<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON NOVEMBER 25, 1996
REGISTRATION NO.
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
---------------
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
---------------
INTERNATIONAL CABLETEL INCORPORATED
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
--------------- 52-1822078
4899
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 LLP
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
AMOUNT PROPOSED MAXIMUM
TITLE OF EACH CLASS OF TO BE MAXIMUM AGGREGATE AMOUNT OF
SECURITIES TO BE REGISTERED REGISTERED(2) OFFERING PRICE OFFERING PRICE(3) REGISTRATION FEE
- --------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock, par value
$0.01 per shares
(including Series A
Junior Participating
Preferred Stock
Purchase Rights)(1)... 3,365,000 -- $84,546,625 $25,620
</TABLE>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
(1) Prior to the occurrence of certain events, the Series A Junior
Participating Preferred Stock Purchase Rights will not be evidenced
separately from shares of Common Stock.
(2) Such number is deemed pursuant to Rule 416 under the Securities Act of
1933, as amended, to include such indeterminate number of shares of Common
Stock as may be issued from time to time pursuant to the terms of the
Registrant's 5% Non-voting Convertible Preferred Stock.
(3) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457 (c) of the Securities Act of 1933.
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; Selected
Consolidated Financial Information
4. Use of Proceeds.............. Use of Proceeds
5. Determination of Offering
Price....................... *
6. Dilution..................... *
7. Selling Security Holders..... Selling Stockholders
8. Plan of Distribution......... Registration Statement Cover Page; Selling
Stockholders; Plan of Distribution
9. Description of Securities to
be Registered............... *
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 NOVEMBER 25, 1996
PROSPECTUS
(ART)
3,365,000 SHARES
INTERNATIONAL CABLETEL INCORPORATED
COMMON STOCK
This Prospectus relates to the resale of up to 3,365,000 shares of Common
Stock, par value $0.01 per share (together with the Series A Junior
Participating Preferred Stock Purchase Rights (the "Rights") associated with
such shares, the "Common Stock") of International CableTel Incorporated, a
Delaware corporation (the "Company"). An aggregate of 1,415,000 of such shares
are issued and outstanding shares of Common Stock (the "ECE Shares") which were
issued on August 30, 1996 in a private placement undertaken in connection with
the Company's acquisition of the 30% minority interest in English Cable
Enterprises, Inc. that the Company did not already own (the "ECE Acquisition").
An aggregate of up to 1,950,000 of such shares (the "Swalec Shares") are
issuable upon conversion or otherwise pursuant to the terms of the Company's
issued and outstanding 5% Non-voting Convertible Redeemable Preferred Stock,
Series A, par value $0.01 per share (the "Series A Preferred Stock"). The
Series A Preferred Stock was issued on October 7, 1996 in a private placement
undertaken in connection with the Company's acquisition of the 40% minority
interest in CableTel Newport that the Company or its subsidiaries did not
already own (the "Newport Acquisition"). For a summary of the ECE Acquisition
and the Newport Acquisition, see "Recent Developments". The ECE Shares and the
Swalec Shares (collectively, the "Shares") may be offered and sold from time to
time by the holders named in this Prospectus or by their transferees, pledgees,
donees or their successors (collectively, the "Selling Stockholders") pursuant
to this Prospectus. See "Selling Stockholders."
The Shares may be offered or sold by the Selling Stockholders from time to
time directly to purchasers or through agents, underwriters or dealers on terms
to be determined at the time of sale. See "Plan of Distribution." If required,
the names of any such agents or underwriters involved in the sale of the Shares
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 Selling Stockholders will receive all of the net proceeds from the sale
of the Shares and will pay all underwriting discounts and selling commissions,
if any, applicable to the sale of Shares. The Company will not receive any
proceeds from the sale of the Shares by the Selling Stockholders. See "Use of
Proceeds".
The Selling Stockholders and any broker-dealers, agents or underwriters which
participate in the distribution of the Shares may be deemed to be
"underwriters" within the meaning of the Securities Act, and any commission
received by them or any profit received by them on the resale of Shares
purchased by them may be deemed to be underwriting commissions or discounts
under the Securities Act of 1933, as amended (the "Securities Act"). See "Plan
of Distribution".
The Common Stock is traded on the Nasdaq Stock Market's National Market (the
"NNM") under the symbol "ICTL". On November 21, 1996 the last reported sale
price of the Common Stock on the NNM was $25.00 per share. Prospective
purchasers of the Common Stock are urged to obtain current information as to
market prices of the Common Stock.
PROSPECTIVE INVESTORS SHOULD CAREFULLY CONSIDER MATTERS DISCUSSED UNDER THE
CAPTION "RISK FACTORS" BEGINNING ON PAGE 8.
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 , 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 24,
1996; for the period ended June 30, 1996, dated August 14, 1996; and for
the period ended September 30, 1996, dated November 12, 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 23, (as amended by Form 8-K/A-1), June 18, September 4, October 1,
and October 9, 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 will provide without charge to each person to whom this
Prospectus is 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.
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS IN CONNECTION WITH THIS OFFERING OTHER THAN THOSE CONTAINED IN
THIS PROSPECTUS AND, IF GIVEN OR MADE, SUCH OTHER INFORMATION AND
REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE
COMPANY. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER
SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS BEEN NO
CHANGE IN THE AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF OR THAT THE
INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO ITS DATE.
THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN
OFFER TO BUY ANY SECURITIES OTHER THAN THE REGISTERED SECURITIES TO WHICH IT
RELATES. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION
OF AN OFFER TO BUY SUCH SECURITIES IN ANY CIRCUMSTANCES IN WHICH SUCH OFFER OR
SOLICITATION IS UNLAWFUL.
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 $1.5650 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 September 30, 1996. See "Exchange Rates" for information regarding
the Noon Buying Rate for the past five fiscal years. On November 21, 1996, the
Noon Buying Rate was $1.6887 per (Pounds)1.00.
4
<PAGE>
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by the more detailed
information and financial statements 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, unless the context otherwise
requires, its consolidated subsidiaries and partnerships including NTL (as
defined below); (ii) "CableTel" means International CableTel Incorporated and
its consolidated subsidiaries and partnerships excluding NTL; and (iii) "NTL"
means NTL Group Limited and, unless the context otherwise requires, its
consolidated subsidiaries.
THE COMPANY
The Company entered the cable telephony/television and telecommunications
market in the United Kingdom in 1993 and is the third largest operator of cable
telephony/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."
RISK FACTORS
See "Risk Factors" for a discussion of certain factors that should be
considered in evaluating an investment in the Shares.
USE OF PROCEEDS
The Selling Stockholders will receive all of the net proceeds from the Shares
sold pursuant to this Prospectus. The Company will not receive any of the
proceeds from sales by the Selling Stockholders of the Shares.
5
<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
NINE MONTHS NINE MONTHS ENDED PRO FORMA
ENDED SEPTEMBER 30, YEAR ENDED YEAR ENDED DECEMBER 31,
SEPTEMBER 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............... $ 204,768 $ 143,473 $ 19,053 $ 206,331 $ 33,741 $ 13,745 $ 10,078
Costs and expenses
Operating expenses.... 130,394 98,941 14,289 129,105 24,415 7,827 4,441
Selling, general and
administrative
expenses............. 97,628 90,092 41,683 91,118 72,629 27,890 5,042
Depreciation and
amortization......... 68,382 60,764 19,320 56,464 29,823 17,916 6,206
--------- --------- -------- --------- -------- -------- --------
Total costs and
expenses........... 296,404 249,797 75,292 276,687 126,867 53,633 15,689
--------- --------- -------- --------- -------- -------- --------
Operating loss........ (91,636) (106,324) (56,239) (70,356) (93,126) (39,888) (5,611)
Other income (expense)
Interest, dividend and
other income......... 29,353 28,669 16,055 22,231 21,185 18,403 5,182
Interest expense...... (116,642) (105,368) (24,322) (58,236) (28,379) (11,410) (2,950)
Foreign currency
transactions gains
(losses)............. 432 432 567 84 84 2,062 (7,052)
--------- --------- -------- --------- -------- -------- --------
Loss before income
taxes and minority
interests............. (178,493) (182,591) (63,939) (106,277) (100,236) (30,833) (10,431)
Income tax benefit
(provision)........... (5,183) (5,183) 1,824 (7,169) 2,477 (1,630) (645)
--------- --------- -------- --------- -------- -------- --------
Loss before minority
interests............. (183,676) (187,774) (62,115) (113,446) (97,759) (32,463) (11,076)
Minority interests..... 11,822 11,822 4,637 6,974 6,974 2,890 --
--------- --------- -------- --------- -------- -------- --------
Net loss............... $(171,854) $(175,952) $(57,478) $(106,472) $(90,785) $(29,573) $(11,076)
========= ========= ======== ========= ======== ======== ========
Net loss per common
share(2).............. $ (5.59) $ (5.73) $ (1.90) $ (3.53) $ (3.01) $ (.98) $ (.83)
========= ========= ======== ========= ======== ======== ========
Weighted average number
of common shares used
in computation of net
loss per share(2)..... 30,717 30,717 30,186 30,190 30,190 30,175 13,327
========= ========= ======== ========= ======== ======== ========
</TABLE>
<TABLE>
<CAPTION>
AS OF
SEPTEMBER 30, 1996
------------------
(IN THOUSANDS)
<S> <C>
BALANCE SHEET DATA:
Cash and cash equivalents.................................. $ 639,082
Working capital............................................ 360,355
Fixed assets, net.......................................... 1,176,421
Total assets............................................... 2,271,827
Long-term debt............................................. 1,682,956
Shareholders' equity....................................... 228,065
</TABLE>
- --------
(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; and (ii) the borrowing of approximately (Pounds)200 million pursuant
to the NTL Facilities (as defined) to finance a portion of the NTL
acquisition (see "The Company--NTL--Summary of the Acquisition"). The pro
forma information is presented for illustrative purposes only and is not
necessarily indicative of the 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.
6
<PAGE>
RISK FACTORS
Ownership of the Shares involves certain risks. Prospective owners of the
Shares, prior to engaging in any transaction which would result in the
ownership thereby of the Shares, should consider carefully the following
factors, in addition to all other information contained in this Prospectus or
incorporated herein by reference.
POTENTIAL ADVERSE CONSEQUENCES OF LEVERAGE
The Company is highly leveraged. At September 30, 1996, the Company's total
long-term indebtedness was approximately $1.7 billion, representing 88.0% of
total capitalization, including the Company's: (i) $647.0 million accreted
value of 11 1/2% Series B Senior Deferred Coupon Notes Due 2006 (the "11 1/2%
Notes"); (ii) $179.4 million accreted value of 12 3/4% Series A Senior
Deferred Coupon Notes Due 2005 (the "12 3/4% Notes"); (iii) $170.7 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 7% Convertible Subordinated Notes due 2008 (the "7%
Convertible Notes" and, together with the 7 1/4% Convertible Notes, the
"Convertible Notes"), and (vi) $219.1 million outstanding under the Long-Term
Facility (as defined). 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 Senior Notes and the 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 Company's 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.
The degree to which the Company is leveraged could have important
consequences to holders of the Shares, 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. In addition, the Company may under certain
circumstances be obligated to offer to repurchase its outstanding debt
securities prior to maturity and there can be no assurance
7
<PAGE>
that the Company will have the financial resources necessary or otherwise be
able to repurchase those securities 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, the aggregate cost of network
construction from September 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)915
million (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 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."
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 or the raising of additional equity by the Company and its
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subsidiaries to finance such transactions. There can be no assurances that
such transactions will occur. 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 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.
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.
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 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 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
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of a substantial portion of these fixed assets is derived from their
employment in the Company's and its subsidiaries' cable television and
telecommunications businesses. In the case of NTL, its principal fixed assets
are transmission towers, masts and antennas and the sites on which they are
located. These assets are highly specialized and, taken individually, can be
expected to have limited marketability. Consequently, in the event that
secured creditors seek to realize on the collateral securing debt of the
Company's subsidiaries, these creditors would be likely to seek to sell the
business as a going concern (possibly through a sale of pledged shares of
subsidiaries), either in its entirety, or by franchise or other business unit,
in order to maximize the proceeds realized.
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. See "Description of Certain Indebtedness--The NTL Facilities--The
A Facilities."
Unknown Acquisition Liabilities. The acquisition of NTL was structured as a
share purchase, which may result in the Purchaser having acquired NTL
companies with unknown liabilities. The Company 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"). Given the
outcome of the Price Cap Review announced on September 23, 1996, it is
anticipated that the Further Payment will not be reduced as a result of the
Price Cap Review. See "The Company--Broadcast Services."
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
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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
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 nine months ended September 30, 1996 and 1995 and years ended
December 31, 1995, 1994, 1993, 1992 and 1991 of $(176.0) million) and $(57.5
million), $(90.8 million), $(29.6 million), $(11.1 million), $1.2 million and
($.9 million), respectively. As of September 30, 1996, the Company's
accumulated deficit was $305.5 million. The development of the Company's
business to date has resulted in significant expenditures and the continued
construction and expansion of its network will require considerable additional
expenditures before significant operating revenues may be generated.
Construction and operating expenditures have resulted in negative cash flow,
which is expected to continue at least until an adequate customer base is
established. The
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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.
REQUIREMENT TO MEET BUILD MILESTONES
The telecommunications license for each franchise contains specific
construction milestones. Under the terms of its current telecommunications
licenses, from September 30, 1996 until the end of 2003, CableTel is required
to construct cable television systems passing an aggregate of approximately
1,296,000 additional premises (residential and business). As of September 30,
1996, the 1996 milestones have been met. 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 September 30, 1996, construction of CableTel's network had passed
approximately 38% 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 which it believes are competitive relative to the cable industry as a
whole, construction costs could increase significantly over the next few years
as existing contracts expire and as demand for cable construction services
grows due to anticipated increases in the cable industry's overall
construction activity. Accordingly, there can be no assurance that the Company
will be able to construct its network in a timely manner, or at a reasonable
cost.
For a discussion of the risks associated with the Company's Anticipated
Funding Requirement for construction of CableTel's network in its existing
franchises, see "--Need for Additional Financing; Proposed Credit Facilities."
UNCERTAINTY OF CUSTOMER ACCEPTANCE
The cable telephony/television and telecommunications industry has a limited
operating history in the United Kingdom. Although initial acceptance of cable
telephony/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
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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
with BT and Mercury hold licenses to provide cable telephone/television
systems outside the Company's franchises. It was recently announced, however,
that Mercury would be merged with three cable operators that hold such
licenses, Nynex CableComms, Bell Cablemedia plc and Videotron Holdings plc, to
form a new company to be known as Cable & Wireless Communications ("C&WC").
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
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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. It has been proposed that C&WC, if formed,
will also offer its services in both such 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 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 & 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
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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. Moreover, if C&WC is formed, it is
proposed that it will offer integrated telephone, CATV, telecommunications and
multimedia services.
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, 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 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 & Wireless PLC
which is proposed to be merged into C&WC), 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
Mercury (or C&WC), 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
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
15
<PAGE>
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.
CableTel has recently introduced a new packaging and pricing structure to
more attractively package its CATV and telephony offerings to customers. See
"The Company--Local Telecommunications and Television Services." It has been
reported that several of the Company's programming suppliers have objected to
this new structure and such objections may lead to the loss of existing
program supply arrangements. In addition, although preliminary sales results
are favorable, there can be no assurance that there will be sufficient
subscriptions for the genre-based packages to allow for favorable margins.
Because of the factors described in the preceding paragraphs, there can be
no assurance that its current programming will continue to be available to the
Company on acceptable commercial terms, or at all.
POSSIBLE CHANGES IN GOVERNMENT REGULATION
The principal business activities of the Company in the United Kingdom are
regulated and supervised by various governmental bodies, the ITC, 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,
16
<PAGE>
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 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
17
<PAGE>
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 construction and operating expenses 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 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.
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 indentures governing the Senior Notes and the
Convertible Notes may have the effect of delaying or preventing transactions
involving a Change of Control (as defined in the indentures) 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 and Senior Notes, may require the Company to
refinance substantial amounts of its indebtedness and would
18
<PAGE>
impose other significant obligations on the Company. The inability of the
Company to purchase all or some of the Convertible Notes and the Senior Notes
tendered for purchase would also constitute an event of default under the
Indenture and the indentures governing the Senior Notes and the Convertible
Notes, which would have certain adverse consequences to the Company.
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, which are 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 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. 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 the Rights generally vote as a class, with
each share of Common Stock being entitled to one vote per share and each share
of Junior Preferred Stock being entitled to 100 votes per share. As a result
of the provisions of the Restated Certificate of Incorporation and the
ownership of the Company, no change of control requiring stockholder approval
is possible without the consent of the owners of the Junior Preferred Stock.
RESTRICTIONS ON DIVIDENDS
The indentures governing the Senior Notes impose certain limitations on the
payment of dividends. The Company's ability to pay cash dividends on the
Company's equity securities including the Common Stock and to make other
"restricted payments" is limited under the indentures governing the Senior
Notes to the sum of (i) the difference between Cumulative EBITDA (as defined
in the indentures governing the Senior Notes) and 1.5 times Cumulative
Interest Expense (also defined in the indentures governing the Senior Notes)
plus (ii) net proceeds from the sale of capital stock (excluding the proceeds
of the Company's offering of 10 million 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. In addition, the
Certificate of Designations relating to the Company's Series A Preferred Stock
imposes certain restrictions on the payment of dividends and the making of
other distributions on shares of junior stock (including Common Stock) and
parity stock. See "Description of Capital Stock--The Series A Preferred
Stock--Dividends Rights." 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."
FLUCTUATIONS IN MARKET PRICE
There can be no assurance that the market prices for Company's securities
including the Common Stock 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.
19
<PAGE>
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.
USE OF PROCEEDS
The Selling Stockholders will receive all of the net proceeds from the
Shares sold pursuant to this Prospectus. The Company will not receive any of
the proceeds from sales of the Shares by the Selling Stockholders.
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............................................... 30.00 22.63
Fourth Quarter (through November 21, 1996).................. 25.75 23.13
</TABLE>
On November 21, 1996, the last sale price for the Company's Common Stock, as
reported on the NNM, was $25.00. As of November 21, 1996, there were
approximately 514 record holders of the Common Stock. This figure does not
reflect beneficial ownership of shares held in nominee name.
20
<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
Certificate of Designations relating to the Company's Series A Preferred Stock
imposes certain restrictions on the payment of dividends and the making of
other distributions on shares of junior stock (including Common Stock) and
parity stock. See "Description of Capital Stock--The Series A Preferred
Stock--Dividends Rights." 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
Nine months ended September 30, 1996.... 1.57 1.54 1.57 1.50
</TABLE>
---------------------
(1) The average of the Noon Buying Rates on the last day of
each month during the relevant period.
21
<PAGE>
CAPITALIZATION
The following table sets forth the capitalization of the Company at
September 30, 1996:
<TABLE>
<CAPTION>
AS OF SEPTEMBER 30, 1996
------------------------
(IN THOUSANDS)
<S> <C>
Cash and cash equivalents............................. $ 639,082
==========
Short-term borrowings, including current portion of
long-term debt....................................... $ 56,653
==========
Long-term debt (excluding current portion):
The 10 7/8% Notes................................... $ 170,747
The 12 3/4% Notes................................... 179,354
The 11 1/2% Notes................................... 647,005
The 7 1/4% Convertible Notes........................ 191,750
The Long Term Facility.............................. 219,100
The 7% Convertible Notes............................ 275,000
----------
Total long-term debt.............................. 1,682,956
Shareholders' equity:
Series preferred stock, $.01 par value, 2,500,000
shares authorized, none issued or outstanding(1)... --
Common stock, $.01 par value, 100,000,000 shares
authorized, 32,007,000 actual, pro forma, and pro
forma as adjusted issued and outstanding(2)........ 320
Additional paid-in capital.......................... 499,315
Cumulative translation adjustment................... 33,923
(Deficit)........................................... (305,493)
----------
Total shareholders' equity........................ 228,065
----------
Total capitalization.................................. $1,911,021
==========
</TABLE>
- ---------------------
(1) Does not include 780 shares of Series A Preferred Stock issued by the
Company on October 7, 1996 in connection with the Newport Acquisition.
(2) Does not include an aggregate of 23,858,000 shares of Common Stock,
consisting of (i) 6,679,000 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; (iv) 7,261,000 shares of Common Stock issuable upon
conversion of the 7% Convertible Notes; and (v) up to 1,950,000 shares of
Common Stock issuable upon conversion or otherwise pursuant to the terms
of the Series A Preferred Stock.
22
<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 September 30, 1996 and for the periods ended
September 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 nine months ended September 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>
NINE MONTHS ENDED
SEPTEMBER 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................ $ 143,473 $ 19,053 $ 33,741 $ 13,745 $ 10,078 $12,220 $7,801
Costs and expenses
Operating expenses..... 98,941 14,289 24,415 7,827 4,441 4,171 3,448
Selling, general and
administrative
expenses............... 90,092 41,683 72,629 27,890 5,042 2,899 1,320
Depreciation and 60,764 19,320 29,823 17,916 6,206 4,495 4,059
amortization........... --------- -------- -------- -------- -------- ------- ------
Total costs and 249,797 75,292 126,867 53,633 15,689 11,565 8,827
expenses............ --------- -------- -------- -------- -------- ------- ------
Operating income
(loss)................ (106,324) (56,239) (93,126) (39,888) (5,611) 655 (1,026)
Other income (expense)
Interest, dividend and
other income........... 28,669 16,055 21,185 18,403 5,182 1,594 604
Interest expense....... (105,368) (24,322) (28,379) (11,410) (2,950) -- --
Foreign currency
transactions gains 432 567 84 2,062 (7,052) -- --
(losses)............... --------- -------- -------- -------- -------- ------- ------
Income (loss) before
income taxes and
minority interests..... (182,591) (63,939) (100,236) (30,833) (10,431) 2,249 (422)
Income tax benefit (5,183) 1,824 2,477 (1,630) (645) (1,028) (504)
(provision)............. --------- -------- -------- -------- -------- ------- ------
Income (loss) before
minority interests...... (187,774) (62,115) (97,759) (32,463) (11,076) 1,221 (926)
Minority interests...... 11,822 4,637 6,974 2,890 -- -- --
--------- -------- -------- -------- -------- ------- ------
Net income (loss)....... $(175,952) $(57,478) $(90,785) $(29,573) $(11,076) $ 1,221 $ (926)
========= ======== ======== ======== ======== ======= ======
Net income (loss) per $ (5.73) $ (1.90) $ (3.01) $ (.98) $ (.83) $ .13 $ (.10)
common share(2)........ ========= ======== ======== ======== ======== ======= ======
Weighted average number
of common shares used
in computation of net
income (loss) per share
including common stock 30,717 30,186 30,190 30,175 13,327 9,367 8,833
equivalents(2)......... ========= ======== ======== ======== ======== ======= ======
</TABLE>
<TABLE>
<CAPTION>
AS OF
SEPTEMBER 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............ $ 639,082 $ 175,283 $294,602 $400,097 $ 9,113 $ 4,571
Working capital......... 360,355 76,128 251,544 410,421 28,750 5,016
Fixed assets, net....... 1,176,421 639,674 191,725 36,422 14,065 16,104
Total assets............ 2,271,827 1,010,669 664,366 594,976 45,647 43,276
Long-term debt ......... 1,682,956 513,026 143,488 130,553 -- --
Shareholders' equity.... 228,065 339,257 436,534 452,402 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.
The Company did not declare or pay any cash dividends during the years
indicated.
23
<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.
At present, the Company is through a divisions structure integrating
CableTel, and its local telephone, cable television and internet businesses,
with NTL, and its television transmission and telecommunications businesses.
This new structure is comprised of the five major business divisions described
below.
LOCAL TELECOMMUNICATIONS AND TELEVISION SERVICES
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. For example, on November 1, 1996 CableTel
announced the introduction of a new pricing and packaging structure for its
telephony and CATV service. In this new structure, CableTel is offering a
First Choice package which includes residential telephone service, all the
terrestrial channels and three popular CATV channels for a monthly access
charge of (Pounds)7.95, which is less than typical telephone line rental alone
and is the same as the CableTel charge for telephone line rental. The customer
may choose from eight genre-based tiers of mini packages called Choice
Collections. Prices range from a total of (Pounds)12.50 for two additional
Choice Collections to (Pounds)19.50 if the customer elects to take all eight.
These prices include the (Pounds)7.95 access charge. CableTel has introduced
the packaging structure in all of its franchises following trials it conducted
in its South Bedfordshire franchise in the first six months of 1996. CableTel
believes that the tiering of its services should increase CATV penetration in
its franchises and decrease customer churn. There is no assurance, however,
that this will be the case. See "Risk Factors--Limited Access to Programming."
The Company's strategies also 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.
24
<PAGE>
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 September 30,
1996, which reflects the ECE Acquisition and is adjusted to take account of
the Newport Acquisition, is outlined below.
<TABLE>
<CAPTION>
OWNERSHIP TOTAL HOMES
REGIONAL AREA MAJOR CITIES/TOWNS PERCENTAGE IN FRANCHISE(1)
<S> <C> <C> <C>
Central Scotland........ Glasgow 100.0% 499,000
South Wales............. Cardiff, Newport and Swansea 100.0 540,000(2)
Suburban London:
Surrey and Hampshire... Guildford and Woking 100.0 136,000
Hertfordshire and
Bedfordshire.......... Luton and Stevenage 100.0 348,600
West Yorkshire.......... Huddersfield 100.0 138,400
Northern Ireland........ Belfast and Londonderry 100.0 428,000(3)
---------
FRANCHISE TOTALS...... 2,090,000
=========
</TABLE>
- ---------------------
(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) 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.
(3) The final regulatory milestone for the Northern Ireland LDL is 428,000
homes of the total of 530,000 homes in the LDL.
Operating Results
CableTel continues to outperform the cable industry's overall customer
penetration averages for the United Kingdom telephony and CATV business. As of
September 30, 1996, CableTel had constructed its integrated full-service
network past 694,400 homes and had 240,455 revenue generating units ("RGUs")
from its newly constructed integrated full-service network. An RGU is one
telephone account or one CATV account; a dual customer counts as two RGUs. As
of September 30, 1996, RGU penetration in CableTel's newly constructed dual
(telephone and CATV) network was 61.5% of homes marketed and CableTel's
penetration was 30.6% for telephone and 30.9% for CATV. By comparison,
according to the latest available published statistics of the ITC dated July
1, 1996, United Kingdom cable customer penetration averaged approximately 22%
for telephone, and approximately 21.3% for television. As of September 30,
1996 CableTel's annualized churn (subscriber termination) rate was less than
12.7%. 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 September 30, 1996, CableTel also had
approximately 48,000 RGUs from those portions of its network that had been
constructed as CATV-only and inherited by CableTel through acquisitions.
25
<PAGE>
The following table illustrates the number of homes passed, the number of
homes released to marketing and the total number of customers as of September
30, 1996 and December 31, 1995 and 1994 for the dual network constructed by
CableTel since 1993:
NEWLY CONSTRUCTED DUAL NETWORK
<TABLE>
<CAPTION>
DECEMBER 31 SEPTEMBER 30
---------------- ------------
1994 1995 1996
<S> <C> <C> <C>
Homes Passed(/1/)............................... 144,000 463,000 694,400
Homes Marketed(/2/)............................. 7,200 176,200 390,800
Total Customers................................. 2,280 57,700 135,300
Dual.......................................... 1,680 44,630 105,155
CATV-Only..................................... 370 6,620 15,600
Telephone-Only................................ 230 6,450 14,545
Total RGUs(/3/)................................. 3,960 102,330 240,455
RGU Penetration................................. 55.0% 58.1% 61.5%
CATV Penetration................................ 28.5% 29.1% 30.9%
Telephone Penetration........................... 26.5% 29.0% 30.6%
</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
CableTel's network. Homes passed does not include CATV-only homes which
are included in CableTel's 794,000 homes passed for the purposes of its
OFTEL milestones.
(2) At September 30, 1996, homes for which the sales process has begun. At
December 31, 1995, homes for which the initial sales process was
completed.
(3) An RGU (revenue generating unit) is one telephone account or one CATV
account; a dual customer counts as two RGUs.
Network Construction
As of September 30, 1996, the Company had constructed its dual network
passed approximately 694,400 homes and had invested approximately $908.4
million in the construction of the network and associated property, plant and
equipment.
The Company has a total of 2,090,000 homes in its franchise areas. As of
September 30, 1996, the Company had a total of approximately 794,000 homes
passed (or 38% of its total franchise homes) for the purposes of its OFTEL
milestones. The Company had, therefore, exceeded its OFTEL milestone for total
homes passed in 1996. The homes passed which count towards the Company's OFTEL
milestone requirements exceed the 694,000 homes passed by the Company's full-
service dual network stated above because, among other things, OFTEL's
definition of "homes passed" includes CATV-only homes inherited by the Company
through prior acquisitions which are not considered by the Company to be full-
service network passings.
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.
The following table summarizes CableTel's construction activities as of
September 30, 1996 and the future network construction progress projected by
the Company:
<TABLE>
<CAPTION>
AS OF DECEMBER 31,
---------------------------------------------------------------------------------------------------
1994 1995 1996(1) 1997(2) 1998(2) 1999(2) 2000(2) 2001(2) 2002(2) 2003(2)
<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
Total homes
passed(3)......... 229,000 548,000 794,000 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) 1996 figures are actual as of September 30, 1996.
(2) The figures presented are based on the Company's projections of its
construction activities; in reviewing such information it should be noted
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
26
<PAGE>
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.
(3) The number of homes passed which count toward the Company's OFTEL
milestones exceeds the Company's 694,400 full-service passings's stated
above because OFTEL definition of "homes passed" is different from the
Company's definition of homes passed by its newly constructed dual
network. For example, the homes which count towards the Company's OFTEL
requirements include, among other things, CATV-only homes inherited by the
Company through prior acquisitions which are not considered by the Company
to be full-service network passings. None of the figures presented include
171,500 homes of Metro Cable TV Limited acquired in 1995 which, due to
technological limitations of the network connecting those homes, cannot be
counted towards the Company's OFTEL build milestones.
BROADCAST SERVICES
The Company's Broadcast Services division (formerly 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 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 has a ten-year contract to
build the transmission system and broadcast the signal for Channel 5, the
United Kingdom's fifth terrestrial channel.
On September 23, 1996 the Director General of OFTEL announced its proposals
for the new price control for the television transmission services provided by
the Broadcast Services division to the ITV companies, Channel 4 and S4C. Under
the new arrangements, the total revenues receivable by the Company for such
services is anticipated to be (Pounds)53.4 million in 1997 and, thereafter
through 2002, will be reduced annually by the Retail Prices Index ("RPI")
minus 4. A final decision is expected before the end of 1996 but is not
expected to change substantially from these figures. 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 receivable from the ITV companies,
Channel 4 and S4C.
