<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON SEPTEMBER 13, 1996
REGISTRATION NO. 333-07879
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
---------------
AMENDMENT NO. 1
TO
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
---------------
INTERNATIONAL CABLETEL INCORPORATED
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
---------------
4899 52-1822078
DELAWARE (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
(STATE OR OTHER CLASSIFICATION CODE NUMBER) IDENTIFICATION NUMBER)
JURISDICTION OF
INCORPORATION OR 110 EAST 59TH STREET
ORGANIZATION) 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. [_]
---------------
CALCULATION OF REGISTRATION FEE
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
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 Stock
10. Interests of Named Experts 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 SEPTEMBER 13, 1996
PROSPECTUS
$275,000,000 (ART)
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 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 September 11, 1996, the reported closing bid price of the Common Stock on
the Nasdaq Stock Market's National Market (the "NNM") (symbol "ICTL") was
$23.625 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 June 30, 1996, the Company had approximately $969.4 million of
Senior Debt outstanding and the Company's subsidiaries had approximately $614.1
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 September 13, 1996.
<PAGE>
[THIS PAGE INTENTIONALLY LEFT BLANK]
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 Reports 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 and for the period ended June 30, 1996, dated August 14, 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), June 11, 1996, and September 3,
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
3
<PAGE>
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 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 $1.5505 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 June 30, 1996. See "Exchange Rates" for information regarding the
Noon Buying Rate for the past five fiscal years. On September 11, 1996, the
Noon Buying Rate was $1.555 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 telephone/television and telecommunications
market in the United Kingdom in 1993 and is the third largest operator of cable
telephone/television 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 residential telephone,
cable television ("CATV") 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 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 June 30, 1996, the
Company had approximately $969.4 million of Senior
Debt outstanding and the Company's subsidiaries had
approximately $614.1 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
Consequences.............. There are certain federal income tax 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 financial
statements which are incorporated herein by reference and the Company's pro
forma statements of operations which are included herein.
<TABLE>
<CAPTION>
PRO FORMA
AS ADJUSTED PRO FORMA
SIX MONTHS SIX MONTHS ENDED AS ADJUSTED
ENDED JUNE 30, YEAR ENDED YEAR ENDED DECEMBER 31,
JUNE 30, ------------------- 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............... $ 127,512 $ 66,217 $ 10,498 $206,331 $ 33,741 $ 13,745 $ 10,078
Costs and expenses
Operating expenses.... 75,151 43,698 6,811 129,105 24,415 7,827 4,441
Selling, general and
administrative
expenses............. 59,388 51,852 24,757 91,118 72,629 27,890 5,042
Depreciation and
amortization......... 39,499 32,601 12,013 54,118 29,823 17,916 6,206
--------- --------- -------- -------- -------- -------- --------
Total costs and
expenses........... 174,038 128,151 43,581 274,341 126,867 53,633 15,689
--------- --------- -------- -------- -------- -------- --------
Operating loss........ (46,526) (61,934) (33,083) (68,010) (93,126) (39,888) (5,611)
Other income (expense)
Interest, dividend and
other income......... 18,203 17,519 10,057 22,231 21,185 18,403 5,182
Interest expense...... (81,289) (61,406) (13,063) (67,543) (28,379) (11,410) (2,950)
Foreign currency
transactions gains
(losses)............. 171 171 629 84 84 2,062 (7,052)
--------- --------- -------- -------- -------- -------- --------
Loss before income
taxes and minority
interests............. (109,441) (105,650) (35,460) (113,238) (100,236) (30,833) (10,431)
Income tax benefit
(provision)........... (3,481) (3,481) 1,076 (7,169) 2,477 (1,630) (645)
--------- --------- -------- -------- -------- -------- --------
Loss before minority
interests............. (112,922) (109,131) (34,384) (120,407) (97,759) (32,463) (11,076)
Minority interests..... 7,249 7,249 2,699 6,974 6,974 2,890 --
--------- --------- -------- -------- -------- -------- --------
Net loss............... $(105,673) $(101,882) $(31,685) (113,433) $(90,785) $(29,573) $(11,076)
========= ========= ======== ======== ======== ======== ========
Net loss per common
share(2).............. $ (3.49) $ (3.36) $ (1.05) $ (3.76) $ (3.01) $ (.98) $ (.83)
========= ========= ======== ======== ======== ======== ========
Weighted average number
of common shares used
in computation of net
loss per share(2)..... 30,290 30,290 30,183 30,190 30,190 30,175 13,327
========= ========= ======== ======== ======== ======== ========
Ratio of earnings to
fixed
charges(3)............ -- -- -- -- -- -- --
</TABLE>
<TABLE>
<CAPTION>
AS OF
JUNE 30, 1996
--------------
ACTUAL
(IN THOUSANDS)
<S> <C>
BALANCE SHEET DATA:
Cash and cash equivalents...................................... $ 735,334
Working capital................................................ 438,319
Fixed assets, net.............................................. 952,541
Total assets................................................... 2,332,713
Long-term debt................................................. 1,575,657
Shareholders' equity........................................... 255,738
</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 Bridge Facility was repaid in
full on August 16, 1996. 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 $98.4
million, $34.8 million, $105.4 million, $31.8 million and $10.4 million for
the six months ended June 30, 1996 and 1995 and for the years ended
December 31, 1995, 1994 and 1993, respectively, and pro forma as adjusted
$102.2 million and $118.4 million for the six months ended June 30, 1996
and for the year ended December 31, 1995, respectively.
