment, repeal or adoption unanimously recommended by the Board of
Directors if all of such directors are persons who would be eligible to serve as
Continuing Directors within the meaning of Section C, Paragraph 8 of this
Article NINTH.
TENTH: No director of the Corporation shall be personally liable to the
-----
Corporation or its stockholders for monetary damages for any breach of fiduciary
duty by such a director as a director. Notwithstanding the foregoing sentence, a
director shall be liable to the extent provided by applicable law (i) for any
breach of the director's duty of loyalty to the Corporation or its stockholders,
(ii) for acts or omissions not in good faith or which involve intentional
misconduct or a knowing violation of law, (iii) pursuant to Section 174 of the
GCL or (iv) for any transaction from which the director derived an improper
personal benefit. No amendment to or repeal of this Article TENTH shall apply to
or have any effect on the liability or alleged liability of any director of the
Corporation for or with respect to any acts or omissions of such director
occurring prior to such amendment or repeal.
ELEVENTH: In furtherance and not in limitation of the powers conferred by
--------
statute, the Board of Directors is expressly authorized to adopt, repeal, alter,
amend or rescind the By-laws of the Corporation. In addition, the By-laws of the
Corporation may be adopted, repealed, altered, amended, or rescinded by the
affirma-
23
<PAGE>
tive vote of sixty-six and two-thirds percent (66-2/3%) of the outstanding stock
of the Corporation entitled to vote thereon.
TWELFTH: Notwithstanding anything contained in this Certificate of
--------
Incorporation to the contrary, the affirmative vote of the holders of at least
sixty-six and two-thirds percent (66-2/3%) of the Voting Stock, voting together
as a single class, shall be required to amend, repeal or adopt any provision
inconsistent with Articles FIFTH, SEVENTH, EIGHTH, NINTH, TENTH and ELEVENTH of
this Certificate of Incorporation.
THIRTEENTH: The Corporation reserves the right to repeal, alter, amend,
----------
or rescind any provision contained in this Restated Certificate of
Incorporation, in the manner now or hereafter prescribed by statute, and all
rights conferred on stockholders herein are granted subject to this reservation.
24
<PAGE>
IN WITNESS WHEREOF, International CableTel Incorporated has caused its
corporate seal to be hereunto affixed and this Restated Certificate of
In corporation to be signed by George S. Blumenthal, its Chairman of the Board,
Chief Executive Officer and Treasurer and attested by Richard J. Lubasch, its
Secretary, this 13th day of October, 1993.
INTERNATIONAL CABLETEL INCORPORATED
By: /s/ George S. Blumenthal
--------------------------------
George S. Blumenthal
Chairman of the Board, Chief Executive
Officer and Treasurer
[SEAL]
ATTEST
/s/ Richard J. Lubasch
- -------------------------------------
Richard J. Lubasch
Secretary
<PAGE>
PAGE 1
State of Delaware
Office of the Secretary of State
--------------------------------
I, EDWARD J. FREEL, SECRETARY OF STATE OF THE STATE OF DELAWARE, DO
HEREBY CERTIFY THE ATTACHED IS A TRUE AND CORRECT COPY OF THE CERTIFICATE OF
AMENDMENT OF "INTERNATIONAL CABLETEL INCORPORATED", FILED IN THIS OFFICE ON THE
FIFTH DAY OF JUNE A.D. 1996, AT 1:50 O'CLOCK P.M.
/s/ Edward J. Freel
[SEAL] -----------------------------------
Edward J. Freel, Secretary of State
AUTHENTICATION: 7981358
DATE: 06-11-96
<PAGE>
STATE OF DELAWARE
SECRETARY OF STATE
DIVISION OF CORPORATIONS
FILED 01:50 PM 06/06/1996
960163417 - 2331497
CERTIFICATE OF AMENDMENT
OF
RESTATED CERTIFICATE OF INCORPORATION
International CableTel Incorporated, a corporation organized
and existing under and by virtue of the General Corporation Law of the State of
Delaware, DOES HEREBY CERTIFY:
FIRST: that the Board of Directors of International
CableTel Incorporated, at a meeting of the Board of Directors duly called and
held on March 12, 1996, adopted a resolution proposing and declaring advisable
the following amendment to the Restated Certificate of Incorporation of said
Company:
FOURTH: A. Authorized Capital. The total number of
shares of stock which the Corporation shall have the
authority to issue is 102,500,000 consisting of 100,000,000
shares of common stock, par value $0.01 per share (the
"Common Stock") and 2,500,000 shares of preferred stock, par
value $0.01 per share (the "Preferred Stock").
SECOND: that the aforesaid amendment was duly adopted in
accordance with the applicable provisions of Section 242 of the General
Corporation Law of the State of Delaware.
IN WITNESS WHEREOF, said International CableTel Incorporated
has caused this Certificate to be signed by Richard J. Lubasch, its Senior Vice
President and General Counsel.
INTERNATIONAL CABLETEL INCORPORATED
June 5, 1996 By: /s/Richard J. Lubasch
---------------------
Richard J. Lubasch
Senior Vice President and
General Counsel
<PAGE>
EXHIBIT 4.1
$275,000,000
7% CONVERTIBLE SUBORDINATED NOTES DUE 2008
REGISTRATION RIGHTS AGREEMENT
Dated as of June 12, 1996
by and among
INTERNATIONAL CABLETEL INCORPORATED
and
DONALDSON, LUFKIN & JENRETTE SECURITIES CORPORATION
SALOMON BROTHERS INC
<PAGE>
This Registration Rights Agreement (this "Agreement") is made and entered
into as of June 12, 1996 by and among International CableTel Incorporated, a
Delaware corporation (the "Company"), and Donaldson, Lufkin & Jenrette
Securities Corporation and Salomon Brothers Inc, as initial purchasers (the
"Initial Purchasers"). The Company proposes to issue and sell to the Initial
Purchasers (the "Initial Firm Placement") $275,000,000 aggregate principal
amount of its 7 % Convertible Subordinated Notes Due 2008 (the "Firm Convertible
Notes"). The Company also proposes to issue and sell to the Initial Purchasers
(the "Initial Additional Placement" and, together with the Initial Firm
----------------------------
Placement, the "Initial Placement") not more than an additional $41,250,000
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principal amount of its 7% Convertible Subordinated Notes Due 2008 (the
"Additional Convertible Notes" and, together with the Firm Convertible Notes,
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the "Convertible Notes"), if requested by the Initial Purchasers as provided in
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Section 2 of the Purchase Agreement (as defined below). As an inducement to the
Initial Purchasers to enter into the purchase agreement, dated as of June 6,
1996 (the "Purchase Agreement"), and in satisfaction of a condition to the
Initial Purchasers' obligations thereunder, the Company agrees with the Initial
Purchasers, (i) for the benefit of the Initial Purchasers and (ii) for the
benefit of the holders from time to time of the Convertible Notes whose names
appear in the register maintained by the Registrar in accordance with the
provisions of the Indenture (as defined in Section 1 hereof) (including the
Initial Purchasers) (each of the foregoing a "Holder" and together the
"Holders"), as follows:
1. Definitions. Capitalized terms used herein without definition shall
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have their respective meanings set forth in the Purchase Agreement. As used in
this Agreement, the following capitalized defined terms shall have the following
meanings:
"Act" means the Securities Act of 1933, as amended from time to time, and
the rules and regulations of the Commission promulgated thereunder.
"Affiliate" of any specified person means any other person which, directly
or indirectly, is in control of, is controlled by, or is under common control
with, such specified person. For purposes of this definition, control of a
person means the power, direct or indirect, to direct or cause the direction of
the management and policies of such person whether by contract or otherwise; and
the terms "controlling" and "controlled" have meanings correlative to the
foregoing.
"Closing Date" has the meaning set forth in the Purchase Agreement.
"Convertible Notes" has the meaning set forth in the preamble hereto.
"Commission" means the Securities and Exchange Commission.
"Effectiveness Target Date" has the meaning set forth in Section 4 hereto.
"Exchange Act" means the Securities Exchange Act of 1934, as amended from
time to time, and the rules and regulations of the Commission promulgated
thereunder.
"Final Offering Memorandum" has the meaning set forth in the Purchase
Agreement.
"Holder" has the meaning set forth in the preamble hereto.
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"Indenture" means the Indenture relating to the Convertible Notes dated as
of June 12, 1996, between the Company and Chemical Bank, as trustee, as the same
may be amended from time to time in accordance with the terms thereof.
"Initial Placement" has the meaning set forth in the preamble hereto.
"Majority Holders" means the Holders of a majority of the aggregate
principal amount of securities registered under a Shelf Registration Statement.
"Prospectus" means the prospectus included in any Shelf Registration
Statement (including, without limitation, a prospectus that discloses
information previously omitted from a prospectus filed as part of an effective
registration statement in reliance upon Rule 430A under the Act), as amended or
supplemented by any prospectus supplement, with respect to the terms of the
offering of any portion of Transfer Restricted Securities, covered by such Shelf
Registration Statement, and all amendments and supplements to the Prospectus,
including post-effective amendments.
"Registration Default" has the meaning set forth in Section 4 hereto.
"Shelf Registration" means a registration effected pursuant to Section 3
hereof.
"Shelf Registration Period" has the meaning set forth in Section 3(b)
hereof.
"Shelf Registration Statement" means a "shelf" registration statement of
the Company pursuant to the provisions of Section 3 hereof which covers some or
all of the Transfer Restricted Securities as applicable, on an appropriate form
under Rule 415 under the Act, or any similar rule that may be adopted by the
Commission, amendments and supplements to such registration statement, including
post-effective amendments, in each case including the Prospectus contained
therein, all exhibits thereto and all material incorporated by reference
therein.
"Supplement Delay Period" means any period commencing on the date of
receipt by a Holder of Transfer Restricted Securities of any notice from the
Company of the existence of any fact or event of the kind described in Section
5(b)(2) hereof and ending on the date of receipt by such Holder of an amended or
supplemented Shelf Registration Statement or Prospectus, as contemplated by
Section 5(h) hereof, or the receipt by such Holder of written notice from the
Company (the "Advice") that the use of the Prospectus may be resumed, and
receipt of copies of any additional or supplemental filings that are
incorporated by reference in the Prospectus.
"Transfer Restricted Securities" means each Convertible Note and the
Common Stock issuable upon conversion thereof until (i) the date on which such
Convertible Note or the Common Stock issuable upon conversion thereof has been
effectively registered under the Securities Act and disposed of in accordance
with the Shelf Registration Statement, (ii) the date on which such Convertible
Note or the Common Stock issuable upon conversion thereof is distributed to the
public pursuant to Rule 144 under the Act (or any similar provision then in
effect) or is saleable pursuant to Rule 144(k) under the Act or (iii) the date
on which such Convertible Note is converted into Common Stock in accordance with
the terms and provisions of the Indenture or otherwise ceases to be outstanding.
"Trustee" means the trustee with respect to the Convertible Notes under
the Indenture.
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"Underwritten Offering" means a registration in which securities of the
Company are sold to an underwriter for reoffering to the public.
2. (a) Securities Subject to This Agreement. The securities entitled to
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the benefits of this Agreement are the Transfer Restricted Securities.
(b) No Holder may participate in any Underwritten Offering hereunder of
Transfer Restricted Securities. The parties hereto agree that the Transfer
Restricted Securities shall not be sold in any Underwritten Offering and the
Company shall in no event be required to cooperate with or pay for any
Underwritten Offering.
3. Shelf Registration. (a) The Company shall, within 45 days after
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Closing Date, file with the Commission and thereafter shall use its best efforts
to cause to be declared effective under the Act by the 120th day (plus any
additional days allowed as a result of a Supplement Delay Period) after the
Closing Date, a Shelf Registration Statement relating to the offer and sale of
the Transfer Restricted Securities by the Holders from time to time in
accordance with the methods of distribution elected by such Holders and set
forth in such Shelf Registration Statement.
(b) Subject to the commencement of any Supplement Delay Period, the
Company shall use its best efforts to keep the Shelf Registration Statement
continuously effective in order to permit the Prospectus forming part thereof to
be usable by Holders for a period of three years from the Closing Date or such
shorter period that will terminate when (i) all the Transfer Restricted
Securities covered by the Shelf Registration Statement have been sold pursuant
to the Shelf Registration Statement, (ii) the date on which, in the opinion of
counsel to the Company, all of the Transfer Restricted Securities then held by
the Holders may be sold by such Holders in the public United States securities
markets without the continued effectiveness of the Shelf Registration Statement
or (iii) the date on which there ceases to be outstanding any Transfer
Restricted Securities (in any such case, such period being called the "Shelf
Registration Period"). The Company shall be deemed not to have used its best
efforts to keep the Shelf Registration Statement effective during the requisite
period if it voluntarily takes any action that would result in Holders of
Transfer Restricted Securities covered thereby not being able to offer and sell
such securities during that period, unless (i) such action is required by
applicable law, (ii) such action is taken by the Company in good faith and for
valid business reasons (not including avoidance of the Company's obligations
hereunder), including the acquisition or divestiture of assets, so long as the
Company promptly thereafter complies with the requirements of Section 5(j)
hereof, if applicable or (iii) such action is taken because of any fact or
circumstance giving rise to a Supplement Delay Period.
4. Liquidated Damages. Subject to Section 5(l), if (a) the Company fails
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to file the Shelf Registration Statement required by Section 3 of this Agreement
on or before the date specified for such filing under Section 3(a) hereof, (b)
such Shelf Registration Statement is not declared effective by the Commission on
or prior to the date specified for such effectiveness (the "Effectiveness Target
Date") or (c) the Shelf Registration Statement is declared effective but
thereafter ceases to be continuously effective or usable in connection with
resales of Transfer Restricted Securities during the Shelf Registration Period
(each such event referred to in clauses (a) through (c) above a "Registration
Default"), then the Company will pay Liquidated Damages to each Holder of
Transfer Restricted Securities, with respect to the first 90-day period
immediately following the occurrence of such Registration Default in an amount
equal to $.05 per week per $1,000 aggregate principal amount of the Transfer
Restricted Securities held by such
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Holder. The amount of the Liquidated Damages will increase by an additional $.05
per week per $1,000 aggregate principal amount of the Transfer Restricted
Securities held by each Holder with respect to each subsequent 90-day period
until all Registration Defaults have been cured, up to a maximum amount of
Liquidated Damages of $.50 per week per $1,000 aggregate principal amount of the
Transfer Restricted Securities held by each Holder. All accrued Liquidated
Damages will be paid by the Company on each interest payment date in cash. Such
payment will be made to the Holder of the Global Notes by wire transfer of
immediately available funds or by federal funds check and to Holders of Transfer
Restricted Securities represented by Certificated Notes, if any, by wire
transfer to the accounts specified by them or by mailing checks to their
registered addresses if no such accounts have been specified. Following the cure
of all Registration Defaults, the accrual of Liquidated Damages will cease.
5. Registration Procedures. In connection with any Shelf Registration
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Statement the following provisions shall apply:
(a) The Company shall ensure that (i) any Shelf Registration Statement and
any amendment thereto and any Prospectus forming part thereof and any
amendment or supplement thereto complies in all material respects with the
Act and the rules and regulations thereunder, (ii) any Shelf Registration
Statement and any amendment thereto does not, when it becomes effective,
contain an untrue statement of a material fact or omit to state a material
fact required to be stated therein or necessary to make the statements
therein not misleading and (iii) any Prospectus forming part of any
Registration Statement, and any amendment or supplement to such Prospectus,
does not include an untrue statement of a material fact or omit to state a
material fact necessary in order to make the statements, in the light of the
circumstances under which they were made, not misleading.
(b) (1) The Company shall advise the Initial Purchasers and the Holders
of Transfer Restricted Securities named in the Shelf Registration Statement,
which have provided in writing to the Company a telephone or facsimile number
and address for notices, and, if requested by the Initial Purchasers or any
such Holder, confirm such advice in writing, when a Shelf Registration
Statement and any amendment thereto has been filed with the Commission and
when the Shelf Registration Statement or any post-effective amendment thereto
has become effective.
(2) The Company shall advise the Initial Purchasers and the Holders of
Transfer Restricted Securities named in the Shelf Registration Statement
which has provided in writing to the Company a telephone or facsimile number
and address for notices, and, if requested by the Initial Purchasers, confirm
such advice in writing:
(i) of any request by the Commission for amendments or supplements
to the Registration Statement or the Prospectus included therein or for
additional information;
(ii) of the initiation by the Commission of proceedings relating to
a stop order suspending the effectiveness of the Shelf Registration
Statement;
(iii) of the issuance by the Commission of any stop order
suspending the effectiveness of the Shelf Registration Statement;
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(iv) of the receipt by the Company of any notification with respect
to the suspension of the qualification of the securities included therein
for sale in any jurisdiction or the initiation or threatening of any
proceeding for such purpose; and
(v) of the existence of any fact and the happening of any event
(including, without limitation, pending negotiations relating to, or the
consummation of, a transaction or the occurrence of any event which would
require additional disclosure of material non-public information by the
Company in the Shelf Registration Statement as to which the Company has a
bona fide business purpose for preserving confidential or which renders
the Company unable to comply with Commission requirements) that, in the
opinion of the Company, makes untrue any statement of a material fact made
in its Shelf Registration Statement, the Prospectus or any amendment or
supplement thereto or any document incorporated by reference therein or
requires the making of any changes in the Shelf Registration Statement or
the Prospectus so that, as of such date, the statements therein are not
misleading and do not omit to state a material fact required to be stated
therein or necessary to make the statements therein (in the case of the
Prospectus, in light of the circumstances under which they were made) not
misleading.
Such advice may be accompanied by an instruction to suspend the use of the
Prospectus until the requisite changes have been made.
(c) The Company shall use its best efforts to obtain the withdrawal of any
order suspending the effectiveness of the Shelf Registration Statement at the
earliest possible time.
(d) The Company shall use its best efforts to furnish to each selling
Holder named in the Shelf Registration Statement who so requests in writing
and who has provided to the Company with an address for notices, without
charge, at least one conformed copy of such Shelf Registration Statement and
any post-effective amendment thereto, including financial statements and, if
the Holder so requests in writing, all exhibits and schedules (including
those incorporated by reference).
(e) The Company shall, during the Shelf Registration Period, deliver to
each Holder of Transfer Restricted Securities named in the Shelf Registration
Statement and who has provided to the Company with an address for notices,
without charge, as many copies of the Prospectus (including each preliminary
Prospectus) included in such Shelf Registration Statement and any amendment
or supplement thereto as such Holder may reasonably request; and, subject to
any notice by the Company in accordance with Section 6(b), the Company
consents to the use of the Prospectus or any amendment or supplement thereto
by each of the selling Holders for the purposes of offering and resale of the
Transfer Restricted Securities covered by the Prospectus in accordance with
the Act or the applicable regulations promulgated under the Act.
(f) Prior to the offering of Transfer Restricted Securities pursuant to
the Shelf Registration Statement, the Company shall register or qualify or
cooperate with the Holders of Transfer Restricted Securities named therein
and their respective counsel in connection with the registration or
qualification of such Transfer Restricted Securities for offer and sale under
the securities or blue sky laws of such jurisdictions of the United States as
any such Holders reasonably request in writing not later than the date that
is five Business Days prior to the Effectiveness Target Date; provided,
however, that the Company will not be required to qualify generally to do
business in any
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jurisdiction where it is not then so qualified or to take any action which
would subject it to general service of process or to taxation in any such
jurisdiction where it is not then so subject.
(g) The Company shall endeavor to cooperate with the Holders of Transfer
Restricted Securities to facilitate the timely preparation and delivery of
certificates representing Transfer Restricted Securities to be sold pursuant
to the Shelf Registration Statement free of any restrictive legends and in
such denominations and registered in such names as Holders may request in
writing at least two Business Days prior to sales of securities pursuant to
such Shelf Registration Statement.
(h) Upon the occurrence of any event contemplated by paragraph (b)(2)(v)
hereof, the Company shall promptly prepare a post-effective amendment to the
Shelf Registration Statement or an amendment or supplement to the related
Prospectus or any document incorporated therein by reference or file any
other required document so that as thereafter delivered to purchasers of the
Transfer Restricted Securities covered thereby, the Prospectus will not
include an untrue statement of a material fact or omit to state any material
fact necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading provided that, in
the event of a material business transaction (including, without limitation,
pending negotiations relating to such a transaction) which would, in the
opinion of counsel to the Company, require disclosure by the Company in the
Shelf Registration Statement of material non-public information which the
Company has a bona fide business purpose for not disclosing, then for so long
as such circumstance exist, the Company shall not be required to prepare and
file a supplement or post-effective amendment hereunder.
(i) Not later than the effective date of any such Shelf Registration
Statement hereunder, the Company shall cause to be provided a CUSIP number
for the Convertible Notes registered under such Shelf Registration Statement,
and provide the Trustee with printed certificates for such Convertible Notes
where necessary, in a form eligible for deposit with The Depository Trust
Company.
(j) The Company shall use its best efforts to comply with all applicable
rules and regulations of the Commission and shall make generally available to
its security holders in a regular filing on Form 10Q or Form 10K an earnings
statement satisfying the provisions of Rule 158 (which need not be audited)
for the twelve-month period commencing after effectiveness of the Shelf
Registration Statement.
(k) The Company shall cause the Indenture to be qualified under the Trust
Indenture Act in a timely manner.
(l) The Company may require each Holder of Transfer Restricted Securities
to be sold pursuant to the Shelf Registration Statement to furnish to the
Company within 20 Business Days after written request for such information
has been made by the Company, such information regarding the Holder and the
distribution of such securities as the Company may from time to time
reasonably require for inclusion in such Shelf Registration Statement and
such other information as may be necessary or advisable in the reasonable
opinion of the Company and its counsel, in connection with such Shelf
Registration Statement. No Holder of Transfer Restricted Securities shall be
entitled to the benefit of any Liquidated Damages under Section 4 of this
Agreement or be entitled to use the Prospectus unless and until such Holder
shall have furnished the information required by this Section
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5(l) and all such information required to be disclosed in order to make the
information previously furnished to the Company by such Holder not materially
misleading.
(m) The Company shall, if requested, promptly incorporate in the Shelf
Registration Statement or Prospectus, if necessary, pursuant to a supplement
or post-effective amendment to the Shelf Registration Statement, such
information as the Majority Holders reasonably request to have included
therein and shall make all required filings of such Prospectus supplement or
post-effective amendment as soon as practicable after the Company is notified
of the matters to be incorporated in such Prospectus supplement or post-
effective amendment; provided however, that the Company shall not be required
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to take any action pursuant to this Section 5(m) that would, in the opinion
of counsel for the Company, violate applicable law or to include information
the disclosure of which at the time would have an adverse effect on the
business or operations of the Company and/or its subsidiaries, as determined
in good faith by the Company.
(n) In the case of the Shelf Registration Statement, the Company shall
take all reasonably appropriate actions in order to expedite or facilitate
the registration of the Transfer Restricted Securities.
(o) The Company shall upon receipt of a reasonable request in writing
therefor (i) make reasonably available at reasonable times prior to the
Effectiveness Target Date for inspection by the Holders of Transfer
Restricted Securities to be registered thereunder and any attorney,
accountant or other agent retained by the Holders, at the office where
normally kept during normal business hours, all financial and other records,
pertinent corporate documents and properties of the Company and its
subsidiaries, and cause the Company's officers, directors and employees to
supply all relevant information reasonably requested by the Holders,
attorney, accountant or other agent in connection with the Shelf Registration
Statement as is customary for similar due diligence examinations; provided,
however, that such persons shall first agree in writing with the Company that
any information that is designated in writing by the Company, in good faith,
as confidential at the time of delivery of such information shall be kept
confidential by such person, unless such disclosure is made in connection
with a court proceeding or required by law, or such information becomes
available to the public generally or through a third party without an
accompanying obligation of confidentiality; (ii) obtain opinions of counsel
to the Company and updates thereof (which counsel, if different from counsel
to the Company referred to in the Purchase Agreement, shall be reasonably
satisfactory to the Majority Holders of Transfer Restricted Securities to be
registered thereunder, if any) addressed to each selling Holder covering such
matters (in form, scope and substance) as those matters set forth in Section
6(a), (b), and (c) of the Purchase Agreement; (iii) obtain "cold comfort"
letters (or, in the case of any person that does not satisfy the conditions
for receipt of a "cold comfort" letter specified in Statement on Auditing
Standards No. 72, an "agreed-upon procedures letter") and updates thereof
from the independent certified public accountants of the Company (and, if
necessary, any other independent certified public accountants of any
subsidiary of the Company or of any business acquired by the Company for
which financial statements and financial data are, or are required to be,
included in the Registration Statement), addressed where reasonably
practicable to each selling Holder of Transfer Restricted Securities
registered thereunder, if any, in customary form and covering matters of the
type customarily covered in "cold comfort" letters in connection with primary
underwritten offerings; and (iv) deliver such documents and certificates as
may be reasonably requested by the Majority Holders including those to
evidence compliance with Section 5(h). The foregoing actions set forth in
clauses (ii), (iii), (iv) and (v) of this Section 5(o)
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shall, if reasonably requested by the Majority Holders be performed at the
effectiveness of such Shelf Registration Statement and each post-effective
amendment thereto.
(p) The Company may offer securities of the Company other than the
Convertible Notes under the Shelf Registration Statement, except where such
offer would conflict with the terms of the Purchase Agreement.
6. Holders' Agreements. Each Holder of Transfer Restricted Securities, by
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the acquisition of such Transfer Restricted Securities, as the case may be,
agrees:
(a) To furnish the information required to be furnished pursuant to
Section 5(l) hereof within the time period set forth therein.
(b) That upon receipt of a notice of the commencement of a Supplement
Delay Period, it will keep the fact of such notice confidential, forthwith
discontinue disposition of its Transfer Restricted Securities, as the case
may be, pursuant to the Shelf Registration Statement, and will not deliver
any Prospectus forming a part thereof until receipt of the amended or
supplemented Shelf Registration Statement or Prospectus, as applicable, as
contemplated by Section 5(h) hereof, or until receipt of the Advice. If a
Supplement Delay Period should occur, the Shelf Registration Period, shall be
extended by the number of days of which the Supplement Delay Period is
comprised; provided that the Shelf Registration Period shall not be extended
if the Company has received an opinion of counsel (which counsel, if
different from counsel to the Company referred to in Section 6 (a) and (b) of
the Purchase Agreement, shall be reasonably satisfactory to the Majority
Holders of the Transfer Restricted Securities named in the Shelf Registration
Period) to the effect that the Transfer Restricted Securities can be freely
tradeable without the continued effectiveness of the Shelf Registration
Statement.
(c) If so directed by the Company in a notice of the commencement of a
Supplement Delay Period, each Holder of Transfer Restricted Securities, as
the case may be, will deliver to the Company (at the Company's expense) all
copies, other than permanent file copies then in such Holder's possession, of
the Prospectus covering the Transfer Restricted Securities, as the case may
be.
(d) Sales of such Transfer Restricted Securities pursuant to a Shelf
Registration Statement shall only be made in the manner set forth in such
currently effective Shelf Registration Statement.
7. Registration Expenses. The Company shall bear all expenses incurred in
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connection with the performance of its obligations under Sections 2, 3, 4 and 5
hereof and will reimburse the Holders for the reasonable fees and disbursements
of one firm or counsel designated by the Majority Holders to act as counsel for
the Holders in connection therewith. Notwithstanding the foregoing or anything
in this Agreement to the contrary, each Holder shall pay all underwriting
discounts and commission of any underwriters with respect to any Transfer
Restricted Securities sold by it.
8. Indemnification and Contribution. (a) In connection with the Shelf
--------------------------------
Registration Statement, the Company agrees to indemnify and hold harmless each
Holder of Transfer Restricted Securities covered thereby (including each Initial
Purchaser), the directors, officers, employees and agents of each such Holder
and each person who controls any such Holder within the meaning of either
Section 15 of
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the Act or Section 20 of the Exchange Act against any and all losses, claims,
damages or liabilities, joint or several, to which they or any of them may
become subject under the Act, the Exchange Act or other Federal or state
statutory law or regulation, at common law or otherwise, insofar as such losses,
claims, damages or liabilities (or actions in respect thereof) arise out of or
are based upon any untrue statement or alleged untrue statement of a material
fact contained in the Shelf Registration Statement as originally filed or in any
amendment thereof, or in any preliminary Prospectus or Prospectus, or in any
amendment thereof or supplement thereto, or arise out of or are based upon the
omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not misleading, and
agrees to reimburse each such indemnified party, as incurred, for any legal or
other expenses reasonably incurred by them in connection with investigating or
defending any such loss, claim, damage, liability or action; provided, however,
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that (i) the Company will not be liable in any case to the extent that any such
loss, claim, damage or liability arises out of or is based upon any such untrue
statement or alleged untrue statement or omission or alleged omission made
therein in reliance upon and in conformity with written information furnished to
the Company by or on behalf of any such Holder specifically for inclusion
therein and (ii) the Company shall not be liable to any indemnified party under
this indemnity agreement with respect to the Shelf Registration Statement or
Prospectus to the extent that any such loss, claim, damage or liability of such
indemnified party results solely from an untrue statement of a material fact
contained in, or the omission of a material fact from, the Shelf Registration
Statement or Prospectus which untrue statement or omission was corrected in an
amended or supplemented Shelf Registration Statement or Prospectus, if the
person alleging such loss, claim, damage or liability was not sent or given, at
or prior to the written confirmation of such sale, a copy of the amended or
supplemented Registration Statement or Prospectus if the Company had previously
furnished copies thereof to such indemnified party and if delivery of a
prospectus is required by the Act and was not so made. This indemnity agreement
will be in addition to any liability which the Company may otherwise have.
The Company also agrees to indemnify or contribute to Losses of, as
provided in Section 8(d), any underwriters of Convertible Notes registered under
the Shelf Registration Statement, their officers and directors and each person
who controls such underwriters on substantially the same basis as that of the
indemnification of the Initial Purchaser and the selling Holders provided in
this Section 6(a) and shall, if requested by any Holder, enter into an
underwriting agreement reflecting such agreement, as provided in Section 5(q)
hereof.
(b) Each Holder of Transfer Restricted Securities covered by the Shelf
Registration Statement (including each Initial Purchaser) severally agrees to
indemnify and hold harmless (i) the Company, (ii) each of its directors, (iii)
each of its officers who signs such Registration Statement and (iv) each person
who controls the Company within the meaning of either the Act or the Exchange
Act to the same extent as the foregoing indemnity from the Company to each such
Holder, but only with reference to written information relating to such Holder
furnished to the Company by or on behalf of such Holder specifically for
inclusion in the documents referred to in the foregoing indemnity. This
indemnity agreement will be in addition to any liability which any such Holder
may otherwise have.
(c) Promptly after receipt by an indemnified party under this Section 8 or
notice of the commencement of any action, such indemnified party will, if a
claim in respect thereof is to be made against the indemnifying party under this
Section 8, notify the indemnifying party in writing of the commencement thereof;
but the failure so to notify the indemnifying party (i) will not relieve it from
liability under paragraph (a) or (b) above unless and to the extent it did not
otherwise learn of such action and such failure results in the forfeiture by the
indemnifying party of substantial rights and defenses and
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(ii) will not, in any event, relieve the indemnifying party from any obligations
to any indemnified party other than the indemnification obligation provided in
paragraph (a) or (b) above. The indemnifying party shall be entitled to appoint
counsel of the indemnifying party's choice at the indemnifying party's expense
to represent the indemnified party in any action for which indemnification is
sought (in which case the indemnifying party shall not thereafter be responsible
for the fees and expenses of any separate counsel retained by the indemnified
party or parties except as set forth below); provided, however, that such
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counsel shall be reasonably satisfactory to the indemnified party.
Notwithstanding the indemnifying party's election to appoint counsel to
represent the indemnified party in an action, the indemnified party shall have
the right to employ separate counsel (including local counsel), and the
indemnifying party shall bear the reasonable fees, costs and expenses of such
separate counsel (and local counsel) if (i) the use of counsel chosen by the
indemnifying party to represent the indemnified party would present such counsel
with a conflict of interest, (ii) the actual or potential defendants in, or
targets of, any such action include both the indemnified party and the
indemnifying party and the indemnified party shall have reasonably concluded
that there may be legal defenses available to it and/or other indemnified
parties which are different from or additional to those available to the
indemnifying party, (iii) the indemnifying party shall not have employed counsel
satisfactory to the indemnified party to represent the indemnified party within
a reasonable time after notice of the institution of such action or (iv) the
indemnifying party shall authorize the indemnified party to employ separate
counsel at the expense of the indemnifying party. An indemnifying party will
not, without the prior written consent of the indemnified parties, settle or
compromise or consent to the entry of any judgment with respect to any pending
or threatened claim, action, suit or proceeding in respect of which
indemnification or contribution may be sought hereunder (whether or not the
indemnified parties are actual or potential parties to such claim or action)
unless such settlement, compromise or consent includes an unconditional release
of each indemnified party from all liability arising out of such claim, action,
suit or proceeding.
(d) In the event that the indemnity provided in paragraph (a) or (b) of
this Section 8 is unavailable to or insufficient to hold harmless an indemnified
party for any reason, then each applicable indemnifying party, in lieu of
indemnif ying such indemnified party, shall have a joint and several obligation
to contribute to the aggregate losses, claims, damages and liabilities
(including legal or other expenses reasonably incurred in connection with
investigating or defending same) (collectively "Losses") to which such
indemnified party may be subject in such proportion as is appropriate to reflect
the relative benefits received by such indemnifying party, on the one hand, and
such indemnified party, on the other hand, from the Initial Placement and the
Shelf Registration Statement which resulted in such Losses; provided, however,
-------- -------
that in no case shall any Initial Purchaser or any subsequent Holder of any
Convertible Notes be responsible, in the aggregate, for any amount in excess of
the purchase discount or commission applicable to such Convertible Notes, as set
forth on the cover page of the Final Offering Memorandum, nor shall any
underwriter be responsible for any amount in excess of the underwriting discount
or commission applicable to the securities purchased by such underwriter under
the Shelf
10
<PAGE>
Registration Statement which resulted in such Losses. If the allocation provided
by the immediately preceding sentence is unavailable for any reason, the
indemnifying party and the indemnified party shall contribute in such proportion
as is appropriate to reflect not only such relative benefits but also the
relative fault of such indemnifying party, on the one hand, and such indemnified
party, on the other hand, in connection with the statements or omissions which
resulted in such Losses as well as any other relevant equitable considerations.