The Broadcast Services division also provides 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.
NATIONAL TELECOMS SERVICES
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.
The first CableTel local switch has already been connected to the NTL
network and the connection of a second CableTel local switch is expected in
the fourth quarter of 1996. This will allow the Company to begin carrying a
portion of its own traffic and to begin offering switched telecoms services to
other carriers early in 1997. The Company expects all seven CableTel local
switches to be connected to the NTL backbone network by the end of 1997. The
Company has also implemented a microwave-to-fiber network enhancement program
as a result of increased customer demand.
The National Telecoms Services division includes the Company'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.
The Company also offers a range of satellite uplinking services including
uplink for a variety of entertainment channels to a number of satellites
27
<PAGE>
including ASTRA 1C, Intelset, Eutelsat and Orion, and an international gateway
service, which is capable of providing long distance and corporate
communications. The Company provides connections to a number of satellites for
clients requiring video, digital audio and data services.
The National Telecoms Services division also includes the Company's Radio
Communications group ("RadioComms") which 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, the Company provides a
range of installation and commissioning services for new network design and
build projects. The Company 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.
INTERNET AND INFORMATION SERVICES
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") which began offering
service in November 1996 under the name Virgin.net. 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 users.
During the third quarter and early fourth quarter of 1996, Cable Online
launched residential internet access service under the CableTel brand name in
all of its local franchises and launched business internet access service
nationally under the Enablis brand name. Cable Online has signed agreements to
provide internet network services to Virgin, Diamond Cable and Telecential,
among others. Internet network services cover a range of services which allow
the customer to act as an internet service provider.
NATIONAL MEDIA SERVICES
The most developmental of the Company's new divisions, National Media
Services, combines Company-wide efforts in programming, content, digital
technology and interactive services. For example,this division will oversee
the weekly television listing guides inserted in local newspapers in the
Surrey franchise and, if current positive trends continue, will launch similar
guides in other franchise areas. This division will also coordinate the
Company's efforts in the areas of digital terrestrial television, local cable
channels, digital cable and alternative interactive service opportunities for
the United Kingdom.
FINANCING STRATEGY
The Company expects that significant additional capital expenditures will be
required to construct the remaining portions of the Company's integrated full-
service network. The Company believes that the aggregate cost of network
construction from September 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
local delivery service license LDL and the Gwent and Glamorgan LDLs) will be
approximately (Pounds)915 million (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."
28
<PAGE>
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 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."
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).
29
<PAGE>
RECENT DEVELOPMENTS
THE ECE ACQUISITION
On August 30, 1996 the Company entered into a share exchange agreement (the
"Share Exchange Agreement") with Booth American Company, a Michigan
corporation, Columbia Management, Inc., an Indiana corporation and Robert T.
Goad, an Indiana resident (collectively, the "ECE Selling Stockholders") and
B/G Co., an Indiana partnership. The Share Exchange Agreement provides for,
among other things, the purchase by the Company of the 30% minority interest
in English Cable Enterprises, Inc., a Delaware corporation ("ECE"), held by
B/G Co. Pursuant to the Share Exchange Agreement, the Company issued 1,415,000
shares of Common Stock to the ECE Selling Stockholders in exchange for such
interest in ECE. The Registration Statement of which this Prospectus is a part
has been filed by the Company pursuant to certain registration rights granted
to the ECE Selling Stockholders in the Share Exchange Agreement in respect of
the ECE Shares. ECE owns and operates, through subsidiaries, four
telecommunications and CATV franchises to the north of London (Central and
East Hertfordshire and South and North Bedfordshire) which comprise
approximately 348,600 homes. As a result of the consummation of the
transactions contemplated by the Share Exchange Agreement, ECE has become a
wholly-owned subsidiary of the Company.
THE NEWPORT ACQUISITION
On October 7, 1996, the Company entered into a share purchase agreement (the
"Share Purchase Agreement") with South Wales Electricity plc, a public limited
company registered in England and Wales ("SWALEC"), and Swalec Telco
Investments Limited, a private limited liability company registered in England
and Wales which is a wholly-owned subsidiary of SWALEC ("Telco"). Pursuant to
the Share Purchase Agreement the Company purchased from Telco the 40% minority
interest (comprising shares and loan notes) in CableTel Newport, an unlimited
company having a share capital registered in England and Wales, that the
Company did not already own in exchange for 780 shares of the Company's Series
A Preferred Stock. The Series A Preferred Stock has an aggregate Stated Value
of $100,000 per share and is convertible into and redeemable for shares of
Common Stock pursuant to the terms of the Certificate of Designations dated
October 7, 1996. See "Description of Capital Stock--The Series A Preferred
Stock." The Registration Statement of which this Prospectus is a part has been
filed by the Company pursuant to certain registration rights given to SWALEC
and Telco in the Share Purchase Agreement in respect of the Common Stock
issuable pursuant to the terms of the Series A Preferred Stock. CableTel
Newport owns and operates, through subsidiaries, telecommunications and CATV
franchises in South Wales which together comprise 540,000 homes. As a result
of the consummation of the transactions contemplated by the Share Purchase
Agreement, CableTel Newport has become a wholly-owned subsidiary of the
Company.
30
<PAGE>
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
(i) the Company's Restated Certificate of Incorporation, as amended, (the
"Charter"), a copy of which was filed as an exhibit to the Registration
Statement on Form S-3 (File No. 333-07879), filed with the Commission on
September 13, 1996; (ii) 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; and (iii) the Company's Certificate of Designations in
respect of the Series A Preferred Stock dated October 7, 1996, a copy of which
was filed as an exhibit to the Company's Current Report on Form 8-K filed with
the Commission on October 9, 1996. 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 September 30, 1996 there were approximately 32,007,000 shares of
Common Stock outstanding. As of September 30, 1996 approximately 6,957,000
additional shares of Common Stock were reserved for issuance upon the
conversion of the 7 1/4% Convertible Notes, approximately 7,261,000 additional
shares of Common Stock were reserved for issuance upon the conversion of the
7% Convertible Notes, approximately 6,679,000 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. In addition, up to 1,950,000 shares of Common Stock are
issuable upon conversion of, or otherwise pursuant to the terms of, the Series
A Preferred Stock issued by the Company on October 7, 1996 in connection with
the Newport Acquisition.
As of October 31, 1996, 2,000 shares of Series A Preferred Stock have been
authorized for issuance, 780 of which were issued in connection with the
Newport Acquisition. See "--The Series A Preferred Stock." No shares of Junior
Preferred Stock have been issued, although one million shares of Junior
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"). See "--Stockholder Rights
Plan."
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.
TRANSFER AGENT AND REGISTRAR
The transfer agent and registrar for the Common Stock is Continental Stock
Transfer & Trust Company.
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
31
<PAGE>
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.
THE SERIES A PREFERRED STOCK.
On October 7, 1996, the Board of Directors created and authorized for
issuance, pursuant to the authority referred to in the immediately preceding
paragraph, 2,000 shares of 5% Non-voting Convertible Preferred Stock, Series A
(the "Series A Preferred Stock"), of which 780 such shares were initially
issued to Swalec Telco
Investments Limited in exchange for all the interests in CableTel Newport that
the Company did not already own. The powers, preferences and rights of the
Series A Preferred Stock are set forth in a Certificate of Designations of
Preferred Stock dated October 7, 1996. Each share of the Series A Preferred
Stock has a stated value of $100,000 (the "Stated Value"), subject to certain
exceptions.
Voting Rights. The holders of the Series A Preferred Stock do not have any
voting rights, except as required by law and except that the consent of
holders representing not less than a majority of the Series A Preferred Stock
is required before the Company can (i) amend any provision of the Certificate
of Designation or the Charter so as to adversely affect the preferences,
rights or powers of the Series A Preferred Stock or (ii) reclassify the
outstanding shares of the Series A Preferred Stock into another class or
series of capital stock. In particular, no such consent is necessary for the
creation of any class or series of capital stock of the company ranking senior
to or on a parity with the Series A Preferred Stock as to dividend rights,
rights of redemption or rights on liquidation.
Dividend Rights. The holders of the Series A Preferred Stock are entitled to
receive cumulative dividends, in preference to dividends on any junior stock
(which include any shares of Common Stock and any shares of Junior Preferred
Stock issuable upon exercise of the Rights), from the fifth anniversary of
their issue date at the rate per annum of 5% of the Stated Value, payable
semi-annually in arrears, subject to certain exceptions. Dividends on the
outstanding shares of Series A Preferred Stock accrue on a daily basis
(without interest or compounding). Accrued but unpaid dividends accrue
additional dividends, from the dividend payment date on which they were due,
at the rate of 7% per annum.
Dividends on the Series A Preferred Stock may be paid, in the sole
discretion of the Board of Directors: (i) in cash out of funds legally
available for such cash dividends; (ii) through the delivery of shares of
Common Stock; or (iii) through the delivery of additional shares of Series A
Preferred Stock. If the Board does not declare any dividend payment in cash,
then the Board is required to declare and pay that dividend through the
delivery of Common Stock or additional Series A Preferred Stock. If the
Company elects to pay any dividend payment by delivery of shares of Common
Stock, the number of shares of Common Stock deliverable is determined by
reference to the average closing price of the Common Stock for the period of
20 consecutive trading days ending on the second trading day immediately
preceding the calculation date (the "Average Market Price").
Subject to certain exceptions specified in the Certificate of Designations,
as long as any shares of Series A Preferred Stock are outstanding, no
dividends may be paid or declared in cash on junior stock, nor may any shares
of junior stock be purchased, redeemed or otherwise acquired by the Company
unless, among other things, full dividends have been paid, or declared and set
aside for payment, on the Series A Preferred Stock and any other class or
series of the Company's capital stock with ranks on a parity basis with the
Series A Preferred Stock (collectively, "Parity Stock"). In addition, subject
to certain exceptions specified in the Certificate of Designations, as long as
any shares of Series A Preferred Stock are outstanding, dividends or other
distributions may not be paid or declared on any Parity Stock, nor may any
shares of Parity Stock be purchased, redeemed or otherwise acquired by the
Company unless, among other things, full dividends on all Parity Stock have
been paid, or declared and set aside for payment, pro rata on the Series A
Preferred Stock and each other share of Parity Stock.
32
<PAGE>
The Company's Redemption Rights. The Company has the right, exercisable at
any time, to redeem all or some of the Series A Preferred Stock at a price
equal to the aggregate Stated Value of the shares to be redeemed, together
with an amount equal to all dividends accrued but unpaid thereon (the
"Redemption Price"). The Company may satisfy the Redemption Price by
delivering a number of shares of Common Stock equal to the product of the
Redemption Price divided by the Average Market Price of the Common Stock on
the redemption date.
Conversion Rights. A holder of Series A Preferred Stock has the right, prior
to 5 days before a redemption date, to convert shares of the Series A
Preferred Stock into such number of shares of Common Stock as is equal to the
aggregate Stated Value of the shares of Series A Preferred Stock surrendered
for conversion divided by the greater of (i) $40.00 (as adjusted pursuant to
the antidilution provisions of the Series A Preferred Stock (the "Fixed
Price") and (ii) the Average Market Price of the Common Stock on the
conversion date.
Mandatory Conversion. If a change of control of the Company occurs, then all
the Series A Preferred Stock shall be deemed to have automatically converted,
effective immediately preceding such change of control, into such number of
shares of Common Stock as is equal to the aggregate Stated Value of the Series
A Preferred Stock divided by the amount per share of Common Stock, equal to
the lesser of (i) the Fixed Price and (ii) the value of the consideration per
share of Common Stock receivable by a holder of Common Stock by reason of the
change of control or, if no such consideration is receivable, then the closing
price of a share of Common Stock as of such time.
Liquidation Rights. If there is any liquidation, dissolution, or winding up
of the Company (other than a Non-Change Reorganization (as defined below)),
then the holders of Series A Preferred Stock, after payment, or provision for
payment of the debts and other liabilities of the Company and the payment or
provision for payment of any distribution on any shares of senior preferred
stock, and before any distribution to the holders of junior preferred stock,
are entitled to be paid out of the assets of the Company available for
distribution to its stockholders an amount per share of Series A Preferred
Stock in cash equal to the amount equal to (i) Stated Value per share of the
Series A Preferred Stock plus (ii) all dividends accrued but unpaid (the
"Liquidation Preference"). If the assets of the Company available for
distribution to the holders of Series A Preferred Stock upon any dissolution,
liquidation or winding up of the Company are insufficient to pay in full the
Liquidation Preference payable to the holders of outstanding shares of Series
A Preferred Stock and the liquidation preference payable to all other parity
preferred stock, then the holders of Series A Preferred Stock and of all other
shares of parity preferred stock shall share ratably in such distribution of
assets.
Antidilution Adjustments. The Fixed Price is subject to adjustment from time
to time upon the occurrence of certain events specified in the Certificate of
Designations for the Series A Preferred Stock. Such events include, subject to
the limitations of the Certificate of Designations: (i) dividends or
distributions on the Common Stock in shares of Common Stock, splits,
subdivisions or combinations of the Common Stock, (ii) certain issuances of
options or convertible securities to substantially all the holders of Common
Stock, (iii) distributions of stock other than Common Stock, indebtedness or
other assets to holders of Common Stock, and (iv) distributions of cash to
holders of Common Stock in excess of the aggregate amount of 10% of the
product of the Average Market Price of the Common Stock times the number of
shares of Common Stock (excluding treasury shares).
Non-Change Reorganizations. If a Non-Change Reorganization occurs, and there
is determinable for the entirety of each Reorganization Unit (as defined in
the Certificate of Designations) an Applicable Price (that is, in brief, an
average trading price on an established market), then the Company is required
to make, as a condition precedent to such Non-Change Reorganization, proper
provision so that each share of Series A Preferred Stock, or each share of
convertible preferred stock (having the same Stated Value and substantially
the same rights, benefits and privileges as a share of Series A Preferred
Stock) of the Company or its successor by merger or consolidation which is
issuable to each holder of Series A Preferred Stock in exchange or
substitution therefor, becomes convertible or redeemable upon and from and
after the occurrence of such Non-Change Reorganization into, instead of Common
Stock: (i) upon conversion at the option of the holder, that number of
Reorganization
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Units determined by dividing the Stated Value of such share by the higher of
(x) the Fixed Price on the conversion date and (y) the Applicable Price of a
Reorganization Unit on the conversion date; (ii) upon conversion resulting
from a change of control, that number of Reorganization Units determined by
dividing the Stated Value of such share by the lesser of (x) the Fixed Price
as of the change of control; and (y) the Applicable Price of a Reorganization
Unit as of the time of the change of control; and (iii) upon redemption, that
number of Reorganization Units determined by dividing the Stated Value of such
share by the Applicable Price of a Reorganization Unit on the redemption date.
If a Non-Change Reorganization occurs, and any Reorganization Unit issuable
in connection with that Non-Change Reorganization does not have in whole or in
part a determinable Applicable Price, then the Company must redeem all the
shares of Series A Preferred Stock prior to the occurrence of such Non-Change
Reorganization and on a basis such that the holders of Series A Preferred
Stock shall be holders of Common Stock for all purposes of the Non-Change
Reorganization.
A "Non-Change Reorganization" includes the following events which do not
also constitute a change of control of the Company: (i) a consolidation or
merger of the Company with another entity (other than a merger or
consolidation in which the Company is the surviving corporation and in which
the Common Stock outstanding immediately prior to the merger or consolidation
remains unchanged), (ii) the sale or other transfer of all or substantially
all of its assets, (iii) certain reorganizations or reclassifications of the
Common Stock or other equity securities of the Company, or (iv) a statutory
exchange of any shares of capital stock of the Company with another
corporation (other than a merger or consolidation in which the Company is the
surviving corporation and in which the Common Stock outstanding immediately
prior to the merger or consolidation remains unchanged).
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 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
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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.
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.
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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 Junior 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 Junior 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
Junior 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
Junior 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 Junior
Preferred Stock's dividend, liquidation and voting rights, the value of one
one-hundredth of a share of Junior 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.
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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 7% CONVERTIBLE NOTES
In June 1996 the Company issued and sold an aggregate principal amount of
$275,000,000 of its 7% Convertible Subordinated Notes Due 2008 in transactions
exempt from, or not subject to, the registration requirements of the
Securities Act. Cash interest on the 7% Convertible Notes will be paid
semiannually on June 15 and December 15 of each year, commencing December 16,
1996. The 7% Convertible Notes will mature on June 15, 2008. The 7%
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 $37.875 per share subject to further
adjustment in certain events. The 7% Convertible Notes are redeemable, in
whole or in part, at the option of the Company, at any time on or after June
15, 1999, at the redemption prices set forth in the indenture pursuant to
which the 7% Convertible Notes were issued (the "7% Convertible Notes
Indenture"). Upon a Change of Control (as defined in the 7% Convertible Notes
Indenture) holders of the 7% Convertible Notes will have the right to require
the Company to purchase all or any part of the 7% 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% 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% Convertible Notes are unsecured obligations of the Company,
subordinated in right of payment to all exiting and future Senior Debt of the
Company (as defined in the 7% Convertible Notes Indenture) including, without
limitations, the 10 7/8% Notes, the 12 3/4% Notes and the 11 1/2% Notes.
The 7% 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 September 13, 1996 the Commission declared effective the
Company's shelf registration statement relating to the resale of the 7%
Convertible Notes and the Common Stock issuable upon conversion thereof by the
holders thereof.
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.
41
<PAGE>
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. As a result of the announcement by the Director
General of OFTEL on September 23, 1996 regarding the new price control
arrangements applicable to NTL's television transmission services, all amounts
outstanding under the Short Term Facility have been automatically converted
into, and shall be deemed to be, amounts outstanding under the Long Term
Facility and will not be required to be prepaid on December 31, 1996.
The Company is obligated to fund the Further Payment 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 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
42
<PAGE>
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.
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.
43
<PAGE>
SELLING STOCKHOLDERS
The Selling Stockholders (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 Shares. The following table shows the number
of shares of Common Stock beneficially owned by each Selling Stockholder as of
the date of this Prospectus (subject to the assumption described in footnote
(5) below) and the number of Shares that may be offered for the account of
such Selling Stockholder pursuant to this Prospectus, assuming that all of the
Shares indicated below as being beneficially owned by each Selling Stockholder
are to be offered pursuant to this Prospectus. The information about each
Selling Stockholder has been obtained from that Selling Stockholder. Except as
described in the footnotes below, none of the Selling Stockholders holds any
position or office with, has been employed by, or has otherwise had a material
relationship with the Company or any of its predecessors or affiliates within
the past three years. Because the Selling Stockholders may offer all or some
portion of the Shares pursuant to this Prospectus, no estimate can be given as
to the amount of the Shares that will be held by the Selling Stockholders upon
termination of any such offering.
<TABLE>
<CAPTION>
NUMBER OF SHARES
OF COMMON STOCK
BENEFICIALLY NUMBER OF SHARES
NAME OF OWNED PRIOR TO TO BE OFFERED
SELLING STOCKHOLDERS THIS OFFERING HEREUNDER
-------------------- ---------------- ----------------
<S> <C> <C>
Booth American Company(1)(2).................. 817,488 817,488
Columbia Management, Inc.(1).................. 570,953 570,953
Robert T. Goad(3)............................. 26,559 26,559
Swalec Telco Investments Limited(4)........... 1,950,000(5) 1,950,000(5)
</TABLE>
- --------
(1) ECE Management Company, a partnership of affiliates of Booth American
Company and Columbia Management, Inc., performed services under a
management agreement with ECE from March 15, 1994, until August 30, 1996.
Booth American Company and Columbia Management, Inc., were partners in B/G
Co., a partnership which owned a 30% minority interest in ECE from March
15, 1994 until August 30, 1996.
(2) Ralph H. Booth II, an officer and director of Booth American Company, was
a director of ECE from March 15, 1994 until August 30, 1996.
(3) Robert T. Goad, an officer and director of Columbia Management, Inc., was
an officer and director of ECE from March 15, 1994 until August 30, 1996.
(4) Swalec Telco Investments Limited owned a 40% minority interest (comprising
shares and loan notes) in CableTel Newport from December 15, 1993 until
October 7, 1996 and nominated directors and alternate directors of
CableTel Newport and its subsidiaries during that period.
(5) Such number represents the maximum number of shares of Common Stock
issuable upon conversion of the Series A Preferred Stock assuming that
Swalec Telco Investments Limited exercises its option to convert all the
Series A Preferred issued and outstanding on the date of this Prospectus.
As of the date of this Prospectus, Swalec Telco Investments Limited does
not beneficially own any Shares.
PLAN OF DISTRIBUTION
The Shares covered hereby may be offered and sold from time to time by the
Selling Stockholders. The Selling Stockholders will act independently of the
Company in making decisions with respect to the timing, manner and size of
each sale except that the Shares are subject to certain contractual
restrictions on transfer. The Share Exchange Agreement restricts transfers of
the ECE Shares and the Share Purchase Agreement restricts transfers of the
Swalec Shares for certain periods specified therein.
Subject to those restrictions, the Shares may be sold from time to time in
one or more transactions to purchasers either directly by the Selling
Stockholders, through agents designated by the Selling Stockholders or
44
<PAGE>
to or through brokers, dealers or underwriters to be designated by the Selling
Stockholders, at such prices (whether at fixed offering prices, prevailing
market prices, varying prices determined at the time of sale or otherwise) and
on such terms as may be determined by the Selling Stockholders at the time of
sale; additionally, such sales may be made on the NNM or in the over-the-
counter market or otherwise. Such agents, brokers, dealers or underwriters
will likely receive commissions or discounts from the Selling Stockholders
which may exceed customary and ordinary amounts to be negotiated immediately
prior to the sale. The Selling Stockholders and any agents, dealers or
underwriters that participate with the Selling Stockholders in the
distribution of the shares of Common Stock offered hereby may be deemed to be
"underwriters" within the meaning of the Securities Act and any commissions
received by them and any profit on the resale of the Shares purchased by them
may be deemed underwriting commissions or discounts under the Securities Act.
To the extent required under the Securities Act, the aggregate amount of
Shares being offered and the terms of the offering, the names of any such
agents, brokers, dealers or underwriters and any applicable commission with
respect to a particular offer will be set forth in an accompanying Prospectus
supplement. The aggregate proceeds to the Selling Stockholders from the sale
of the shares of Common Stock offered hereby will be the selling price of the
shares of Common Stock sold less the aggregate commissions and discounts
thereon, if any, and other expenses of issuance and distribution. None of the
proceeds from the sale of the shares of Common Stock offered hereby will be
received by the Company.
To comply with the securities laws of certain jurisdictions, if applicable,
the Shares may be offered or sold in such jurisdictions only through
registered or licensed brokers or dealers.
Under applicable rules and regulations under the Exchange Act, any person
engaged in a distribution of the Shares may be limited in its ability to
engage in market activities with respect to such Shares. In addition and
without limiting the foregoing, each Selling Stockholder will be subject to
(i) applicable provisions of the Exchange Act and the rules and regulations
thereunder and (ii) the provisions of the Share Exchange Agreement or, as the
case may be, the Share Purchase Agreement applicable to such Selling
Stockholder, which provisions may limit the timing of purchases and sales of
the Shares by the Selling Stockholders (including pursuant to an underwritten
offering). All of the foregoing may affect the marketability of the Shares.
LEGAL MATTERS
The validity of the shares of Common Stock and the associated Rights offered
hereby will be passed upon for the Company by Richard J. Lubasch, Senior Vice
President, General Counsel and Secretary of the Company. Mr. Lubasch owns
shares of the Company's capital stock and options to acquire additional shares
of the Company's capital stock.
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.
45
<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 nine
months ended September 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, 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 nine months ended September
30, 1996 ((Pounds)1 = $1.5363) 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 nine months ended September 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 NINE MONTHS ENDED SEPTEMBER 30, 1996
(IN THOUSANDS)
<TABLE>
<CAPTION>
CABLETEL NTL ADJUSTMENTS PRO FORMA
--------- ------- ----------- ---------
<S> <C> <C> <C> <C>
Revenues.......................... $ 143,473 $61,295 $ 204,768
Costs and expenses:
Operating expenses.............. 98,941 31,453 130,394
Selling, general and
administrative................. 90,092 7,536 97,628
Depreciation and amortization... 60,764 3,878 $ 3,740 (a) 68,382
--------- ------- -------- ---------
Total costs and expenses.......... 249,797 42,867 3,740 296,404
--------- ------- -------- ---------
Income (loss) from operations..... (106,324) 18,428 (3,740) (91,636)
Interest (expense)................ (105,368) (1,670) (9,604)(b) (116,642)
Interest income................... 28,669 684 -- 29,353
Other............................. 432 -- -- 432
--------- ------- -------- ---------
Income (loss) before provision for
income taxes and minority
interests........................ (182,591) 17,442 (13,344) (178,493)
Benefit (provision) for income
taxes............................ (5,183) (3,255) 3,255 (c) (5,183)
--------- ------- -------- ---------
Income (loss) before minority
interests........................ (187,774) 14,187 (10,089) (183,676)
Minority interest................. 11,822 -- -- 11,822
--------- ------- -------- ---------
Income (loss) from continuing
operations....................... $(175,952) $14,187 $(10,089) $(171,854)
========= ======= ======== =========
Net (loss) per share.............. $ (5.73) -- -- $ (5.59)
========= ======= ======== =========
Weighted average number of shares
used in calculation of earnings
per share........................ 30,717 -- -- 30,717
========= ======= ======== =========
</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 $ 11,220 (a) 56,464
--------- -------- -------- ---------
Total costs and expenses......... 126,867 138,600 11,220 276,687
--------- -------- -------- ---------
Income (loss) from operations.... (93,126) 33,990 (11,220) (70,356)
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 (37,799) (106,277)
Benefit (provision) for income
taxes........................... 2,477 (9,998) 352 (c) (7,169)
--------- -------- -------- ---------
Income (loss) before minority
interests....................... (97,759) 21,760 (37,447) (113,446)
Minority interests............... 6,974 -- -- 6,974
--------- -------- -------- ---------
Income (loss) from continuing
operations...................... $ (90,785) $ 21,760 $(37,447) $(106,472)
========= ======== ======== =========
Net (loss) per share............. $ (3.01) -- -- $ (3.53)
========= ======== ======== =========
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 nine months
ended September 30, 1996 and the year ended December 31, 1995 the following
pro forma adjustments have been made:
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEAR ENDED SEPTEMBER 30,
DECEMBER 31, 1995 1996
------------------ ------------------
(IN THOUSANDS) (IN THOUSANDS)
<S> <C> <C> <C> <C>
(a) Amortization of goodwill over 30
years and the depreciation of the
excess of the fair value over
book value of property and
equipment acquired............... $(11,220) $ (3,740)
(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
-------- --------
$(37,447) $(10,089)
======== ========
</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............................................................... 7
Use of Proceeds............................................................ 20
Price Range of Common Stock................................................ 20
Dividend Policy............................................................ 21
Exchange Rates............................................................. 21
Capitalization............................................................. 22
Selected Consolidated Financial Information................................ 23
The Company................................................................ 24
Recent Developments........................................................ 30
Description of Capital Stock............................................... 31
Description of Certain Indebtedness........................................ 38
Selling Stockholders....................................................... 44
Plan of Distribution....................................................... 44
Legal Matters.............................................................. 45
Experts.................................................................... 45
Index to Pro Forma Statements of Operations................................ F-1
</TABLE>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
3,365,000 SHARES
[ICT LOGO]
COMMON STOCK
----------------
PROSPECTUS
----------------
DATED , 1996
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN THE PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following is an itemization of all expenses (subject to future
contingencies) incurred or expected to be incurred by the Company in connection
with the Offering.
<TABLE>
<S> <C>
SEC registration fee............................................. $25,620
Nasdaq Listing Fee...............................................
Legal fees and expenses..........................................
Accounting fees and expenses.....................................
Printing and engraving fees......................................
Miscellaneous expenses...........................................
-------
Total........................................................ $
=======
</TABLE>
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS
As permitted by Section 102 of the Delaware General Corporation Law (the
"DGCL"), the Company's Restated Certificate of Incorporation eliminates a
director's personal liability for monetary damages to the Company and its
stockholders arising from a breach or alleged breach of a director's fiduciary
duty except for liability under Section 174 of the DGCL or liability for a
breach of the director's duty of loyalty to the Company or its stockholders,
for acts or omissions not in good faith or which involve intentional misconduct
or a knowing violation of law or for any transaction in which the director
derived an improper personal benefit. The effect of this provision in the
certificate of incorporation is to eliminate the rights of the Company and its
stockholders (through stockholders, derivative suits on behalf of the Company)
to recover monetary damages against a director for breach of fiduciary duty as
a director (including breaches resulting from negligent or grossly negligent
behavior) except in the situations described above.
The Company's By-laws provide that directors and officers of the Company
shall be indemnified against liabilities arising from their service as
directors and officers to the full extent permitted by law. Section 145 of the
DGCL empowers a corporation to indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending or completed action,
suit or proceeding, whether civil, criminal, administrative or investigative
(other than an action by or in the right of the corporation) by reason of the
fact that he is or was a director, officer, employee or agent of the
corporation or is or was serving at the request of the corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise, against expenses (including attorney's
fees), judgments, fines and amounts paid in settlement actually and reasonably
incurred by him in connection with such action, suit or proceeding if he acted
in good faith and in a manner he reasonably believed to be in, or not opposed
to, the best interests of the corporation, and, with respect to any criminal
action or proceeding, had no reasonable cause to believe his conduct was
unlawful.
Section 145 also empowers a corporation to indemnify any person who was or is
a party or is threatened to be made a party to any threatened, pending or
completed action or suit by or in the right of the corporation to procure a
judgment in its favor by reason of the fact that such person acted in any of
the capacities set forth above, against expenses (including attorneys' fees)
actually and reasonably incurred by him in connection with the defense or
settlement of such action or suit if he acted under similar standards, except
that no indemnification may be made in respect of any claim, issue or matter as
to which such person shall have been adjudged to be liable to the corporation
unless, and only to the extent that, the Court of Chancery or the court in
which such action was brought shall determine that despite the adjudication of
liability such person is fairly and reasonably entitled to indemnity for such
expenses which the court shall deem proper.
Section 145 further provides that to the extent that a director or officer of
a corporation has been successful in the defense of any action, suit or
proceeding referred to above or in the defense of any claim, issue or matter
II-1
<PAGE>
therein, he shall be indemnified against expenses (including attorneys' fees)
actually and reasonably incurred by him in connection therewith; that
indemnification provided for by Section 145 shall not be deemed exclusive of
any other rights to which the indemnified party may be entitled; and that the
corporation is empowered to purchase and maintain insurance on behalf of a
director or officer of the corporation against any liability asserted against
him and incurred by him in any such capacity, or arising out of his status as
such, whether or not the corporation would have the power to indemnify him
against such liabilities under Section 145.