9
<PAGE>
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 June 30, 1996 the
Company had approximately $969.4 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 highly leveraged. At June 30, 1996, the Company's total long-
term indebtedness was approximately $1.6 billion, representing 86.0% of total
capitalization, including the Company's: (i) $629.1 million accreted value of
11 1/2% Series B Senior Deferred Coupon Notes Due 2006 (the "11 1/2% Notes");
(ii) $174.0 million accreted value of 12 3/4% Series A Senior Deferred Coupon
Notes Due 2005 (the "12 3/4% Notes"); (iii) $166.3 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"); (iv) $191.8 million principal amount of 7 1/4% Convertible
Subordinated Notes Due 2005 (the "7 1/4% Convertible Notes"); (v) $275 million
principal amount of Convertible Notes, and (vi) $140 million of The Long-Term
Facility. 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 June 30, 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)1.00
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 may 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 June 30, 1996, the
Convertible Notes were structurally subordinated to approximately $614.1
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.
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
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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. 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 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.
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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." 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. 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.
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 six months ended June 30, 1996 and 1995 and years ended
December 31, 1995, 1994, 1993, 1992 and 1991 of $(101.9 million) and $(31.7
million), $(90.8 million), $(29.6 million), $(11.1 million), $1.2 million and
($.9 million), respectively. As of June 30, 1996, the Company's accumulated
deficit was $231.4 million. The
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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 six months ended June 30, 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 $98.4 million and $34.8 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 six
months ended June 30, 1996 were inadequate to cover pro forma as adjusted
fixed charges by $118.4 million and $102.2 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 June 30, 1996 until the end of 2003, CableTel is required to
construct cable television systems passing an aggregate of approximately
1,394,000 additional premises (residential and business), including
approximately 83,200 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 June 30, 1996, construction of CableTel's network had passed
approximately 33% 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.
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
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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 telephone/television and telecommunications industry has a limited
operating history in the United Kingdom. Although initial acceptance of cable
telephone/television 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.
CATV. CableTel's CATV 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 CATV 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 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
17
<PAGE>
with BT and Mercury hold licenses to provide cable telephone/television
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.
The Broadcasting Act 1996 was enacted in August 1996. It provides 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 price reductions in
certain categories of calls and, due to regulatory price controls, BT will be
making 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
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
18
<PAGE>
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"). This technology could
grow to become a competitive threat to the Company's networks, particularly if
all changes are reduced further on the mobile networks. NTL"s Radio
Communications Division may enable the Company to benefit from the growth in
this technology. There can be no assurance, however, 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, 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 programming that is also offered by CableTel,
to approximately 3.6 million subscribers in the United Kingdom. BSkyB's
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<PAGE>
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 announced the results of his review
on July 24, 1996 when he received new undertakings from BSKyB as to its future
behavior and announced that a new industry rate card would be approved after
consultation with the cable industry. The OFT also found that there was no
evidence that the linkage between the direct-to-home (DTH) retail price and
its wholesale price charged to cable operators was anti-competitive and that
no action was required on this issue. Additionally, the OFT found that there
was no evidence that BSkyB had been cross-subsidizing the retail part of its
business from profits of the wholesale segment to the detriment of
competition.
However, the OFT found that BSkyB's requirement that cable operators carry
its basic channels to 100% of their subscribers inhibited cable operators in
their ability to offer tailored packages and inhibited the growth of local
cable industry. BSkyB has accepted an undertaking not to require carriage in
excess of 80% in the future.
BSkyB also accepted an undertaking not to bundle bonus programmes (such as
occurred in respect of the Disney Channel) with premium channels in the future
(the ITC is currently investigating a complaint concerning the terms of supply
of the Disney Channel). It is expected that the new industry rate card will be
published during the final quarter of 1996. However, notwithstanding the OFT's
intervention, 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.
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<PAGE>
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, the
Department of National Heritage 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 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. This process is
continuing and the DTI and OFTEL are working toward a further draft
consultative license to be published in the near future.
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
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<PAGE>
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 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
22
<PAGE>
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
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 Restated
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
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<PAGE>
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 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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<PAGE>
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." 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.............................................. 33.25 28.00
Third Quarter (through September 11, 1996).................. 30.00 22.63
</TABLE>
On September 11, 1996, the last sale price for the Company's Common Stock,
as reported on the NNM, was $23.625. As of September 11, 1996, there were
approximately 517 record holders of the Common Stock. This figure does not
reflect beneficial ownership of shares held in nominee name.
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<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
Six months ended June, 1996............. 1.55 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 six months ended June 30, 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 $98.4 million and $34.8 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 six
months ended June 30, 1996 were inadequate to cover pro forma as adjusted
fixed charges by $118.4 million and $102.2 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 June 30,
1996:
<TABLE>
<CAPTION>
AS OF JUNE 30, 1996
-------------------
(IN THOUSANDS)
<S> <C>
Cash and cash equivalents.................................. $ 735,334
==========
Short-term borrowings, including current portion of long-
term debt................................................. $ 226,683(1)
==========
Long-term debt (excluding current portion):
The 10 7/8% Notes........................................ $ 166,325
The 12 3/4% Notes........................................ 173,953
The 11 1/2% Notes........................................ 629,085
The 7 1/4% Convertible Notes............................. 191,750
The Long Term Facility................................... 139,544
The 7% Convertible Notes................................. 275,000
----------
Total long-term debt................................... 1,575,657
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, 30,592,000 actual, pro forma, and pro forma
as adjusted issued and outstanding(2)................... 306
Additional paid-in capital............................... 465,192
Cumulative translation adjustment........................ 21,663
(Deficit)................................................ (231,423)
----------
Total shareholders' equity............................. 255,738
----------
Total capitalization....................................... $1,831,395
==========
</TABLE>
- ---------------------
(1) Includes (Pounds)50 million ($77.5 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.
(2) Does not include an aggregate of 21,903,000 shares of Common Stock,
consisting of (i) 6,674,000 shares of Common Stock subject to options,
(ii) 1,011,000 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. In addition, the Company issued
1,415,000 shares of Common Stock in connection with its purchase of the
30% minority interests in English Cable Enterprises Inc.
