<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MAY 22, 1997
REGISTRATION NO. 333-25577
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
----------------
AMENDMENT NO. 1
TO
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
----------------
NTL INCORPORATED
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
----------------
DELAWARE 4899 52-1822078
(PRIMARY STANDARD INDUSTRIAL CLASSIFICATION CODE NUMBER)
(I.R.S. EMPLOYER
(STATE OR OTHER IDENTIFICATION NUMBER)
JURISDICTION
OFINCORPORATION OR
ORGANIZATION)
110 EAST 59TH STREET NEW YORK, NEW YORK 10022 (212) 906-8440
(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
NTL INCORPORATED 110 EAST 59TH STREET NEW YORK, NEW YORK 10022 (212) 906-8440
(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: As soon as
practicable after the Registration Statement becomes effective.
If the securities being registered on this form are being offered in
connection with the formation of a holding company and there is compliance
with General Instruction G, check the following box. [_]
----------------
THIS REGISTRATION STATEMENT SHALL HEREAFTER BECOME EFFECTIVE IN ACCORDANCE
WITH THE PROVISIONS OF SECTION 8(a) OF THE SECURITIES ACT OF 1933, AS AMENDED.
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<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 STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE +
+UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF +
+ANY SUCH STATE. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
SUBJECT TO COMPLETION, DATED MAY 22, 1997
PROSPECTUS
[LOGO] NTL INCORPORAED
OFFER FOR ALL OUTSTANDING
10% SENIOR NOTES DUE 2007 IN EXCHANGE FOR
10% SERIES B SENIOR NOTES DUE 2007
AND
13% SENIOR REDEEMABLE EXCHANGEABLE PREFERRED STOCK IN EXCHANGE FOR
13% SERIES B SENIOR REDEEMABLE EXCHANGEABLE PREFERRED STOCK
OF
NTL INCORPORATED
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M. NEW YORK CITY TIME, ON ,
1997, UNLESS EXTENDED
NTL Incorporated (formerly International CableTel Incorporated), a Delaware
corporation (the "Company"), hereby offers, upon the terms and subject to the
conditions set forth in this Prospectus and the accompanying Letters of
Transmittal (which together constitute the "Exchange Offer"), to exchange (i)
an aggregate principal amount of up to $400,000,000 10% Series B Senior Notes
Due 2007 (the "New Notes") of the Company for a like principal amount of the
issued and outstanding 10% Senior Notes Due 2007 (the "Old Notes" and, together
with the New Notes, the "Notes") and (ii) up to 100,000 shares of 13% Series B
Senior Redeemable Exchangeable Preferred Stock, par value $0.01 per share (and
up to an additional 150,000 shares of such stock issuable from time to time
instead of cash dividends, the "New Preferred Stock" and, together with the New
Notes, the "New Securities"), of the Company for a like number of shares of the
issued and outstanding 13% Senior Redeemable Exchangeable Preferred Stock
(including any additional shares of such stock issued from time to time instead
of cash dividends, the "Old Preferred Stock" and, together with the New
Preferred Stock, the "Preferred Stock") (the Old Preferred Stock together with
the Old Notes, the "Old Securities" and, together with the New Securities, the
"Securities"), in each case, from the respective holders thereof (the
"Holders"). The terms of the New Notes and the New Preferred Stock are
identical in all material respects to the Old Notes and the Old Preferred
Stock, respectively, except that the New Securities do not include transfer
restrictions, registration rights and special interest or dividend provisions
included in the Old Securities.
The Old Notes are, and the New Notes will be, senior unsecured obligations of
the Company, ranking pari passu in right of payment of principal and interest
with all other existing and future unsubordinated obligations of the Company
and ranking senior to all other existing and future subordinated debt of the
Company. The Subordinated Debentures, if and when issued, will be subordinated
to all Senior Debt (as defined) of the Company. As of March 31, 1997, the
Company had approximately $1,455 million of unsubordinated debt (all of which
constitutes Senior Debt) outstanding. The Company is a holding company and,
therefore, the Old Notes are, and the New Notes and the Subordinated Debentures
(if and when issued) will be, effectively subordinated to all existing and
future indebtedness and other liabilities and commitments of the Company's
subsidiaries, which effectively rank senior in right of payment to the Notes.
As of March 31, 1997, such subsidiaries had approximately $619 million of total
liabilities, including approximately $238 million of indebtedness, which
effectively rank senior in right of payment to the Notes.
The New Notes will bear interest from the most recent date to which interest
has been paid on the Old Notes or, if no interest has been paid on the Old
Notes, from February 12, 1997. Accordingly, if the relevant record date for
interest payment occurs after the consummation of the Exchange Offer,
registered holders of New Notes on such record date will receive interest
accruing from the most recent date to which interest has been paid or, if no
interest has been paid, from February 12, 1997. If, however, the relevant
record date for interest payment occurs prior to the consummation of the
Exchange Offer, registered holders of Old Notes on such record date will
receive interest accruing from the most recent date to which interest has been
paid or, if no interest has been paid, from February 12, 1997. Old Notes
accepted for exchange will cease to accrue interest from and after the date of
consummation of the Exchange Offer, except as set forth in the immediately
preceding
(continued on page 2)
SEE "RISK FACTORS" ON PAGE 15 OF THIS PROSPECTUS FOR A DESCRIPTION OF CERTAIN
RISKS TO BE CONSIDERED BY HOLDERS WHO TENDER THEIR OLD SECURITIES IN THE
EXCHANGE OFFER.
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 , 1997.
<PAGE>
(continued from front cover page)
sentence. Holders of Old Notes whose Old Notes are accepted for exchange will
not receive any payment in respect of interest on such Old Notes otherwise
payable on any interest payment date the record date for which occurs on or
after consummation of the Exchange Offer.
The New Securities are being offered hereunder in order to satisfy certain
obligations of the Company contained in the Registration Rights Agreements (as
defined). Based on interpretations of the staff of the Securities and Exchange
Commission (the "Commission"), as set forth in no-action letters issued to
third parties, the Company believes that the New Notes and New Preferred Stock
issued pursuant to the Exchange Offer in exchange for the Old Notes and Old
Preferred Stock, respectively, may be offered for resale, resold and otherwise
transferred by Holders thereof (other than any such Holder which is an
"affiliate" of the Company within the meaning of Rule 405 under the Securities
Act of 1933, as amended (the "Securities Act")), without compliance with the
registration and prospectus delivery provisions of the Securities Act,
provided that such New Securities are acquired in the ordinary course of such
Holders' business and such Holders have no arrangement or understanding with
any person to participate in the distribution (within the meaning of the
Securities Act) of such New Securities. The Company acknowledges and each
Holder, other than a broker-dealer, must acknowledge that it is not engaged
in, does not intend to engage in, and has no arrangement or understanding with
any person to participate in the distribution of New Securities. If any Holder
is an affiliate of the Company, is engaged in or intends to engage in or has
any arrangement or understanding with any person to participate in the
distribution of the New Securities to be acquired pursuant to the Exchange
Offer, such Holder (i) could not rely on the applicable interpretations of the
staff of the Commission and (ii) must comply with the registration and
prospectus delivery requirements of the Securities Act in connection with any
resale transaction. Each broker-dealer who holds Old Securities acquired for
its own account as a result of market-making activities or other trading
activities, and who receives New Securities in exchange for such Old
Securities pursuant to the Exchange Offer, may be an "underwriter" within the
meaning of the Securities Act and must acknowledge that it will deliver a
prospectus meeting the requirements of the Securities Act in connection with
any resale of such New Securities. The Letters of Transmittal state that by so
acknowledging and by delivering a prospectus, a broker dealer will not be
deemed to admit that it is an "underwriter" within the meaning of the
Securities Act. This Prospectus, as it may be amended or supplemented from
time to time, may be used by a broker-dealer in connection with resales of New
Notes and New Preferred Stock received in exchange for Old Notes and Old
Preferred Stock, respectively, where such Old Security was acquired by such
broker-dealer as a result of market-making activities or other trading
activities. The Company has agreed that, starting on the Expiration Date (as
defined) and ending at the close of business on the 180th day following the
Expiration Date it will make this Prospectus available to any broker-dealer
for use in connection with any such resale. See "Plan of Distribution."
The Company will not receive any proceeds from the Exchange Offer. The
Company will pay all of the expenses incident to the Exchange Offer. Tenders
of Old Securities pursuant to the Exchange Offer may be withdrawn at any time
prior to the Expiration Date. If the Company terminates the Exchange Offer and
does not accept for exchange any Old Securities, the Company will promptly
return Old Securities to the Holders thereof. See "The Exchange Offer."
The Old Securities are eligible for trading in the Private Offerings,
Resales and Trading through Automated Linkages ("PORTAL") market. Prior to
this Exchange Offer, there has been no public market for the Securities.
Although the Initial Purchasers (as defined) have informed the Company that
they intend to make a market in the New Securities, they are not obligated to
do so and any such market-making may be discontinued at any time without
notice. If a market for the Securities should develop, the New Notes and the
New Preferred Stock could trade at a discount from its principal value and
liquidation preference, respectively. The Company does not currently intend to
list the New Securities on any securities exchange or to seek approval for
quotations through any automated quotation systems. There can be no assurance
that a market for the New Securities will develop.
2
<PAGE>
UNTIL . (90 DAYS AFTER THE DATE OF THIS PROSPECTUS) DEALERS AFFECTING
TRANSACTIONS IN THE NEW SECURITIES, WHETHER OR NOT PARTICIPATING IN THE
EXCHANGE OFFER, MAY BE REQUIRED TO DELIVER A PROSPECTUS. THIS OBLIGATION IS IN
ADDITION TO THE OBLIGATION OF DEALERS TO DELIVER A PROSPECTUS WHEN ACTING AS
UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR SUBSCRIPTIONS.
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 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 may also 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-
4 (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, 1996, dated March 28, 1997;
(b) the Company's Quarterly Report on Form 10-Q for the quarter ended
March 31, 1997, dated May 13, 1997;
(c) the Company's Current Reports on Form 8-K dated January 23, 1997
(filed January 28, 1997), January 28, 1997 (filed January 30, 1997),
February 13, 1997 (filed February 19, 1997), March 26, 1997 (filed March
27, 1997) and May 8, 1997 (filed May 9, 1997); and
(d) the Company's definitive proxy statement for the Annual Meeting of
its stockholders to be held on June 3, 1997 (filed April 28, 1997).
3
<PAGE>
All documents subsequently filed by the Company pursuant to Sections 13(a),
13(c), 14 or 15(d) of the Exchange Act prior to the termination of the offering
of securities hereunder shall be deemed to be incorporated by reference in this
Prospectus and to be a part of this Prospectus from the date of the filing
thereof. Any statement contained in a document incorporated or deemed to be
incorporated by reference herein shall be deemed to be modified or superseded
for purposes of this Prospectus to the extent that a statement contained herein
or in any 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.
THIS PROSPECTUS INCORPORATES DOCUMENTS BY REFERENCE WHICH ARE NOT PRESENTED
HEREIN OR DELIVERED HEREWITH. THESE DOCUMENTS ARE AVAILABLE WITHOUT CHARGE TO
EACH PERSON TO WHOM THIS PROSPECTUS IS DELIVERED UPON THE REQUEST OF SUCH
PERSON TO: NTL INCORPORATED, 110 EAST 59TH STREET, 26TH FLOOR, NEW YORK, NEW
YORK 10022, ATTENTION: RICHARD J. LUBASCH, ESQ.; TELEPHONE: (212) 906-8440. IN
ORDER TO ENSURE TIMELY DELIVERY OF THE DOCUMENTS, ANY REQUEST SHOULD BE NO LESS
THAN FIVE DAYS PRIOR TO THE EXPIRATION OF THE EXCHANGE OFFER.
----------------
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 $1.6395 per (Pounds)1.00, the noon buying rate in The
City of New York for cable transfers in pounds sterling as certified for
customers purposes by the Federal Reserve Bank of New York (the "Noon Buying
Rate") on March 31, 1997. See "Exchange Rates" for information regarding the
Noon Buying Rate for the past five fiscal years. On May 19, 1997, the Noon
Buying Rate was $1.638 per (Pounds)1.00.
----------------
The New Securities exchanged pursuant to the Exchange Offer will be available
initially only in book-entry form and will be issued in the form of Global
Securities (as defined). The Global Securities will be deposited with, or on
behalf of, The Depository Trust Company ("DTC") and registered in its name or
in the name of Cede & Co., its nominee. Beneficial interests in the Global
Securities will be shown on, and transfers thereof will be effected through,
records maintained by DTC and its Participants (as defined). Beneficial
interests in the Notes (but not the Preferred Stock) may be held through the
Euroclear System ("Euroclear") and Cedel Bank, societe anonyme ("CEDEL"). After
initial issuance of the Global Securities, New Securities in certificated form
will be issued in exchange for the Global Securities only in limited
circumstances. See "Book-Entry; Delivery and Form" for further discussion of
these matters and for definitions of certain of the capitalized terms used in
this paragraph.
4
<PAGE>
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by the more detailed
information and financial statements appearing elsewhere in this Prospectus or
incorporated in this Prospectus by reference. Prospective investors should
carefully consider the factors set forth under the caption "Risk Factors."
Capitalized terms not defined in this Summary have the meanings given them
elsewhere in this Prospectus. Certain technical terms used in this Prospectus
are defined in the glossary which begins on page A-1 of this Prospectus.
THE COMPANY
NTL Incorporated, formerly known as International CableTel Incorporated (the
"Company"), was incorporated in April 1993 under the laws of the State of
Delaware. 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 operated by the Company. In
the past twelve months, the Company has expanded its local telecommunications
("telecoms") and television services business to include a national telecoms
network, national television and radio broadcast transmission services, and
Internet service provision as well as other related communications businesses.
In its franchise areas, which are clustered in five regional areas, the
Company is constructing integrated, high capacity, high speed, full-service
networks which allows the Company to offer customers residential telephone,
cable television ("CATV") and business telecommunications services. The
Company's local networks provide a two-way communications pathway which is also
capable of delivering new services which may emerge from the convergence of
telecommunications, information services and entertainment.
In May 1996, the Company purchased NTL Group Limited and its subsidiaries
("NTL Group") which provides broadcast and broadband transmission and
communications services on a nationwide basis in the United Kingdom. NTL
Group's core business has been the transmission of television programming for
the Independent Television ("ITV") (Channel 3) companies, Channel 4 and the
Welsh Fourth Channel ("S4C"). NTL Group has also been awarded the contract for
the transmission of the Channel 5 signal for Channel 5 Broadcasting Limited.
Under contracts with those companies, the Company is responsible for operating,
monitoring and maintaining a broadcast transmission service. NTL Group has
enhanced its national infrastructure of over 1,200 owned and shared
transmission sites throughout the United Kingdom to diversify beyond its core
business and has expanded its national network to enter into the
telecommunications and radio sectors. The Company, through NTL Group, now
operates a national broadband microwave communications network which it uses to
provide carrier and trunk services to telecommunications companies, provides
independent radio signal transmission, leases and manages cell sites for
wireless telephony operators, commissions and maintains emergency service radio
systems, operates satellite earth stations that uplink video signals to
satellites and designs and builds studio and broadcast facilities. Management
believes that the combination of the Company's local, high capacity, full-
service networks and NTL Group's national diversified network creates a variety
of strategic benefits for the Company.
In October 1996, the Company announced a new organizational structure
integrating its local telephone, cable television and internet businesses with
NTL Group's national telecommunications and television transmission businesses.
Five business divisions were created for the combined organization: Local
Telecoms and Television Services, National Telecoms Services, Broadcast
Services, Internet and Information Services and National Media Services. In
March 1997, the Company changed its name to NTL Incorporated to reflect this
organizational structure and capitalize on NTL Group's legacy in the United
Kingdom as a provider of reliable communications services. See "The Company."
5
<PAGE>
THE EXCHANGE OFFER
Up to $400,000,000 principal amount of New Notes
Securities Offered.......... and 250,000 shares of New Preferred Stock
comprised of up to 100,000 shares issuable in
exchange for Old Preferred Stock and up to
150,000 additional shares issuable from time to
time instead of cash dividends. The terms of the
New Securities and the Old Securities are
identical in all material respects, except that
the terms of the New Securities do not include
certain transfer restrictions, registration
rights, and special interest or dividend
provisions relating to the Old Preferred Stock,
each as summarized below under "Registration
Rights."
The Exchange Offer.......... The New Notes are being offered in exchange for a
like principal amount of Old Notes that are
properly tendered and accepted. The shares of New
Preferred Stock are being offered in exchange for
a like number of shares of Old Preferred Stock
that are properly tendered and accepted. The
issuance of the New Securities is intended to
satisfy obligations of the Company contained in
the Registration Rights Agreements (the
"Registration Rights Agreements") each dated
February 12, 1997, each by and among the Company
and Donaldson, Lufkin & Jenrette Securities
Corporation, Chase Securities Inc. and Merrill
Lynch, Pierce, Fenner & Smith Incorporated (the
"Initial Purchasers") as the initial purchasers
with respect to the initial sale of the Old
Securities. For procedures for tendering, see
"The Exchange Offer."