Benefits received by the Company shall be deemed to be equal to the sum of (x)
the total net proceeds from the Initial Placement (before deducting expenses) as
set forth on the cover page of the Final Offering Memorandum and (y) the total
amount of additional interest which the Company was not required to pay as a
result of registering the securities covered by the Shelf Registration Statement
which resulted in such Losses. Benefits received by the Initial Purchasers shall
be deemed to be equal to the total purchase discounts and commissions as set
forth on the cover page of the Final Offering Memorandum, and benefits received
by any other Holders shall be deemed to be equal to the value of receiving
Convertible Notes, as applicable, registered under the Act. Benefits received by
any underwriter shall be deemed to be equal to the total underwriting discounts
and commissions, as set forth on the cover page of the Prospectus forming a part
of the Shelf Registration Statement which resulted in such Losses. Relative
fault shall be determined by reference to whether any alleged untrue statement
or omission relates to information provided by the indemnifying party, on the
one hand, or by the indemnified party, on the other hand. The parties agree that
it would not be just and equitable if contribution were determined by pro rata
allocation or any other method of allocation which does not take account of the
equitable considerations referred to above. Notwithstanding the provisions of
this paragraph (d), no person guilty of fraudulent misrepresentation (within the
meaning of Section 11(f) of the Act) shall be entitled to contribution from any
person who was not guilty of such fraudulent misrepresentation. For purposes of
this Section 8, each person who controls a Holder within the meaning of the Act
and each director, officer, employee and agent of such Holder shall have the
same rights to contribution as such Holder, and each person who controls the
Company within the meaning of the Act, each officer of the Company who shall
have signed the Shelf Registration Statement and each director of the Company
shall have the same rights to contribution as the Company, subject in each case
to the applicable terms and conditions of this paragraph (d).
(e) The provisions of this Section 8 will remain in full force and effect,
regardless of any investigation made by or on behalf of any Holder or the
Company or any of the officers, directors or controlling persons referred to in
Section 8 hereof, and will survive the sale by a Holder of Transfer Restricted
Securities.
9. Miscellaneous.
-------------
(a) No Inconsistent Agreements. The Company has not, as of the date
--------------------------
hereof, entered into, nor shall it, on or after the date hereof, enter into, any
agreement with respect to its securities that is inconsistent with the rights
granted to the Holders herein or otherwise conflicts with the provisions hereof.
(b) Amendments and Waivers. The provisions of this Agreement, including
----------------------
the provisions of this sentence, may not be amended, qualified, modified or
supplemented, and waivers or consents to departures from the provisions hereof
may not be given, unless the Company has obtained the written consent of the
Holders of at least a majority of the then outstanding aggregate principal
amount of Convertible Notes; provided that, with respect to any matter that
--------
directly or indirectly affects the rights of any Initial Purchaser hereunder,
the Company shall obtain the written consent of each such Initial Purchaser
against which such amendment, qualification, supplement, waiver or consent is to
be effective. Notwithstanding the foregoing (except the foregoing proviso), a
waiver or consent to departure from the provisions hereof with respect to a
matter that relates exclusively to the rights of Holders whose securities are
being sold pursuant to a Shelf Registration Statement and that does not directly
or indirectly affect the rights of other Holders may be given by the Majority
Holders, determined on the basis of Convertible Notes being sold rather than
registered under such Shelf Registration Statement.
11
<PAGE>
(c) Notices. All notices and other communications provided for or
-------
permitted hereunder shall be made in writing by hand-delivery, first-class mail,
telex, telecopier, or air courier guaranteeing overnight delivery:
(1) if to a Holder, at the most current address given by such Holder to
the Company in accordance with the provisions of this Section 9(c), which
address initially is, with respect to each Holder, the address of such
Holder maintained by the registrar under the Indenture, as the case may
be, with a copy in like manner to Donaldson, Lufkin & Jenrette Securities
Corporation;
(2) if to the Initial Purchasers, initially at the respective addresses
set forth in the Purchase Agreement; and
(3) if to the Company, initially at its address set forth in the
Purchase Agreement.
All such notices and communications shall be deemed to have been duly
given when received.
The Initial Purchasers or the Company by notice to the other may designate
additional or different addresses for subsequent notices or communications.
(d) Successors and Assigns. This Agreement shall inure to the benefit of
----------------------
and be binding upon the successors and assigns of each of the parties hereto,
including, without the need for an express assignment or any consent by the
Company thereto, subsequent Holders of Convertible Notes. The Company hereby
agrees to extend the benefits of this Agreement to any Holder of Convertible
Notes and any such Holder may specifically enforce the provisions of this
Agreement as if an original party hereto.
(e) Counterparts. This agreement may be executed in any number of
------------
counterparts and by the parties hereto in separate counterparts, each of which
when so executed shall be deemed to be an original and all of which taken
together shall constitute one and the same agreement.
(f) Headings. The headings in this agreement are for convenience of
--------
reference only and shall not limit or otherwise affect the meaning hereof.
(g) Governing Law. This agreement shall be governed by and construed in
-------------
accordance with the internal laws of the State of New York applicable to
agreements made and to be performed in said State (without reference to the
conflict of law rules thereof).
(h) Severability. In the event that any one of more of the provisions
------------
contained herein, or the application thereof in any circumstances, is held
invalid, illegal or unenforceable in any respect for any reason, the validity,
legality and enforceability of any such provision in every other respect and of
the remaining provisions hereof shall not be in any way impaired or affected
thereby, it being intended that all of the rights and privileges of the parties
shall be enforceable to the fullest extent permitted by law.
(i) Convertible Notes Held by the Company, etc. Whenever the consent or
------------------------------------------
approval of Holders of a specified percentage of principal amount of Convertible
Notes is required hereunder, Convertible Notes held by the Company or its
Affiliates (other than subsequent Holders of Convertible Notes if such
subsequent Holders are deemed to be Affiliates solely by reason of their
holdings of such Convertible
12
<PAGE>
Notes) shall not be counted in determining whether such consent or approval was
given by the Holders of such required percentage.
[Signature Page Follows]
13
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first written above.
INTERNATIONAL CABLETEL INCORPORATED
By:
Name:
Title:
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
SALOMON BROTHERS INC
By: DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
By:
Name:
Title:
14
<PAGE>
EXHIBIT 4.2
Execution Copy
================================================================================
INTERNATIONAL CABLETEL INCORPORATED
Issuer
_______________________
7% Convertible Subordinated Notes Due 2008
_______________________
INDENTURE
Dated as of June 12, 1996
_______________________
CHEMICAL BANK
as Trustee
================================================================================
<PAGE>
CROSS-REFERENCE TABLE/1/
<TABLE>
<CAPTION>
TRUST INDENTURE INDENTURE
<S> <C>
310(a)(1)................................................. 9.10
(a)(2)................................................. 9.10
(a)(3)................................................. N.A.
(a)(4)................................................. N.A.
(a)(5)................................................. 9.10
(b).................................................... 9.08; 9.10
(c).................................................... N.A.
311(a).................................................... 9.11
(b).................................................... 9.11
(c).................................................... N.A.
312(a).................................................... 2.05
(b).................................................... 12.03
(c).................................................... 12.03
313(a).................................................... 12.03
(b)(1)................................................. N.A.
(b)(2)................................................. 9.06
(c).................................................... 12.03
(d).................................................... 9.06
314(a)....................................................4.02, 4.03, 12.02
(b).................................................... N.A.
(c)(1)................................................. 12.04
(c)(2)................................................. 12.04
(c)(3)................................................. N.A.
(d).................................................... N.A.
(e).................................................... 12.05
(f).................................................... N.A.
315(a).................................................... 9.01
(b).................................................... 9.05
(c).................................................... 9.01
(d).................................................... 9.01
(e).................................................... 8.11
316(a)(last sentence)..................................... 2.09
(a)(1)(A).............................................. 8.05
(a)(1)(B).............................................. 8.04
(a)(2)................................................. N.A.
(b).................................................... 8.07
(c).................................................... 11.04
317(a)(1)................................................. 8.08
(a)(2)................................................. 8.09
(b).................................................... 2.04
318(a).................................................... 12.01
</TABLE>
N.A. means not applicable
- ---------------------
/1/This Cross-Reference Table is not part of the Indenture.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
ARTICLE I
Definitions and Incorporation by Reference
------------------------------------------
<S> <C> <C>
SECTION 1.01. Definitions.................................. 1
SECTION 1.02. Other Definitions............................ 10
SECTION 1.03. Incorporation by Reference of Trust
Indenture Act.............................. 10
SECTION 1.04. Rules of Construction........................ 11
ARTICLE II
The Securities
--------------
SECTION 2.01. Form and Dating.............................. 11
SECTION 2.02. Execution and Authentication................. 13
SECTION 2.03. Registrar, Paying Agent and Conversion Agent. 14
SECTION 2.04. Paying Agent to Hold Money in Trust.......... 14
SECTION 2.05. Noteholder Lists............................. 14
SECTION 2.06. Transfer and Exchange........................ 14
SECTION 2.07. Replacement Securities....................... 19
SECTION 2.08. Outstanding Securities....................... 19
SECTION 2.09. Treasury Securities.......................... 20
SECTION 2.10. Temporary Securities......................... 20
SECTION 2.11. Cancellation................................. 21
SECTION 2.12. Defaulted Interest........................... 21
ARTICLE III
Redemption
----------
SECTION 3.01. Notices to Trustee........................... 21
SECTION 3.02. Selection of Securities to be Redeemed....... 21
SECTION 3.03. Notice of Redemption......................... 22
SECTION 3.04. Effect of Notice of Redemption............... 22
SECTION 3.05. Deposit of Redemption Price.................. 22
SECTION 3.06. Securities Redeemed in Part.................. 23
SECTION 3.07. Optional Redemption and Optional Tax
Redemption................................. 23
SECTION 3.08. Change of Control Offer...................... 23
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
ARTICLE IV
Covenants
---------
<S> <C> <C>
SECTION 4.01. Payment of Securities........................ 25
SECTION 4.02. SEC Reports.................................. 25
SECTION 4.03. Compliance Certificate....................... 25
SECTION 4.04. Stay, Extension and Usury Laws............... 26
SECTION 4.05. Corporate Existence.......................... 26
SECTION 4.06. Taxes........................................ 27
SECTION 4.07. Change of Control............................ 27
SECTION 4.08. Payment of Additional Amounts................ 27
ARTICLE V
Conversion
----------
SECTION 5.01. Conversion Privilege......................... 28
SECTION 5.02. Conversion Procedure......................... 28
SECTION 5.03. Fractional Shares............................ 29
SECTION 5.04. Taxes on Conversion.......................... 29
SECTION 5.05. Company to Provide Stock..................... 29
SECTION 5.06. Adjustment of Conversion Price............... 29
SECTION 5.07. No Adjustment................................ 32
SECTION 5.08. Other Adjustments............................ 32
SECTION 5.09. Adjustments for Tax Purposes................. 33
SECTION 5.10. Notice of Adjustment......................... 33
SECTION 5.11. Notice of Certain Transactions............... 33
SECTION 5.12. Effect of Reclassifications, Consolidations,
Mergers or Sales on Conversion Privilege... 33
SECTION 5.13. Trustee's Disclaimer......................... 34
ARTICLE VI
Subordination
-------------
SECTION 6.01. Agreement to Subordinate and Ranking......... 35
SECTION 6.02. No Payment on Securities if Senior Debt in
Default.................................... 35
SECTION 6.03. Distribution on Acceleration of Securities;
Dissolution and Reorganization; Subrogation
of Securities.............................. 36
SECTION 6.04. Reliance by Senior Debt on Subordination
Provisions................................. 39
SECTION 6.05 No Waiver of Subordination Provisions........ 39
SECTION 6.06. Trustee's Relation to Senior Debt............ 39
SECTION 6.07. Other Provisions Subject Hereto.............. 40
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
ARTICLE VII
Successors
----------
<S> <C> <C>
SECTION 7.01. Merger, Consolidation or Sale of Assets...... 40
SECTION 7.02. Successor Corporation Substituted............ 41
ARTICLE VIII
Defaults and Remedies
---------------------
SECTION 8.01. Events of Default............................ 41
SECTION 8.02. Acceleration................................. 42
SECTION 8.03. Other Remedies............................... 43
SECTION 8.04. Waiver of Past Defaults...................... 43
SECTION 8.05. Control by Majority.......................... 44
SECTION 8.06. Limitation on Suits.......................... 44
SECTION 8.07. Rights of Noteholders to Receive Payment..... 44
SECTION 8.08. Collection Suit by Trustee................... 44
SECTION 8.09. Trustee May File Proofs of Claim............. 45
SECTION 8.10. Priorities................................... 45
SECTION 8.11. Undertaking for Costs........................ 45
ARTICLE IX
Trustee
-------
SECTION 9.01. Duties of Trustee............................ 45
SECTION 9.02. Rights of Trustee............................ 46
SECTION 9.03. Individual Rights of Trustee................. 46
SECTION 9.04. Trustee's Disclaimer......................... 47
SECTION 9.05. Notice of Defaults........................... 47
SECTION 9.06. Reports by Trustee to Noteholders............ 47
SECTION 9.07. Compensation and Indemnity................... 47
SECTION 9.08. Replacement of Trustee....................... 48
SECTION 9.09. Successor Trustee by Merger, Etc............. 49
SECTION 9.10. Eligibility; Disqualification................ 49
SECTION 9.11. Preferential Collection of Claims Against
Company.................................... 49
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
ARTICLE X
Discharge of Indenture
----------------------
<S> <C> <C>
SECTION 10.01. Termination of Company's Obligations......... 49
SECTION 10.02. Repayment to Company......................... 49
ARTICLE XI
Amendments, Supplements and Waivers
-----------------------------------
SECTION 11.01. Without Consent of Noteholders............... 50
SECTION 11.02. With Consent of Noteholders.................. 50
SECTION 11.03. Compliance with Trust Indenture Act.......... 51
SECTION 11.04. Revocation and Effect of Consents............ 51
SECTION 11.05. Notation on or Exchange of Securities........ 52
SECTION 11.06. Trustee Protected............................ 52
ARTICLE XII
Miscellaneous
-------------
SECTION 12.01. Trust Indenture Act Controls................. 52
SECTION 12.02. Notices...................................... 52
SECTION 12.03. Communication by Noteholders with Other
Noteholders................................ 52
SECTION 12.04. Certificate and Opinion as to Conditions
Precedent.................................. 53
SECTION 12.05. Statements Required in Certificate or Opinion 53
SECTION 12.06. Rules by Trustee and Agents.................. 53
SECTION 12.07. Legal Holidays............................... 53
SECTION 12.08. No Recourse Against Others................... 53
SECTION 12.09. Counterparts................................. 54
SECTION 12.10. Variable Provisions.......................... 54
SECTION 12.11. GOVERNING LAW................................ 54
SECTION 12.12. No Adverse Interpretation of Other Agreements 54
SECTION 12.13. Successors................................... 55
SECTION 12.14. Severability................................. 55
SECTION 12.15. Table of Contents, Headings, Etc............. 55
</TABLE>
EXHIBIT A FORM OF CONVERTIBLE SUBORDINATED NOTE
EXHIBIT B FORM OF TRANSFER CERTIFICATE PURSUANT TO
SECTION 2.06(a)(ii)
EXHIBIT C FORM OF TRANSFER CERTIFICATE PURSUANT TO SECTION
2.06(a)(iii)
<PAGE>
EXHIBIT D FORM OF TRANSFER CERTIFICATE PURSUANT TO SECTION
2.06(a)(iv) and (v)
EXHIBIT E FORM OF TRANSFER CERTIFICATE PURSUANT TO SECTION
2.06(a)(iv) and (v)
EXHIBIT F FORM OF TRANSFER CERTIFICATE PURSUANT TO SECTION
2.06(a)(viii) (Transferor)
EXHIBIT G FORM OF TRANSFER CERTIFICATE PURSUANT TO SECTION
2.06(a)(viii) (Euroclear or Cedel)
EXHIBIT H FORM OF TRANSFER CERTIFICATE PURSUANT TO SECTION
2.06(a)(viii) (Certificated Securities)
<PAGE>
INDENTURE dated as of June 12, 1996 between International CableTel
Incorporated, a Delaware corporation (the "Company") and Chemical Bank, a New
York corporation, as trustee (the "Trustee").
Each party agrees as follows for the benefit of the other party and for the
equal and ratable benefit of the holders of $275,000,000 aggregate principal
amount of the Company's 7% Convertible Subordinated Notes Due 2008, or, if
Donaldson, Lufkin & Jenrette Securities Corporation and Salomon Brothers Inc
(the "Initial Purchasers") exercise their over-allotment option granted in the
Purchase Agreement defined below, of up to $316,250,000 aggregate principal
amount of the Company's 7% Convertible Subordinated Notes Due 2008 (in either
case, the "Securities"):
ARTICLE I
Definitions and Incorporation by Reference
------------------------------------------
SECTION 1.01. Definitions. "Affiliate" of any specified person means any
------------ ---------
other person directly or indirectly controlling or controlled by or under direct
or indirect common control with such specified person. For the purposes of this
definition, "control" (including, with correlative meanings, the terms
"controlling", "controlled by" and "under common control with"), as used with
respect to any person, shall mean the possession, directly or indirectly, of the
power to direct or cause the direction of the management or policies of such
person, whether through the ownership of voting securities or by agreement or
otherwise; provided, however, that beneficial ownership of 10% or more of the
-------- -------
voting securities of a person shall be deemed to be control.
"Agent" means any Registrar, Paying Agent, Conversion Agent or co-
-----
registrar.
"Annualized Pro Forma EBITDA" means, with respect to any person, such
---------------------------
person's Pro Forma EBITDA for the latest fiscal quarter multiplied by four.
"Asset Sale" means (i) any sale, lease, transfer, conveyance or other
----------
disposition of any assets (including by way of a sale-and-leaseback) other than
the sale or transfer of inventory or goods held for sale in the ordinary course
of business (provided that the sale, lease, transfer, conveyance or other
--------
disposition of all or substantially all of the assets of the Company shall be
governed by the provisions of Section 7.01 hereof) or (ii) any issuance, sale,
lease, transfer, conveyance or other disposition of any Equity Interests of any
of the Company's Restricted Subsidiaries to any person; in either case other
than to (w) the Company, (x) any Wholly Owned Subsidiary, or (y) any Controlled
Subsidiary which is a Subsidiary of the Company on the Issuance Date provided
that at the time of and after giving effect to such issuance, sale, lease,
transfer, conveyance or other disposition to such Controlled Subsidiary, the
Company's ownership percentage in such Controlled Subsidiary is equal to or
greater than such percentage on the Issuance Date.
"Board of Directors" means the Board of Directors of the Company or any
------------------
authorized committee of the Board.
"Board Resolution" means a duly authorized resolution of the Board of
----------------
Directors.
<PAGE>
2
"Business Day" means any day that is not a Legal Holiday.
------------
"Capital Stock" means any and all shares, interests, participations, rights
-------------
or other equivalents (however designated) of corporate stock, including, without
limitation, partnership interests.
"Cash Equivalents" means (i) United States dollars or British pounds
----------------
sterling, (ii) securities issued or directly and fully guaranteed or insured by
the United States government or United Kingdom government or any agency or
instrumentality thereof having maturities of not more than six months from the
date of acquisition, (iii) certificates of deposit and eurodollar time deposits
with maturities of six months or less from the date of acquisition, bankers'
acceptances with maturities not exceeding six months and overnight bank
deposits, in each case with any commercial bank(s) domiciled in the United
States, the United Kingdom or the Republic of Ireland having capital and surplus
in excess of $500 million, (iv) repurchase obligations with a term of not more
than seven days for underlying securities of the types described in clauses (ii)
and (iii) entered into with any financial institution meeting the qualifications
specified in clause (iii) above and (v) commercial paper rated P-1 or the
equivalent thereof by Moody's Investors Service, Inc. or A-1 or the equivalent
thereof by Standard & Poor's Ratings Group and in each case maturing within six
months after the date of acquisition.
"Change of Control" means (i) the sale, lease or transfer of all or
-----------------
substantially all of the assets of the Company 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 any Permitted Holder),
(ii) the liquidation or dissolution of the Company, (iii) any "person" or
"group" (within the meaning of Sections 13(d) 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 any
Permitted Holder, becomes the "beneficial owner" (as defined in Rule 13d-3 under
the Exchange Act) of more than 35% of the total voting power of all classes of
the voting stock of the Company and/or warrants or options to acquire such
voting stock, calculated on a fully diluted basis, or (iv) during any period of
two consecutive years, individuals who at the beginning of such period
constituted the Company's Board of Directors (together with any new directors
whose election or appointment by such board or whose nomination for election by
the shareholders of the Company was approved by a vote of 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.
"Common Stock" means the common stock of the Company as the same exists at
------------
the date of the execution of this Indenture or as such stock may be constituted
from time to time.
"Company" means the party named as such above until a successor replaces it
-------
in accordance with Article VII and thereafter means the successor.
"Consolidated Interest Expense" means, for any person, for any period, the
-----------------------------
amount of interest in respect of Indebtedness (including amortization of
original issue discount, amortization of debt
<PAGE>
3
issuance costs, and noncash interest payments on any Indebtedness and the
interest portion of any deferred payment obligation and after taking into
account the effect of elections made under any Interest Rate Agreement, however
denominated, with respect to such Indebtedness), the amount of Redeemable
Dividends, Restricted Subsidiary Preferred Stock Dividends and the interest
component of rentals in respect of any capital lease obligation paid, in each
case whether accrued or scheduled to be paid or accrued by such person and its
Subsidiaries (other than Non-Restricted Subsidiaries) during such period to the
extent such amounts were deducted in computing Consolidated Net Income,
determined on a consolidated basis in accordance with GAAP. For purposes of this
definition, interest on a capital lease obligation shall be deemed to accrue at
an interest rate reasonably determined by such person to be the rate of interest
implicit in such capital lease obligation in accordance with GAAP consistently
applied.
"Consolidated Net Income" means, with respect to any person for any period,
-----------------------
the aggregate of the Net Income of such person and its Subsidiaries (other than
NonRestricted Subsidiaries) for such period, on a consolidated basis, determined
in accordance with GAAP; provided that (i) the Net Income of any person that is
--------
not a Subsidiary or that is accounted for by the equity method of accounting
shall be included only to the extent of the amount of dividends or distributions
paid to the referent person or a Wholly Owned Subsidiary, (ii) the Net Income of
any person that is a Subsidiary (other than a Subsidiary of which at least 80%
of the Capital Stock having ordinary voting power for the election of directors
or other governing body of such Subsidiary is owned by the referent person
directly or indirectly through one or more Subsidiaries) shall be included only
to the extent of the amount of dividends or distributions paid to the referent
person or a Wholly Owned Subsidiary, (iii) the Net Income of any person acquired
in a pooling of interests transaction for any period prior to the date of such
acquisition shall be excluded and (iv) the cumulative effect of a change in
accounting principles shall be excluded.
"Controlled Subsidiary" means any Subsidiary of the Company in which the
---------------------
Company has primary control over significant budgetary, dividend and
capitalization decisions.
"Convertible Notes" means the Company's 7 1/4% Convertible Subordinated
-----------------
Notes Due 2005 outstanding at any given time.
"Daily Market Price" means the price of a share of Common Stock on the
------------------
relevant date, determined (a) on the basis of the last reported sale price
regular way of the Common Stock as reported on the Nasdaq Stock Market's
National Market (the "NNM"), or if the Common Stock is not then listed on the
NNM, as reported on such national securities exchange upon which the Common
Stock is listed, or (b) if there is no such reported sale on the day in
question, on the basis of the average of the closing bid and asked quotations
regular way as so reported, or (c) if the Common Stock is not listed on the NNM
or on any national securities exchange, on the basis of the average of the high
bid and low asked quotations regular way on the day in question in the over-the-
counter market as reported by the National Association of Securities Dealers
Automated Quotation System, or if not so quoted, as reported by National
Quotation Bureau, Incorporated, or a similar organization.
"Default" means any event that is, or with the passage of time or the
-------
giving of notice or both, would be an Event of Default.
<PAGE>
4
"Depositary" means The Depository Trust Company, its nominees and their
----------
respective successors.
"Disqualified Stock" means any Capital Stock which, by its terms (or by the
------------------
terms of any security into which it is convertible or for which it is
exchangeable), or upon the happening of any event, matures or is mandatorily
redeemable, pursuant to a sinking fund obligation or otherwise, or redeemable at
the option of the holder thereof, in whole or in part, on or prior to the date
on which the Securities mature.
"EBITDA" means, for any person, for any period, an amount equal to (a) the
------
sum of (i) Consolidated Net Income for such period (exclusive of any gain or
loss realized in such period upon an Asset Sale), plus (ii) the provision for
taxes for such period based on income or profits to the extent such income or
profits were included in computing Consolidated Net Income and any provision for
taxes utilized in computing net loss under clause (i) hereof, plus (iii)
Consolidated Interest Expense for such period, plus (iv) depreciation for such
period on a consolidated basis, plus (v) amortization of intangibles for such
period on a consolidated basis, plus (vi) any other noncash item reducing
Consolidated Net Income for such period, minus (b) all noncash items increasing
Consolidated Net Income for such period, all for such person and its
Subsidiaries determined in accordance with GAAP consistently applied.
"Equity Interests" means Capital Stock and all warrants, options or other
----------------
rights to acquire Capital Stock (but excluding any Indebtedness that is
convertible into, or exchangeable for Capital Stock).
"Excess Payment" means the portion of the aggregate of any cash plus the
--------------
fair market value (as determined by the Board of Directors, whose determination
shall be conclusive evidence of such fair market value and described in a Board
Resolution) of other consideration payable in respect of any tender offer or
other negotiated transaction by the Company or a Subsidiary for all or any
portion of the Company's Common Stock that is in excess of an amount equal to
the product of (x) the number of shares of Common Stock with respect to which
the aggregate tender offer or negotiated purchase consideration is payable times
(y) the Reference Price.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
------------
"Exchange Rate Contract" means, with respect to any person, any currency
----------------------
swap agreements, forward exchange rate agreements, foreign currency futures or
options, exchange rate collar agreements, exchange rate insurance and other
agreements or arrangements, or combination thereof, designed to provide
protection against fluctuations in currency exchange rates. An Exchange Rate
Contract may also include an Interest Rate Agreement.
"Existing Indebtedness" means Indebtedness of the Company and its
---------------------
Subsidiaries in existence on the Issuance Date, until such amounts are repaid.
"GAAP" means generally accepted accounting principles set forth in the
----
opinions and pronouncements of the Accounting Principles Board of the American
Institute of Certified Public Accountants and statements and pronouncements of
the Financial Accounting Standards Board or in such
<PAGE>
5
other statements by such other entity as approved by a significant segment of
the accounting profession, which are in effect on the Issuance Date.
"Guarantee" means a guarantee (other than by endorsement of negotiable
---------
instruments for collection in the ordinary course of business), direct or
indirect, in any manner (including, without limitation, letters of credit and
reimbursement agreements in respect thereof), of all or any part of any
Indebtedness.
"Indebtedness" means, with respect to any person, any indebtedness of such
------------
person, whether or not contingent, in respect of borrowed money or evidenced by
bonds, notes, debentures or similar instruments or letters of credit (or
reimbursement agreements in respect thereof) or representing the balance
deferred and unpaid of the purchase price of any property (including pursuant to
capital leases and sale-and-leaseback transactions) or representing any hedging
obligations under an Exchange Rate Contract or an Interest Rate Agreement,
except any such balance that constitutes an accrued expense or trade payable, if
and to the extent any of the foregoing indebtedness (other than obligations
under an Exchange Rate Contract or an Interest Rate Agreement) would appear as a
liability upon a balance sheet of such person prepared in accordance with GAAP,
and also includes, to the extent not otherwise included, the Guarantee of items
which would be included within this definition.
"Indenture" means this Indenture as amended from time to time.
---------
"Indentures" means the indentures governing the Senior Notes and the
----------
Convertible Notes, including any amendments or supplements thereto.
"Initial Purchasers" means Donaldson, Lufkin & Jenrette Securities
------------------
Corporation and Salomon Brothers Inc.
"Interest Payment Date" has the meaning set forth in Section 1 of the
---------------------
Securities.
"Interest Rate Agreement" means, for any person, any interest rate swap
-----------------------
agreement, interest rate cap agreement, interest rate collar agreement or other
similar agreement designed to protect the party indicated therein against
fluctuations in interest rates.
"Interest Record Date" has the meaning set forth in Section 1 of the
--------------------
Securities.
"Issuance Date" means the date on which the Securities are first
-------------
authenticated and issued.
"Lien" means, with respect to any asset, any mortgage, lien, pledge,
----
charge, security interest or encumbrance of any kind in respect of such asset,
whether or not filed, recorded or otherwise perfected under applicable law
(including any conditional sale or other title retention agreement, any lease in
the nature thereof, any option or other agreement to sell or give a security
interest in and any filing of or agreement to give any financing statement under
the Uniform Commercial Code (or equivalent statutes) of any jurisdiction).
"Liquidated Damages" has the meaning set forth in Section 13 of the
------------------
Securities.
<PAGE>
6
"Material License" means a license to operate a cable or telephone system
----------------
held by the Company or any of its Subsidiaries which system at the time of
determination covers a number of Net Households which equals or exceeds 5% of
the aggregate number of Net Households covered by all of the licenses to operate
cable or telephone systems held by the Company and its Subsidiaries at such
time.
"Material Subsidiary" means (i) OCOM, OCOM Sub I, Inc., CableTel UK Group,
-------------------
Inc. (formerly known as OCOM Sub II, Inc.), OCOM Sub III, Inc., CableTel Surrey
and Hampshire Limited (formerly known as CableTel Surrey Limited), CableTel
Cardiff Limited, CableTel Glasgow, CableTel Newport, CableTel Kirklees and NTL
Group Limited and (ii) any other Subsidiary of the Company which is a
"significant subsidiary" as defined in Rule 1-02(w) of Regulation S-X under the
Securities Act and the Exchange Act (as such Regulation is in effect on the date
hereof).
"Net Households" means the product of (i) the number of households covered
--------------
by a cable license in the United Kingdom and (ii) the percentage of the entity
holding such license which is owned directly or indirectly by the Company.
"Net Income" means, with respect to any person for a specific period, the
----------
net income (loss) of such person during such period, determined in accordance
with GAAP, excluding, however, any gain (but not loss) during such period,
together with any related provision for taxes on such gain (but not loss),
realized during such period in connection with any Asset Sale (including,
without limitation, dispositions pursuant to sale-and-leaseback transactions),
and excluding any extraordinary gain (but not loss) during such period, together
with any related provision for taxes on such extraordinary gain (but not loss).
"Non-Recourse Debt" means Indebtedness or that portion of Indebtedness (a)
-----------------
as to which none of the Company nor any Restricted Subsidiary: (i) provides
credit support (including any undertaking, agreement or instrument which would
constitute Indebtedness); (ii) is directly or indirectly liable; or (iii)
constitutes the lender; and (b) no default with respect to which (including any
rights which the holders thereof may have to take enforcement action against a
Non-Restricted Subsidiary) would permit (upon notice, lapse of time or both) any
holder of any other Indebtedness of the Company or of any Restricted Subsidiary
to declare a default on such other Indebtedness or cause the payment thereof to
be accelerated or payable prior to its stated maturity.
"Non-Restricted Subsidiary" means a Subsidiary that (a) at the time of its
-------------------------
designation as a Non-Restricted Subsidiary has not acquired any assets, at any
previous time, directly or indirectly from the Company or any of its
Subsidiaries, (b) has no Indebtedness other than Non-Recourse Debt and (c) that
at the time of such designation, after giving pro forma effect to such
designation, the ratio of Indebtedness to Annualized Pro Forma EBITDA of the
Company is equal to less than the ratio of Indebtedness to Annualized Pro Forma
EBITDA of the Company immediately preceding such designation, provided, however,
-------- -------
that if the ratio of Indebtedness to Annualized Pro Forma EBITDA of the Company
immediately preceding such designation is 6:1 or less, then the ratio of
Indebtedness to Annualized Pro Forma EBITDA of the Company may be .5 greater
than such ratio immediately preceding such designation.
"10% Notes" means the Company's 10% Senior Deferred Coupon Notes Due 2003
----------
<PAGE>
7
outstanding at any given time.
"12 3/4% Notes" means the Company's 12 3/4% Series A Senior Deferred Coupon
-------------
Notes Due 2005 outstanding at any given time.
"11 1/2% Notes" means the Company's 11 1/2% Series B Senior Deferred Coupon
-------------
Notes Due 2006 outstanding at any given time.
"Noteholder" or "holder" means a person in whose name a Security is
---------- ------
registered.
"Obligations" means any principal, interest, penalties, fees,
-----------
indemnifications, reimbursements, damages and other liabilities payable under
the documentation governing any Indebtedness.
"OCOM" means OCOM Corporation, a wholly owned subsidiary of the Company.
----
"Offering Memorandum" means the offering memorandum relating to the
-------------------
Securities dated June 7, 1996.
"Officers' Certificate" means a certificate signed by two Officers, one of
---------------------
whom must be the Chairman of the Board, the President, the Treasurer or a Vice-
President of the Company. See Sections 12.04 and 12.05 hereof.