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 June 30, 1996 and for the periods ended June 30,
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 six months ended June 30, 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>
SIX MONTHS ENDED
JUNE 30, 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................ $ 66,217 $ 10,498 $ 33,741 $ 13,745 $ 10,078 $12,220 $7,801
Costs and expenses
Operating expenses..... 43,698 6,811 24,415 7,827 4,441 4,171 3,448
Selling, general and
administrative
expenses............... 51,852 24,757 72,629 27,890 5,042 2,899 1,320
Depreciation and
amortization........... 32,601 12,013 29,823 17,916 6,206 4,495 4,059
Total costs and --------- -------- -------- -------- -------- ------- ------
expenses............ 128,151 43,581 126,867 53,633 15,689 11,565 8,827
--------- -------- -------- -------- -------- ------- ------
Operating income
(loss)................ (61,934) (33,083) (93,126) (39,888) (5,611) 655 (1,026)
Other income (expense)
Interest, dividend and
other income........... 17,519 10,057 21,185 18,403 5,182 1,594 604
Interest expense....... (61,406) (13,063) (28,379) (11,410) (2,950) -- --
Foreign currency
transactions gains
(losses)............... 171 629 84 2,062 (7,052) -- --
--------- -------- -------- -------- -------- ------- ------
Income (loss) before
income taxes and
minority interests..... (105,650) (35,460) (100,236) (30,833) (10,431) 2,249 (422)
Income tax benefit
(provision)............. (3,481) 1,076 2,477 (1,630) (645) (1,028) (504)
--------- -------- -------- -------- -------- ------- ------
Income (loss) before
minority interests...... (109,131) (34,384) (97,759) (32,463) (11,076) 1,221 (926)
Minority interests...... 7,249 2,699 6,974 2,890 -- -- --
--------- -------- -------- -------- -------- ------- ------
Net income (loss)....... (101,882) (31,685) $(90,785) $(29,573) $(11,076) $ 1,221 $ (926)
========= ======== ======== ======== ======== ======= ======
Net income (loss) per
common share(2)........ $ (3.36) $ (1.05) $ (3.01) $ (.98) $ (.83) $ .13 $ (.10)
========= ======== ======== ======== ======== ======= ======
Weighted average number
of common shares used
in computation of net
income (loss) per share
including common stock
equivalents(2)......... 30,290 30,183 30,190 30,175 13,327 9,367 8,833
========= ======== ======== ======== ======== ======= ======
Ratio of earnings to
fixed charges(3)....... -- -- -- -- -- 81:1 --
</TABLE>
<TABLE>
<CAPTION>
AS OF
JUNE 30, 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............ $ 735,334 $ 175,283 $294,602 $400,097 $ 9,113 $ 4,571
Working capital......... 438,319 76,128 251,544 410,421 28,750 5,016
Fixed assets, net....... 952,541 639,674 191,725 36,422 14,065 16,104
Total assets............ 2,332,713 1,010,669 664,366 594,976 45,647 43,276
Long-term debt ......... 1,575,657 513,026 143,488 130,553 -- --
Shareholders' equity.... 255,738 339,257 436,534 452,402 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 $98.4
million, $34.8 million, $105.4 million, $31.8 million, $10.4 million and
$422,000 for the six months ended June 30, 1996 and 1995 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 telephony/cable and telecommunications market in the
United Kingdom in 1993 and is the third largest operator of telephony/cable
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 residential telephone, CATV, business
telecommunications services and internet access services, thereby generating
four 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 June 30, 1996, CableTel had constructed its integrated
full-service network past 611,300 homes and had approximately 183,700 revenue
generating units ("RGUs") from its newly constructed integrated full-service
network, which resulted in penetration rates of homes marketed of 30% 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 June 30, 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 100.0(5) 348,600 348,600(5)
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 1,874,000(6)
========= =========
</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 final 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.
(5) As of September 12, 1996.
(6) Including homes in Hertfordshire and Bedfordshire as of September 12,
1996.
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" telephony/cable
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 industry's overall customer
penetration averages for the United Kingdom telephony and CATV business. As of
June 30, 1996, Company customer RGU penetration in CableTel's newly
constructed dual (telephone and CATV) network was 59% of homes marketed. As of
June 30, 1996, CableTel's penetration was 30% for telephone and 29% for CATV.
By comparison, according to the latest available statistics of the ITC dated
July 1, 1996, United Kingdom cable customer penetration averaged approximately
22% for telephone, and approximately 21.3% for television. At June 30, 1996
CableTel's churn (subscriber termination) rate was approximately 14% per year.
Although this rate is 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 June 30, 1996, CableTel had approximately 233,500 RGUs, including
49,800 RGUs from those portions of its network that had been contracted as
CATV-only and inherited by CableTel through acquisitions. The following table
illustrates the number of homes passed, the number of homes released to
marketing and the total number of customers as of June 30, 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 JUNE 30
---------------- -------
<CAPTION>
1994 1995 1996
<S> <C> <C> <C>
Homes Passed(/1/).................................... 144,000 463,000 611,300
Homes Marketed(/2/).................................. 7,200 176,200 311,500
Total Customers...................................... 2,280 57,700 107,100
Dual............................................... 1,680 44,630 76,600
Cable-Only......................................... 370 6,620 13,700
Telephone-Only..................................... 230 6,450 16,800
Total RGUs(/3/)...................................... 3,960 102,330 183,700
RGU Penetration...................................... 55% 58% 59%
Cable Penetration.................................... 28% 29% 29%
Telephone Penetration................................ 27% 29% 30%
</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>
Network Construction
During 1995, the Company constructed its network past more than 319,000
homes in its existing franchise areas. As of June 30, 1996, the Company had
passed more than 696,000 homes, or approximately 33% 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 June 30, 1996,
approximately $792.6 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 June
30, 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 above.