The Company has entered into a director and officer indemnity agreement
("Indemnity Agreement") with each officer and director of the Company (an
"Indemnitee"). Under the By-laws and these Indemnity Agreements, the Company
must indemnify an Indemnitee to the fullest extent permitted by the DGCL for
losses and expenses incurred in connection with actions in which the Indemnitee
is involved by reason of having been a director or officer of the Company. The
Company is also obligated to advance expenses an Indemnitee may incur in
connection with such actions before any resolution of the action.
ITEM 16. EXHIBITS.
The following exhibits are filed as part of this Registration Statement.
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
------- -----------
<C> <S>
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 the Registrant(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)
2.5. Share Exchange Agreement dated as of August 30, 1996, among the
Registrant, B/G Co., Booth American Company, Columbia Management, Inc.
and Robert T. Goad
2.6. Share Purchase Agreement dated October 7, 1996 by and among the
Registrant, South Wales Electricity plc and Swalec Telco Investments
Limited
4.1. Restated Certificate of Incorporation of the Registrant, as amended by
Certificate of Amendment, dated June 5, 1996(3)
4.2. Restated Bylaws of the Registrant(1)
4.3. Rights Agreement, dated as of October 1, 1993, by and between the
Registrant and Continental Stock Transfer and Trust Company, as Rights
Agent(1)
4.4. Specimen of Common Stock Certificate of the Registrant(1)
5.1. Opinion of Richard J. Lubasch, General Counsel to the Registrant, as
to the legality of the securities being registered hereby*
23.1. Consent of Ernst & Young LLP
23.2. Consent of Ernst & Young
23.3. Consent of Richard J. Lubasch, General Counsel to the Registrant
(included in Exhibit 5.1)*
24. Powers of Attorney (included in the signature pages to the
Registration Statement)
</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.
(3) Incorporated by reference from the Registrant's Registration Statement on
Form S-3, File No. 333-07879.
* To be filed by amendment.
II-2
<PAGE>
ITEM 17. UNDERTAKINGS.
The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act, each filing of the
registrant's annual report pursuant to Section 13(a) or 15(d) of the Exchange
Act (and, where applicable, each filing of an employee benefit plan's annual
report pursuant to Section 15(d) of the Exchange Act) that is incorporated by
reference in the registration statement shall be deemed to be a new
registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers and controlling persons of the
registrant pursuant to the foregoing provisions, or otherwise, the registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Securities
Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
registrant of expenses incurred or paid by a director, officer or controlling
person of the registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the registrant will, unless in
the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the
Securities Act and will be governed by the final adjudication of such issue.
The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this Registration Statement:
(i) To include any prospectus required by Section 10(a) (3) of the
Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising after the
effective date of the registration statement (or the most recent post-
effective amendment thereof) which, individually or in the aggregate,
represent a fundamental change in the information set forth in the
registration statement. Notwithstanding the foregoing, any increase or
decrease in volume of securities offered (if the total dollar value of
securities offered would not exceed that which was registered) and any
deviation from the low or high and of the estimated maximum offering
range may be reflected in the form of prospectus filed with the
Commission pursuant to Rule 424(b) if, in the aggregate, the changes in
volume and price represent no more than 20 percent change in the maximum
aggregate offering price set forth in the "Calculation of Registration
Fee" table in the effective registration statement.
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in the registration statement or
any material change to such information in the registration statement;
provided, however, that paragraphs (1)(i) and (1)(ii) do not apply if the
registration statement is on Form S-3, Form S-8 or Form F-3, and the
information required to be included in a post-effective amendment by
those paragraphs is contained in periodic reports filed with or furnished
to the Commission by the registrant pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934 that are incorporated by reference 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.
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 25TH DAY OF
NOVEMBER, 1996.
International CableTel Incorporated
By: /s/ Richard J. Lubasch
----------------------------------
RICHARD J. LUBASCH SENIOR VICE
PRESIDENT--GENERAL
COUNSEL AND SECRETARY
POWER OF ATTORNEY
Each person whose signature appears below hereby authorizes Richard J.
Lubasch, George S. Blumenthal, J. Barclay Knapp and Gregg Gorelick and each and
any one of them, as attorneys-in-fact and agents, with full powers of
substitution, to sign on his or her behalf, individually and in the capacities
stated below, and to file any and all amendments (including post-effective
amendments) to this Registration Statement with the Securities and Exchange
Commission, granting to said attorney-in fact and agents full power and
authority to perform any other act on behalf of the undersigned required to be
done in the premises.
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS REGISTRATION
STATEMENT HAS BEEN SIGNED BY THE FOLLOWING PERSONS IN THE CAPACITIES AND ON THE
DATES INDICATED.
SIGNATURE TITLE DATE
--------- ----- ----
/s/ George S. Blumenthal Chairman of the November 25, 1996
- ------------------------------------ Board and
GEORGE S. BLUMENTHAL Treasurer
/s/ J. Barclay Knapp President, Chief November 25, 1996
- ------------------------------------ Executive and
J. BARCLAY KNAPP Financial Officer
and Director
/s/ Gregg Gorelick Vice President-- November 25, 1996
- ------------------------------------ Controller
GREGG GORELICK
/s/ Sidney R. Knafel Director November 25, 1996
- ------------------------------------
SIDNEY R. KNAFEL
/s/ Ted H. McCourtney Director November 25, 1996
- ------------------------------------
TED H. MCCOURTNEY
/s/ Alan J. Patricof Director November 25, 1996
- ------------------------------------
ALAN J. PATRICOF
/s/ Warren Potash Director November 25, 1996
- ------------------------------------
WARREN POTASH
/s/ Michael S. Willner Director November 25, 1996
- ------------------------------------
MICHAEL S. WILLNER
II-4
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT PAGE
NO. DESCRIPTION NO.
------- ----------- ----
<C> <S> <C>
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 the Registrant(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)
2.5. Share Exchange Agreement dated as of August 30, 1996, among the
Registrant, B/G Co., Booth American Company, Columbia
Management, Inc. and Robert T. Goad
2.6. Share Purchase Agreement dated October 7, 1996 by and among the
Registrant, South Wales Electricity plc and Swalec Telco
Investments Limited
4.1. Restated Certificate of Incorporation of the Registrant, as
amended by Certificate of Amendment, dated June 5, 1996(3)
4.2. Restated Bylaws of the Registrant(1)
4.3. Rights Agreement, dated as of October 1, 1993, by and between
the Registrant and Continental Stock Transfer and Trust
Company, as Rights Agent(1)
4.4. Specimen of Common Stock Certificate of the Registrant(1)
5.1. Opinion of Richard J. Lubasch, General Counsel to the
Registrant, as to the legality of the securities being
registered hereby*
23.1. Consent of Ernst & Young LLP
23.2. Consent of Ernst & Young
23.3. Consent of Richard J. Lubasch, General Counsel to the
Registrant (included in Exhibit 5.1)*
24. Powers of Attorney (included in the signature pages to the
Registration Statement)
</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.
(3) Incorporated by reference from the Registrant's Registration Statement on
Form S-3, File No. 333-07879.
* To be filed by amendment.
<PAGE>
EX-2.5
______________________________________________________________________________
SHARE EXCHANGE AGREEMENT
among
INTERNATIONAL CABLETEL INCORPORATED,
B/G CO.,
BOOTH AMERICAN COMPANY,
COLUMBIA MANAGEMENT, INC.
and
ROBERT T. GOAD
Dated as of August 30, 1996
______________________________________________________________________________
<PAGE>
<TABLE>
<CAPTION>
TABLE OF CONTENTS Page
----
ARTICLE I
<S> <C>
EXCHANGE OF INTEREST.............................................. 2
Section 1.1 Exchange of B/G's Interest in ECE............... 2
Section 1.2 Consideration................................... 2
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF ICT............................. 3
Section 2.1 Organization Etc................................ 3
Section 2.2 Capitalization.................................. 4
Section 2.3 Authority....................................... 5
Section 2.4 Consents and Approvals; No Violations........... 6
Section 2.5 SEC Reports and Financial Statements............ 7
Section 2.6 Absence of Certain Changes...................... 8
Section 2.7 Litigation...................................... 9
Section 2.8 Tax Free Reorganization Matters................. 9
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF B/G............................. 10
Section 3.1 Organization.................................... 10
Section 3.2 ECE Shares; Interests in ECE.................... 10
Section 3.3 Authority 11
Section 3.4 Consents and Approvals; No Violations........... 11
Section 3.5 Investment Purpose.............................. 12
Section 3.6 Litigation...................................... 12
Section 3.7 Tax Basis....................................... 13
ARTICLE IV
COVENANTS......................................................... 13
Section 4.1 Legends......................................... 13
Section 4.2 Restrictions on Sale............................ 13
Section 4.3 Registration Rights............................. 16
Section 4.4 Registration Expenses........................... 20
Section 4.5 Management Agreement............................ 21
Section 4.6 Covenant Not To Compete.......................... 21
Section 4.7 Non-Disclosure................................... 24
Section 4.8 Contribution Agreement........................... 25
Section 4.9 Mutual Releases.................................. 25
Section 4.10 Further Assurances............................. 27
Section 4.11 Tax Matter Covenants; Expenses.................. 27
Section 4.12 Resignations.................................... 28
</TABLE>
<PAGE>
<TABLE>
<S> <C>
ARTICLE V
OBLIGATIONS OF PARTIES AFTER THE DATE HEREOF...................... 28
Section 5.1 Survival........................................ 28
Section 5.2 Indemnification................................. 28
Section 5.3 Claims.......................................... 29
ARTICLE VI
MISCELLANEOUS..................................................... 32
Section 6.1 Amendment....................................... 32
Section 6.2 Extension; Waiver............................... 32
Section 6.3 Notices......................................... 32
Section 6.4 Counterparts.................................... 33
Section 6.5 Entire Agreement; No Third Party Beneficiaries.. 34
Section 6.6 Governing Law................................... 34
Section 6.7 Specific Performance............................ 34
Section 6.8 Assignment...................................... 34
Section 6.9 Severability.................................... 34
Schedule 2.2...................................................... 38
</TABLE>
ii
<PAGE>
THIS SHARE EXCHANGE AGREEMENT is made as of the 30th day of August
1996, among INTERNATIONAL CABLETEL INCORPORATED, a Delaware corporation ("ICT"),
B/G CO., an Indiana partnership ("B/G"), BOOTH AMERICAN COMPANY, a Michigan
corporation ("Booth"), COLUMBIA MANAGEMENT, INC., an Indiana corporation
("Columbia"), and ROBERT T. GOAD, an Indiana resident ("Goad").
W I T N E S S E T H:
-------------------
WHEREAS, each of ICT and B/G holds an interest in English Cable
Enterprises, Inc., a Delaware corporation ("ECE");
WHEREAS, ICT desires to acquire all of B/G's interest in ECE, and B/G
desires to transfer all of such interest to ICT;
WHEREAS, ICT desires to use shares of its common stock as
consideration for its acquisition of B/G's interest in ECE;
WHEREAS, Booth, Columbia and Goad are all of the partners (the
"Partners") of B/G, which is being liquidated simultaneously with the execution
of this Agreement; the Partners desire that the shares of ICT's common stock to
be received by B/G pursuant to this Agreement be directly distributed to the
Partners as provided herein; and
WHEREAS, the transaction between the parties hereto is intended to
qualify as a reorganization under Section 368(a)(1)(B) of the Internal Revenue
Code of 1986, as amended (the "Code");
NOW, THEREFORE, in consideration of the foregoing premises, the mutual
covenants herein contained and other good and valuable consideration, the
<PAGE>
receipt and sufficiency of which are hereby acknowledged, the parties hereto
agree as follows:
ARTICLE I
EXCHANGE OF INTEREST
Section 1.1 Exchange of B/G's Interest in ECE. Simultaneously with the
---------------------------------
execution hereof and subject to the terms set forth in this Agreement and in
reliance upon the representations and warranties and agreements of ICT, B/G is
assigning, transferring and delivering to ICT, and ICT is acquiring from B/G,
good and valid title free and clear of all interests, liens, charges,
encumbrances, equities, claims, assessments and options of whatever nature, to
9,330 shares of ECE Series B Common Stock, par value $.01 per share (such
shares, which constitute all of the shares of ECE owned, directly or indirectly,
by B/G, are known herein as the "ECE Shares").
Section 1.2 Consideration. As consideration for the transfer of the ECE
-------------
Shares by B/G to ICT, subject to the terms set forth in this Agreement and in
reliance upon the representations, warranties, and agreements of B/G and the
Partners contained herein, ICT is issuing and delivering in the aggregate to the
Partners, and the Partners are acquiring, good and valid title to, 1,415,000
shares (the "Issued Shares") of voting common stock, par value $0.01 per share,
of ICT (the "ICT Common Stock"), allocated among the Partners as follows:
<TABLE>
Partner Issued Shares
-------- -------------
<S> <C>
Booth 817,488
Columbia 570,953
Goad 26,559
</TABLE>
2
<PAGE>
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF ICT
ICT represents and warrants to B/G and each of the Partners as follows:
Section 2.1 Organization Etc.
----------------
(a) ICT and each of its Subsidiaries (as defined below) is a
corporation or other legal entity duly organized, validly existing and in good
standing under the laws of the jurisdiction of its incorporation or organization
and has all requisite corpo rate power and authority to own, lease and operate
the assets owned and leased by it and to carry on its business as now being
conducted, except where the failure to be so organized, existing or in good
standing or to have such power and authority would not, individually or in the
aggregate, have a Material Adverse Effect (as defined below) on ICT and its
Subsidiaries taken as a whole. As used in this Agreement, the term "Material
Adverse Effect" with respect to an entity (or group of entities taken as a
whole) means such event, change or effect which is materially adverse to the
business, properties, assets, liabilities, results of operations or financial
condition of such entity (or group of entities taken as a whole). ICT and each
of its Subsidiaries is duly qualified or licensed to do business and in good
standing in each jurisdiction in which the property owned, leased or operated by
it or the nature of the business conducted by it makes such qualification or
licensing necessary, except where the failure to be so duly qualified or
licensed and in good standing would not, individually or in the aggregate, have
a Material Adverse Effect on ICT and its Subsidiaries taken as a whole. For
purposes of this Agreement, the term "Subsidiary" when used with respect to any
party, means any entity of which such party (either alone or through or together
with any other Subsidiary) owns, directly or indirectly, 50% or more of the
3
<PAGE>
stock or other equity interests the holders of which are generally entitled to
vote for the election of the board of directors or other governing body of such
entity.
(b) ICT has heretofore made available to B/G a complete and correct
copy of the charter and by-laws or comparable organizational documents, each as
amended to date, of ICT and each of its Subsidiaries. Such charters, by-laws
and comparable organizational documents are in full force and effect. Neither
ICT nor any of its Subsidiaries is in violation of any provision of its charter,
by-laws or comparable organizational documents, except for such violations that
would not, individually or in the aggregate, have a Material Adverse Effect on
ICT or its Subsidiaries taken as a whole.
Section 2.2 Capitalization. As of the date of this Agreement, the
--------------
authorized capital stock of ICT consists of 100,000,000 shares of ICT Common
Stock, of which 30,591,800 shares are issued and outstanding and 21,902,851
shares are reserved for issuance upon exercise of options or warrants or
conversion of convertible securities, and 2,500,000 shares of preferred stock,
$.01 par value, of which no shares are issued and outstanding.
All the outstanding shares of ICT's capital stock are, and the Issued
Shares will be, when issued and paid for in accordance with the terms hereof,
duly authorized, validly issued, fully paid and nonassessable and not subject to
any preemptive rights of third parties in respect thereto. Except for the
21,902,851 shares of ICT capital stock issuable as referenced above, there are
no existing options, warrants, calls, subscriptions or other rights or other
agreements or binding commitments of any character relating to the issued or
unissued capital stock of ICT or any of its Subsidiaries obligating ICT or any
of its Subsidiaries to issue, transfer or sell or
4
<PAGE>
cause to be issued, transferred or sold any shares of capital stock of, or other
equity interests in, ICT or any of its Subsidiaries or securities convertible
into or exchange able for such shares or equity interests or obligating ICT or
any of its Subsidiaries to grant, extend or enter into any such option, warrant,
call, subscription or other right, agreement or commitment. As of the date of
this Agreement, there are no outstanding contractual obligations of ICT or any
of its Subsidiaries to repurchase, redeem or otherwise acquire any shares of
capital stock of ICT or any of its Subsidiaries. Each of the outstanding shares
of capital stock of each of ICT's Subsidiaries is duly authorized, validly
issued, fully paid and nonassessable, and such shares owned by ICT are owned
free and clear of any lien, claim, option, charge, security interest, limitation
on voting rights and encumbrance of any kind, except as set forth on Schedule
2.2 hereto or as would not have a Material Adverse Effect on ICT and its
Subsidiaries taken as a whole.
Section 2.3 Authority. ICT has the requisite corporate power and
---------
authority to execute and deliver this Agreement and to consummate the
transactions contemplated hereby. The execution, delivery and performance of
this Agreement by ICT and the consummation by ICT of the transactions
contemplated hereby have been duly authorized by all necessary corporate action
on the part of ICT and no other corporate proceedings on the part of ICT are
necessary to authorize this Agreement or to consummate the transactions
contemplated hereby. This Agreement has been duly executed and delivered by
ICT and, assuming this Agreement constitutes a valid and binding obligation of
B/G, constitutes a valid and binding obligation of ICT, enforceable against ICT
in accordance with its terms.
5
<PAGE>
Section 2.4 Consents and Approvals; No Violations.
---------------------- -------------
(a) Except for filings, permits, authorizations, notices, consents
and approvals as may be required under, and other applicable requirements of,
the Securities Exchange Act of 1934, as amended (the "Exchange Act"), the
Securities Act of 1933, as amended (the "Securities Act"), or state securities
or blue sky laws, neither the execution, delivery or performance of this
Agreement by ICT nor the consummation by ICT of the transactions contemplated
hereby and compliance by ICT with any of the provisions hereof will (i) conflict
with or result in any breach of any provisions of the certificate of
incorporation or by-laws or comparable organizational documents of ICT or any of
its Subsidiaries, (ii) require any filing with, or permit, authorization,
consent or approval of, any court, arbitral tribunal, administrative agency or
commission or other governmental or other regulatory authority or agency (a
"Governmental Entity") (except where the failure to obtain such permits,
authorizations, consents or approvals or to make such filings would not prevent
or delay consummation of the transactions contemplated by this Agreement in any
material respect and would not, individually or in the aggregate, have a
Material Adverse Effect on ICT and its Subsidiaries taken as a whole), (iii)
result in a violation or breach of, or constitute (with or without due notice or
lapse of time or both) a default (or give rise to any right of termination,
amendment, cancellation or acceleration) under, or result in the creation of any
lien or other encumbrance on any property or asset of ICT or any of its
Subsidiaries pursuant to, any of the terms, conditions or provisions of any
note, bond, mortgage, indenture, lease, license, contract, agreement or other
instrument or obligation to which ICT or any of its Subsidiaries is a party or
by which any of them or any of their properties or assets may be bound or (iv)
violate any order,
6
<PAGE>
writ, injunction, decree, statute, rule or regulation applicable to ICT or any
of its Subsidiaries or by which any property or asset of ICT or any of its
Subsidiaries is bound or affected, except, in the case of clauses (iii) and
(iv), for violations, breaches, defaults or other occurrences which would not
prevent or delay consummation of this Agreement or the transactions contemplated
hereby in any material respect and would not, individually or in the aggregate,
have a Material Adverse Effect on ICT and its Subsidiaries taken as a whole.
(b) Except as disclosed in the ICT SEC Documents (as defined in
Section 2.5), neither ICT nor any of its Subsidiaries is in conflict with, or in
default or violation of, (i) any order, writ, injunction, decree, statute, rule
or regulation of any Governmental Entity applicable to ICT or any of its
Subsidiaries or by which any of them or any of their properties or assets may be
bound or (ii) any note, bond, mortgage, indenture, lease, license, contract,
agreement or other instrument or obligation to which ICT or any of its
Subsidiaries is a party or by which any of them or any of their properties or
assets may be bound or affected, except for any such conflicts, defaults or
violations which have not had and are not likely to have a Material Adverse
Effect on ICT and its Subsidiaries taken as a whole.
Section 2.5 SEC Reports and Financial Statements. ICT has filed with
------------------------------------
the Securities and Exchange Commission (the "SEC"), and has heretofore made
available to B/G true and complete copies of all forms, reports and documents
required to be filed by it since January 1, 1996, under the Exchange Act or the
Securities Act (as such documents have been amended since the time of their
filing, collectively, the "ICT SEC Documents"). The ICT SEC Documents, including
without limitation any financial statements or schedules included therein, at
the time filed, (a) did not contain
7
<PAGE>
any untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading and (b) complied in all material respects with the applicable
requirements of the Exchange Act or the Securities Act, as the case may be.
The financial statements of ICT included in the ICT SEC Documents complied as to
form in all material respects with applicable accounting requirements and with
the published rules and regulations of the SEC with respect thereto, have been
prepared in accordance with GAAP applied on a consistent basis during the
periods involved (except as may be indicated in the notes thereto or, in the
case of the unaudited statements, as permitted on ICT's Form 10-Q as filed with
the SEC under the Exchange Act) and fairly present (subject, in the case of the
unaudited statements, to normal, recurring audit adjustments which will not be
material in amount or effect) the consolidated financial position of ICT and its
consolidated Subsidiaries as at the dates thereof and the consolidated results
of their operations and cash flows for the periods then ended. Except as
reflected, reserved against or otherwise disclosed in the financial statements
of ICT included in the ICT SEC Documents, neither ICT nor any of its
Subsidiaries has any liabilities or obligations (absolute, accrued, fixed,
contingent or otherwise) material to ICT and its Subsidiaries taken as a whole
that would be required to be reflected on, or reserved against in, a balance
sheet of ICT or the notes thereto, prepared in accordance with generally
accepted accounting principles consistently applied.
Section 2.6 Absence of Certain Changes. Except as disclosed in the
--------------------------
ICT SEC Documents, since December 31, 1995, ICT has conducted its business only
in the ordinary course of such business and there has not been (a) any material
adverse
8
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change in ICT and its Subsidiaries taken as a whole, (b) any declaration,
setting aside or payment of any dividend or other distribution with respect to
its capital stock or (c) any material change in its accounting principles,
practices or methods.
Section 2.7 Litigation. There is no suit, claim, action, proceeding
----------
or investigation pending or, to the best knowledge of ICT, threatened, against
ICT or any of its Subsidiaries before any Governmental Entity which,
individually or in the aggregate, is reasonably likely to have a Material
Adverse Effect on the ability of ICT to consummate the transactions contemplated
by this Agreement. Neither ICT nor any of its Subsidiaries is subject to any
outstanding order, writ, injunction or decree which, insofar as can be
reasonably foreseen, individually or in the aggregate, would have a Material
Adverse Effect on the ability of ICT to consummate the transactions contemplated
by this Agreement.
Section 2.8 Tax Free Reorganization Matters. ICT represents and
-------------------------------
warrants as follows:
(a) ICT and ECE have each adopted a plan of reorganization as provided
in the Code and any Treasury Regulations promulgated thereunder (the "Treasury
Regulations") with respect to the intended qualification of the share exchange
as a tax free reorganization within the meaning of Section 368(a)(1)(B) of the
Code;
(b) Immediately after the exchange contemplated by this Agreement, ICT
will own shares of ECE's capital stock possessing at least eighty percent (80%)
of the combined voting power of all the shares of capital stock of ECE entitled
to vote and at least eighty percent (80%) of each class of shares of capital
stock of ECE not entitled to vote;
9
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(c) The transactions described in this Agreement have a "bona fide
business purpose" as defined in the Treasury Regulations.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF B/G
B/G and each of the Partners, jointly and severally, represent and
warrant to ICT as follows (excepting the representations set forth in Section
3.5 which are made severally and not jointly):
Section 3.1 Organization.
------------
(a) B/G is a partnership duly organized and validly existing under the
laws of the jurisdiction of its organization and has all requisite partnership
power and authority to own, lease and operate its properties and to carry on
its business as now being conducted, except where the failure to be so
organized, existing or in good standing or to have such power and authority
would not, individually or in the aggregate, have a Material Adverse Effect on
B/G.
(b) B/G has heretofore made available to ICT a complete and correct
copy of its organizational documents, each as amended to date. Such
organizational documents are in full force and effect. B/G is not in violation
of any provision of its organizational documents, except for such violations
that would not, individually or in the aggregate, have a Material Adverse Effect
on B/G.
Section 3.2 ECE Shares; Interests in ECE. The ECE Shares are owned
----------------------------
by B/G free and clear of any lien, claim, option, charge, security interest,
limitation on voting rights and encumbrance of any kind. The ECE Shares
represent all of B/G and the Partners' interest in ECE. Neither B/G nor any of
the Partners has outstanding any
10
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grant of an interest in ECE to any third party or is aware that at present any
interest in ECE is held by any third party.
Section 3.3 Authority. B/G and each Partner have the requisite
---------
power and authority to execute and deliver this Agreement and to consummate the
transactions contemplated hereby. The execution, delivery and performance of
this Agreement by B/G and each Partner and the consummation by B/G and each
Partner of the other transactions contemplated hereby have been duly authorized
by all necessary partnership action on the part of B/G and by all necessary
corporate action on the part of Booth and Columbia and no other proceedings on
the part of any of them are necessary to authorize this Agreement or to
consummate the transactions contemplated hereby.
Section 3.4 Consents and Approvals; No Violations. Neither the
-------------------------------------
execution, delivery or performance of this Agreement by B/G or the Partners nor
the consummation by B/G or the Partners of the transactions contemplated hereby
and compliance by B/G or any Partner with any of the provisions hereof will (i)
conflict with or result in any breach of any provision of the respective
organizational documents of B/G or any Partner, (ii) require any filing with, or
permit, authorization, consent or approval of, any Governmental Entity (except
where the failure to obtain such permits, authorizations, consents or approvals
or to make such filings would not prevent or delay consummation of the
transactions contemplated by this Agreement in any material respect), (iii)
result in a violation or breach of, or constitute (with or without due notice or
lapse of time or both) a default (or give rise to any right of termination,
amendment, cancellation or acceleration) under, or result in the creation of any
lien or other encumbrance on any property or asset of B/G or such Partner
pursuant to, any of the terms,
11
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conditions or provisions of any note, bond, mortgage, indenture, license, lease,
contract, agreement or other instrument or obligation to which B/G or such
Partner is a party or by which B/G or such Partner or any of B/G's or such
Partner's properties or assets may be bound or (iv) violate any order, writ,
injunction, decree, statute, rule or regulation applicable to B/G or such
Partner or by which any property or asset of B/G or such Partner is bound or
affected, except, in the case of clauses (iii) and (iv), for violations,
breaches, defaults or other occurrences which would not prevent or delay
consummation of this Agreement or the transactions contemplated hereby in any
material respect.
Section 3.5 Investment Purpose. Each of the Partners, will acquire
------------------
the Issued Shares for his own account for the purpose of investment and not with
a view to or for sale in connection with any distribution thereof, except
pursuant to an effective registration statement under the Securities Act and all
applicable state securities laws or pursuant to an exemption from the Securities
Act and all applicable state securities laws.
Section 3.6 Litigation. There is no suit, claim, action, proceeding
----------
or investigation pending or, to the best knowledge of B/G or the Partners,
threatened, against B/G or any Partner or any of its Subsidiaries before any
Governmental Entity which, individually or in the aggregate, is reasonably
likely to have a Material Adverse Effect on the ability of B/G or any Partner to
consummate the transactions contemplated by this Agreement. None of B/G, its
Subsidiaries or any Partner is subject to any outstanding order, writ,
injunction or decree which, insofar as can be reasonably foreseen, individually
or in the aggregate, would have a Material Adverse Effect on the
12
<PAGE>
ability of B/G or the Partners to consummate the transactions contemplated by
this Agreement.
Section 3.7 Tax Basis. The ECE Shares owned by B/G have a tax basis
---------
for federal income tax purposes of $5,832,324.
ARTICLE IV
COVENANTS
Section 4.1 Legends. The Certificates for the Issued Shares shall be
-------
endorsed with the following legend:
The Shares represented by this Certificate are transferable only upon
compliance with the provisions of the Share Exchange Agreement, dated as of
August 30, 1996, among the Corporation B/G, Co., Booth American Company,
Columbia Management, Inc. and Robert T. Goad. A copy of such Agreement is
on file at the offices of the Corporation.
The Shares represented by this Certificate have not been registered under
the Securities Act of 1933. The Shares have been acquired for investment
and may not be sold, transferred, pledged or assigned in the absence of an
effective registration statement for these shares under the Securities Act
of 1933, or an exemption from registration under said Act.
Upon request of ICT and delivery to ICT of the legended Certificates, ICT
will from time to time issue substitute Certificates representing Issued Shares
which will not contain any portion of the above-legend which is not then
applicable.
Section 4.2 Restrictions on Sale.
--------------------
(A) Notwithstanding anything to the contrary set forth herein, for a period
of two years from the date of this Agreement (the "Lock-Up Period"), none of the
Partners shall be permitted to sell, transfer, pledge or assign (a "transfer")
any of the Issued Shares (including any securities of ICT issued or issuable by
way of a dividend or stock split or in connection with or after a combination of
shares, recapitalization,
13
<PAGE>
merger, consolidation or other reorganization or otherwise of ICT (such shares,
the "Related Shares")) except as set forth in this Section 4.2 as follows:
(a) at any time any of each Partner's Issued Shares may be transferred
to any of the other Partners;
(b) twenty-five percent (25.0%) of each Partner's Issued Shares may be
transferred following the six month anniversary of the date hereof.
Furthermore, any Issued Shares transferred pursuant to this subsection (b) shall
no longer be subject to the provisions of this Section 4.2 after any such
transfer;
(c) Columbia may pledge in a bona fide transaction any of its Issued
Shares to European Cable Capital Partners, L.P., as collateral in connection
with an outstanding Amended and Restated Promissory Note and Security Agreement
dated as of June 27, 1996, or any replacement thereof, in substitution for ECE
Shares and the partnership interest of Columbia in B/G which are being released
as collateral simultaneously with the execution of this Agreement, and the
pledgee thereof shall, subject to any restrictions under applicable law, be
entitled to effect transfer of Issued Shares to itself, an affiliate or, with
the consent of ICT, a third party in connection with any realization on such
collateral, provided that the pledgee thereof or, if applicable, such affiliate
or third party, shall sign an agreement, in form reasonably satisfactory to ICT,
agreeing to the terms of the Lock-Up set forth in this Agreement; and
(d) Booth may transfer up to 90,000 Issued Shares to Ralph H. Booth II
at any time simultaneously with or after the execution of this Agreement,
provided that Ralph H. Booth II shall sign an agreement, in form reasonably
satisfactory to ICT, agreeing to the terms of the Lock-Up set forth in this
Agreement.