---
"Opinion of Counsel" means a written opinion from legal counsel who is
------------------
acceptable to the Trustee. The counsel may be an employee of or counsel to the
Company or the Trustee. See Sections 12.04 and 12.05 hereof.
---
"Permitted Designee" means (i) a spouse or a child of a Permitted Holder,
------------------
(ii) trusts for the benefit of a Permitted Holder or a spouse or child of a
Permitted Holder, (iii) in the event of the death or incompetence of a Permitted
Holder, his estate, heirs, executor, administrator, committee or other personal
representative or (iv) any person so long as a Permitted Holder owns at least
50% of the voting power of all classes of the voting stock of such person.
"Permitted Holders" means George S. Blumenthal, J. Barclay Knapp and their
-----------------
Permitted Designees.
"person" means any individual, corporation, partnership, joint venture,
------
association, joint stock company, trust, unincorporated organization or
government or any agency or political subdivision thereof.
"principal" of a debt security means the principal of the security plus the
---------
premium, if any, on the security.
"Pro Forma EBITDA" means for any person, for any period, the EBITDA of such
----------------
person as determined on a consolidated basis in accordance with GAAP
consistently applied after giving effect
<PAGE>
8
to the following: (i) if, during or after such period, such person or any of its
Subsidiaries shall have made any Asset Sale, Pro Forma EBITDA of such person and
its Subsidiaries for such period shall be reduced by an amount equal to the Pro
Forma EBITDA (if positive) directly attributable to the assets which are the
subject of such Asset Sale for the period or increased by an amount equal to the
Pro Forma EBITDA (if negative) directly attributable thereto for such period and
(ii) if, during or after such period, such person or any of its Subsidiaries
completes an acquisition of any person or business which immediately after such
acquisition is a Subsidiary of such person or whose assets are held directly by
such person or a Subsidiary of such person, Pro Forma EBITDA shall be computed
so as to give pro forma effect to the acquisition of such person or business;
and provided further that, with respect to the Company, all of the foregoing
----------------
references to "Subsidiary" or "Subsidiaries" shall be deemed to refer only to a
"Restricted Subsidiary" or "Restricted Subsidiaries" of the Company.
"Redeemable Dividend" means, for any dividend with regard to Disqualified
-------------------
Stock, the quotient of the dividend divided by the difference between one and
the maximum statutory federal income tax rate (expressed as a decimal number
between 1 and 0) then applicable to the issuer of such Disqualified Stock.
"Reference Price" means the average of the Daily Market Prices per share of
---------------
Common Stock on the five consecutive trading days selected by the Company out of
the 10 consecutive trading days next succeeding the date of payment of the
negotiated transaction consideration or expiration of the tender offer, as the
case may be.
"Registration Rights Agreement" means the Registration Rights Agreement
-----------------------------
relating to the Securities dated June 12, 1996, between the Company and the
Initial Purchasers.
"Restricted Subsidiary" means any Subsidiary of the Company which is not a
---------------------
Non-Restricted Subsidiary.
"Restricted Subsidiary Preferred Stock Dividend" means, for any dividend
----------------------------------------------
with regard to preferred stock of a Restricted Subsidiary, the quotient of the
dividend divided by the difference between one and the maximum statutory federal
income tax rate (expressed as a decimal number between 1 and 0) then applicable
to the issuer of such preferred stock.
"SEC" means the Securities and Exchange Commission.
---
"Securities" means the Securities described above issued under this
----------
Indenture.
"Securities Act" means the Securities Act of 1933, as amended.
--------------
"Senior Debt" means the principal of, interest on and other amounts due on
-----------
(i) Indebtedness of the Company, whether outstanding on the date of the
Indenture or thereafter created, incurred, assumed or guaranteed by the Company
for money borrowed from banks or other financial institutions; (ii) Indebtedness
of the Company, whether outstanding on the date of the Indenture or thereafter
created, incurred, assumed or guaranteed by the Company, including, without
limitation, the Senior Notes and (iii) Indebtedness of the Company under
interest rate swaps, caps or similar hedging
<PAGE>
9
agreements and foreign exchange contracts, currency swaps or similar agreements;
unless, in the instrument creating or evidencing or pursuant to which
Indebtedness under (i) or (ii) is outstanding, it is expressly provided that
such Indebtedness is not senior in right of payment to the Securities. Senior
Debt includes, with respect to the obligations described in clauses (i) and (ii)
above, interest accruing, pursuant to the terms of such Senior Debt, on or after
the filing of any petition in bankruptcy or for reorganization relating to the
Company, whether or not post-filing interest is allowed in such proceeding, at
the rate specified in the instrument governing the relevant obligation.
Notwithstanding anything to the contrary in the foregoing, Senior Debt shall not
include: (a) Indebtedness of or amounts owed by the Company for compensation to
employees, or for goods or materials purchased in the ordinary course of
business, or for services; or (b) Indebtedness of the Company to a Subsidiary of
the Company. Furthermore, the Securities shall rank pari pasu with and shall not
be senior in right of payment to the Convertible Notes.
"Senior Notes" means the Company's 10% Notes, the 12 3/4% Notes and the 11
------------
1/2% Notes.
"Shelf Registration Statement" shall have the meaning set forth in the
----------------------------
Registration Rights Agreement.
"Subsidiary" means any corporation, association or other business entity of
----------
which more than 50% of the total voting power of shares of Capital Stock
entitled (without regard to the occurrence of any contingency) to vote in the
election of directors, managers or trustees thereof is at the time owned or
controlled, directly or indirectly, by any person or one or more of the other
Subsidiaries of that person or a combination thereof.
"TIA" means the Trust Indenture Act of 1939 (15 U.S. Code (S)(S)77aaa-
---
77bbbb) as in effect on the date of execution of this Indenture.
"Transfer Restricted Securities" shall have the meaning set forth in the
------------------------------
Registration Rights Agreement.
"Trustee" means the party named as such above until a successor replaces it
-------
in accordance with the applicable provisions of this Indenture and thereafter
means the successor.
"Trust Officer" means the Chairman of the Board, the President or any other
-------------
officer or assistant officer of the Trustee assigned by the Trustee to
administer its corporate trust matters.
"Wholly Owned Subsidiary" means, at any time, a Restricted Subsidiary all
-----------------------
of the Capital Stock of which (except directors' qualifying shares) is at the
time owned directly or indirectly by the Company.
<PAGE>
10
SECTION 1.02. Other Definitions.
------------------
<TABLE>
<CAPTION>
Defined in
Term Section
- ---- ----------
<S> <C>
"Additional Amounts"................. 4.08
"Agent Members"...................... 2.01
"Bankruptcy Law"..................... 8.01
"Cedel".............................. 2.01
"Change of Control Offer"............ 4.07
"Change of Control Payment".......... 4.07
"Change of Control Payment Date"..... 3.08
"Commencement Date".................. 3.08
"Conversion Agent"................... 2.03
"Conversion Date".................... 5.02
"Conversion Price"................... 5.06
"Conversion Shares".................. 5.06
"Custodian".......................... 8.01
"Distribution Date".................. 5.06
"Distribution Record Date"........... 5.06
"Euroclear".......................... 2.01
"Event of Default"................... 8.01
"Global Notes"....................... 2.01
"Legal Holiday"...................... 12.07
"Non-Global Purchaser"............... 2.01
"Offer Amount"....................... 3.08
"Officer"............................ 12.10
"Paying Agent"....................... 2.03
"Payment Blockage Notice"............ 6.02
"Payment Blockage Period"............ 6.02
"Payment Default".................... 8.01
"Purchase Agreement"................. 2.01
"Purchase Date"...................... 5.06
"QIBs"............................... 2.01
"Registrar".......................... 2.03
"Regulation S"....................... 2.01
"Regulation S Temporary Global Note". 2.01
"Rule 144A Global Note".............. 2.01
"Certificated Securities"............ 2.01
"Rights"............................. 5.06
"Rule 144A".......................... 2.01
"Tender Period"...................... 3.08
"Regulation S Permanent Global Note". 2.06
</TABLE>
SECTION 1.03. Incorporation by Reference of Trust Indenture Act.
--------------------------------------------------
Whenever this Indenture refers to a provision of the TIA, the provision is
incorporated by reference in and made a part
<PAGE>
11
of this Indenture.
The following TIA terms used in this Indenture have the following
meanings:
"indenture securities" means the Securities;
--------------------
"indenture security holder" means a Noteholder;
-------------------------
"indenture to be qualified" means this Indenture;
-------------------------
"indenture trustee" or "institutional trustee" means the Trustee; and
----------------- ---------------------
"obligor" on the Securities means the Company or any other obligor on
-------
the Securities.
All other terms used in this Indenture that are defined by the TIA,
defined by TIA reference to another statute or defined by SEC rule under the TIA
have the meanings so assigned to them.
SECTION 1.04. Rules of Construction. Unless the context otherwise
----------------------
requires:
(a) a term has the meaning assigned to it;
(b) an accounting term not otherwise defined has the meaning assigned
to it in accordance with GAAP consistently applied;
(c) references to "GAAP" shall mean GAAP in effect as of the time when
and for the period as to which such accounting principles are to be
applied;
(d) "or" is not exclusive;
(e) words in the singular include the plural, and words in the plural
include the singular; and
(f) provisions apply to successive events and transactions.
ARTICLE II
The Securities
--------------
SECTION 2.01. Form and Dating. The Securities and the Trustee's
----------------
certificate of authentication shall be substantially in the form of Exhibit A
which is hereby incorporated in and expressly made a part of this Indenture. The
Securities may have notations, legends or endorsements required by law, stock
exchange rule, agreements to which the Company is subject, if any, or usage
(provided that any such notation, legend or endorsement is in a form acceptable
to the Company). The Company shall furnish any such legend not contained in
Exhibit A to the Trustee in writing. Each
<PAGE>
12
Security shall be dated the date of its authentication. The terms and provisions
of the Securities set forth in Exhibit A are part of the terms of this Indenture
and to the extent applicable, the Company and the Trustee, by their execution
and delivery of this Indenture, expressly agree to such terms and provisions and
to be bound thereby.
(a) Global Notes. The Securities are being offered and sold by the
-------------
Company pursuant to a Purchase Agreement relating to the Securities, dated June
6, 1996, among the Company and the Initial Purchasers (the "Purchase
Agreement").
Securities offered and sold in reliance on Regulation S under the
Securities Act ("Regulation S"), as provided in the Purchase Agreement, shall be
issued initially in the form of a single, temporary global Security in fully
registered form without interest coupons with the Global Securities Legend and
Restricted Securities Legend set forth in Exhibit A hereto (the "Regulation S
Temporary Global Note") which shall be deposited on behalf of the purchasers of
the Securities represented thereby with the Trustee, at its New York office, as
custodian, for the Depositary, and registered in the name of the Depositary or
the nominee of the Depositary for the accounts of designated agents holding on
behalf of the Euroclear System ("Euroclear") or Cedel Bank, societe anonyme
("Cedel"), duly executed by the Company and authenticated by the Trustee as
hereinafter provided. The aggregate principal amount of the Regulation S
Temporary Global Note may from time to time be increased or decreased by
adjustments made on the records of the Trustee and the Depositary or its
nominee, as the case may be, as hereinafter provided.
Securities offered and sold to Qualified Institutional Buyers ("QIBs")
in reliance on Rule 144A under the Securities Act ("Rule 144A") as provided in
the Purchase Agreement, shall be issued in the form of one or more, permanent
global Securities in definitive, fully registered form without interest coupons
with the Global Securities Legend and Restricted Securities Legend set forth in
Exhibit A hereto (each, a "Rule 144A Global Note"), which shall be deposited on
behalf of the purchasers of the Securities represented thereby with the Trustee,
at its New York office, as custodian for the Depositary, and registered in the
name of the Depositary or a nominee of the Depositary, duly executed by the
Company and authenticated by the Trustee as hereinafter provided. The aggregate
principal amount of the Rule 144A Global Note may from time to time be increased
or decreased by adjustments made on the records of the Trustee and the
Depositary or its nominee as hereinafter provided.
Upon effectiveness of the Shelf Registration Statement, the Securities
resold or transferred pursuant to the prospectus forming part of the Shelf
Registration Statement may be represented by one or more permanent global
Securities in definitive, fully registered form without interest coupons with
the Global Securities Legend but not the Restricted Securities Legend set forth
in Exhibit A hereto, registered in the name of the Depositary or a nominee of
the Depositary, duly executed by the Company and authenticated by the Trustee as
hereinafter provided. The aggregate principal amount of such global Securities
may from time to time be increased or decreased by adjustments made on the
records of the Trustee and the Depositary or its nominee to reflect transfers of
beneficial interests from the Regulation S Permanent Global Note and the Rule
144A Global Note, subject to the rules and procedures of Euroclear and Cedel, as
the case may be, and the Depositary.
(b) Book-Entry Provisions. This Section 2.01(b) shall apply only to
----------------------
the Regulation S
<PAGE>
13
Temporary Global Note, the Rule 144A Global Note and the Regulation S Permanent
Global Note (as defined herein) (the "Global Notes") deposited with or on behalf
of the Depositary.
The Company shall execute and the Trustee shall, in accordance with
this Section 2.01(b), authenticate and deliver initially one or more Global
Notes that (a) shall be registered in the name of Cede & Co. or other nominee of
such Depositary and (b) shall be delivered by the Trustee to such Depositary or
pursuant to such Depositary's instructions or held by the Trustee as custodian
for the Depositary.
Members of, or participants in, the Depositary ("Agent Members") shall
have no rights under this Indenture with respect to any Global Note held on
their behalf by the Depositary or by the Trustee as the custodian of the
Depositary or under such Global Note, and the Depositary may be treated by the
Company, the Trustee and any agent of the Company or the Trustee as the absolute
owner of such Global Note for all purposes whatsoever. Notwithstanding the
foregoing, nothing herein shall prevent the Company, the Trustee or any agent of
the Company or the Trustee from giving effect to any written certification,
proxy or other authorization furnished by the Depositary or impair, as between
the Depositary and its Agent Members, the operation of customary practices of
such Depositary governing the exercise of the rights of a holder of a beneficial
interest in any Global Note.
(c) Certificated Securities. Except as provided in Section 2.10,
------------------------
owners of beneficial interests in Global Notes will not be entitled to receive
physical delivery of certificated Securities. Purchasers of Securities who are
not QIBs and did not purchase Securities sold in reliance on Regulation S under
the Securities Act (referred to herein as the "Non-Global Purchasers") will
receive certificated Securities bearing the Restricted Securities Legend set
forth in Exhibit A hereto ("Certificated Securities"). Certificated Securities
will bear the Restricted Securities Legend set forth on Exhibit A unless removed
in accordance with Section 2.06(b) hereof and may not be exchanged for a Global
Note, or interest therein, at any time.
After a transfer of any Securities during the period of the
effectiveness of a Shelf Registration Statement with respect to the Securities,
all requirements pertaining to legends on such Security will cease to apply, the
requirements requiring any such Security issued to certain holders be issued in
global form will cease to apply, and a certificated Security without legends
will be available to the holder of such Securities who transfers such Securities
pursuant to a prospectus which is part of such Shelf Registration Statement.
SECTION 2.02. Execution and Authentication. Two Officers shall sign
-----------------------------
the Securities for the Company by manual or facsimile signature. The Company's
seal shall be reproduced on the Securities.
If an Officer whose signature is on a Security no longer holds that
office at the time the Security is authenticated, the Security shall
nevertheless be valid.
A Security shall not be valid until authenticated by the manual
signature of an authorized officer of the Trustee. The signature shall be
conclusive evidence that the Security has been authenticated under this
Indenture.
<PAGE>
14
Upon a written order of the Company signed by an Officer, the Trustee
shall authenticate the Securities for original issue up to an aggregate
principal amount stated in paragraph 5 of the Securities. The aggregate
principal amount of Securities outstanding at any time shall not exceed the
amount set forth herein except as provided in Section 2.07.
The Trustee may appoint an authenticating agent acceptable to the
Company to authenticate Securities. An authenticating agent may authenticate
Securities whenever the Trustee may do so. Each reference in this Indenture to
authentication by the Trustee includes authentication by such agent. An
authenticating agent has the same rights as an Agent to deal with the Company or
an Affiliate.
SECTION 2.03. Registrar, Paying Agent and Conversion Agent. The
---------------------------------------------
Company shall maintain in the Borough of Manhattan, City of New York, State of
New York (i) an office or agency where Securities may be presented for
registration of transfer or for exchange ("Registrar"), (ii) an office or agency
where Securities may be presented for payment ("Paying Agent") and an office or
agency where Securities may be presented for conversion ("Conversion Agent").
The Registrar shall keep a register of the Securities and of their transfer and
exchange. The Company may appoint the Registrar, the Paying Agent and the
Conversion Agent and may appoint one or more co-registrars, one or more
additional paying agents and one or more additional conversion agents in such
other locations as it shall determine. The term "Paying Agent" includes any
additional paying agent and the term "Conversion Agent" includes any additional
conversion agent. The Company may change any Paying Agent, Registrar, co-
registrar or Conversion Agent without prior notice to any Noteholder. The
Company shall notify the Trustee of the name and address of any Agent not a
party to this Indenture. If the Company fails to appoint or maintain another
entity as Registrar, Paying Agent or Conversion Agent, the Trustee shall act as
such. The Company or any of its Affiliates may act as Paying Agent, Registrar,
co-registrar or Conversion Agent.
SECTION 2.04. Paying Agent to Hold Money in Trust. The Company shall
------------------------------------
require each Paying Agent other than the Trustee to agree in writing that the
Paying Agent will hold in trust for the benefit of Noteholders or the Trustee
all money held by the Paying Agent for the payment of principal or interest on
the Securities, and will notify the Trustee of any default by the Company in
making any such payment. While any such default continues, the Trustee may
require a Paying Agent to pay all money held by it to the Trustee. The Company
at any time may require a Paying Agent to pay all money held by it to the
Trustee and to account for any money disbursed by it. Upon payment over to the
Trustee, the Paying Agent (if other than the Company or an Affiliate of the
Company) shall have no further liability for the money. If the Company or an
Affiliate of the Company acts as Paying Agent, it shall segregate and hold in a
separate trust fund for the benefit of the Noteholders all money held by it as
Paying Agent.
SECTION 2.05. Noteholder Lists. The Trustee shall preserve in as
-----------------
current a form as is reasonably practicable the most recent list available to it
of the names and addresses of Noteholders. If the Trustee is not the Registrar,
the Company shall furnish to the Trustee on or before each interest payment date
and at such other times as the Trustee may request in writing a list in such
form and as of such date as the Trustee may reasonably require of the names and
addresses of Noteholders.
SECTION 2.06. Transfer and Exchange. Where Securities are presented
----------------------
to the Registrar
<PAGE>
15
or a co-registrar with a request to register a transfer or to exchange them for
an equal principal amount of Securities of other denominations, the Registrar
shall register the transfer or make the exchange if its requirements for such
transactions are met. To permit registrations of transfers and exchanges, the
Company shall issue and the Trustee shall authenticate Securities at the
Registrar's request. No service charge shall be made for any registration of
transfer or exchange (except as otherwise expressly permitted herein), but the
Company may require payment of a sum sufficient to cover any transfer tax or
similar governmental charge payable in connection therewith (other than any such
transfer tax or similar governmental charge payable upon exchanges pursuant to
Sections 2.10, 3.06 or 11.05 hereof).
The Company shall not be required (i) to issue, register the transfer
of, or exchange, Securities during a period beginning at the opening of business
15 days before the day of any selection of Securities for redemption under
Section 3.02 hereof and ending at the close of business on the day of selection,
or (ii) to register the transfer or exchange of any Security so selected for
redemption in whole or in part, except the unredeemed portion of any Security
being redeemed in part.
(a) Notwithstanding any provision to the contrary herein, so long as
a Global Note remains outstanding and is held by or on behalf of the Depositary,
transfers of a Global Note, in whole or in part, or of any beneficial interest
therein, shall only be made in accordance with Section 2.01(b) and this Section
2.06(a); provided, however, that beneficial interests in a Global Note may be
-------- -------
transferred to persons who take delivery thereof in the form of a beneficial
interest in the same Global Note in accordance with the transfer restrictions
set forth in the Restricted Securities Legend and under the heading "Notice to
Investors" in the Offering Memorandum.
(i) Except for transfers or exchanges made in accordance with any of
clauses (ii) through (v) of this Section 2.06(a), transfers of a Global
Note shall be limited to transfers of such Global Note in whole, but not in
part, to nominees of the Depositary or to a successor of the Depositary or
such successor's nominee.
(ii) Rule 144A Global Note to Regulation S Temporary Global Note. If
------------------------------------------------------------
an owner of a beneficial interest in the Rule 144A Global Note deposited
with the Depositary or the Trustee as custodian for the Depositary wishes
at any time to transfer its interest in such Rule 144A Global Note to a
person who is required to take delivery thereof in the form of an interest
in the Regulation S Temporary Global Note, such owner may, subject to the
rules and procedures of the Depositary, exchange or cause the exchange of
such interest for an equivalent beneficial interest in the Regulation S
Temporary Global Note. Upon receipt by the Trustee, as Registrar, at its
office in The City of New York of (1) instructions given in accordance with
the Depositary's procedures from an Agent Member directing the Trustee to
credit or cause to be credited a beneficial interest in the Regulation S
Temporary Global Note in an amount equal to the beneficial interest in the
Rule 144A Global Note to be exchanged, (2) a written order given in
accordance with the Depositary's procedures containing information
regarding the participant account of the Depositary and, in the case of a
transfer pursuant to and in accordance with Regulation S, the Euroclear or
Cedel account to be credited with such increase and (3) in the case of a
transfer, a certificate in the form of Exhibit B attached hereto given by
the holder of such beneficial interest stating that the transfer of such
interest has been made in compliance with the transfer restrictions
applicable to the Global Notes and (A) pursuant to and in accordance with
<PAGE>
16
Regulation S, (B) that the Security being transferred is not a "restricted
security" as defined in Rule 144 under the Securities Act, or (C) stating
that the person transferring such interest reasonably believes that the
person acquiring such interest in the Regulation S Temporary Global Note is
a QIB and is obtaining such beneficial interest in a transaction meeting
the requirements of Rule 144A, then the Trustee, as Registrar, shall
instruct the Depositary to reduce or cause to be reduced the principal
amount at maturity of the Rule 144A Global Note and to increase or cause to
be increased the principal amount at maturity of the Regulation S Temporary
Global Note by the aggregate principal amount at maturity of the beneficial
interest in the Rule 144A Global Note to be exchanged, to credit or cause
to be credited to the account of the person specified in such instructions
a beneficial interest in the Regulation S Temporary Global Note equal to
the reduction in the principal amount at maturity of the Rule 144A Global
Note, and to debit or cause to be debited from the account of the person
making such exchange or transfer the beneficial interest in the Rule 144A
Global Note that is being exchanged or transferred.
(iii) Regulation S Temporary Global Note to Rule 144A Global Note.
------------------------------------------------------------
If an owner of a beneficial interest in the Regulation S Temporary Global
Note deposited with the Depositary or with the Trustee as custodian for the
Depositary wishes at any time to transfer its interest in such Regulation S
Temporary Global Note to a person who is required to take delivery thereof
in the form of an interest in the Rule 144A Global Note, such holder may,
subject to the rules and procedures of Euroclear or Cedel, as the case may
be, and the Depositary, exchange or cause the exchange of such interest for
an equivalent beneficial interest in the Rule 144A Global Note. Upon
receipt by the Trustee, as Registrar, at its office in The City of New York
of (1) instructions from Euroclear or Cedel, if applicable, and the
Depositary, directing the Trustee, as Registrar, to credit or cause to be
credited a beneficial interest in the Rule 144A Global Note equal to the
beneficial interest in the Regulation S Temporary Global Note to be
exchanged, such instructions to contain information regarding the
participant account with the Depositary to be credited with such increase,
(2) a written order given in accordance with the Depositary's procedures
containing information regarding the participant account of the Depositary
and (3) a certificate in the form of Exhibit C attached hereto given by the
owner of such beneficial interest and stating (a)(i) that the person
transferring such interest in the Regulation S Temporary Global Note
reasonably believes that the person acquiring such interest in the Rule
144A Global Note is a QIB and is obtaining such beneficial interest in a
transaction meeting the requirements of Rule 144A or (ii) such transfer is
being made pursuant to another exemption from the registration requirements
of the Securities Act (in which case such certificate must be accompanied
by an opinion of counsel regarding the availability of such exemption) and
(b) such transfer is being made in accordance with all applicable
securities laws of any state of the United States or any other
jurisdiction, then Euroclear or Cedel or the Trustee, as Registrar, as the
case may be, will instruct the Depositary to reduce or cause to be reduced
the Regulation S Temporary Global Note and to increase or cause to be
increased the principal amount at maturity of the Rule 144A Global Note by
the aggregate principal amount at maturity of the beneficial interest in
the Regulation S Temporary Global Note to be exchanged, and the Trustee, as
Registrar, shall instruct the Depositary, concurrently with such reduction,
to credit or cause to be credited to the account of the person specified in
such instructions a beneficial interest in the Rule 144A Global Note equal
to the reduction in the principal amount at maturity of the Regulation S
Temporary Global Note and to debit or cause to be debited from the account
of the person making such transfer the
<PAGE>
17
beneficial interest in the Regulation S Temporary Global Note that is being
transferred.
(iv) Global Note to Certificated Security. If an owner of a
-------------------------------------
beneficial interest in a Global Note deposited with the Depositary or with
the Trustee as custodian for the Depositary wishes at any time to transfer
its interest in such Global Note to a person who is required to take
delivery thereof in the form of a Certificated Security, such owner may,
subject to the rules and procedures of Euroclear or Cedel, if applicable,
and the Depositary, cause the exchange of such interest for one or more
Certificated Securities of any authorized denomination or denominations and
of the same aggregate principal amount at maturity. Upon receipt by the
Trustee, as Registrar, at its office in The City of New York of (1)
instructions from Euroclear or Cedel, if applicable, and the Depositary
directing the Trustee, as Registrar, to authenticate and deliver one or
more Certificated Securities of the same aggregate principal amount at
maturity as the beneficial interest in the Global Note to be exchanged,
such instructions to contain the name or names of the designated transferee
or transferees, the authorized denomination or denominations of the
Certificated Securities to be so issued and appropriate delivery
instructions, (2) a certificate in the form of Exhibit D attached hereto
given by the owner of such beneficial interest and stating that the person
transferring such interest in such Global Note reasonably believes that the
person acquiring the Certificated Securities for which such interest is
being exchanged is an institutional "accredited investor" (as defined in
Rule 501(a)(1), (2), (3) or (7) of Regulation D under the Securities Act)
and is acquiring such Certificated Securities having an aggregate principal
amount of not less than $100,000 for its own account or for one or more
accounts as to which the transferee exercises sole investment discretion,
(3) a certificate in the form of Exhibit E attached hereto given by the
person acquiring the Certificated Securities for which such interest is
being exchanged, to the effect set forth therein, and (4) such other
certifications, legal opinions or other information as the Company may
reasonably require to confirm that such transfer is being made pursuant to
an exemption from, or in a transaction not subject to, the registration
requirements of the Securities Act, then Euroclear or Cedel, if applicable,
or the Trustee, as Registrar, as the case may be, will instruct the
Depositary to reduce or cause to be reduced such Global Note by the
aggregate principal amount at maturity of the beneficial interest therein
to be exchanged and to debit or cause to be debited from the account of the
person making such transfer the beneficial interest in the Global Note that
is being transferred, and concurrently with such reduction and debit the
Company shall execute, and the Trustee shall authenticate and deliver, one
or more Certificated Securities of the same aggregate principal amount at
maturity in accordance with the instructions referred to above.
(v) Certificated Security to Certificated Security. If a holder of a
-----------------------------------------------
Certificated Security wishes at any time to transfer such Certificated
Security to a person who is required to take delivery thereof in the form
of a Certificated Security, such holder may, subject to the restrictions on
transfer set forth herein and in such Certificated Security, cause the
exchange of such Certificated Security for one or more Certificated
Securities of any authorized denomination or denominations and of the same
aggregate principal amount at maturity. Upon receipt by the Trustee, as
Registrar, at its office in The City of New York of (1) such Certificated
Security, duly endorsed as provided herein, (2) instructions from such
holder directing the Trustee, as Registrar, to authenticate and deliver one
or more Certificated Securities of the same aggregate principal amount at
maturity as the Certificated Security to be exchanged, such instructions to
<PAGE>
18
contain the name or authorized denomination or denominations of the
Certificated Securities to be so issued and appropriate delivery
instructions, (3) a certificate from the holder of the Certificated
Security to be exchanged in the form of Exhibit D attached hereto, (4) a
certificate in the form of Exhibit E attached hereto given by the person
acquiring the Certificated Securities for which such interest is being
exchanged, to the effect set forth therein, and (5) such other
certifications, legal opinions or other information as the Company may
reasonably require to confirm that such transfer is being made pursuant to
an exemption from, or in a transaction not subject to, the registration
requirements of the Securities Act, then the Trustee, as Registrar, shall
cancel or cause to be cancelled such Certificated Security and concurrently
therewith, the Company shall execute, and the Trustee shall authenticate
and deliver, one or more Certificated Securities of the same aggregate
principal amount at maturity, in accordance with the instructions referred
to above.
(vi) Other Exchanges. In the event that a beneficial interest in a
----------------
Global Note is exchanged for Securities in definitive registered form
pursuant to Section 2.10, prior to the effectiveness of a Shelf
Registration Statement with respect to such Securities, such Securities may
be exchanged only in accordance with such procedures as are substantially
consistent with the provisions of clauses (ii) through (v) above (including
the certification requirements intended to ensure that such transfers
comply with Rule 144A or Regulation S under the Securities Act, as the case
may be) and such other procedures as may from time to time be adopted by
the Company.
(vii) Restricted Period. Prior to the termination of the "restricted
------------------
period" (as defined in Regulation S under the Securities Act) with respect
to the issuance of the Securities, transfers of interests in the Regulation
S Temporary Global Note to "U.S. persons" (as defined in Regulation S under
the Securities Act) shall be limited to transfers made pursuant to the
provisions of Section 2.06(a)(iii). The Company shall advise the Trustee
as to the termination of the restricted period and the Trustee may rely
conclusively thereon.
(viii) Regulation S Temporary Global Note to Regulation S Permanent
------------------------------------------------------------
Global Note. Following the termination of the "restricted period" (as
------------
defined in Regulation S under the Securities Act) with respect to the
issuance of the Securities, beneficial interests in the Regulation S
Temporary Global Note shall be exchanged for an interest in a Global Note
in definitive, fully registered form without interest coupons, with the
Global Securities Legend set forth in Exhibit A hereto, but without the
Restricted Securities Legend (a "Regulation S Permanent Global Note"),
pursuant to the rules and procedures of the Depositary; provided, however,
that prior to (i) the payment of interest or principal with respect to a
holder's beneficial interest in the Regulation S Temporary Global Note and
(ii) any exchange of such beneficial interest for a beneficial interest in
the Regulation S Permanent Note, Euroclear or Cedel receive a certificate
substantially in the form of Exhibit F hereto from the beneficial owner of
such beneficial interest and Euroclear and Cedel deliver a certificate
substantially in the form of Exhibit G hereto to the Trustee (or the paying
agent if different from the Trustee). Upon proper presentment to the
Trustee of a certificate substantially in the form of Exhibit H hereto and
subject to the rules and procedures of DTC or its direct or indirect
participants, including Euroclear and Cedel, an interest in a Regulation S
Permanent Global Note may be exchanged for a certificated Security that is
free from any restriction on transfer (other than such as are solely
attributable to any holder's status).
<PAGE>
19
(b) Except in connection with a Shelf Registration Statement
contemplated by and in accordance with the terms of the Registration Rights
Agreement, if Securities are issued upon the transfer, exchange or replacement
of Securities bearing the Restricted Securities Legend set forth in Exhibit A
hereto, or if a request is made to remove such Restricted Securities Legend on
Securities, the Securities so issued shall bear the Restricted Securities
Legend, or the Restricted Securities Legend shall not be removed, as the case
may be, unless there is delivered to the Company such satisfactory evidence,
which may include an opinion of counsel licensed to practice law in the State of
New York, as may be reasonably required by the Company, that neither the legend
nor the restrictions on transfer set forth therein are required to ensure that
transfers thereof comply with the provisions of Rule 144A, Rule 144 or
Regulation S under the Securities Act or, with respect to Certificated
Securities, that such Securities are not "restricted" within the meaning of Rule
144 under the Securities Act. Upon provision of such satisfactory evidence, the
Trustee, at the direction of the Company, shall authenticate and deliver
Securities that do not bear the legend.
(c) Neither the Company nor the Trustee shall have any responsibility
for any actions taken or not taken by the Depositary.
SECTION 2.07. Replacement Securities. If the holder of a Security
-----------------------
claims that the Security has been lost, destroyed or wrongfully taken or if such
Security is mutilated and is surrendered to the Trustee, the Company shall issue
and the Trustee shall authenticate a replacement Security if the Trustee's and
the Company's requirements are met. If required by the Trustee or the Company,
an indemnity bond must be sufficient in the judgment of both to protect the
Company, the Trustee, any Agent or any authenticating agent from any loss which
any of them may suffer if a Security is replaced. The Company may charge for its
expenses in replacing a Security.
In case any such mutilated, destroyed, lost or stolen Security has
become or is about to become due and payable, or is about to be purchased by the
Company pursuant to Article III hereof, the Company in its discretion may,
instead of issuing a new Security, pay or purchase such Security, as the case
may be.
Every replacement Security is an additional obligation of the Company.
SECTION 2.08. Outstanding Securities. The Securities outstanding at
-----------------------
any time are all the Securities authenticated by the Trustee except for those
canceled by it, those delivered to it for cancellation, and those described in
this Section as not outstanding.