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 June 30,
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)1.00 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,
now known as NTL Investment Holdings Limited, (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 a Bridge Facility which was used to finance most of
the remainder of the Initial Payment and acquisition costs and expenses. This
Bridge Facility was repaid in full on August 16, 1996 out of the net proceeds
of the issuance of the Convertible Notes.
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, now known
as Chase Manhattan 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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<PAGE>
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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<PAGE>
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
June 30, 1996, the Company had approximately $969.4 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 June 30, 1996, the Company had approximately $969.4 million of
indebtedness outstanding that constituted Senior Debt and approximately $614.1
million of indebtedness outstanding and other obligations of Subsidiaries of
the Company (excluding intercompany liabilities) 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
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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
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
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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 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, subject to certain
exceptions specified in the Registration Rights Agreement, it would use its
best efforts to keep the shelf registration statement of which this prospectus
forms part (the "Shelf Registration Statement") continuously effective under
the Securities Act until June 12, 1999. 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 the Shelf Registration Statement ceases to be effective or
usable in connection with resales of Transfer Restricted Securities (as
defined below) during the periods specified in the Registration Rights
Agreement (such event 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
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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 the Depository Trust
Company ("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, 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, as amended, (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 6,674,000 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, now known as The Chase Manhatten 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, now known
as The Chase Manhatten 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 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 Purchase
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. The Bridge Facility was
repaid in full on August 16, 1996.
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 paid in full and matching funding has been obtained by the Purchaser in
the form of equity or subordinated debt. On August 16, 1996, the Bridge
Facility was repaid in full using proceeds from the Convertible Notes.
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
Contemporaneously with its execution of the A Facilities, The Chase Manhattan
Bank, N.A. agreed to lend to the Purchaser up to (Pounds)60 million aggregate
principal amount under a secured term loan facility (the "Bridge Facility").
The proceeds of the Bridge Facility were primarily used to finance a portion of
the NTL acquisition and associated expenses. On August 16, 1996, the Bridge
Facility was repaid in full using a portion of the net proceeds from the
Convertible Notes.
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.
Although no assurance can be given, it is possible that U.S. Treasury
Regulations may be issued that will provide that, upon the conversion of a
Convertible Note having market discount, a U.S. Holder will not be
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required to include any amount in income 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 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 as to each Selling Holder from such Selling
Holder. 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 the date on which they provided the
information regarding their Convertible Notes in transactions exempt from the
registration requirements of the Securities Act.
<TABLE>
<CAPTION>
PRINCIPAL AMOUNT
NUMBER SELLING HOLDER OF CONVERTIBLE NOTES
------ -------------- --------------------
<C> <S> <C>
1. Donaldson Lufkin & Jenrette Securities.......... $29,859,000
2. The Income Fund of America, Inc................. $15,000,000
3. INVESCO Industrial Income Fund, Inc............. $15,000,000
4. Baron Asset Fund................................ $14,000,000
5. AIM Management Inc.............................. $11,100,000
6. United States Trust Company
of New York
Managed Pooled Pension and
Profit Sharing Trust........................... $11,000,000
7. New York Life Insurance Company................. $ 8,575,000
The TCW Group Inc. on behalf of the following
8. entities:
TCW Convertible Value Fund................... $ 1,460,000
General Motors Salaried Employees Convertible
Fund......................................... $ 3,670,000
TCW Convertible Securities Fund.............. $ 2,140,000
Cincinnati Bell Telephone Convertible Value
Fund......................................... $ 410,000
TCW/DW Income & Growth Fund.................. $ 275,000
9. Guardian Life Insurance Co. of America.......... $ 6,600,000
10. Lazard Small Cap Portfolio...................... $ 5,589,000
11. Phoenix Income & Growth Series Fund............. $ 5,000,000
12. BZW Securities Limited.......................... $ 5,000,000
13. Pitney Bowes Retirement Fund.................... $ 4,750,000
14. Allstate Insurance Company...................... $ 4,000,000
15. Salomon Brothers Inc............................ $ 3,700,000
Commonwealth Life Insurance Co.--StockTRAC
16. (Teamsters I).................................. $ 3,500,000
17. Van Kampen American Capital Harbor Fund......... $ 3,400,000
18. Q Investments, L.P.............................. $ 3,300,000
19. Froley, Revy Investment Co., Inc., on behalf of
the following entities:
</TABLE>
68
<PAGE>
<TABLE>
<CAPTION>
PRINCIPAL AMOUNT
NUMBER SELLING HOLDER OF CONVERTIBLE NOTES
------ -------------- --------------------
<C> <S> <C>
Oregon Equity Fund.............................. $ 2,055,000
Delaware State Retirement Fund.................. $ 470,000