Tenders, Expiration Date; The Exchange Offer will expire at 5:00 p.m., New
Withdrawal............... York City time, on , 1997, or such later
date and time to which it is extended (the
"Expiration Date"). Each holder tendering Old
Securities must acknowledge that it is not
engaging in, nor intends to engage in, a
distribution of the New Securities. The tender of
Old Securities pursuant to the Exchange Offer may
be withdrawn at any time prior to the Expiration
Date. Any Old Securities not accepted for
exchange for any reason will be returned without
expense to the tendering holder thereof as
promptly as practicable after the expiration or
termination of the Exchange Offer.
Federal Income Tax The exchange pursuant to the Exchange Offer
Consequences............. should not result in any income, gain or loss to
holders of Old Securities exchanging the same for
New Securities pursuant to the Exchange Offer or
the Company for federal income tax purposes. See
"Certain Federal Income Tax Considerations."
Use of Proceeds............. There will be no proceeds to the Company from the
exchange pursuant to the Exchange Offer.
Exchange Agents............. The Chase Manhattan Bank is serving as the
Exchange Agent for the Exchange Offer in respect
of the Notes. Continental Stock Transfer & Trust
Company is serving as the Exchange Agent for the
Exchange Offer in respect of the Preferred Stock.
6
<PAGE>
Shelf Registration Under certain circumstances, certain holders of
Statement................ Old Securities (including holders who may not
participate in the Exchange Offer, or who may not
freely resell New Securities received in the
Exchange Offer) may require the Company to file,
and cause to become effective, a shelf
registration statement under the Securities Act,
which would cover resales of Old Securities by
such holders. See "Registration Rights."
7
<PAGE>
CONSEQUENCES OF EXCHANGING OLD SECURITIES PURSUANT TO THE EXCHANGE OFFER
Based on interpretations by the staff of the Commission in no action letters
issued to third parties, generally holders of Old Securities (other than any
holder who is an "affiliate" of the Company within the meaning of Rule 405
under the Securities Act) who exchange their Old Securities for New Securities
pursuant to the Exchange Offer may offer such New Securities for resale, resell
such New Securities, and otherwise transfer such New Securities without
compliance with the registration and prospectus delivery provisions of the
Securities Act; provided that such New Securities are acquired in the ordinary
course of the holders' business and such holders, other than brokers-dealers,
are not engaged in, do not intend to engage in and have no arrangement or
understanding with any person to participate in, a distribution of such New
Securities.
Each broker-dealer who holds Old Securities acquired for its own account as a
result of market-making activities or other trading activities, and who
receives New Securities in exchange for such Old Securities pursuant to the
Exchange Offer, may be an "underwriter" within the meaning of the Securities
Act and must acknowledge that it will deliver a prospectus meeting the
requirements of the Securities Act in connection with any resale of such New
Securities. See "Plan of Distribution."
To comply with the securities laws of certain jurisdictions, it may be
necessary to qualify for sale or register thereunder the New Securities prior
to offering or selling such New Securities. The Company has agreed, pursuant to
the Registration Rights Agreements and subject to certain specified limitations
therein, to register or qualify the New Securities held by broker-dealers for
offer or sale under the securities or blue sky laws of such jurisdictions as
any such holder of such New Securities reasonably requests in writing. Unless
the Company is so requested, the Company does not intend to register or qualify
the sale of the New Securities in any such jurisdictions.
If a Holder of Old Notes does not exchange such Old Notes for New Notes
pursuant to the Exchange Offer, such Old Notes will continue to be subject to
provisions of the Indenture regarding transfer and exchange of the Old Notes
and the restrictions on transfer contained in the legend on the Old Notes. If a
Holder of Old Preferred Stock does not exchange such Old Preferred Stock for
New Preferred Stock pursuant to the Exchange Offer, such Old Preferred Stock
will continue to be subject to the restrictions on transfer contained in the
legend on the Old Preferred Stock certificates. In general, Old Securities may
not be offered or sold unless registered under the Securities Act, except
pursuant to an exemption from, or in a transaction not subject to, the
Securities Act and applicable state securities laws. The Company does not
currently anticipate that it will take any action to register Old Securities
under the Securities Act. See "The Exchange Offer--Consequences of Failure to
Exchange" and "Registration Rights."
8
<PAGE>
SUMMARY DESCRIPTION OF THE NEW NOTES
The terms of the New Notes and the Old Notes are identical in all material
respects, except that the New Notes do not include certain transfer
restrictions, registration rights and Special Interest (as defined) provisions
included in the Old Notes. See "Registration Rights."
Securities Offered.......... $400,000,000 principal amount of 10% Series B
Senior Notes Due 2007.
Maturity Date............... February 15, 2007.
Interest.................... Interest on the Notes will accrue at the rate of
10% per annum and will be payable in cash
semiannually on February 15 and August 15,
commencing on August 15, 1997.
Ranking.....................
The New Notes will rank senior in right of
payment to all subordinated indebtedness of the
Company and will rank pari passu in right of
payment with all existing and future
unsubordinated obligations. The New Notes will
rank pari passu with the Old Notes. As of March
31, 1997, the Company had approximately $1,455
million of unsubordinated debt outstanding. Such
unsubordinated debt includes the Company's 10
7/8% Senior Deferred Coupon Notes Due 2003 (the
"10 7/8% Notes"), its 12 3/4% Senior Deferred
Coupon Notes Due 2005 (the "12 3/4% Notes") and
its 11 1/2% Senior Deferred Coupon Notes Due 2006
(the "11 1/2% Notes" and, together with the 10
7/8% Notes and the 12 3/4% Notes, the "Deferred
Coupon Notes"). In addition, the Notes will be
effectively subordinated to all existing and
future indebtedness and other liabilities of the
Company's subsidiaries including borrowings under
the NTLIH Facilities (as defined) and, if
obtained, the Proposed Credit Facilities (as
defined). As of March 31, 1997, such subsidiaries
had approximately $619 million of total
liabilities, including approximately $238 million
of indebtedness. See "Risk Factors--Potential
Adverse Consequences of Leverage."
Optional Redemption......... On or after February 15, 2002, the Notes will be
redeemable at the option of the Company, in whole
at any time or in part from time to time, at the
redemption prices set forth herein, plus accrued
and unpaid interest, if any, to the date of
redemption.
Change of Control........... Upon the occurrence of a Change of Control
Triggering Event (as defined), the Company will
be required to make an offer to purchase all of
the Notes at 101% of principal amount thereof
plus accrued and unpaid interest to the date of
purchase. The Company may not have sufficient
funds or the financial resources necessary to
satisfy its obligations to repurchase the Notes
and other debt that may become repayable upon a
Change of Control Triggering Event.
9
<PAGE>
Certain Covenants........... The indenture governing the Notes (the
"Indenture") will contain covenants relating to,
among other things, the following matters: (i)
restricted payments; (ii) incurrence of
additional indebtedness and issuance of preferred
stock; (iii) liens; (iv) dividend and other
payment restrictions affecting subsidiaries; (v)
mergers, consolidations and sales of assets; (vi)
transactions with affiliates; (vii) payments for
consent; and (viii) reports.
Registration Rights......... Pursuant to the Registration Rights Agreement for
the Notes (the "Notes Registration Rights
Agreement"), if the Exchange Offer is not
consummated or, if required pursuant to the
provisions of the Registration Rights Agreement,
a resale shelf registration statement is not
declared effective on or before July 22, 1997,
Special Interest will accrue and be payable
semiannually until such time as an exchange offer
is consummated or a resale shelf registration is
declared effective, as the case may be. See
"Registration Rights."
Form, Denomination and
Registration of Notes......
New Notes exchanged for Old Notes are expected to
be eligible for trading through the facilities of
DTC. New Notes traded through the facilities of
DTC will be represented by a global note or notes
in definitive, fully registered form without
interest coupons deposited with the trustee for
the New Notes (the "Trustee") as custodian for
and registered in the name of a nominee of DTC.
New Notes exchanged for Old Notes which are in
the form of registered definitive certificates
will be issued in the form of registered
definitive certificates until otherwise directed
by the holders of such New Notes. See "Book-
Entry; Delivery and Form."
10
<PAGE>
SUMMARY DESCRIPTION OF THE NEW PREFERRED STOCK
The terms of the New Preferred Stock and the Old Preferred Stock are
identical in all material respects, except that the New Preferred Stock do not
include certain transfer restrictions, registration rights and Special Dividend
(as defined) provisions included in the Old Preferred Stock. See "Registration
Rights."
Securities Offered.......... 250,000 shares of 13% Series B Senior Redeemable
Exchangeable Preferred Stock, par value $0.01 per
share, comprised of up to 100,000 shares to be
issued in exchange for Old Preferred Stock and up
to 150,000 additional shares issuable from time
to time in lieu of cash dividends, and the
Subordinated Debentures issuable upon the
exchange of the Preferred Stock.
Liquidation Preference...... $1,000 per share.
Mandatory Redemption........ The Company is required, subject to certain
conditions, to redeem all of the Preferred Stock
outstanding on February 15, 2009 at a redemption
price equal to 100% of the liquidation preference
thereof, plus accrued and unpaid dividends to the
date of redemption.
Optional Redemption......... The Preferred Stock is redeemable, at the option
of the Company, in whole or in part, at any time
on or after February 15, 2002 at the redemption
prices set forth herein, plus accrued and unpaid
dividends to the date of redemption.
Dividends...................
At a rate equal to 13% per annum of the
liquidation preference per share, accrued and,
when declared, payable quarterly beginning May
15, 1997 and accruing from February 12, 1997 (the
"Issuance Date"). Dividends accruing on or before
February 15, 2004 may be paid, at the option of
the Company, in cash, by issuing additional
shares of Preferred Stock having an aggregate
liquidation preference equal to the amount of
such dividends, or in any combination of the
foregoing. Dividends accruing after February 15,
2004 must be paid in cash.
Dividend Payment Dates...... February 15, May 15, August 15 and November 15,
commencing May 15, 1997.
Voting...................... The Preferred Stock will be non-voting, except as
otherwise required by law and except in certain
circumstances described herein, including (i)
amending certain rights of the holders of the
Preferred Stock and (ii) the issuance of any
class of equity securities that ranks on a parity
with or senior to the Preferred Stock, other than
additional shares of Preferred Stock issued in
lieu of cash dividends or parity securities
issued to finance the redemption by the Company
of the Preferred Stock. In addition, if (i)
dividends are in
11
<PAGE>
arrears for six quarterly periods (whether or not
consecutive) or (ii) the Company fails to make a
mandatory redemption or a Change of Control Offer
(as defined) as required or fails to pay pursuant
to such redemption or offer, holders of a
majority of the outstanding shares of Preferred
Stock, voting as a class, will be entitled to
elect two directors to the Company's board of
directors.
Exchange Provisions......... On any scheduled dividend payment date, the
Company may, at its option, exchange all, but not
less than all, of the shares of Preferred Stock
then outstanding into the Company's 13% Series B
Subordinated Exchange Debentures Due 2009 (such
debentures, together with any such debentures
issued from time to time in lieu of cash
interest, the "Subordinated Debentures").
Ranking..................... The Preferred Stock will, with respect to
dividend rights and rights on liquidation,
winding up and dissolution of the Company, rank
(i) senior to all classes of common stock, the
Junior Preferred Stock (as defined), the Series A
Preferred Stock (as defined) and each other class
of capital stock or series of preferred stock
which specifically provides that such class or
series will rank junior to the Preferred Stock or
that does not specify its rank, (ii) on a parity
with each class of capital stock or series of
preferred stock that specifically provides that
such class or series will rank on a parity with
the Preferred Stock and (iii) junior to each
other class of capital stock or series of
preferred stock which specifically provides that
such class or series will rank senior to the
Preferred Stock. See "--Voting."
Change of Control Put and In the event of a Change of Control Triggering
Call....................... Event (as defined), the Company will, subject to
certain conditions, offer to purchase all
outstanding shares of Preferred Stock at a
purchase price equal to 101% of the liquidation
preference thereof, plus accrued and unpaid
dividends to the date of purchase; provided,
however, that no holder shall have the right to
require the Company to repurchase such holder's
shares of Preferred Stock until the earlier of
the dates on which all of the Deferred Coupon
Notes (as defined) have been repaid or matured.
There can be no assurance that the Company will
be able to purchase all of the Preferred Stock in
the event of a Change of Control Triggering
Event.
In addition, upon a Change of Control Call Event,
the Company will have the option to redeem all of
the outstanding shares of Preferred Stock at a
redemption price equal to 100% of the liquidation
preference thereof plus the Applicable Premium
(as defined) and accrued and unpaid dividends to
the date of repurchase.
Registration Rights......... Pursuant to the Registration Rights Agreement for
the Preferred Stock (the "Preferred Stock
Registration Rights Agreement"), if the Exchange
Offer is not consummated or, if required pursuant
to the provisions of the Preferred Stock
Registration Rights Agreement, a resale shelf
registration statement is not declared effective
on or before July 22, 1997, Special Dividends
will accrue and be payable
12
<PAGE>
quarterly until such time as an exchange offer is
consummated or a resale shelf registration is
declared effective, as the case may be. See
"Registration Rights."
Form, Denomination and
Registration of Preferred
Stock......................
New Preferred Stock exchanged for Old Preferred
Stock is expected to be eligible for trading
through the facilities of DTC. New Preferred
Stock traded through the facilities of DTC will
be represented by a global certificate or
certificates in definitive, fully registered form
deposited with the registrar for the New
Preferred Stock (the "Registrar") as custodian
for and registered in the name of a nominee of
DTC. New Preferred Stock exchanged for Old
Preferred Stock which is in the form of
registered definitive certificates will be issued
in the form of registered definitive certificates
until otherwise directed by the holders of such
New Preferred Stock. See "Book--Entry; Delivery
and Form."
SUBORDINATED DEBENTURES:
Issue....................... 13% Series B Subordinated Exchange Debentures Due
2009 issuable in exchange for the Preferred Stock
in an aggregate principal amount equal to the
liquidation preference of the Preferred Stock so
exchanged, plus accrued and unpaid dividends to
the date (the "Exchange Date") fixed for the
exchange thereof.
Maturity Date............... February 15, 2009.
Interest.................... Interest will accrue at the rate of 13% per annum
from the most recent interest payment date to
which interest has been paid or provided for or,
if no interest has been paid or provided for,
from the Exchange Date. Interest will be payable
semiannually in arrears on each February 15 and
August 15 commencing with the first such date
after the Exchange Date. Interest accruing on or
prior to February 15, 2004, may, at the option of
the Company, be paid in cash, by issuing
additional Subordinated Debentures, or in any
combination of the foregoing. Interest accruing
after February 15, 2004 must be paid in cash.
Ranking.....................
The Subordinated Debentures will be subordinated
to all existing and future Senior Debt (including
the Notes and the Deferred Coupon Notes (the
"Senior Notes")) of the Company. As of March 31,
1997, the Company had approximately $1,455
million of Senior Debt outstanding. In addition,
the Subordinated Debentures will be effectively
subordinated to all existing and future
indebtedness and other liabilities of the
Company's subsidiaries. As of March 31, 1997,
such subsidiaries had approximately $619 million
of total liabilities, including approximately
$238 million of indebtedness. The Subordinated
Debentures will rank pari passu with the
13
<PAGE>
Convertible Subordinated Notes (as defined) and
will rank pari passu with or senior to any class
or series of Indebtedness that expressly provides
that it ranks pari passu with or subordinate to
the Subordinated Debentures, as the case may be.
Optional Redemption......... On or after February 15, 2002, the Subordinated
Debentures will be redeemable at the option of
the Company, in whole at any time or in part from
time to time, at the redemption prices set forth
herein, plus accrued and unpaid interest to the
date of redemption.
Change of Control........... In the event of a Change of Control Triggering
Event, the Company will be required to make an
offer to purchase all outstanding Subordinated
Debentures at a purchase price equal to 101% of
the principal amount thereof, plus accrued and
unpaid interest to the date of purchase. The
Company may not have sufficient funds or the
financial resources necessary to satisfy its
obligations to repurchase the Subordinated
Debentures and other debt that may become
repayable upon a Change of Control Triggering
Event.
Certain Covenants........... The indenture governing the Subordinated
Debentures (the "Subordinated Debenture
Indenture") will contain certain covenants
relating to, among other things, the following
matters: (i) restricted payments; (ii) incurrence
of additional indebtedness and issuance of
preferred stock; (iii) mergers, consolidations
and sales of assets; (iv) transactions with
affiliates; (v) payments for consent; and (vi)
reports.
RISK FACTORS
Holders of Old Securities should carefully consider the information set forth
under the caption "Risk Factors" and all other information set forth in this
Prospectus before tendering their Old Securities in the Exchange Offer,
although the risk factors (other than "--Consequences of Failure to Exchange
Old Securities" and "--Requirements for Transfer of New Securities") are
generally applicable to the Old Securities as well as the New Securities.
14
<PAGE>
RISK FACTORS
Holders of Old Securities should consider carefully all of the information
set forth in this Prospectus and incorporated by reference in this Prospectus.
See "Available Information" and "Incorporation of Documents By Reference."