14
<PAGE>
All Issued Shares may be transferred without restriction after the Lock-Up
Period has expired, subject to any restrictions under applicable law.
(B) Notwithstanding anything in this Agreement to the contrary, all Issued
Shares may be transferred without restriction in the event of an ICT Change of
Control, subject to any restrictions under applicable law. An ICT Change of
Control shall mean (i) the sale, lease or transfer of all or substantially all
of the assets of ICT 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 ICT, (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 ICT
and/or warrants or options to acquire such voting stock, calculated on a fully
diluted basis, or (iv) during any period of six consecutive months, individuals
who at the beginning of such period constituted ICT'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 ICT 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
15
<PAGE>
for election was previously so approved) cease for any reason to constitute a
majority of the ICT's Board of Directors then in office.
"Permitted Designee" shall mean (i) a spouse or a child of a Permitted
Holder, (ii) trusts for the benefit of a Permitted Holder or a spouse or a child
of a Permitted Holder, his estate, heirs, executor, administrator, committee or
other personal representative or (iii) 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" shall mean George S. Blumenthal, J. Barclay Knapp and
their Permitted Designees.
Section 4.3 Registration Rights. (a) ICT shall use its best efforts to
-------------------
cause to become effective not later than 120 days after the date hereof, a
registration statement on Form S-3 (or if such form is not available to ICT for
any reason, such other form as ICT may use) (an "S-3 Registration Statement"),
in compliance with the Securities Act with respect to, and shall take all other
necessary and appropriate actions which can be taken by it in order to effect,
the registration of the Issued Shares (including any Related Shares), and to
maintain such registration for as long as any of the Issued Shares (including
any Related Shares) is owned by any of the Partners.
(b) So long as any of the them owns any Issued Shares, each of B/G and the
Partners, as the case may be shall, in connection with any registration of ICT's
securities, upon the written request of the underwriters managing any
underwritten offering of ICT's securities, agree in writing not to effect any
sale, disposition or distribution of any of the Issued Shares (including any
Related Shares) (other than any such shares to be included in such registration)
without the prior written consent of
16
<PAGE>
the underwriters, for a period of time specified by such underwriters not to
exceed one hundred and eighty (180) days from the effective date of such
registration.
(c) In the case of each registration effected by ICT pursuant to this
Agreement under the federal securities laws, ICT agrees to indemnify and hold
harmless, to the full extent permitted by law, B/G or the Partners, as the case
may be (each, a "Holder"), and such Holder's officers, directors, agents and
employees against all losses, claims, damages, liabilities and expenses arising
out of or based upon any untrue or alleged untrue statement of a material fact
contained in the registration statement under which securities of ICT owned by
such Holder were registered under the Securities Act, any prospectus or
preliminary prospectus or in any amendment or supplement thereto or any omission
or alleged omission to state therein a material fact required to be stated
therein or necessary to make the statements therein (in the case of a
prospectus, in the light of the circumstances under which they were made) not
misleading, except insofar as the same arise out of, are based upon or are
contained in any information furnished in writing to ICT by such Holder
expressly for use therein or by the Holder's failure to deliver a copy of the
applicable registration statement or final prospectus after ICT has furnished
such Holder with a sufficient number of copies of the same.
In connection with any registration statement in which a Holder is
participating, such Holder shall furnish to ICT in writing such information and
affidavits as ICT reasonably requests for use in connection with any
registration statement or prospectus and agrees to indemnify and hold harmless,
to the full extent permitted by law, ICT, its directors, officers, agents,
employees against any losses, claims, damages, liabilities and expenses arising
out of or based upon any untrue or
17
<PAGE>
alleged untrue statement of a material fact contained in the registration
statement under which securities of ICT owned by such Holder are registered
under the Securities Act, any prospectus or preliminary prospectus or in any
amendment or supplement thereto or any omission or alleged omission to state
therein a material fact required to be stated therein or necessary to make the
statements therein (in the case of a prospectus, in the light of the
circumstances under which they were made) not misleading, to the extent, but
only to the extent, that such untrue or alleged untrue statement or omission or
alleged omission is contained in or should have been contained in any
information or affidavit so furnished in writing by such Holder to ICT
specifically for inclusion in such registration statement or prospectus;
provided that (i) such Holder will not be required to make any representations
- --------
or warranties except those which relate solely to such Holder and his intended
method of distribution and (ii) the liability of such Holder pursuant to this
provision will be limited to liability arising from misstatements or omissions
regarding such Holder and his intended method of distribution. In no event
shall the liability of any Holder, hereunder be greater in an amount than the
dollar amount of the proceeds received by such holder upon the sale of the
securities of the Registrant giving rise to such indemnification obligation.
If for any reason the indemnification provided for in the preceding
paragraphs of this Section 4.3 is unavailable to an indemnified party or is
insufficient to hold it harmless as contemplated by the preceding paragraphs,
then the indemnifying party, in lieu of indemnifying such indemnified party,
shall contribute to the amount paid or payable by such indemnified party as a
result of such loss, claim, damage, liability or expense in such proportion as
is appropriate to reflect not only the
18
<PAGE>
relative benefits received by the indemnified party and the indemnifying party,
but also the relative fault of the indemnified party and the indemnifying party
in connection with the actions which resulted in such loss, claim, damage,
liability or expense, as well as any other relevant equitable considerations.
The relative fault of such indemnifying party and indemnified party shall be
determined by reference to, among other things, whether any action in question,
including any untrue or alleged untrue statement of a material fact or omission
or alleged omission to state a material fact, has been made by, or relates to
information supplied by, such indemnifying party or indemnified party, and the
parties' relative intent, knowledge, access to information and opportunity to
correct or prevent such action. The amount paid or payable by a party as a
result of the losses, claims, damages, liabilities and expenses referred to
above shall be deemed to including any legal or other fees or expenses
reasonably incurred by such party in connection with any investigation or
proceeding.
The parties hereto agree that it would not be just and equitable if
contribution pursuant to this Section 4.3 were determined by pro rata allocation
or by any other method of allocation which does not take into account the
equitable considerations referred to in the immediately preceding paragraph. No
Person guilty of fraudulent misrepresentation (within the meaning of Section
11(f) of the Securities Act) shall be entitled to contribution from any Person
who was not guilty of such fraudulent misrepresentation. No Holder shall be
required to contribute in an amount greater than the dollar amount of proceeds
received by such Holder with respect to the sale of securities of the Registrant
held by such Holder.
(d) In connection with the S-3 Registration Statement, ICT shall (i)
furnish to a Holder such number of copies of the S-3 Registration Statement
(including
19
<PAGE>
exhibits), each amendment and supplement thereto, all documents incorporated by
reference therein, the prospectus included in the S-3 Registration Statement
(including each preliminary prospectus) and such other documents as such Holder
may reasonably request in order to facilitate the disposition of the Issued
Shares owned by such Holder; (ii) immediately notify such Holder, at any time
when a prospectus relating to the ICT Common Stock to be sold is required to be
delivered under the Securities Act, when it becomes aware of the happening of
any event as a result of which the prospectus included in such registration
statement (as then in effect) contains an untrue statement of a material fact or
omits to state a material fact required to be stated therein or necessary to
make the statements therein not misleading and, as promptly as practicable
thereafter, prepare in sufficient quantities (and make available to such Holder)
a supplement or amendment to such prospectus so that, as thereafter delivered to
the purchasers of such shares of ICT Common Stock, such prospectus will not
contain an untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements therein not
misleading; and (iii) use its best efforts to cause all such ICT Common Stock to
be listed on a national securities exchange or designated for trading on Nasdaq
to the same extent ICT's other outstanding common stock is so listed or
designated.
Section 4.4 Registration Expenses. (a) All expenses incident to the
---------------------
performance of or compliance with the registration provisions of this Agreement
by ICT, including, without limitation, all registration and filing fees,
National Association of Securities Dealers' fees, printing and engraving
expenses, messenger and delivery expenses, and fees and disbursements of counsel
for ICT and the independent
20
<PAGE>
certifies public accountants for ICT, and other persons retained by ICT (all
such expenses being herein called "Registration Expenses"), will be borne by ICT
and ICT will, in any event, pay its internal expenses of its officers and
employees performing legal or accounting duties, the expense of any annual
audit, the expense of any liability insurance and the expenses and fees for
listing the securities to be registered on each securities exchange on which
similar securities issued by ICT are then listed or designating the securities
to be registered on Nasdaq if similar securities issued by ICT are then
designated.
Section 4.5 Management Agreement. The Management Agreement between ECE
--------------------
Management Company, a partnership organized under the laws of Indiana
("Management"), and ECE shall be terminated as of the date hereof. ECE shall
pay on a prorated basis to Management any management fees earned by Management
to the date hereof, and any expenses reimbursable to Manager under the
Management Agreement to the date hereof.
Section 4.6 Covenant Not to Compete. B/G and each of the Partners agree
-----------------------
that until the expiration of a period of two (2) years commencing on the date
hereof, neither it nor any of its affiliates will engage, directly or
indirectly, as a partner, co-venturer, stockholder, or other equity investor, in
any venture, enterprise, consortium, corporation or organization which engages
in, as one of its principal businesses, building, owning, or operating a
telecommunications network in the Territory (as defined below) or providing
telecommunications services in the Territory (a "Competing Business"), without
the prior consent of ICT, provided, however, that nothing contained in this
-------- -------
Agreement shall prohibit any of them from (i) owning or investing in the stock
or securities of any such Competing Business so long as such ownership or
21
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investment shall constitute less than five percent (5%) of the outstanding
capital stock of any such Competing Business and so long as none of them is
represented on the board of, or has an active role in the business activities
of, or strategic planning for, such Competing Business; (ii) engaging in
television and radio programming and broadcasting activities in the Territory;
or (iii) directly or indirectly providing telecommunications (including
telephony) services to or for facilities located in the Territory owned or
operated by any one or more accounts served by any such Competing Business, so
long as the provision by such Competing Business of such services to or for any
such account in the Territory is incidental to the overall business relationship
between the Competing Business and such account. As used in the preceding
sentence, the provision of telecommunications services to an account by a
Competing Business in the Territory shall be deemed incidental to the overall
business relationship between the Competing Business and such account (A) if the
Competing Business shall provide or contract to provide telecommunications
services to such accounts both within and outside the Territory and (B) if (as
represented by the account to the Competing Business) the total expenses
incurred by the account (and its affiliates) to all providers for
telecommunication services allocable to locations within the Territory during
the period commencing one (1) year prior to the date on which the Competing
Business first provided such service to the account in the Territory ("Base
Year") constitute less than twenty percent (20%) of the total telecommunications
expenses incurred by the account (and its affiliates) to all providers with
respect to all facilities owned or operated by the account (and its affiliates)
within the United Kingdom during the Base Year. However, if the account shall
not provide to the Competing Business (after due inquiry by the Competing
22
<PAGE>
Business) the information described in the preceding sentence, the provision of
such service by a Competing Business in the Territory shall be deemed incidental
to the overall business relationship between the Competing Business and such
account (A) if the Competing Business shall provide or contract to provide
telecommunications services to such accounts both within and outside the
Territory and (B) if the Competing Business reasonably concludes in good faith,
based on available information relating to facilities and operations of the
account (and its affiliates) in the United Kingdom, that the estimated total
expenses incurred by the account (and its affiliates) to all providers for
telecommunication services allocable to locations within the Territory during
the Base Year constitutes less than twenty percent (20%) of the total estimated
telecommunications expense incurred by the account (and its affiliates) to all
providers with respect to all facilities owned or operated by the account (and
its affiliates) within the United Kingdom during the Base Year.
Notwithstanding anything to the contrary contained in this Agreement, B/G
and each of the Partners agree that until two (2) years from the date hereof,
neither they nor any of their affiliates will provide, directly or indirectly,
any support or services directly to any venture, enterprise, consortium,
corporation or organization which are directly related to or in furtherance of
the efforts of such venture, enterprise, consortium, corporation or organization
to obtain a license to engage in a Competing Business within the Territory other
than as permitted in any of (i) through (iii) above; provided that none of them
shall be restricted from providing support or services (i) directly to any of
the investors or participants in such ventures, enterprises, consortia,
corporation or organizations for a purpose unrelated thereto or (ii) which are
not
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directly related to or in furtherance of efforts to obtain such a license and
not otherwise prohibited by the terms of this Agreement.
The provisions of this Section 4.6 shall not be applicable from and after
the date of liquidation, dissolution or termination of ECE or in the events of a
change of control of ICT as defined in Section 4.2. "Territory" shall mean
those portions of Luton/South Bedfordshire, Central Hertfordshire, North
Bedfordshire and East Hertfordshire and Broxbourne where affiliates of ECE are
licensed to provide telecommunications services as provided in the licenses
issued by the United Kingdom's Department of Trade and Industry dated August 24,
1990, December 8, 1990, January 9, 1991 and January 11, 1991, respectively.
Section 4.7 Non-Disclosure. (a) Each of B/G and the Partners shall (i)
--------------
take reasonable steps to prevent disclosure to unaffiliated third parties of any
proprietary information relating to ICT, ECE or any of their business operations
in the United Kingdom; (ii) use at least the same degree of care to avoid
disclosure of such information as it uses with respect to its own proprietary
information and (iii) disclose such information to its Affiliates, directors,
officers, employees and agents only on a need to know basis.
(b) Each of B/G and the Partners shall have no obligation with respect to
information which (i) is already known to it at the time of disclosure; (ii) is,
at the time of that disclosure, or comes thereafter, in the public domain other
than pursuant to a breach by it; (iii) is rightfully received from a third party
without a restriction on further disclosure and without breach of the provisions
of this Section 4.7; (iv) is independently developed by it; or (v) is disclosed
by ECE or ICT, as the case may be, without restriction.
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(c) Each of B/G and the Partners agrees that (i) confidential information
shall remain the property of the disclosing party, and nothing herein shall be
deemed as granting to B/G or the Partners any express or implied license under
any patent, copyright or other statutory right of ICT or ECE; (ii) all
information transmitted in written or tangible form shall be promptly returned
to the disclosing party or destroyed upon written request at the option of the
disclosing party; (iii) without the prior consent of ICT or ECE, as the case may
be, neither B/G nor the Partners will disclose to any third party the fact that
proprietary information has been made available to it; and (iv) without the
prior consent of ICT, it shall not disclose to any third party any facts with
respect to ECE or ICT except where such disclosure is required by law or by a
governmental or administrative agency or body.
Section 4.8 Contribution Agreement. Upon the execution hereof, the
----------------------
Contribution Agreement, dated as of October 19, 1993, by and among ICT, Booth
and Columbia (including all amendments and modifications thereto) (the
"Contribution Agreement") shall be terminated.
Section 4.9 Mutual Releases. (a) Except as to the matters referenced in
---------------
the last sentence of Section 4.5 above, each of the Partners, B/G and Management
hereby forever releases and discharges each of ECE and ICT, and all of its
shareholders, employees, officers, directors, agents, affiliates, successors
and assigns, from any claims or counterclaims he or it has or might assert,
together with any and all obligations, liabilities, actions, causes of action,
claims and demands whatsoever, whether known or unknown, whether suspected or
unsuspected, whether or not founded in fact or in law and of and from any and
all manner of suits, debts, dues, sums of money, accounts, bills, covenants,
controversies, agreements, promises,
25
<PAGE>
damages, claims and demands whatsoever, in law or in equity, which any Partner,
B/G or Management has or may have had or which any Partner, B/G, Management or
their shareholders, employees, officers, directors, agents, affiliates, family
members, heirs, successors and assigns hereafter can, shall or may have for any
reason, cause or thing whatsoever related to the Contribution Agreement and the
Management Agreement, the obligations thereunder, and any other matter involving
the formation, management, or operation of ECE with respect to all periods
prior to the date of this Agreement.
(b) Each of ECE and ICT hereby forever releases and discharges each of the
Partners, B/G and Management, and all of their shareholders, partners,
employees, officers, directors, agents, affiliates, family members, heirs,
successors and assigns, from any claims or counterclaims it has or might assert,
together with any and all obligations, liabilities, actions, causes of action,
claims and demands whatsoever, whether known or unknown, whether suspected or
unsuspected, whether or not founded in fact or in law, and of and from any and
all manner of suits, debts, dues, sums of money, accounts, bills, covenants,
controversies, agreements, promises, damages, claims and demands whatsoever, in
law or in equity, which ECE or ICT has or may have had or which ECE or ICT or
its shareholders, employees, officers, directors, agents, affiliates, successors
and assigns hereafter can, shall or may have for any reason, cause or thing
whatsoever related to the Contribution Agreement and the Management Agreement,
the obligations thereunder, and any other matter involving the formation,
management, or operation of ECE with respect to all periods prior to the date of
this Agreement.
26
<PAGE>
(c) Each of the Partners, B/G, Management, ECE and ICT does not admit any
liability by reason of the mutual releases granted herein, but to the contrary
denies any such liability.
(d) Each of the parties hereto is executing this Agreement and granting the
mutual releases set forth in this Section 4.9 upon the advice and with the
consent of his or its counsel.
Section 4.10 Further Assurances. The parties hereto shall execute and
------------------
deliver such further instruments of conveyance, transfer, assignment and other
similar documents and shall take such other actions as each of them may
reasonably request of the other in order to effectuate the purposes of this
Agreement and to carry out the terms hereof.
Section 4.11 Tax Matter Covenants; Expenses. (a) ICT agrees, to the
------------------------------
extent contemplated for a tax-free reorganization under Section 368(a)(1)(B) of
the Code, (i) to retain ownership of at least 51.0% of ECE's capital stock for a
sufficient period of time, (ii) not to do anything which would result in a
failure by ICT or ECE to meet the "continuity of interest" requirements with
respect to the reorganization pursuant to the Treasury Regulations, (iii) to
cause ECE to maintain the same line of business for a sufficient period of time
and to comply with the "continuity of business enterprise" requirements with
respect to the reorganization under the Treasury Regulations, (iv) to file all
necessary or appropriate tax returns and other documents with the Internal
Revenue Service (the "IRS"), (v) to maintain all necessary financial, accounting
and other records with respect to the reorganization required under the Treasury
Regulations, (vi) to take all other necessary or appropriate actions, and (vii)
to cause ECE to take all such actions described in (i) through (vi) above;
provided, however,
27
<PAGE>
that ICT may take any action(s) or cause ECE to take any action(s) listed in (i)
through (vii) of this Section 4.11, if ICT obtains an opinion of its counsel
that such action(s) should not adversely affect the status of the exchange of
stock contemplated herein as a tax-free reorganization under Section
368(a)(1)(B) of the Code. B/G and each Partner agrees, so that the exchange of
stock contemplated herein qualifies as a tax-free reorganization under Section
368(a)(1)(B) of the Code, (i) to file all necessary or appropriate tax returns
and other documents with the IRS, (ii) to maintain all necessary accounting and
financial records, and (iii) to take all other necessary or appropriate actions.
(b) ICT, ECE, B/G and each Partner will pay their respective expenses, if
any, incurred in connection with the exchange of stock contemplated herein.
Section 4.12 Resignations. Simultaneously herewith, B/G has caused Goad
------------
and Ralph H. Booth II to deliver their resignations as a director and, as to
Goad, as an officer, of ECE.
ARTICLE V
OBLIGATIONS OF PARTIES AFTER THE DATE HEREOF
Section 5.1 Survival. The representations and warranties and covenants of
--------
the parties contained in this Agreement shall survive the execution and delivery
of this Agreement.
Section 5.2 Indemnification.
---------------
Subject to the other provisions of this Article V, from and after the date
hereof:
(a) ICT shall indemnify and hold harmless each of the Partners and B/G and
its affiliates, and each of their affiliates' and their respective affiliates'
directors, officers, employees, representatives and agents, and each of the
heirs, executors,
28
<PAGE>
successors and assigns of any of the foregoing (collectively, the
"Representatives") from and against any costs or expenses (including reasonable
attorneys' fees), judgments, fines, losses, claims, damages and amounts paid in
settlement (collectively, "Damages") to the extent they are the result of any
breach of any representation or warranty made by ICT under this Agreement.
(b) Each of the Partners and B/G shall indemnify and hold harmless ICT and
its Representatives from and against any Damages to the extent they arise out of
and are the result of any breach of any representation or warranty made by B/G
or the Partners under this Agreement. ICT and its Representatives, on the one
hand, and B/G and the Partners and their Representatives, on the other hand, as
the case may be, are referred to herein as the "Indemnified Parties."
(c) None of ICT, B/G or the Partners, as the case may be, shall be
obligated to indemnify a party pursuant to this Article V for any Damages
pursuant to Sections 5.2(a) and 5.2(b) unless ICT, B/G or a Partner, as the case
may be, shall have received written notice of such Damages in the case of a
breach of a representation and warranty, within two years from the date hereof;
provided, however, in the event that an Indemnified Party (x) receives notice of
- -------- -------
any matter which provides a reasonable basis for a claim to indemnification
hereunder and within the applicable period provided in this Section 5.2(c) and
(y) provides notice to the Indemnifying Party (as defined hereinafter) of the
receipt of such notice, then such Indemnified Party shall be entitled to
indemnification with respect to such claim until its final resolution.
Section 5.3 Claims.
------
(a) If an Indemnified Party intends to seek indemnification pursuant to
this Article V, such Indemnified Party shall promptly notify ICT, B/G or the
Partner, as the
29
<PAGE>
case may be (the "Indemnifying Party"), in writing of such claim describing such
claim in reasonable detail; provided, however, that the failure to provide such
-------- -------
notice shall not affect the obligations of the Indemnifying Party unless it is
actually prejudiced thereby, subject, however, to the time periods specified in
Section 5.1 hereof. In the event that such claim involves a claim by a third
party against the Indemnified Party, the Indemnifying Party shall have 30 days
after receipt of such notice to decide whether it will undertake, conduct and
control, through counsel of its own choosing and at its own expense, the
settlement or defense thereof, and if it so decides, the Indemnified Party shall
cooperate with it in connection therewith; provided, however, that the
-------- -------
Indemnified Party may participate in such settlement or defense through counsel
chosen by it; and provided, further, however, that the fees and expenses of such
-------- ------- -------
counsel shall be borne by the Indemnified Party. The decision by an Indemnifying
Party to undertake the defense or settlement of such claim shall be conclusive
evidence of its concurrence that any Indemnified Party involved in such claim is
entitled to indemnification hereunder with respect to such claim.
Notwithstanding anything in this Section 5.3(a) to the contrary, the
Indemnifying Party may, without the consent of the Indemnified Party, settle or
compromise any action or consent to the entry of any judgment which includes as
an unconditional term thereof the delivery by the claimant or plaintiff to the
Indemnified Party of a duly executed written release of the Indemnified Party
from all liability in respect of such action, which release shall be reasonably
satisfactory in form and substance to counsel for the Indemnified Party;
provided, however, that the Indemnifying Party shall not, without the written
- -------- -------
consent of the Indemnified Party, settle or compromise any action in any manner
that, in the reasonable judgment of the Indemnified Party or its counsel, would
materially and ad-
30
<PAGE>
versely affect the Indemnified Party, other than as a result of money damages or
other money payments. If the Indemnifying Party does not notify the Indemnified
Party within 30 days after the receipt of the Indemnified Party's notice of a
claim of indemnity hereunder that it elects to undertake the defense thereof,
the Indemnified Party shall have the right to contest, settle or compromise the
claim but shall not thereby waive any right to indemnity therefor pursuant to
this Agreement. So long as the Indemnifying Party is contesting any such claim
in good faith, the Indemnified Party shall not pay or settle any such claim.
Notwithstanding the foregoing, the Indemnified Party shall have the right to pay
or settle any such claim; provided, however, that so long as the Indemnifying
-------- -------
Party is contesting such claim in good faith, any such settlement shall include
as an unconditional term thereof the delivery by the claimant or plaintiff to
the Indemnifying Party of a duly executed written release of the Indemnifying
Party from all liability in respect of such action; and provided, further,
-------- -------
however, that in such event it shall waive any right to indemnity therefor by
- -------
the Indemnifying Party; and provided, further, however, that the Indemnified
-------- ------- -------
Party shall provide the Indemnifying Party reasonable advance notice of any
proposed settlement or payment and shall not pay or settle any claim if the
Indemnifying Party shall reasonably object.
(b) The Indemnified Party shall cooperate fully in all aspects of any
investigation, defense, pre-trial activities, trial, compromise, settlement or
discharge of any claim in respect of which indemnity is sought pursuant to
Article V, including, but not limited to, by providing the other party with
reasonable access to employees and officers (including as witnesses) and other
information.
31
<PAGE>
ARTICLE VI
MISCELLANEOUS
Section 6.1 Amendment. This Agreement may not be amended by the
---------
parties hereto except by an instrument in writing signed on behalf of each of
the parties hereto.
Section 6.2 Extension; Waiver. At any time during the term of this
-----------------
Agreement or during the time any provision survives the date hereof as provided
herein, the parties hereto, may to the extent legally allowed, (a) extend the
time for the performance of any of the obligations or other acts of the other
parties hereto, (b) waive any inaccuracies in the representations and warranties
contained herein or in any document delivered pursuant hereto and (c) waive
compliance with any of the agreements or conditions contained here. Any
agreement on the part of a party hereto to any such extension or waiver shall be
valid only if set forth in a written instrument signed on behalf of such party.
Section 6.3 Notices. All consents, notices and other communications
-------
hereunder shall be in writing and shall be deemed given if delivered personally,
telecopied (which is confirmed) or mailed by registered or certified mail
(return receipt requested) to the parties at the following addresses or
telephone numbers (or at such other address for a party as shall be specified by
like notice):
(a) if to ICT or ECE, to it c/o:
International CableTel Incorporated
110 East 59th Street
New York, New York 10022
Attention: Richard J. Lubasch
Telecopy: (212) 906-8497
32
<PAGE>
with a copy to:
Skadden, Arps, Slate, Meagher
& Flom
919 Third Avenue
New York, N.Y. 10022
Attention: Thomas H. Kennedy
Telecopy: (212) 735-3637
and
(b) if to B/G or a Partner, to it:
c/o Columbia Management, Inc.
845 West 116th Street
Carmel, IN 46032
Attention: Robert T. Goad
Telecopy: (317)575-9817
with a copy to:
Bose McKinney & Evans
2700 First Indiana Plaza
135 North Pennsylvania Street
Indianapolis, IN 46204
Attention: Kendall C. Crook
Telecopy: (317)684-5173
and to:
Honigman, Miller, Schwartz & Cohn
2290 First National Building
Detroit, MI 48226
Attention: David Foltyn
Telecopy: (313)962-0176
Section 6.4 Counterparts. This Agreement may be executed in two or
------------
more counterparts, all of which shall be considered one and the same agreement
and shall become effective when two or more counterparts have been signed by
each of the parties and delivered to the other parties, it being understood that
all parties need not sign the same counterpart.
33
<PAGE>
Section 6.5 Entire Agreement; No Third Party Beneficiaries. This
----------------------------------------------
Agreement, including all Schedules hereto, (a) constitute the entire agreement
and supersede all prior agreements and understandings, both written and oral,
among the parties with respect to the subject matter hereof and thereof, and (b)
except as expressly provided herein are not intended to confer upon any person
other than the parties hereto and thereto any rights or remedies hereunder or
thereunder.
Section 6.6 Governing Law. This Agreement shall be governed and
-------------
construed in accordance with the laws of the State of New York applicable to
contracts made, executed, delivered and performed wholly within the State of New
York, without regard to any applicable conflicts of law.
Section 6.7 Specific Performance. The parties hereto agree that if
--------------------
any of the provisions of this Agreement were not performed in accordance with
their specific terms or were otherwise breached, irreparable damage would occur,
no adequate remedy at law would exist and damages would be difficult to
determine, and that the parties shall be entitled to specific performance of the
terms hereof, in addition to any other remedy at law or equity.
Section 6.8 Assignment. Neither this Agreement nor any of the
----------
rights, interests or obligations hereunder shall be assigned by any of the
parties hereto (whether by operation of law or otherwise) without the prior
written consent of the other parties. This Agreement will be binding upon,
inure to the benefit of and be enforceable by the parties and their respective
successors and assigns.
Section 6.9 Severability. Any term or provision of this Agreement
------------
which is invalid or unenforceable in any jurisdiction shall, as to that
jurisdiction, be ineffective to the extent of such invalidity or
unenforceability without rendering invalid or
34
<PAGE>
unenforceable the remaining terms and provisions of this Agreement or affecting
the validity or enforceability of any of the terms or provisions of this
Agreement in any other jurisdiction. If any provision of this Agreement is so
broad as to be unenforceable, the provision shall be interpreted to be only so
broad as is enforceable.
35
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be signed by their respective officers thereunto duly authorized, or
individuals, as appropriate as of the date first written above.
INTERNATIONAL CABLETEL INCORPORATED
By:_______________________________
Name:
Title:
B/G CO.
By:_______________________________
Name:
Title:
BOOTH AMERICAN COMPANY
By:_______________________________
Name:
Title:
COLUMBIA MANAGEMENT, INC.
By:_______________________________
Name:
Title:
_________________________________
Robert T. Goad
36
<PAGE>
English Cable Enterprises, Inc. hereby acknowledges the provisions of
Sections 4.5 and 4.9:
ENGLISH CABLE ENTERPRISES, INC.
By:________________________________________
Name:
Title:
ECE Management Company hereby acknowledges and agrees to the
provisions of Sections 4.5 and 4.9:
ECE MANAGEMENT COMPANY
By:_______________________________________
Name:
Title:
By:_______________________________
Name:
Title:
37
<PAGE>
Schedule 2.2
Encumbrances on Capital Stock
-----------------------------
[None.]