ICI American Holding Pension Trust.............. $ 200,000
Zeneca Holdings Pension Trust................... $ 190,000
NALCO Chemical Co. Retirement Trust............. $ 85,000
20. PaineWebber High Income Fund, a series of
PaineWebber Managed Investments Trust.......... $ 2,750,000
21. Highbridge Capital Corporation.................. $ 2,500,000
22. Xerox Profit Sharing Trust...................... $ 2,400,000
23. Baron Growth Income Fund........................ $ 2,000,000
24. Security Reinsurance Company.................... $ 2,000,000
25. Societe Generale................................ $ 2,000,000
26. People Security Life Insurance--StockTRAC (Cam-
den)........................................... $ 1,500,000
27. Leviton Companies............................... $ 1,500,000
28. Salomon Brothers International Limited.......... $ 1,250,000
29. Husic Capital Management as a discretionary
asset manager for the Ameritech Pension Plan
under an investment management agreement....... $ 1,250,000
30. New York Life Insurance & Annuity Corporation... $ 1,250,000
31. Golden Rule Insurance Company................... $ 1,000,000
32. Value Line Convertible Fund..................... $ 1,000,000
33. Pacific Mutual Life Ins. Co..................... $ 1,000,000
34. Managed High Yield Fund Inc..................... $ 1,000,000
35. Hughes Aircraft Company Retirement Plans........ $ 1,000,000
36. Ellsworth Convertible Growth and Income Fund,
Inc............................................ $ 750,000
37. Bancroft Convertible Fund, Inc.................. $ 750,000
38. Trinity College................................. $ 750,000
39. The Olin Foundation............................. $ 675,000
40. PaineWebber Utility Income Fund, a series of
PaineWebber Managed Investments Trust.......... $ 650,000
41. General Retirement System of the City of De-
troit.......................................... $ 631,000
42. Millenium Trading Co. L.P....................... $ 600,000
43. Van Kampen American Capital Convertible Securi-
ties........................................... $ 600,000
44. Colgate Palmolive Retirement Trust.............. $ 575,000
45. Summus Financial................................ $ 506,000
46. Southport Partners International Ltd............ $ 500,000
47. Guaranty National Insurance Company............. $ 500,000
48. Baker Nye Securities L.P........................ $ 500,000
49. Guardian Pension Trust.......................... $ 400,000
50. BSI--Banca della Svizzera Italiana.............. $ 375,000
51. Construction Laborers Pension Trust Fund........ $ 350,000
52. Global Opportunities Partners................... $ 253,000
53. Lazard Freres Global Opportunities Fund Ltd..... $ 253,000
54. Three M Operating Subsidiary.................... $ 253,000
55. PaineWebber Offshore Funds plc--The High Income
Fund........................................... $ 250,000
56. BPI Global Opportunities Fund................... $ 126,000
57. Brena D. Freeman................................ $ 25,000
58. Bonnie Herman IRA Rollover...................... $ 25,000
59. Richard J. Clay IRA Rollover.................... $ 25,000
60. Robert T. Palmer Money Purchase Pension Plan &
Trust.......................................... $ 25,000
61. Any other holder of Convertible Notes or future
transferee from any such holder................ $ 79,900
------------
Total........................................... $275,000,000
============
</TABLE>
69
<PAGE>
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 a 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 the Selling Holder. 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.
70
<PAGE>
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-K/A-1) 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.
71
<PAGE>
INDEX TO PRO FORMA STATEMENTS OF OPERATIONS
INTERNATIONAL CABLETEL INCORPORATED
<TABLE>
<S> <C>
Pro forma Condensed Consolidated Statements of Operations (Unaudited)...... F-2
Pro forma Condensed Consolidated Statement of Operations for the six months
ended June, 30, 1996 (Unaudited).......................................... F-3
Pro forma Condensed Consolidated Statement of Operations for the year ended
December 31, 1995
(Unaudited)............................................................... F-4
Notes to Pro forma Condensed Consolidated Statements of Operations (Unau-
dited).................................................................... F-5
</TABLE>
F-1
<PAGE>
INTERNATIONAL CABLETEL INCORPORATED
PRO FORMA CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
In May 1996, a wholly owned subsidiary of International CableTel
Incorporated ("CableTel"), entered into an agreement (the "Agreement") and
acquired all of the issued and outstanding stock of NTL Group Limited ("NTL")
in exchange for cash of approximately (Pounds)200,000,000, subject to
adjustment, an additional cash payment of (Pounds)17,100,000 payable in
October 1996, (which corresponds to tax credits of (Pounds)13,000,000 expected
by NTL by October 1, 1996 and tax credit carryforwards of (Pounds)4,100,000,
although the (Pounds)17,100,000 payment is unconditional) and an agreement to
pay (Pounds)35,000,000, subject to adjustment, one year from closing. A
substantial portion of the purchase price was financed (the "Financing")
through (i) a bank facility of (Pounds)140,000,000 and (ii) a
(Pounds)60,000,000 short term bank loan.
The following unaudited pro forma condensed consolidated statements of
operations of CableTel give effect to the Agreement and the Financing. In
accordance with FAS 52, the statement of operations has been translated into
dollars using the average exchange rate for the six months ended June 30, 1996
((Pounds)1 = $1.5275) and for the year then ended December 31, 1995
((Pounds)1 = $1.5782).
The NTL historical statements of operations have been adjusted to reflect
U.S. GAAP and to eliminate the gain on the sale of its Advanced Products
Division and the operations of that division.
The unaudited pro forma condensed consolidated statement of operations for
the six months ended June 30, 1996 and for the year ended December 31, 1995
gives effect of the Agreement and Financing as if they had occurred at the
beginning of the respective periods.
The pro forma statements of operations have been prepared by CableTel's
management. These pro forma statements of operations may not be indicative of
the results that actually would have occurred if the transactions had been in
effect on the dates indicated or which may be obtained in the future. The pro
forma statements of operations should be read in conjunction with the
consolidated financial statements and notes of CableTel and NTL.