Holders should particularly evaluate the following risks before tendering
their Old Securities in the Exchange Offer, although the risk factors set
forth below (other than the first two risk factors) are generally applicable
to the New Securities as well as the Old Securities. Information contained in
this Prospectus (including the documents incorporated by reference in this
Prospectus) contains "forward-looking statements" which can be identified by
the use of forward-looking terminology such as "believes," "expects," "may,"
"should," "estimates," "projected," "contemplates" or "anticipates" or the
negative thereof or other variations thereon or comparable terminology. See,
e.g., "Incorporation of Certain Documents By Reference," "Summary--The
Company" and "The Company." No assurance can be given that the future results
covered by the forward-looking statements will be achieved. The following
matters constitute cautionary statements identifying important factors with
respect to such forward-looking statements, including certain risks and
uncertainties, that could cause actual results to vary materially from the
future results covered in such forward-looking statements. Other factors, such
as the general state of the economies of the United States and the United
Kingdom, could also cause actual results to vary materially from the future
results covered in such forward-looking statements.
CONSEQUENCES OF FAILURE TO EXCHANGE
Issuance of the New Notes and New Preferred Stock in exchange for the Old
Notes and Old Preferred Stock, respectively, pursuant to the Exchange Offer
will be made following the prior satisfaction, or waiver, of the conditions
set forth in "The Exchange Offer--Certain Conditions to the Exchange Offer"
and only after a timely receipt by the Note Exchange Agent (as defined) of
such Old Notes or the Preferred Stock Exchange Agent (as defined) of such Old
Preferred Stock, as the case may be, a properly completed and duly executed
Letter of Transmittal in respect of such Old Security and all other required
documents. Therefore, holders of Old Securities desiring to tender such Old
Securities in exchange for New Securities should allow sufficient time to
ensure timely delivery. Neither the Note Exchange Agent, the Preferred Stock
Exchange Agent nor the Company is under any duty to give notification of
defects or irregularities with respect to the tenders of Old Securities for
exchange. Old Notes that are not tendered or are tendered but not accepted
will, following the consummation of the Exchange Offer, continue to be subject
to the provisions of the Indenture regarding transfer and exchange of the Old
Notes, the existing restrictions upon transfer thereof set forth in the legend
on the Old Notes and in the Offering Memorandum dated February 7, 1997
relating to the Old Securities (the "Offering Memorandum"). Old Preferred
Stock that is not tendered or is tendered but not accepted will, following the
consummation of the Exchange Offer, continue to be subject to the existing
restrictions upon transfer thereof set forth in the legend of the Old
Preferred Stock and in the Offering Memorandum. Except in certain limited
circumstances with respect to certain types of holders of Old Securities (see
"Registration Rights"), the Company will have no further obligation to provide
for the registration under the Securities Act of such Old Securities. In
general, Old Securities, unless registered under the Securities Act, may not
be offered or sold except pursuant to an exemption from, or in a transaction
not subject to, the Securities Act and applicable state securities laws. The
Company does not currently anticipate that it will take any action to register
the Old Securities under the Securities Act or blue sky laws.
REQUIREMENTS FOR TRANSFER OF NEW SECURITIES
Based on interpretations by the staff of the Commission, as set forth in no
action letters issued to third parties, the Company believes that the New
Notes and New Preferred Stock issued in exchange for the Old Notes and Old
Preferred Stock, respectively, pursuant to the Exchange Offer may be offered
for resale, resold or otherwise transferred by Holders thereof (other than any
such Holder which is an "affiliate" of the Issuer within the meaning of Rule
405 under the Securities Act) without compliance with the registration and
prospectus
15
<PAGE>
delivery provisions of the Securities Act, provided that such New Securities
are acquired in the ordinary course of such Holders' business and such Holders
have no arrangement with any person to participate in the distribution (within
the meaning of the Securities Act) of such New Securities. Each Holder, other
than a broker-dealer, must acknowledge that it is not engaged in, and does not
intend to engage in, and has no arrangement or understanding with any person
to participate in, a distribution of New Securities. If any Holder is an
affiliate of the Company, is engaged in or intends to engage in or has any
arrangement or understanding with respect to the distribution of the New
Securities to be acquired pursuant to the Exchange Offer, such Holder (i)
could not rely on the applicable interpretations of the staff of the
Commission and (ii) must comply with the registration and prospectus delivery
requirements of the Securities Act in connection with any resale transactions.
Each broker-dealer who holds Old Securities acquired for its own account as a
result of market-making activities or other trading activities, and who
receives New Securities in exchange for such Old Securities pursuant to the
Exchange Offer, may be an "underwriter" within the meaning of the Securities
Act and must acknowledge that it will deliver a prospectus meeting the
requirements of the Securities Act in connection with any resale of such New
Securities. The Letters of Transmittal state that by so acknowledging and by
delivering a prospectus, a broker-dealer will not be deemed to admit that it
is an "underwriter" within the meaning of the Securities Act. This Prospectus,
as it may be amended or supplemented from time to time, may be used by a
broker-dealer in connection with resales of New Securities received in
exchange for Old Securities where such Old Securities were acquired by such
broker-dealer as a result of market-making activities or other trading
activities. The Company has agreed that starting on the Expiration Date and
ending on the close of business of the 180th day following the Expiration
Date, it will make this Prospectus available to any broker-dealer for use in
connection with any such resale. See "Plan of Distribution." However, to
comply with the securities laws of certain jurisdictions, if applicable, the
New Securities may not be offered or sold unless they have been registered or
qualified for sale in such jurisdictions or an exemption from registration nor
qualification is available and is complied with. The Company has agreed,
pursuant to the Registration Right Agreements and subject to certain specified
limitations therein, to register or qualify the New Securities for offer or
sale under the securities or blue sky laws of such jurisdiction as any holder
of the Securities reasonably request in writing. Unless the Company is so
requested, the Company does not intend to take any action to register or
qualify the sale of the New Securities in any such jurisdictions. See "The
Exchange Offer--Consequences of Exchanging Old Securities."
POTENTIAL ADVERSE CONSEQUENCES OF LEVERAGE
The Company is and, following the consummation of the Exchange Offer will
continue to be, highly leveraged. At March 31, 1997, the Company's total
obligations under its Preferred Stock and long-term indebtedness was
approximately $2.3 billion, representing 93% of total capitalization,
including: (i) the Deferred Coupon Notes; (ii) $191.8 million principal amount
of 7 1/4% Convertible Subordinated Notes Due 2005 (the "7 1/4% Convertible
Notes"); (iii) $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 (iv) $237.9 million
outstanding under the Term Loan Facility (as defined). As the Company's
subsidiaries draw down amounts expected to be available under the Revolving
Credit Facility (as defined), the Potential Credit Facilities (as defined) and
other possible future financings, the amount of debt outstanding will increase
further. The indentures governing the Notes, the Deferred Coupon Notes, the
Convertible Notes and the Subordinated Debentures permit the Company and its
subsidiaries to incur substantial additional indebtedness, and the terms of
the Preferred Stock do not restrict the ability of the Company and its
subsidiaries to incur additional indebtedness.
The ability of the Company and its subsidiaries to make scheduled payments
under present and future indebtedness (including the Notes) and cash dividends
in respect of the Preferred Stock 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
16
<PAGE>
Company's and its subsidiaries' control. See "--Uncertainty of Construction
Progress and Costs," "--Need for Additional Financing" and "--Holding Company
Structure; Dependence Upon Cash Flow from Subsidiaries."
In addition, all or a substantial portion of the indebtedness of the Company
(other than the Notes) matures prior to the maturity of the Securities. The
Company's ability to make cash payments pursuant to the terms of the
Securities may be dependent, in part, on the Company's ability to refinance
that indebtedness which will depend, in part, on factors beyond the control of
the Company. The mandatory redemption provisions of the Preferred Stock may
have a material adverse effect on the Company's ability to refinance such
indebtedness.
The agreements and debt instruments in respect of the Company's indebtedness
(including the NTLIH Facilities; see "Description of Certain Indebtedness--The
NTLIH Facilities") contain, and the Potential 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. Although the Company believes that it and
its subsidiaries are in compliance with their respective covenants and
restrictions, continued compliance with 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 certain
subsidiaries of the Company to make payments to the Company which might
otherwise fund payments due on the Securities, the Subordinated Debentures and
the Company's other obligations as they fall due. See "--Holding Company
Structure; 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, to service and
repay indebtedness (including, without limitation, the Notes and the
Subordinated Debentures), to redeem, or make cash payments in respect of, the
Preferred Stock 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 Securities and the Subordinated Debentures,
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 and the
development and expansion of its national telecommunications network; (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 certain outstanding securities prior to maturity and there can be
no assurance that the Company will have the financial resources necessary or
otherwise be able to repurchase those securities in such circumstances.
NEED FOR ADDITIONAL FINANCING
The development, construction and operation of the Company's cable
television and telecommunications network will require substantial capital.
The proceeds of the offering of the Old Securities (the "Offering") alone will
not be sufficient to fund the Company's projected requirements through
completion of the network. Based on the information currently available to the
Company, the Company currently estimates that, from January 1, 1997 through
December 31, 2002 (the date by which the Company currently estimates that its
network will have passed the total of 2,090,000 homes required by its
regulatory build schedules) the aggregate cost of network construction
(including the license payments in respect of the Northern Ireland LDL and the
Glamorgan and Gwent LDL) will be approximately (Pounds)860 million
(approximately $1.410 billion). The Company also estimates that, after giving
effect to the issuance of the Securities, scheduled cash interest payments on
and principal repayments of indebtedness of the Company and its subsidiaries
(assuming no conversion of convertible debt or refinancing of existing
indebtedness and no exchange of the Preferred Stock) from January 1, 1997
through
17
<PAGE>
December 31, 2002 will be approximately $873 million and $237 million,
respectively. In addition, the Company will require significant amounts of
capital to finance the other capital expenditures and the cost of operations
of the Company, its subsidiaries and joint ventures and meet all their other
obligations as they fall due.
The Company intends to fund the requirements referred to in the preceding
paragraph from: (i) cash, cash equivalents and marketable securities on hand
(approximately $788 million as of March 31, 1997); (ii) further equity and/or
debt financings (including, but not limited to, the Potential Credit
Facilities); and (iii) funds internally generated by the operations of the
Company's subsidiaries (including from the revenues receivable by NTL Group
under contracts, which have a projected total value of (Pounds)573 million).
See "Description of Certain Indebtedness--The Potential Credit Facilities."
The Company currently expects that cash, cash equivalents and marketable
securities on hand as of March 31, 1997 of approximately $788 million should
be sufficient to meet those obligations of the Company and its subsidiaries
falling due in 1997 (including the costs of local network construction in its
franchises, development and expansion of its national telecommunications
network, debt service, joint venture obligations and the payment (the "Further
Payment") of (Pounds)35 million deferred consideration in respect of the
acquisition of NTL Group paid in May 1997).
The Company estimates that, whether or not the Potential Credit Facilities
are obtained and fully drawn, significant amounts of additional funding will
be required to meet obligations of the Company and its subsidiaries falling
due after 1997. The Company currently intends to obtain such additional
funding from further debt and/or equity financings and funds internally
generated by the operations of the Company's subsidiaries. The Company does
not have any firm plans for any such further financings at this time. The
substantial costs of network construction and debt service will result in
negative cash flow until an adequate customer base is established.
The information in the preceding paragraphs and elsewhere in this Prospectus
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. The Company assumes no
obligation to update these projections to reflect actual funding requirements,
capital expenditures and results, changes in assumptions or in the factors
affecting such projections. There can be no assurance that: (i) the Potential
Credit Facilities or any other financings will be obtained when required, on
acceptable terms or at all; (ii) the Company or its subsidiaries will be able
to access all amounts available under the terms of the Potential Credit
Facilities or other financings; (iii) actual amounts required to complete the
Company's planned build out will not exceed the amount estimated above (see
"--Uncertainty of Construction Progress and Costs") or that additional
financing substantially in excess of that amount 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, licenses or other new businesses that would require additional
capital; (vi) operating cash flow will meet expectations or that the Company
will be able to access such cash from its subsidiaries' operations to meet any
unfunded portion of its capital requirements when required or to satisfy the
terms of the Securities, the Existing Notes or the Company's other debt
instruments and agreements for the incurrence of additional debt financing
(see "--Holding Company Structure; Dependence Upon Cash Flow from
Subsidiaries"); (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"); or (viii) that there will
not be changes in applicable United States or United Kingdom tax laws.
The inability of the Company to obtain the Potential Credit Facilities or
secure additional financings could result in the Company and/or its
subsidiaries defaulting on their respective obligations, all the indebtedness
of the Company and its subsidiaries becoming immediately due and repayable and
failure to comply with the
18
<PAGE>
minimum build milestones set forth in its licenses which could lead to the
revocation of those licenses. See "--Requirement to Meet Build Milestones."
The Company will continue to consider strategic acquisitions and
combinations involving businesses operating, or owning licenses to operate,
cable, telephone, television or telecommunications systems or services and
related businesses principally 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 subsidiaries to finance such transactions. There can be no assurances
that such transactions will occur. The indentures governing the Notes and the
Deferred Coupon 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 such indentures) or certain entities, directly
or indirectly, engaged in a Cable Business if such entities meet certain
qualifying criteria specified in such indentures.
Furthermore, if the Company were to make additional investments or acquire
additional franchises, funding would be needed in addition to the anticipated
funding requirements described above. If the Company's bid for one or more of
the digital terrestrial television ("DTT") multiplex licenses is successful,
significant capital expenditures will be required to develop and implement DTT
technology and equipment and to supply DTT services by July 1, 1998 or within
one year of the grant of the license.
The mandatory redemption provisions of the Preferred Stock may have a
material adverse effect on the Company's ability to obtain additional
financing.
RESTRICTIONS ON ABILITY TO PAY DIVIDENDS OR MAKE PAYMENTS ON PREFERRED STOCK
The terms of the indentures governing the Deferred Coupon Notes and the
Notes restrict the payment of cash dividends or other distributions on the
Preferred Stock unless certain financial ratios are achieved. In addition, the
Company may in the future incur additional indebtedness which contains similar
restrictions.
In addition to the limitations imposed on the payment of dividends by those
indentures and any agreements governing indebtedness of the Company, under
Delaware law the Company is permitted to pay dividends on its capital stock,
including Preferred Stock, only out of its surplus or, in the event that it
has no surplus, out of its net profits for the year in which a dividend is
declared or for the immediately preceding fiscal year. Surplus is defined as
the excess of a company's total assets over the sum of its total liabilities
plus the par value of its outstanding capital stock. In order to pay dividends
in cash, the Company must have surplus or net profits equal to the full amount
of the cash dividend at the time such dividend is declared. In determining the
Company's ability to pay dividends, Delaware law permits the board of
directors of the Company to revalue the Company's assets and liabilities from
time to time to their fair market values in order to create surplus. The
Company cannot predict what the value of its assets or the amount of its
liabilities will be in the future and, accordingly, there can be no assurance
that the Company will be able to pay cash dividends on the Preferred Stock.
There can be no assurance that the Company will have the financial, legal or
contractual ability to pay cash dividends on the Preferred Stock after
February 15, 2004 or effect a mandatory redemption or change of control
repurchase of the Preferred Stock.
HOLDING COMPANY STRUCTURE; 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, therefore, the holders of the Securities, 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 the creditors of any other persons directly or indirectly owning
such subsidiary or joint venture.
19
<PAGE>
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 event that it has no surplus, out of its net
profits for the fiscal year in which the dividend is declared or for the
immediately 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.
In addition, the terms of existing and future indebtedness of the Company's
subsidiaries (including the Potential Credit Facilities) may limit the payment
of dividends, loans or other distributions to the Company. In particular, the
loan facilities (the "NTLIH Facilities") arranged to finance the purchase
price of NTL Group prohibit NTL Investment Holdings Limited ("NTLIH"), the
wholly-owned subsidiary of the Company which purchased NTL Group, 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 NTLIH and its
subsidiaries must be applied to prepay amounts outstanding under the term loan
facility of (Pounds)140 million (the "Term Loan Facility") comprising a part
of the NTLIH Facilities. See "Description of Certain Indebtedness--The NTLIH
Facilities."
The New Securities will be effectively subordinated to all existing and
future indebtedness and other liabilities and commitments of the Company's
subsidiaries, including borrowings under the NTLIH Facilities and any
borrowings by the Company's subsidiaries under the Potential Credit
Facilities. The total liabilities of the Company's subsidiaries at March 31,
1997 was approximately $619 million. In addition, the Indenture permits
subsidiaries of the Company to incur additional Indebtedness (as defined in
the Indenture) to finance the construction and working capital needs of a
Cable Business and the acquisition of Cable Assets (as defined in the
Indenture) or the acquisitions of certain entities, directly or indirectly,
engaged in a Cable Business, if such entities meet certain qualifying criteria
specified in the Indenture. In light of the Company's strategy of continued
growth, in part through acquisitions, the Company and its subsidiaries may
incur substantial indebtedness in the future. Borrowings under the NTLIH
Facilities are, and a substantial portion of the Company's and its
subsidiaries' existing and future indebtedness (including borrowings under the
Potential Credit Facilities) is expected to be, secured by liens and other
security interests over the assets of the Company's subsidiaries and the
Company's equity interests in the Company's subsidiaries. In addition, the
ability of the Company and, therefore, the holders of the Securities 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 NTLIH Facilities, the
Company to subordinate its right to repayment of indebtedness outstanding
between it and the borrower under such agreement or any other 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 or other subsidiaries under the NTLIH
Facilities have been and will be subordinated to the rights of the lenders
under the NTLIH Facilities pursuant to subordination agreements with such
lenders.