If a Security is replaced, paid or purchased pursuant to Section 2.07
hereof, it ceases to be outstanding unless the Trustee receives proof
satisfactory to it that the replaced, paid or purchased Security is held by a
bona fide purchaser.
If Securities are considered paid under Section 4.01 hereof, they
cease to be outstanding and interest on them ceases to accrue.
<PAGE>
20
A Security does not cease to be outstanding because the Company or an
Affiliate of the Company holds the Security.
SECTION 2.09. Treasury Securities. In determining whether the
--------------------
Noteholders of the required principal amount of Securities have concurred in any
direction, waiver or consent, Securities owned by the Company or an Affiliate of
the Company shall be considered as though they are not outstanding, except that
for the purposes of determining whether the Trustee shall be protected in
relying on any such direction, waiver or consent, only Securities which the
Trustee knows are so owned shall be so disregarded.
SECTION 2.10. Temporary Securities. (a) Until definitive Securities
---------------------
are ready for delivery, the Company may prepare and the Trustee shall
authenticate temporary Securities. Temporary Securities shall be substantially
in the form of definitive Securities but may have variations that the Company
considers appropriate for temporary Securities. Without unreasonable delay, the
Company shall prepare and the Trustee shall authenticate definitive Securities
in exchange for temporary Securities.
(b) A Global Note deposited with the Depositary or with the Trustee as
custodian for the Depositary pursuant to Section 2.01 shall be transferred to
the beneficial owners thereof in the form of certificated Securities only if
such transfer complies with Section 2.06 and (i) the Depositary notifies the
Company that it is unwilling or unable to continue as Depositary for such Global
Note or if at any time such Depositary ceases to be a "clearing agency"
registered under the Exchange Act and a successor depositary is not appointed by
the Company within 90 days of such notice, or (ii) an Event of Default has
occurred and is continuing.
(c) Any Global Note that is transferable to the beneficial owners
thereof in the form of certificated Securities pursuant to this Section 2.10
shall be surrendered by the Depositary to the Trustee located in the Borough of
Manhattan, The City of New York, to be so transferred, in whole or from time to
time in part, without charge, and the Trustee shall authenticate and deliver,
upon such transfer of each portion of such Global Note, an equal aggregate
principal amount at maturity of Securities of authorized denominations in the
form of certificated Securities. Any portion of a Global Note transferred
pursuant to this Section shall be executed, authenticated and delivered only in
denominations of $1,000 and any integral multiple thereof and registered in such
names as the Depositary shall direct. Any Note in the form of certificated
Securities delivered in exchange for an interest in the Rule 144A Global Note
shall, except as otherwise provided by Section 2.06(b) bear the Restricted
Securities Legend set forth in Exhibit A hereto. Any Note in the form of
certificated Securities delivered in exchange for an interest in the Regulation
S Temporary Global Note shall, except as otherwise provided by Section 2.06(b)
bear the Restricted Securities Legend set forth in Exhibit A hereto.
(d) Subject to the provisions of Section 2.09(c), the registered
holder of a Global Note may grant proxies and otherwise authorize any person,
including Agent Members and persons that may hold interests through Agent
Members, to take any action which a holder is entitled to take under this
Indenture or the Securities.
(e) In the event of the occurrence of either of the events specified
in Section 2.09(b), the Company will promptly make available to the Trustee a
reasonable supply of certificated Securities in
<PAGE>
21
definitive, fully registered form without interest coupons.
SECTION 2.11. Cancellation. The Company at any time may deliver
-------------
Securities to the Trustee for cancellation. The Registrar, Paying Agent and
Conversion Agent shall forward to the Trustee any Securities surrendered to them
for registration of transfer, redemption, conversion, exchange or payment. The
Trustee shall promptly cancel all Securities surrendered for registration of
transfer, redemption, conversion, exchange, payment, replacement or cancellation
and shall dispose of canceled Securities as the Company directs. The Company
may not issue new Securities to replace Securities that it has paid or that have
been delivered to the Trustee for cancellation or that any holder has converted.
SECTION 2.12. Defaulted Interest. If the Company fails to make a
-------------------
payment of interest on the Securities, it shall pay such defaulted interest plus
any interest payable on the defaulted interest, in any lawful manner. It may
pay such defaulted interest, plus any such interest payable on it, to the
persons who are Noteholders on a subsequent special record date. The Company
shall fix any such record date and payment date. At least 15 days before any
such record date, the Company shall mail to Noteholders a notice that states the
record date, payment date, and amount of such interest to be paid.
ARTICLE III
Redemption
----------
SECTION 3.01. Notices to Trustee. If the Company elects to redeem
-------------------
Securities pursuant to the Optional Redemption provision of the Securities
(paragraph 6 of the Securities) or Optional Tax Redemption provision of the
Securities (paragraph 7 of the Securities) and Section 3.07 hereof, it shall
notify the Trustee of the redemption date and the principal amount of Securities
to be redeemed and in connection with an optional tax redemption, such notice
shall be accompanied by an Officers' Certificate to the effect that the
conditions to such redemption contained herein have been complied with. The
Company shall give each notice provided for in this Section 3.01 at least 50
days before the redemption date (unless a shorter notice period shall be
satisfactory to the Trustee).
SECTION 3.02. Selection of Securities to be Redeemed. If less than
---------------------------------------
all the Securities are to be redeemed, the Trustee shall select the Securities
to be redeemed pro rata or by lot or by a method that complies with the
requirements of any exchange on which the Securities are listed that the Trustee
considers fair and appropriate. The Trustee shall make the selection not more
than 75 days and not less than 30 days before the redemption date from
Securities outstanding not previously called for redemption. The Trustee may
select for redemption portions of the principal of Securities that have
denominations larger than $1,000. Securities and portions of them it selects
shall be in amounts of $1,000 or integral multiples of $1,000. Provisions of
this Indenture that apply to Securities called for redemption also apply to
portions of Securities called for redemption. The Trustee shall notify the
Company promptly of the Securities or portions of Securities to be called for
redemption.
If any Security selected for partial redemption is converted in part
after such selection, the converted portion of such Security shall be deemed (so
far as may be) to be the portion to be selected for redemption. The Securities
(or portions thereof) so selected shall be deemed duly selected for
<PAGE>
22
redemption for all purposes hereof, notwithstanding that any such Security is
converted in whole or in part before the mailing of the notice of redemption.
Upon any redemption of less than all the Securities, the Company and the Trustee
may treat as outstanding any Securities surrendered for conversion during the
period 15 days next preceding the mailing of a notice of redemption and need not
treat as outstanding any Security authenticated and delivered during such period
in exchange for the unconverted portion of any Security converted in part during
such period.
SECTION 3.03. Notice of Redemption. At least 30 days but not more
---------------------
than 60 days before a redemption date, the Company shall mail a notice of
redemption to each holder whose Securities are to be redeemed at such holder's
registered address.
The notice shall identify the Securities to be redeemed and shall
state:
(a) the redemption date;
(b) the redemption price;
(c) if any Security is being redeemed in part, the portion of the
principal amount of such Security to be redeemed and that, after the
redemption date, upon surrender of such Security, a new Security or
Securities in principal amount equal to the unredeemed portion will be
issued;
(d) the name and address of the Paying Agent;
(e) that Securities called for redemption must be surrendered to the
Paying Agent to collect the redemption price plus accrued interest;
(f) that interest on Securities called for redemption ceases to accrue
on and after the redemption date; and
(g) the paragraph of the Securities pursuant to which the Securities
called for redemption are being redeemed.
Such notice shall also state the current Conversion Price and the date
on which the right to convert such Securities or portions thereof into Common
Stock of the Company will expire.
At the Company's request, the Trustee shall give notice of redemption
in the Company's name and at its expense.
SECTION 3.04. Effect of Notice of Redemption. Once notice of
-------------------------------
redemption is mailed, Securities called for redemption become due and payable on
the redemption date at the price set forth in the Security.
SECTION 3.05. Deposit of Redemption Price. On or before the
----------------------------
redemption date, the Company shall deposit with the Trustee or with the Paying
Agent money sufficient to pay the redemption price of and accrued interest on
all Securities to be redeemed on that date unless theretofore converted
<PAGE>
23
into Common Stock pursuant to the provisions hereof. The Trustee or the Paying
Agent shall return to the Company any money not required for that purpose.
SECTION 3.06. Securities Redeemed in Part. Upon surrender of a
----------------------------
Security that is redeemed in part, the Company shall issue and the Trustee shall
authenticate for the holder at the expense of the Company a new Security equal
in principal amount to the unredeemed portion of the Security surrendered.
SECTION 3.07. Optional Redemption and Optional Tax Redemption. The
------------------------------------------------
Company may redeem all or any portion of the Securities, upon the terms and at
the redemption prices set forth in each of the Securities. The Company may also
redeem all of the Securities in accordance with the Optional Tax Redemption
provision of the Securities (paragraph 6 of the Securities). Any redemption
pursuant to this Section 3.07 shall be made pursuant to the provisions of
Section 3.01 through 3.07 hereof.
SECTION 3.08. Change of Control Offer. (a) In the event that,
------------------------
pursuant to Section 4.07 hereof, the Company shall commence a Change of Control
Offer, the Company shall follow the procedures in this Section 3.08.
(b) The Change of Control Offer shall remain open for a period
specified by the Company which shall be no less than 30 calendar days and no
more than 40 calendar days following its commencement (the "Commencement Date")
(as determined in accordance with Section 4.07 hereof), except to the extent
that a longer period is required by applicable law (the "Tender Period"). Upon
the expiration of the Tender Period (the "Change of Control Payment Date"), the
Company shall purchase the principal amount of Securities required to be
purchased pursuant to Section 4.07 hereof (the "Offer Amount").
(c) If the Change of Control Payment Date is on or after an interest
payment record date and on or before the related interest payment date, any
accrued interest will be paid to the person in whose name a Security is
registered at the close of business on such record date, and no additional
interest will be payable to Noteholders who tender Securities pursuant to the
Change of Control Offer.
(d) The Company shall provide the Trustee with notice of the Change
of Control Offer at least 10 days before the Commencement Date.
(e) On or before the Commencement Date, the Company or the Trustee
(at the expense of the Company) shall send, by first class mail, a notice to
each of the Noteholders, which shall govern the terms of the Change of Control
Offer and shall state:
(i) that the Change of Control Offer is being made pursuant to this
Section 3.08 and Section 4.07 hereof and the length of time the Change of
Control Offer will remain open;
(ii) the Offer Amount, the purchase price (as determined in accordance
with Section 4.07 hereof), the Change of Control Payment Date, and that all
Securities tendered will be accepted for payment;
<PAGE>
24
(iii) that any Security or portion thereof not tendered or accepted
for payment will continue to accrue interest;
(iv) that, unless the Company defaults in the payment of the Change of
Control Payment, any Security or portion thereof accepted for payment
pursuant to the Change of Control Offer shall cease to accrue interest
after the Change of Control Payment Date;
(v) that Noteholders electing to have a Security or portion thereof
purchased pursuant to any Change of Control Offer will be required to
surrender the Security, with the form entitled "Option of Noteholder To
Elect Purchase" on the reverse of the Security completed, to the Company, a
depositary, if appointed by the Company, or a Paying Agent at the address
specified in the notice prior to the close of business on the third
Business Day preceding the Change of Control Payment Date;
(vi) that Noteholders will be entitled to withdraw their election if
the Company, depositary or Paying Agent, as the case may be, receives, not
later than the close of business on the second Business Day preceding the
Change of Control Payment Date, or such longer period as may be required by
law, a letter or a telegram, telex, facsimile transmission (receipt of
which is confirmed and promptly followed by a letter) setting forth the
name of the Noteholder, the principal amount of the Security or portion
thereof the Noteholder delivered for purchase and a statement that such
Noteholder is withdrawing his election to have the Security or portion
thereof purchased;
(vii) that Noteholders whose Securities are being purchased only in
part will be issued new Securities equal in principal amount to the
unpurchased portion of the Securities surrendered, which unpurchased
portion must be equal to $1,000 in principal amount or an integral multiple
thereof.
In addition, the notice shall, to the extent permitted by applicable
law, be accompanied by a copy of the information regarding the Company and its
Subsidiaries which is required to be contained in the most recent Quarterly
Report on Form 10-Q or Annual Report on Form 10-K (including any financial
statements or other information required to be included or incorporated by
reference therein) and any Reports on Form 8-K filed since the date of such
Quarterly Report or Annual Report which the Company has filed with the SEC (or
would have been required to file if the Company had remained a Company
incorporated in the United States), on or prior to the date of the notice. The
notice shall contain all instructions and materials necessary to enable such
Noteholders to tender Securities pursuant to the Change of Control Offer.
(f) At least one Business Day prior to the Change of Control Payment
Date, the Company shall irrevocably deposit with the Trustee or a Paying Agent
in immediately available funds an amount equal to the Offer Amount to be held
for payment in accordance with the terms of this Section. On the Change of
Control Payment Date, the Company shall, to the extent lawful, (i) accept for
payment the Securities or portions thereof tendered pursuant to the Change of
Control Offer, (ii) deliver or cause the depositary or Paying Agent to deliver
to the Trustee Securities so accepted and (iii) deliver to the Trustee an
Officers' Certificate stating such Securities or portions thereof have been
accepted for payment
<PAGE>
25
by the Company in accordance with the terms of this Section 3.08. The
depositary, the Paying Agent or the Company, as the case may be, shall promptly
(but in any case not later than ten (10) calendar days after the Change of
Control Payment Date) mail or deliver to each tendering Noteholder an amount
equal to the purchase price of the Securities tendered by such Noteholder, and
the Trustee shall promptly authenticate and mail or deliver to such Noteholders
a new Security equal in principal amount to any unpurchased portion of the
Security surrendered. Any Securities not so accepted shall be promptly mailed or
delivered by or on behalf of the Company to the holder thereof. The Company will
publicly announce in a newspaper of general circulation the results of the
Change of Control Offer on, or as soon as practicable after, the Change of
Control Payment Date.
(g) The Change of Control Offer shall be made by the Company in
compliance with all applicable provisions of the Exchange Act, and all
applicable tender offer rules promulgated thereunder, and shall include all
instructions and materials necessary to enable such Noteholders to tender their
Securities.
ARTICLE IV
Covenants
---------
SECTION 4.01. Payment of Securities. The Company shall pay the
----------------------
principal of and interest and Liquidated Damages, if any, on the Securities on
the dates and in the manner provided in the Securities. Principal and interest
and Liquidated Damages, if any, shall be considered paid on the date due if the
Paying Agent (other than the Company or a Permitted Subsidiary of the Company)
holds on that date money designated for and sufficient to pay all principal and
interest and Liquidated Damages, if any, then due unless such money is paid to
holders of Senior Debt pursuant to Article VI. To the extent lawful, the
Company shall pay interest (including post-petition interest in any proceeding
under any Bankruptcy Law) on overdue installments of interest (without regard to
any applicable grace period) at the rate borne by the Securities, compounded
semiannually.
SECTION 4.02. SEC Reports. Whether or not required by the rules and
------------
regulations of the SEC, so long as any Securities are outstanding, the Company
will file with the SEC and furnish to the Trustee and, if requested, to the
holders of Securities all quarterly and annual financial information required to
be contained in a filing with the SEC on Forms 10-Q and 10-K (or the equivalent
thereof in the event the Company becomes a corporation organized under the laws
of England and Wales), including a "Management's Discussion and Analysis of
Results of Operations and Financial Condition" and, with respect to annual
information only, a report thereon by the Company's certified independent
accountants. This Section 4.02 will apply notwithstanding that the Company
becomes a company incorporated in England and Wales.
SECTION 4.03. Compliance Certificate. The Company shall deliver to
-----------------------
the Trustee, within 90 days after the end of each fiscal year of the Company, an
Officers' Certificate stating that a review of the activities of the Company and
its subsidiaries during the preceding fiscal year has been made under the
supervision of the signing Officers with a view to determining whether the
Company has kept, observed, performed and fulfilled its obligations under, and
complied with the covenants and
<PAGE>
26
conditions contained in, this Indenture, and further stating, as to each such
Officer signing such certificate, that to the best of his knowledge the Company
has kept, observed, performed and fulfilled each and every covenant, and
complied with the covenants and conditions contained in this Indenture and is
not in default in the performance or observance of any of the terms, provisions
and conditions hereof (or, if a Default or Event of Default shall have occurred,
describing all such Defaults or Events of Default of which he may have
knowledge) and that to the best of his knowledge no event has occurred and
remains in existence by reason of which payments on account of the principal or
of interest, if any, on the Securities are prohibited.
One of the Officers signing such Officers' Certificate shall be either
the Company's principal executive officer, principal financial officer or
principal accounting officer.
The Company will so long as any of the Securities are outstanding,
deliver to the Trustee, forthwith upon becoming aware of:
(a) any Default, Event of Default or default in the performance of any
covenant, agreement or condition contained in this Indenture; or
(b) any event of default under any other mortgage, indenture or
instrument as that term is used in Section 8.01(e),
an Officers' Certificate specifying such Default, Event of Default or default.
Immediately upon the occurrence of any event giving rise to an
increase in the interest rate on the Securities in accordance with Section 13 of
the form thereof or the termination of any such increase, the Company shall give
the Trustee notice of such increase or termination, of the interest rate borne
by the Securities after giving effect to such increase or termination and of the
event giving rise to such increase or termination (such notice to be contained
in an Officers' Certificate), and prior to receipt of such Officers' Certificate
the Trustee shall be entitled to assume that no such increase or termination has
occurred, as the case may be.
SECTION 4.04. Stay, Extension and Usury Laws. The Company covenants
-------------------------------
(to the extent that it may lawfully do so) that it will not at any time insist
upon, plead, or in any manner whatsoever claim or take the benefit or advantage
of, any stay, extension or usury law wherever enacted, now or at any time
hereafter in force, which may affect the covenants or the performance of this
Indenture; and the Company (to the extent it may lawfully do so) hereby
expressly waives all benefit or advantage of any such law, and covenants that it
will not, by resort to any such law, hinder, delay or impede the execution of
any power herein granted to the Trustee, but will suffer and permit the
execution of every such power as though no such law has been enacted.
SECTION 4.05. Corporate Existence. Subject to Article VII hereof,
--------------------
the Company will do or cause to be done all things necessary to preserve and
keep in full force and effect its corporate existence and the corporate,
partnership or other existence of each subsidiary of the Company in accordance
with the respective organizational documents of each subsidiary and the rights
(charter and statutory), licenses and franchises of the Company and its
subsidiaries; provided, however, that the
-------- -------
<PAGE>
27
Company shall not be required to preserve any such right, license or franchise,
or the corporate, partnership or other existence of any subsidiary, if the Board
of Directors shall determine that the preservation thereof is no longer
desirable in the conduct of the business of the Company and its subsidiaries
taken as a whole and that the loss thereof is not adverse in any material
respect to the Noteholders. The Company shall notify the Trustee in writing of
any subsidiary which qualifies as a Material Subsidiary and is not specified in
clause (i) of the definition thereof.
SECTION 4.06. Taxes. The Company shall, and shall cause each of its
------
subsidiaries to, pay prior to delinquency all taxes, assessments and
governmental levies, except as contested in good faith and by appropriate
proceedings.
SECTION 4.07. Change of Control. (a) Upon the occurrence of a
------------------
Change of Control, each holder of Securities shall have the right, in accordance
with this Section 4.07 and Section 3.08 hereof, to require the Company to
repurchase all or any part (equal to $1,000 or an integral multiple thereof) of
such holder's Securities pursuant to the terms of Section 3.08 (the "Change of
Control Offer") at a purchase price equal to 101% of the principal amount
thereof, plus accrued and unpaid interest thereon to the Change of Control
Payment Date (the "Change of Control Payment").
(b) Within 40 days following any Change of Control, the Company shall
mail to each holder the notice provided by Section 3.08(e)(i).
SECTION 4.08. Payment of Additional Amounts. At least 10 days prior
------------------------------
to the first date on which payment of principal and any premium or interest or
Liquidated Damages, if any, on the Securities is to be made, and at least 10
days prior to any subsequent such date if there has been any change with respect
to the matters set forth in the Officers' Certificate described in this Section
4.08, the Company will furnish the Trustee and the Paying Agent, if other than
the Trustee, with an Officers' Certificate instructing the Trustee and the
Paying Agent whether the Company is obligated to pay Additional Amounts (as
defined in Section 2 of the Securities) with respect to such payment of
principal, or of any premium or interest or Liquidated Damages, if any, on the
Securities. If the Company will be obligated to pay Additional Amounts with
respect to such payment, then such Officers' Certificate shall specify by
country the amount, if any, required to be withheld on such payments to such
holders and the Company will pay to the Trustee or the Paying Agent such
Additional Amounts. The Company shall indemnify the Trustee and the Paying
Agent for, and hold them harmless against, any loss, liability or expense
reasonably incurred without negligence or bad faith on their part arising out of
or in connection with actions taken or omitted by any of them in reliance on any
Officers' Certificate furnished to them pursuant to this Section 4.08.
Whenever in this Indenture there is mentioned, in any context, the
payment of principal (and premium, if any), Offer Amount, interest, Liquidated
Damages, if any, or any other amount payable under or with respect to any
Security such mention shall be deemed to include mention of the payment of
Additional Amounts provided for in this Section 4.08 and Section 2 of the
Securities to the extent that, in such context, Additional Amounts are, were and
would be payable in respect thereof pursuant to the provisions of this Section
4.08 and Section 2 of the Securities and express mention of the payment of
Additional Amounts (if applicable) in any provisions hereof shall not be
construed as excluding Additional Amounts in those provisions hereof where such
express mention is not made (if applicable).
<PAGE>
28
ARTICLE V
Conversion
----------
SECTION 5.01. Conversion Privilege. A holder of a Security may
---------------------
convert it into fully paid and nonassessable shares of Common Stock of the
Company at any time after 90 days following the date of original issuance
thereof and prior to maturity at the Conversion Price then in effect, except
that, with respect to any Security called for redemption, such conversion right
shall terminate at the close of business on the Business Day immediately
preceding the redemption date (unless the Company shall default in making the
redemption payment when it becomes due, in which case the conversion right shall
terminate on the date such default is cured). The number of shares of Common
Stock issuable upon conversion of a Security is determined by dividing the
principal amount of the Security converted by the conversion price in effect on
the Conversion Date (the "Conversion Price").
The initial Conversion Price is stated in paragraph 12 of the
Securities and is subject to adjustment as provided in this Article V.
A holder may convert a portion of a Security equal to any integral
multiple of $1,000. Provisions of this Indenture that apply to conversion of all
of a Security also apply to conversion of a portion of it.
SECTION 5.02. Conversion Procedure. To convert a Security, a holder
---------------------
must satisfy the requirements in paragraph 12 of the Securities. The date on
which the holder satisfies all of those requirements is the conversion date (the
"Conversion Date"). As soon as practicable after the Conversion Date, the
Company shall deliver to the holder through the Conversion Agent a certificate
for the number of whole shares of Common Stock issuable upon the conversion and
a check for any fractional share determined pursuant to Section 5.03. The
person in whose name the certificate is registered shall become the stockholder
of record on the Conversion Date and, as of such date, such person's rights as a
Noteholder shall cease; provided, however, that no surrender of a security on
-------- -------
any date when the stock transfer books of the Company shall be closed shall be
effective to constitute the person entitled to receive the shares of Common
Stock upon such conversion as the stockholder of record of such shares of Common
Stock on such date, but such surrender shall be effective to constitute the
person entitled to receive such shares of Common Stock as the stockholder of
record thereof for all purposes at the close of business on the next succeeding
day on which such stock transfer books are open; provided further, however, that
---------------- -------
such conversion shall be at the Conversion Price in effect on the date that such
Security shall have been surrendered for conversion, as if the stock transfer
books of the Company had not been closed.
No payment or adjustment will be made for accrued and unpaid interest
or Liquidated Damages, if any, on a converted Security or for dividends or
distributions on shares of Common Stock issued upon conversion of a Security,
but if any holder surrenders a Security for conversion after the close of
business on the record date for the payment of an installment of interest and
prior to the opening of business on the next interest payment date, then,
notwithstanding such conversion, the interest payable on such interest payment
date shall be paid to the holder of such Security on such record date. In such
<PAGE>
29
event, such Security, when surrendered for conversion, need not be accompanied
by payment of an amount equal to the interest payable on such interest payment
date on the portion so converted.
If a holder converts more than one Security at the same time, the
number of whole shares of Common Stock issuable upon the conversion shall be
based on the total principal amount of Securities converted.
Upon surrender of a Security that is converted in part, the Trustee
shall authenticate for the holder a new Security equal in principal amount to
the unconverted portion of the Security surrendered.
SECTION 5.03. Fractional Shares. The Company will not issue
------------------
fractional shares of Common Stock upon conversion of a Security. In lieu
thereof, the Company will pay an amount in cash based upon the Daily Market
Price of the Common Stock on the trading day prior to the date of conversion.
SECTION 5.04. Taxes on Conversion. The issuance of certificates for
--------------------
shares of Common Stock upon the conversion of any Security shall be made without
charge to the converting Noteholder for such certificates or for any tax in
respect of the issuance of such certificates, and such certificates shall be
issued in the respective names of, or in such names as may be directed by, the
holder or holders of the converted Security; provided, however, that in the
-------- -------
event that certificates for shares of Common Stock are to be issued in a name
other than the name of the holder of the Security converted, such Security, when
surrendered for conversion, shall be accompanied by an instrument of transfer,
in form satisfactory to the Company, duly executed by the registered holder
thereof or his duly authorized attorney; and provided further, however, that the
---------------- -------
Company shall not be required to pay any tax which may be payable in respect of
any transfer involved in the issuance and delivery of any such certificates in a
name other than that of the holder of the converted Security, and the Company
shall not be required to issue or deliver such certificates unless or until the
person or persons requesting the issuance thereof shall have paid to the Company
the amount of such tax or shall have established to the satisfaction of the
Company that such tax has been paid or is not applicable.
SECTION 5.05. Company to Provide Stock. The Company shall at all
-------------------------
times reserve and keep available, free from preemptive rights, out of its
authorized but unissued Common Stock, solely for the purpose of issuance upon
conversion of Securities as herein provided, a sufficient number of shares of
Common Stock to permit the conversion of all outstanding Securities for shares
of Common Stock. All shares of Common Stock which may be issued upon conversion
of the Securities shall be duly authorized, validly issued, fully paid and
nonassessable when so issued. Shares of Common Stock issuable upon conversion
of a Transfer Restricted Security shall bear such restrictive legends as the
Company shall provide in accordance with applicable law. If shares of Common
Stock are to be issued upon conversion of a Transfer Restricted Security and
they are to be registered in a name other than that of the holder of such
Transfer Restricted Security, then the person in whose name such shares of
Common Stock are to be registered must deliver to the Trustee a certificate
satisfactory to the Company and signed by such person as to compliance with the
restrictions on transfer contained in such restrictive legends.
SECTION 5.06. Adjustment of Conversion Price. The Conversion Price
-------------------------------
shall be subject to adjustment from time to time as follows:
(a) In case the Company shall (1) pay a dividend in shares of Common
Stock to holders of Common Stock, (2) make a distribution in shares of Common
Stock to holders of Common Stock,
<PAGE>
30
(3) subdivide its outstanding shares of Common Stock into a greater number of
shares of Common Stock or (4) combine its outstanding shares of Common Stock
into a smaller number of shares of Common Stock, the Conversion Price in effect
immediately prior to such action shall be adjusted so that the holder of any
Security thereafter surrendered for conversion shall be entitled to receive the
number of shares of Common Stock which he would have owned immediately following
such action had such Securities been converted immediately prior thereto. Any
adjustment made pursuant to this subsection (a) shall become effective
immediately after the record date in the case of a dividend or distribution and
shall become effective immediately after the effective date in the case of a
subdivision or combination.
(b) In case the Company shall issue rights or warrants to
substantially all holders of Common Stock entitling them (for a period
commencing no earlier than the record date for the determination of holders of
Common Stock entitled to receive such rights or warrants and expiring not more
than 45 days after such record date) to subscribe for or purchase shares of
Common Stock (or securities convertible into Common Stock) at a price per share
less than the current market price (as determined pursuant to subsection (f)
below) of the Common Stock on such record date, the Conversion Price shall be
adjusted so that the same shall equal the price determined by multiplying the
Conversion Price in effect immediately prior to such record date by a fraction
of which the numerator shall be the number of shares of Common Stock outstanding
on such record date, plus the number of shares of Common Stock which the
aggregate offering price of the offered shares of Common Stock (or the aggregate
conversion price of the convertible securities so offered) would purchase at
such current market price, and of which the denominator shall be the number of
shares of Common Stock outstanding on such record date plus the number of
additional shares of Common Stock offered (or into which the convertible
securities so offered are convertible). Such adjustments shall become effective
immediately after such record date.
(c) In case the Company shall distribute to all holders of Common
Stock shares of any class of stock other than Common Stock, evidences of
indebtedness or other assets (other than cash dividends out of current or
retained earnings), or shall distribute to substantially all holders of Common
Stock rights or warrants to subscribe for securities (other than those referred
to in subsection (b) above), then in each such case the Conversion Price shall
be adjusted so that the same shall equal the price determined by multiplying the
Conversion Price in effect immediately prior to the date of such distribution by
a fraction of which the numerator shall be the current market price (determined
as provided in subsection (f) below) of the Common Stock on the record date
mentioned below less the then fair market value (as determined by the Board of
Directors, whose determination shall be conclusive evidence of such fair market
value and described in a Board Resolution) of the portion of the assets so
distributed or of such subscription rights or warrants applicable to one share
of Common Stock, and of which the denominator shall be such current market price
of the Common Stock. Such adjustment shall become effective immediately after
the record date for the determination of the holders of Common Stock entitled to
receive such distribution. Notwithstanding the foregoing, in the event that the
Company shall distribute rights or warrants (other than those referred to in
subsection (b) above) ("Rights") pro rata to holders of Common Stock, the
Company may, in lieu of making any adjustment pursuant to this Section 5.06,
make proper provision so that each holder of a Security who converts such
Security (or any portion thereof) after the record date for such distribution
and prior to the expiration or redemption of the Rights shall be entitled to
receive upon such conversion, in addition to the shares of Common Stock issuable
upon such conversion (the "Conversion Shares"), a number of Rights to be
determined as
<PAGE>
31
follows: (i) if such conversion occurs on or prior to the date for the
distribution to the holders of Rights of separate certificates evidencing such
Rights (the "Distribution Date"), the same number of Rights 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 of and applicable to the Rights; and (ii) if such conversion occurs
after the Distribution Date, the same number of Rights to which a holder of the
number of shares of Common Stock into which the principal amount of the Security
so converted was convertible immediately prior to the Distribution Date would
have been entitled on the Distribution Date in accordance with the terms and
provisions of and applicable to the Rights.
(d) In case the Company shall, by dividend or otherwise, at any time
distribute to all holders of its Common Stock cash (including any distributions
of cash out of current or retained earnings of the Company but excluding any
cash that is distributed as part of a distribution requiring a Conversion Price
adjustment pursuant to paragraph (c) of this Section) in an aggregate amount
that, together with the sum of (x) the aggregate amount of any other
distributions to all holders of its Common Stock made in cash plus (y) all
Excess Payments, in each case made within the 12 months preceding the date fixed
for determining the stockholders entitled to such distribution (the
"Distribution Record Date") and in respect of which no Conversion Price
adjustment pursuant to paragraphs (c) or (e) of this Section or this paragraph
(d) has been made, exceeds 10% of the product of the current market price per
share (determined as provided in paragraph (f) of this Section) of the Common
Stock on the Distribution Record Date times the number of shares of Common Stock
outstanding on the Distribution Record Date (excluding shares held in the
treasury of the Company), the Conversion Price shall be reduced so that the same
shall equal the price determined by multiplying such Conversion Price in effect
immediately prior to the effectiveness of the Conversion Price reduction
contemplated by this paragraph (d) by a fraction of which the numerator shall be
the current market price per share (determined as provided in paragraph (f) of
this Section) of the Common Stock on the Distribution Record Date less the
amount of such cash and other consideration (including any Excess Payments) so
distributed applicable to one share (based on the pro rata portion of the
aggregate amount of such cash and other consideration (including any Excess
Payments), divided by the shares of Common Stock outstanding on the Distribution
Record Date) of Common Stock and the denominator shall be such current market
price per share (determined as provided in paragraph (f) of this Section) of the
Common Stock on the Distribution Record Date, such reduction to become effective
immediately prior to the opening of business on the day following the
Distribution Record Date.
(e) In case a tender offer or other negotiated transaction made by
the Company or any Subsidiary for all or any portion of the Common Stock shall
be consummated, if an Excess Payment is made in respect of such tender offer or
other negotiated transaction and the amount of such Excess Payment, together
with the sum of (x) the aggregate amount of all Excess Payments plus (y) the
aggregate amount of all distributions to all holders of the Common Stock made in
cash (specifically including distributions of cash out of retained earnings), in
each case made within the 12 months preceding the date of payment of such
current negotiated transaction consideration or expiration of such current
tender offer, as the case may be (the "Purchase Date"), and as to which no
adjustment pursuant to paragraph (c) or paragraph (d) of this Section or this
paragraph (e) has been made, exceeds 10% of the product of the current market
price per share (determined as provided in paragraph (f) of this Section) of the
Common Stock on the Purchase Date times the number of shares of Common Stock
outstanding (including any tendered shares but excluding any shares held in the
treasury of the Company) on the Purchase Date, the
<PAGE>
32
Conversion Price shall be reduced so that the same shall equal the price
determined by multiplying such Conversion Price in effect immediately prior to
the effectiveness of the Conversion Price reduction contemplated by this
paragraph (e) by a fraction of which the numerator shall be the current market
price per share (determined as provided in paragraph (f) of this Section) of the
Common Stock on the Purchase Date less the amount of such Excess Payments and
such cash distributions, if any, applicable to one share (based on the pro rata
portion of the aggregate amount of such Excess Payments and such cash
distributions, divided by the shares of Common Stock outstanding on the Purchase
Date) of Common Stock and the denominator shall be such current market price per
share (determined as provided in paragraph (f) of this Section) of the Common
Stock on the Purchase Date, such reduction to become effective immediately prior
to the opening of business on the day following the Purchase Date.