38
<PAGE>
EX-2.6
CONFORMED COPY
DATED October 7th, 1996
SWALEC TELCO INVESTMENTS LIMITED
SOUTH WALES ELECTRICITY PLC
and
INTERNATIONAL CABLETEL INCORPORATED
________________________________
SHARE PURCHASE AGREEMENT
________________________________
<PAGE>
SHARE PURCHASE AGREEMENT
------------------------
CONTENTS
--------
<TABLE>
<CAPTION>
Page
- ------------
<S> <C> <C>
1. INTERPRETATION........................................... 1
2. SALE AND PURCHASE........................................ 7
3. CONSIDERATION............................................ 8
4. COMPLETION............................................... 8
5. THE SELLER'S WARRANTIES.................................. 9
6. CABLETEL REMEDIES........................................ 10
7. PURCHASER'S WARRANTIES AND INDEMNITY..................... 10
8. THE SELLER'S REMEDIES.................................... 10
9. INVESTMENT REPRESENTATIONS............................... 11
10. COVENANTS AND UNDERTAKINGS............................... 12
11. REGISTRATION UNDER THE SECURITIES ACT.................... 15
12. RESTRICTIONS ON BUSINESS ACTIVITIES...................... 26
13. THE JOINT VENTURE AGREEMENT AND OTHER ARRANGEMENTS....... 29
14. CONSORTIUM RELIEF........................................ 32
15. EFFECT OF COMPLETION..................................... 33
16. REMEDIES AND WAIVERS..................................... 33
17. ASSIGNMENT............................................... 33
18. FURTHER ASSURANCE........................................ 34
19. ENTIRE AGREEMENT......................................... 34
20. NOTICES.................................................. 34
21. ANNOUNCEMENTS............................................ 35
22. CONFIDENTIALITY.......................................... 36
23. RESTRICTIVE TRADE PRACTICES ACT 1976..................... 37
24. COSTS AND EXPENSES....................................... 37
25. COUNTERPARTS............................................. 37
26. INVALIDITY............................................... 37
27. CHOICE OF GOVERNING LAW.................................. 38
28. JURISDICTION............................................. 38
29. AGENT FOR SERVICE........................................ 38
SCHEDULE 1 Completion Arrangements........................ 39
SCHEDULE 2 Seller's Warranties............................ 41
SCHEDULE 3 Purchaser's Warranties......................... 44
SCHEDULE 4 Limitations on Liabilities under the Warranties 48
SCHEDULE 5 Seller's Interests............................. 53
SCHEDULE 6 Agreements between the Parties................. 54
SCHEDULE 7 Form of Deed of Release........................ 55
SCHEDULE 8 Purchaser's Commission Documents............... 60
SIGNATURES................................................... 61
</TABLE>
i
<PAGE>
THIS AGREEMENT is made October 7th, 1996
BETWEEN:-
1. SWALEC TELCO INVESTMENTS LIMITED of Newport Road, St. Mellons, Cardiff CF3
9XW (registered in England and Wales No. 2837273) (the "Seller");
------
2. SOUTH WALES ELECTRICITY PLC of Newport Road, St. Mellons, Cardiff CF3 9XW
(registered in England and Wales No. 2366985) ("SWALEC");
------
AND
3. INTERNATIONAL CABLETEL INCORPORATED of 110 East 59th Street, New York, NY
10022, USA (a Delaware corporation) (the "Purchaser").
---------
WHEREAS:-
The Seller has agreed to sell and the Purchaser has agreed to purchase all
of the Seller's Interests (as defined in this agreement) in each case on
the terms and subject to the conditions of this agreement.
NOW IT IS HEREBY AGREED as follows:
1. INTERPRETATION
--------------
(A) In this agreement and the schedules to it:-
"Books and Records" means all books of account and other documents and
-----------------
all computer disks or tapes or other machine
legible programs or other records;
"Business Day" means a day (other than a Saturday or a Sunday) on
------------
which commercial banks are open for business in
London and New York;
""B" Directors" means the directors of the Company appointed by
-------------
the "B" Shareholders pursuant to the articles of
association of the Company and holding office for
the time being and, unless otherwise stated,
includes their duly appointed alternates;
"Business Information" means all information, know-how and
--------------------
records (whether or not confidential and in
whatever form held) including (without limitation)
all formulas, designs, specifications, drawings,
data, manuals and instructions and all customer
lists, sales information, auditors comment letters
and forecasts, and all computer software and all
accounting and tax records, correspondence, orders
and inquiries relating exclusively to the Company;
<PAGE>
"Commission" means the Securities and Exchange Commission or
---------- any other federal agency at the time adminis-
tering the Securities Act;
"Commission Documents" means the reports and other documents specified in
-------------------- schedule 8 (The Purchaser's Commission Documents)
filed by the Purchaser under the Exchange Act (as
such documents have been amended since the time of
their filing but prior to Completion);
"Common Stock" means the shares of common stock, par value $0.01
------------ per share, of the Purchaser including in the case
of a reclassification, recapitalization or other
change in the common stock, or in the case of a
consolidation or merger of the Purchaser with or
into another person affecting the common stock,
such capital stock to which a holder of common
stock shall be entitled upon the occurrence of
such event;
"Companies Acts" means the Companies Act 1985, the Criminal Justice
-------------- Act 1993, the Companies Consolidation
(Consequential Provisions) Act 1985 and the
Companies Act 1989;
"Company" means CableTel Newport of CableTel House, 1
------- Lakeside Road, Farnborough, Hants GU14 6XP
(registered in England No. 2478879);
"Completion" means completion of the sale and purchase of the
---------- Interests under this agreement;
"Completion Date" means the date of this agreement;
---------------
"Confidential Business
---------------------
Information" means Business Information which is confidential
----------- or not generally known;
"Convertible Preferred
---------------------
Stock" means the shares of Non-voting Convertible
----- Preferred Stock, Series A, par value $0.01 per
share, of the Purchaser created under a
Certificate of Designation in the agreed form
filed with the Secretary of State of Delaware on
the date of this agreement and issued to the
Seller under this agreement, and after closing
shall also mean any security issued or issuable
with respect to the Convertible Preferred Stock
(except any shares of Common Stock and any secu-
2
<PAGE>
rity issued upon conversion or redemption of such
Convertible Redeemable Preferred Stock or issued
or issuable security) by way of payment-in-kind,
stock dividend or stock split or in connection
with a combination of shares, recapitalization,
merger, consolidation or other reorganization or
otherwise;
"Deed of Release" has the meaning given in clause 13(C);
---------------
"Disclosure Letter" means the letter dated October 7th, 1996 written
----------------- by the Seller and SWALEC to the Purchaser for the
purposes of clause 6(B) (Seller's Warranties) and
delivered to the Purchaser before execution of
this Agreement;
"Exchange Act" means the Securities Exchange Act of 1934, or any
------------ similar federal statute, and the rules and
regulations of the Commission thereunder, all as
the same shall be in effect at the time;
"Group" means the Company, all the subsidiaries and
----- subsidiary undertakings of the Company and each
undertaking in which the Company has a
participating interest (as defined in section 260
of the Companies Act 1985) which is not a
Subsidiary of the Company;
"Holder" means each person who appears in the securities
------ register maintained by or on behalf of the
Purchaser (or would so appear if such register
were properly maintained) with respect to the
Registrable Securities or, as the case may be,
Restricted Securities;
"Joint Venture Agreement" means the Subscription and Shareholders Agreement
----------------------- dated 15th December, 1993 between (1) SWALEC
Investments Limited ("SIL"), (2) the Seller, (4)
the Purchaser, (5) CableTel Holdings (UK) Limited
("CHUK"), (6) Ocom Sub II, Inc., (7) the Company
and CableTel South Wales Limited ("CSW"), as
amended by deeds of variation dated 15th December,
1995 and 28th March 1996;
"ICTA 1988" means the Income and Corporation Taxes Act 1988;
---------
"Interests" means the Shares and the Loan Notes;
---------
3
<PAGE>
"Loan Notes" means all the loan notes, bonds, debentures or
---------- other indebtedness of the Group to any member of
the Seller's Group specified in Part B of
schedule 5 (The Seller's Interests);
"NMM" means the Nasdaq Stock Market's National Market;
---
"Proceedings" means any proceeding, suit or action arising
----------- out of or in connection with this agreement;
"Purchaser's Group" means the Purchaser, its subsidiaries and
----------------- subsidiary undertakings, any holding company of
the Purchaser and all other subsidiaries of any
such holding company from time to time;
"Purchaser's Warranties" means the warranties set out in schedule 3 (The
---------------------- Purchaser's Warranties) given by the Purchaser and
"Purchaser's Warranty" shall be construed
accordingly;
"Registrable Securities" means (a) any shares of Common Stock issued or
---------------------- -
issuable upon conversion or redemption of the
Convertible Preferred Stock and (b) any shares of
-
Common Stock issued or issuable by way of stock
dividend or stock split or otherwise pursuant to
the terms and conditions of the Convertible
Preferred Stock (but not any shares of Convertible
Preferred Stock); provided that a share of Common
Stock, once issued, shall cease to be a
Registrable Security (i) when a registration
statement with respect to the sale of such a share
shall have become effective under the Securities
Act and such share shall have been disposed of in
accordance with such registration statement, (ii)
on the expiry of the Effectiveness Period (as
defined in clause 11(B)(ii) and extended pursuant
to clause 11(D)(vi), (iii) when it shall have been
otherwise transferred, and a new certificate for
it not bearing a legend restricting further
transfer shall have been delivered (or should
have been delivered under clause 10(D)) by the
Purchaser and subsequent disposition of it shall
not require registration or qualification of them
under the Securities Act or any similar state law
then in force, or (vi) it has ceased to be
outstanding;
4
<PAGE>
"Restricted Securities" means (a) any shares of Convertible Preferred
--------------------- -
Stock from time to time issued and outstanding,
(b) any shares of Common Stock issued upon
-
conversion or redemption of the Convertible
Preferred Stock which are required by the terms of
this agreement to be evidenced by a certificate
or certificates bearing the applicable legend set
forth in clause 10(C), (c) any shares of Common
Stock issued or issuable by way of stock dividend
or stock split or otherwise pursuant to the terms
and conditions of the Convertible Preferred
Stock, which are required by the terms of this
agreement to be evidenced by a certificate or
certificates bearing the applicable legend set
forth in clause 10(C), and (d) unless the context
otherwise requires, any shares of Common Stock
issuable upon the conversion or redemption of the
Convertible Preferred Stock, which, when so
issued, will be required by the terms hereof to be
evidenced by a certificate or certificates bearing
the applicable legend set forth in such section
specified in clause 10(C);
"RTPA 1976" means the Restrictive Trade Practices Acts 1976;
---------
"Securities Act" means the Securities Act of 1933, or any similar
-------------- federal statute, and the rules and regulations of
the Commission thereunder, all as the same shall
be in effect at the time;
"Seller's Group" means the Seller, its subsidiaries and subsidiary
-------------- undertakings from time to time, any holding
company of the Seller from time to time, all other
subsidiaries or subsidiary undertakings of any
such holding company from time to time (except
members of the Group);
"Seller's Solicitors" means Edwards Geldard of Dumfries House, Dumfries
------------------- Place, Cardiff CFI 4YF;
"Seller's Warranties" means the representations and warranties set out
------------------- in clause 9 (Investment Representations) and the
warranties set out in schedule 2 (The Seller's
Warranties) given by the Seller and SWALEC and
"Seller's Warranty" shall be construed
accordingly;
"Service Document" has the meaning given in clause 29(C) (Agent for
---------------- service);
5
<PAGE>
"Shares" means all the issued "B" ordinary shares in the
------ capital of the Company;
"Tax" or "Taxation" means and includes all forms of taxation and
--- -------- statutory, governmental, supra-governmental,
state, principal, local governmental or municipal
impositions, duties, contributions and levies, in
each whether of the United Kingdom or elsewhere,
whenever imposed and all penalties, charges, costs
and interest relating thereto and without
limitation all employment taxes and any deductions
or withholdings of any sort;
"Transfer" means any sale, assignment, pledge or other
-------- disposition of any security, or of any interest
therein, which could constitute a "sale" as that
term is defined in section 2(3) of the Securities
Act;
"Underwritten Offering" means an underwritten offering in which
--------------------- Registrable Securities are sold by the Holders of
Registrable Securities;
"U.S. Counsel" means legal counsel which is, in the reasonable
------------ opinion of the Purchaser, sufficiently experi-
enced in U.S. federal and state securities laws to
deliver the legal opinions called for by the
provisions of this agreement (including, in the
case of the Purchaser, counsel to the Purchaser
whether or not an employee of the Purchaser);
"Working Hours" means 9.30 a.m. to 5.30 p.m. (local time) on a
------------- Business Day.
(B) In this agreement, unless otherwise specified:-
(i) references to clauses, sub-clauses, paragraphs, sub-paragraphs and
schedules are to clauses, sub-clauses, paragraphs, sub-paragraphs of,
and schedules to, this agreement;
(ii) a reference to any statute or statutory provision shall be construed
as a reference to the same as it may have been, or may from time to
time be, amended, modified or re-enacted;
(iii) references to a "company" shall be construed so as to include any
company, corporation or other body corporate, wherever and however
incorporated or established;
6
<PAGE>
(iv) references to a "person" shall be construed so as to include any
individual, firm, company, government, state or agency of a state or
any joint venture, association or partnership (whether or not having
separate legal personality);
(v) references to "indemnify" and "indemnifying" any person against any
circumstance include indemnifying and keeping him harmless from all
actions, claims and proceedings from time to time made against that
person and all loss or damage and all payments, costs or expenses made
or incurred by that person as a consequence of or which would not have
arisen but for that circumstance,
(vi) the expressions "body corporate", "debentures", "holding company",
"paid up", "subsidiary", "subsidiary undertaking" and "wholly-owned
subsidiary" shall have the meaning given in the Companies Act 1985;
(vii) a person shall be deemed to be connected with another if that person
is connected with another within the meaning of section 839 ICTA 1988;
(viii) references to writing shall include any modes of reproducing words
in a legible and non-transitory form;
(ix) headings to clauses and schedules are for convenience only and do not
affect the interpretation of this agreement;
(x) the schedules form part of this agreement and shall have the same
force and effect as if expressly set out in the body of this
agreement, and any reference to this agreement shall include the
schedules; and
(xi) "in the agreed form" means in relation to any document, in the form
agreed by the parties prior to execution hereof and for the purpose of
identification signed by or on behalf of the Seller and the Purchaser.
2. SALE AND PURCHASE
-----------------
(A) The Seller shall sell with full title guarantee, and the Purchaser shall
purchase, the Interests specified in schedule 5 (The Seller's Interests).
The Seller shall sell the Interests free from all claims, liens, charges,
encumbrances and equities arising by, through or under Seller or members of
the Seller's Group, and shall be sold with all rights attached or accruing
to them at Completion.
(B) The Purchaser shall be entitled from and after Completion to exercise all
rights attached or accruing to the Interests including, without limitation,
the right to receive all dividends, distributions, payments, repayments,
redemptions or any return of capital declared, paid or made by the Company.
7
<PAGE>
3. CONSIDERATION
-------------
(A) In consideration for the sale of the Interests by the Seller to the
Purchaser, subject to the terms and provisions set forth in this agreement,
the Purchaser shall issue and deliver to the Seller in accordance with
clause 4 (Completion), and the Seller shall acquire, good and valid title
to 780 shares of Convertible Preferred Stock in accordance with clause 4
(Completion).
(B) The parties have agreed to attribute the value of such shares of
Convertible Preferred Stock on the basis that 540 shares of Convertible
Preferred Stock shall be attributed to the Loan Notes and 240 shares of
Convertible Preferred Stock to the Shares.
4. COMPLETION
----------
(A) Completion shall take place immediately after signature of this Agreement.
(B) At Completion:-
(i) the Seller or SWALEC, as the case may be, shall do or procure the
doing of those things listed in paragraphs (i) to (iv) of schedule 1
(Completion Arrangements) which are required of the Seller or SWALEC;
and
(ii) the Purchaser shall do or procure the doing of the things listed in
paragraphs (v) and (vi) of schedule 1 (Completion Arrangements) and
deliver to the Seller's Solicitors a duly executed stock certificate
representing the shares of Convertible Preferred Stock stated in
clause 3 (Consideration).
(C) The Purchaser shall not be obliged to complete this agreement unless each
of the Seller and SWALEC complies fully with the requirements of sub-clause
(B)(i) so far as they relate to the Seller, SWALEC or any member of the
Seller's Group.
(D) The Purchaser shall not be obliged to complete the sale and purchase of any
of the Interests unless the sale and purchase of all the Interests is
completed simultaneously.
(E) If the obligations of the Seller and SWALEC under sub-clause (B)(i) and
schedule 1 (Completion Arrangements) are not complied with on the
Completion Date, the Purchaser may:-
(i) defer Completion (so that the provisions of this clause 4 shall apply
to Completion as so deferred); or
(ii) proceed to Completion as far as practicable (without limiting its
rights under this agreement); or
(iii) treat this agreement as terminated for breach of a condition.
8
<PAGE>
(F) If the obligations of the Purchaser under sub clause (B) (ii) and schedule
1 (Completion Arrangements) are not complied with on the Completion Date,
the Seller and SWALEC may;
(i) defer Completion (so that the provisions of this clause 4 shall apply
to Completion as so deferred); or
(ii) proceed to Completion as far as practicable (without limiting its
rights under this agreement); or
(iii) treat this agreement as terminated for breach of a condition.
(G) Each of the Seller and SWALEC undertake to indemnify the member of the
Group concerned against any and all claims which may be made against it by
any of the resigning "B" Directors because of his or their resignation from
office or of his or their employment being terminated and against all
costs, charges and expenses incurred by any member of the Group which are
incidental to any such claim.
(H) Delivery of the stock certificate representing the shares of Convertible
Preferred Stock stated in clause 3 (Consideration) in accordance with sub-
clause (B)(ii) shall discharge the obligations of the Purchaser under
clause 2 (Sale and Purchase).
(I) If, following Completion, the Purchaser or the Seller becomes aware that
there has been any material breach of the Seller's Warranties or the
Purchaser's Warranties (as the case may be) or any term of this agreement,
neither the Purchaser nor the Seller shall be entitled to treat this
agreement as terminated but shall be entitled to claim damages or exercise
any other right, power or remedy under this agreement.
5. THE SELLER'S WARRANTIES
-----------------------
(A) Each of the Seller and SWALEC warrant to the Purchaser in the terms of
schedule 2 (the Seller's Warranties) at the date of this agreement.
(B) Each of the Seller and SWALEC accept that the Purchaser is entering into
this agreement in reliance upon each of the Seller's Warranties.
(C) Each of the Seller and SWALEC undertake (if any claim is made against it in
connection with the sale of the Interests to the Purchaser) not to make any
claim against any member of the Group or any director, employee or adviser
of any member of the Group on whom the Seller may have relied before
agreeing to any terms of this agreement.
(D) Each of the Seller's Warranties shall be construed as a separate and
independent warranty and (except where expressly provided to the contrary)
shall not be limited or restricted by reference to or inference from the
terms of any other the Seller's Warranty or any other term of this
agreement.
9
<PAGE>
6. CABLETEL REMEDIES
-----------------
(A) Completion shall not in any way constitute a waiver of any of the
Purchaser's rights.
(B) In the absence of any fraud or dishonesty on the part of the Seller, SWALEC
or any of their agents or advisers, the Purchaser shall not be entitled to
claim that any fact causes any of the Seller's Warranties to be breached if
fairly disclosed or specifically referred to in the Disclosure Letter or
in any document referred to in the Disclosure Letter and delivered with
it.
(C) No liability shall attach to the Seller or SWALEC in respect of claims
under the Seller's Warranties if and to the extent that the limitations
referred to in sub-clause (A) and set out in schedule 4 (Limitations on
liability under the Warranties) apply, in the absence of any fraud or
dishonesty on the part of the Seller or SWALEC, or any of their agents or
advisers.
(D) Each of the Seller and SWALEC acknowledge that the restrictions contained
in clause 10 (Covenants and Undertakings), clause 21 (Announcements) and
clause 22 (Confidentiality) shall continue to apply after the termination
of the sale and purchase of the Interests under this agreement without
limit in time, except in the case of clause 10 (Covenants and Undertakings)
as expressly provided in that clause.
(E) The Purchaser is entitled to terminate the agreement in the circumstances
referred to in clause 4(E)(iii) (Completion).
7. PURCHASER'S WARRANTIES AND INDEMNITY
------------------------------------
(A) The Purchaser warrants to the Seller and SWALEC in the terms of schedule 3
(the Purchaser's Warranties) at the date of this agreement.
(B) The Purchaser accepts that the each of the Seller and SWALEC is entering
into this agreement in reliance upon each of the Purchaser's Warranties.
(C) Each of the Purchaser's Warranties shall be construed as a separate and
independent warranty and (except where expressly provided to the contrary)
shall not be limited or restricted by reference to or inference from the
terms of any other Purchaser's Warranty or any other term of this
agreement.
8. THE SELLER'S REMEDIES
---------------------
(A) Completion shall not in any way constitute a waiver of any of the rights of
the Seller or SWALEC.
(B) In the absence of any fraud or dishonesty on the part of the Purchaser or
any of its agents or advisers, neither the Seller nor SWALEC shall be
entitled to claim that any fact causes any of the Purchaser's Warranties to
be breached if it has been disclosed in the Commission Documents.
10
<PAGE>
(C) No liability shall attach to the Purchaser in respect of claims under the
Purchaser's Warranties if and to the extent that the limitations referred
to in sub-clause (A) and set out in schedule 4 (Limitations on liability
under the Warranties) apply, in the absence of fraud or dishonesty on the
part of Purchaser, or any of its agents or advisers.
(D) The Purchaser acknowledges that the provisions of clause 11 (Registration
under the Securities Act) and the restrictions contained in clause 21
(Announcements) and clause 22 (Confidentiality) shall continue to apply
after the termination of the sale and purchase of the Interests under this
agreement without limit in time, except, in the case of clause 10
(Covenants and Undertakings) as expressly provided in that clause.
9. INVESTMENT REPRESENTATIONS
--------------------------
(A) Each of the Seller and SWALEC acknowledge and understand that the
Convertible Preferred Stock and the Common Stock or other securities
issuable upon conversion or redemption thereof (collectively, the
"Securities") have not been registered under the Securities Act and without
-----------
prejudice to any other restrictions on transfer imposed hereby, the
Securities may not be offered or sold within the United States or to, or
for the account or benefit of, U.S. persons except in accordance with
Regulation S or pursuant to an exemption from the registration requirements
of the Securities Act.
(B) None of the Seller, SWALEC or any of their respective affiliates, nor any
persons acting on its or their behalf, have engaged or will engage in any
directed selling efforts with respect to the Securities on behalf of the
Purchaser.
(C) The Seller, SWALEC and each of their respective affiliates will not offer
or sell on behalf of the Purchaser the Securities in the United States by
means of any form of general solicitation or general advertising within the
meaning of Rule 502(c) under the Securities Act, including, but not limited
to:
(i) any advertisement, article, notice or other communication published in
any newspaper, magazine or similar media or broadcast over television or
radio; or
(ii) any seminar or meeting whose attendees have been invited by any
general solicitation or general advertising.
(D) (i) Neither the Seller nor SWALEC has offered or sold, and neither the
Seller nor SWALEC will offer or sell in the United Kingdom by means of any
document, any Securities except to persons whose ordinary activities
involve them in acquiring, holding, managing or disposing of investments
(whether as a principal or agent) for the purposes of their business or
otherwise in circumstances which have not resulted and will not result in
an offer to the public in the United Kingdom within the meaning of the
Public Offers of Securities Regulations 1995,
(ii) The Seller has complied and will comply with all applicable provisions
of the Public Offers of Securities Regulations 1995 and the Financial
Services Act 1986
11
<PAGE>
with respect to anything done by it in relation to the Securities, in, from
or otherwise involving the United Kingdom and
(iii) The Seller and SWALEC have only issued or passed on and will only
issue or pass on, to any person in the United Kingdom any document received
by it in connection with the issue of the Securities to a person who is of
a kind described in Article 8 of the Financial Services Act 1986
(Investment Advertisements) (Exemptions) (No. 2) Order 1995 or is a person
to whom the document may otherwise lawfully be issued or passed on.
(E) The Seller and SWALEC have received and reviewed the Commission Documents.
(F) The Securities will be acquired pursuant to this agreement solely for the
account of the Seller, for investment, and not with a view to the
distribution of the Securities (other than a Transfer described in the
proviso to clause 10(I)(i)).
10. COVENANTS AND UNDERTAKINGS
--------------------------
(A) At any such time as any shares of Common Stock are traded on the NMM or
listed on any national securities exchange, the Purchaser will, at its
expense, obtain promptly and maintain the approval for trading on the NMM,
or as the case may be, listing on each such exchange of the shares of
Common Stock issuable upon conversion or redemption of then outstanding
Convertible Preferred Stock and maintain such approval and/or the listing
of such shares of Common Stock after their issuance.
(B) Each share of Convertible Preferred Stock (including each share of
Convertible Preferred Stock issued upon the Transfer of any share of
Convertible Preferred Stock or otherwise issued pursuant to the terms of
the Convertible Preferred Stock) shall be stamped or otherwise imprinted
with a legend in substantially the following form:
"This share of Convertible Preferred Stock and any shares issued or
acquired upon the conversion or redemption of this share of
Convertible Preferred Stock have not been registered under the
Securities Act of 1933, as amended, or any state securities laws and,
unless so registered, may not be offered, sold, transferred or
otherwise disposed of except pursuant to an exemption from, or in a
transaction not subject to, the registration requirements of such Act
and applicable state securities laws. In addition, this share of
Convertible Preferred Stock and such shares may be transferred, sold
or otherwise be disposed of only in compliance with the conditions
specified in an agreement dated October 7, 1996 between Swalec Telco
Investments Limited, South Wales Electricity plc and International
CableTel Incorporated including, without limitation, the condition
that this share of Convertible Preferred Stock may not be transferred,
sold or otherwise be disposed of without the prior written consent of
the International CableTel Incorporated. A complete and correct copy
of the form of such agreement is available for inspection at the
principal office of International CableTel Incorporated."
12
<PAGE>
(C) Except as otherwise permitted by this clause 10, each certificate for any
shares of Common Stock issued upon conversion or redemption of the
Convertible Preferred Stock or issued otherwise pursuant to the terms of
the Convertible Preferred Stock, and each certificate issued upon the
Transfer of any such Common Stock, shall be stamped or otherwise imprinted
with a legend in substantially the following form:
"The shares represented by this certificate have not been registered
under the Securities Act of 1933 or any state securities laws and,
unless so registered, may not be offered, sold, transferred or
otherwise disposed of except pursuant to an exemption from, or in a
transaction not subject to, the registration requirements of such Act
and applicable state securities laws. In addition, such shares may be
transferred, sold or otherwise be disposed of only in compliance with
the conditions specified in a Share Purchase Agreement dated October
7, 1996, between Swalec Telco Investments Limited, South Wales
Electricity plc and International CableTel Incorporated. A complete
and correct copy of the form of such agreement is available for
inspection at the principal office of International CableTel
Incorporated."
(D) Without prejudice to sub-clause (I), before any Transfer of any Restricted
Securities which are not registered under an effective registration
statement under the Securities Act, other than a Transfer of such
securities by the Seller to SWALEC, the Holder thereof will give written
notice to the Purchaser of that holder's intention to effect such Transfer.
(E) Subject to sub-clause (I), a Holder who has complied with sub-clause (D)
shall be permitted to Transfer any Restricted Securities to a person (each,
a "Transferee") if, prior to such Transfer: -
(i) the Transferee represents to the Purchaser in writing that it is
- acquiring such Restricted Securities for investment and not with a
view to the distribution thereof (subject, however, to any requirement
of law that the disposition thereof shall at all times be within the
control of such transferee),
(ii) the Transferee agrees in writing with the Purchaser to be bound by,
-- and to comply in all respects with, the provisions of this clause 10
and clause 11 (Registration under the Securities Act); and
(iii) the Purchaser receives an opinion reasonably satisfactory to it of
--- Oppenheimer Wolff & Donnelly or other U.S. Counsel reasonably
satisfactory to the Purchaser, stating that such Transfer may be
effected without registration under the Securities Act (which
opinion shall be delivered at the expense of the Holder of the
Restricted Securities).
(F) The restrictions imposed by sub-clauses (B) to (E) shall cease and
terminate as to any particular Restricted Securities when:
(i) a registration statement with respect to such Restricted Securities
shall have become effective under the Securities Act, or
13
<PAGE>
(ii) the Purchaser receives an opinion (reasonably satisfactory to the
Purchaser) of Oppenheimer Wolff & Donnelly or other U.S. counsel
reasonably satisfactory the Purchaser, stating that such restrictions
are no longer required in order to ensure compliance with the
Securities Act (which opinion shall be delivered at the expense of the
Holder of the Restricted Securities).
(G) Whenever the restrictions imposed by sub-clauses (B) to (E) shall cease and
terminate as to any Restricted Securities, the Holder thereof shall be
entitled to receive from the Purchaser, without expense (other than
applicable transfer taxes, if any), new certificates representing such
securities not bearing the applicable legends required by sub-clauses (B)
and (C) upon delivery of the legended certificates representing such
securities to the Purchaser.
(H) The Purchaser will at all times reserve and keep available, for issuance
and delivery upon conversion of the shares of Convertible Preferred Stock,
the number of shares of Common Stock from time to time issuable upon
conversion of the shares of Convertible Preferred Stock at the time
outstanding. All shares of Common Stock issuable upon conversion of any
shares of Convertible Preferred Stock shall be duly authorized and, when
issued upon such conversion, shall be validly issued, fully paid and
nonassessable.
(I) Subject to sub-clause (J) but notwithstanding anything to the contrary in
any other provision of this agreement, the Seller, SWALEC (if, subsequent
to Completion, it becomes the Holder of Restricted Securities or
Registrable Securities) and each other Holder of Restricted Securities or
Registrable Securities who acquires such securities under sub-clause 10(E)
by its acquisition of such securities, covenants and undertakes not to
Transfer: -
(i) any shares of Convertible Preferred Stock or any interest therein to
any person at any time without the prior written consent of the
Purchaser (which consent may be withheld or delayed in the Purchaser's
absolute discretion);
PROVIDED THAT, the Seller may Transfer all the shares of Convertible
Preferred Stock to SWALEC and SWALEC may Transfer all or some of the
shares of Convertible Preferred Stock to any other member of the
Seller's Group if each such other member complies with sub-clause
10(E) without the need for such prior written consent;
(ii) any shares of Common Stock or any interest therein, at any time on or
before 31st December, 1996; and
(iii) more than an aggregate cumulative amount of:
(a) 300,000 shares of Common Stock or any interest therein between
1st January and 31st May, 1997;
(b) 600,000 shares of Common Stock or any interest therein between
1st June, 1997 and 30th November, 1997;
14
<PAGE>
(c) 1,200,000 shares of Common Stock or any interest therein between
1st December, 1997 and 28th February, 1998
PROVIDED THAT, in each case, such amounts shall be subject to such
appropriate adjustments to reflect any stock split, sub-division,
reclassification of, or other change in, the Common Stock or other
security issued or issuable upon conversion or redemption of any
Convertible Preferred Stock.