20
<PAGE>
The principal fixed assets of the Company's local telecoms business are
cable headends, cable television and telecommunications distribution
equipment, telecommunications switches and customer equipment. The value of a
substantial portion of these fixed assets is derived from their employment in
the Company's and its subsidiaries' cable television and telecommunications
businesses. In the case of the Company's national telecoms and broadcast
businesses, the 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.
As a result of the restrictions referred to in the preceding paragraphs,
there can be no assurance that the Company will be able to gain access to the
cash flow of its subsidiaries in a timely manner or in amounts sufficient to
make cash payments pursuant to the terms of the Securities and to pay interest
on and to pay the principal of the Company's other indebtedness when due.
Even if the Company is able to gain access to the cash flow of its
subsidiaries, its ability to meet cash debt service and repayment obligations
of the Company and its subsidiaries (including the Company's obligations under
the Securities) will depend on the future operating performance and financial
results of those subsidiaries, which will be subject, in part, to factors
beyond the control of such subsidiaries, such as prevailing economic
conditions and financial, business and other factors. In any event, management
does not anticipate that the Company and its subsidiaries will generate
sufficient cash flow from operations to repay at maturity the entire principal
amount of the Notes and other indebtedness of the Company and its subsidiaries
or to redeem all of the Preferred Stock on the mandatory redemption date.
Accordingly, the Company will be required to consider a number of measures,
including (i) refinancing all or a portion of such indebtedness and the
Preferred Stock, (ii) seeking modifications of the terms of such indebtedness,
(iii) seeking additional debt financing, which would be subject to obtaining
necessary lender consents, (iv) seeking additional equity financing, or (v) a
combination of the foregoing. The particular measures the Company may
undertake and the ability of the Company to accomplish those measures will
depend on the financial condition of the Company and its subsidiaries at the
time, as well as a number of factors beyond the control of the Company and its
subsidiaries, including prevailing economic and market conditions and
financial, business and other factors. No assurance can be given that any of
the foregoing measures can be accomplished, or can be accomplished in
sufficient time to make timely payments with respect to the Notes, the
Company's other indebtedness or the Preferred Stock. In addition, there can be
no assurance that any such measures can be accomplished on terms which are
favorable to the Company and its subsidiaries.
DEPENDENCE UPON SITE SHARING ARRANGEMENT
As a result of, among other factors, a natural shortage of potential
transmission sites and the difficulties in obtaining planning permission for
erection of further masts, the British Broadcasting Corporation (the "BBC")
and NTL Group 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 Castle Tower Corporation (as the successor
to the BBC's Home Service transmission business) and NTL Group notwithstanding
the privatization of the BBC's transmission business. 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
21
<PAGE>
sharing arrangements would have a material adverse effect on the Company's
business and would also result in an event of default under the NTLIH
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 NTLIH Facilities
could lead to defaults under the indentures governing the Notes, the Existing
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
The Company's broadcast business is substantially dependent upon contracts
with the ITV contractors, Channel 4, S4C and Vodafone for the provision of
transmission services. The prices that the Company may charge these companies
for television transmission services are 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, these companies have renewed their contracts with NTL Group,
there can be no assurance that they will do so upon expiration of the current
contracts, that they will not negotiate terms for the provision of
transmission services on a basis less favorable to the Company or that they
would not seek to obtain from third parties all or a portion of the
transmission services currently provided by the Company. The loss of any one
of these contracts could have a material adverse effect on the business of the
Company.
OPERATING LOSSES; LIMITED FINANCIAL HISTORY
The Company had net income (loss) for the three months ended March 31, 1997
and 1996 and years ended December 31, 1996, 1995, 1994, 1993 and 1992 of
$(85,761 million) and $(42,724 million), $(254.5 million), $(90.8 million),
$(29.6 million), $(11.1 million) and $1.2 million, respectively. As of March
31, 1997, the Company's accumulated deficit was $469.8 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. Construction and operating
expenditures have resulted in negative cash flow, which is expected to
continue at least until an adequate customer base is established. The Company
also expects to incur substantial additional operating losses, and there can
be no assurance that the Company will achieve or sustain profitability in the
future. Failure to become profitable could adversely affect the Company's
ability to sustain operations and obtain additional required funds. See "--
Need for Additional Financing." Moreover, such a failure would adversely
affect the Company's ability to pay the required payments on the Notes, the
Company's other indebtedness and the Preferred Stock. See "--Potential Adverse
Consequences of Leverage," "--Need for Additional Financing" and "--Holding
Company Structure; Dependence Upon Cash Flow from Subsidiaries."
DEFICIENCY OF EARNINGS TO FIXED CHARGES AND EARNINGS TO COMBINED FIXED CHARGES
AND PREFERRED STOCK DIVIDENDS
For the three months ended March 31, 1997 and 1996 and years ended December
31, 1993, 1994, 1995 and 1996, the Company's earnings were insufficient to
cover fixed charges by approximately $85.4 million and $42.7 million, $10.4
million, $31.8 million, $105.4 million and $236.5 million, respectively. The
ratio of earnings to fixed charges for the year 1992 was 81:1. The Company's
earnings for the three months ended March 31, 1997 were inadequate to cover
combined fixed charges and preferred stock dividends by $87.1 million. Fixed
charges consist of interest expense, including capitalized interest,
amortization of fees related to debt financing and rent expense deemed to be
interest. The issuance of the Notes will have the effect of increasing the
total amount of the Company's indebtedness and increasing its interest expense
in subsequent periods.
REQUIREMENT TO MEET BUILD MILESTONES
The telecommunications license for each franchise contains specific
construction milestones. Under the terms of its current telecommunications
licenses, from December 31, 1996 until the end of 2003, the Company is
required to construct cable television systems passing an aggregate of
approximately 1,296,000 additional
22
<PAGE>
premises (residential and business). 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). Historically, the Company
has constructed its network in accordance with and ahead of these construction
milestones. As of December 31, 1996, the 1996 milestones had been met and
exceeded. The Company believes it will be able to satisfy its milestones in
the future, but there can be no assurance that such milestones will be met or
that any application to modify those milestones would be accepted. See "--Need
for Additional Financing" and "--Uncertainty of Construction Progress and
Costs." If 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.
UNCERTAINTY OF CONSTRUCTION PROGRESS AND COSTS
At March 31, 1997, construction of the Company's local network had passed
approximately 48% of its final regulatory milestone requirements for all its
franchises (including the Northern Ireland and Gwent and Glamorgan
franchises). Successful construction and development of the Company's local
network will depend on, among other things, 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. 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 costs of network construction will not exceed the aggregate cost of
network construction estimated under "--Need for Additional Financing" above
or that additional funding substantially in excess of that amount will not be
required.
In building its network, the Company 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 the Company's franchise areas due to
existing underground utility infrastructure. In addition, the Company is
responsible for restoring the surface area after its underground construction
is completed. Although the Company 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.
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 the
Company's local telecom services may develop over time. The Company's future
revenue growth from its local telecoms and CATV services depends in large
measure on (i) the development of significant consumer preference for CATV
over other types of in-home entertainment and (ii) customer acceptance of the
Company as an attractive alternative to its competitors as a provider of
telephone and other telecommunications services. 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, the Company has not
experienced significant churn (subscriber terminations) in its franchise areas
although the Company expects churn rates to increase. There can be no
assurance as to the Company'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.
23
<PAGE>
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. The Company'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 the Company will compete to varying
degrees with other communications and entertainment media, including DTH
services, home video, cinema exhibition of feature films, and live theater. In
particular, the availability of recently released movies on videocassettes may
affect the degree to which the Company is able to sell pay television and PPV
services to its subscribers.
National public telephone operators ("PTOs"), such as British
Telecommunications plc ("BT"), may apply for the award of CATV licenses in
respect of areas of the United Kingdom that have not already been licensed. In
April 1997, another national PTO, Mercury Communications Limited, merged with
three cable operators that hold such licenses: Nynex CableComms, Bell
Cablemedia plc and Videotron Holdings plc to form Cable & Wireless
Communications ("C&WC"), the largest cable operator in the United Kingdom.
C&WC and certain companies associated with BT, therefore, hold licenses to
provide cable telephone/television systems that cannot, under current ITC
policy, be in any of the Company's franchises. This policy may be changed by
further regulations which reflect changes in policy of relevant governmental
authorities. See "--Possible Changes in Government Regulation." Any such
change in policy could have a material adverse effect on the Company.
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 introduction of DTT and digital satellite television is expected to
provide both additional programming opportunities as well as increased
competition for the Company's multichannel CATV services. DTT is expected to
provide an additional 18 or more new terrestrial channels serving between 60%
and 90% of the United Kingdom's population. British Sky Broadcasting ("BSkyB")
has announced its intention to launch a 200 channel digital satellite
television service in the United Kingdom, combined with interactive services
such as home banking and Internet access, in the spring of 1998 in conjunction
with BT, Midland Bank and Matsushita, a Japanese electronics company. The
primary function of the joint venture, which will be known as British
Interactive Broadcasting, is to subsidize the purchase of digital decoders
which will sit on television sets and receive the new services. There can be
no assurance that the Company will have access to these new systems or that
satisfactory (or any) terms of carriage will be obtained by the Company for
DTT or digital satellite programs or channels.
The full extent to which existing or future competitors using existing or
developing media, including, but not limited to, DTT and digital satellite
television, will compete with cable television systems cannot be predicted
with certainty. 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 Telephone Services. BT is the Company's principal competitor in
providing local telephone services to residential customers. Because BT is the
only end-to-end provider of telecommunications services in the United Kingdom
and has resources substantially greater than those of the Company, BT is a
formidable competitor to the Company in providing both business and
residential telephone services. According to OFTEL, at February 1997, nearly
92% of all United Kingdom residential telephone exchange line customers were
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
24
<PAGE>
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. C&WC offers its services in both the
markets. In addition, IONICA L3 Limited ("IONICA") began 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 during 1997.
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 call charges are reduced further on the
mobile networks. NTL's Radio Communications Division may enable the Company to
benefit from the growth in this technology.
The Company believes that it has a competitive advantage in the residential
market because of its ability to offer integrated telephone, CATV,
telecommunications services (including interactive and on line services) and
dual product packages designed to encourage customers to subscribe to both
services. However, there can be no assurance that this competitive advantage
will continue. Indeed, BT, C&WC and other national PTOs will be entitled to
convey CATV services from 2001 or, subject to a review by the Director
General, possibly from sometime in 1998. See "--Possible Changes In Government
Regulation." Moreover, C&WC will offer integrated telephone, CATV,
telecommunications and multimedia services.
BSkyB is reported from time to time to be in discussions with BT about the
formation of cooperative arrangements. For example, BT and BSkyB have
announced the formation of British Interactive Broadcasting, a joint venture
which is intended to subsidize the provision of a digital television set top
receiver and decoder. See "--CATV." In addition, BT and News International, an
affiliate of BSkyB, have formed a joint venture to provide Internet services
in the United Kingdom under the name Line One. Given the respective market
positions of BT and BSkyB, the Company believes that, if the two companies
successfully combine their respective market strengths, the resulting
combination may provide significant competition to certain services provided
by the Company. At present, however, it remains to be seen whether cooperative
arrangements between these two parties and their affiliates will be successful
and the extent to which they may be prohibited by EU antitrust regulations.
There can be no assurance, therefore, that the Company will be able to
compete successfully with BT or other telecommunications operators.
25
<PAGE>
Business Telecommunications. BT also is the Company's principal competitor
in providing business telecommunications services. In addition, the Company
competes with C&WC, Energis Communications Limited ("Energis") (a subsidiary
of the National Grid Company plc), Scottish Telecom and Atlantic 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
range and quality of services and the Company expects price competition to
intensify as C&WC, Energis and other telecommunications operators compete
aggressively. Most of these competitors have substantial resources and some,
such as BT and C&WC, a well established business customer base. There can be
no assurance, therefore, 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.
Broadcast Services. The Broadcast Services division of the Company may face
increased competition for its business, particularly following the
privatization of the BBC's transmission business.
LIMITED ACCESS TO PROGRAMMING
The Company's ability to make a competitive offering of cable television
services is dependent on the Company'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 the Company by operating
a DTH satellite service that provides programming, including programming that
is also offered by the Company, 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. This review was supplemented by a further review 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 final outcome
of this review, announced in December 1996, was that the OFT approved the
structure of the ratecard and made only minor amendments in response to the
submissions made by the Cable Communications Association on behalf of the
cable industry. BSkyB, therefore, brought the new ratecard into effect in
February 1997. The Company estimates that, since the introduction of the
revised ratecard in March 1995 through February 16, 1997, the overall
aggregate increase in BSkyB's wholesale prices would have been between
approximately 23% and 26% (although BSkyB has provided additional basic and
bonus premium channels during this period). No assurance can be given,
therefore, that, notwithstanding BSkyB's undertakings to the OFT and the OFT's
regulatory role, 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 the Company) 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.
26
<PAGE>
The Company obtains most of its programming through arrangements with BSkyB
and other programming suppliers which are not reflected in signed written
agreements. To date, the Company 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 the Company will be able to enter into a definitive agreement
with BSkyB, that the terms of such definitive agreement will not be less
favorable to the Company than the current arrangement, or that BSkyB will
continue to supply programming to the Company on reasonable commercial terms
or at all. Moreover, the Company has not, to date, entered into written
contracts with many of its other program suppliers. The loss of BSkyB or other
programming, a deterioration in the perceived quality of BSkyB or other
programming, or a material increase in the price that the Company is required
to pay for BSkyB or other programming could have a material adverse effect on
the Company.
The Company has recently introduced a new packaging and pricing structure to
more attractively package its CATV and telephony offerings to customers. It
has been publicly reported that several of the Company's programming suppliers
have objected to this new structure. One supplier, Wire TV Limited, has
obtained an injunction in the High Court prohibiting the Company from acting
in breach of its program supply agreement with that supplier. The Court,
however, stayed the effect of the injunction until June 17, 1997 so as to
permit the Company to comply with its order. The Company expects to amend the
new packaging and pricing structure to comply with the High Court order while
preserving its marketing strategy and the integrity of the new structure, but
the effect of these amendments may be subject to the further examination by
the Court.
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, the Radio Communications Agency and OFTEL
under the directions of the Director General and the DTI on behalf of the
Secretary of State for Trade and Industry. Changes in laws, regulations or
governmental policy (or the interpretations of such laws or regulations)
affecting the Company's activities and those of its competitors, such as
licensing requirements, changes in 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 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 a
franchise area could have a material adverse effect on the Company's financial
condition and results of operations. The Labour Party, which was elected as
the governing party in May 1997, has stated its intention to remove the
existing restrictions on the eligibility of BT and other national PTOs to
compete with the Company's CATV business on a rolling basis from 1998 onwards.
The new UK Labour Government is committed to levying a "Windfall Tax" on
what it has described as the excess profits of privatized utilities. No
detailed public statement on the proposed scope of the tax has been made, and
the Company is therefore unable to determine whether, and to what extent, such
a tax might be applicable to the core activities of NTL's TV transmission
business. NTL would dispute any such application. Details of the new tax are
likely to be announced in a forthcoming budget statement, due in late June
1997 or early July 1997.
A substantial portion of the Company's broadcast services 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. On December 24, 1996, the Director General
of OFTEL issued the formal modification to NTL's Telecommunications Act
license to deal with the new price control for the television transmission
services provided by NTL to the ITV companies, Channel 4 and S4C. Under the
new arrangements, the total revenues receivable by NTL for such services
(excluding certain insignificant items) may not exceed (Pounds)53.15 million
in 1997 and, thereafter through 2002, will be adjusted
27
<PAGE>
annually by the Retail Prices Index ("RPI") minus 4. 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.
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, 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.
MANAGEMENT OF GROWTH AND EXPANSION
The Company has experienced rapid growth and development in a relatively
short period of time and will continue to do so to meet its strategic
objectives and regulatory milestones. The management of such growth will
require, among other things, stringent control of construction and other
costs, continued development of the Company's financial and management
controls, increased marketing activities and the training of new personnel.
Failure to manage its rapid growth and development successfully could have a
material adverse effect on the Company's financial condition and operating
results.
DEPENDENCE ON KEY PERSONNEL
The Company's businesses are managed by a small number of key executive
officers, the loss of certain of whom, such as Mr. George S. Blumenthal and
Mr. J. Barclay Knapp, could have a material adverse effect on the Company. The
Company believes that its future success will depend in large part on its
continued ability to attract and retain highly skilled and qualified
personnel. The Company has not entered into written employment contracts or
non-compete agreements with, nor has it obtained life insurance policies
covering, such key executive officers. Certain executive officers and other
senior managers of the Company also serve as executive officers or 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. 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." Moreover, 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 are generated primarily in British pounds sterling while its interest
and principal obligations with respect to most of the Company's existing
indebtedness 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
28
<PAGE>
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.