(f) The current market price per share of Common Stock on any date
shall be deemed to be the average of the Daily Market Prices for the shorter of
(i) thirty consecutive business days ending on the last full trading day on the
exchange or market referred to in determining such Daily Market Prices prior to
the time of determination or (ii) the period commencing on the date next
succeeding the first public announcement of the issuance of such rights or such
warrants or such other distribution or such negotiated transaction through such
last full trading day on the exchange or market referred to in determining such
Daily Market Prices prior to the time of determination.
(g) In any case in which this Section 5.06 shall require that an
adjustment be made immediately following a record date, the Company may elect to
defer (but only until five Business Days following the filing by the Company
with the Trustee of the certificate described in Section 5.10 below) issuing to
the holder of any Security converted after such record date the shares of Common
Stock and other Capital Stock of the Company issuable upon such conversion over
and above the shares of Common Stock and other Capital Stock of the Company
issuable upon such conversion only on the basis of the Conversion Price prior to
adjustment; and, in lieu of the shares the issuance of which is so deferred, the
Company shall issue or cause its transfer agents to issue due bills or other
appropriate evidence of the right to receive such shares.
SECTION 5.07. No Adjustment. No adjustment in the Conversion Price
--------------
shall be required until cumulative adjustments amount to 1% or more of the
Conversion Price as last adjusted; provided, however, that any adjustments which
-------- -------
by reason of this Section 5.07 are not required to be made shall be carried
forward and taken into account in any subsequent adjustment. All calculations
under this Article V shall be made to the nearest cent or to the nearest one-
hundredth of a share, as the case may be. No adjustment need be made for rights
to purchase Common Stock pursuant to a Company plan for reinvestment of
dividends or interest. No adjustment need be made for a change in the par value
or no par value of the Common Stock.
SECTION 5.08. Other Adjustments. (a) In the event that, as a result
------------------
of an adjustment made pursuant to Section 5.06 above, the holder of any Security
thereafter surrendered for conversion shall become entitled to receive any
shares of Capital Stock of the Company other than shares of its Common Stock,
thereafter the Conversion Price of such other shares so receivable upon
conversion of any Securities shall be subject to adjustment from time to time in
a manner and on terms as nearly equivalent as practicable to the provisions with
respect to Common Stock contained in this Article V. (b) In the event that
shares of Common Stock are not delivered after the expiration of any of the
rights
<PAGE>
33
or warrants referred to in Section 5.06(b) and Section 5.06(c) hereof, the
Conversion Price shall be readjusted to the Conversion Price which would
otherwise be in effect had the adjustment made upon the issuance of such rights
or warrants been made on the basis of delivery of only the number of shares of
Common Stock actually delivered.
SECTION 5.09. Adjustments for Tax Purposes. The Company may make
-----------------------------
such reductions in the Conversion Price, in addition to those required by
Section 5.06 above, as it determines to be advisable in order that any stock
dividend, subdivision of shares, distribution or rights to purchase stock or
securities or distribution of securities convertible into or exchangeable for
stock made by the Company to its stockholders will not be taxable to the
recipients thereof.
SECTION 5.10. Notice of Adjustment. Whenever the Conversion Price is
---------------------
adjusted, the Company shall promptly mail to Noteholders at the addresses
appearing on the Registrar's books a notice of the adjustment and file with the
Trustee an Officers' Certificate briefly stating the facts requiring the
adjustment and the manner of computing it. The certificate shall be conclusive
evidence of the correctness of such adjustment.
SECTION 5.11. Notice of Certain Transactions. In the event that:
-------------------------------
(1) the Company takes any action which would require an adjustment in
the Conversion Price;
(2) the Company takes any action that would require a supplemental
indenture pursuant to Section 5.12; or
(3) there is a dissolution or liquidation of the Company;
a holder of a Security may wish to convert such Security into shares of Common
Stock prior to the record date for or the effective date of the transaction so
that he may receive the rights, warrants, securities or assets which a holder of
shares of Common Stock on that date may receive. Therefore, the Company shall
mail to Noteholders at the addresses appearing on the Registrar's books and the
Trustee a notice stating the proposed record or effective date, as the case may
be. The Company shall mail the notice at least 15 days before such date;
however, failure to mail such notice or any defect therein shall not affect the
validity of any transaction referred to in clause (1), (2) or (3) of this
Section 5.11.
SECTION 5.12. Effect of Reclassifications, Consolidations, Mergers or
-------------------------------------------------------
Sales on Conversion Privilege. If any of the following shall occur, namely:
- ------------------------------
(i) any reclassification or change of outstanding shares of Common Stock
issuable upon conversion of Securities (other than a change in par value, or
from par value to no par value, or from no par value to par value, or as a
result of a subdivision or combination), (ii) any consolidation or merger to
which the Company is a party other than a merger in which the Company is the
continuing corporation and which does not result in any reclassification of, or
change (other than a change in name, or par value, or from par value to no par
value, or from no par value to par value or as a result of a subdivision or
combination) in, outstanding shares of Common Stock or (iii) any sale or
conveyance of all or substantially all of the property or business of the
Company as an entirety, then the Company, or such successor or purchasing
corporation,
<PAGE>
34
as the case may be, shall, as a condition precedent to such reclassification,
change, consolidation, merger, sale or conveyance, execute and deliver to the
Trustee a supplemental indenture in form satisfactory to the Trustee providing
that the holder of each Security then outstanding shall have the right to
convert such Security into the kind and amount of shares of stock and other
securities and property (including cash) receivable upon such reclassification,
change, consolidation, merger, sale or conveyance by a holder of the number of
shares of Common Stock deliverable upon conversion of such Security immediately
prior to such reclassification, change, consolidation, merger, sale or
conveyance. Such supplemental indenture shall provide for adjustments of the
Conversion Price which shall be as nearly equivalent as may be practicable to
the adjustments of the Conversion Price provided for in this Article V. The
foregoing, however, shall not in any way affect the right a holder of a Security
may otherwise have, pursuant to clause (ii) of the last sentence of subsection
(c) of Section 5.06, to receive Rights upon conversion of a Security. If, in the
case of any such consolidation, merger, sale or conveyance, the stock or other
securities and property (including cash) receivable thereupon by a holder of
Common Stock includes shares of stock or other securities and property of a
corporation other than the successor or purchasing corporation, as the case may
be, in such consolidation, merger, sale or conveyance, then such supplemental
indenture shall also be executed by such other corporation and shall contain
such additional provisions to protect the interests of the holders of the
Securities as the Board of Directors of the Company shall reasonably consider
necessary by reason of the foregoing. The provision of this Section 5.12 shall
similarly apply to successive consolidations, mergers, sales or conveyances.
In the event the Company shall execute a supplemental indenture
pursuant to this Section 5.12, the Company shall promptly file with the Trustee
an Officers' Certificate briefly stating the reasons therefor, the kind or
amount of shares of stock or securities or property (including cash) receivable
by holders of the Securities upon the conversion of their Securities after any
such reclassification, change, consolidation, merger, sale or conveyance and any
adjustment to be made with respect thereto.
SECTION 5.13. Trustee's Disclaimer. The Trustee has no duty to
---------------------
determine when an adjustment under this Article V should be made, how it should
be made or what such adjustment should be, but may accept as conclusive evidence
of the correctness of any such adjustment, and shall be protected in relying
upon the Officers' Certificate with respect thereto which the Company is
obligated to file with the Trustee pursuant to Section 5.10. The Trustee makes
no representation as to the validity or value of any securities or assets issued
upon conversion of Securities, and the Trustee shall not be responsible for the
Company's failure to comply with any provisions of this Article V.
The Trustee shall not be under any responsibility to determine the
correctness of any provisions contained in any supplemental indenture executed
pursuant to Section 5.12, but may accept as conclusive evidence of the
correctness thereof, and shall be protected in relying upon, the Officers'
Certificate with respect thereto which the Company is obligated to file with the
Trustee pursuant to Section 5.12.
<PAGE>
35
ARTICLE VI
Subordination
-------------
SECTION 6.01. Agreement to Subordinate and Ranking. The Company, for
-------------------------------------
itself and its successors, and each holder, by his acceptance of Securities,
agree that the payment of the principal of or interest or Liquidated Damages, if
any, on or any other amounts due on the Securities is subordinated in right of
payment, to the extent and in the manner stated in this Article VI, to the prior
payment in full of all existing and future Senior Debt. The Securities shall
rank pari pasu with, and shall not be senior in right of payment to, the
Convertible Notes or such other Indebtedness of the Company whether outstanding
on the date of this Indenture or hereafter created, incurred, issued or
guaranteed by the Company, where the instrument creating or evidencing such
Indebtedness expressly provides that such Indebtedness ranks pari pasu with the
Securities and the Convertible Notes.
SECTION 6.02. No Payment on Securities if Senior Debt in Default.
---------------------------------------------------
Anything in this Indenture to the contrary notwithstanding, no payment on
account of principal of or redemption of, interest or Liquidated Damages, if
any, on or other amounts due on the Securities, and no redemption, purchase, or
other acquisition of the Securities, shall be made by or on behalf of the
Company (i) unless full payment of amounts then due for principal and interest
and of all other amounts then due on all Senior Debt has been made or duly
provided for pursuant to the terms of the instrument governing such Senior Debt,
(ii) if, at the time of such payment, redemption, purchase or other acquisition,
or immediately after giving effect thereto, there shall exist under any Senior
Debt, or any agreement pursuant to which any Senior Debt is issued, any default,
which default shall not have been cured or waived and which default shall have
resulted in the full amount of such Senior Debt being declared due and payable
or (iii) if, at the time of such payment, redemption, purchase or other
acquisition, the Trustee shall have received written notice from any of the
holders of Senior Debt or such holder's representative (a "Payment Blockage
Notice") that there exists under such Senior Debt, or any agreement pursuant to
which such Senior Debt is issued, any default, which default shall not have been
cured or waived, permitting the holders thereof to declare any amounts of such
Senior Debt due and payable, but only for the period (the "Payment Blockage
Period") commencing on the date of receipt of the Payment Blockage Notice and
ending (unless earlier terminated by notice given to the Trustee by the holders
of such Senior Debt) on the earlier of (a) the date on which such event of
default shall have been cured or waived or (b) 180 days from the receipt of the
Payment Blockage Notice. Upon termination of the Payment Blockage Period,
payments on account of principal of or interest or Liquidated Damages, if any,
on the Securities (other than, subject to Section 6.03, amounts due and payable
by reason of the acceleration of the maturity of the Securities) and
redemptions, purchases or other acquisitions may be made by or on behalf of the
Company. Notwithstanding anything herein to the contrary, (a) only one Payment
Blockage Notice may be given during any period of 360 consecutive days with
respect to the same event of default or any other events of default on the same
issue of Senior Debt existing and known to the person giving such notice at the
time of such notice unless such event of default or such other events of default
have been cured or waived for a period of not less than 90 consecutive days and
(b) no new Payment Blockage Period may be commenced by the holder or holders of
the same issue of Senior Debt or their representative or representatives during
any period of 360 consecutive days unless all events of default which were the
object of the immediately preceding Payment Blockage Notice, and any other event
of default on the same issue of Senior Debt existing and known to the person
giving such notice at the time of such notice, have been cured or waived.
<PAGE>
36
In the event that, notwithstanding the provisions of this Section
6.02, payments are made by or on behalf of the Company in contravention of the
provisions of this Section 6.02, such payments shall be held by the Trustee, any
Paying Agent or the holders, as applicable, in trust for the benefit of, and
shall be paid over to and delivered to, the holders of Senior Debt or their
representative or the trustee under the indenture or other agreement (if any),
pursuant to which any instruments evidencing any Senior Debt may have been
issued for application to the payment of all Senior Debt ratably according to
the aggregate amounts remaining unpaid to the extent necessary to pay all Senior
Debt in full in accordance with the terms of such Senior Debt, after giving
effect to any concurrent payment or distribution to or for the holders of Senior
Debt.
The Company shall give prompt written notice to the Trustee and any
Paying Agent of any default or event of default under any Senior Debt or under
any agreement pursuant to which any Senior Debt may have been issued.
SECTION 6.03. Distribution on Acceleration of Securities; Dissolution
-------------------------------------------------------
and Reorganization; Subrogation of Securities. (a) If the Securities are
- ----------------------------------------------
declared due and payable because of the occurrence of an Event of Default, the
Company or the Trustee shall give prompt written notice to the holders of all
Senior Debt or to the trustee(s) for such Senior Debt of such acceleration. The
Company may not pay the principal of or interest or Liquidated Damages, if any,
on or any other amounts due on the Securities until five days after such holders
or trustee(s) of Senior Debt receive such notice and, thereafter, the Company
may pay the principal of or interest or Liquidated Damages, if any, on or any
other amounts due on the Securities only if the provisions of this Article VI
permit such payment.
(b) Upon (i) any acceleration of the principal amount due on the
Securities because of an Event of Default or (ii) any distribution of assets of
the Company upon any dissolution, winding up, liquidation or reorganization of
the Company (whether in bankruptcy, insolvency or receivership proceedings or
upon an assignment for the benefit of creditors or any other dissolution,
winding up, liquidation or reorganization of the Company):
(1) the holders of all Senior Debt shall first be entitled to receive
payment in full of the principal thereof, the interest thereon and any other
amounts due thereon before the holders are entitled to receive payment on
account of the principal of or interest or Liquidated Damages, if any, on or any
other amounts due on the Securities;
(2) any payment or distribution of assets of the Company of any kind
or character, whether in cash, property or securities (other than securities of
the Company as reorganized or readjusted or securities of the Company or any
other corporation provided for by a plan of reorganization or readjustment the
payment of which is subordinate, at least to the extent provided in this Article
with respect to the Securities, to the payment in full without diminution or
modification by such plan of all Senior Debt), to which the holders or the
Trustee would be entitled except for the provisions of this Article, shall be
paid by the liquidating trustee or agent or other person making such a payment
or distribution, directly to the holders of Senior Debt (or their
representatives(s) or trustee(s) acting on their behalf), ratably according to
the aggregate amounts remaining unpaid on account of the principal of or
interest on and other amounts due on the Senior Debt held or represented by
each, to the extent
<PAGE>
37
necessary to make payment in full of all Senior Debt remaining unpaid, after
giving effect to any concurrent payment or distribution to the holders of such
Senior Debt; and
(3) in the event that, notwithstanding the foregoing, any payment or
distribution of assets of the Company of any kind or character, whether in cash,
property or securities (other than securities of the Company as reorganized or
readjusted, or securities of the Company or any other corporation provided for
by a plan of reorganization or readjustment the payment of which is subordinate,
at least to the extent provided in this Article with respect to the Securities,
to the payment in full without diminution or modification by such plan of Senior
Debt), shall be received by the Trustee or the holders before all Senior Debt is
paid in full, such payment or distribution shall be held in trust for the
benefit of, and be paid over to upon request by a holder of the Senior Debt, the
holders of the Senior Debt remaining unpaid (or their representatives) or
trustee(s) acting on their behalf, ratably as aforesaid, for application to the
payment of such Senior Debt until all such Senior Debt shall have been paid in
full, after giving effect to any concurrent payment or distribution to the
holders of such Senior Debt.
Subject to the payment in full of all Senior Debt, the holders shall
be subrogated to the rights of the holders of Senior Debt to receive payments or
distributions of cash, property or securities of the Company applicable to the
Senior Debt until the principal of and interest and Liquidated Damages, if any,
on the Securities shall be paid in full and, for purposes of such subrogation,
no such payments or distributions to the holders of Senior Debt of cash,
property or securities which otherwise would have been payable or distributable
to holders shall, as between the Company, its creditors other than the holders
of Senior Debt, and the holders, be deemed to be a payment by the Company to or
on account of the Senior Debt, it being understood that the provisions of this
Article are and are intended solely for the purpose of defining the relative
rights of the holders, on the one hand, and the holders of Senior Debt, on the
other hand.
Nothing contained in this Article or elsewhere in this Indenture or in
the Securities is intended to or shall (i) impair, as between the Company and
its creditors other than the holders of Senior Debt, the obligation of the
Company, which is absolute and unconditional, to pay to the holders the
principal of and interest and Liquidated Damages, if any, on the Securities as
and when the same shall become due and payable in accordance with the terms of
the Securities or is intended to or (ii) affect the relative rights of the
holders and creditors of the Company other than holders of Senior Debt or, as
between the Company and the Trustee, the obligations of the Company to the
Trustee, or (iii) prevent the Trustee or the holders from exercising all
remedies otherwise permitted by applicable law upon default under this
Indenture, subject to the rights, if any, under this Article of the holders of
Senior Debt in respect of cash, property and securities of the Company received
upon the exercise of any such remedy.
Upon distribution of assets of the Company referred to in this
Article, the Trustee, subject to the provisions of Section 9.01 hereof, and the
holders shall be entitled to rely upon a certificate of the liquidating trustee
or agent or other person making any distribution to the Trustee or to the
holders for the purpose of ascertaining the persons entitled to participate in
such distribution, the holders of the Senior Debt and other indebtedness of the
Company, the amount thereof or payable thereon, the amount or amounts paid or
distributed thereon and all other facts pertinent thereto or to this Article.
The Trustee, however, shall not be deemed to owe any fiduciary duty to the
holders of Senior Debt. Nothing
<PAGE>
38
contained in this Article or elsewhere in this Indenture, or in any of the
Securities, shall prevent the good faith application by the Trustee of any
moneys which were deposited with it hereunder, prior to its receipt of written
notice of facts which would prohibit such application, for the purpose of the
payment of or on account of the principal of or interest or Liquidated Damages,
if any, on, the Securities unless, prior to the date on which such application
is made by the Trustee, the Trustee shall be charged with notice under Section
6.03(d) hereof of the facts which would prohibit the making of such application.
(c) The provisions of this Article shall not be applicable to any
cash, properties or securities received by the Trustee or by any holder when
received as a holder of Senior Debt and nothing in Section 9.11 hereof or
elsewhere in this Indenture shall deprive the Trustee or such holder of any of
its rights as such holder.
(d) The Company shall give prompt written notice to the Trustee of
any fact known to the Company which would prohibit the making of any payment of
money to or by the Trustee in respect of the Securities pursuant to the
provisions of this Article. The Trustee, subject to the provisions of Section
9.01 hereof, shall be entitled to assume that no such fact exists unless the
Company or any holder of Senior Debt or any trustee therefor has given such
notice to the Trustee. Notwithstanding the provisions of this Article or any
other provisions of this Indenture, the Trustee shall not be charged with
knowledge of the existence of any fact which would prohibit the making of any
payment of monies to or by the Trustee in respect of the Securities pursuant to
the provisions in this Article, unless, and until three Business Days after, the
Trustee shall have received written notice thereof from the Company or any
holder or holders of Senior Debt or from any trustee therefor; and, prior to the
receipt of any such written notice, the Trustee, subject to the provisions of
Section 9.01 hereof, shall be entitled in all respects conclusively to assume
that no such facts exist; provided that if on a date not less than three
--------
Business Days immediately preceding the date upon which by the terms hereof any
such monies may become payable for any purpose (including, without limitation,
the principal of or interest or Liquidated Damages, if any, on any Security),
the Trustee shall not have received with respect to such monies the notice
provided for in this Section 6.03(d), than anything herein contained to the
contrary notwithstanding, the Trustee shall have full power and authority to
receive such monies and to apply the same to the purpose for which they were
received, and shall not be affected by any notice to the contrary which may be
received by it on or after such prior date.
The Trustee shall be entitled to rely on the delivery to it of a
written notice by a person representing himself to be a holder of Senior Debt
(or a trustee on behalf of such holder) to establish that such notice has been
given by a holder of Senior Debt (or a trustee on behalf of any such holder or
holders). In the event that the Trustee determines in good faith that further
evidence is required with respect to the right of any person as a holder of
Senior Debt to participate in any payment or distribution pursuant to this
Article, the Trustee may request such person to furnish evidence to the
reasonable satisfaction of the Trustee as to the amount of Senior Debt held by
much person, the extent to which such person is entitled to participate in such
payment or distribution and any other facts pertinent to the rights of such
person under this Article, and, if such evidence is not furnished, the Trustee
may defer any payment to such person pending judicial determination as to the
right of such person to receive such payment; nor shall the Trustee be charged
with knowledge of the curing or waiving of any default of the character
specified in Section 6.02 hereof or that any event or any condition preventing
any payment in respect of the Securities shall have ceased to exist, unless and
until the Trustee shall have received an
<PAGE>
39
Officers' Certificate to such effect.
(e) The provisions of this Section 6.03 applicable to the Trustee
shall also apply to any Paying Agent for the Company.
SECTION 6.04. Reliance by Senior Debt on Subordination Provisions.
----------------------------------------------------
Each holder of any Security by his acceptance thereof acknowledges and agrees
that the foregoing subordination provisions are, and are intended to be, an
inducement and a consideration for each holder of any Senior Debt, whether such
Senior Debt was created or acquired before or after the issuance of the
Securities, to acquire and continue to hold, or to continue to hold, such Senior
Debt, and such holder of Senior Debt shall be deemed conclusively to have relied
on such subordination provisions in acquiring and continuing to hold, or in
continuing to hold, such Senior Debt. Notice of any default in the payment of
any Senior Debt, except as expressly stated in this Article, and notice of
acceptance of the provisions hereof are hereby expressly waived. Except as
otherwise expressly provided herein, no waiver, forbearance or release by any
holder of Senior Debt under such Senior Debt or under this Article shall
constitute a release of any of the obligations or liabilities of the Trustee or
holders of the Securities provided in this Article.
SECTION 6.05. No Waiver of Subordination Provisions. Except as
--------------------------------------
otherwise expressly provided herein, no right of any present or future holder of
any Senior Debt to enforce subordination as herein provided shall at any time in
any way be prejudiced or impaired by any act or failure to act on the part of
the Company or by any act or failure to act, in good faith, by any such holder,
or by any noncompliance by the Company with the terms, provisions and covenants
of this Indenture, regardless of any knowledge thereof any such holder may have
or be otherwise charged with.
Without in any way limiting the generality of the foregoing paragraph,
the holders of Senior Debt may, at any time and from time to time, without the
consent of, or notice to, the Trustee or the holders of the Securities, without
incurring responsibility to the holders of the Securities and without impairing
or releasing the subordination provided in this Article VI or the obligations
hereunder of the holders of the Securities to the holders of Senior Debt, do any
one or more of the following: (i) change the manner, place or terms of payment
of, or renew or alter, Senior Debt, or otherwise amend or supplement in any
manner Senior Debt or any instrument evidencing the same or any agreement under
which Senior Debt is outstanding; (ii) sell, exchange, release or otherwise
dispose of any property pledged, mortgaged or otherwise securing Senior Debt;
(iii) release any person liable in any manner for the collection of Senior Debt;
and (iv) exercise or refrain from exercising any rights against the Company or
any other person.
SECTION 6.06. Trustee's Relation to Senior Debt. The Trustee in its
----------------------------------
individual capacity shall be entitled to all the rights set forth in this
Article in respect of any Senior Debt at any time held by it, to the same extent
as any holder of Senior Debt, and nothing in Section 9.11 hereof or elsewhere in
this Indenture shall deprive the Trustee of any of its rights as such holder.
With respect to the holders of Senior Debt, the Trustee undertakes to
perform or to observe only such of its covenants and obligation, as are
specifically set forth in this Article, and no implied covenants or obligations
with respect to the holders of Senior Debt shall be read into this
<PAGE>
40
Indenture against the Trustee. The Trustee shall not owe any fiduciary duty to
the holders of Senior Debt but shall have only such obligations to such holders
as are expressly set forth in this Article.
Each holder of a Security by his acceptance thereof authorizes and
directs the Trustee on his behalf to take such action as may be necessary or
appropriate to effectuate the subordination provided in this Article and
appoints the Trustee his attorney-in-fact for any and all such purposes,
including, in the event of any dissolution, winding up or liquidation or
reorganization under any applicable bankruptcy law of the Company (whether in
bankruptcy, insolvency or receivership proceedings or otherwise), the timely
filing of a claim for the unpaid balance of such holder's Securities in the form
required in such proceedings and the causing of such claim to be approved. If
the Trustee does not file a claim or proof of debt in the form required in such
proceedings prior to 30 days before the expiration of the time to file such
claims or proofs, then any holder or holders of Senior Debt or their
representative or representatives shall have the right to demand, sue for,
collect, receive and receipt for the payments and distributions in respect of
the Securities which are required to be paid or delivered to the holders of
Senior Debt as provided in this Article and to file and prove all claims
therefor and to take all such other action in the name of the holders or
otherwise, as such holders of Senior Debt or representative thereof may
determine to be necessary or appropriate for the enforcement of the provisions
of this Article.
SECTION 6.07. Other Provisions Subject Hereto. Except as expressly
--------------------------------
stated in this Article, notwithstanding anything contained in this Indenture to
the contrary, all the provisions of this Indenture and the Securities are
subject to the provisions of this Article. However, nothing in this Article
shall apply to or adversely affect the claims of, or payment, to, the Trustee
pursuant to Section 9.07. Notwithstanding the foregoing, the failure to make a
payment on account of principal of or interest or Liquidated Damages, if any, on
the Securities by reason of any provision of this Article VI shall not be
construed as preventing the occurrence of an Event of Default under Section
8.01.
ARTICLE VII
Successors
----------
SECTION 7.01. Merger, Consolidation or Sale of Assets. The Company
----------------------------------------
may not consolidate or merge with or into (whether or not the Company is the
surviving corporation), or sell, assign, transfer, lease, convey or otherwise
dispose of all or substantially all of its properties or assets in one or more
related transactions to, another corporation, person or entity unless:
(a) the Company is the surviving corporation or the entity or the
person formed by or surviving any such consolidation or merger (if other
than the Company) or to which such sale, assignment, transfer, lease,
conveyance or other disposition shall have been made is a corporation
organized or existing under the laws of England and Wales or of the United
States, any state thereof or the District of Columbia;
(b) the entity or person formed by or surviving any such consolidation
or merger (if other than the Company) or the entity or person to which such
sale, assignment, transfer, lease, conveyance or other disposition will
have been made assumes all the Obligations (including the
<PAGE>
41
due and punctual payment of Additional Amounts if the surviving corporation
is a corporation organized or existing under the laws of England and Wales)
of the Company, pursuant to a supplemental indenture in a form reasonably
satisfactory to the Trustee, under the Securities and the Indenture;
(c) immediately after such transaction no Default or Event of Default
exists;
(d) the Company or any entity or person formed by or surviving any
such consolidation or merger, or to which such sale, assignment, transfer,
lease, conveyance or other disposition will have been made will have a
ratio of Indebtedness to Annualized Pro Forma EBITDA equal to or less than
the ratio of Indebtedness to Annualized Pro Forma EBITDA of the Company
immediately preceding the transaction; provided, however, that if the ratio
-------- -------
of Indebtedness to Annualized Pro Forma EBITDA of the Company immediately
preceding such transaction is 6:1 or less, then the ratio of Indebtedness
to Annualized Pro Forma EBITDA of the Company may be 0.5 greater than such
ratio immediately preceding such transaction; and
(e) such transaction would not result in the loss of any material
authorization or Material License of the Company or its Subsidiaries.
SECTION 7.02. Successor Corporation Substituted. Upon any
----------------------------------
consolidation or merger, or any sale, assignment, transfer, lease, conveyance or
other disposition of all or substantially all of the assets of the Company in
accordance with Section 7.01 hereof, the successor corporation formed by such
consolidation or into or with which the Company is merged or to which such sale,
assignment, transfer, lease, conveyance or other disposition is made shall
succeed to, and be substituted for and may exercise every right and power of,
the Company under this Indenture with the same effect as if such successor
person has been named as the Company herein; provided, however, that the
-------- -------
predecessor Company in the case of a sale, assignment, transfer, lease,
conveyance or other disposition shall not be released from the obligation to pay
the principal of and interest on the Securities.
ARTICLE VIII
Defaults and Remedies
---------------------
SECTION 8.01. Events of Default. An "Event of Default" occurs if:
------------------
(a) the Company defaults in the payment of interest or Liquidated
Damages, if any (and Additional Amounts, if applicable) on any Security
when the same becomes due and payable and the Default continues for a
period of 30 days after the date due and payable;
(b) the Company defaults in the payment of the principal of any
Security when the same becomes due and payable at maturity, upon redemption
or otherwise;
(c) the Company or any Subsidiary thereof fails to observe or perform
any covenant or agreement contained in Section 4.07 hereof;
<PAGE>
42
(d) the Company or any Subsidiary thereof fails to observe or perform
any other covenant or agreement contained in this Indenture or the
Securities, required by any of them to be performed and the Default
continues for a period of 60 days after notice from the Trustee to the
Company or from the holders of 25% in aggregate principal amount of the
outstanding Securities to the Company and the Trustee stating that such
notice is a "Notice of Default";
(e) there is a default under any mortgage, indenture or instrument
under which there may be issued or by which there may be secured or
evidenced any Indebtedness for money borrowed by the Company or any
Subsidiary (or the payment of which is guaranteed by the Company or any
Subsidiary), whether such Indebtedness or guarantee now exists or is
created after the Issuance Date, which default (i) is caused by a failure
to pay when due principal of or interest on such Indebtedness within the
grace period provided for in such Indebtedness (which failure continues
beyond any applicable grace period) (a "Payment Default") or (ii) results
in the acceleration of such Indebtedness prior to its express maturity and,
in each case, the principal amount of any such Indebtedness, together with
the principal amount of any other such Indebtedness under which there is a
Payment Default or the maturity of which has been so accelerated,
aggregates $5 million or more;
(f) a final judgment or final judgments (other than any judgment as to
which a reputable insurance company has accepted full liability) for the
payment of money are entered by a court or courts of competent jurisdiction
against the Company or any Subsidiary of the Company which remains
undischarged for a period (during which execution shall not be effectively
stayed) of 60 days, provided that the aggregate of all such judgments
exceeds $5 million;
(g) the Company or any Material Subsidiary pursuant to or within the
meaning of any Bankruptcy Law: (i) commences a voluntary case, (ii)
consents to the entry of an order for relief against it in an involuntary
case in which it is the debtor, (iii) consents to the appointment of a
Custodian of it or for all or substantially all of its property, (iv) makes
a general assignment for the benefit of its creditors, or (v) generally is
unable to pay its debts as the same become due;
(h) a court of competent jurisdiction enters an order or decree under
any Bankruptcy Law that: (i) is for relief against the Company or any
Subsidiary in an involuntary case, (ii) appoints a Custodian of the Company
or any Subsidiary or for all or substantially all of its property, or (iii)
orders the liquidation of the Company or any Subsidiary, and the order or
decree remains unstayed and in effect for 60 days; and
(i) the revocation of a Material License.
The term "Bankruptcy Law" means Title 11, U.S. Code or any similar
Federal or state law for the relief of debtors. The term "Custodian" means any
receiver, trustee, assignee, liquidator or similar official under any Bankruptcy
Law.
SECTION 8.02. Acceleration. If an Event of Default (other than an
-------------
Event of Default specified in clauses (g) and (h) of Section 8.01 hereof) occurs
and is continuing, the Trustee by notice to the Company, or the Noteholders of
at least 25% in principal amount of the then outstanding Securities
<PAGE>
43
by notice to the Company and the Trustee, may declare all the Securities to be
due and payable. Upon such declaration, the principal of, premium, if any, and
interest and Liquidated Damages, if any, on the Securities shall be due and
payable immediately. If an Event of Default specified in clause (g) or (h) of
Section 8.01 hereof occurs, such an amount shall ipso facto become and be
immediately due and payable without any declaration or other act on the part of
the Trustee or any Noteholder. The Noteholders of a majority in aggregate
principal amount of the then outstanding Securities by notice to the Trustee may
rescind an acceleration and its consequences if the rescission would not
conflict with any judgment or decree and if all existing Events of Default have
been cured or waived except nonpayment of principal or interest that has become
due solely because of the acceleration.
In the case of any Event of Default pursuant to the provisions of
Section 8.01 occurring by reason of any wilful action (or inaction) taken (or
not taken) by or on behalf of the Company with the intention of avoiding payment
of the premium that the Company would have had to pay if the Company then had
elected to redeem the Securities pursuant to paragraph 6 of the Securities an
equivalent premium shall, upon demand of the Noteholders of at least 25% in
principal amount of the then outstanding Securities delivered to the Company and
the Trustee, also become and be immediately due and payable to the extent
permitted by law, anything in this Indenture or in the Securities to the
contrary notwithstanding. If an Event of Default occurs prior to June 15, 1999,
by reason of any wilful action (or inaction) taken (or not taken) by or on
behalf of the Company with the intention of avoiding the prohibition on
redemption of the Securities prior to June 15, 1999, pursuant to Section 6 of
the Securities then the premium payable for purposes of this paragraph for each
of the years beginning on June 15 of the years set forth below shall, subject to
the foregoing demand, be as set forth in the following table expressed as a
percentage of the amount that would otherwise be due pursuant to this Section
8.02 but for the provisions of this sentence.
<TABLE>
<CAPTION>
Year Percentage
------ -----------
<S> <C>
1996................. 107.0%
1997................. 106.3%
1998................. 105.6%
</TABLE>
SECTION 8.03. Other Remedies. If an Event of Default occurs and is
---------------
continuing, the Trustee may pursue any available remedy to collect the payment
of principal or interest or Liquidated Damages, if any, on the Securities or to
enforce the performance of any provision of the Securities or this Indenture.