(J) The restrictions imposed by paragraphs (ii) and (iii) of sub-clause (I)
-------------------------------------------
will not apply: -
(i) to any shares of Common Stock issued upon redemption of all or some
of the shares of Convertible Preferred Stock pursuant to an exercise
by the Purchaser of its right to redeem the shares of Convertible
Preferred Stock set out in the Certificate of Designations for the
Convertible Preferred Stock dated the date of this agreement;
(ii) to any shares of Common Stock issuable upon conversion of the shares
of Convertible Preferred Stock in connection with the occurrence of a
Change of Control (as defined in the Certificate of Designations for
the Convertible Preferred Stock dated the date of this agreement) nor
at any time after such issuance; or
(iii) on or at any time after 1st March, 1998.
(K) The Purchaser will not issue any shares of Non-voting Convertible Preferred
Stock, Series A, par value $0.01 per share except such shares issued
hereunder or issued pursuant to the terms of or in exchange or substitution
for any such shares so issued under this agreement without the prior
written consent of the Holders of a majority by number of such shares so
issued.
11. REGISTRATION UNDER THE SECURITIES ACT
-------------------------------------
(A) The Purchaser shall use its best efforts, subject to and in accordance with
sub-clause (B), to cause to become effective on or before 31st December,
1996, a registration statement on Form S-3 (or if that form is not
available to the Purchaser for any reason, such other appropriate
registration form of the Commission that is a short form registration
statement similar to Form S-3 or its successor if there shall be such a
form and, if not, then such form as shall be selected by the Purchaser and
as shall be reasonably acceptable to the Holders of a majority (by number
of shares) of the Registrable Securities) in compliance with the Securities
Act with respect to, and shall take all other necessary and appropriate
actions which can be taken by it in order to effect, the registration of
the Registrable Securities for resale by the Holders of Registrable
Securities, all to the extent requisite to permit disposition of the
Registrable Securities, in accordance with the methods of disposition
elected by such Holders and set forth in such registration statement.
15
<PAGE>
(B) In connection with the required best efforts of Purchaser to effect the
registration of any Registrable Securities under the Securities Act as
provided in this clause 11, the Purchaser will:
(i) use its best efforts to cause such registration statement to become
effective under the Securities Act on or before 31st December, 1996,
provided, however, that the Purchaser may delay such filing or
-------- -------
effectiveness under the circumstances and during the periods
described in sub-clauses (D) and (E);
(ii) subject to subclauses (D) and (E), prepare and file with the
Commission such amendments and supplements to such registration
statement and the prospectus used in connection therewith as may be
necessary to keep such registration statement continuously effective
after the date such registration statement has become effective in
accordance with paragraph (i) of this sub-clause (B) for a period
(the "Effectiveness Period") expiring on the earliest to occur of (i)
the fourth anniversary of the date of this agreement (subject to sub-
clause (D)(vi)) or, if such date is later than such anniversary (as
extended), the date when the Registrable Securities may be freely
sold pursuant to Rule 144 (or any successor or similar provision),
(ii) the date as of which no shares of Common Stock constitute
Registrable Securities, (iii) the date as of which all of the
Registrable Securities shall have been sold, distributed or otherwise
transferred and new certificates for all of such Registrable
Securities not bearing a legend restricting further transfer shall
have been delivered by the Purchaser and subsequent disposition
thereof shall not require registration or qualification of them under
the Securities Act or any similar state law then in force and comply
with the provisions of the Securities Act with respect to the sale or
other disposition of all Registrable Securities covered by such
registration statement during the Effectiveness Period in accordance
with the intended methods of disposition by the Seller or Holders of
Registrable Securities set forth in such registration statement;
(iii) furnish, from time to time during the Effectiveness Period, to each
Holder of Registrable Securities named in such registration statement
who so requests in writing and who has provided to the Purchaser an
address for such purpose, at least one conformed copy of such
registration statement and of each such amendment and supplement
thereto (in each case including, if such seller so requests, all
exhibits), such number of copies of the prospectus contained in such
registration statement (including any preliminary prospectus and any
summary prospectus) and any other prospectus filed under Rule 424
under the Securities Act, in conformity with the requirements of the
Securities Act, as such Holder may reasonably request for the
purposes contemplated by the Securities Act;
(iv) use its best efforts to register or qualify, prior to effectiveness
of the registration statement if possible using such efforts (and if
not then as soon as practicable thereafter as is possible using such
efforts) all Registrable Securities covered by such registration
statement for offer and sale under such other securities or blue sky
laws of such jurisdictions of the United States as any Holder of
Registrable Securities named in such registration statement shall
reasonably request by written notice to the Purchaser, to keep such
16
<PAGE>
registration or qualification in effect for so long as such
registration statement remains in effect, and take any other action
which may be reasonably necessary or advisable to enable such Holder
to consummate the disposition in such jurisdictions of the securities
owned by such Holder, except that the Purchaser shall not for any
such purpose be required to qualify generally to do business as a
foreign corporation in any jurisdiction wherein it would not but for
the requirements of this paragraph (iv) be obligated to be so
qualified or to take any action which would subject itself to
taxation or to consent to general service of process in any such
jurisdiction;
(v) use its best efforts to cause all Registrable Securities covered by
such registration statement to be registered with or approved by such
other governmental agencies or authorities as the Seller shall have
specified in writing to the Purchaser as necessary to enable the
Seller to consummate the disposition of such Registrable Securities;
(vi) furnish to each Holder of Registrable Securities who is named in such
registration statement and has provided the Purchaser with such
Holder's address, a signed counterpart, addressed to such Holder
(and, in the case of an Underwritten Offering, underwriters, if any)
of:
(1) an opinion of U.S. Counsel for the Purchaser, dated the
effective date of such registration statement (and, if such
registration includes an Underwritten Offering, dated the date
of the closing under the underwriting agreement), reasonably
satisfactory in form and substance to such Holder, and
(2) "comfort" letter, dated the effective date of such registration
statement (and, if such registration includes an Underwritten
Offering, dated the date of the closing under the underwriting
agreement)], signed by the independent public accountants who
have certified the Purchaser's financial statements included in
such registration statement,
covering substantially the same matters with respect to such
registration statement (and the prospectus included therein) and, in
the case of the accountants' letter, with respect to events
subsequent to the date of such financial statements, as are
customarily covered in opinions of issuer's counsel and in
accountants' letters delivered to the underwriters in underwritten
public offerings of securities and, in the case of the accountants'
letter, such other financial matters;
(vii) notify each Holder, during the Effectiveness Period, upon discovery
that, or upon the happening of any event known to the Purchaser as a
result of which, the prospectus included in such registration
statement, as then in effect, includes an untrue statement of a
material fact or omits to state any material fact required to be
stated therein or necessary to make the statements therein not
misleading in light of the circumstances under which they were made,
and if any event shall occur as a result of which it is necessary, in
the opinion of counsel to the Purchaser, to amend or supplement the
17
<PAGE>
prospectus in order to make the prospectus not misleading in the
light of the circumstances existing at the time it is delivered to a
purchaser, the Purchaser shall amend or supplement the prospectus
(i) in the case of a Transaction Delay Period (as defined in sub-
clause (D)(ii)) or an Information Delay Period (as defined in sub-
clause (D)(i)), not later than the expiration of such Delay Period
and (ii) in any other case, as soon as practicable using the
Purchaser's best efforts, so that, in either such case, as so amended
or supplemented, the prospectus will not include an untrue statement
of a material fact or omit to state a material fact necessary in
order to make the statements therein, in the light of the
circumstances existing at the time it is delivered to a purchaser,
not misleading, and the Purchaser will furnish to each Holder of
Registrable Securities such number of copies of such amendment or
supplement as such Holder may reasonably request in writing;
(viii) otherwise use its best efforts to comply with all applicable rules
and regulations of the Commission, and make generally available to
its security holders, as soon as practicable, but not later than 90
days of the close of the period covered thereby, in a regular filing
on Form 10-K or Form 10-Q, an earnings statement satisfying Rule 158
under the Securities Act (which need not be audited) for the twelve
month period beginning not later than the first day of the
Purchaser's fiscal quarter next following the "effective date" (as
defined in such Rule 158) of such registration statement;
(ix) provide and cause to be maintained a transfer agent and registrar for
all Registrable Securities from and after a date not later than the
effective date of such registration statement; and
(x) enter into such reasonably appropriate agreements and take such other
reasonably appropriate actions as the Holders of a majority (by
number of shares) of the Registrable Securities included or to be
included in such shelf registration statement shall reasonably
request in writing in order to expedite or facilitate the
registration of such Registrable Securities.
(C) Each Holder of Registrable Securities, by its acquisition of Registrable
Securities shall be deemed to have undertaken to furnish the Purchaser in
writing, within 15 Business Days after receipt therefor, such information
regarding such Holder and such Holder's intended method of disposition of
such securities as the Purchaser may from time to time reasonably request
in writing.
(D) (i) If, at any time prior to the expiration of the Effectiveness Period,
the Board of Directors of the Purchaser has determined in good faith
that the filing of the registration statement or the compliance by the
Purchaser with its disclosure obligations in connection with the
registration statement would require the disclosure of material
information which the Purchaser has a bona fide business purpose for
---- ----
preserving as confidential the Purchaser may, upon giving the Holders
written notice (a "Determination Notice"), delay the filing of the
registration statement (if not then filed) and shall not be required
to maintain the effectiveness thereof (without the right, however, to
de-register any such shares) or amend or supplement the Registration
Statement for a period (an "Information Delay Period") commencing on
the date of
18
<PAGE>
delivery of the Determination Notice and expiring upon the earlier to
occur of (x) the date on which such material information is disclosed
to the public or ceases to be material or (y) 60 days after the
Purchaser makes such good faith determination. Each Determination
Notice shall be accompanied by a certificate of an officer of the
Purchaser to the effect that the Board of Directors has made the good
faith determination required by this sub-paragraph (i) and specifying
the date upon which such determination was made.
(ii) If one or more Holders holding at least a majority (by number of
shares at the time issued and outstanding) of Registrable Securities
determine at any time prior to the expiration of the Effectiveness
Period to sell Registrable Securities in an Underwritten Offering
pursuant to the registration statement, they shall so notify the
Purchaser in writing at least 30 days prior to the commencement of
such Underwritten Offering (a "Holder Notice"). If, within 30 days
after delivery of a Holder Notice, the Purchaser shall notify such
Holder(s) in writing that it intends to engage in an offering of its
equity securities or any securities convertible into, or exchangeable
or exercisable for, its equity securities (whether or not involving
registration of such securities under the Securities Act), and such
notice is accompanied by a letter from an investment banking firm
which is nationally recognized in the United States and which is to
act as the lead underwriter or initial purchaser in such offering to
the effect that, in such firm's good faith belief, sales of all or
some of Registrable Securities in the proposed Underwritten Offering
by such Holders pursuant to the registration statement at such time
are likely to materially adversely affect the successful marketing of
such offering (the "Purchaser Notice"), then, the Holders shall not be
entitled to sell and shall refrain (but only to the extent specified
by such investment banking firm) from selling their Registrable
Securities in such Underwritten Offering for a period (a "Transaction
Delay Period") commencing on the date that the Purchaser Notice was
given to the Holders and expiring upon the earliest to occur of (i)
the abandonment of such financing, and (ii) 120 days after the date
the Purchaser Notice was given.
(iii) If the Purchaser does not so deliver a Purchaser Notice within the
30 day period referred to in sub-paragraph (ii), then Holders holding
at least a majority (by number of shares at the time issued and
outstanding) of Registrable Securities may proceed to sell
Registrable Securities in an Underwritten Offering pursuant to the
registration statement provided that the distribution of Registrable
Securities in such an Underwritten Offering is completed prior to the
expiration of the Effectiveness Period. The Purchaser shall, within
thirty days after delivery of a Holder Notice, confirm in writing to
the Holders whether or not it intends to engage in an offering of its
equity securities or any securities convertible into, exchangeable or
exerciseable for its equity securities which would be conducted
concurrently with such Underwritten Offering. If the Purchaser
confirms that it intends to engage in such an offering or if the
Purchaser confirms that it does not intend to engage in such an
offering but after the expiry of those thirty days decides to engage
in such an offering, then it shall give the managing underwriter of
the Underwritten Offering notice of the intended timetable for such
offering of the Purchaser.
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<PAGE>
(iv) If, within 30 days after the delivery of a Holder Notice, the Purchaser
shall, instead of delivering the Purchaser Notice, notify such
Holder(s) in writing that it intends to register its Common Stock under
the Securities Act (other than by a registration in connection with an
acquisition, stock option plan, stock purchase plan savings or similar
plan) and such Common Stock are to be distributed by or through one or
more underwriters (a "Purchaser Offering"), the Purchaser will, subject
to the provisions of sub-clause D(v), use its best efforts to arrange
for such underwriters to include all the Registrable Securities to be
offered and sold by such Holder in the proposed Underwritten Offering
among the Common Stock to be distributed by such underwriters in the
Purchaser Offering to the extent of the number which the Purchaser is
so advised by the managing underwriter of such Purchaser Offering (in
the letter referred to in sub-clause D(v)) can be sold in such
Purchaser Offering,
PROVIDED THAT if, at any time after giving written notice of its
intention to register its Common Stock and prior to the effective date
of the registration statement filed in connection with such Purchaser
Offering, the Purchaser shall determine for any reason either not to
register or to delay registration of the securities included in such
Purchaser Registration, the Purchaser may, at its election, give
written notice of such determination to each Holder of Registrable
Securities and, thereupon, without prejudice, however, to the rights
of any Holder of Registrable Securities under sub-clause 11(B), (x) in
the case of a determination not to register, shall be relieved of its
obligation to register any Registrable Securities in connection with
such registration or to include any Registrable Securities therein and
(y) in the case of a determination to delay registering, shall be
permitted to delay registering any Registrable Securities as part of
the Purchaser Offering, for the same period as the delay in
registering such Common Stock.
(v) If the managing underwriter of such Purchaser Offering shall advise
the Purchaser by letter (with a copy to each Holder of the
Registrable Securities requesting such registration and the holders
of any other securities which shall have exercised, in respect of such
Purchaser Offering, registration rights comparable to the rights under
this clause 11) of its good faith belief that inclusion in such
underwritten distribution of all or a specified number of such
Registrable Securities or of such other securities so requested to be
included is likely to materially adversely affect the successful
marketing of the Common Stock (other than such Registrable Securities
and other securities so requested to be included) by the underwriters
in such Purchaser Offering (such writing to state the basis of such
belief and the approximate number of such Registrable Securities and
shares of other securities so requested to be included which may be
included in such Purchaser Offering without such effect), then the
Purchaser may, upon written notice to all Holders of such Registrable
Securities and of such other securities so requested to be included,
exclude pro rata from such Purchaser Offering (if and to the extent
--- ----
stated by such managing underwriter to be necessary to eliminate such
effect) the number of such Registrable Securities and shares of such
other securities so requested to be included in the Purchaser Offering
of which shall have been requested by each Holder of Registrable
Securities
20
<PAGE>
and by the holders of such other securities so that the resultant
aggregate number of such Registrable Securities and of such other
shares of securities so requested to be included which are included in
such Purchaser Offering shall be equal to the approximate number of
shares stated in such managing underwriter's letter to be the number
which may be included in such Purchaser Offering without such effect.
(vi) A Transaction Delay Period and an Information Delay Period are
hereinafter collectively referred to as "Delay Periods" or a "Delay
Period." The Purchaser will give prompt written notice to each Holder
of Registrable Securities of the commencement of each Delay Period. The
Purchaser shall not be entitled to implement Delay Periods which, when
taken together with any other Delay Periods during the previous twelve
months, are in effect for more than 180 days during such twelve month
period. The Purchaser shall not, in any event, be entitled to implement
(x) Information Delay Periods which, when taken together with any other
Information Delay Period during the previous twelve months, are in
effect for more than 120 days during such twelve month period or (y)
more than one Transaction Delay Period during any twelve month period.
The Effectiveness Period shall be extended by the number of days during
which each Delay Period is in effect. Accordingly, references in this
clause 11 to the Effectiveness Period shall be construed as the
Effectiveness Period as so extended.
(E) Each Holder of Registrable Securities agrees by its acquisition of such
Registrable Securities that (i) the Purchaser shall not be obligated to
maintain the effectiveness of a registration statement with respect to the
Registrable Securities during any Information Delay Period (but the
Purchaser shall not de-register any Common Stock described in such
registration statement); and (ii) upon receipt of any notice from the
Purchaser of the existence of any fact or event of the kind described in
sub-clause (B)(vii) or the notice of commencement of the Information Delay
Period pursuant to sub-clause (D)(i), it will:
(a) keep the fact and subject matter of such notice confidential;
(b) forthwith discontinue that Holder's Transfer of Registrable Securities
pursuant to the registration statement relating to such Registrable
Securities until that Holder receives either (a) copies of a
supplemented or amended prospectus in accordance with sub-clause
(B)(vii) or (b) a notice from the Purchaser advising it that use of
the prospectus forming part of such registration statement may be
resumed; and
(c) if so directed by the Purchaser, will deliver to the Purchaser (at the
Purchaser's expense) all copies, other than permanent file copies,
then in such Holder's possession of the prospectus relating to such
Registrable Securities current at the time of receipt of such
direction.
(F) In the case of the registration effected under the Securities Act by the
Purchaser pursuant to this clause 11, the Purchaser agrees to:
21
<PAGE>
(i) indemnify and hold harmless, to the full extent permitted by law,
each Holder of the Registrable Securities named in such registration
statement, its officers, directors, agents and employees and each
other person who participates as an underwriter in the offering or
sale of such securities and each other person, if any, who controls
such seller or any such underwriter within the meaning of the
Securities Act, against all losses, claims, damages, liabilities and
expenses, joint or several, arising out of or based upon any untrue
or alleged untrue statement of a material fact contained in the
registration statement under which the Registrable Securities of the
Purchaser owned by the Holder were registered under the Securities
Act, any prospectus or preliminary or summary prospectus or in any
amendment or supplement thereto or any omission or alleged omission
to state therein a material fact required to be stated therein or
necessary to make the statements therein (in the case of a
prospectus, in the light of the circumstances under which they were
made) not misleading; and
(ii) reimburse each such Holder, and each such officer, director, agent
and employee, underwriter and controlling person, as incurred, for
any legal or any other expenses reasonably incurred by them in
connection with investigating or defending any such loss, claim,
liability, action or proceeding;
PROVIDED THAT:-
(a) the Purchaser shall not be liable to any such person in any case
to the extent that any such untrue statement or alleged untrue
statement or omission or alleged omission was made therein in
reliance upon and in conformity with written information
furnished to the Purchaser by or on behalf of such person
specifically for inclusion therein;
(b) the Purchaser shall not be liable to any indemnified party under
this sub-clause (F) with respect to such registration statement
or prospectus to the extent that any such loss, claim, damage or
liability of such indemnified party results from an untrue
statement of a material fact contained in, or the omission of a
material fact from, the registration statement or prospectus
which untrue statement or omission was corrected in an amended or
supplemented registration statement or prospectus, if the person
alleging such loss, claim, damage or liability was not sent or
given, at or prior to the written confirmation of such sale, a
copy of the amended or supplemented registration statement or
prospectus and the Purchaser had previously furnished copies
thereof to such indemnified party; and
(c) the Purchaser shall not be liable in any such case to the extent
any such loss, claim, damage or liability arises out of or is
based upon any sale of Registrable Securities by a Holder during
any period in which it has agreed or deemed to have agreed,
pursuant to the provisions of this sub-clause (E), not to sell
Registrable Securities.
(G) In connection with any registration statement in which a Holder of
Registrable Securities is participating, such Holder agrees to indemnify
and hold harmless, to
22
<PAGE>
the full extent permitted by law, the Purchaser, its directors, officers,
agents, employees against any losses, claims, damages, liabilities and
expenses arising out of or based upon any untrue or alleged untrue
statement of a material fact contained in the registration statement under
which securities of the Purchaser owned by such holder are registered under
the Securities Act, any prospectus or preliminary prospectus or in any
amendment or supplement thereto or any omission or alleged omission to
state therein a material fact required to be stated therein or necessary to
make the statements therein (in the case of a prospectus, in the light of
the circumstances under which they were made) not misleading, to the extent
that (i) such untrue or alleged untrue statement or omission or alleged
omission was made in reliance upon and in conformity with any information
furnished in writing by the Seller or such Holder to the Purchaser
specifically for inclusion in such registration statement or prospectus,
(ii) such losses, claims, damages or liabilities arise out of or are based
upon misstatements or alleged misstatements or omissions or alleged
omissions in respect of which the provisions of paragraphs (a), (b) and (c)
of sub-clause (F) specifically provide that the Purchaser shall not be
liable therefor.
(H) Any person entitled to indemnification hereunder will:-
(a) give prompt written notice to the indemnifying party of any claim with
respect to which it seeks indemnification and
(b) unless in such indemnified party's reasonable judgment a conflict of
interest between such indemnified and indemnifying parties may exist with
respect to such claim, permit such indemnifying party to assume the defense
of such claim with counsel reasonably satisfactory to the indemnified
party.
If such defense is assumed, the indemnifying party will not be subject to
any liability for any settlement made by the indemnified party without its
consent (but such consent will not be reasonably withheld). An
indemnifying party who is not entitled to, or elects not to, assume the
defense of a claim will not be obligated to pay the fees and expenses of
more than one U.S. counsel for all parties indemnified by such indemnifying
party with respect to such claim, unless in the reasonable judgment of the
outside U.S. counsel of any such indemnified party a conflict of interest
may exist between such indemnified party and any other of such indemnified
parties with respect to such claim.
(I) The Purchaser on the one hand and each Holder of Registrable Securities on
the other shall indemnify the other on a basis mutatis mutandis with the
----------------
indemnity specified elsewhere in sub-clauses (F) and (G) (with appropriate
modifications) with respect to any required registration or other
qualification of securities under any federal or state law or regulation of
any governmental authority other than the Securities Act.
(J) The indemnification required by this clause 11 shall:-
(i) be made by periodic payments of the amount thereof during the course
of the investigation or defense, as and when bills are received or
expense, loss, damage or liability is incurred; and
23
<PAGE>
(ii) will remain in full force and effect regardless of any investigation
made by or on behalf of the indemnified party or any officer, director
or controlling person of such indemnified party and will survive the
Transfer of shares of Common Stock.
(K) If the indemnification provided for under this clause 11 is unavailable for
any reason other than the exceptions to indemnification contained in sub-
clause (F) or (G), then the indemnifying party shall contribute to the
amount paid or payable by the indemnified party as a result of such losses,
claims, damages, liabilities or expenses in such proportion as is
appropriate to reflect the relative fault of the indemnifying party on one
hand and the indemnified party on the other hand in connection with the
statements or omissions that resulted in such losses, claims, damages,
liabilities or expenses. Notwithstanding the foregoing, no person guilty
of fraudulent misrepresentations (within the meaning of Section 11(f) of
the Securities Act) shall be entitled to contribution from any person who
was not guilty of such fraudulent misrepresentation.
(L) The Purchaser will file, during the period when a prospectus is required to
be delivered under the Securities Act, the reports required to be filed by
it under the Exchange Act to the extent required from time to time to
enable such holder to sell Registrable Securities without registration
under the Securities Act within the limitation of the exemptions provided
by (a) Rule 144 under the Securities Act, as such Rule may be amended from
time to time or (b) any similar rule or regulation hereafter adopted by the
Commission. Upon the request of any holder of Registrable Securities, the
Company will deliver to such holder a written statement as to whether it
has complied with such requirements.
(M) (i) Subject to sub-clause (M)(ii), all fees and expenses incident to the
Purchaser's performance of or compliance with this clause 11 will be
borne by the Purchaser regardless of whether a Registration Statement
becomes effective, including: (a) all registration and filing fees
and expenses; (b) all fees and expenses associated with compliance
with federal securities and state Blue Sky or securities laws of the
states of the United States including the legal fees relating solely
to legal counsel on Blue Sky matters; (c) all expenses of printing
or copying (including printing of any stock certificates and printing
or copying of Prospectuses and registration statements), messenger
and delivery services; (d) all fees and disbursements of counsel for
the Purchaser; (e) all application and filing fees in connection with
listing any Registrable Securities pursuant to the requirements of
sub-clause (B)(x); and (f) all fees and disbursements of independent
certified public accountants of the Purchaser (including the expenses
of any "comfort" letters required by such performance); and (g) its
own internal expenses (including, without limitation, all salaries
and expenses of its officers and employees performing legal or
accounting duties), the expenses of any annual audit or quarterly
review and the expense of any liability insurance of the Purchaser,
PROVIDED THAT, in the case of an Underwritten Offering, the Purchaser
shall not be required bear, and the Seller and the Holders on whose
behalf Registrable Securities are included in such registration shall
reimburse the Purchaser in accordance with paragraph (iii) of this
sub-clause (L) in respect of, any and all of the fees and expenses
referred to above (other than the expenses
24
<PAGE>
referred to in item (g)) that the Purchaser would not have incurred
in connection with the registration of the Registrable Securities
pursuant to this clause 11 if such registration did not involve an
Underwritten Offering.
(ii) Each Holder on whose behalf Registrable Securities are included in a
registration statement pursuant to clause 11, whether or not it
involves an Underwritten Offering, shall be responsible for the
payment of all fees and expenses incurred by it or any underwriters
retained by it in connection with such registration statement and any
Underwritten Offering, including, without limitation, the fees and
expenses of any counsel, solicitors, accountants, financial adviser
or any other adviser or agent retained by it or such underwriters,
advisers or agents, and all costs and expenses in connection with the
preparation and negotiation of underwriting agreements and documents,
marketing materials and meetings. Notwithstanding paragraph (i) or
anything in this agreement to the contrary, each Holder on whose
behalf Registrable Securities to be included in the registration
statement shall pay all underwriting discounts, commissions and other
selling expenses and transfer taxes, if any.
(iii) All fees and expenses which the Purchaser has not agreed to bear
under paragraph (i) of this sub-clause (M) and all fees and expenses
referred to in paragraph (ii) of this sub-clause (M), shall be
allocated pro rata among all persons on whose behalf Registrable
--- ----
Securities are included in such registration on the basis of the
respective amounts of such Securities then being registered on their
behalf.
(N) If the registration pursuant to this clause 11 involves an Underwritten
Offering, each underwriter thereof shall be an investment banking firm of
national standing in the United States selected by Holders of at least a
majority (by number of shares issued and outstanding) of Registrable
Securities with the prior written approval of the Purchaser (such approval
not to be unreasonably withheld).
(O) No person may participate in any Underwritten Offering hereunder unless
such person:
(i) agrees to sell such person's securities on the basis provided in any
- underwriting arrangements approved, subject to the terms and
conditions hereof, by the Purchaser and the Seller which approval
shall not be unreasonably withheld; and
(ii) completes and executes all questionnaires, indemnities, underwriting
-- agreements and other documents (other than powers of attorney)
required under the terms of such underwriting arrangements.
(P) If requested by the underwriters for any Underwritten Offering by any
Holder participating therein, the Purchaser will enter into an underwriting
agreement with such underwriters for such Underwritten Offering, such
agreement to be reasonably satisfactory in substance and form to the
Purchaser, the Seller and the underwriters and to contain such
representations and warranties by the Purchaser and such other terms as are
generally prevailing in agreements of this type, including, without
25
<PAGE>
limitation, indemnities to the effect and to the extent provided in clause
(F). The Holders will co-operate with the Purchaser in the negotiation of
the underwriting agreement and will incorporate therein the reasonable
suggestions of the Purchaser regarding the form and substance thereof. The
Holders shall not be required to make any representations or warranties
contained in a writing furnished by the Holder for use in such registration
statement or agreements with the Purchaser or the underwriters other than
representations, warranties or agreements regarding the Holder, the
Holder's Registrable Securities and the Holder's intended method of
distribution and any other representation required by law.
(Q) The Purchaser may offer securities of the Purchaser other than the
Registrable Securities under the registration statement referred to in this
clause 11.
12. RESTRICTIONS ON BUSINESS ACTIVITIES
-----------------------------------
(A) Each of the Seller and SWALEC undertake to procure that each member of the
Seller's Group will not, either alone or in conjunction with or on behalf
of any other person (whether directly or indirectly, and whether as
shareholder, participator, partner, promoter, director, officer, agent,
manager, employee or consultant of, in or to any other person firm or
company), do any of the following things:-
(i) within two years after the Completion Date, compete directly or
indirectly with any business of any member of the Purchaser's Group
(including the Group) with regard to the provision of entertainment,
advertising, telephone and related interactive services via fixed
wire network to customers within the franchise areas within the
United Kingdom, the franchises for which are, on the Completion Date
held by any member of the Purchaser's Group (or such other business
of the Group as the shareholders of the Company shall have
specifically agreed in writing before the Completion Date shall be
undertaken by the Group) (such services being known as the "Relevant
Services");
(ii) within two years after the Completion Date, solicit away from or
endeavor to entice away from or discourage from dealing with, any
member of the Group any person who was at any time during the period
of one year preceding the Completion Date a manufacturer for or
supplier or customer or client of such member;
(iii) within two years after the Completion Date, supply or provide any
goods or services competing directly or indirectly with those
supplied by any member of the Group to any person who was at any time
during the period of one year preceding the Completion Date a
customer or client of any member of the Group to whom any member of
the Group had during that period supplied or provided goods or
services in the ordinary course of its business;
(iv) within two years after the Completion Date, solicit or endeavor to
entice away from or discourage from being employed by or providing
services to any member of the Group any person who was at the
Completion Date an officer or employee of any member of the Group
(other than a "B" Director
26
<PAGE>
not being a person engaged exclusively or primarily to provide
services to any member of the Group) or the Purchaser (insofar as
such person is providing services primarily or exclusively for any
member of the Group) whether or not such person would commit a breach
of contract by reason of leaving service except for those persons who
answer a public advertisement or who approach a member of the
Seller's Group;
(v) within two years after the Completion Date, not employ or manage or
attempt to employ or engage or negotiate or arrange the employment or
engagement by any other person, firm or company of any person who is
at the Completion Date, or was at any time during the period of one
year prior thereto, an officer (other than a "B" Director not being a
person engaged exclusively or primarily to provide services to any
member of the Group) or employee of any member of the Group or the
Purchaser (other than a "B" Director) insofar as such person is
providing services primarily or exclusively for any member of the
Group, except for those persons who answer a public advertisement or
who approach a member of the Seller's Group.
(vi) disclose to any other person or (in any way which may be detrimental
to the business of any member of the Group as carried on at the
Completion Date) use any information which is Confidential Business
Information for so long as that information remains Confidential
Business Information except that this paragraph (vi) shall not apply
in respect of the revealing of such information in the following
circumstances:-
(a) to any of the professional advisers of any member of the
Seller's Group if such advisers have provided to the Purchaser
an undertaking from such advisers on the same terms so far as is
practicable under this paragraph (vi);
(b) pursuant to any listing agreement with or the rules and
regulations of any recognized security exchange on which
securities of any member of the Seller's Group are listed or
traded;
(c) as required by law or pursuant to the United States Internal
Revenue Code;
(d) when the relevant information has entered the public domain
otherwise than by the default by any member of the Seller's
Group of the provisions of this agreement; or
(e) to the extent required by any regulatory or governmental body to
which any member of the Seller's Group is subject or as required
by any governmental order, decree, regulation, license or rule.