LACK OF PUBLIC MARKET
The Old Securities were offered to a small number of institutional buyers
and are eligible for trading in the Private Offerings Resales and Trading
through Automatic Linkages ("PORTAL") Market. The New Securities and, if and
when issued, the Subordinated Debentures will be new securities and there is
no existing trading market for them. The Initial Purchasers have informed the
Company that they currently intend to make a market in the New Securities.
They are not obligated to do so, however, and any such market making may be
discontinued at any time without notice. The Company does not intend to apply
for listing or quotation of the New Securities or the Subordinated Debentures
on any securities exchange or to seek approval for quotation through any
automated quotation system. Accordingly, there can be no assurance as to the
ongoing development or liquidity of any market for the Securities. If an
active public market for the Securities does not develop or is interrupted,
the market price and liquidity of the Securities may be adversely affected.
In addition, the liquidity of, and trading markets for, the New Securities
and, if and when issued, the Subordinated Debentures may be adversely affected
by declines in the market for high-yield securities and or preferred stock
generally. Such a decline may adversely effect liquidity and trading markets
independent of the financial performance of, and prospects for, the Company.
LOWERING OF CREDIT AGENCY RATINGS
On April 3, 1997, Standard & Poor's lowered its ratings on the Company's
securities by one gradation and removed the ratings from CreditWatch where
they were placed February 6, 1997. The rating agency indicated that the rating
outlook is stable and that the rating actions reflect a riskier financial
profile than previously anticipated, with slower-than-expected improvement in
credit measures over the medium term.
29
<PAGE>
THE EXCHANGE OFFER
TERMS OF THE EXCHANGE OFFER; PERIOD FOR TENDERING OLD SECURITIES
The Old Securities were sold by the Company to the Initial Purchasers on
February 12, 1997 pursuant to a Purchase Agreement, dated February 7, 1996.
Upon the terms and subject to the conditions set forth in this Prospectus and
in the accompanying Letters of Transmittal (which together constitute the
Exchange Offer), the Company will accept for exchange Old Securities which are
properly tendered on or prior to the Expiration Date and not withdrawn as
permitted below. As used herein, the term "Expiration Date" means 5:00 p.m.,
New York City time, on , 1997; provided however, that if the Company, in
its sole discretion, has extended the period of time for which the Exchange
Offer is open, the term "Expiration Date" means the latest time and date to
which the Exchange Offer is extended.
As of the date of this Prospectus, $400,000,000 aggregate principal amount
of the Old Notes and 100,000 shares of Old Preferred Stock were outstanding.
This Prospectus, together with the Letters of Transmittal, is first being sent
on or about the date of this Prospectus, to all Holders of Old Securities
known to the Company. The Company's obligation to accept Old Securities for
exchange pursuant to the Exchange Offer is subject to certain conditions as
set forth under "Certain Conditions to the Exchange Offer" below.
The Company expressly reserves the right, at any time or from time to time,
to extend the period of time during which the Exchange Offer is open, and
thereby delay acceptance for exchange of any Old Securities, by giving oral or
written notice of such extension to the Holders thereof. During any such
extension, all Old Securities previously tendered will remain subject to the
Exchange Offer and may be accepted for exchange by the Company. Any Old
Securities not accepted for exchange for any reason will be returned without
expense to the tendering Holder thereof as promptly as practicable after the
expiration or termination of the Exchange Offer.
Old Notes tendered in the Exchange Offer must be in denominations of
principal amount of $1,000 and any integral multiple thereof.
The Company expressly reserves the right to amend or terminate the Exchange
Offer, and not to accept for exchange any Old Securities not theretofore
accepted for exchange, upon the occurrence of any of the conditions of the
Exchange Offer specified below under "Certain Conditions to the Exchange
Offer." The Company will give oral or written notice of any extension,
amendment, non-acceptance or termination to the Holders of the Old Securities
as promptly as practicable, such notice in the case of any extension to be
issued by means of a press release or other public announcement no later than
9:00 a.m., New York City time, on the next business day after the previously
scheduled Expiration Date.
PROCEDURES FOR TENDERING OLD SECURITIES
The tender to the Company of Old Securities by a Holder thereof as set forth
below and the acceptance thereof by the Company will constitute a binding
agreement between the tendering Holder and the Company upon the terms and
subject to the conditions set forth in this Prospectus and in the accompanying
Letter of Transmittal in respect of the Notes or Preferred Stock, as the case
may be. Except as set forth below, a Holder (which term, for purposes of the
Exchange Offer, includes any participant in the Book-Entry Transfer Facility
(as defined) system whose name appears on a security position listing as the
holder of such Old Securities) who wishes to tender Old Securities for
exchange pursuant to the Exchange Offer must transmit the appropriate Letter
of Transmittal, properly completed and duly executed, including all other
documents required by such Letter of Transmittal or (in the case of a book-
entry transfer) an Agent's Message in lieu of such Letter of Transmittal, in
the case of the Old Notes, to The Chase Manhattan Bank (the "Note Exchange
Agent") at the address set forth below under "Note Exchange Agent" or, in the
case of the Old Preferred Stock, to the Continental Stock Transfer & Trust
Company (the "Preferred Stock Exchange Agent" and, together with the Note
Exchange Agent, the "Exchange Agents") at the address set forth below under
"Preferred Stock Exchange Agent," in each case, on or prior to the Expiration
Date. In addition, either (i) certificates for such Old Securities must be
received by the appropriate Exchange Agent along with the appropriate Letter
of Transmittal, (ii) a timely
30
<PAGE>
confirmation of a book-entry transfer (a "Book-Entry Confirmation") of such
Old Securities, if such procedure is available, into the appropriate Exchange
Agent's account at DTC (the "Book-Entry Transfer Facility") pursuant to the
procedure for book-entry transfer described below, must be received by the
appropriate Exchange Agent prior to the Expiration Date along with the
appropriate Letter of Transmittal or an Agent's Message in lieu of a Letter of
Transmittal, or (iii) the Holder must comply with the guaranteed delivery
procedures described below. The term "Agent's Message" means a message,
transmitted by the Book-Entry Transfer Facility to and received by the
appropriate Exchange Agent and forming a part of a Book-Entry Confirmation,
which states that the Book-Entry Transfer Facility has received an express
acknowledgment from the tendering participant, which acknowledgment states
that such participant has received and agrees to be bound by, and make the
representations and warranties contained in, the appropriate Letter of
Transmittal and that the Company may enforce such Letter of Transmittal
against such participant.
THE METHOD OF DELIVERY OF OLD SECURITIES, LETTERS OF TRANSMITTAL AND ALL
OTHER REQUIRED DOCUMENTS IS AT THE ELECTION AND RISK OF THE HOLDERS. IF SUCH
DELIVERY IS BY MAIL, IT IS RECOMMENDED THAT REGISTERED MAIL, PROPERLY INSURED,
WITH RETURN RECEIPT REQUESTED, BE USED. IN ALL CASES, SUFFICIENT TIME SHOULD
BE ALLOWED TO ASSURE TIMELY DELIVERY. NO LETTERS OF TRANSMITTAL OR OLD
SECURITIES SHOULD BE SENT TO THE COMPANY.
Signatures on a Letter of Transmittal or a notice of withdrawal, as the case
may be, must be guaranteed unless the Old Securities surrendered for exchange
pursuant thereto are tendered (i) by a Holder of the Old Securities who has
not completed the box entitled "Special Issuance Instructions" or "Special
Delivery Instructions" on the Letter of Transmittal or (ii) for the account of
an Eligible Institution (as defined below). In the event that signatures on a
Letter of Transmittal or a notice of withdrawal, as the case may be, are
required to be guaranteed, such guarantees must be by a firm which is a member
of a registered national securities exchange or a member of the National
Association of Securities Dealers, Inc. or by a commercial bank or trust
company having an office or correspondent in the United States or by such
other Eligible Institution within the meaning of Rule 17 (A) (d)-15 of the
Securities Exchange Act of 1934, as amended (collectively, "Eligible
Institutions"). If Old Securities are registered in the name of a person other
than a signer of the Letter of Transmittal, the Old Securities surrendered for
exchange must be endorsed by, or be accompanied by a written instrument or
instruments of transfer, or exchange, in satisfactory form as determined by
the Company in its sole discretion, duly executed by the registered Holder
with the signature thereon guaranteed by an Eligible Institution.
All questions as to the validity, form, eligibility (including time of
receipt) and acceptance of Old Securities tendered for exchange will be
determined by the Company in its sole discretion, which determination shall be
final and binding. The Company reserves the absolute right to reject any and
all tenders of any particular Old Security not properly tendered or to not
accept any particular Old Security which acceptance might, in the judgment of
the Company or its counsel, be unlawful. The Company also reserves the
absolute right to waive any defects or irregularities or conditions of the
Exchange Offer as to any particular Old Security either before or after the
Expiration Date (including the right to waive the ineligibility of any Holder
who seeks to tender Old Securities in the Exchange Offer). The interpretation
of the terms and conditions of the Exchange Offer as to any particular Old
Security either before or after the Expiration Date (including the appropriate
Letter of Transmittal and the instructions thereto) by the Company shall be
final and binding on all parties. Unless waived, any defects or irregularities
in connection with tenders of Old Securities for exchange must be cured within
such reasonable period of time as the Company shall determine. Neither the
Company, the Exchange Agents nor any other person shall be under any duty to
give notification of any defect or irregularity with respect to any tender of
Old Securities for exchange, nor shall any of them incur any liability for
failure to give such notification.
If a Letter of Transmittal is signed by a person or persons other than the
registered Holder or Holders of Old Securities, such Old Securities must be
endorsed or accompanied by appropriate powers of attorney, in either case
signed exactly as the name or names of the registered Holder or Holders that
appear on the Old Securities.
If a Letter of Transmittal or any Old Securities or powers of attorney are
signed by trustees, executors, administrators, guardians, attorneys-in-fact,
officers of corporations or others acting in a fiduciary or
31
<PAGE>
representative capacity, such persons should so indicate when signing, and,
unless waived by the Company, proper evidence satisfactory to the Company of
their authority to so act must be submitted with the Letter of Transmittal.
By tendering, each Holder will represent to the Company that, among other
things, the New Securities acquired pursuant to the Exchange Offer are being
obtained in the ordinary course of business of the person receiving such New
Securities, whether or not such person is the Holder, that neither the Holder
nor any such other person has an arrangement or understanding with any person
to participate in the distribution of such New Securities and that neither the
Holder nor any such other person is an "affiliate," as defined under Rule 405
of the Securities Act, of the Company. If any Holder is an affiliate of the
Company, is engaged in or intends to engage in or has any arrangement with any
person to participate in the distribution of the New Securities to be acquired
pursuant to the Exchange Offer, such Holders (i) could not rely on the
applicable interpretations of the staff of the Commission and (ii) must comply
with the registration and prospectus delivery requirements of the Securities
Act in connection with any resale transaction. Each broker-dealer who holds Old
Securities acquired for its own account as a result of market-making activities
or other trading activities, and who receives New Securities in exchange for
such Old Securities pursuant to the Exchange Offer, may be an "underwriter"
within the meaning of the Securities Act and must acknowledge that it will
deliver a prospectus meeting the requirements of the Securities Act in
connection with any resale of such New Securities. The Letters of Transmittal
state that by so acknowledging and by delivering a prospectus, a broker-dealer
will not be deemed to admit that it is an "underwriter" within the meaning of
the Securities Act.
ACCEPTANCE OF OLD SECURITIES FOR EXCHANGE; DELIVERY OF NEW SECURITIES
Upon satisfaction or waiver of all of the conditions to the Exchange Offer,
the Company will accept, promptly after the Expiration Date, all Old Securities
properly tendered, issue the New Securities promptly after acceptance of the
Old Securities and cause the New Notes to be authenticated by the Trustee and
the New Preferred Stock to be countersigned by the Registrar. See "Certain
Conditions to the Exchange Offer" below. For purposes of the Exchange Offer,
the Company shall be deemed to have accepted properly tendered Old Securities
for exchange when, as and if the Company has given oral (promptly confirmed in
writing) or written notice thereof to the Exchange Agents.
For each Old Note accepted for exchange, the Holder of such Old Note will
receive a New Note having a principal amount equal to that of the surrendered
Old Note. For each share of Old Preferred Stock accepted for exchange, the
Holder of such Old Preferred Stock will receive one share of New Preferred
Stock. If the Exchange Offer is not consummated by July 22, 1997, Special
Payments will accrue (in addition to the stated interest on the Old Notes and
dividends (if any) on the Old Preferred Stock) from and including July 23,
1997. The Special Interest will be payable in cash semiannually in arrears each
February 15 and August 15, respectively, commencing August 15, 1997 to holders
of record of the Old Notes on the immediately preceding February 1 and August
1, respectively, at a rate per annum equal to 0.50% of the principal amount of
the Old Notes (determined daily). The Special Dividends will be payable, at the
option of the Company, in cash or in additional shares of Preferred Stock or in
any combination of cash or such shares quarterly in arrears each May 15, August
15, November 15 and February 15, commencing May 15, 1997. The aggregate amount
of Special Payments (as defined) payable pursuant to the above provisions will
in no event exceed 1.50% per annum of the principal amount of the Old Notes
(determined daily) or the liquidation preference of the Old Preferred Stock, as
the case may be.
The New Notes will bear interest from the most recent date to which interest
has been paid on the Old Notes or, if no interest has been paid on the Old
Notes, from February 12, 1997. Accordingly, if the relevant record date for
interest payment occurs after the consummation of the Exchange Offer,
registered holders of New Notes on such record date will receive interest
accruing from the most recent date to which interest has been paid or, if no
interest has been paid, from February 12, 1997. If, however, the relevant
record date for interest payment occurs prior to the consummation of the
Exchange Offer, registered holders of Old Notes on such record date will
receive interest accruing from the most recent date to which interest has been
paid or, if no interest has been paid, from February 12, 1997. Old Notes
accepted for exchange will cease to accrue interest from and after the date of
consummation of the Exchange Offer, except as set forth in the immediately
preceding sentence.
32
<PAGE>
Holders of Old Notes whose Old Notes are accepted for exchange will not
receive any payment in respect of interest on such Old Notes otherwise payable
on any interest payment date the record date for which occurs on or after
consummation of the Exchange Offer.
In all cases, issuance of New Securities for Old Securities that are
accepted for exchange pursuant to the Exchange Offer will be made only after
timely receipt by the appropriate Exchange Agent of certificates for such Old
Securities or a timely Book-Entry Confirmation of such Old Securities into the
appropriate Exchange Agent's account at the Book-Entry Transfer Facility, the
appropriate Letter of Transmittal properly completed and duly executed or an
Agent's message in lieu thereof and all other required documents. If any
tendered Old Securities are not accepted for any reason set forth in the terms
and conditions of the Exchange Offer or if Old Securities are submitted for an
amount or quantity greater than the Holder desires to exchange, such
unaccepted or non-exchanged Old Securities will be returned without expense to
the tendering Holder thereof (or, in the case of Old Securities tendered by
book-entry transfer into the appropriate Exchange Agent's account at the Book-
Entry Transfer Facility pursuant to the book-entry procedures described below,
such non-exchanged Old Securities will be credited to an account maintained
with such Book-Entry Transfer Facility) as promptly as practicable after the
expiration or termination of the Exchange Offer.
BOOK-ENTRY TRANSFER
The Exchange Agents will request the establishment of accounts with respect
to the Old Securities at the Book-Entry Transfer Facility for purposes of the
Exchange Offer within two business days after the date of this Prospectus
unless an Exchange Agent already has established an account with the Book-
Entry Transfer Facility suitable for the Exchange Offer, and any financial
institution that is a participant in the Book-Entry Transfer Facility's system
may make book-entry delivery of Old Securities by causing the Book-Entry
Transfer Facility to transfer such Old Securities into the appropriate
Exchange Agent's account at the Book-Entry Transfer Facility in accordance
with such Book-Entry Transfer Facility's procedures for transfer.
ALTHOUGH DELIVERY OF OLD SECURITIES MAY BE EFFECTED THROUGH BOOK-ENTRY
TRANSFER AT THE BOOK-ENTRY TRANSFER FACILITY, THE APPROPRIATE LETTER OF
TRANSMITTAL (OR A FACSIMILE THEREOF), WITH ANY REQUIRED SIGNATURE GUARANTEES
OR AN AGENT'S MESSAGE IN LIEU THEREOF AND ANY OTHER REQUIRED DOCUMENTS, MUST,
IN ANY CASE, BE TRANSMITTED TO AND RECEIVED BY THE APPROPRIATE EXCHANGE AGENT
AT ONE OF THE ADDRESSES SET FORTH BELOW UNDER "NOTE EXCHANGE AGENT" OR
"PREFERRED STOCK EXCHANGE AGENT," AS THE CASE MAY BE, ON OR PRIOR TO THE
EXPIRATION DATE OR THE GUARANTEED DELIVERY PROCEDURES DESCRIBED BELOW MUST BE
COMPLIED WITH.