The Trustee may maintain a proceeding even if it does not possess any
of the Securities or does not produce any of them in the proceeding. A delay or
omission by the Trustee or any Noteholder in exercising any right or remedy
accruing upon an Event of Default shall not impair the right or remedy or
constitute a waiver of or acquiescence in the Event of Default. All remedies
are cumulative to the extent permitted by law.
SECTION 8.04. Waiver of Past Defaults. The Noteholders of a majority
------------------------
in aggregate principal amount of the then outstanding Securities by notice to
the Trustee may waive an existing Default or Event of Default and its
consequences except a continuing Default or Event of Default in the payment
<PAGE>
44
of the principal of, or interest or Liquidated Damages, if any, on any Security.
When a Default or Event of Default is waived, it is cured and ceases; but no
such waiver shall extend to any subsequent or other Default or impair any right
consequent thereon.
SECTION 8.05. Control by Majority. The Noteholders of a majority in
--------------------
principal amount of the then outstanding Securities may direct the time, method
and place of conducting any proceeding for any remedy available to the Trustee
or exercising any trust or power conferred on it. However, the Trustee may
refuse to follow any direction that conflicts with law or this Indenture, is
unduly prejudicial to the rights of other Noteholders, or would involve the
Trustee in personal liability.
SECTION 8.06. Limitation on Suits. A Noteholder may pursue a remedy
--------------------
with respect to this Indenture or the Securities only if:
(a) the Noteholder gives to the Trustee notice of a continuing Event
of Default;
(b) the Noteholders of at least 25% in principal amount of the then
outstanding Securities make a request to the Trustee to pursue the remedy;
(c) such Noteholder or Noteholders offer to the Trustee indemnity
satisfactory to the Trustee against any loss, liability or expense;
(d) the Trustee does not comply with the request within 60 days after
receipt of the request and the offer of indemnity; and
(e) during such 60-day period the Noteholders of a majority in
principal amount of the then outstanding Securities do not give the Trustee
a direction inconsistent with the request.
A Noteholder may not use this Indenture to prejudice the rights of
another Noteholder or to obtain a preference or priority over another
Noteholder.
SECTION 8.07. Rights of Noteholders to Receive Payment.
-----------------------------------------
Notwithstanding any other provision of this Indenture, the right of any
Noteholder of a Security to receive payment of principal and interest and
Liquidated Damages, if any, on the Security, on or after the respective due
dates expressed in the Security, or to bring suit for the enforcement of any
such payment on or after such respective dates, shall not be impaired or
affected without the consent of the Noteholder made pursuant to this Section.
SECTION 8.08. Collection Suit by Trustee. If an Event of Default
---------------------------
specified in Section 8.01(a) or (b) occurs and is continuing, the Trustee may
recover judgment in its own name and as trustee of an express trust against the
Company for the whole amount of principal and interest and Liquidated Damages,
if any, remaining unpaid on the Securities and, to the extent lawful, interest
on overdue principal and interest and Liquidated Damages, if any, and such
further amount as shall be sufficient to cover the costs and expenses of
collection, including the reasonable compensation, expenses, disbursements and
advances of the Trustee, its agents and counsel.
<PAGE>
45
SECTION 8.09. Trustee May File Proofs of Claim. The Trustee may file
---------------------------------
such proofs of claim and other papers or documents as may be necessary or
advisable in order to have the claims of the Trustee and the Noteholders allowed
in any judicial proceedings relative to the Company, its creditors or its
property. Nothing contained herein shall be deemed to authorize the Trustee to
authorize or consent to or accept or adopt on behalf of any Noteholder any plan
of reorganization, arrangement, adjustment or composition affecting the
Securities or the rights of any Noteholder thereof, or to authorize the Trustee
to vote in respect of the claim of any Noteholder in any such proceeding.
SECTION 8.10. Priorities. If the Trustee collects any money pursuant
-----------
to this Article, it shall pay out the money in the following order:
First: to the Trustee for amounts due under Section 9.07 hereof;
------
Second: to the holders of Senior Debt to the extent required by
-------
Article VI;
Third: to Noteholders for amounts due and unpaid on the Securities
------
for principal and interest and Liquidated Damages, if any (and Additional
Amounts, if applicable), ratably, without preference or priority of any
kind, according to the amounts due and payable on the Securities for
principal and interest and Liquidated Damages, if any, respectively; and
Fourth: to the Company.
-------
The Trustee may fix a record date and payment date for any payment to
Noteholders made pursuant to this Section.
SECTION 8.11. Undertaking for Costs. In any suit for the enforcement
----------------------
of any right or remedy under this Indenture or in any suit against the Trustee
for any action taken or omitted by it as a Trustee, a court in its discretion
may require the filing by any party litigant in the suit of an undertaking to
pay the costs of the suit, and the court in its discretion may assess reasonable
costs, including reasonable attorneys' fees, against any party litigant in the
suit, having due regard to the merits and good faith of the claims or defenses
made by the party litigant. This Section does not apply to a suit by the
Trustee, a suit by a holder pursuant to Section 8.07 hereof, or a suit by
Noteholders of more than 10% in principal amount of the then outstanding
Securities.
ARTICLE IX
Trustee
-------
SECTION 9.01. Duties of Trustee. (a) If an Event of Default has
------------------
occurred and is continuing, the Trustee shall exercise such of the rights and
powers vested in it by this Indenture, and use the same degree of care and skill
in their exercise, as a prudent man would exercise or use under the
circumstances in the conduct of his own affairs.
(b) Except during the continuance of an Event of Default: (i) the
Trustee need perform
<PAGE>
46
only those duties that are specifically set forth in this Indenture and no
others and (ii) in the absence of bad faith on its part, the Trustee may
conclusively rely, as to the truth of the statements and the correctness of the
opinions expressed therein, upon certificates or opinions furnished to the
Trustee and conforming to the requirements of this Indenture. However, the
Trustee shall examine the certificates and opinions to determine whether or not
they conform to the requirements of this Indenture and to confirm the
correctness of all mathematical computations.
(c) The Trustee may not be relieved from liability for its own
negligent action, its own negligent failure to act, or its own wilful
misconduct, except that: (i) this paragraph does not limit the effect of
paragraph (b) of this Section 9.01; (ii) the Trustee shall not be liable for any
error of judgment made in good faith by a Trust Officer, unless it is proved
that the Trustee was negligent in ascertaining the pertinent facts and (iii) the
Trustee shall not be liable with respect to any action it takes or omits to take
in good faith in accordance with a direction received by it pursuant to Section
8.05 hereof.
(d) Every provision of this Indenture that in any way relates to the
Trustee is subject to paragraphs (a), (b) and (c) of this Section 9.01.
(e) The Trustee may refuse to perform any duty or exercise any right
or power unless it receives indemnity satisfactory to it against any loss,
liability or expense.
(f) The Trustee shall not be liable for interest on any money
received by it except as the Trustee may agree in writing with the Company.
Money held in trust by the Trustee need not be segregated from other funds
except to the extent required by law.
SECTION 9.02. Rights of Trustee. (a) The Trustee may rely on any
------------------
document believed by it to be genuine and to have been signed or presented by
the proper person. The Trustee need not investigate any fact or matter stated
in the document.
(b) Before the Trustee acts or refrains from acting, it may require
an Officers' Certificate or an Opinion of Counsel, or both. The Trustee shall
not be liable for any action it takes or omits to take in good faith in reliance
on such Officers' Certificate or Opinion of Counsel.
(c) The Trustee may act through agents and shall not be responsible
for the misconduct or negligence of any agent appointed with due care.
(d) The Trustee shall not be liable for any action it takes or omits
to take in good faith which it believes to be authorized or within its rights or
powers.
(e) The Trustee shall not be charged with knowledge of any Event of
Default under subsection (c), (d), (e), (f) or (i) of Section 8.01 or of the
identity of any Material Subsidiary referred to in clause (ii) of the definition
thereof unless either (1) a Trust Officer assigned to its Corporate Trustee
Administration Department shall have actual knowledge thereof, or (2) the
Trustee shall have received notice thereof in accordance with Section 12.02
hereof from the Company or any holder.
SECTION 9.03. Individual Rights of Trustee. The Trustee in its
-----------------------------
individual or any other
<PAGE>
47
capacity may become the owner or pledgee of Securities and may otherwise deal
with the Company or an Affiliate with the same rights it would have if it were
not Trustee. Any Agent may do the same with like rights. However, the Trustee is
subject to Sections 9.10 and 9.11 hereof.
SECTION 9.04. Trustee's Disclaimer. The Trustee makes no
---------------------
representation as to the validity or adequacy of this Indenture or the
Securities, it shall not be accountable for the Company's use of the proceeds
from the Securities, and it shall not be responsible for any statement of the
Company in the Indenture or any statement in the Securities other than its
authentication or for compliance by the Company with the Registration Rights
Agreement.
SECTION 9.05. Notice of Defaults. If a Default or Event of Default
-------------------
occurs and is continuing and if it is known to the Trustee, the Trustee shall
mail to Noteholders a notice of the Default or Event of Default within 90 days
after it occurs. Except in the case of a Default or Event of Default in payment
on any Security, the Trustee may withhold the notice if and so long as a
committee of its Trust Officers in good faith determines that withholding the
notice is in the interests of Noteholders.
SECTION 9.06. Reports by Trustee to Noteholders. Within 60 days
----------------------------------
after the reporting date stated in Section 12.10, the Trustee shall mail to
Noteholders a brief report dated as of such reporting date that complies with
TIA (S) 313(a) if and to the extent required by such (S) 313(a). The Trustee
also shall comply with TIA (S) 313(b)(2). The Trustee shall also transmit by
mail all reports as required by TIA (S) 313(c).
A copy of each report at the time of its mailing to Noteholders shall
be filed with the SEC and each stock exchange on which the Securities are
listed. The Company shall notify the Trustee when the Securities are listed on
any stock exchange.
SECTION 9.07. Compensation and Indemnity. The Company shall pay to
---------------------------
the Trustee from time to time reasonable compensation for its services
hereunder. The Trustee's compensation shall not be limited by any law on
compensation of a trustee of an express trust. The Company shall reimburse the
Trustee upon request for all reasonable disbursements, expenses and advances
incurred or made by it. Such disbursements and expenses may include the
reasonable disbursements, compensation and expenses of the Trustee's agents and
counsel.
The Company shall indemnify the Trustee against any loss or liability
incurred by it except as set forth in the next paragraph. The Trustee shall
notify the Company promptly of any claim for which it may seek indemnity. The
Company shall defend the claim and the Trustee shall cooperate in the defense.
The Trustee may have separate counsel and the Company shall pay the reasonable
fees, disbursements and expenses of such counsel. The Company need not pay for
any settlement made without its consent, which consent shall not be unreasonably
withheld.
The Company need not reimburse any expense or indemnify against any
loss or liability incurred by the Trustee through negligence or bad faith.
To secure the Company's payment obligations in this Section, the
Trustee shall have a lien prior to the Securities on all money or property held
or collected by the Trustee, except money or
<PAGE>
48
property held in trust to pay principal and interest on particular Securities.
When the Trustee incurs expenses or renders services after an Event of
Default specified in Section 8.01(g) or (h) occurs, the expenses and the
compensation for the services are intended to constitute expenses of
administration under any Bankruptcy Law.
SECTION 9.08. Replacement of Trustee. A resignation or removal of
-----------------------
the Trustee and appointment of a successor Trustee shall become effective only
upon the successor Trustee's acceptance of appointment as provided in this
Section.
The Trustee may resign by so notifying the Company. The Noteholders
of a majority in principal amount of the then outstanding Securities may remove
the Trustee by so notifying the Trustee and the Company. The Company may remove
the Trustee if:
(a) the Trustee fails to comply with Section 9.10 hereof, unless the
Trustee's duty to resign is stayed as provided in TIA (S) 310(b);
(b) the Trustee is adjudged a bankrupt or an insolvent or an order for
relief is entered with respect to the Trustee under any Bankruptcy Law;
(c) a Custodian or public officer takes charge of the Trustee or its
property; or
(d) the Trustee becomes incapable of acting.
If the Trustee resigns or is removed or if a vacancy exists in the
office of Trustee for any reason, the Company shall promptly appoint a successor
Trustee. Within one year after the successor Trustee takes office, the
Noteholders of a majority in principal amount of the then outstanding Securities
may appoint a successor Trustee to replace the successor Trustee appointed by
the Company.
If a successor Trustee does not take office within 60 days after the
retiring Trustee resigns or is removed, the retiring Trustee, the Company or the
Noteholders of at least 10% in principal amount of the then outstanding
Securities may petition any court of competent jurisdiction for the appointment
of a successor Trustee.
If the Trustee fails to comply with Section 9.10 hereof, unless the
Trustee's duty to resign is stayed as provided in TIA (S) 310(b), any Noteholder
who has been a bona fide holder of a Security for at least six months may
petition any court of competent jurisdiction for the removal of the Trustee and
the appointment of a successor Trustee.
A successor Trustee shall deliver a written acceptance of its
appointment to the retiring Trustee and to the Company. Thereupon the
resignation or removal of the retiring Trustee shall become effective, and the
successor Trustee shall have all the rights, powers and duties of the Trustee
under this Indenture. The successor Trustee shall mail a notice of its
succession to Noteholders. The retiring Trustee shall promptly transfer all
property held by it as Trustee to the successor Trustee, subject to the lien
provided for in Section 9.07 hereof. Notwithstanding replacement of the Trustee
pursuant to this
<PAGE>
49
Section 9.08, the Company's obligations under Section 9.07 hereof shall continue
for the benefit of the retiring trustee with respect to expenses and liabilities
incurred by it prior to such replacement.
SECTION 9.09. Successor Trustee by Merger, Etc. If the Trustee
---------------------------------
consolidates, merges or converts into, or transfers all or substantially all of
its corporate trust business to, another corporation, the successor corporation
without any further act shall be the successor Trustee.
SECTION 9.10. Eligibility; Disqualification. This Indenture shall
------------------------------
always have a Trustee who satisfies the requirements of TIA (S) 310(a)(1) and
(5). The Trustee shall always have a combined capital and surplus as stated in
Section 12.10 hereof. The Trustee is subject to TIA (S) 310(b). The following
indenture shall be deemed to be specifically described herein for the purposes
of clause (i) of the first proviso contained in the TIA (S) 310(b): indenture,
dated as of April 20, 1995, between the Company and Chemical Bank, as trustee,
relating to the Convertible Notes.
SECTION 9.11. Preferential Collection of Claims Against Company. The
--------------------------------------------------
Trustee is subject to TIA (S) 311(a), excluding any creditor relationship listed
in TIA (S) 311(b). A Trustee who has resigned or been removed shall be subject
to TIA (S) 311(a) to the extent indicated therein.
ARTICLE X
Discharge of Indenture
----------------------
SECTION 10.01. Termination of Company's Obligations. This Indenture
-------------------------------------
shall cease to be of further effect (except that the Company's obligations under
Sections 9.07 and 10.02 hereof shall survive) when all outstanding Securities
theretofore authenticated and issued have been delivered to the Trustee for
cancellation and the Company has paid all sums payable hereunder.
Thereupon, the Trustee upon request of the Company, shall acknowledge
in writing the discharge of the Company's obligations under this Indenture,
except for those surviving obligations specified above.
SECTION 10.02. Repayment to Company. The Trustee and the Paying
---------------------
Agent shall promptly pay to the Company upon request any excess money or
securities held by them at any time.
The Trustee and the Paying Agent shall pay to the Company upon request
any money held by them for the payment of principal or interest that remains
unclaimed for two years after the date upon which such payment shall have become
due; provided, however, that the Company shall have first caused notice of such
-------- -------
payment to the Company to be mailed to each Noteholder entitled thereto no less
than 30 days prior to such payment. After payment to the Company, the Trustee
and the Paying Agent shall have no further liability with respect to such money
and Noteholders entitled to the money must look to the Company for payment as
general creditors unless any applicable abandoned property law designates
another person.
<PAGE>
50
ARTICLE XI
Amendments, Supplements and Waivers
-----------------------------------
SECTION 11.01. Without Consent of Noteholders. The Company and the
-------------------------------
Trustee may amend or supplement this Indenture or the Securities without the
consent of any Noteholder:
(a) to cure any ambiguity, defect or inconsistency;
(b) to comply with Sections 5.12 and 7.01 hereof;
(c) to provide for uncertificated Securities in addition to
certificated Securities;
(d) to make any change that does not adversely affect the interests
hereunder of any Noteholder; or
(e) to qualify this Indenture under the TIA or to comply with the
requirements of the SEC in order to maintain the qualification of the
Indenture under the TIA.
SECTION 11.02. With Consent of Noteholders. Subject to Section 8.07
----------------------------
hereof, the Company and the Trustee may amend or supplement this Indenture or
the Securities with the written consent (including consents obtained in
connection with any tender offer) of the Noteholders of at least a majority in
principal amount of the then outstanding Securities. Subject to Sections 8.04
and 8.07 hereof, the Noteholders of a majority in principal amount of the
Securities then outstanding may also waive compliance in a particular instance
by the Company with any provision of this Indenture or the Securities. However,
without the consent of each Noteholder affected, an amendment, supplement or
waiver under this Section may not:
(a) reduce the amount of Securities whose Noteholders must consent to
an amendment, supplement or waiver;
(b) reduce the rate of or change the time for payment of interest on
any Security;
(c) reduce the principal of or change the fixed maturity of any
Security or alter the redemption provisions of Sections 6 and 7 of the
Securities;
(d) make any Security payable in money other than that stated in the
Security;
(e) make any change in Section 8.04, 8.07 or 11.02 hereof (this
sentence);
(f) waive a default in the payment of the principal of, or interest
on, any Security;
(g) waive a redemption payment payable on any Security;
(h) make any change that adversely affects the right of Noteholders to
convert Securities
<PAGE>
51
into Common Stock of the Company; or
(i) make any change in Articles V and VI hereof that adversely affects
the interests of the Noteholders.
To secure a consent of the Noteholders under this Section 11.02, it
shall not be necessary for the Noteholders to approve the particular form of any
proposed amendment, supplement or waiver, but it shall be sufficient if such
consent approves the substance thereof.
Neither the Company nor any of its Subsidiaries shall, directly or
indirectly, pay or cause to be paid any consideration, whether by way of
interest, fee or otherwise, to any holder of Securities or as an inducement to
any consent, waiver or amendment of any of the terms or provisions of this
Indenture or the Securities unless such consideration is offered to be paid or
agreed to be paid to all holders of the Securities that consent, waive or agree
to amend in the time frame set forth in the solicitation documents relating to
such consent, waiver or agreement.
After an amendment, supplement or waiver under this Section becomes
effective, the Company shall mail to Noteholders a notice briefly describing the
amendment or waiver.
SECTION 11.03. Compliance with Trust Indenture Act. Every amendment
------------------------------------
to this Indenture or the Securities shall be set forth in a supplemental
indenture that complies with the TIA as then in effect.
SECTION 11.04. Revocation and Effect of Consents. Until an
----------------------------------
amendment, supplement or waiver becomes effective, a consent to it by a
Noteholder of a Security is a continuing consent by the Noteholder and every
subsequent Noteholder of a Security or portion of a Security that evidences the
same debt as the consenting Noteholder's Security, even if notation of the
consent is not made on any Security. However, any such Noteholder or subsequent
Noteholder may revoke the consent as to such Noteholder's Security or portion of
a Security if the Trustee receives the notice of revocation before the date on
which the Trustee receives an Officers' Certificate certifying that the
Noteholders of the requisite principal amount of Securities have consented to
the amendment, supplement or waiver.
The Company may, but shall not be obligated to, fix a record date for
the purpose of determining the Noteholders entitled to consent to any amendment,
supplement or waiver. If a record date is fixed, then notwithstanding the
provisions of the immediately preceding paragraph, those persons who were
Noteholders at such record date (or their duly designated proxies), and only
those persons, shall be entitled to consent to such amendment, supplement or
waiver or to revoke any consent previously given, whether or not such persons
continue to be Noteholders after such record date. No consent shall be valid or
effective for more than 90 days after such record date unless consents from
Noteholders of the principal amount of Securities required hereunder for such
amendment or waiver to be effective shall have also been given and not revoked
within such 90-day period.
After an amendment, supplement or waiver becomes effective it shall
bind every Noteholder, unless it is of the type described in any of clauses (a)
through (i) of Section 11.02 hereof. In such case, the amendment or waiver shall
bind each Noteholder who has consented to it and every
<PAGE>
52
subsequent Noteholder that evidences the same debt as the consenting
Noteholder's Security.
SECTION 11.05. Notation on or Exchange of Securities. The Trustee
--------------------------------------
may place an appropriate notation about an amendment or waiver on any Security
thereafter authenticated. The Company in exchange for all Securities may issue
and the Trustee shall authenticate new Securities that reflect the amendment or
waiver.
SECTION 11.06. Trustee Protected. The Trustee shall sign all
------------------
supplemental indentures, except that the Trustee may, but need not, sign any
supplemental indenture that adversely affects its rights.
ARTICLE XII
Miscellaneous
-------------
SECTION 12.01. Trust Indenture Act Controls. If any provision of
-----------------------------
this Indenture limits, qualifies, or conflicts with another provision which is
automatically deemed to be incorporated in this Indenture by the TIA, the
incorporated provision shall control.
SECTION 12.02. Notices. Any notice or communication by the Company
--------
or the Trustee to the other is duly given if in writing and delivered in person
or mailed by first-class mail to the other's address stated in Section 12.10
hereof. The Company or the Trustee by notice to the other may designate
additional or different addresses for subsequent notices or communications.
Any notice or communication to a Noteholder shall be mailed by first-
class mail to his address shown on the register kept by the Registrar. Failure
to mail a notice or communication to a Noteholder or any defect in it shall not
affect its sufficiency with respect to other Noteholders.
If a notice or communication is mailed in the manner provided above
within the time prescribed, it is duly given, whether or not the addressee
receives it.
If the Company mails a notice or communication to Noteholders, it
shall mail a copy to the Trustee and each Agent at the same time.
All other notices or communications shall be in writing.
In case by reason of the suspension of regular mail service, or by
reason of any other cause, it shall be impossible to mail any notice as required
by the Indenture, then such method of notification as shall be made with the
approval of the Trustee shall constitute a sufficient mailing of such notice.
SECTION 12.03. Communication by Noteholders with Other Noteholders.
----------------------------------------------------
Noteholders may communicate pursuant to TIA (S) 312(b) with other Noteholders
with respect to their rights under this Indenture or the Securities. The
Company, the Trustee, the Registrar and anyone else shall have the
<PAGE>
53
protection of TIA (S) 312(c).
SECTION 12.04. Certificate and Opinion as to Conditions Precedent.
---------------------------------------------------
Upon any request or application by the Company to the Trustee to take any action
under this Indenture, the Company shall furnish to the Trustee:
(a) an Officers' Certificate stating that, in the opinion of the
signers, all conditions precedent, if any, provided for in this Indenture
relating to the proposed action have been complied with; and
(b) an Opinion of Counsel stating that, in the opinion of such
counsel, all such conditions precedent have been complied with.
SECTION 12.05. Statements Required in Certificate or Opinion. Each
----------------------------------------------
certificate or opinion with respect to compliance with a condition or covenant
provided for in this Indenture (other than pursuant to Section 4.03) shall
include:
(a) a statement that the person signing such certificate or rendering
such opinion has read such covenant or condition;
(b) a brief statement as to the nature and scope of the examination or
investigation upon which the statements or opinions contained in such
certificate or opinion are based;
(c) a statement that, in the opinion of such person, such person has
made such examination or investigation as is necessary to enable such
person to express an informed opinion as to whether or not such covenant or
condition has been complied with; and
(d) a statement as to whether or not, in the opinion of such person,
such condition or covenant has been complied with.
SECTION 12.06. Rules by Trustee and Agents. The Trustee may make
----------------------------
reasonable rules for action by, or a meeting of, Noteholders. The Registrar or
Paying Agent may make reasonable rules and set reasonable requirements for its
functions.
SECTION 12.07. Legal Holidays. A "Legal Holiday" is a Saturday, a
---------------
Sunday or a day on which banking institutions in the State of New York are not
required to be open. If a payment date is a Legal Holiday at a place of
payment, payment may be made at that place on the next succeeding day that is
not a Legal Holiday, and no interest shall accrue for the intervening period.
If any other operative date for purposes of this Indenture shall occur on a
Legal Holiday then for all purposes the next succeeding day that is not a Legal
Holiday shall be such operative date.
SECTION 12.08. No Recourse Against Others. A director, officer,
---------------------------
employee or stockholder, as such, of the Company shall not have any liability
for any obligations of the Company under the Securities or the Indenture or for
any claim based on, in respect of or by reason of such obligations or their
creation. Each Noteholder by excepting a Security waives and releases all such
<PAGE>
54
liability. The waiver and release are part of the consideration for the issue
of the Securities.
SECTION 12.09. Counterparts. This Indenture may be executed in any
-------------
number of counterparts and by the parties hereto in separate counterparts, each
of which when so executed shall be deemed to be an original and all of which
taken together shall constitute one and the same agreement.
SECTION 12.10. Variable Provisions. "Officer" means the Chairman of
--------------------
the Board, the President, any Vice-President, the Treasurer, the Secretary, any
Assistant Treasurer or any Assistant Secretary of the Company.
The Company initially appoints the Trustee as Paying Agent, Registrar,
Conversion Agent and authenticating agent.
The first certificate pursuant to Section 4.03 hereof shall be for the
fiscal year ending on December 31, 1996.
The reporting date for Section 9.06 hereof is March 15 of each year.
The first reporting date is March 15, 1997.
The Trustee shall always have a combined capital and surplus of at
least $100,000,000 as set forth in its most recent published annual report of
condition.
The Company's address is:
International CableTel Incorporated
110 East 59th Street
New York, New York 10022
Attention of: Richard J. Lubasch, Esq.
General Counsel
The Trustee's address is:
Chemical Bank
450 West 33rd Street
New York, New York 10001
Attention: Corporate Trustee
Administration Department
SECTION 12.11. GOVERNING LAW. THE INTERNAL LAWS OF THE STATE OF NEW
--------------
YORK SHALL GOVERN THIS INDENTURE AND THE SECURITIES, WITHOUT REGARD TO THE
CONFLICT OF LAWS PROVISIONS THEREOF.
SECTION 12.12. No Adverse Interpretation of Other Agreements. This
----------------------------------------------
Indenture may not be used to interpret another indenture, loan or debt agreement
of the Company or an Affiliate. Any such indenture, loan or debt agreement may
not be used to interpret this Indenture.
<PAGE>
55
SECTION 12.13. Successors. All agreements of the Company in this
-----------
Indenture and the Securities shall bind its successor. All agreements of the
Trustee in this Indenture shall bind its successor.
SECTION 12.14. Severability. In case any provision in this Indenture
-------------
or in the Securities shall be invalid, illegal or unenforceable, the validity,
legality and enforceability of the remaining provisions shall not in any way be
affected or impaired thereby.
SECTION 12.15. Table of Contents, Headings, Etc. The Table of
---------------------------------
Contents, Cross-Reference Table, and headings of the Articles and Sections of
this Indenture have been inserted for convenience of reference only, are not to
be considered a part hereof, and shall in no way modify or restrict any of the
terms or provisions hereof.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Indenture to
be duly executed, all as of the date first written above.
International CableTel Incorporated, as Company,
By: /s/
__________________________________________
Name:
Title:
Chemical Bank, as Trustee,
By: /s/
__________________________________________
Name:
Title:
<PAGE>
STATE OF NEW YORK )
) ss.:
COUNTY OF NEW YORK )
Personally appeared before me, the undersigned authority in and for
the said county and state, on this day of June, 1996, within my
jurisdiction, the within named Richard J. Lubasch who acknowledged that he is
Senior Vice President, Secretary and General Counsel of International CableTel
Incorporated, a Delaware corporation, and that for and on behalf of the said
corporation, and as its act and deed he executed the above and foregoing
instrument, after first having been duly authorized by said corporation so to
do.
/s/ Dawn Marie Comer
---------------------------------
NOTARY PUBLIC
DAWN MARIE COMER
[Notarial Seal] Notary Public, State of New York
No. 01CO4884120
Qualified in Kings County
Commission Expires January 26, 1997
<PAGE>
STATE OF NEW YORK )
) ss.:
COUNTY OF NEW YORK )
Personally appeared before me, the undersigned authority in and for
the said county and state, on this day of June, 1996, within my
jurisdiction, the within named Andrew M. Deck, who acknowledged that he is a
Senior Trust Officer of Chemical Bank, and that for and on behalf of the said
corporation, and as its act and deed he executed the above and foregoing
instrument, after first having been duly authorized by said corporation so to
do.
/s/ Emily Fayan
---------------------------------
NOTARY PUBLIC
EMILY FAYAN
[Notarial Seal] Notary Public, State of New York
No. 24-4737006
Qualified in Kings County
Certificate Filed in New York County
Commission Expires December 31, 1997
<PAGE>
EXHIBIT A
[FORM OF FACE OF NOTE]
[Global Securities Legend]
UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE
DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), NEW YORK, NEW YORK, TO
THE COMPANY OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND
ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR SUCH OTHER
NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS
MADE TO CEDE & CO., OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED
REPRESENTATIVE OF DTC) ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR
OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER
HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.
TRANSFERS OF THIS GLOBAL NOTE SHALL BE LIMITED TO TRANSFERS IN WHOLE, BUT
NOT IN PART, TO NOMINEES OF DTC OR TO A SUCCESSOR THEREOF OR SUCH SUCCESSOR'S
NOMINEE AND TRANSFERS OF PORTIONS OF THIS GLOBAL NOTE SHALL BE LIMITED TO
TRANSFERS MADE IN ACCORDANCE WITH THE RESTRICTIONS SET FORTH IN THE INDENTURE
REFERRED TO ON THE REVERSE HEREOF.
[Restricted Securities Legend]
"THE SECURITY (OR ITS PREDECESSOR) EVIDENCED HEREBY WAS ORIGINALLY ISSUED IN
A TRANSACTION EXEMPT FROM REGISTRATION UNDER SECTION 5 OF THE UNITED STATES
SECURITIES ACT OF 1933 (THE "SECURITIES ACT"), AND THE SECURITY EVIDENCED HEREBY
AND ANY SHARES OF COMMON STOCK ISSUED UPON CONVERSION HEREOF MAY NOT BE OFFERED,
SOLD OR OTHERWISE TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR AN
APPLICABLE EXEMPTION THEREFROM. EACH PURCHASER OF THE SECURITY EVIDENCED HEREBY
IS HEREBY NOTIFIED THAT THE SELLER MAY BE RELYING ON THE EXEMPTION FROM THE
PROVISIONS OF SECTION 5 OF THE SECURITIES ACT PROVIDED BY RULE 144A THEREUNDER.
THE HOLDER OF THE SECURITY EVIDENCED HEREBY AGREES FOR THE BENEFIT OF THE
COMPANY THAT (A) SUCH SECURITY MAY BE RESOLD, PLEDGED OR OTHERWISE TRANSFERRED,
ONLY (1)(a) TO A PERSON WHO THE SELLER REASONABLY BELIEVES IS A QUALIFIED
INSTITUTIONAL BUYER (AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT) IN A
TRANSACTION MEETING THE REQUIREMENTS OF RULE 144A, (b) IN A TRANSACTION MEETING
THE REQUIREMENTS OF RULE 144 UNDER THE SECURITIES ACT, (c) OUTSIDE THE UNITED
STATES TO A FOREIGN PERSON IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 904
UNDER THE SECURITIES ACT OR (d) IN ACCORDANCE WITH ANOTHER EXEMPTION FROM THE
<PAGE>
2
REGISTRATION REQUIREMENTS OF THE SECURITIES ACT (AND BASED UPON AN OPINION OF
COUNSEL IF THE COMPANY SO REQUESTS), (2) TO THE COMPANY OR (3) PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT AND, IN EACH CASE, IN ACCORDANCE WITH ANY
APPLICABLE SECURITIES LAWS OF ANY STATE OF THE UNITED STATES OR ANY OTHER
APPLICABLE JURISDICTION AND (B) THE HOLDER WILL, AND EACH SUBSEQUENT HOLDER IS
REQUIRED TO, NOTIFY ANY PURCHASER FROM IT OF THE SECURITY EVIDENCED HEREBY OR
ANY COMMON STOCK ISSUED UPON CONVERSION HEREOF OF THE RESALE RESTRICTIONS SET
FORTH IN (A) ABOVE."
<PAGE>
3
No. --------- $_______
[CUSIP No. 459216AH0/CINS No. U45925AC5]
INTERNATIONAL CABLETEL INCORPORATED
7% CONVERTIBLE SUBORDINATED NOTE
DUE 2008
INTERNATIONAL CABLETEL INCORPORATED
International CableTel Incorporated, a Delaware corporation (the
"Company") promises to pay to CEDE & CO. or registered assigns, the principal
sum of $200,000,000 (or such lesser or greater amount as indicated on Schedule A
hereof) on June 15, 2008, subject to the further provisions of this Convertible
Note set forth on the reverse hereof which further provisions shall for all
purposes have the same effect as if set forth at this place.
Interest Payment Dates: June 15 and December 15, commencing December 15, 1996
Interest Record Dates: June 1 and December 1
<PAGE>
4
IN WITNESS WHEREOF, International CableTel Incorporated has
caused this Convertible Note to be signed manually or by facsimile by its duly
authorized officers and a facsimile of its corporate seal to be affixed hereto
or imprinted hereon.
Dated:
International CableTel Incorporated
By:
------------------------------------
By:
------------------------------------
[Seal]
TRUSTEE'S CERTIFICATE OF
AUTHENTICATION
This is one of the 7% Convertible Subordinated
Notes Due 2008 described in the
within-mentioned Indenture.