(vii) without limitation to the provisions of this clause, in relation to a
business which is competitive or likely to be competitive with the
business of any member of the Group as carried on at the Completion
Date, use any trade or business name or distinctive mark, style or
logo used by or in the business
27
<PAGE>
of any member of the Group at any time during the two years before
Completion or anything intended or likely to be confused with it; or
(viii) assist any other person to do any of the foregoing things;
PROVIDED THAT the restrictions set out in sub-clause (A) shall not
prohibit:-
(a) the acquisition or holding by any member of the Seller's Group of
shares amounting to less than 10% of the capital of a company quoted
on any stock exchange;
(b) any member of the Seller's Group using for its own internal
purposes or making available its distribution network and assets on
commercial terms to Energis Communications Limited and to third
parties pursuant to, or in the reasonable interests of, the Seller's
Group's electricity supply and distribution businesses;
(c) the doing of any of the foregoing things if, and to the extent,
such things have been previously approved in writing by the Purchaser;
(d) Hyder Services Limited through its division known as Lusis
("Lusis") providing Relevant Services solely to any other member of
Seller's Group for its own internal purposes;
(e) Lusis providing Relevant Services to a customer, but only if and
to the extent that:
(i) such customer is a customer of Lusis pursuant to a
contract in effect on the date of this agreement;
(ii) revenues, turn-over or sales receivable from such
customer or any member of such customer's affiliated
group by Lusis for such Relevant Services do not at
anytime exceed (Pounds)100,000 in any one calendar
year; and
(iii) SWALEC uses the best endeavours required of it and
otherwise complies with its obligations under clause 13
(G)(ii) PROVIDED THAT CableTel (UK) Limited uses its
reasonable endeavours as referred to in clause
13(G)(i); or
(f) Lusis providing Relevant Services to any person other than the
customers referred to in subclause (e), but only if, and to the
extent that;
(i) it is reasonable to anticipate that such person will expend
not less than (Pounds)50,000 annually for those Relevant
Services in the then calendar year;
28
<PAGE>
(ii) the Purchaser (or such member of the Purchaser's Group as
it may designate in writing) is offered, in writing, the
reasonable right of first refusal to provide telephony
services to such person on a basis that is at least
competitive with telephony services that can be provided by
others, both in terms of pricing and deliverability
provided that the Purchaser or such member is acceptable to
any such person (which shall be ascertained by a joint
approach to such person by Lusis and the Purchaser or such
member); and
(iii) telephone services are not provided via the fixed wire
network of any member of the Seller's Group on a basis that
does not permit the full recovery of its costs (including
capital costs) associated with the provision of those
services and a commercially reasonable margin thereon.
(B) The Purchaser undertakes to procure that each member of the Purchaser's
Group will not, either alone or in conjunction with or on behalf of any
other person (whether directly or indirectly, and whether as shareholder,
participator, partner, promoter, director, officer, agent, manager,
employee or consultant of, in or to any other person, firm or company)
whilst any member of the Purchaser's Group is the holder of any shares in
the Company and for a period of two years after such date compete directly
or indirectly with any member of the Seller's Group with regard to the
electricity supply and distribution business of any member of the Seller's
Group within the region served by the Seller on the Completion Date.
(C) Each undertaking contained in this clause 12 shall be construed as a
separate undertaking and if one or more of the undertakings is held to be
against the public interest or unlawful or in any way an unreasonable
restraint of trade, the remaining undertakings shall continue to bind the
parties giving or entering into the same.
13. THE JOINT VENTURE AGREEMENT AND OTHER ARRANGEMENTS
--------------------------------------------------
(A) The parties agree that each of the agreements specified in Part A of
schedule 6 (Agreements between the parties) (including all amendments, and
modifications of, and supplements to, those agreements) will be terminated
on the Completion Date.
(B) The parties agree that all agreements between members of the Group and
members of the Seller's Group (excluding the agreements referred to in sub-
clause (A), but including, without limitation, each of the agreements
specified in Part B of schedule 6 (Agreements between the parties)) shall
continue in full force and effect notwithstanding the provisions of sub-
clause (A).
(C) The parties agree that each of them will, on Completion and in accordance
with their respective obligations under paragraphs (i)(f) and (vii)(c) of
Schedule 1, procure that all parties to the Joint Venture Agreement enter
into a deed of release in the form set out in schedule 7 (Form of Deed of
Release) (the "Deed of Release").
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<PAGE>
(D) The Purchaser undertakes to fully indemnify the Seller and any member of
the Seller's Group and their respective officers against any obligation,
loss, cost, claim, liability, expense, damage or demand suffered or
incurred by the Seller or any member of the Seller's Group or their
respective officers (the "Indemnified Persons") arising from or in respect
of the Joint Venture Agreement, the articles of association of the Company
and any document entered into pursuant hereto or contemplated thereto, or
otherwise arising in connection with the Company save to the extent that
any such obligation, loss, cost, claim, liability, expense, damage or
demand is suffered or incurred by an Indemnified Person as a consequence of
any:-
(i) willful default;
(ii) negligence;
(iii) breach of the Joint Venture Agreement, the articles of association
of the Company and any document entered into pursuant thereto, or
contemplated thereby; or
(iv) breach of directors' fiduciary duties;
by an Indemnified Person which was not known to the Purchaser or any member
of the Purchaser's Group at the time of entering into this agreement.
(E) The Purchaser undertakes to the Seller and SWALEC to hold, upon written
request of the Seller or SWALEC, informal meetings, approximately once each
calendar quarter, at which a senior officer of the Purchaser (such as the
President or a cognizant Vice President) will be available to discuss the
business and operations of the Purchaser, as the same are described in the
Purchaser's publicly available information. Such meetings shall occur at
such times during Working Hours on Business Days, for such duration and in
such location as are mutually convenient to the respective representatives
of the Purchaser and the Seller or SWALEC intending to attend such
meetings. This undertaking shall cease to have effect if at any time, the
number of shares of Convertible Preferred Stock held of record by all
members of the Seller's Group is, or becomes, less than 10% of the
aggregate number of shares of Convertible Preferred Stock outstanding.
(F) In sub-clauses (F) to (K), "Lease" means the lease dated 24th March 1994
between (1) P & O Developments Limited (2) Acer Consultants Limited (now
called Hyder Consulting Limited) and (3) Acer Group Limited in respect of
premises at 1st Floor 65 Petty France London SW1, and words and expressions
defined in the Lease shall have the same meanings when used in sub-clauses
(F) to (K).
(G) SWALEC will procure that Hyder Consulting Limited ("HCL") will:
(i) within 10 Business Days after the Completion Date enter into an
agreement for the assignment of the Lease to CableTel (UK) Limited,
such agreement to be in the form initialled by the parties for
identification (which shall include a provision requiring CableTel
(UK) Limited to use all reasonable endeavours to obtain the Landlord's
licence to assign the Lease), the assignment of the Lease executed in
pursuance of such agreement to contain an
30
<PAGE>
indemnity covenant by which CableTel (UK) Limited will on behalf of
itself and all those claiming title to the Lease through or under it
indemnify Hyder Consulting Limited and Acer Group Limited for all
sums, costs, claims and other amounts payable by either of them to the
landlord under the Lease as a result of non-compliance with or non-
performance of the covenants and other obligations contained in the
Lease at any time during the Contractual Term after such assignment of
the Lease, save in respect of the matters in respect of which SWALEC
has provided an indemnity under sub-clause (H); and
(ii) use best endeavours to obtain the Licence to Assign in accordance with
clause 1.2 of the agreement referred to in sub-clause (i) from the
Landlord; provided that such best endeavours shall not require SWALEC
or HCL to expend or incur any liability which could result in
expenditure of more than (Pounds)25,000 in aggregate (which amount
shall include their own internal costs attributable to the provision
of property and legal services); but which will (notwithstanding this
foregoing proviso) require SWALEC or HCL to enter into (or procure the
entering into by another member of the Seller's Group) of such
agreements or other arrangements as may be reasonably required by the
Landlord (including, but not limited to guarantees, sureties, rent
deposit deeds or indemnities) to enable the Licence to Assign to be
concluded to the satisfaction of the Landlord PROVIDED THAT this shall
not require SWALEC, HCL or such member to pay or deposit monies in
excess of the Initial Rent payable for the remainder of the
Contractual Term. The Purchaser hereby agrees to indemnify SWALEC,
HCL and such member against all claims, demands, sums, costs and other
amounts suffered or incurred by any of them pursuant to such
agreements or arrangements, save to the extent that such claims,
demands, sums, costs or amounts relate to the payment or non-payment
of the Initial Rent or rates in respect of the Premises payable for
the remainder of the Contractual Term. In the event that the Landlord
refuses to grant the Licence to Assign notwithstanding the fulfilment
by SWALEC or HCL of its obligations aforementioned, SWALEC or HCL
shall use their reasonable endeavours within six months of the date of
this agreement to assign or sub-let the Premises on an arm's length
basis at market rent to a willing assignee or tenant and shall pay to
CableTel (UK) Limited an amount equal to the Initial Rent or part
thereof plus rates paid by that assignee or tenant.
(H) SWALEC will during the residue of the Contractual Term for so long as the
Lease is vested in CableTel (UK) Limited or any of its associated or
subsidiary companies indemnify CableTel (UK) Limited and the Purchaser
(which indemnity shall provide that it may be claimed as a debt or
liquidated demand) in respect of all Initial Rent (and Value Added Tax
thereon to the extent that CableTel (UK) Limited (or any person treated as
a member of the same group as CableTel (UK) Limited for value added tax
purposes) is unable to obtain a credit for the same as allowable input tax,
after using all reasonable endeavors to obtain such credit) and rates, but
not Additional Rents payable under the Lease as and when due under the
Lease;
(I) The Purchaser will procure that CableTel (UK) Limited will:
31
<PAGE>
(i) notify SWALEC of any notice relating to rates payable in respect of
the Premises (including without limitation notices proposing rating
revaluation) and shall not agree to any increase in the rateable value
or the rates payable in respect of the Premises without first allowing
SWALEC at SWALEC's expense to make such representations and to take
such action in respect thereof (in either case in the name of CableTel
(UK) Limited) as SWALEC shall desire; and
(ii) not without the prior express written consent of SWALEC agree to any
increase in the Initial Rent nor to any variation of the dates on
which the Initial Rent is payable under the Lease.
(J) The Purchaser shall procure that CableTel (UK) Limited will, within 10
Business Days after the Completion Date, execute and deliver to Hyder
Consulting Limited a counterpart of the agreement for the assignment of the
Lease referred to in sub-clause G(i).
(K) The Purchaser undertakes that, if required by the Landlord (as defined in
the Lease), it will covenant with the Landlord as Surety in the terms of
Clause 3 of the draft License to Assign marked October 2nd, 1996 (in the
form initialled by the parties hereto) or such other form as the Landlord
and the Purchaser may agree.
14. CONSORTIUM RELIEF
-----------------
(A) The Purchaser undertakes to procure that the Company and each member of the
Group shall surrender for no payment all amounts eligible for surrender
under the provisions of sections 402 to 413 of ICTA 1988 as the Seller
shall at its sole discretion direct in respect of the accounting periods of
members of the Group for any accounting period, or part of an accounting
period, in the two calendar years to 31 December 1996, and in respect of
that part of the accounting period for the year to 31 December 1994, for
the period from 1 September 1994 to 31 December 1994.
(B) The Purchaser warrants that the Inland Revenue has agreed that CableTel UK
Group, Inc. was resident for tax purposes in the United Kingdom from 31
August 1994.
(C) The Purchaser shall procure that the members of the Group shall make all
claims and elections, and do all things that need to be done, to give
effect to such surrenders in a timely manner.
(D) The Purchaser shall procure that the members of the Group shall not take
any action which shall reduce the amounts eligible for surrenders.
(E) The Purchaser shall:-
(i) send the Seller copies of the computations of the amounts referred to
in sub-clause (A), and copies of the relevant accounts of each member
of the Group, not less than 14 days prior to their submission to the
Inland Revenue;
32
<PAGE>
(ii) advise the Seller of all significant matters which arise subsequent
to their submission to the Inland Revenue;
(iii) provide copies of relevant correspondence; and
(iv) take into consideration any reasonable comments expressed by the
Seller on such computations, significant matters and correspondence.
(F) The Purchaser undertakes to the Seller that, for the purposes of the ICTA
1988 consortium relief, it will procure that CableTel UK Group, Inc. or any
other member of the Purchaser's Group holding shares in any member of the
Group was at all times from 31 August 1994 until Completion resident in the
United Kingdom for United Kingdom tax purposes PROVIDED THAT the Purchaser
shall not be liable hereunder if CableTel UK Group, Inc. or a member of the
Purchaser's Group holding shares in any member of the Group was not so
resident by reason of a change in legislation, Inland Revenue practice, the
terms of any relevant double tax treaty or by virtue of any other matter of
circumstance arising after Completion which is outside of the control of
the Purchaser but so that in such circumstances the Purchaser will take all
such action which is reasonable within its control so as to ensure that the
Purchaser will be treated as being so resident in the United Kingdom again.
(G) The Purchaser hereby covenants with the Seller to pay to the Seller an
amount equal to any liability or increased liability to Tax of the Seller
or any member of the Seller's Group which arises as a consequence of or by
reference to any action or omission carried out or effected by the
Purchaser or any member of the Group contrary to the provisions of
paragraph (A) to (F) of this clause.
15. EFFECT OF COMPLETION
--------------------
Any provision of this agreement and any other documents referred to in it
which is capable of being performed after but which has not been performed
at or before Completion and all the Seller's Warranties, all the
Purchaser's Warranties and all indemnities and other undertakings contained
in or entered into pursuant to this agreement shall remain in full force
and effect notwithstanding Completion.
16. REMEDIES AND WAIVERS
--------------------
(A) No delay or omission on the part of any party to this agreement in
exercising any right, power or remedy provided by law or under this
agreement or any other documents referred to in it shall:-
(i) impair such right, power or remedy; or
(ii) operate as a waiver thereof.
(B) The single or partial exercise of any right, power or remedy provided by
law or under this agreement shall not preclude any other or further
exercise thereof or the exercise of any other right, power or remedy.
33
<PAGE>
(C) Save as otherwise expressly provided in this Agreement, the remedies
provided in this agreement are cumulative and not exclusive of any remedies
provided by law.
17. ASSIGNMENT
----------
(A) The benefits of this agreement and any agreements referred to in clause 19
(Entire agreement) may be assigned (together with any cause of action
arising in connection with any of them) by either party to any successor
company (by way of merger, consolidation or transfer of all or
substantially all of its assets) provided that such party's obligations
under this agreement are novated to such a successor.
(B) The provisions of clauses 10 and 11 shall be binding upon and inure to the
benefit of and be enforceable without the need for an express assignment,
by subsequent holders of Restricted Securities or Registrable Securities.
(C) Except as stated in sub-clauses (A) and (B), neither the benefits nor the
obligations under this Agreement shall be assignable.
18. FURTHER ASSURANCE
-----------------
Each of the parties shall from time to time, on being required to do so by
the other party to this agreement, now or at any time in the future, do or
procure the doing of all such acts and/or execute or procure the execution
of all such documents in a form satisfactory to such other party as such
other party may reasonably consider necessary for giving full effect to
this agreement and securing to such other party the full benefit of the
rights, powers and remedies conferred upon such other party in this
agreement.
19. ENTIRE AGREEMENT
----------------
(A) This agreement and the Deed of Release constitute the whole and only
agreement between the parties relating to the sale and purchase of the
Interests and supersedes and extinguishes any prior drafts, agreements,
undertakings, representations, warranties and arrangements of any nature
whatsoever, whether or not in writing, relating thereto.
(B) Each party acknowledges that in entering into this agreement and the Deed
of Release on the terms set out therein, it is not relying upon any
representation, warranty, promise or assurance made or given by any other
party or any other person, whether or not in writing, at any time before
the execution of this agreement which is not expressly set out in this
agreement.
(C) This agreement may only be varied in writing signed by each of the parties.
20. NOTICES
-------
(A) Any notice or other communication given or made under or in connection with
the matters contemplated by this agreement shall be in writing.
34
<PAGE>
(B) Any such notice or other communication shall be addressed as provided in
sub-clause (C) and, if so addressed, shall be deemed to have been duly
given or made as follows:-
(i) if sent by personal delivery, upon delivery at the address of the
relevant party; and
(ii) if sent by first class post, six Business Days after the date of
posting;
PROVIDED THAT if, in accordance with the above provisions, any such notice
or other communication would otherwise be deemed to be given or made
outside Working Hours, such notice or other communication shall be deemed
to be given or made at the start of Working Hours on the next Business Day.
(C) The relevant addressee, address of each party for the purposes of this
agreement, subject to sub-clause (D), are:-
Name of party Address
------------- --------------
South Wales Alexandra Gate,
Electricity plc Rover Way,
Cardiff CF2 2UE,
Wales,
Attention: John James
International CableTel 110 East 59th Street,
Incorporated New York, NY 10022,
U.S.A.
Attention: Richard J. Lubasch
with a copy of each notice or other communication sent to the Purchaser to:
CableTel (UK) Limited CableTel House,
1 Lakeside Road,
Farnborough,
Hants GU14 6XP
England
Attention: Robert Mackenzie
(D) A party may notify the other parties to this agreement of a change to its
name, relevant addressee or address for the purposes of sub-clause (C)
PROVIDED THAT such notification shall only be effective on:-
(i) the date specified in the notification as the date on which the change
is to take place; or
(ii) if no date is specified or the date specified is less than five clear
Business Days after the date on which notice is given, the date
falling five clear Business Days after notice of any such change has
been given.
35
<PAGE>
(E) For the avoidance of doubt, the parties agree that the provisions of this
clause shall not apply in relation to the service of Service Documents.
21. ANNOUNCEMENTS
-------------
(A) Subject to sub-clause (B), no announcement concerning the sale of the
Interests, the purchase of the Convertible Preferred Stock or any ancillary
matter shall be made by any member of the Seller's Group without the prior
approval of the Purchaser, such approval not to be unreasonably withheld or
delayed or by any member of the Purchaser's Group without the prior
approval of the Seller and SWALEC, such approval not to be unreasonably
withheld or delayed.
(B) Any member of the Seller's Group and any member of the Purchaser's Group
may make an announcement concerning the sale of the Interests, the purchase
of the Convertible Preferred Stock or any ancillary matter if required by:-
(i) the law of any relevant jurisdiction; or
(ii) any securities exchange or regulatory or governmental body to which
such member is subject, wherever situated, including (without
limitation) the Commission, the NNM, the Federal Trade Commission, the
London Stock Exchange or The Panel on Takeovers and Mergers, whether
or not the requirement has the force of law,
PROVIDED THAT any such announcement shall be made only after notice to the
other party.
(C) The restrictions contained in this clause shall continue to apply after the
termination of the sale and purchase of the Interests under this agreement
without limit in time.
22. CONFIDENTIALITY
---------------
(A) Subject to sub-clause (B), each party shall treat as strictly confidential
all information received or obtained as a result of entering into or
performing this agreement or the agreements specified in Part B of schedule
6 (Agreements between the parties) (including, without limitation, that
party's involvement or participation in the affairs of any member of the
Group) which relates to:-
(i) any member of the Group; or
(ii) the other party.
(B) Each party may disclose information which would otherwise be confidential
if and to the extent:-
(i) required by the law of any relevant jurisdiction;
36
<PAGE>
(ii) required by any securities exchange or regulatory or governmental
body to which either party is subject, wherever situated, including
(without limitation) the Commission, the NNM, the Federal Trade
Commission, the London Stock Exchange or the Panel on Takeovers and
Mergers, whether or not the requirement for information has the force
of law;
(iii) required to vest the full benefit of this agreement in either party;
(iv) disclosed to the professional advisers, auditors and bankers of each
party;
(v) the information has come into the public domain through no fault of
that party; or
(vi) the other parties have given prior written approval to the
disclosure, such approval not to be unreasonably withheld or delayed,
PROVIDED THAT any such information disclosed pursuant to paragraphs (i) or
(iii) shall be disclosed only after notice to the other parties.
(C) The restrictions contained in this clause shall continue to apply after the
termination of the sale and purchase of the Interests under this agreement
without limit in time.
23. RESTRICTIVE TRADE PRACTICES ACT 1976
------------------------------------
If there is any provision of this agreement, or of any agreement or
arrangement of which this agreement forms part, which causes or would cause
this agreement or that agreement or arrangement to be subject to
registration under the RTPA 1976, then that provision shall not take effect
until the day after particulars of this agreement or of that agreement or
arrangement (as the case may be) have been furnished to the Director
General of Fair Trading pursuant to section 24 RTPA 1976.
24. COSTS AND EXPENSES
------------------
Except as otherwise stated in any other provision of this agreement, each
party shall pay its own costs and expenses in relation to the negotiations
leading up to the sale of the Interests and to the preparation, execution
and carrying into effect of this agreement and all other documents referred
to in it.
25. COUNTERPARTS
------------
(A) This agreement may be executed in any number of counterparts, and by the
parties on separate counterparts, but shall not be effective until each
party has executed at least one counterpart.
(B) Each counterpart shall constitute an original of this agreement, but at the
counterparts shall together constitute but one and the same instrument.
37
<PAGE>
26. INVALIDITY
----------
If at any time any provision of this agreement is or becomes illegal,
invalid or unenforceable in any respect under the law of any jurisdiction, that
shall not affect or impair:-
(A) the legality, validity or enforceability in that jurisdiction of any other
provision of this agreement, or
(B) the legality, validity or enforceability under the law of any other
jurisdiction of that or any other provision of this agreement.
27. CHOICE OF GOVERNING LAW
-----------------------
This agreement shall be governed by and construed in accordance with
English law.
28. JURISDICTION
------------
The parties to this agreement irrevocably agree for the exclusive benefit
of the Purchaser that the courts of England are to have jurisdiction to
settle any disputes which may arise out of or in connection with this
agreement and that accordingly any Proceedings may be brought in such
courts. Nothing contained in this clause shall limit the right of
Purchaser to take Proceedings against the Seller in any other court of
competent jurisdiction, nor shall the taking of Proceedings in one or more
jurisdictions preclude the taking of Proceedings in any other jurisdiction,
whether concurrently or not, to the extent permitted by the law of such
other jurisdiction.
29. AGENT FOR SERVICE
-----------------
(A) The Purchaser irrevocably agrees that any Service Document may be
sufficiently and effectively served on it in connection with Proceedings in
England and Wales by service on the Company at its registered office
(Attention: Robert Mackenzie).
(B) A copy of any Service Document served on an agent pursuant to this clause
shall be sent by post to the Purchaser at its address for the time being
for the service of notices and other communications under clause 20
(Notices), but no failure or delay in so doing shall prejudice the
effectiveness of service of the Service Document in accordance with the
provisions of sub-clause (A).
(C) "Service Document" means a writ, summons, order, judgment or other process
----------------
issued out of the courts of England and Wales in connection with any
Proceedings.
AS WITNESS the hands of the duly authorized representatives of the
----------
parties hereto the day and year first before written.
38
<PAGE>
SCHEDULE 1
----------
(Completion arrangements referred to in
clause 4 (Completion))
At Completion:-
(i) the Seller shall deliver to the Purchaser:-
(a) duly executed transfers in respect of the Interests in favour of
the Purchaser, share certificates for the Shares and loan notes
evidencing the Loan Notes in the name of the relevant transferors
and certified copies of any power of attorney under which any
transfer is executed on behalf of the Seller or nominee;
(b) such waivers or consents (other than any waivers or consents
which may be required from a member of the Purchaser's Group), as
the Purchaser may require to enable the Purchaser to be
registered as holders of the Interests;
(c) a certificate of a duly authorized officer or attorney of the
Seller certifying that no decrease in the valuation of the value
of the Interests has been recorded in the Books and Records of
any member of the Seller's Group since 1st January, 1996 and
before the time of Completion;
(d) a copy of the minutes of a duly held meeting of the directors of
the Seller authorizing the execution by the Seller of this
agreement (such copy minutes being certified as correct by the
secretary of the Seller); and
(e) a counterpart of the Deed of Release duly executed by each member
of the Seller's Group which is named as a party thereto.
(ii) the Seller shall procure the "B" Directors of the Company (and any
alternate directors appointed by them) to resign their offices as
such and to relinquish any rights which they may have under any
contract of employment with the Company or any other member of the
Group or under any statutory provision including any right to
damages for wrongful dismissal, redundancy payment or compensation
for loss of office or unfair dismissal, such resignations to be
tendered at the board meetings referred to in paragraph (iii)(b);
(iii) the Seller shall procure that:-
(a) there be lodged at the registered office of the Company a notice
duly executed by the Seller appointing each of the persons
nominated by the Purchaser as the "B" Directors of the Company
in substitution for the "B" Directors referred to in paragraph
(ii) above, as the Purchas-
39
<PAGE>
er shall direct such appointments to take effect on the
Completion Date; and
(b) the "B" Directors referred to in paragraph (ii) above shall
deliver to the Company an acknowledgement executed as a deed
that he has no claim against any member of the Group for breach
of contract, compensation for loss of office, redundancy or
unfair dismissal or on any other account whatsoever and that no
agreement or arrangement is outstanding under which any member
of the Group has or could have any obligation to him.
(iv) the Seller shall deliver to the Purchaser an opinion of the Seller's
Solicitors in the agreed form;
(v) the Purchaser shall procure board meetings of the Company and
CableTel South Wales Limited to be held at which it shall be resolved
to approve the Deed of Release and the execution thereof by each such
company; and
(vi) the Purchaser shall deliver to the Seller:
(a) an opinion of U.S. counsel to the Purchaser in the agreed form;
(b) a counterpart of the Deed of Release duly executed by each
member of the Purchaser's Group which is named as a party
thereto;
(c) a waiver of the provisions of articles 6.1 to 6.11 of the
Company's articles of association in the agreed form duly
executed by CableTel (UK) Group, Inc.
40
<PAGE>
SCHEDULE 2
----------
The Seller's warranties referred to
in clause 5 (The Seller's Warranties)
Each of the Seller and SWALEC warrants to the Purchaser as follows:-
1. OWNERSHIP OF THE SHARES
-----------------------
(A) The Seller is the sole beneficial owner of the Shares specified in schedule
4 (The Seller's Interests), such shares in aggregate constitute the entire
issued share capital of the Company beneficially owned by any member of the
Seller's Group and the Loan Notes specified in schedule 5 (The Seller's
Interests) constitute all the loan notes, bonds, debentures or other
indebtedness of the Company (other than any indebtedness arising in the
ordinary course of trading relationships between the Company and members of
the Seller's Group) registered in the name of, beneficially owned or held
by, or owed to any member of the Seller's Group.
(B) Each of the Interests are owned by the Seller free and clear of any equity,
claim, option, right to acquire, mortgage, pledge, lien, charge, security
interest, limitation on voting rights and encumbrance of any kind and there
is no agreement or commitment to give or create any and no claim has been
made by any person to be entitled to any. The Interests represent all of
the Seller's Group's shares, interests, participations or equivalents
(however designated) of each member of the Seller's Group in the Group
howsoever arising. Neither it nor any member of the Seller's Group has
granted any interest in the Group to any third party or caused any interest
in the Group to be held by any third party.
2. CAPACITY OF THE SELLER
----------------------
(A) It has the requisite power and authority to enter into and perform this
agreement and to consummate the transactions contemplated by the agreement.
(B) The execution, delivery and performance of this agreement by it and the
consummation by it of the other transactions contemplated by this
agreement have been duly authorized by all necessary action on the part of
it and no other proceedings on the part of it are necessary to authorise
this Agreement or to consummate the transactions contemplated by this
agreement.
(C) This agreement constitutes and the other documents executed by it which are
to be delivered at Completion will, when executed, constitute binding
obligations of it in accordance with their respective terms.
(D) The execution and delivery of, and the performance by it of its obligations
under this agreement will not:-
(i) result in a breach of any provision of its memorandum or articles of
association
41
<PAGE>
(ii) result in a breach of, or constitute a default under, any instrument
to which any member of the Seller's Group is a party or by which any
member of the Seller's Group is bound; or
(iii) result in a breach of any order, judgment or decree of any court or
governmental agency to which any member of the Seller's Group is a
party or by which any member of the Seller's Group is bound; or
(iv) require the consent of its shareholders or of any other person.
3. ARRANGEMENTS BETWEEN THE GROUP AND THE SELLER'S GROUP
-----------------------------------------------------
Except for the Loan Notes and any indebtedness arising in the ordinary
course of trading relationships between members of the Seller's Group and
members of the Group, no indebtedness (actual or contingent) is
outstanding, and there is no contract or arrangement which has not been
entered into on arm's length terms between any member of the Group and any
member of the Seller's Group or any person who is a director of or
connected with the Seller, SWALEC or with any such member.
4. OTHER INTERESTS OF SELLER AND SWALEC
------------------------------------
Neither the Seller, SWALEC nor any director of or person connected with the
Seller or SWALEC has any interest (other than the holding of shares
amounting to less than 10% of the capital of a company quoted on any stock
exchange), direct or indirect, in any business which competes or is likely
to compete with any business now carried on by any member of the Group.
5. ACCURACY OF INFORMATION
-----------------------
The information given in schedule 5 (the Seller's Interests) is true and
accurate in all respects and is not misleading because of any omission or
ambiguity or for any other reason.
6. INSOLVENCY
----------
(A) No order has been made and no resolution has been passed for the winding up
of the Seller, SWALEC, or Hyder plc or for a provisional liquidator to be
appointed in respect of either or all of them and no petition has been
presented and no meeting has been convened for the purpose of winding up of
the Seller, SWALEC, or Hyder plc.
(B) No administration order has been made and no petition for such an order has
been presented in respect of the Seller, SWALEC, or Hyder plc.
(C) No receiver (which expression shall include an administrative receiver) has
been appointed in respect of the Seller, SWALEC, Hyder plc or all or any of
their respective assets.
42
<PAGE>
(D) Neither the Seller, SWALEC, nor Hyder is insolvent, or unable to pay its
debts within the meaning of section 123 Insolvency Act 1986, or has stopped
paying its debts as they fall due.
(E) No voluntary arrangement has been proposed under section 1 Insolvency Act
1986 in respect of the Seller, SWALEC, or Hyder plc.
(F) No event analogous to any of the foregoing has occurred in or outside
England and Wales.