GUARANTEED DELIVERY PROCEDURES
If a Holder of the Old Securities desires to tender such Old Securities and
the Old Securities are not immediately available, or time will not permit such
Holder's Old Securities or other required documents to reach the Note Exchange
Agent or the Preferred Stock Exchange Agent, as the case may be, before the
Expiration Date, or the procedure for book-entry transfer cannot be completed
on a timely basis, a tender may be effected if (i) the tender is made through
an Eligible Institution, (ii) prior to the Expiration Date, the appropriate
Exchange Agent received from such Eligible Institution the appropriate Notice
of Guaranteed delivery, substantially in the form provided by the Company (by
telegram, telex, facsimile transmission, mail or hand delivery), setting forth
the name and address of the Holder of Old Securities and the amount of Old
Securities tendered, stating that the tender is being made thereby and
guaranteeing that within five New York Stock Exchange ("NYSE") trading days
after the date of execution of the Notice of Guaranteed Delivery, the
certificates for all physically tendered Old Securities, in proper form for
transfer, or a Book-Entry Confirmation, as the case may be, together with a
properly completed and duly executed appropriate Letter of Transmittal (or
facsimile thereof or Agent's Message in lieu thereof) with any required
signature guarantees, and any other documents required by the appropriate
Letter of Transmittal will be deposited by the Eligible Institution with the
appropriate Exchange Agent and (iii) the certificates for all physically
tendered Old Securities, in proper form for transfer, or a Book-Entry
Confirmation, as the case may be, together with a properly completed and duly
executed appropriate Letter of Transmittal (or facsimile thereof or
33
<PAGE>
Agent's Message in lieu thereof) with any required signature guarantees, and
all other documents required by the appropriate Letter of Transmittal, are
received by the appropriate Exchange Agent within five NYSE trading days after
the date of execution of the Notice of Guaranteed Delivery.
WITHDRAWAL RIGHTS
Tenders of Old Securities may be withdrawn at any time prior to the
Expiration Date.
For a withdrawal to be effective, a written notice of withdrawal must be
received by the appropriate Exchange Agent at the addresses set forth below
under "Note Exchange Agent" or "Preferred Stock Exchange Agent," as the case
may be. Any such notice of withdrawal must specify the name of the person
having tendered the Old Securities to be withdrawn, identify the Old
Securities to be withdrawn (including the principal amount in the case of such
Old Notes or the number of shares in the case of the Old Preferred Stock), and
(where certificates for Old Securities have been transmitted) specify the name
in which such Old Securities are registered, if different from that of the
withdrawing Holder. If certificates for Old Securities have been delivered or
otherwise identified to the Note Exchange Agent or the Preferred Stock
Exchange Agent, as the case may be, then, prior to the release of such
certificates the withdrawing Holder must also submit the serial numbers of the
particular certificates to be withdrawn and a signed notice of withdrawal with
signatures guaranteed by an Eligible Institution unless such Holder is an
Eligible Institution. If Old Securities have been tendered pursuant to the
procedure for book-entry transfer described above, the executed notice of
withdrawal, guaranteed by an Eligible Institution, unless such Holder is an
Eligible Institution, must specify the name and number of the account at the
Book-Entry Transfer Facility to be credited with the withdrawn Old Securities
and otherwise comply with the procedures of such facility. All questions as to
the validity, form and eligibility (including time of receipt) of such notices
will be determined by the Company, whose determination shall be final and
binding on all parties. Any Old Securities so withdrawn will be deemed not to
have been validly tendered for exchange for purposes of the Exchange Offer.
Any Old Securities which have been tendered for exchange but which are not
exchanged for any reason will be returned to the Holder thereof without cost
to such Holder (or, in the case of Old Securities tendered by book-entry
transfer into the appropriate Exchange Agent's account at the Book-Entry
Transfer Facility pursuant to the book-entry transfer procedures described
above, such Old Securities will be credited to an account maintained with such
Book-Entry Transfer Facility for the Old Securities) as soon as practicable
after withdrawal, rejection of tender or termination of the Exchange Offer.
Properly withdrawn Old Securities may be retendered by following one of the
procedures described under "--Procedures for Tendering Old Securities" above
at any time on or prior to the Expiration Date.
CERTAIN CONDITIONS TO THE EXCHANGE OFFER
Notwithstanding any other provision of the Exchange Offer, the Company shall
not be required to accept for exchange, or to issue New Securities in exchange
for, the Old Securities and may terminate or amend the Exchange Offer if at
any time before the acceptance of such Old Securities for exchange or the
exchange of the New Securities for such Old Securities any of the following
events shall occur:
(a) there shall be threatened, instituted or pending any action or
proceeding before, or any injunction, order or decree shall have been
issued by, any court or governmental agency or other governmental
regulatory or administrative agency or commission, (i) seeking to restrain
or prohibit the making or consummation of the Exchange Offer or any other
transaction contemplated by the Exchange Offer, or assessing or seeking any
damages as a result thereof, or (ii) resulting in a material delay in the
ability of the Company to accept for exchange or exchange some or all of
the Old Securities pursuant to the Exchange Offer, or any statute, rule,
regulation, order or injunction shall be sought, proposed, introduced,
enacted, promulgated or deemed applicable to the Exchange Offer or any of
the transactions contemplated by the Exchange Offer by any government or
governmental authority, domestic or foreign, or any action shall have been
taken, proposed or threatened, by any government, governmental authority,
agency or court, domestic or foreign, that in the sole judgment of the
Company might directly or indirectly result in any of the consequences
referred to in clauses (i) or (ii) above or, on the sole judgement of the
Company, might result in the holders of New Securities having obligations
with respect to resales and transfers of New Securities which are greater
than those described in the interpretation of the Commission referred to on
the cover page of this Prospectus, or would otherwise make it inadvisable
to proceed with the Exchange Offer; or
34
<PAGE>
(b) there shall have occurred (i) any general suspension of or general
limitation on prices for, or trading in, securities on any national
securities exchange or in the over-the-counter market, (ii) any limitation
by any governmental agency or authority which may adversely affect the
ability of the issuer to complete the transactions contemplated by the
Exchange Offer, (iii) a declaration of a banking moratorium or any
suspension of payments in respect of banks in the United States or any
limitation by any governmental agency or authority which adversely affects
the extension of credit or (iv) a commencement of a war, armed hostilities
or other similar international calamity directly or indirectly involving
the United States, or, in the case of any of the foregoing existing at the
time of the commencement of the Exchange Offer, a material acceleration or
worsening thereof; or
(c) any change (or any development involving a prospective change) shall
have occurred or be threatened in the business, properties, assets,
liabilities, financial condition, operations, results of operations or
prospects of the Company and its subsidiaries taken as a whole that, in the
reasonable judgment of the Company, is or may be adverse to the Company, or
the Company shall have become aware of facts that, in the reasonable
judgment of the Company, have or may have adverse significance with respect
to the value of the Old Securities or the New Securities;
which, in the reasonable judgment of the Company in any case, and regardless
of the circumstances (including any action by the Company) giving rise to any
such condition, makes it inadvisable to proceed with the Exchange Offer and/or
with such acceptance or exchange or with such exchange.
The foregoing conditions are for the sole benefit of the Company and may be
asserted by the Company regardless of the circumstances giving rise to any
such condition or may be waived by the Company in whole or in part at any time
and from time to time in its sole discretion. The failure by the Company at
any time to exercise any of the foregoing rights shall not be deemed a waiver
of any such right and each such right shall be deemed an ongoing right which
may be asserted at any time and from time to time.
In addition, the Company (i) will not accept for exchange any Old Notes
tendered, and no New Notes will be issued in exchange for any such Old Notes,
if at such time any stop order shall be threatened or in effect with respect
to the Registration Statement of which this Prospectus constitutes a part or
the qualification of the Indenture under the Trust Indenture Act of 1939, as
amended (the "TIA"), and (ii) will not accept for exchange any Old Preferred
Stock tendered, and no New Preferred Stock will be issued in exchange for any
such Old Preferred Stock, if at such time any stop order shall be threatened
or in effect with respect to the Registration Statement of which this
Prospectus constitutes a part.
NOTE EXCHANGE AGENT
The Chase Manhattan Bank (the "Note Exchange Agent") has been appointed as
the Exchange Agent in respect of the Notes for the Exchange Offer. All
executed Letters of Transmittal in respect of the Notes should be directed to
the Note Exchange Agent at one of the addresses set forth below. Questions and
requests for assistance, requests for additional copies of this Prospectus or
of the Letter of Transmittal in respect of the Notes and requests for Notices
of Guaranteed Delivery should be directed to the Note Exchange Agent addressed
as follows:
Delivery To: The Chase Manhattan Bank, as Exchange Agent
By Mail, By Hand and Overnight By Facsimile:
Courier:
The Chase Manhattan Bank (212) 638-7380
Corporate Trust-Securities Window (212) 344-9367
Room 234--North Building
55 Water Street Confirm by Telephone:
New York, New York 10041
Carlos Esteves: (212) 638-0828
Sharon Lewis: (212) 638-0454
DELIVERY OF THE LETTER OF TRANSMITTAL IN RESPECT OF THE NOTES TO AN ADDRESS
OTHER THAN AS SET FORTH ABOVE OR TRANSMISSION VIA FACSIMILE OTHER THAN AS SET
FORTH ABOVE DOES NOT CONSTITUTE A VALID DELIVERY OF SUCH LETTER OF TRANSMITTAL
.
35
<PAGE>
PREFERRED STOCK EXCHANGE AGENT
Continental Stock Transfer & Trust Company (the "Preferred Stock Exchange
Agent") has been appointed as the Exchange Agent in respect of the Preferred
Stock for the Exchange Offer. All executed Letters of Transmittal in respect
of Preferred Stock should be directed to the Preferred Stock Exchange Agent at
one of the addresses set forth below. Questions and requests for assistance,
requests for additional copies of this Prospectus or of the Letter of
Transmittal in respect of the Preferred Stock and requests for Notices of
Guaranteed Delivery should be directed to the Preferred Stock Exchange Agent
addressed as follows:
Delivery To: Continental Stock Transfer & Trust Company, as Exchange Agent
By Mail, By Hand and Overnight By Facsimile:
Courier: (212) 509-5150
Continental Stock Transfer & Trust
Company
2 Broadway, 19th Floor
New York, New York 10004
Confirm by Telephone:
(212) 509-4000 Ext. 535
(for Eligible Institutions only)
DELIVERY OF THE LETTER OF TRANSMITTAL IN RESPECT OF THE PREFERRED STOCK TO AN
ADDRESS OTHER THAN AS SET FORTH ABOVE OR TRANSMISSION VIA FACSIMILE OTHER THAN
AS SET FORTH ABOVE DOES NOT CONSTITUTE A VALID DELIVERY OF SUCH LETTER OF
TRANSMITTAL.
FEES AND EXPENSES
The Company will not make any payment to brokers, dealers, or others
soliciting acceptances of the Exchange Offer except for reimbursement of
mailing expenses.
The estimated cash expenses to be incurred in connection with the Exchange
Offer will be paid by the Company and are estimated in the aggregate to be
$200,000.
TRANSFER TAXES
Holders who tender their Old Securities for exchange will not be obligated
to pay any transfer taxes in connection therewith, except that holders who
instruct the Company to register New Securities in the name of, or request
that Old Securities not tendered or not accepted in the Exchange Offer be
returned to, a person other than the registered tendering holder will be
responsible for the payment of any applicable transfer tax thereon.
CONSEQUENCES OF FAILURE TO EXCHANGE
Holders of Old Securities who do not exchange their Old Securities for New
Securities pursuant to the Exchange Offer will continue to be subject, (i) in
the case of the Notes, to the provisions in the Indenture regarding transfer
and exchange of the Old Notes and the restrictions on transfer of such Old
Notes as set forth in the legend on the Old Notes and as described in the
Offering Memorandum and (ii) in the case of the Old Preferred Stock, to the
restrictions on transfer of such Old Preferred Stock set forth in the legend
on the Old Preferred Stock and as described in the Offering Memorandum, in
each such case as a consequence of the issuance of such Old Securities
pursuant to exemptions from, or in transactions not subject to, the
registration requirements of the Securities Act and applicable state
securities laws. In general, the Old Securities may not be offered or sold,
unless registered under the Securities Act, except pursuant to an exemption
from, or in a transaction not subject to, the Securities Act and applicable
state securities laws. The Company does not currently anticipate that it will
take any action to register the Old Securities under the Securities Act.
Based on interpretations by the staff of the Commission, as set forth in no-
action letters issued to third parties, the Company believes that New Notes
and New Preferred Stock issued in exchange of Old Notes and Old Preferred
Stock, respectively, pursuant to the Exchange Offer may be offered for resale,
resold or otherwise
36
<PAGE>
transferred by Holders thereof (other than any such Holder which is an
"affiliate" of the Company within the meaning of Rule 405 under the Securities
Act) without compliance with the registration and prospectus delivery
provisions of the Securities Act, provided that such New Securities are
acquired in the ordinary course of such Holders' business and such Holders,
other than brokers-dealers, are not engaged in, do not intend to engage in and
have no arrangement or understanding with any person to participate in, the
distribution (within the meaning of the Securities Act) of such New
Securities. If any Holder has any arrangement or understanding with respect to
the distribution of the New Securities to be acquired pursuant to the Exchange
Offer, such Holder (i) could not rely on the applicable interpretations of the
staff of the Commission and (ii) must comply with the registration and
prospectus delivery requirements of the Securities Act in connection with any
resale transaction. Each broker-dealer that receives New Securities for its
own account in exchange for Old Securities must acknowledge that such Old
Securities were acquired by such broker-dealer as a result of market-making
activities or other trading activities and that it will deliver a prospectus
in connection with any resale of such New Securities. See "Plan of
Distribution."
In addition, to comply with the securities laws of certain jurisdictions, if
applicable, the New Securities may not be offered or sold unless they have
been registered or qualified for sale in such jurisdiction or an exemption
from registration or qualification is available and is complied with. The
Company does not currently intend to take any action to register or qualify
the sale of the New Securities in any such jurisdictions.
USE OF PROCEEDS
The Company will not receive any cash proceeds from the exchange of Old
Notes and Old Preferred Stock for New Notes and New Preferred Stock,
respectively, pursuant to the Exchange Offer. The approximately $485.6 million
net proceeds to the Company from the sale of the Old Securities will be used,
subject to the provisions of the indentures governing the Deferred Coupon
Notes, to finance the construction and working capital requirements
(including, without limitation, debt service and repayment obligations) of the
Company. In addition, subject to the provisions of indentures governing the
Deferred Coupon Notes, a portion of the net proceeds may also be used to make
acquisitions of businesses or assets related to the Company's cable
telephony/television and telecommunications business.
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
1996................................... 1.71 1.56 1.72 1.49
</TABLE>
---------------------
(1) The average of the Noon Buying Rates on the last day of
each month during the relevant period.
37
<PAGE>
CAPITALIZATION
The following table sets forth the capitalization of the Company at March
31, 1997:
<TABLE>
<CAPTION>
AS OF MARCH 31, 1997
--------------------
(IN THOUSANDS)
<S> <C>
Cash, cash equivalents and marketable securities.......... $ 787,633
==========
Short-term borrowings, including current portion of long-
term debt................................................ $ 3,169
==========
Long-term debt (excluding current portion):
NTLIH Term Loan Facility................................ $ 234,755
10% Notes Due 2007 ..................................... 400,000
10 7/8% Notes Due 2003.................................. 180,031
12 3/4% Notes Due 2005.................................. 190,788
11 1/2% Notes Due 2006.................................. 684,208
7 1/4% Convertible Notes Due 2005....................... 191,750
7% Convertible Notes Due 2008........................... 275,000
----------
Total long-term debt.................................. 2,156,532
Senior redeemable exchangeable preferred stock, par value
$0.01 per share, plus accreted dividends, liquidation
preference $1,000 per share, 2,500,000 shares authorized,
100,000 shares issued and outstanding.................... 101,697
Shareholders' equity:
Series preferred stock, $.01 par value, 2,500,000 shares
authorized
Series A convertible preferred stock $.01 par value,
2,000 authorized, 780 shares, issued and
outstanding.......................................... --
Common stock, $.01 par value, 100,000,000 shares
authorized, 32,097,000 issued and outstanding(1)....... 321
Additional paid-in capital.............................. 547,398
Cumulative translation adjustment....................... 100,004
(Deficit)............................................... (469,756)
----------
Total shareholders' equity............................ 177,967
----------
Total capitalization...................................... $2,436,196
==========
</TABLE>
- ---------------------
(1) Does not include an aggregate of 23,994,000 shares of Common Stock,
consisting of: (i) 6,817,000 shares of Common Stock subject to options;
(ii) 1,009,000 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 of the Convertible Preferred Stock.
See "Description of Capital Stock."