CHEMICAL BANK, as Trustee
By:
------------------------------------
Authorized Officer
<PAGE>
5
INTERNATIONAL CABLETEL INCORPORATED
7% Convertible Subordinated Note Due 2008
1. Interest. INTERNATIONAL CABLETEL INCORPORATED, a Delaware
---------
corporation (the "Company"), is the issuer of this 7% Convertible Subordinated
Note Due 2008 (the "Convertible Note"). The Company promises to pay interest
on the Convertible Notes in cash semiannually on each June 15 and December 15
(each an "Interest Payment Date"), commencing on December 15, 1996, to holders
of record on the immediately preceding June 1 and December 1 (each an
"Interest Record Date").
Interest on the Convertible Notes will accrue from the most recent date to
which interest has been paid, or if no interest has been paid, from June 12,
1996. Interest will be computed on the basis of a 360-day year of twelve 30-
day months. To the extent lawful, the Company shall pay interest (including
post-petition interest in any proceeding under any Bankruptcy Law) on overdue
installments of interest (without regard to any applicable grace period) at
the rate borne by the Convertible Notes, compounded annually. Any interest
paid on this Convertible Note shall be increased to the extent necessary to
pay Additional Amounts as set forth in this Convertible Note.
2. Additional Amounts. This Section 2 will apply only in the event
-------------------
that the Company becomes, or a successor to the Company is, a corporation
organized or existing under the laws of England and Wales. All payments made
by the Company on this Convertible Note will be made without deduction or
withholding, for or on account of, any and all present or future taxes,
duties, assessments, or governmental charges of whatever nature unless the
deduction or withholding of such taxes, duties, assessments or governmental
charges is then required by law. If, as a result of a consolidation,
amalgamation, reorganization, reconstruction, reincorporation or similar
arrangement, the Company becomes, or a successor to the Company is, a
corporation organized or existing under the laws of England and Wales and any
deduction or withholding for or on account of any present or future taxes,
assessments or other governmental charges of the United Kingdom (or any
political subdivision or taxing authority thereof or therein), shall at any
time be required in respect of any amounts to be paid by the Company under
this Convertible Note, the Company will pay or cause to be paid such
additional amounts ("Additional Amounts") as may be necessary in order that
the net amounts received by a holder of this Convertible Note after such
deduction or withholding shall be not less than the amounts specified in this
Convertible Note to which the holder of this Convertible Note is entitled;
provided, however, that the Company shall not be required to make any payment
-------- -------
of Additional Amounts for or on account of:
(a) any tax, assessment or other governmental charge to the extent
such tax, assessment or other governmental charge would not have been
imposed but for (i) the existence of any present or former connection
between such holder (or between a fiduciary, settlor, beneficiary, member
or shareholder of, or possessor of a power over, such holder, if such
holder is an estate, nominee, trust, partnership or corporation)
otherwise than merely by the holding of this Convertible Note or the
receipt of amounts payable in respect of this Convertible Note and the
United Kingdom or any political subdivision or taxing authority thereof
or therein or such holder being subject to the United Kingdom's
jurisdiction, including, without limitation, such holder (or
<PAGE>
6
such fiduciary, settlor, beneficiary, member, shareholder or possessor)
being or having been a citizen or resident thereof or being or having
been present or engaged in trade or business therein or having or having
had a permanent establishment therein or (ii) such holder's present or
former status as a personal holding company, a foreign personal holding
company, a foreign tax exempt organization, a foreign private foundation,
a controlled foreign corporation or a passive foreign investment company
for United Kingdom tax purposes or as a corporation that accumulates
earnings to avoid United Kingdom tax; or (iii) the presentation of this
Convertible Note (where presentation is required) for payment on a date
more than 15 days after the date on which such payment became due and
payable or the date on which payment thereof is duly provided for,
whichever occurs later, except to the extent that the holder would have
been entitled to Additional Amounts had this Convertible Note been
presented on the last day of such period of 15 days;
(b) any tax, assessment or other governmental charge that is imposed
or withheld by reason of the failure to comply by the holder of this
Convertible Note or, if different, the beneficial owner of the interest
payable on this Convertible Note with certification, information or other
reporting requirements or a timely request of the Company addressed to
such holder or beneficial owner to provide information, documents or
other evidence concerning the nationality, residence, identity or
connection with the taxing jurisdiction of such holder or beneficial
owner which is required or imposed by a statute, treaty, regulation or
administrative practice of the taxing jurisdiction as a precondition to
exemption from all or part of such tax, assessment or governmental
charge;
(c) any estate, inheritance, gift, sales, transfer, personal
property or similar tax, assessment or other governmental charge;
(d) any tax, assessment or other governmental charge which is
collectible otherwise than by withholding from payments of principal
amount at maturity, redemption amount, Change of Control Payment,
interest, with respect to a Convertible Note or withholding from the
proceeds of a sale or exchange of a Convertible Note, or from Common
Stock or cash in lieu of fractional shares delivered in respect of
conversion of a Convertible Note;
(e) any tax, assessment or other governmental charge required to be
withheld by any Paying Agent from any payment of principal amount at
maturity, redemption amount, Change of Control Payment, interest, if any,
with respect to a Convertible Note or from Common Stock or cash in lieu
of fractional shares delivered in respect of conversion of a Convertible
Note, if such payment can be made without such withholding by any other
Paying Agent located inside the United Kingdom;
(f) any tax, assessment or other governmental charge imposed on a
holder that is not the beneficial owner of a Convertible Note to the
extent that the beneficial owner would not have been entitled to the
payment of any such Additional Amounts had the beneficial owner directly
held the Convertible Note;
(g) any tax, assessment or other governmental charge directly
attributable to the holder being treated for United Kingdom tax purposes
as having received a distribution subject to tax as
<PAGE>
7
a dividend as a result of an adjustment of the Conversion Price;
(h) any combination of items (a), (b), (c), (d), (e), (f) and (g)
above;
nor shall Additional Amounts be paid with respect to any payment of the
principal of, or any interest on, this Convertible Note to any holder who is a
fiduciary or partnership or other than the sole beneficial owner of such
payment to the extent that a beneficiary or settlor would not have been
entitled to any Additional Amounts had such beneficiary or settlor been the
holder of this Convertible Note. All references to interest on the
Convertible Notes in the Indenture or the Convertible Notes shall include any
Additional Amounts payable to the Company pursuant to this Section 2.
3. Method of Payment. The Company will pay interest on the
------------------
Convertible Notes (except defaulted interest) to the persons who are
registered holders of the Convertible Notes at the close of business on the
record date for the next interest payment date even though Convertible Notes
are canceled after the record date and on or before the interest payment date.
The holder hereof must surrender Convertible Notes to a Paying Agent to
collect principal payments. The Company will pay principal and interest and
Liquidated Damages, if any, in money of the United States that at the time of
payment is legal tender for payment of public and private debts. However, the
Company may pay principal and interest and Liquidated Damages, if any, by
check payable in such money. It may mail an interest check to a holder's
registered address.
4. Paying Agent and Registrar. The Trustee will act as Paying
---------------------------
Agent, Registrar and Conversion Agent. The Company may change any Paying
Agent, Registrar, co-registrar or Conversion Agent without prior notice. The
Company or any of its Affiliates may act in any such capacity.
5. Indenture. The Company issued the Convertible Notes under an
----------
indenture, dated as of June 12, 1996 (the "Indenture"), between the Company
and Chemical Bank, as Trustee. The terms of the Convertible Notes include
those stated in the Indenture and those made part of the Indenture by the
Trust Indenture Act of 1939 (15 U.S. Code (Sections 77aaa-77bbbb) as
in effect on the date of the Indenture. The Convertible Notes are subject to,
and qualified by, all such terms, certain of which are summarized hereon, and
holders are referred to the Indenture and such Act for a statement of such
terms. The Convertible Notes are unsecured general obligations of the Company
limited to $275,000,000 (or, if the Initial Purchasers' over-allotment option
is exercised in full, $316,250,000) in aggregate principal amount and
subordinated in right of payment to all existing and future Senior Debt of the
Company.
6. Optional Redemption. Except as provided in Section 7 hereof the
--------------------
Convertible Notes are not redeemable at the Company's option prior to June 15,
1999. Thereafter, the Convertible Notes will be subject to redemption at the
option of the Company, in whole or in part (in any integral multiple of
$1,000), upon not less than 30 nor more than 60 days prior notice by mail at
the following redemption prices (expressed as percentages of the principal
amount set forth below), if redeemed during the 12-month period beginning June
15 of the years indicated:
Redemption
Year Price
- ---- ----------
1999............................................................. 104.9%
<PAGE>
8
2000............................................................ 104.2%
2001............................................................ 103.5%
2002............................................................ 102.8%
2003............................................................ 102.1%
2004............................................................ 101.4%
2005............................................................ 100.7%
2006 and thereafter............................................. 100.0%
in each case together with accrued interest to the redemption date (subject to
the right of holders of record on the relevant record date to receive interest
due on an interest payment date). On or after the redemption date, interest will
cease to accrue on the Convertible Notes, or portion thereof, called for
redemption.
7. Optional Tax Redemption. (a) The Convertible Notes may be
-----------------------
redeemed at the option of the Company, in whole but not in part, upon nO Not
less than 30 nor more than 60 days' notice, at any time at a redemption price
equal to the principal amount thereof plus accrued and unpaid interest to the
date fixed for redemption if after the date on which Section 2 of this
Convertible Note becomes applicable (the "Relevant Date") there has occurred any
change in or amendment to the laws (or any regulations or official rulings
promulgated thereunder) of the United Kingdom (or any political subdivision or
taxing authority thereof or therein) or any change in or amendment to the
official application or interpretation of such laws, regulations or rulings (a
"Change in Tax Law") which becomes effective after the Relevant Date, as a
result of which the Company is or would be so required on the next succeeding
Interest Payment Date to pay Additional Amounts with respect to the Convertible
Notes as described under Section 2 hereof with respect to withholding taxes
imposed by the United Kingdom (or any political subdivision or taxing authority
thereof or therein) (a "U.K. Withholding Tax") and such U.K. Withholding Tax is
imposed at a rate that exceeds the rate (if any) at which U.K. Withholding Tax
was imposed on the Relevant Date as described under Section 2 hereof; provided,
-------
however, that (i) this paragraph shall not apply to the extent that, at the
- -------
Relevant Date it was known or would have been known had professional advice of a
nationally recognized accounting firm in the United Kingdom been sought, that a
Change in Tax Law in the United Kingdom was to occur after the Relevant Date,
(ii) no such notice of redemption may be given earlier than 90 days prior to the
Relevant Date were a payment in respect of the Convertible Notes then due, (iii)
at the time such notice of redemption is given, such obligation to pay such
Additional Amount remains in effect and (iv) the payment of such Additional
Amounts cannot be avoided by the use of any reasonable measures available to the
Company.
(b) The Convertible Notes may also be redeemed, in whole but
not in part, at any time at a redemption price equal to the principal amount
thereof plus accrued and unpaid interest to the date fixed for redemption if the
person formed after the Relevant Date by a consolidation, amalgamation,
reorganization or reconstruction (or other similar arrangement) of the Company
or the person into which the Company is merged after the Relevant Date or to
which the Company conveys, transfers or leases its properties and assets after
the Relevant Date substantially as an entirety (collectively, a "Subsequent
Consolidation") is required, as a consequence of such Subsequent Consolidation
and as a consequence of a Change in Tax Law in the United Kingdom occurring
after the date of such Subsequent Consolidation, to pay Additional Amounts with
respect to Convertible Notes with respect to U.K. Withholding Tax as described
under Section 2 hereof and such U.K. Withholding Tax is imposed at a rate that
exceeds the
<PAGE>
9
rate (if any) at which U.K. Withholding Tax was or would have been imposed on
the date of such Subsequent Consolidation; provided, however, that this
-------- -------
paragraph shall not apply to the extent that, at the Relevant Date it was
known or would have been known had professional advice of a nationally
recognized accounting firm been sought, that a Change in Tax Law in the United
Kingdom was to occur after such date.
The Company will also pay, or make available for payment, to holders on the
Redemption Date any Additional Amounts (as described, but subject to the
exceptions referred to, in Section 2 hereof) resulting from the payment of such
Redemption Price.
8. Notice of Redemption. Notice of redemption will be mailed
---------------------
at least 30 days but not more than 60 days before the redemption date to each
holder of the Convertible Notes to be redeemed at his address of record. The
Convertible Notes in denominations larger than $1,000 may be redeemed in part
but only in integral multiples of $1,000. In the event of a redemption of less
than all of the Convertible Notes, the Convertible Notes will be chosen for
redemption by the Trustee in accordance with the Indenture. On and after the
redemption date, interest ceases to accrue on the Convertible Notes or portions
of them called for redemption.
If this Convertible Note is redeemed subsequent to a record
date with respect to any interest payment date specified above and on or prior
to such interest payment date, then any accrued interest will be paid to the
person in whose name this Convertible Note is registered at the close of
business on such record date.
9. Mandatory Redemption. Except as set forth in Section 4.07
---------------------
of the Indenture, the Company will not be required to make mandatory redemption
payments with respect to the Convertible Notes. There are no sinking fund
payments with respect to the Convertible Notes.
10. Repurchase at Option of holder. (a) If there is a Change
-------------------------------
of Control, the Company shall be required to offer to purchase on the Change of
Control Payment Date all outstanding Convertible Notes at a purchase price equal
to 101% of the principal amount thereof on the date of purchase, plus accrued
and unpaid interest to the Change of Control Payment Date. Holders of
Convertible Notes that are subject to an offer to purchase will receive a Change
of Control Offer from the Company prior to any related Change of Control Payment
Date and may elect to have such Convertible Notes or portions thereof in
authorized denominations purchased by completing the form entitled "Option of
Holder To Elect Purchase" appearing below. Holders have the right to withdraw
their election by delivering a written notice of withdrawal to the Company or
the Paying Agent in accordance with the terms of the Indenture.
11. Subordination. The payment of the principal of, interest
--------------
on or any other amounts due on the Convertible Notes is subordinated in right of
payment to all existing and future Senior Debt of the Company, as described in
the Indenture. Each holder, by accepting a Convertible Note, agrees to such
subordination and authorizes and directs the Trustee on its behalf to take such
action as may be necessary or appropriate to effectuate the subordination so
provided and appoints the Trustee as its attorney-in-fact for such purpose.
12. Conversion. The holder of any Convertible Note has the
-----------
right, exercisable at any
<PAGE>
10
time after 90 days following the date of original issuance thereof and prior to
the close of business (New York time) on the date of the Convertible Note's
maturity, to convert the principal amount thereof (or any portion thereof that
is an integral multiple of $1,000) into shares of Common Stock at the initial
Conversion Price of $37.875 per share, subject to adjustment under certain
circumstances, except that if a Convertible Note is called for redemption, the
conversion right will terminate at the close of business on the business day
immediately preceding the date fixed for redemption.
To convert a Convertible Note, a holder must (1) complete and
sign a conversion notice substantially in the form set forth below, (2)
surrender the Convertible Note to a Conversion Agent, (3) furnish appropriate
endorsements or transfer documents if required by the Registrar or Conversion
Agent and (4) pay any transfer or similar tax, if required. Upon conversion, no
adjustment or payment will be made for interest or dividends, but if any holder
surrenders a Convertible Note for conversion after the close of business on the
record date for the payment of an installment of interest and prior to the
opening of business on the next interest payment date, then, notwithstanding
such conversion, the interest payable on such interest payment date will be paid
to the registered holder of such Convertible Note on such record date. In such
event, such Convertible Note, when surrendered for conversion, need not be
accompanied by payment of an amount equal to the interest payable on such
interest payment date on the portion so converted. The number of shares issuable
upon conversion of a Convertible Note is determined by dividing the principal
amount of the Convertible Note converted by the Conversion Price in effect on
the Conversion Date. No fractional shares will be issued upon conversion but a
cash adjustment will be made for any fractional interest.
A Note in respect of which a holder has delivered an "Option of
Holder to Elect Purchase" form appearing below exercising the option of such
holder to require the Company to purchase such Note may be converted only if the
notice of exercise is withdrawn as provided above and in accordance with the
terms of the Indenture. The above description of conversion of the Convertible
Notes is qualified by reference to, and is subject in its entirety by, the more
complete description thereof contained in the Indenture.
13. Registration Rights. The holder of this Convertible Note
--------------------
is entitled to the benefits of a Registration Rights Agreement, dated as of June
12, 1996, among the Company and the Initial Purchasers (the "Registration Rights
Agreement"). Pursuant to the Registration Rights Agreement the Company has
agreed for the benefit of the holders of the Convertible Notes, that (i) it
will, at its cost, within 45 days after the closing of the sale of the
Convertible Notes (the "Closing"), file a shelf registration statement (the
"Shelf Registration Statement") with the Securities and Exchange Commission (the
"Commission") with respect to resales of the Convertible Notes and the Common
Stock issuable upon conversion thereof, (ii) it will use its best efforts to
cause such Shelf Registration Statement to be declared effective by the
Commission within 120 days after the Closing and (iii) it will use its best
efforts to keep such Shelf Registration Statement continuously effective under
the Securities Act until, subject to certain exceptions specified in the
Registration Rights Agreement, the third anniversary of the date of the Closing
or such earlier date as of which all the Convertible Notes or the Common Stock
issuable upon conversion thereof have been sold pursuant to such Shelf
Registration Statement. If (a) the Company fails to file the Shelf Registration
Statement required by the Registration Rights Agreement on or before the date
specified above for such filing, (b) such Shelf Registration Statement is not
declared effective by the Commission on or prior to the date specified above for
such effectiveness, or (c) the Shelf Registration Statement is declared
effective but thereafter ceases to be effective or usable in connection with
resales
<PAGE>
11
of Transfer Restricted Securities during the periods specified above (each such
event referred to in clauses (a) through (c) above a "Registration Default"),
then the Company will pay liquidated damages to each Holder of Transfer
Restricted Securities, with respect to the first 90-day period immediately
following the occurrence of such Registration Default in an amount equal to $.05
per week per $1,000 principal amount of Convertible Notes constituting Transfer
Restricted Securities held by such Holder ("Liquidated Damages"). The amount of
the Liquidated Damages will increase by an additional $.05 per week per $1,000
principal amount constituting Transfer Restricted Securities with respect to
each subsequent 90-day period until all Registration Defaults have been cured,
up to a maximum amount of Liquidated Damages of $.50 per week per $1,000
principal amount of Convertible Notes constituting Transfer Restricted
Securities. All accrued Liquidated Damages shall be paid by the Company on each
Interest Payment Date for which Liquidated Damages are owed to the holders of
Global Notes by wire transfer of immediately available funds or by federal funds
check and to holders of Certificated Securities registered as such as of the
preceding Interest Record Date by mailing checks to their registered addresses.
Following the cure of all Registration Defaults, the accrual of Liquidated
Damages will cease.
14. Denominations, Transfer, Exchange. The Convertible Notes
----------------------------------
are in registered form, without coupons, in denominations of $1,000 and integral
multiples of $1,000. The transfer of Convertible Notes may be registered, and
Convertible Notes may be exchanged, as provided in the Indenture. The Registrar
may require a holder, among other things, to furnish appropriate endorsements
and transfer documents and to pay any taxes and fees required by law or
permitted by the Indenture. The Registrar need not exchange or register the
transfer of any Convertible Note or portion of a Convertible Note selected for
redemption (except the unredeemed portion of any Convertible Note being redeemed
in part). Also, it need not exchange or register the transfer of any Convertible
Note for a period of 15 days before a selection of Convertible Notes to be
redeemed.
15. Persons Deemed Owners. Except as provided in paragraph 3
----------------------
of this Convertible Note, the registered holder of a Convertible Note may be
treated as its owner for all purposes.
16. Unclaimed Money. If money for the payment of principal or
----------------
interest remains unclaimed for two years, the Trustee and the Paying Agent shall
pay the money back to the Company at its written request. After that, holders of
Convertible Notes entitled to the money must look to the Company for payment
unless an abandoned property law designates another Person and all liability of
the Trustee and such Paying Agent with respect to such money shall cease.
17. Defaults and Remedies. The Convertible Notes shall have
----------------------
the Events of Default as set forth in Section 8.01 of the Indenture. Subject to
certain limitations in the Indenture, if an Event of Default occurs and is
continuing, the Trustee by notice to the Company or the holders of at least 25%
in aggregate principal amount of the then outstanding Convertible Notes by
notice to the Company and the Trustee may declare all the Convertible Notes to
be due and payable immediately, except that in the case of an Event of Default
arising from certain events of bankruptcy or insolvency, all unpaid principal
and interest accrued on the Convertible Notes shall become due and payable
immediately without further action or notice. Upon acceleration as described in
either of the preceding sentences, the subordination provisions of the Indenture
preclude any payment being made to holders for at least 5 days except as
otherwise provided in the Indenture.
<PAGE>
12
The holders of a majority in principal amount of the
Convertible Notes then outstanding by written notice to the Trustee may rescind
an acceleration and its consequences if the rescission would not conflict with
any judgment or decree and if all existing Events of Default have been cured or
waived except nonpayment of principal or interest that has become due solely
because of the acceleration. Holders may not enforce the Indenture or the
Convertible Notes except as provided in the Indenture. Subject to certain
limitations, holders of a majority in principal amount of the then outstanding
Convertible Notes issued under the Indenture may direct the Trustee in its
exercise of any trust or power. The Company must furnish annually compliance
certificates to the Trustee. The above description of Events of Default and
remedies is qualified by reference to, and subject in its entirety by, the more
complete description thereof contained in the Indenture.
18. Amendments, Supplements and Waivers. Subject to certain
------------------------------------
exceptions, the Indenture or the Convertible Notes may be amended or
supplemented with the consent of the holders of at least a majority in principal
amount of the then outstanding Convertible Notes (including consents obtained in
connection with a tender offer or exchange offer for Convertible Notes), and any
existing default may be waived with the consent of the holders of a majority in
principal amount of the then outstanding Convertible Notes. Without the consent
of any holder, the Indenture or the Convertible Notes may be amended among other
things, to cure any ambiguity, defect or inconsistency, to provide for
assumption of the Company's obligations to holders, to make any change that does
not adversely affect the rights of any holder, to qualify the Indenture under
the TIA, or to comply with the requirements of the SEC in order to maintain the
qualification of the Indenture under the TIA.
19. Trustee Dealings with the Company. The Trustee, in its
----------------------------------
individual or any other capacity may become the owner or pledgee of the
Convertible Notes and may otherwise deal with the Company or an Affiliate with
the same rights it would have, as if it were not Trustee, subject to certain
limitations provided for in the Indenture and in the TIA. Any Agent may do the
same with like rights.
20. No Recourse Against Others. A director, officer, employee
---------------------------
or stockholder, as such, of the Company shall not have any liability for any
obligations of the Company under the Convertible Notes or the Indenture or for
any claim based on, in respect of or by reason of such obligations or their
creation. Each holder of the Convertible Notes by accepting a Convertible Note
waives and releases all such liability. The waiver and release are part of the
consideration for the issue of the Convertible Notes.
21. Governing Law. THE INTERNAL LAWS OF THE STATE OF NEW YORK
--------------
SHALL GOVERN THE INDENTURE AND THE CONVERTIBLE NOTES WITHOUT REGARD TO CONFLICT
OF LAW PROVISIONS THEREOF.
22. Authentication. The Convertible Notes shall not be valid
---------------
until authenticated by the manual signature of an authorized officer of the
Trustee or an authenticating agent.
23. Abbreviations. Customary abbreviations may be used in the
--------------
name of a holder or an assignee, such as: TEN COM (= tenants in common), TEN ENT
(= tenants by the entireties), JT TEN (= joint tenants with right of
survivorship and not as tenants in common), CUST (= Custodian), and U/G/M/A (=
Uniform Gifts to Minors Act).
<PAGE>
13
The Company will furnish to any holder of the Convertible Notes
upon written request and without charge a copy of the Indenture. Request may be
made to:
International CableTel Incorporated
110 East 59th Street
New York, New York 10022
Attention of: Richard J. Lubasch, Esq.
General Counsel
* * *
<PAGE>
14
ASSIGNMENT FORM
To assign this Convertible Note, fill in the form below:
(I) or (we) assign and transfer this Convertible Note to
- --------------------------------------------------------------------------------
(Insert assignee's social security or tax I.D. no.)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(Print or type assignee's name, address and zip code)
and irrevocably appoint _______________________________ agent to transfer
this Convertible Note on the books of the Company. The agent may
substitute another to act for him.
Your Signature: _______________________________________
(Sign exactly as your name appears on the other side
of this Convertible Note)
Date: __________________
Signature Guarantee:**________________________________
In connection with any transfer of any of the Convertible Notes evidenced
by this certificate occurring prior to the date that is three years after
the later of the date of original issuance of such Convertible Notes and
the last date, if any, on which such Convertible Notes were owned by the
Company or any Affiliate
**Signature must be guaranteed by a commercial bank, trust company or member
firm of the New York Stock Exchange.
<PAGE>
15
of the Company, the undersigned confirms that such Convertible Notes are
being transferred:
CHECK ONE BOX BELOW
(1) /_/ to the Company; or
(2) /_/ pursuant to and in compliance with Rule 144A under the
Securities Act of 1933; or
(3) /_/ pursuant to and in compliance with Regulation S under the
Securities Act of 1933; or
(4) /_/ to an institutional "accredited investor" (as defined in
Rule 501(a)(1), (2), (3) or (7) under the Securities Act
of 1933 that has furnished to the Trustee a signed letter
containing certain representations and agreements (the
form of which letter can be obtained from the Trustee);
or
(5) /_/ pursuant to another available exemption from the
registration requirements of the Securities Act of 1933;
or
(6) /_/ pursuant to an effective registration statement under of
the Securities Act of 1933.
Unless one of the boxes is checked, the Trustee will refuse to
register any of the Convertible Notes evidenced by this certificate
in the name of any person other than the registered holder thereof;
provided, however, that if box (2), (3), (4) or (5) is checked, the
-------- -------
Trustee may require, prior to registering any such transfer of the
Convertible Notes such legal opinions, certifications and other
information as the Company has reasonably requested to confirm that
such transfer is being made pursuant to an exemption from, or in a
transaction not subject to, the registration requirements of the
Securities Act of 1933, such as the exemption provided by Rule 144
under such Act.
------------------------------
Signature
Signature Guarantee:*
----------------------------- ------------------------------
Signature must be guaranteed Signature
----------------------------
*Signature must be guaranteed by a commercial bank, trust company or member
firm of the New York Stock Exchange.
<PAGE>
16
TO BE COMPLETED BY PURCHASER IF (2) ABOVE IS CHECKED.
The undersigned represents and warrants that it is purchasing
this Convertible Note for its own account or an account with respect to
which it exercises sole investment discretion and that it and any such
account is a "qualified institutional buyer" within the meaning of Rule
144A under the Securities Act of 1933, and is aware that the sale to it
is being made in reliance on Rule 144A and acknowledges that it has
received such information regarding the Company as the undersigned has
requested pursuant to Rule 144A or has determined not to request such
information and that it is aware that the transferor is relying upon the
undersigned's foregoing representations in order to claim the exemption
from registration provided by Rule 144A.
Dated: ________________ ________________________________________
NOTICE: To be executed by
an executive officer
<PAGE>
17
[TO BE ATTACHED TO GLOBAL NOTES]
SCHEDULE A
The initial principal amount of this Global Note shall be
$23,250,000. The following increases or decreases in the principal
amount of this Global Note have been made:
Amount of
increase in
Principal
Amount of this Signature of
Global Note Amount of Principal Amount authorized
including upon decrease in of this officer of
exercise of Principal Amount Global Note Trustee or
over-allotment of this following such Securities
Date Made option Global Note decrease or increase Custodian
================================================================================
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
===============================================================================
<PAGE>
18
OPTION OF HOLDER TO ELECT PURCHASE
If you want to elect to have this Convertible Note or a portion
thereof repurchased by the Company pursuant to Section 3.08 or 4.07 of the
Indenture, check the box: [ ]
If the purchase is in part, indicate the portion (in denominations of
$1,000 or any integral multiple thereof) to be purchased: _________________
Your Signature: _______________________________________
(Sign exactly as your name appears on the other side of this
Convertible Note)
Date: __________________
Signature Guarantee:* _________________________________
---------------
*Signature must be guaranteed by a commercial bank, trust company or
member firm of the New York Stock Exchange.
<PAGE>
19
ELECTION TO CONVERT
To International CableTel Incorporated:
The undersigned owner of this Convertible Note hereby irrevocably
exercises the option to convert this Convertible Note, or the portion below
designated, into Common Stock of INTERNATIONAL CABLETEL INCORPORATED in
accordance with the terms of the Indenture referred to in this Convertible
Note, and directs that the shares issuable and deliverable upon conversion,
together with any check in payment for fractional shares, be issued in the
name of and delivered to the undersigned, unless a different name has been
indicated in the assignment below. If shares are to be issued in the name of
a person other than the undersigned, the undersigned will pay all transfer
taxes payable with respect thereto.
Any holder of Convertible Notes, upon the exercise of its conversion
rights in accordance with the terms of the Indenture and the Security, agrees
to be bound by the terms of the Registration Rights Agreement relating to the
Common Stock issuable upon conversion of the Convertible Notes.
Date:
in whole __
Portions of Convertible Note to be
converted ($1,000 or integral multiples
thereof): $________________
--------------------------------------------
Signature (for conversion only)
Please Print or Typewrite Name and
Address, Including Zip Code, and Social
Security or Other Identifying Number
------------------------------------------
------------------------------------------
------------------------------------------
Signature Guarantee:*_____________________
* Signature must be guaranteed by a commercial bank, trust company or member
firm of the New York Stock Exchange.
<PAGE>
EXHIBIT B
FORM OF TRANSFER CERTIFICATE
FOR TRANSFER FROM
RULE 144A GLOBAL NOTE
TO REGULATION S TEMPORARY GLOBAL NOTE
(Transfers pursuant to (Section) 2.06(a)(ii)
of the Indenture)
Chemical Bank, as Trustee
450 West 33rd Street
New York, New York 10001
Attn: Corporate Trustee
Administration Department
Re: International CableTel Incorporated
7% Convertible Subordinated Notes
Due 2008 (the "Convertible Notes")
-----------------------------------------
Reference is hereby made to the Indenture dated as of June 12,
1996 (the "Indenture") between International CableTel Incorporated, as
Issuer, and Chemical Bank, as Trustee. Capitalized terms used but not
defined herein shall have the meanings given them in the Indenture.
This letter relates to U.S. $____________ aggregate principal
amount of Convertible Notes which are held in the form of the Rule 144A
Global Note (CUSIP No. 459216AH0) with the Depositary in the name of [name
of transferor] (the "Transferor") to effect the transfer of the Convertible
Notes in exchange for an equivalent beneficial interest in the Regulation S
Temporary Global Note.
In connection with such request, the Transferor does hereby
certify that such transfer has been effected in accordance with the
transfer restrictions set forth in the Securities and (i) with respect to
transfers made in reliance on Regulation S, does certify that:
(1) the offer of the Securities was not made to a person in the
United States;
(2) the transaction was executed in, on or through the facilities
of a designated offshore securities market and neither the Transferor
nor any person acting on its behalf knows that the transaction was
pre-arranged with a buyer in the United States;
(3) no directed selling efforts have been made in contravention
of the requirements of Rule 903(b) or 904(b) of Regulation S, as
applicable; and
(4) the transaction is not part of a plan or scheme to evade the
registration
<PAGE>
2
requirements of the United States Securities Act of 1933
(the "Securities Act");
(ii) with respect to transfers made in reliance on Rule 144 certify that
the Convertible Notes are being transferred in a transaction permitted by
Rule 144 under the Securities Act; and (ii) with respect to transfers made
in reliance on Rule 144A, that such Convertible Notes are being transferred
in accordance with Rule 144A under the Securities Act to a transferee that
the Transferor reasonably believes is purchasing the Convertible Notes for
its own account or an account with respect to which the transferee
exercises sole investment discretion and the transferee and any such
account is a "qualified institutional buyer" within the meaning of Rule
144A, in a transaction meeting the requirements of Rule 144A and in
accordance with applicable securities laws of any state of the United
States or any other jurisdiction.
In addition, if the sale is made during a restricted period and
the provisions of Rule 903(c)(2) or (3) or Rule 904(c)(1) of Regulation S
are applicable thereto, we confirm that such sale has been made in
accordance with the applicable provisions of Rule 903(c)(2) or (3) or Rule
904(c)(1), as the case may be.
You and the Company are entitled to rely upon this letter and are
irrevocably authorized to produce this letter or a copy hereof to any
interested party in any administrative or legal proceedings or official
inquiry with respect to the matters covered hereby. Terms used in this
certificate have the meanings set forth in Regulation S.
[Name of Transferor]
By:
------------------------------
Name:
Title:
Date:
cc: International CableTel Incorporated
110 East 59th Street
New York, New York 10022
Attn: Richard J. Lubasch, Esq.
General Counsel
<PAGE>
EXHIBIT C
FORM OF TRANSFER CERTIFICATE FOR TRANSFER
FROM REGULATION S TEMPORARY GLOBAL NOTE
TO RULE 144A GLOBAL NOTE
(Transfers pursuant to (Section) 2.06(a)(iii)
of the Indenture)
Chemical Bank, as Trustee
450 West 33rd Street
New York, New York 10001
Attn: Corporate Trustee
Administration Department
Re: International CableTel Incorporated
7% Convertible Subordinated Notes
Due 2008 ("the "Convertible Notes")
-------------------------------------
Reference is hereby made to the Indenture dated as of June 12, 1996
(the "Indenture") between International CableTel Incorporated, as Issuer,
and Chemical Bank, as Trustee. Capitalized terms used but not defined
herein shall have the meanings given them in the Indenture.