F-2
<PAGE>
INTERNATIONAL CABLETEL INCORPORATED
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS (UNAUDITED)
FOR THE SIX MONTHS ENDED JUNE 30, 1996
(IN THOUSANDS)
<TABLE>
<CAPTION>
CABLETEL NTL ADJUSTMENTS PRO FORMA
--------- ------- ----------- ---------
<S> <C> <C> <C> <C>
Revenues........................... $ 66,217 $61,295 $127,512
Costs and expenses:
Operating expenses............... 43,698 31,453 75,151
Selling, general and
administrative.................. 51,852 7,536 59,388
Depreciation and amortization.... 32,601 3,878 $ 3,020 (a) 39,499
--------- ------- ------- --------
Total costs and expenses........... 128,151 42,867 3,020 174,038
--------- ------- ------- --------
Income (loss) from operations...... (61,934) 18,428 (3,020) (46,526)
Interest (expense)................. (61,406) (1,670) (9,604)(b) (72,680)
Interest income.................... 17,519 684 -- 18,203
Other.............................. 171 -- -- 171
--------- ------- ------- --------
Income (loss) before provision for
income taxes and minority
interests......................... (105,650) 17,442 (12,624) (100,832)
Benefit (provision) for income
taxes............................. (3,481) (3,255) 3,255 (c) (3,481)
--------- ------- ------- --------
Income (loss) before minority
interests......................... (109,131) 14,187 (9,369) (104,313)
Minority interest.................. 7,249 -- -- 7,249
--------- ------- ------- --------
Income (loss) from continuing
operations........................ $(101,882) $14,187 $(9,369) $(97,064)
========= ======= ======= ========
Net (loss) per share............... $ (3.36) -- -- $ (3.20)
========= ======= ======= ========
Weighted average number of shares
used in calculation of earnings
per share......................... 30,290 -- -- 30,290
========= ======= ======= ========
</TABLE>
F-3
<PAGE>
INTERNATIONAL CABLETEL INCORPORATED
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS (UNAUDITED)
FOR THE YEAR ENDED DECEMBER 31, 1995
(IN THOUSANDS)
<TABLE>
<CAPTION>
CABLETEL NTL ADJUSTMENTS PRO FORMA
--------- -------- ----------- ---------
<S> <C> <C> <C> <C>
Revenues......................... $ 33,741 $172,590 $ 206,331
Costs and expenses:
Operating expenses............. 24,415 104,690 129,105
Selling, general and
administrative................ 72,629 18,489 91,118
Depreciation and amortization.. 29,823 15,421 $ 8,874 (a) 54,118
--------- -------- -------- ---------
Total costs and expenses......... 126,867 138,600 8,874 274,341
--------- -------- -------- ---------
Income (loss) from operations.... (93,126) 33,990 (8,874) (68,010)
Interest (expense)............... (28,379) (3,278) (26,579)(b) (58,236)
Interest income.................. 21,185 1,046 22,231
Other............................ 84 84
--------- -------- -------- ---------
Income (loss) before provision
for income taxes and minority
interests....................... (100,236) 31,758 (35,453) (103,931)
Benefit (provision) for income
taxes........................... 2,477 (9,998) 352 (c) (7,169)
--------- -------- -------- ---------
Income (loss) before minority
interests....................... (97,759) 21,760 (35,101) (111,100)
Minority interests............... 6,974 -- -- 6,974
--------- -------- -------- ---------
Income (loss) from continuing
operations...................... $ (90,785) $ 21,760 $(35,101) $(104,126)
========= ======== ======== =========
Net (loss) per share............. $ (3.01) -- -- $ (3.45)
========= ======== ======== =========
Weighted average number of shares
used in calculation of earnings
per share....................... 30,190 -- -- 30,190
========= ======== ======== =========
</TABLE>
F-4
<PAGE>
INTERNATIONAL CABLETEL INCORPORATED
NOTES TO PRO FORMA CONDENSED CONSOLIDATED
STATEMENTS OF OPERATIONS (UNAUDITED)
For purposes of determining the effect of the Agreement and Financing on
CableTel's Condensed Consolidated Statements of Operations for the six months
ended June 30, 1996 and the year ended December 31, 1995 the following pro
forma adjustments have been made:
<TABLE>
<CAPTION>
YEAR ENDED SIX MONTHS ENDED
DECEMBER 31, 1995 JUNE 30, 1996
------------------ -----------------
(IN THOUSANDS) (IN THOUSANDS)
<S> <C> <C> <C> <C>
(a) Amortization of goodwill over 30
years............................. $ (8,874) $(3,020)
(b) Interest expense on debt at 10
1/2% per annum for the short term
debt and 9 1/4% per annum for the
long term debt.................... $(29,857) $(11,343)
Less interest on NTL debt retired... 3,278 1,739
-------- --------
(26,579) (9,604)
(c) Estimated tax benefit from filing
for group relief.................. 352 3,255
-------- -------
$(35,101) $(9,369)
======== =======
</TABLE>
F-5
<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 the 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....................................................... 70
Legal Matters.............................................................. 71
Experts.................................................................... 71
Index to Pro Forma Statements of Operations................................ F-1
</TABLE>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
$275,000,000
[ICT LOGO]
7% CONVERTIBLE SUBORDINATED NOTES DUE 2008
----------------
PROSPECTUS
----------------
DATED SEPTEMBER 13, 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
Nasdaq Listing Fee........................................... 17,500.00
Legal fees and expenses...................................... 100,000.00
Accounting fees and expenses................................. 30,000.00
Printing and engraving fees.................................. 100,000.00
Miscellaneous expenses....................................... 25,000.00
-----------
Total.................................................... $367,327.59
===========
</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.
* Previously filed.
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 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:
(a) that for purposes of determining any liability under the Securities
Act of 1933, the information omitted from the form of prospectus filed as
part of this registration statement in reliance upon Rule 430A and
contained in a form of prospectus filed by the Registrant pursuant to Rule
424(b)(1) or (4) or 497(h) under the Securities Act shall be deemed to be
part of this Registration Statement as of the time it was declared
effective.
(b) that for purposes of determining any liability under the Securities
Act of 1933, each post-effective amendment that contains a form of
prospectus 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.
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 13TH DAY OF
SEPTEMBER, 1996.
International CableTel Incorporated
/s/ Richard J. Lubasch
By: __________________________________
RICHARD J. LUBASCH SENIOR VICE
PRESIDENT--GENERAL
COUNSEL AND SECRETARY
POWER OF ATTORNEY
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.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
Chairman of the
* Board, Chief September 13,
- ------------------------------------ Executive Officer 1996
GEORGE S. BLUMENTHAL and Treasurer
(Chief Executive
Officer)
President, Chief
* Operating and September 13,
- ------------------------------------ Financial Officer 1996
J. BARCLAY KNAPP and Director
(Chief Financial
Officer)
Vice President--
* Controller (Chief September 13,
- ------------------------------------ Accounting 1996
GREGG GORELICK Officer)
Director
* September 13,
- ------------------------------------ 1996
SIDNEY R. KNAFEL
Director
* September 13,
- ------------------------------------ 1996
TED H. MCCOURTNEY
Director
* September 13,
- ------------------------------------ 1996
ALAN J. PATRICOF
Director
* September 13,
- ------------------------------------ 1996
WARREN POTASH
Director
* September 13,
- ------------------------------------ 1996
MICHAEL S. WILLNER
*By: /s/ Richard J. Lubasch
- ------------------------------------
RICHARD J. LUBASCH
Attorney-in-fact
</TABLE>
II-4
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT PAGE
NO. DESCRIPTION NO.