38
<PAGE>
SELECTED CONSOLIDATED FINANCIAL INFORMATION
The selected consolidated financial information presented below under the
captions Income Statement Data for the years ended December 31, 1996, 1995,
1994, 1993 and 1992 and Balance Sheet Data as of December 31, 1996, 1995,
1994, 1993 and 1992, were derived from the Consolidated Financial Statements
of the Company audited by Ernst & Young LLP. The accompanying unaudited
interim financial information as of March 31, 1997 and for the periods ended
March 31, 1997 and 1996 include all adjustments (consisting only of normal
recurring accruals) which are, in the opinion of management, necessary for a
fair presentation of the results of operations for such interim periods.
Operating results for the three months ended March 31, 1997 are not
necessarily indicative of the results that may be expected for the year ending
December 31, 1997. The following information should be read in conjunction
with the Consolidated Financial Statements and notes thereto incorporated by
reference in this Prospectus. See "Incorporation of Certain Documents By
Reference."
<TABLE>
<CAPTION>
THREE MONTHS
ENDED MARCH 31, YEAR ENDED DECEMBER 31,
------------------ ------------------------------------------------
1997 1996 1996(1) 1995 1994 1993(2) 1992
-------- -------- --------- -------- -------- -------- -------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Revenues................ $106,817 $ 18,434 $ 228,343 $ 33,741 $ 13,745 $ 10,078 $12,220
Costs and expenses
Operating expenses..... 76,628 12,629 157,432 24,415 7,827 4,441 4,171
Selling, general and
administrative
expenses............... 42,415 21,798 129,891 72,629 27,890 5,042 2,899
Depreciation and
amortization........... 33,005 12,190 98,653 29,823 17,916 6,206 4,495
-------- -------- --------- -------- -------- -------- -------
Total costs and
expenses............ 152,048 46,617 385,976 126,867 53,633 15,689 11,565
-------- -------- --------- -------- -------- -------- -------
Operating income
(loss)................ (45,231) (28,183) (157,633) (93,126) (39,888) (5,611) 655
Other income (expense)
Interest, dividend and
other income........... 7,401 7,763 33,634 21,185 18,403 5,182 1,594
Interest expense....... (47,609) (24,711) (137,032) (28,379) (11,410) (2,950) --
Foreign currency
transactions gains
(losses)............... (322) (123) 2,408 84 2,062 (7,052) --
-------- -------- --------- -------- -------- -------- -------
Income (loss) before
income taxes and
minority interests..... (85,761) (45,254) (258,623) (100,236) (30,833) (10,431) 2,249
Income tax benefit
(provision)............. -- (42) (7,653) 2,477 (1,630) (645) (1,028)
-------- -------- --------- -------- -------- -------- -------
Income (loss) before
minority interests...... (85,761) (45,296) (266,276) (97,759) (32,463) (11,076) 1,221
Minority interests...... -- 2,572 11,822 6,974 2,890 -- --
-------- -------- --------- -------- -------- -------- -------
Net income (loss)....... $(85,761) $(42,724) $(254,454) $(90,785) $(29,573) $(11,076) $ 1,221
======== ======== ========= ======== ======== ======== =======
Net income (loss) per
common share(3)........ $ (2.73) $ (1.41) $ (8.20) $ (3.01) $ (.98) $ (.83) $ .13
======== ======== ========= ======== ======== ======== =======
Weighted average number
of common shares used
in computation of net
income (loss) per share
including common stock
equivalents(3)......... 32,084 30,211 31,041 30,190 30,175 13,327 9,367
======== ======== ========= ======== ======== ======== =======
Ratio of earnings to
fixed charges and
earnings to combined
fixed charges and
preferred stock
dividends(4)........... -- -- -- -- -- -- 81:1
</TABLE>
39
<PAGE>
SELECTED CONSOLIDATED FINANCIAL INFORMATION
<TABLE>
<CAPTION>
AS OF
MARCH 31, AS OF DECEMBER 31,
--------- ------------------------------------------------
1997 1996(1) 1995 1994 1993(2) 1992
--------- ---------- ---------- -------- -------- -------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Working capital......... $ 594,652 $ 242,102 $ 76,128 $251,544 $410,421 $28,750
Fixed assets, net....... 1,481,537 1,459,528 639,674 191,725 36,422 14,065
Total assets............ 2,841,474 2,454,611 1,010,669 664,366 594,976 45,647
Long-term debt ......... 2,156,532 1,732,168 513,026 143,488 130,553 --
Shareholders' equity.... 177,967 328,114 339,257 436,534 452,402 43,260
</TABLE>
- --------
(1) In May 1996, the Company purchased NTL Group for an aggregate purchase
price of approximately $439 million. The net assets and results of
operations of NTL Group are included in the consolidated financial
statements from the date of the acquisition.
(2) 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.
(3) After giving retroactive effect to the four-for-three stock split by way
of stock dividend paid in August 1995.
(4) Fixed charges consist of interest expense, including capitalized interest,
amortization of fees related to debt financing and rent expense deemed to
be interest. The fixed charges coverage deficiency amounted to $85.4
million and $42.7 million, $236.5 million, $105.4 million, $31.8 million
and $10.4 million for the three months ended March 31, 1997 and 1996 and
for the years ended December 31, 1996, 1995, 1994 and 1993, respectively.
The combined fixed charges and preferred stock dividends coverage
deficiency amounted to $87.1 million for the three months ended March 31,
1997.
The Company did not declare or pay any cash dividends during the years
indicated.
40
<PAGE>
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 operated by the Company. In the past
twelve months, the Company has expanded its local telecoms and television
services business to include a national telecoms network, national television
and radio broadcast transmission services and Internet service provision as
well as other related communications businesses.
In its franchise areas, the Company is constructing integrated, high
capacity, high speed, full-service networks which allows the Company to offer
customers residential telephone, CATV and business telecommunications
services. The Company's local networks provide a two-way communications
pathway which is also capable of delivering new services which may emerge from
the convergence of telecommunications, information services and entertainment.
In May 1996, the Company purchased the NTL Group which provides broadcast
and broadband transmission and communications services on a nationwide basis
in the United Kingdom. NTL's core business has been the transmission of
television programming for the ITV (Channel 3) companies, Channel 4 and S4C.
The NTL Group has also been awarded the contract for the transmission of the
Channel 5 signal for Channel 5 Broadcasting Limited. Under contracts with
those companies, NTL Group is responsible for operating, monitoring and
maintaining a broadcast transmission service. NTL Group has enhanced its
national infrastructure of over 1,200 owned and shared transmission sites
throughout the United Kingdom to diversify beyond its core business and has
expanded its national network to enter into the telecommunications and radio
sectors. The Company, through NTL Group now operates a national broadband
microwave communications network which it uses to provide carrier and trunk
services to telecommunications companies, provides independent radio signal
transmission, leases and manages cell sites for wireless telephony operators,
commissions and maintains emergency service radio systems, operates satellite
earth stations that uplink video signals to satellites and designs and builds
studio and broadcast facilities. Management believes that the combination of
the Company's local high capacity full-service networks and NTL Group's
national diversified network creates a variety of strategic benefits for the
Company.
In October 1996, the Company announced a new organizational structure
integrating its local telephone, cable television and internet businesses with
its national telecommunications and television transmission businesses. Five
business divisions were created for the combined organization: Local Telecoms
and Television Services, National Telecoms Services, Broadcast Services,
Internet and Information Services and National Media Services.
In March 1997, the Company changed its name to NTL Incorporated to reflect
the integration of the services provided by the Company and NTL Group to
create a national telecommunications company in the United Kingdom and to
capitalize on NTL Group's legacy in the United Kingdom as a provider of
reliable communications services.
BUSINESS DIVISIONS
LOCAL TELECOMS AND TELEVISION SERVICES
The Local Telecoms and Television Services division consists of the
Company's core business of offering residential telephony, residential CATV
and business telephony services in the Company's franchise areas in the United
Kingdom.
The Company has clustered 16 separate franchises into five distinct
geographic regions (the "Regional Areas"). These Regional Areas give the
Company an operating presence not only in England, but in Scotland, Wales and
Northern Ireland. In 1996, the Company acquired the remaining minority
interests in its Suburban London and South Wales Regional Areas and now has
100% ownership interests in the licenses in all of its franchise areas.
41
<PAGE>
Summary information for the franchises in each of the Regional Areas at
March 31, 1997 is set forth below:
<TABLE>
<CAPTION>
TOTAL
OWNERSHIP HOMES IN
REGIONAL AREA FRANCHISES PERCENTAGE FRANCHISE(1)
<S> <C> <C> <C>
Central Scotland................. N.W. Glasgow/Clydebank 100% 128,000
Greater Glasgow 100 254,000
Bearsden/Milngavie 100 14,000
Paisley/Renfrew 100 73,000
Inverclyde/Eastwood 100 30,000
---------
499,000
---------
South Wales...................... Cardiff/Penarth 100% 103,000
Newport 100 85,000
Swansea/Neath 100 122,000
Glamorgan/Gwent(2) 100 230,000
---------
540,000
---------
Suburban London.................. Surrey/Hampshire 100% 136,000
Central Hertfordshire 100 102,000
East Hertfordshire 100 56,600
North Bedfordshire 100 95,000
South Bedfordshire 100 95,000
---------
484,600
---------
West Yorkshire................... Huddersfield/Dewsbury 100% 138,400
---------
Northern Ireland(3).............. 100% 428,000
---------
FRANCHISE TOTALS............... 2,090,000
=========
</TABLE>
- ---------------------
(1) Total Homes in Franchise represents the Company's regulatory milestones
which were derived from the 1981 census (being the census statistics at
the date each license was granted).
(2) The final regulatory milestone for the Gwent and Glamorgan LDL is 230,000
homes 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.
NATIONAL TELECOMS SERVICES
The National Telecoms Services division includes the national telecoms,
radio communications and satellite services business units.
This division builds and operates digital networks for customers, typically
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. Access to a national telecoms network represents one of the
primary potential strategic benefits of the NTL Group acquisition for the
Company. The Company intends to connect its local broadband networks in its
five Regional Areas to the national telecoms network in order to become a
fully integrated national telecoms provider. The Company believes that it can
maximize its return on its investment in its integrated full-service network
by successfully combining its strategies for developing, operating and
marketing "last mile" telephony/cable systems with the national transmission
network to provide high-quality voice, data and communications services
throughout the United Kingdom.
The Company expects all seven local switches to be connected to the national
telecommunications network during 1997 and 1998. The Company expects to begin
carrying a portion of its own long distance traffic and expects to begin
offering switched telecommunications services by the end of 1997. The Company
has also implemented a microwave-to-fiber network enhancement program as a
result of increased customer demand.
42
<PAGE>
Management believes that the integration of its local networks with the
national network creates strategic advantages for the Company's telephony
business. This integration will allow the Company to carry telecommunications
traffic between each of its Regional Areas and throughout the United Kingdom
and, therefore, achieve significant savings on the interconnection fees it is
currently paying other carriers. In addition, using the national telecoms
network gives the Company greater pricing flexibility and, therefore, will
enable the Company to design and offer new telephony service packages to its
customers, which management believes should have a positive effect on the
Company's penetration rates. The Company's network infrastructures are
separate from those of British Telecommunications plc ("BT") and Mercury and
expected to be capable of delivering national long distance services in the
United Kingdom in competition with BT and Mercury.
The Company also offers a range of satellite uplinking services including
uplinks for a variety of entertainment channels to a number of satellites
including ASTRA 1C, Intelsat, 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 Group 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
radio sites for the Mercury One-2-One mobile telephone network in the United
Kingdom.
BROADCAST SERVICES
The Company's Broadcast Services division includes the original core
transmission services of NTL Group providing 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 owned and shared
transmission sites which deliver broadcast signals for ITV, Channel 4, S4C,
Teletext and many of the United Kingdom's independent radio broadcasters. In
addition, in 1996 NTL Group entered into a ten-year contract to build the
transmission system and broadcast the signal for Channel 5, the United
Kingdom's fifth terrestrial channel, which began broadcasting in March 1997.
In addition to transmission services, the Broadcast Services division markets
added value services to its existing television customers including additional
monitoring services, reserve system services and contribution/ distribution
services.
The Broadcast Services division also offers a range of services to radio
broadcasting licensees in the United Kingdom including: target service area
planning; site location, installation and construction; and equipment
selection, procurement, operation, monitoring and maintenance. This division
offers total broadcast contract services ("TBCs"), where it designs, builds,
owns and maintains the operator's transmission facilities, and facility
management contract services ("FMCs"), where it maintains customer-owned
equipment and administers the operation of the transmission service.
The Broadcast Services division also includes NTL International, which
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.
43
<PAGE>
INTERNET AND INFORMATION SERVICES
In 1995, the Company 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. Cable Online provides Internet service on a
wholesale basis to other Internet service providers as well as on a retail
basis. In 1996, the Company established 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
Company subsidiary and 51% by Virgin and is intended to offer Internet access
and interactive services to United Kingdom consumers and small office/home
users. In addition, Virgin Net has contracted Cable Online to provide the
dial-up national network and back office structure necessary for access to
Virgin Net and the Internet.
During the third quarter and early fourth quarter of 1996, Cable Online
launched residential Internet access service under the Cable Online 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 wholesale Internet network services to Virgin, Diamond Cable
Communications PLC and Telecential. Internet network services cover a range of
services which allow the customer to act as an Internet service provider.
As with the Company's telephony business, access to the national telecoms
network will have strategic benefits for Cable Online and the Company's
Internet services businesses. Utilizing the national telecoms network is
expected to reduce the operating costs, increase the flexibility and national
reach and improve the overall marketing and product opportunities of Cable
Online.
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 oversees the
weekly television listing guides inserted in local newspapers in certain of
the Company's franchise areas. This division also coordinates 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.
44
<PAGE>
DESCRIPTION OF NOTES
GENERAL
The Old Notes were issued pursuant to an Indenture dated as of February 12,
1997 (the "Indenture") between the Company and The Chase Manhattan Bank, as
trustee (the "Trustee"). A copy of the Indenture has been filed as an exhibit
to the Registration Statement of which this Prospectus is a part. The New
Notes will also be issued pursuant to the Indenture, which will be qualified
under the Trust Indenture Act of 1939, as amended ("TIA"), upon the
effectiveness of the Registration Statement of which this Prospectus is a
part. The form and terms of the New Notes include those stated in the
Indenture (including the form of New Notes) and those made part of the
Indenture by reference to the TIA. The New Notes are subject to all such
terms, and holders of the New Notes are referred to the Indenture and the TIA
for a statement of those terms. The following summary of certain provisions of
the Indenture does not purport to be complete and is qualified in its entirety
by reference to the Indenture, including the definitions therein of certain
terms used below. The definitions of certain terms used in the following
summary are set forth below under "--Certain Definitions." In this
"Description of Notes," the term "Company" refers to International CableTel
Incorporated and not any of its Subsidiaries. As used in this section,
references of the "Notes" refer to the Old Notes and the New Notes, unless the
context requires otherwise.
The Notes will be unsecured obligations of the Company, ranking pari passu
in right of payment with all senior unsecured Indebtedness and senior in right
of payment to all subordinated Indebtedness of the Company.
The operations of the Company are conducted through its Subsidiaries and,
therefore, the Company is dependent upon the cash flow of its Subsidiaries to
meet its obligations, including its obligations under the Notes. As a result,
the Notes will be effectively subordinated to all existing and future
indebtedness and other liabilities and commitments of such Subsidiaries.
The Notes will accrue interest at the rate per annum shown on the cover page
of this Prospectus from February 12, 1997, or from the most recent interest
payment date to which interest has been paid or duly provided for. Interest
will be payable semiannually on February 15 and August 15 of each year,
beginning on August 15, 1997, to the holders of record on the immediately
preceding February 1 and August 1, respectively. Interest on overdue principal
and (to the extent permitted by law) on overdue installments of interest will
accrue at a rate equal to the rate borne by the Notes. Interest will be
computed on the basis of a 360-day year comprised of twelve 30-day months.
The Notes will be payable both as to principal and interest at the office or
agency of the Company maintained for such purpose within the City and State of
New York or, at the option of the Company, payment of interest may be made by
check mailed to the holders of the Notes at their respective addresses set
forth in the register of holders of Notes or, if a holder so requests, by wire
transfer of immediately available funds to an account previously specified in
writing by such holder to the Company and the Trustee. Until otherwise
designated by the Company, the Company's office or agency in New York will be
the office of the Trustee maintained for such purpose. The Notes will mature
on February 15, 2007 and will be issued in registered form, without coupons,
and in denominations of $1,000 and integral multiples thereof.
OPTIONAL REDEMPTION
Except as referred to herein under "--Covenants--Additional Amounts;
Optional Tax Redemption," the Notes are not redeemable at the Company's option
prior to February 15, 2002. Thereafter, the Notes will be subject to
redemption at the option of the Company, in whole or in part, upon not less
than 30 nor more than 60 days' notice, at the redemption prices (expressed as
percentages of principal amount) set forth below plus accrued
45
<PAGE>
and unpaid interest thereon to the applicable redemption date, if redeemed
during the twelve-month period beginning on February 15 of the years indicated
below:
<TABLE>
<CAPTION>
YEAR PERCENTAGE
---- ----------
<S> <C>
2002........................................................... 105.000%
2003........................................................... 103.333%
2004........................................................... 101.667%
2005 and thereafter............................................ 100.000%
</TABLE>
MANDATORY REDEMPTION
Except as set forth below under "--Change of Control" and "--Asset Sales,"
the Company is not required to make mandatory redemption or sinking fund
payments with respect to the Notes.