This letter relates to U.S. $__________ aggregate principal amount of
Convertible Notes which are held in the form of the Regulation S Temporary
Global Note with the Depositary (CINS No. ___) in the name of [name of
transferor] (the "Transferor") to effect the transfer of the Convertible
Notes in exchange for an equivalent beneficial interest in the Rule 144A
Global Note.
In connection with such request, and in respect of such Convertible
Notes the Transferor does hereby certify that such Convertible Notes are
being transferred in accordance with (i) the transfer restrictions set
forth in the Convertible Notes and (ii) Rule 144A under the United States
Securities Act of 1933 to a transferee that the Transferor reasonably
believes is purchasing the Convertible Notes for its own account or an
account with respect to which the transferee exercises sole investment
discretion and the transferee and any such account is a "qualified
institutional buyer" within the meaning of Rule 144A, in a transaction
meeting the
<PAGE>
2
requirements of Rule 144A and in accordance with applicable securities laws
of any state of the United States or any other jurisdiction.
[Name of Transferor],
By:
--------------------------
Name:
Title:
Dated:
cc: International CableTel Incorporated
110 East 59th Street
New York, New York 10022
Attn: Richard J. Lubasch, Esq.
General Counsel
<PAGE>
EXHIBIT D
FORM OF TRANSFER CERTIFICATE FOR TRANSFER
FROM GLOBAL NOTE OR CERTIFICATED
SECURITY TO CERTIFICATED SECURITY
(Transfers pursuant to (Section) 2.06(a)(iv)
or (Section) 2.06(a)(vi) of the Indenture)
Chemical Bank, as Trustee
450 West 33rd Street
New York, New York 10001
Attn: Corporate Trustee
Administration Department
Re: International CableTel Incorporated
7% Convertible Subordinated Notes
Due 2008 (the "Convertible Notes")
----------------------------------------
Reference is hereby made to the Indenture dated as of June 12,
1996 (the "Indenture") between International CableTel Incorporated, as
Issuer, and Chemical Bank, as Trustee. Capitalized terms used but not
defined herein shall have the meanings given them in the Indenture.
This letter relates to U.S. $___________ aggregate principal
amount of Convertible Notes which are held [in the form of the
[Restricted/Regulation S] [Global] Security (CUSIP No. 459216AH0 /CINS No.
U45925AC5) with the Depositary]/*/in the name of [name of transferor] (the
"Transferor") to effect the transfer of the Securities.
In connection with such request, and in respect of such
Convertible Notes, the Transferor does hereby certify that such Convertible
Notes are being transferred in accordance with (i) the transfer
restrictions set forth in the Convertible Notes and (ii) to a transferee
that the Transferor reasonably believes is an institutional "accredited
investor" (as defined in Rule 501(a)(1), (2), (3) or (7) of Regulation D
under the Securities Act of 1933) and is acquiring at least $100,000
principal amount of Convertible Notes for its own account or for one or
more accounts as to which the transferee exercises sole investment
discretion and (iii) in accordance
----------------------------------
*Insert, if appropriate.
<PAGE>
2
with applicable securities laws of any state of the United States or any
other jurisdiction.
[Name of Transferor],
By:
-----------------------------
Name:
Title:
Dated:
cc: International CableTel Incorporated
110 East 59th Street
New York, New York 10022
Attn: Richard J. Lubasch, Esq.
General Counsel
<PAGE>
EXHIBIT E
FORM OF ACCREDITED INVESTOR TRANSFEREE CERTIFICATE
(Transfers pursuant to (Section) 2.06(a)(iv)
and (Section) 2.06(a)(v))
Chemical Bank, as Trustee
450 West 33rd Street
New York, New York 10001
Attn: Corporate Trustee
Administration Department
Re: International CableTel Incorporated
7% Convertible Subordinated Notes
Due 2008 (the "Convertible Notes")
----------------------------------------
Reference is hereby made to the Indenture dated as of June 12,
1996 (the "Indenture") between International CableTel Incorporated, as
Issuer, and Chemical Bank, as Trustee. Capitalized terms used but not
defined herein shall have the meanings given them in the Indenture.
This letter relates to U.S. $____________ aggregate principal
amount of Convertible Notes which are held [in the form of the
[Restricted/Regulation S] Global Note (CUSIP No. 459216AH0 /CINS No.
U45925AC5) with the Depositary]/*/in the name of [name of transferor] (the
"Transferor") to effect the transfer of the Convertible Notes to the
undersigned.
In connection with such request, and in respect of such
Convertible Notes we confirm that:
1. We understand that the Convertible Notes were originally
offered in a transaction not involving any public offering in the
United States within the meaning of the United States Securities Act
of 1933, as amended (the "Securities Act"), that the Convertible Notes
have not been registered under the Securities Act and that (A) the
Convertible Notes may be offered, resold, pledged or otherwise
transferred only (i) to a person who the seller reasonably believes is
a "qualified institutional buyer" (as defined in Rule 144A under the
Securities Act) in a transaction meeting the requirements of Rule
144A, in a transaction meeting the requirements of Rule 144 under the
Securities Act, outside the United States to a foreign person in a
transaction meeting the requirements of Rule 904 under the Securities
Act or in accordance with another exemption from the registration
requirements of the Securities Act (and based upon an opinion of
counsel if
--------------------------------
*Insert and modify, if appropriate.
<PAGE>
2
the Company so requests), (ii) to the Company or (iii) pursuant to an
effective registration statement, and, in each case, in accordance
with any applicable securities laws of any State of the United States
or any other applicable jurisdiction and (B) the purchaser will, and
each subsequent holder is required to, notify any subsequent purchaser
from it of the resale restrictions set forth in (A) above.
2. We are a corporation, partnership or other entity having such
knowledge and experience in financial and business matters as to be
capable of evaluating the merits and risks of an investment in the
Convertible Notes, and we are (or any account for which we are
purchasing under paragraph 4 below is) an institutional accredited
investor as defined in Rule 501(a)(1), (2), (3) or (7) under the
Securities Act, able to bear the economic risk of our proposed
investment in the Securities.
3. We are acquiring the Convertible Notes for our own account
(or for accounts as to which we exercise sole investment discretion
and have authority to make, and do make, the statements contained in
this letter) and not with a view to any distribution of the
Convertible Notes, subject, nevertheless, to the understanding that
the disposition of our property shall at all times be and remain
within our control.
4. We are, and each account (if any) for which we are purchasing
Convertible Notes is, purchasing Convertible Notes having an aggregate
principal amount of not less than $100,000.
5. We understand that (a) the Convertible Notes will be
delivered to us in registered form only and that the certificate
delivered to us in respect of the Convertible Notes will bear a legend
substantially to the following effect:
"THE SECURITY (OR ITS PREDECESSOR) EVIDENCED HEREBY WAS ORIGINALLY
ISSUED IN A TRANSACTION EXEMPT FROM REGISTRATION UNDER SECTION 5 OF THE
UNITED STATES SECURITIES ACT OF 1933 (THE "SECURITIES ACT"), AND THE
SECURITY EVIDENCED HEREBY AND ANY SHARES OF COMMON STOCK ISSUED UPON
CONVERSION HEREOF MAY NOT BE OFFERED, SOLD OR OTHERWISE TRANSFERRED IN THE
ABSENCE OF SUCH REGISTRATION OR AN APPLICABLE EXEMPTION THEREFROM. EACH
PURCHASER OF THE SECURITY EVIDENCED HEREBY IS HEREBY NOTIFIED THAT THE
SELLER MAY BE RELYING ON THE EXEMPTION FROM THE PROVISIONS OF SECTION 5 OF
THE SECURITIES ACT PROVIDED BY RULE 144A THEREUNDER. THE HOLDER OF THE
SECURITY EVIDENCED HEREBY AGREES FOR THE BENEFIT OF THE COMPANY THAT (A)
SUCH SECURITY AND ANY SHARES OF COMMON STOCK ISSUED UPON CONVERSION HEREOF
MAY BE RESOLD, PLEDGED OR OTHERWISE TRANSFERRED, ONLY (1)(a) TO A PERSON
WHO THE SELLER REASONABLY BELIEVES IS A QUALIFIED INSTITUTIONAL BUYER (AS
DEFINED IN RULE 144A UNDER THE SECURITIES ACT) IN A TRANSACTION MEETING THE
REQUIREMENTS OF RULE 144A, (b) IN A
<PAGE>
3
TRANSACTION MEETING THE REQUIREMENTS OF RULE 144 UNDER THE SECURITIES ACT,
(c) OUTSIDE THE UNITED STATES TO A FOREIGN PERSON IN A TRANSACTION MEETING
THE REQUIREMENTS OF RULE 904 UNDER THE SECURITIES ACT OR (d) IN ACCORDANCE
WITH ANOTHER EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES
ACT (AND BASED UPON AN OPINION OF COUNSEL IF THE COMPANY SO REQUESTS), (2)
TO THE COMPANY OR (3) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT AND,
IN EACH CASE, IN ACCORDANCE WITH ANY APPLICABLE SECURITIES LAWS OF ANY
STATE OF THE UNITED STATES OR ANY OTHER APPLICABLE JURISDICTION AND (B) THE
HOLDER WILL, AND EACH SUBSEQUENT HOLDER IS REQUIRED TO, NOTIFY ANY
PURCHASER FROM IT OF THE SECURITY EVIDENCED HEREBY OR ANY COMMON STOCK
ISSUED UPON CONVERSION HEREOF OF THE RESALE RESTRICTIONS SET FORTH IN (A)
ABOVE."
and (b) such certificates will be reissued without the foregoing
legend only in accordance with the terms of the Indenture.
6. We agree that in the event that at some future time we wish
to dispose of any of the Securities, we will not do so unless:
(a) the Convertible Notes are sold to the Company or any
Subsidiary thereof;
(b) the Convertible Notes are sold to a qualified
institutional buyer in compliance with Rule 144A under the
Securities Act;
(c) the Convertible Notes are sold to an institutional
accredited investor, as defined in Rule 501(a)(1), (2), (3) or
(7) under the Securities Act, acquiring at least $100,000
principal amount of the Convertible Notes that, prior to such
transfer, furnishes to the Trustee a signed letter containing
certain representations and agreements relating to the
restrictions on transfer of the Convertible Notes (the form of
which letter can be obtained from such Trustee);
(d) the Convertible Notes are sold outside the United States
in compliance with Rule 903 or Rule 904 under the Securities Act;
(e) the Convertible Notes are sold by us pursuant to Rule
144 under the Securities Act; or
<PAGE>
4
(f) the Convertible Notes are sold pursuant to an effective
registration statement under the Securities Act.
Very truly yours,
[PURCHASER]
By:
________________________
Name:
Title:
Dated:
cc: International CableTel Incorporated
110 East 59th Street
New York, New York 10022
Attn: Richard J. Lubasch, Esq.
General Counsel
<PAGE>
EXHIBIT F
FORM OF CERTIFICATE FOR TRANSFERS OF
REGULATION S TEMPORARY GLOBAL NOTE
FOR REGULATION S PERMANENT GLOBAL NOTE
(Transfers pursuant to (Section) 2.06(a)(viii))
(Transferor)
[MORGAN GUARANTY TRUST COMPANY
OF NEW YORK, BRUSSELS OFFICE AS
OPERATOR OF THE EUROCLEAR SYSTEM]
[CEDEL BANK, SOCIETE ANONYME]
Re: International CableTel Incorporated
7% Convertible Subordinated Notes
Due 2008 (the "Convertible Notes")
----------------------------------------
Reference is hereby made to the Indenture dated as of June 12,
1996 (the "Indenture") between International CableTel Incorporated, as
Issuer, and Chemical Bank, as Trustee. Capitalized terms used but not
defined herein shall have the meanings given them in the Indenture.
This certificate relates to U.S. $____________ aggregate
principal amount of Convertible Notes which are held in the form of the
Regulation S Temporary Global Note (CINS No. U45925AC5) with the Depositary
in the name of [name of transferor] (the "Transferor") to effect the
transfer of the beneficial interest in such Regulation S Temporary Global
Note for a beneficial interest in an equivalent aggregate principal amount
of the Regulation S Permanent Global Note.
In connection with such request, and in respect of such
Convertible Notes we confirm that:
1. We are either not a U.S. person (as defined below) or we have
purchased our beneficial interest in the above referenced Regulation S
Temporary Global Note in a transaction that is exempt from the
registration requirements under the Securities Act.
2. We are delivering this certificate in connection with
obtaining a beneficial interest in the Regulation S Permanent Global
Note in exchange for our beneficial interest in the Regulation S
Temporary Global Note.
For purposes of this certificate, "U.S. person" means (i) any
individual resident in the United States, (ii) any partnership or
corporation organized or incorporated under the laws
<PAGE>
2
of the United States, (iii) any estate of which an executor or
administrator is a U.S. person (other than an estate governed by foreign
law and of which at least one executor or administrator is a non-U.S.
person who has sole or shared investment discretion with respect to its
assets), (iv) any trust of which any trustee is a U.S. person (other than a
trust of which at least one trustee is a non-U.S. person who has sole or
shared investment discretion with respect to its assets and no beneficiary
of the trust (and no settlor if the trust is revocable) is a U.S. person),
(v) any agency or branch of a foreign entity located in the United States,
(vi) any non-discretionary or similar account (other than an estate or
trust) held by a dealer or other fiduciary for the benefit or account of a
U.S. person, (vii) any discretionary or similar account (other than an
estate or trust) held by a dealer or other fiduciary organized,
incorporated or (if an individual) resident in the United States (other
than such an account held for the benefit or account of a non-U.S. person),
(viii) any partnership or corporation organized or incorporated under the
laws of a foreign jurisdiction and formed by a U.S. person principally for
the purpose of investing in securities not registered under the Securities
Act (unless it is organized or incorporated, and owned, by accredited
investors within the meaning of Rule 501(a) under the Securities Act who
are not natural persons, estates or trusts); provided, however, that the
-----------------
term "U.S. person" shall not include (A) a branch or agency of a U.S.
person that is located and operating outside the United States for valid
business purposes as a locally regulated branch or agency engaged in the
banking or insurance business, (B) any employee benefit plan established
and administered in accordance with the law, customary practices and
documentation of a foreign country and (C) the international organizations
set forth in Section 902(o)(7) of Regulation S under the Securities Act and
any other similar international organizations, and their agencies,
affiliates and pension plans.
We irrevocably authorize you to produce this certificate or a copy
hereof to any interested party in any administrative or other proceedings
with respect to the matters covered by this certificate.
Very truly yours,
[TRANSFEROR]
By: ________________________
Name:
Title:
To be completed by the account holder
as, or as agent for, the beneficial
Dated: owner(s) of the Convertible Notes to
cc: International CableTel which this certificate relates.
Incorporated
110 East 59th Street
New York, New York 10022
Attn: Richard J. Lubasch, Esq.
General Counsel
<PAGE>
1
EXHIBIT G
FORM OF CERTIFICATE FOR TRANSFERS OF
REGULATION S TEMPORARY GLOBAL NOTE
FOR REGULATION S PERMANENT GLOBAL NOTE
(Transfers pursuant to (Section) 2.06(a)(viii))
(Euroclear or Cedel)
Chemical Bank
450 West 33rd Street
New York, New York 10001
Attention: Corporate Trustee
Administration Department
Re: International CableTel Incorporated
7% Convertible Subordinated Notes
Due 2008 (the "Convertible Notes")
----------------------------------------
Reference is hereby made to the Indenture dated as of June 12,
1996 (the "Indenture") between International CableTel Incorporated, as
Issuer, and Chemical Bank, as Trustee. Capitalized terms used but not
defined herein shall have the meanings given them in the Indenture.
This certificate relates to U.S. $____________ aggregate
principal amount of Convertible Notes which are held in the form of the
Regulation S Temporary Global Note (CINS No. U45925AC5) with the Depositary
to effect the transfer of the beneficial interest in such Regulation S
Temporary Global Note for a beneficial interest in an equivalent aggregate
principal amount of the Regulation S Permanent Global Note.
In connection with such request, this is to certify that, based
solely on certificates we have received in writing, by tested telex or by
electronic transmission from member organizations appearing in our records
as persons being entitled to a portion of the principal amount of the
Regulation S Temporary Global Note set forth above (our "Member
Organizations") substantially to the effect set forth in the Indenture,
U.S. $_________ aggregate principal amount of the Convertible Notes is
owned by persons that are not citizens or residents of the United States,
domestic partnerships, domestic corporations or any estate or trust the
income of which is subject to United States federal income taxation
regardless of its source or any other person deemed a "U.S. person" under
Regulation S under the Securities Act of 1933, as amended.
<PAGE>
2
We further certify (i) that we are not making available herewith
for exercise (or if relevant, exercise of any rights of collection of any
interest) any portion of the Regulation S Global Note excepted in such
certificates and (ii) that, as of the date hereof, we have not received any
notification from any of our Member Organizations to the effect that the
statements made by such Member Organizations with respect to any portion of
the part submitted herewith for exchange (or, if relevant, exercise or any
rights of collection of any interest) are no longer true and cannot be
relied upon as of the date hereof.
We understand that this certificate is required in connection with
certain laws, and, if applicable, certain securities laws of the United
States. In connection therewith, if administrative or legal proceedings
are commenced or threatened in connection with which this certificate is or
would be relevant, we irrevocably authorize you to produce this
certification to any interested party in such proceedings.
Very truly yours,
[MORGAN GUARANTY TRUST COMPANY
OF NEW YORK, BRUSSELS OFFICE AS
OPERATOR OF THE EUROCLEAR SYSTEM]
[CEDEL BANK, SOCIETE ANONYME]
By:
________________________
Name:
Title:
Dated:
cc: International CableTel Incorporated
110 East 59th Street
New York, New York 10022
Attn: Richard J. Lubasch, Esq.
General Counsel
<PAGE>
1
EXHIBIT H
FORM OF CERTIFICATE FOR TRANSFERS OF
REGULATION S PERMANENT GLOBAL NOTE FOR
CERTIFICATED SECURITIES
(Transfers pursuant to (Section) 2.06(a)(viii))
(Transferor)
Chemical Bank
450 West 33rd Street
New York, New York 10001
Attn: Corporate Trustee
Adminstrative Department
Re: International CableTel Incorporated
7% Convertible Subordinated Notes
Due 2008 (the "Convertible Notes")
----------------------------------------
Reference is hereby made to the Indenture dated as of June 12,
1996 (the "Indenture") between International CableTel Incorporated, as
Issuer, and Chemical Bank, as Trustee. Capitalized terms used but not
defined herein shall have the meanings given them in the Indenture.
This certificate relates to U.S. $____________ aggregate
principal amount of Convertible Notes which are held in the form of the
Regulation S Permanent Global Note (CINS No. U45925AC5) with the Depositary
in the name of [name of transferor] (the "Transferor") to effect the
transfer of the beneficial interest in such Regulation S Permanent Global
Note for a beneficial interest in an equivalent aggregate principal amount
of Certificated Securities.
In connection with such request, and in respect of such
Convertible Notes we confirm that:
1. We are either not a U.S. person (as defined below) or we have
purchased our beneficial interest in the above referenced Regulation S
Permanent Global Note in a transaction that is exempt from the
registration requirements under the Securities Act.
2. We are delivering this certificate in connection with
obtaining a beneficial interest in Certificated Securities in exchange
for our beneficial interest in the Regulation S Permanent Global Note.
For purposes of this certificate, "U.S. person" means (i) any
individual resident in the United States, (ii) any partnership or
corporation organized or incorporated under the laws of the United States,
(iii) any estate of which an executor or administrator is a U.S. person
(other than an estate governed by foreign law and of which at least one
executor or administrator is a non-U.S. person who has sole or shared
investment discretion with respect to its assets), (iv) any
<PAGE>
2
trust of which any trustee is a U.S. person (other than a trust of which at
least one trustee is a non-U.S. person who has sole or shared investment
discretion with respect to its assets and no beneficiary of the trust (and
no settlor if the trust is revocable) is a U.S. person), (v) any agency or
branch of a foreign entity located in the United States, (vi) any non-
discretionary or similar account (other than an estate or trust) held by a
dealer or other fiduciary for the benefit or account of a U.S. person,
(vii) any discretionary or similar account (other than an estate or trust)
held by a dealer or other fiduciary organized, incorporated or (if an
individual) resident in the United States (other than such an account held
for the benefit or account of a non-U.S. person), (viii) any partnership or
corporation organized or incorporated under the laws of a foreign
jurisdiction and formed by a U.S. person principally for the purpose of
investing in securities not registered under the Securities Act (unless it
is organized or incorporated, and owned, by accredited investors within the
meaning of Rule 501(a) under the Securities Act who are not natural
persons, estates or trusts); provided, however, that the term "U.S. person"
-------- -------
shall not include (A) a branch or agency of a U.S. person that is located
and operating outside the United States for valid business purposes as a
locally regulated branch or agency engaged in the banking or insurance
business, (B) any employee benefit plan established and administered in
accordance with the law, customary practices and documentation of a foreign
country and (C) the international organizations set forth in Section
902(o)(7) of Regulation S under the Securities Act and any other similar
international organizations, and their agencies, affiliates and pension
plans.
We irrevocably authorize you to produce this certificate or a copy
hereof to any interested party in any administrative or other proceedings
with respect to the matters covered by this certificate.
Very truly yours,
[TRANSFEROR]
By: ________________________
Name:
Title:
To be completed by the account holder
as, or as agent for, the beneficial
Dated: owner(s) of the Convertible Notes to
cc: International CableTel which this certificate relates.
Incorporated
110 East 59th Street
New York, New York 10022
Attn: Richard J. Lubasch, Esq.
General Counsel
<PAGE>
Exhibit 12.1
STATEMENT RE: COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
<TABLE>
<CAPTION>
PROFORMA
AS ADJUSTED MARCH PROFORMA
MARCH 31, -------------------------- AS ADJUSTED
1996 1996 1995 1995
------------ ------------ ------------ -------------
<S> <C> <C> <C> <C>
Fixed charges:
Interest........ $ 34,482,000 $ 24,711,000 $ 4,242,000 $ 70,419,000
Amortization of
debt expense.... 356,000 1,072,000 126,000 1,424,000
Interest portion
of rental
expense......... 913,000 244,000 137,000 3,652,000
------------ ------------ ------------ -------------
$ 35,751,000 $ 26,027,000 $ 4,505,000 $ 75,495,000
============ ============ ============ =============
Earnings:
Income (loss)
from operations. ($46,466,000) ($42,682,000) ($13,914,000) ($113,567,000)
Fixed charges
per above....... 35,751,000 26,027,000 4,505,000 75,495,000
Less: Capital-
ized interest... 0 0 0 (12,183,000)
------------ ------------ ------------ -------------
($10,715,000) ($16,655,000) ($ 9,409,000) ($ 50,255,000)
============ ============ ============ =============
Ratio of Earnings
to Fixed
Charges(1)....... -- -- -- --
<CAPTION>
DECEMBER 31
---------------------------------------------------------------
1995 1994 1993 1992 1991
------------- ------------- ------------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Fixed charges:
Interest........ $ 40,562,000 $ 15,316,000 2,950,000
Amortization of
debt expense.... 1,424,000 502,000 117,000
Interest portion
of rental
expense......... 647,000 369,000 66,000 28,000 8,000
------------- ------------- ------------- ---------- ----------
$ 42,633,000 $ 16,187,000 $ 3,133,000 $ 28,000 $ 8,000
============= ============= ============= ========== ==========
Earnings:
Income (loss)
from operations. ($93,262,000) ($27,943,000) ($10,431,000) $2,249,000 ($422,000)
Fixed charges
per above....... 42,633,000 16,187,000 3,133,000 28,000 8,000
Less: Capital-
ized interest... (12,183,000) (3,906,000)
------------- ------------- ------------- ---------- ----------
($62,812,000) ($15,662,000) ($ 7,298,000) $2,277,000 ($414,000)
============= ============= ============= ========== ==========
Ratio of Earnings
to Fixed
Charges(1)....... -- -- -- 81.1 --
</TABLE>
- ----
(1) The ratio of earnings to fixed charges is not meaningful for periods that
result in a deficit. For the three months ended March 31, 1996 and 1995
and for the years ended December 31, 1995, 1994, 1993 and 1991, the
deficit of earnings to fixed charges was $42,682,000, $13,914,000,
$105,445,000, $31,849,000, $10,431,000 and $422,000, respectively, and the
proforma as adjusted for the three months ended March 31, 1996 and for the
year ended December 31, 1995 was $46,466,000 and $125,750,000,
respectively.
<PAGE>
EXHIBIT 23.1
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the captions "Experts" and
"Selected Consolidated Financial Information" in the Registration Statement
(Form S-3) and related Prospectus of International CableTel Incorporated for
the registration of 7% Convertible Subordinated Notes Due 2008 and to the
incorporation by reference therein of our report dated March 15, 1996, with
respect to the consolidated financial statements and schedule of International
CableTel Incorporated included in its Annual Report (Form 10-K) for the year
ended December 31, 1995, filed with the Securities and Exchange Commission.
Ernst & Young LLP
New York, New York
July 2, 1996
<PAGE>
EXHIBIT 23.2
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Experts" in the
Registration Statement (Form S-3) and related Prospectus of International
CableTel Incorporated for the registration of 7% Convertible Subordinated
Notes Due 2008 and to the incorporation by reference therein of our report on
the consolidated financial statements of NTL Group Limited dated March 15,
1996, included in International CableTel's Form 8K-A filed with the Securities
and Exchange Commission on May 30, 1996.
Ernst & Young
London, England
July 3, 1996
<PAGE>
EXHIBIT 25.1
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------
FORM T-1
STATEMENT OF ELIGIBILITY UNDER THE TRUST INDENTURE ACT OF 1939 OF A CORPORATION
DESIGNATED TO ACT AS TRUSTEE
----------------
CHECK IF AN APPLICATION TO DETERMINE ELIGIBILITY OF
A TRUSTEE PURSUANT TO SECTION 305(b)(2)
----------------
CHEMICAL BANK
(EXACT NAME OF TRUSTEE AS SPECIFIED IN ITS CHARTER)
NEW YORK 13-4994650
(STATE OF INCORPORATION IF NOT A (I.R.S. EMPLOYER IDENTIFICATION NO.)
NATIONAL BANK)
10017
270 PARK AVENUE (ZIP CODE)
NEW YORK, NEW YORK
(ADDRESS OF PRINCIPAL EXECUTIVE
OFFICES)
WILLIAM H. MCDAVID
GENERAL COUNSEL
270 PARK AVENUE
NEW YORK, NEW YORK 10017
TEL: (212) 270-2611
(NAME, ADDRESS AND TELEPHONE NUMBER OF AGENT FOR SERVICE)
----------------
INTERNATIONAL CABLETEL INCORPORATED
(EXACT NAME OF OBLIGOR AS SPECIFIED IN ITS CHARTER)
DELAWARE 52-1822078
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER IDENTIFICATION NO.)
INCORPORATION OR ORGANIZATION)
10022
110 EAST 59TH STREET (ZIP CODE)
NEW YORK, NEW YORK
(ADDRESS OF PRINCIPAL EXECUTIVE
OFFICES)
----------------
7% CONVERTIBLE SUBORDINATED NOTES DUE 2008
(TITLE OF THE INDENTURE SECURITIES)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
GENERAL
ITEM 1. GENERAL INFORMATION
Furnish the following information as to the trustee:
(a)Name and address of each examining or supervising authority to which it is
subject.
New York State Banking Department, State House, Albany, New York 12110.
Board of Governors of the Federal Reserve System, Washington, D.C.,
20551
Federal Reserve Bank of New York, District No. 2, 33 Liberty Street,
New York, N.Y.
Federal Deposit Insurance Corporation, Washington, D.C., 20429.
(b)Whether it is authorized to exercise corporate trust powers.
Yes.
ITEM 2. AFFILIATIONS WITH THE OBLIGOR.
If the obligor is an affiliate of the trustee, describe each such
affiliation.
None.
2
<PAGE>
ITEM 16. LIST OF EXHIBITS
List below all exhibits filed as a part of this Statement of Eligibility.
1. A copy of the Articles of Association of the Trustee as now in effect,
including the Organization Certificate and the Certificates of Amendment dated
February 17, 1969, August 31, 1977, December 31, 1980, September 9, 1982,
February 28, 1985 and December 2, 1991 (see Exhibit 1 to Form T-1 filed in
connection with Registration Statement No. 33-50010, which is incorporated by
reference).
2. A copy of the Certificate of Authority of the Trustee to Commence
Business (see Exhibit 2 to Form T-1 filed in connection with Registration
Statement No. 33-50010, which is incorporated by reference).
3. None, authorization to exercise corporate trust powers being contained in
the documents identified above as Exhibits 1 and 2.
4. A copy of the existing By-Laws of the Trustee (see Exhibit 4 to Form T-1
filed in connection with Registration Statement No. 33-84460, which is
incorporated by reference).
5. Not applicable.
6. The consent of the Trustee required by Section 321(b) of the Act (see
Exhibit 6 to Form T-1 filed in connection with Registration Statement No. 33-
50010, which is incorporated by reference).
7. A copy of the latest report of condition of the Trustee, published
pursuant to law or the requirements of its supervising or examining authority.
8. Not applicable.
9. Not applicable.
SIGNATURE
Pursuant to the requirements of the Trust Indenture Act of 1939 the Trustee,
Chemical Bank, a corporation organized and existing under the laws of the
State of New York, has duly caused this statement of eligibility to be signed
on its behalf by the undersigned, thereunto duly authorized, all in the City
of New York and State of New York, on the 8th day of July, 1996.
CHEMICAL BANK
/s/ Andrew M. Deck
By___________________________________
Andrew M. Deck
Senior Trust Officer
3
<PAGE>
EXHIBIT 7 TO FORM T-1
BANK CALL NOTICE
RESERVE DISTRICT NO. 2
CONSOLIDATED REPORT OF CONDITION OF
CHEMICAL BANK
OF 270 PARK AVENUE, NEW YORK, NEW YORK 10017
AND FOREIGN AND DOMESTIC SUBSIDIARIES,
A MEMBER OF THE FEDERAL RESERVE SYSTEM,
AT THE CLOSE OF BUSINESS MARCH 31, 1996, IN
ACCORDANCE WITH A CALL MADE BY THE FEDERAL RESERVE BANK OF THIS
DISTRICT PURSUANT TO THE PROVISIONS OF THE FEDERAL RESERVE ACT.
<TABLE>
ASSETS
<CAPTION>
DOLLAR AMOUNTS
IN MILLIONS
----------------
<S> <C> <C>
Cash and balances due from depository institutions:
Noninterest-bearing balances and currency and coin......... $ 3,391
Interest-bearing balances.................................. 2,075
Securities:..................................................
Held to maturity securities.................................. 3,607
Available for sale securities................................ 29,029
Federal Funds sold and securities purchased under agreements
to resell in domestic offices of the bank and of its Edge
and Agreement subsidiaries, and in IBF's:
Federal funds sold......................................... 1,264
Securities purchased under agreements to resell............ 354
Loans and lease financing receivables:
Loans and leases, net of unearned income................... $73,216
Less: Allowance for loan and lease losses.................. 1,854
Less: Allocated transfer risk reserve...................... 104
-------
Loans and leases, net of unearned income, allowance, and
reserve................................................... 71,258
Trading Assets............................................... 25,919
Premises and fixed assets (including capitalized leases)..... 1,337
Other real estate owned...................................... 30
Investments in unconsolidated subsidiaries and associated
companies................................................... 187
Customer's liability to this bank on acceptances outstanding. 1,082
Intangible assets............................................ 419
Other assets................................................. 7,406
--------
TOTAL ASSETS................................................. $147,358
========
</TABLE>
4
<PAGE>
<TABLE>
LIABILITIES
<CAPTION>
DOLLAR AMOUNTS
IN MILLIONS
--------------
<S> <C>
Deposits
In domestic offices......................................... $ 45,786
Noninterest-bearing................. 14,972
Interest-bearing.................... 30,814
In foreign offices, Edge and Agreement subsidiaries, and
IBF's...................................................... 36,550
Noninterest-bearing.....................202
Interest-bearing.....................36,348
Federal funds purchased and securities sold under agreements
to repurchase in domestic offices of the bank and of its
Edge and Agreement subsidiaries, and in IBF's Federal funds
purchased 11,412
Securities sold under agreements to repurchase.............. 2,444
Demand notes issued to the U.S. Treasury..................... 699
Trading liabilities.......................................... 19,998
Other Borrowed money:
With a remaining maturity of one year or less............... 11,305
With a remaining maturity of more than one year............. 130
Mortgage indebtedness and obligations under capitalized
leases...................................................... 13
Bank's liability on acceptances executed and outstanding..... 1,089
Subordinated notes and debentures............................ 3,411
Other liabilities............................................ 6,778
TOTAL LIABILITIES............................................ 139,615
=========
EQUITY CAPITAL
Common stock................................................. 620
Surplus...................................................... 4,664
Undivided profits and capital reserves....................... 3,058
Net unrealized holding gains (Losses) on available-for-sale
securities.................................................. (607)
Cumulative foreign currency translation adjustments.......... 8
TOTAL EQUITY CAPITAL......................................... 7,743
---------
TOTAL LIABILITIES, LIMITED-LIFE PREFERRED STOCK AND EQUITY
CAPITAL..................................................... $ 147,358
=========
</TABLE>
I, Joseph L. Sclafani, S.V.P. & Controller of the above-named bank, do
hereby declare that this Report of Condition has been prepared in conformance
with the instructions issued by the appropriate Federal regulatory authority
and is true to the best of my knowledge and belief.
JOSEPH L. SCLAFANI
We, the undersigned directors, attest to the correctness of this Report of
Condition and declare that it has been examined by us, and to the best of our
knowledge and belief has been prepared in conformance with the instructions
issued by the appropriate Federal regulatory authority and is true and
correct.
WALTER V. SHIPLEY
EDWARD D. MILLER DIRECTORS
THOMAS G. LABRECQUE
5