------- ----------- ----
<C> <S> <C>
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.
* Previously filed.
<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-
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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
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(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
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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
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<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 "Interested 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
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<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
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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
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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>
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>
September 13, 1996
International CableTel Incorporated
110 East 59th Street
New York, New York 10022
Re: International CableTel Incorporated Registration
Statement on Form S-3
Ladies and Gentlemen:
We have acted as special counsel to International CableTel Incorporated, a
Delaware corporation (the "Company"), in connection with the preparation of a
registration statement on Form S-3 (File No. 333-07879) (the "Registration
Statement") relating to the registration for resale of $275,000,000 aggregate
principal amount of the company's 7% Convertible Subordinated Notes Due 2008
(the "Convertible Notes") and the shares ("the Shares") of the Company's
common stock, par value $.01 per share (the "Common Stock"), issuable upon
exercise of the Convertible Notes.
This opinion is delivered in accordance with the requirements of Item
601(b)(5) of Regulation S-K under the Securities Act of 1933, as amended (the
"Act").
In connection with this opinion, we have examined originals or copies,
certified or otherwise identified to our satisfaction, of (a) the Registration
Statement as filed with the Securities and Exchange Commission (the
"Commission") on July 10, 1996 under the Act, Amendment No. 1 thereto filed
with the Commission on September , 1996 (such Registration Statement, as so
amended, being hereafter referred to as the "Registration Statement"); (b) the
Indenture dated as of June 12, 1996 between the Company and Chemical Bank, now
known as The Chase Manhattan Bank, as Trustee (the "Indenture") pursuant to
which the Convertible Notes were issued; (c) the Registration Rights Agreement
between the Company and (the "Rights Agreement"); (d) certain resolutions of
the Board of Directors of the Company and the Pricing Committee of the Board
of Directors of the Company, in each case relating to the issuance of the
Convertible Notes and related matters; (e) the Restated Certificate of
Incorporation of the Company, as presently in effect; and (f) the Restated By-
Laws of the Company, as presently in effect. We have also examined originals
or copies, certified or otherwise identified to our satisfaction, of such
records of the Company and such agreements, certificates of public officials,
certificates of officers or other representatives of the Company and others,
and such other documents, certificates and records as we have deemed necessary
or appropriate as a basis for the opinions set forth herein.
In our examination, we have assumed the legal capacity of all natural
persons, the genuineness of all signatures, the legal capacity of all natural
persons, the authenticity of all documents submitted to us as originals, the
conformity to original documents of all documents submitted to us as
certified, conformed or photostatic copies and the authenticity of the
originals of such latter documents. In making our examination of documents
executed by parties other than the Company, we have assumed that such parties
had the power, corporate and other, to enter into and perform all obligations
thereunder and have also assumed the due authorization by all requisite
action, corporate and other, and execution and delivery by such parties of
such documents and the validity and binding effect thereof. As to any facts
material to the opinions expressed herein which we have not independently
established or verified, we have relied upon statements and representations of
officers and other representatives of the Company and others.
Members of our firm are admitted to the bar in the States of Delaware and
New York, and we express no opinion as to the laws of any other jurisdiction.
Based upon and subject to the foregoing, we are of the opinion that (a) the
Convertible Notes are valid and binding obligations of the Company and
enforceable against the Company in accordance with their terms, except to the
extent that enforcement thereof may be limited by (1) bankruptcy, insolvency,
reorganization, moratorium
1
<PAGE>
or other similar laws now or hereafter in effect relating to creditors' rights
generally and (2) general principles of equity (regardless of whether
enforceability is considered in a proceeding at law or in equity); and (b) the
Shares, when the Convertible Notes are converted into Shares in accordance
with the terms of the Indenture, will be validly issued, fully paid and
nonassessable.
We hereby consent to the filing of this opinion with the Commission as
Exhibit 5.1 to the Registration Statement. We also consent to the reference to
our firm under the caption "Legal Matters" in the Registration Statement. In
giving this consent, we do not thereby admit that we are included in the
category of persons whose consent is required under Section 7 of the Act or
the rules and regulations of the Commission.
Very truly yours,
Skadden, Arps, Slate, Meagher & Flom
2
<PAGE>
Exhibit 12.1
STATEMENT RE: COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
<TABLE>
<CAPTION>
PROFORMA
AS ADJUSTED JUNE PROFORMA
JUNE 30, -------------------------- AS ADJUSTED
1996 1996 1995 1995
------------- ------------ ------------ -------------
<S> <C> <C> <C> <C>
Fixed charges:
Interest........ $ 81,289,000 $ 61,406,000 $ 15,054,000 $ 79,726,000
Amortization of
debt expense.... 712,000 2,229,000 532,000 1,424,000
Interest portion
of rental
expense......... 1,826,000 1,088,000 323,500 3,652,000
------------- ------------ ------------ -------------
$ 83,827,000 $ 64,723,000 $ 15,909,500 $ 84,802,000
============= ============ ============ =============
Earnings:
Income (loss)
from operations. ($102,192,000) ($98,401,000) ($32,761,000) ($106,264,000)
Fixed charges
per above....... 83,827,000 64,723,000 15,909,500 84,802,000
Less: Capital-
ized interest... (1,991,000) (12,183,000)
------------- ------------ ------------ -------------
($18,365,000) ($33,678,000) ($18,842,500) ($33,645,000)
============= ============ ============ =============
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 six months ended June 30, 1996 and 1995 and
for the years ended December 31, 1995, 1994, 1993 and 1991, the deficit of
earnings to fixed charges was $98,401,000, $34,752,000, $105,445,000,
$31,849,000, $10,431,000 and $422,000, respectively, and the proforma as
adjusted for the six months ended June 30, 1996 and for the year ended
December 31, 1995 was $102,192,000 and $118,447,000, 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 Amendment No. 1 to the
Registration Statement (Form S-3 No. 333-07879) and related Prospectus of
International CableTel Incorporated 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
September 11, 1996
<PAGE>
EXHIBIT 23.2
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Experts" in
Amendment No. 1 to the Registration Statement (Form S-3 No. 333-07879) and
related Prospectus of International CableTel Incorporated 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 Incorporated's Form 8-K/A-1 dated May 9, 1996, filed
with the Securities and Exchange Commission.