(G) No unsatisfied judgment is outstanding against the Seller or Hyder plc.
7. LITIGATION
----------
No injunction, stop notice or charging order has been made, awarded or
threatened against the Seller which prevents or seeks to prevent the Seller
from selling the Interests to the Purchaser.
43
<PAGE>
SCHEDULE 3
----------
The warranties referred to in clause 7 (The Purchaser's Warranties)
As used in this schedule 3, the term "Material Adverse Effect" with respect to
an entity (or group of entities taken as a whole) means an effect which is
materially adverse to the business, properties, assets, liabilities, results of
operations and financial condition of such entity (or group of entities taken as
a whole).
The Purchaser warrants to the Seller and SWALEC as follows:
1. ORGANIZATION ETC.
----------------
(A) The Purchaser and each of its subsidiaries is a corporation or other legal
entity duly organized, validly existing and in good standing under the laws
of the jurisdiction of its incorporation or organization and has all
requisite corporate power and authority to own, lease and operate the
assets owned and leased by it and to carry on its business as now being
conducted, except where the failure to be so organized, existing or in good
standing or to have such power and authority would not, individually or in
the aggregate, have a Material Adverse Effect (as defined herein) on the
Purchaser and its subsidiaries taken as a whole.
(B) The Purchaser and each of its subsidiaries is duly qualified or licensed to
do business and in good standing in each jurisdiction in which the
property owned, leased or operated by it or the nature of the business
conducted by it makes such qualification or licensing necessary, except
where the failure to be so duly qualified or licensed and in good standing
would not, individually or in the aggregate, have a Material Adverse Effect
on the Purchaser and its subsidiaries taken as a whole.
(C) The Purchaser has made available to the Seller a complete and correct copy
of its charter and by-laws, each as amended to date. Such charter and by-
laws are in full force and effect. The Purchaser is not, nor will the
execution, delivery or performance of this Agreement by Purchaser result
in any, in violation of any provision of its charter or by-laws.
2. CAPITALIZATION.
--------------
(A) As of the date of this agreement, the authorized capital stock of the
Purchaser consists of 100,000,000 shares of the Purchaser's Common Stock,
of which 32,006,800 shares are issued and outstanding and 21,902,850 shares
are reserved for issuance upon exercise of options or warrants or
conversion of convertible securities, and 2,500,000 shares of preferred
stock, $.01 par value, of which no shares are issued and outstanding and
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 between the Purchaser and
Continental Stock Transfer & Trust Company, a true and correct copy of
which Rights Agreement has heretofore been delivered by the Purchaser to
the Seller.
(B) All the outstanding shares of the Purchaser's capital stock are, and the
shares of Convertible Preferred Stock, and any shares of Common Stock into
or for which
44
<PAGE>
such Convertible Preferred Stock is convertible or redeemable, will be,
when issued and paid for in accordance with the terms hereof, duly
authorized, validly issued, fully paid and nonassessable and not subject to
any preemptive rights of third parties in respect thereby.
3. AUTHORITY
---------
(A) The Purchaser has the requisite corporate power and authority to execute
and deliver this agreement and to perform its obligations under this
agreement.
(B) The execution, delivery and performance of this agreement by the Purchaser
have been duly authorized by all necessary corporate action on the part of
the Purchaser and no other corporate proceedings on the part of the
Purchaser, as the case may be, are necessary to authorize this agreement or
to perform its obligations under this agreement.
(C) This agreement has been duly executed and delivered by the Purchaser and,
assuming this agreement constitutes a valid and binding obligation of the
Seller, constitutes a valid and binding obligation of the Purchaser,
enforceable against the Purchaser in accordance with its terms except as
the enforceability thereof may be limited by the effect of (x) bankruptcy,
insolvency, reorganization, moratorium or other similar laws now or
hereafter in effect relating to or affecting the rights and remedies of
creditors and (y) general principles of equity, whether enforcement is
considered in a proceeding in equity or at law, and the discretion of the
court before which any proceedings therefor may be brought.
4. CONSENTS AND APPROVALS; NO VIOLATIONS.
--------------------------------------
(A) Neither the execution, delivery or performance of this agreement by the
Purchaser nor the consummation by the Purchaser of the transactions
contemplated by this agreement:
(i) require any filing with, or permit, authorization, consent or
approval of, any court, arbitral tribunal, administrative agency or
commission or other governmental or other regulatory authority or
agency (a "Governmental Entity");
(ii) result in a breach of or default under any material obligation,
agreement or condition contained in any security, contract,
indenture, agreement or instrument (including, without limitation,
any loan or note agreement or indenture relating to any outstanding
securities) to which the Purchaser or any subsidiary is a party or
by which the Purchaser or any material subsidiary may be bound;
(iii) violate any order, writ, injunction, decree, statute, rule or
regulation applicable to the Purchaser
provided that the foregoing warranties shall be deemed to be in breach
only, in the case of subparagraph (i), where failure to obtain such
permits, authorizations, consents or approvals or to make such filings,
and, in the case of subparagraphs (ii)
45
<PAGE>
and (iii), for violations, breaches, defaults or other occurrences which,
in either case, would prevent or delay consummation of this agreement in
any material respect or would have a Material Adverse Effect on the
Purchaser and its subsidiaries taken as a whole.
5. COMMISSION REPORTS AND FINANCIAL STATEMENTS.
-------------------------------------------
(A) The Purchaser has filed with the Commission, and has made available to the
Seller, true and complete copies of the Commission Documents (including all
amendments thereto). The Commission Documents are all the filings with the
Commission that the Purchaser was required to make under the Exchange Act
from 23rd March, 1996 to the Completion Date.
(B) The Commission Documents, including without limitation any financial
statements or schedules included therein, at the time filed:
(i) did not contain any untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary in
order to make the statements therein, in light of the circumstances
under which they were made, not misleading and
(ii) complied in all material respects with the applicable requirements of
the Exchange Act or the Securities Act, as the case may be.
(C) The consolidated balance sheets of the Purchaser and its consolidated
subsidiaries for the fiscal years ended December 31 in each of the years
1993 and 1994, and the related consolidated statements of income,
stockholder's equity and cash flows for the fiscal years respectively
ending on such dates, accompanied by reports thereon containing opinions by
the Purchaser's then current certified public accountants (copies of which
have been furnished to you) have been prepared in accordance with U.S.
generally accepted accounting principles consistently applied and present
fairly the financial position of the Purchaser and its consolidated
subsidiaries as of such dates and the results of their operations and cash
flows for such years.
(D) The consolidated financial statements of the Purchaser included in the
Commission Documents comply as to form in all material respects with
applicable accounting requirements and with the published rules and
regulations of the Commission with respect thereby, have been prepared in
accordance with U.S. generally accepted accounting principles applied on a
consistent basis during the periods presented (except as may be indicated
in the notes thereto or, in the case of the unaudited statements, as
permitted on the Purchaser's Form 10-Q as filed with the Commission under
the Exchange Act) and fairly present (subject, in the case of the unaudited
statements, to normal, recurring audit adjustments which will not be
material in amount or effect) in all material respects the consolidated
financial position of the Purchaser and its consolidated subsidiaries as at
the dates thereof and the consolidated results of their operations and cash
flows for the periods then ended.
46
<PAGE>
6. ABSENCE OF CERTAIN CHANGES.
--------------------------
Except as disclosed in the Commission Documents, since June 30, 1996, the
Purchaser has conducted its business in the ordinary course of such
business and there has not been:
(i) any event or occurrence which has had any Material Adverse Effect on
the Purchaser and its subsidiaries taken as a whole,
(ii) any declaration, setting aside or payment of any dividend or other
distribution with respect to its capital stock or
(iii) any material change in its accounting principles, practices or
methods.
7. LITIGATION.
----------
Except as disclosed in the Commission Document, there is no suit, claim,
action, proceeding or investigation pending or, to the best knowledge of
the Purchaser, threatened, against the Purchaser or any of its subsidiaries
before any governmental entity which, in the aggregate, is reasonably
likely to have a Material Adverse Effect on the Purchaser and its
subsidiaries taken as a whole or the ability of the Purchaser to perform
its obligations under this agreement. Neither the Purchaser nor any of its
subsidiaries is subject to any outstanding order, writ, injunction or
decree which, insofar as can be reasonably foreseen, individually or in the
aggregate, would have a Material Adverse Effect on the Purchaser and its
subsidiaries taken as a whole or the ability of the Purchaser to perform
its obligations under this agreement.
47
<PAGE>
SCHEDULE 4
----------
LIMITATIONS ON LIABILITY UNDER THE WARRANTIES
---------------------------------------------
WARRANTIES
- ----------
Subject to the next sentence, notwithstanding anything in this agreement to the
contrary, the provisions of this Schedule shall operate to limit the liability
of one party (the "Defaulting Party") in respect of any claim by the other
party (the "Non-defaulting Party") for any breach of the Agreement (including
any breach of or inaccuracy in the Defaulting Party's Warranties). For the
purpose of this schedule, SWALEC, the Seller and each Relevant Member (as
defined in paragraph 2 below) shall collectively be deemed to be one party.
The provisions of this Schedule 4 shall not limit, affect or impair the
liability of any party or Holder of Registrable Securities under sub-clauses
11(F) to 11(K), the Purchaser's liability under clause 13(D) or clause 14(G) of
the agreement or the Seller's and SWALEC's liability under clause 9 of the
agreement. All other obligations, covenants, undertakings, indemnities and
warranties contained in the agreement are referred to in this schedule as the
"Obligations."
1. LIMITATION ON QUANTUM
---------------------
(A) The Non-defaulting Party shall not be entitled in any event to any payment
in respect of any claim or claims under any of the Defaulting Party's
Obligations unless and until the amount of any individual claim exceeds
(Pounds)10,000; PROVIDED THAT the total aggregate liability of the
Defaulting Party for breach of the Defaulting Party's Obligations shall
not in any event exceed (Pounds) 52,080,000 or, if the Defaulting Party is
the Seller, SWALEC and the Relevant Member, the aggregate amount payable by
the Seller, SWALEC and the Relevant Member pursuant to paragraph 2 below or
(if less) (Pounds)52,080,000.
(B) For the purpose of paragraph I(A), where a claim relates to more than one
event, circumstance, act or omission which event, circumstance, act or
omission would separately constitute a breach of or give rise to a claim
for breach of any of the Defaulting Party's Obligations, such claim shall
be treated as a separate claim in respect of each such event, circumstance,
act or omission.
2. MANNER OF SATISFYING CLAIMS
---------------------------
The liability of the Seller, SWALEC and each Relevant Member in respect of
all claims brought by the Purchaser for breach of the Obligations (the
"Indemnification Amount") shall be satisfied solely by the payment to the
Purchaser of the proceeds from the Sale, whenever consummated, by the
Relevant Member of that number of the Convertible Preferred Stock issued to
the Seller on Completion or the Common Stock issued to the Seller or
another member of the Seller's Group upon conversion of such Convertible
Preferred Stock (the "Stock") rounded upward to the nearest whole share,
which is derived by dividing the Indemnification Amount by the
48
<PAGE>
ask/bid price of the Stock on the date the Indemnification Amount is agreed
by the parties (the "Indemnification Shares"). The Seller shall procure
that Indemnification Shares then owned by the Relevant Member shall be held
by the Relevant Member and shall be sold, subject to compliance with
applicable law as soon as practicable, at the direction of the Purchaser,
and the proceeds of the Sale (net of any taxes arising from such Sale) of
such Indemnification Shares shall be remitted to the Purchaser. To the
extent that the Seller is unable to satisfy its obligations pursuant to
this clause 2 due to a prior disposal of some or all the Indemnification
Shares, the Seller shall first remit to the Purchaser any proceeds (net of
any taxes arising from such Sale) from prior Sales of the Indemnification
Shares and thereafter the proceeds from the Sale (net of any taxes arising
from such Sale) of the Relevant Member's existing holdings of
Indemnification Shares. No further payment shall be required to be made by
the Seller, SWALEC or any Relevant Member once proceeds of the Sale of all
the Stock has been paid to the Purchaser. For the purposes of this
paragraph 2, "Relevant Member" means a member of the Seller's Group which,
(save in the case of SWALEC) having complied with clause 10(E) of the
agreement, holds the Stock for the time being and "Sale" means a sale of
Stock by a Relevant Member to a person who or which is not a member of the
Seller's Group.
3. TIME LIMITS FOR BRINGING CLAIM
------------------------------
No claim shall be brought against the Defaulting Party in respect of any
breach of the Defaulting Party's Obligations unless the Non-defaulting
Party shall have given to the Defaulting Party written notice of such claim
specifying (in reasonable detail), in so far as then known to the Non-
defaulting Party and is reasonably necessary for the Defaulting Party to
ascertain the general nature of the following, the matter which gives rise
to the breach or claim, the nature of the breach or claim and the
approximate amount claimed in respect thereof (detailing the Non-defaulting
Party's calculation of the loss thereby alleged to have been suffered by
it) within 90 days after the officers of the Defaulting Party become aware
of the basis of such claim and in any event on or before the sixth
anniversary of Completion.
PROVIDED that the liability of the Defaulting Party shall absolutely
determine (if such claim has not been previously satisfied, settled or
withdrawn) if legal proceedings in respect of such claim shall not have
been commenced within six months of the service of such notice and for this
purpose proceedings shall not be deemed to have been commenced unless they
shall have been properly issued and validly served upon the Defaulting
Party.
AND FURTHER PROVIDED that such a claim, once commenced, is progressed by
the Non-defaulting Party as quickly as reasonably possible.
49
<PAGE>
4. CONDUCT OF LITIGATION
---------------------
(A) Upon the Non-defaulting Party becoming aware of anything which is or may
constitute a breach of any of the Defaulting Party's Obligations or of any
claim, action or demand against it or matter likely to give rise to any of
these in respect of the Defaulting Party's Obligations, the Non-defaulting
Party shall:
(i) promptly notify the Defaulting Party by written notice as soon as
practicable after it appears to the Non-defaulting Party that any
assessment or claim of a third party received by or coming to the
notice of the Non-defaulting Party may result in a claim under the
Defaulting Party's Obligations;
(ii) subject to the Defaulting Party indemnifying the Non-defaulting party
and, if so required by the Non-defaulting Party the relevant member
of the Group to their reasonable satisfaction against any liability,
costs, damages or expenses which may properly be incurred thereby,
take such reasonable action, provide such reasonable assistance and
give such information and access to personnel, premises, chattels,
documents and records to the Defaulting Party and its professional
advisers as the Defaulting Party may reasonably request in order to
investigate, avoid, dispute, resist, mitigate, settle, compromise,
defend or appeal any claim in respect thereof or adjudication with
respect thereto or any claim or potential claim in respect of a
breach of any of the Defaulting Party's Obligations;
(iii) at the request and cost of the Defaulting Party, allow the Defaulting
Party to take the sole conduct of such actions as the Defaulting
Party may deem reasonably appropriate in connection with any such
assessment or claim in the name of the Non-defaulting Party and in
that connection the Non-default ing Party shall give or cause to be
given to the Defaulting Party and at the cost of the Defaulting Party
all such assistance as the Defaulting Party may reasonably require in
avoiding, disputing, resisting, settling, compromising, defending or
appealing any such claim and shall instruct such solicitors or other
professional advisors as the Defaulting Party may nominate to act on
behalf of the Non-defaulting Party but to act in accordance with the
reasonable instructions of the Defaulting Party;
(iv) use all reasonable endeavors to ensure that no admission of
liability, agreement, settlement or compromise is made with any
third party in relation to any such claim or adjudication without the
prior written consent of the Defaulting Party (such consent not to be
unreasonably withheld or delayed); and
(v) take at the cost of the Defaulting Party all reasonable action to
mitigate any loss suffered by it in respect of which a claim could be
made under the Defaulting Party's Obligations.
50
<PAGE>
(B) In any event, the Defaulting Party shall be entitled at any stage and at
its reasonable discretion to settle any such third party assessment or
claim and shall notify the Non-defaulting Party of its decision so to
settle such assessment or claim.
5. NO LIABILITY IF LOSS IS OTHERWISE COMPENSATED FOR
-------------------------------------------------
Non-defaulting Party can only claim once
- ----------------------------------------
(A) The Defaulting Party shall not be liable for breach of any of the
Defaulting Party's Obligations to the extent that the subject of the claim
has been or is made good or is otherwise compensated for without cost to
the Non-defaulting Party.
Tax
- ---
(B) In calculating the liability of the Defaulting Party for any breach of the
Defaulting Party's Obligations there shall be taken into account the amount
by which any tax for which any member of the Non-defaulting Party's Group
is now or may in the future be accountable or liable to be assessed is
reduced or extinguished as a result of the matter giving rise to such
liability PROVIDED THAT no such amount shall be taken into account until
such time as the Non-defaulting Party receives such benefit.
6. ACTS OF NON-DEFAULTING PARTY
----------------------------
No claim shall be against the Defaulting Party under the Defaulting Party's
Obligations to the extent that such claim is attributable to:
(A) any voluntary action, omission, transaction or arrangement carried out
at the request of or with the consent of the Non-defaulting Party
before Completion;
(B) any voluntary act, omission, transaction or arrangement carried out by
the Non-defaulting Party or by persons deriving title from the Non-
defaulting Party or any member of the Non-defaulting Party's Group
(other than an action, omission, transaction or arrangement carried
out pursuant to a legally binding obligation created on or before
Completion) occurring after Completion otherwise than in the ordinary
course of business; or
(C) any admission of liability made after the date hereof by the Non-
defaulting Party or by persons deriving title from the Non-defaulting
Party or any member of the Non-defaulting Party's Group on or after
Completion.
7. RETROSPECTIVE LEGISLATION
-------------------------
No liability shall arise in respect of any breach of any of the Defaulting
Party's Obligations to the extent that liability for such breach occurs or
is increased as a
51
<PAGE>
result of any legislation not in force at the date hereof or change in
rates of taxation which in either case takes effect retrospectively.
8. NON-DEFAULTING PARTY'S KNOWLEDGE
--------------------------------
The Defaulting Party shall not be liable in respect of any claim under the
Defaulting Party's Obligations to the extent that the Non-defaulting Party
or any member of the Defaulting Party's Group which is resident in the
United Kingdom for tax purposes or operates or is registered in the United
Kingdom or any of their respective directors, employees or agents had
actual knowledge of the claim or the matter forming the basis for such
claim on the date of this agreement.
9. NO LIABILITY FOR CONTINGENT OR NON-QUANTIFIABLE CLAIMS
------------------------------------------------------
If any breach of the Defaulting Party's Obligations arises by reason of
some liability which, at the time such breach or claim is notified to the
Defaulting Party, is contingent only or otherwise not capable of being
quantified, then the Defaulting Party shall not be under any obligation to
make any payment in respect of such breach or claim unless and until such
liability ceases to be contingent or becomes capable of being quantified,
as the case may be, before six years from Completion. So long as such
claim shall have been notified to the Defaulting Party in accordance with
paragraph 3 above, then the first proviso to that paragraph shall be
amended in relation to such claim so as to require that (subject to the six
year limit imposed in the previous sentence) legal proceedings be commenced
within six months from the date on which the said liability ceases to be
contingent or becomes capable of being quantified, as the case may be, in
order for the liability of the Defaulting Party not to determine.
10. PAYMENT OF CLAIM TO BE REDUCTION IN PURCHASE PRICE
--------------------------------------------------
Any payment by the Seller or SWALEC in respect of any claim under the
Seller's Warranties shall be deemed to be a reduction in the consideration
paid by the Purchaser under clause 3 of this agreement.
11. OVERRIDING EFFECT
-----------------
If there shall be any inconsistency between the provisions of this schedule
and the remaining provisions of this agreement, then the provisions of this
schedule shall prevail. No one provision of this schedule shall reduce or
prejudice the limitation or reduction of the liability of the Defaulting
Party under any other provision of this schedule.
52
<PAGE>
SCHEDULE 5
----------
(The Seller's Interests)
----------------------
Part A
- ------
(A) Numbers of Shares registered in the name of, and beneficially owned by,
-----------------------------------------------------------------------
members of the Seller's Group
-----------------------------
Number of
Registered Ordinary
Full name address Shares owned
--------------------- ------------- ------------
SWALEC TELCO Newport Road, 60,060,000
Investments Limited St. Mellons,
Cardiff
CF3 9XW
Part B
- ------
(B) Details of Loan Notes registered in the name of, held by or beneficially
------------------------------------------------------------------------
owned by members of the Seller's Group and all other non-trading
----------------------------------------------------------------
indebtedness owed by any member of the Group to any member of the Seller's
--------------------------------------------------------------------------
Group
-----
The following Loan Notes are registered in the name of, held by, or
beneficially owned by the person(s) whose name(s) are set opposite them:
<TABLE>
<CAPTION>
Name of Registered
Principal amount and designation of and, if different,
Loan Notes (or other indebtedness) beneficial owner
- ----------------------------------- ------------------
<S> <C>
1. (Pounds)4,000,000 unsecured Loan Note 1999 (issued on 18 May, 1994) SWALEC TELCO
Investments Limited
2. (Pounds)4,000,000 unsecured Loan Note 2000 (issued on 21 July, 1995) SWALEC TELCO
Investments Limited
3. (Pounds)4,400,000 unsecured Loan Note 2000 (issued on 5 October, 1995) SWALEC TELCO
Investments Limited
4. (Pounds)3,680,000 unsecured Loan Note 2001 (issued on 21 December, 1995) SWALEC TELCO
Investments Limited
5. (Pounds)20,000,000 unsecured Loan Note 2001 (issued on 19 September, 1996) SWALEC TELCO
Investments Limited
(Pounds)36,080,000 SWALEC TELCO
Investments Limited
</TABLE>
53
<PAGE>
SCHEDULE 6
----------
Part A
- ------
The agreements referred to in clause 13(A) (Agreements and other
arrangements to be terminated).
1. the Joint Venture Agreement.
2. the Agreement for Provision of Management Services dated December 15, 1993
between (1) the Purchaser (2), CHUK, (3) SIL and (4) CSW.
Part B
- ------
The agreements referred to in clause 13(B) (Agreements and other
arrangements between the parties that continue in full force and effect)
1. the agreement for the grant of a lease of Colchester House, Colchester
Avenue, Cardiff, between SWALEC and CSW dated 1st October, 1996.
2. Various electricity supply agreements and agreements for the supply of
power supply equipment between SWALEC and CSW.
3. The operating lease for an overhead fibre optic link between SWALEC and CSW
dated 10th May, 1995.
4. Various wayleave agreements, licenses and other consents for the
installation of the Group's telecommunications network.
5. The site sharing agreement in respect of the site at Castleton Radio
Station, Newport, Gwent, between SWALEC and CSW dated 24th January, 1995
(as amended and renewed).
6. Various agreements and arrangements between operating subsidiaries of Hyder
plc and members of the Group for:
(i) the supply of water, the treatment of effluent and the provision of
services ancillary thereto;
(ii) the supply or hire of vehicles and the provision of transport and
vehicle maintenance services; and
(iii) the provision of telecommunications services.
54
<PAGE>
SCHEDULE 7
----------
The deed of release referred to in clause 13(C)
(Form of Deed of Release)
THIS DEED OF RELEASE is made the day of October 1996.
BETWEEN:
1. SOUTH WALES ELECTRICITY PLC of Newport Road, St. Mellons, Cardiff CF3 9XW
("SWE").
2. SWALEC INVESTMENTS LIMITED of Newport Road, St. Mellons, aforesaid
("Swalec").
3. SWALEC TELCO INVESTMENTS LIMITED of Newport Road, St. Mellons, aforesaid
("STIL").
4. INTERNATIONAL CABLETEL INCORPORATED of 110 East 59th Street, 26th Floor,
New York, ("IC (US)").
5. CABLETEL LIMITED (formerly CableTel Holdings (UK) Limited) of CableTel
House, 1 Lakeside Road, Farnborough, Hants GU14 6XP ("IC").
6. CABLETEL UK GROUP INC (formerly OCOM Sub II, Inc.) of CableTel House,
aforesaid ("IC UK").
7. CABLETEL NEWPORT (formerly Newport Cablevision Company) of CableTel House,
aforesaid ("Newport").
8. CABLETEL SOUTH WALES LIMITED of CableTel House, aforesaid ("CableTel").
W H E R E A S:
(A) The parties are the parties to a subscription and shareholders agreement
dated 15th December 1993 (the "Joint Venture Agreement") as amended by
Deeds of Variation dated 15th December 1995 and 28th March 1996.
(B) STIL currently hold 60,060,000 B Ordinary Shares and (Pounds)36,080,000
Loan Notes evidencing the indebtedness of Newport to STIL in the sum of
(Pounds)36,080,000 (together, the "Interests").
55
<PAGE>
(C) By an agreement of even date herewith (the "Agreement") between STIL, SWE
and IC (US), STIL agreed to sell and IC (US) agreed to purchase all of
STIL's Interests.
Pursuant to the Agreement STIL and IC (US) have agreed to procure that all
parties to the Subscription Agreement enter into this Deed of Release.
NOW IT IS HEREBY AGREED as follows:
1. INTERPRETATION
--------------
Expressions used but not otherwise defined in this Deed and which are
defined in the Joint Venture Agreement shall bear the same meaning in this
Deed. "Management Agreement" means an agreement for the provision of
management services dated December 15, 1993 between (1) IC (US) (2)
CableTel Holdings (UK) Limited (3) Swalec and (4) CableTel.
2. RELEASE AND WAIVER OF IC (US)
-----------------------------
In consideration of the release and waiver contained in clause 3 of this
Deed of Release, IC (US), IC, IC UK, Newport and CableTel hereby release
and discharge STIL, SWE, Swalec and all subsidiaries, subsidiary
undertakings and any holding company of SWE, Swalec or STIL and all other
subsidiaries and subsidiary undertakings of any such holding company (the
"STIL Group") and all officers, employees and agents thereof from all
demands, duties, responsibilities, obligations and liabilities under or in
respect of the Joint Venture Agreement (as amended), the Articles of
Association, the Management Agreement and any document entered into
pursuant thereto, or contemplated thereby and hereby waive all claims of
whatsoever nature against all officers, employees and agents of the STIL
Group and hereby waive all claims against the STIL Group arising or
accruing under or pursuant to the Joint Venture Agreement (as amended), the
Management Agreement or the Articles of Association of Newport and any
document entered into pursuant thereto or contemplated thereby.
3. RELEASE AND WAIVER OF SWE GROUP
-------------------------------
In consideration of the release and waiver contained in clause 2 of this
Deed of Release, SWE, Swalec and STIL hereby release and discharge to
Cabletel (UK) Limited, IC (US), IC, IC UK, Newport, CableTel and all
subsidiaries, subsidiary undertakings and any holding company of IC (US),
IC, IC UK, Newport or CableTel and all other subsidiaries and subsidiary
undertakings of any such holding company (the "IC US Group") and all
officers, employees and agents thereof from all demands, duties,
responsibilities, obligations and liabilities under or in respect of the
Joint Venture Agreement (as amended), the Management Agreement, the
Articles of Association and any document entered into pursuant thereto or
contemplated thereby and hereby waive all claims of whatsoever nature
against all officers, employees and agents of the IC US Group and hereby
waive all claims against the IC US Group arising or accruing under or
pursuant to the Joint Venture Agreement
56
<PAGE>
(as amended) the Management Agreement or the Articles of Association of
Newport and any document entered into pursuant thereto or contemplated
thereby.
PROVIDED ALWAYS that this clause shall not in any way prejudice, limit or
affect nor operate as a release or waiver of, the indemnity contained in
clause 13(D) of the Agreement.
4. COUNTERPARTS
------------
This Deed may be signed in two or more counterparts and by each party
hereto on separate counterparts, each of which when so signed and delivered
shall be an original but all counterparts together shall constitute one and
the same instrument.
57
<PAGE>
IN WITNESS WHEREOF this Deed has been executed as a Deed by the parties thereto
but remains undelivered until the day and year first above written.
EXECUTED as a Deed by
SOUTH WALES ELECTRICITY PLC
acting by:
Director
Director/Secretary
EXECUTED as a Deed by
SWALEC INVESTMENTS LIMITED
acting by:
Director
Director/Secretary
EXECUTED as a Deed by
SWALEC TELCO INVESTMENTS LIMITED
acting by:
Director
Director/Secretary
EXECUTED as a Deed by
INTERNATIONAL CABLETEL INCORPORATED
acting by its duly authorized representative:
EXECUTED as a Deed by
CABLETEL LIMITED
acting by:
Director
58
<PAGE>
Director/Secretary
EXECUTED as a Deed by
CABLETEL UK GROUP INC
acting by its duly authorized representative:
EXECUTED as a Deed by
CABLETEL NEWPORT
acting by:
Director
Director/Secretary
EXECUTED as a Deed by
CABLETEL SOUTH WALES LIMITED
acting by:
Director
Director/Secretary
59
<PAGE>
SCHEDULE 8
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(The Purchaser's Commission Documents)
1. Annual Report on Form 10-K, for the fiscal year ended December 31, 1995.
2. Annual Report to Shareholders, for the year ended December 31, 1995.
3. Quarterly Report on Form 10-Q, for the quarterly period ended March 31,
1996.
4. Quarterly Report on Form 10-Q/A-1 for the quarterly period ended March 31,
1996.
5. Preliminary Proxy Statement, as filed on April 29, 1996.
6. Current Report on Form 8-K/A-1, as filed on May 9, 1996.
7. Current Report on Form 8-K, as filed on May 9, 1996.
8. Current Report on Form 8-K, as filed on June 11, 1996.
9. Quarterly Report on Form 10-Q for the quarterly period ended June 30, 1996
dated August 14, 1996.
10. Current Report on Form 8-K, as filed on September 3, 1996.
60
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SIGNATURES
- ----------
SWALEC TELCO INVESTMENTS LIMITED
By its attorney: J.A. THOMAS
----------------------------------------
Name: J.A. THOMAS
Title:
SOUTH WALES ELECTRICITY PLC
By its attorney: J.A. THOMAS
----------------------------------------
Name: J.A. THOMAS
Title:
INTERNATIONAL CABLETEL INCORPORATED
By: RICHARD LUBASCH
---------------------------------------------------
Name:
Title:
61
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EXHIBIT 23.1
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the captions "Experts" and
"Selected Consolidated Financial Information" in the Registration Statement
(Form S-3) and related Prospectus of International CableTel Incorporated for
the registration of 3,365,000 shares of the Company's Common Stock 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
November 22, 1996
<PAGE>
EXHIBIT 23.2
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Experts" in the
Registration Statement (Form S-3) and related Prospectus of International
CableTel Incorporated for the registration of 3,365,000 shares of the Company's
Common Stock and to the incorporation by reference therein of our report dated
March 15, 1996, with respect to the consolidated financial statements of NTL
Group Limited 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
November 22, 1996