Ernst & Young
London, England
September 11, 1996
<PAGE>
- --------------------------------------------------------------------------------
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)
----------------
THE CHASE MANHATTAN BANK
(EXACT NAME OF TRUSTEE AS SPECIFIED IN ITS CHARTER)
NEW YORK 13-4994650
(STATE OF INCORPORATION (I.R.S. EMPLOYER
IF NOT A NATIONAL BANK) IDENTIFICATION NO.)
270 PARK AVENUE 10017
NEW YORK, NEW YORK (ZIP CODE)
(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)
110 EAST 59TH STREET 10022
NEW YORK, NEW YORK (ZIP CODE)
(ADDRESS OF PRINCIPAL EXECUTIVE
OFFICES)
----------------
7% CONVERTIBLE SUBORDINATED NOTES DUE 2005
(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.
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, December 2, 1991 and July 10, 1996 (see Exhibit 1
to Form T-1 filed in connection with Registration Statement No. 333-06249,
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. On July 14,
1996, in connection with the merger of Chemical Bank and The Chase
Manhattan Bank (National Association), Chemical Bank, the surviving
corporation, was renamed The Chase Manhattan Bank.)
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. 333-06249, 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. On July 14, 1996, in
connection with the merger of Chemical Bank and The Chase Manhattan Bank
(National Association), Chemical Bank, the surviving corporation, was
renamed The Chase Manhattan Bank.)
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. (On July 14, 1996, in connection with the merger of Chemical
Bank and The Chase Manhattan Bank (National Association), Chemical Bank,
the surviving corporation, was renamed The Chase Manhattan Bank.)
8. Not applicable.
9. Not applicable.
2
<PAGE>
SIGNATURE
PURSUANT TO THE REQUIREMENTS OF THE TRUST INDENTURE ACT OF 1939 THE TRUSTEE,
THE CHASE MANHATTAN 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 9TH DAY OF SEPTEMBER, 1996.
The Chase Manhattan 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 JUNE 30, 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>
<CAPTION>
DOLLAR AMOUNTS
IN MILLIONS
--------------
<S> <C>
ASSETS
Cash and balances due from depository institutions:
Noninterest-bearing balances and currency and coin............ $ 4,167
Interest-bearing balances..................................... 5,094
Securities:
Held to maturity securities..................................... 3,367
Available for sale securities................................... 27,786
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............................................ 7,204
Securities purchased under agreements to resell............... 136
Loans and lease financing receivables:
Loans and leases, net of unearned income...................... 67,215
Less: Allowance for loan and lease losses..................... 1,768
Less: Allocated transfer risk reserve......................... 75
--------
Loans and leases, net of unearned income, allowance, and
reserve...................................................... 65,372
Trading Assets.................................................. 28,610
Premises and fixed assets (including capitalized leases)........ 1,326
Other real estate owned......................................... 26
Investments in unconsolidated subsidiaries and associated
companies...................................................... 68
Customer's liability to this bank on acceptances outstanding.... 995
Intangible assets............................................... 309
Other assets.................................................... 6,993
--------
TOTAL ASSETS.................................................... $151,453
========
LIABILITIES
Deposits
In domestic offices........................................... $ 46,917
Noninterest-bearing........................................... 16,711
Interest-bearing.............................................. 30,206
--------
In foreign offices, Edge and Agreement subsidiaries, and
IBF's........................................................ 31,577
Noninterest-bearing........................................... 2,197
Interest-bearing.............................................. 29,380
--------
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... 12,155
Securities sold under agreements to repurchase................ 8,536
Demand notes issued to the U.S. Treasury........................ 1,000
Trading liabilities............................................. 20,914
Other Borrowed money:
With a remaining maturity of one year or less................. 10,018
With a remaining maturity of more than one year............... 192
Mortgage indebtedness and obligations under capitalized leases.. 12
Bank's liability on acceptances executed and outstanding........ 1,001
Subordinated notes and debentures............................... 3,411
Other liabilities............................................... 8,091
TOTAL LIABILITIES............................................... 143,824
========
</TABLE>
4
<PAGE>
<TABLE>
<S> <C>
EQUITY CAPITAL
Common stock......................................................... 620
Surplus.............................................................. 4,664
Undivided profits and capital reserves............................... 2,970
Net unrealized holding gains (Losses) on available-for-sale
securities.......................................................... (633)
Cumulative foreign currency translation adjustments.................. 8
TOTAL EQUITY CAPITAL................................................. 7,629
--------
TOTAL LIABILITIES, LIMITED-LIFE PREFERRED STOCK AND EQUITY CAPITAL... $151,453
========
</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 in- structions
issued by the appropriate Federal regulatory authority and is true and
correct.
WALTER V. SHIPLEY
EDWARD D. MILLER DIRECTORS
THOMAS G. LABRECQUE
5