CHANGE OF CONTROL
Upon the occurrence of a Change of Control Triggering Event, each holder of
Notes shall have the right to require the Company to repurchase all or any
part (equal to $1,000 or an integral multiple thereof) of such holder's Notes
pursuant to the offer described below (the "Change of Control Offer") at a
purchase price equal to 101% of the principal amount thereof plus accrued and
unpaid interest, if any, to the date of purchase (the "Change of Control
Payment"). Within 40 days following any Change of Control Triggering Event,
the Company shall mail a notice to each holder stating: (1) that the Change of
Control Offer is being made pursuant to the covenant entitled "Change of
Control" and that all Notes tendered will be accepted for payment; (2) the
purchase price and the purchase date, which shall be no earlier than 30 days
nor later than 40 days from the date such notice is mailed (the "Change of
Control Payment Date"); (3) that any Notes not tendered will continue to
accrue interest; (4) that, unless the Company defaults in the payment of the
Change of Control Payment, all Notes accepted for payment pursuant to the
Change of Control Offer shall cease to accrue interest after the Change of
Control Payment Date; (5) that holders electing to have any Notes purchased
pursuant to a Change of Control Offer will be required to surrender the Notes,
with the form entitled "Option of Holder to Elect Purchase" on the reverse of
the Notes completed, to the Paying Agent at the address specified in the
notice prior to the close of business on the third Business Day preceding the
Change of Control Payment Date; (6) that holders will be entitled to withdraw
their election if the Paying Agent receives, not later than the close of
business on the second Business Day preceding the Change of Control Payment
Date, a telegram, telex, facsimile transmission or letter setting forth the
name of the holder, the principal amount of Notes delivered for purchase, and
a statement that such holder is withdrawing his election to have such Notes
purchased; and (7) that holders whose Notes are being purchased only in part
will be issued new Notes equal in principal amount to the unpurchased portion
of the Notes surrendered, which unpurchased portion must be equal to $1,000 in
principal amount or an integral multiple thereof.
The Company will comply with the requirements of Rules 13e-4 and 14e-1 under
the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and any
other securities laws and regulations thereunder to the extent such laws and
regulations are applicable in connection with the repurchase of the Notes in
connection with a Change of Control Triggering Event.
On the Change of Control Payment Date, the Company will, to the extent
lawful, (1) accept for payment Notes or portions thereof tendered pursuant to
the Change of Control Offer, (2) deposit with the Paying Agent an amount equal
to the Change of Control Payment in respect of all Notes or portions thereof
so tendered and (3) deliver or cause to be delivered to the Trustee the Notes
so accepted together with an Officers' Certificate stating the Notes or
portions thereof tendered to the Company. The Paying Agent shall promptly mail
to each holder of Notes so accepted (or, if such a holder requests, wire
transfer immediately available funds to an account previously specified in
writing by such holder to the Company and the Paying Agent) payment in an
amount equal to the purchase price for such Notes, and the Trustee shall
promptly authenticate and mail to each holder a new Note equal in principal
amount to any unpurchased portion of the Notes surrendered, if any; provided
that
46
<PAGE>
each such new Note shall be in a principal amount of $1,000 or an integral
multiple thereof. The Company will publicly announce the results of the Change
of Control Offer on or as soon as practicable after the Change of Control
Payment Date.
Except as described above with respect to a Change of Control Triggering
Event, the Indenture does not contain any other provisions that permit the
holders of the Notes to require that the Company repurchase or redeem the
Notes in the event of a takeover, recapitalization or similar restructuring.
The Indenture contains covenants which may afford holders of the Notes
protection in the event of a highly leveraged transaction, reorganization,
restructuring, merger or similar transaction, including the Change of Control
provision described above and the provisions described under "--Incurrence of
Indebtedness and Issuance of Preferred Stock" and "--Merger, Consolidation or
Sale of Assets" below. Each such covenant is, however, subject to certain
exceptions which may permit the Company to be involved in such a highly
leveraged transaction that may adversely affect the holders of the Notes.
The Change of Control Offer requirement of the Notes may in certain
circumstances make more difficult or discourage a takeover of the Company,
and, thus, the removal of incumbent management. The Change of Control Offer
requirement, however, is not the result of management's knowledge of any
specific effort to accumulate the Company's stock or to obtain control of the
Company by means of a merger, tender offer, solicitation or otherwise, or part
of a plan by management to adopt a series of anti-takeover provisions.
Instead, the Change of Control Offer requirement is a result of negotiations
between the Company and the Initial Purchasers. Management has not entered
into any agreement or plan involving a Change of Control, although it is
possible that the Company would decide to do so in the future. Subject to the
limitations discussed below, the Company could, in the future, enter into
certain transactions including acquisitions, refinancings or other
recapitalizations, that would not constitute a Change of Control Triggering
Event under the Indenture, but that could increase the amount of indebtedness
outstanding at such time or otherwise affect the Company's capital structure
or credit ratings.
The indentures for the 10 7/8% Notes, in an aggregate principal amount at
maturity of $212,000,000, the 12 3/4% Notes, in an aggregate principal amount
at maturity of $277,803,500, and the 11 1/2% Notes in an aggregate principal
amount at maturity of $1,050,000,000, which rank pari passu with the Notes,
contain change of control provisions. The indentures for the Convertible
Notes, which are subordinated to the Notes, also contain change of control
provisions.
The Company's ability to pay cash to the holders of Notes pursuant to a
Change of Control Offer may be limited by the Company's then existing
financial resources. See "Risk Factors--Potential Adverse Consequences of
Leverage" and "--Holding Company Structure; Dependence Upon Cash Flow from
Subsidiaries." Any future credit agreements or other agreements relating to
indebtedness of the Company may contain prohibitions or restrictions on the
Company's ability to effect a Change of Control Payment. In the event a Change
of Control Triggering Event occurs at a time when such prohibitions or
restrictions are in effect, the Company could seek the consent of its lenders
to the purchase of Notes or could attempt to refinance the borrowings that
contain such prohibition. If the Company does not obtain such a consent or
repay such borrowings, the Company will be effectively prohibited from
purchasing Notes. In such case, the Company's failure to purchase tendered
Notes would constitute an Event of Default under the Indenture. Moreover, the
events that constitute a Change of Control Triggering Event or require an
Asset Sale Offer under the Indenture may also constitute events of default
under future debt instruments or credit agreements of the Company or the
Company's subsidiaries (including the Potential Credit Facilities). Such
events of default may permit the lenders under such debt instruments or credit
agreements to accelerate the debt and, if such debt is not paid or
repurchased, to enforce their security interests in what may be all or
substantially all of the assets of the Company's subsidiaries. Any such
enforcement may limit the Company's ability to raise cash to repay or
repurchase the Notes.
It is not intended that the Change of Control Offer will be made in the
event the Company enters into a transaction with management or their
affiliates. The definition of Change of Control includes a phrase relating to
the sale, lease, transfer, conveyance or other disposition of "all or
substantially all" of the Company's assets. Although there is a developing
body of case law interpreting the phrase "substantially all," there is no
precise
47
<PAGE>
established definition of the phrase under applicable law. Accordingly, the
ability of a holder of Notes to require the Company to repurchase such Notes
as a result of a sale, lease, transfer, conveyance or other disposition of
less than all of the assets of the Company and its Subsidiaries to another
person may be uncertain.
ASSET SALES
The Indenture will provide that the Company will not and will not permit any
of its Restricted Subsidiaries to cause, make or suffer to exist any Asset
Sale, unless (i) no Default exists or is continuing immediately prior to and
after giving effect to such Asset Sale, (ii) the Company (or the Restricted
Subsidiary, as the case may be) receives consideration at the time of such
Asset Sale at least equal to the fair market value (evidenced by a resolution
of the Board of Directors set forth in an Officers' Certificate delivered to
the Trustee) of the assets sold or otherwise disposed of and (iii) (a) at
least 80% of the consideration therefor received by the Company or such
Restricted Subsidiary is in the form of Cash Equivalents or (b) the
consideration therefor received by the Company or such Restricted Subsidiary
is Cable Assets, or Capital Stock in a Qualified Subsidiary, the sole assets
of which are Cable Assets, that are determined in the resolution referred to
in (ii) above to be substantially comparable in type to the assets being sold
or (c) the Company or such Restricted Subsidiary receives Capital Stock in a
Cable Controlled Subsidiary (or an entity that will become a Cable Controlled
Subsidiary after giving effect to such transaction) as consideration therefor,
provided that the aggregate fair market value measured at such time of Capital
Stock so received, and still held pursuant to all transactions under this
clause (c), plus the aggregate fair market value of Capital Stock, if any,
retained after the applicable 60 day period in all transactions under clause
(d) below, will be no more than the proceeds that would be received from the
sale of Equity Interests in a Cable Business (in which the Company has an
Equity Interest) representing 5% of the Company's Net Households immediately
prior to such transaction or (d) the Company or such Restricted Subsidiary
receives as consideration therefor, Capital Stock in a company engaged in a
Cable Business which is publicly traded either in the United Kingdom or in the
United States, provided that (i) the aggregate fair market value measured at
such time of Capital Stock so received will be no more than the proceeds that
would be received from the sale of Equity Interests in a Cable Business (in
which the Company has an Equity Interest) representing 10% of the Company's
Net Households immediately prior to such transaction and (ii) within 60 days
of an Asset Sale pursuant to this clause (d), the Company or such Restricted
Subsidiary Monetizes an amount of such Capital Stock having a fair market
value equal to the difference between (x) the aggregate fair market value
measured at such time of Capital Stock received and still held in all
transactions pursuant to this clause (d), plus the aggregate fair market value
of Capital Stock, if any, received and still held in all transactions under
clause (c) above, and (y) the proceeds that would be received from the sale of
Equity Interests in a Cable Business (in which the Company has an Equity
Interest) representing 5% of the Company's Net Households immediately prior to
such transaction; provided, however, that the amount of (x) any liabilities
(as shown on the Company's or such Restricted Subsidiary's most recent balance
sheet or in the notes thereto), of the Company or any Restricted Subsidiary
(other than liabilities that are by their terms subordinated to the Notes)
that are assumed by the transferee of any such assets and (y) any notes or
other obligations received by the Company or any such Restricted Subsidiary
from such transferee that are immediately converted by the Company or such
Restricted Subsidiary into cash, shall be deemed to be Cash Equivalents (to
the extent of the Cash Equivalents received in such conversion) for purposes
of this clause (iii).
For purposes of the Indenture, the phrase "comparable in type" shall
include, without limitation and irrespective of the asset being sold, a
Qualified Cable Asset.
Within 360 days after any Asset Sale, the Company (or the Restricted
Subsidiary, as the case may be) will cause the Net Proceeds from such Asset
Sale (i) to be used to permanently reduce Indebtedness of a Restricted
Subsidiary or (ii) to be invested or reinvested in a Cable Controlled
Property. Any Net Proceeds from any Asset Sale that are not used or reinvested
as provided in the preceding sentence constitute "Excess Proceeds." When the
aggregate amount of Excess Proceeds exceeds $15 million, the Company will make
an offer (an "Asset Sale Offer") to all holders of Notes and Other Qualified
Notes to purchase the maximum principal amount of Notes and Other Qualified
Notes (determined on a pro rata basis according to the accreted value or
principal amount, as the case may be, of the Notes and the Other Qualified
Notes; provided, however, that the Asset Sale Offer must be made first to the
holders of the Applicable Notes) that may be purchased out of the Excess
Proceeds, if
48
<PAGE>
any, remaining after the consummation of the aforementioned Asset Sale Offer
to the holders of the Applicable Notes (x) with respect to the Other Qualified
Notes, based on the terms set forth in the indenture related to each issue of
the Other Qualified Notes and (y) with respect to the Notes, at an offer price
in cash in an amount equal to 100% of the outstanding principal amount thereof
plus accrued and unpaid interest, if any, to the date fixed for the closing of
such offer, in accordance with the procedures set forth in the Indenture. To
the extent that the aggregate principal amount or accreted value, as the case
may be, of Notes and Other Qualified Notes tendered pursuant to an Asset Sale
Offer is less than the Excess Proceeds, if any, remaining after the
consummation of the aforementioned Asset Sale Offer to the holders of the
Applicable Notes, the Company may use such deficiency for general corporate
purposes. If the aggregate principal amount or accreted value, as the case may
be, of Notes and Other Qualified Notes surrendered by holders thereof exceeds
the amount of Excess Proceeds, if any, remaining after the consummation of the
aforementioned Asset Sale Offer to the holders of the Applicable Notes, then
such remaining Excess Proceeds will be allocated pro rata according to
accreted value or principal amount, as the case may be, to the Notes and each
issue of the Other Qualified Notes and, the Trustee will select the Notes to
be purchased from the amount allocated to the Notes on the basis set forth
under "Selection and Notice" below. Upon completion of such offers to purchase
each of the Applicable Notes and the Notes and the Other Qualified Notes, the
amount of Excess Proceeds will be reset at zero. No such Asset Sale Offer to
purchase the Notes and Other Qualified Notes shall be required to be made by
the Company pursuant to the foregoing provisions if there are no Excess
Proceeds remaining after the consummation of the Asset Sale Offer made to
holders of the Applicable Notes.
Notwithstanding the foregoing, the Company and its Subsidiaries may (i)
sell, lease, transfer, convey or otherwise dispose of assets or property
acquired after October 14, 1993, by the Company or any Subsidiary in a sale-
and-leaseback transaction so long as the proceeds of such sale are immediately
applied to permanently reduce Indebtedness of a Restricted Subsidiary or if
there is no such Indebtedness or such proceeds exceed the amount of such
Indebtedness then such proceeds or excess proceeds are reinvested in a Cable
Controlled Property within 360 days after such sale, lease, transfer,
conveyance or disposition, (ii)(x) swap or exchange assets or property with a
Cable Controlled Subsidiary or (y) issue, sell, lease, transfer, convey or
otherwise dispose of equity securities of any of the Company's Subsidiaries to
a Cable Controlled Subsidiary, in each of cases (x) and (y) so long as (A) the
ratio of Indebtedness to Annualized Pro Forma EBITDA of the Company after such
transaction is equal to or less than the ratio of Indebtedness to Annualized
Pro Forma EBITDA of the Company immediately preceding such transaction
provided, however, that if the ratio of Indebtedness to Annualized Pro Forma
EBITDA of the Company immediately preceding such transaction is 6:1 or less,
then the ratio of Indebtedness to Annualized Pro Forma EBITDA of the Company
may be 0.5 greater than such ratio immediately preceding such transaction and
(B) either (I) the assets so contributed consist solely of a license to
operate a Cable Business and the Net Households covered by all of the licenses
to operate cable and telephone systems held by the Company and its Restricted
Subsidiaries immediately after and giving effect to such transaction equals or
exceeds the number of Net Households covered by all of the licenses to operate
cable and telephone systems held by the Company and its Restricted
Subsidiaries immediately prior to such transaction or (II) the assets so
contributed consist solely of Cable Assets and the value of the Capital Stock
received, immediately after and giving effect to such transaction, as
determined by an investment banking firm of recognized standing with knowledge
of the Cable Business, equals or exceeds the value of the Cable Assets
exchanged for such Capital Stock, (iii) sell or transfer Long
Distance/Microwave Assets so long as the Net Proceeds of such sale or transfer
are applied in accordance with the provisions of the preceding paragraph, or
(iv) issue, sell, lease, transfer, convey or otherwise dispose of Equity
Interests in any Cable Controlled Subsidiary if (A) the only consideration
received therefor other than Cash Equivalents is Cable Assets and (B) within
270 days of such disposition the Company or such Subsidiary, as the case may
be, commits to invest the cash (or Cash Equivalents) proceeds therefrom in a
Cable Controlled Property and actually so invests such proceeds in a Cable
Controlled Property within 15 months of such disposition; provided, however,
that in connection with each transaction under clauses (ii) and (iv) above,
the Company delivers to the Trustee: (1) with respect to any such transaction
where the aggregate value of all the consideration received by the Company and
its Subsidiaries exceeds $1 million or any series of such transactions where
the aggregate value of all the consideration so received exceeds $1 million, a
resolution of the Board of Directors set forth in an Officers' Certificate
certifying
49
<PAGE>
that such disposition is approved by a majority of the disinterested directors
on the Board of Directors, and (2) with respect to any such transaction or any
series of transactions where the aggregate value of all the consideration
received by the Company and its Subsidiaries exceeds $10 million, an opinion
as to the fairness to the Company or such Subsidiary from a financial point of
view issued by an investment banking firm of national standing with high yield
experience together with an Officers' Certificate to the effect that such
opinion complies with clause (2) of this proviso.
SELECTION AND NOTICE
If less than all of the Notes are to be redeemed at any time, selection of
Notes for redemption will be made by the Trustee in compliance with the
requirements of the principal national securities exchange, if any, on which
the Notes are listed, or, in the absence of such requirements or if the Notes
are not so listed, on a pro rata basis, provided that no Notes of $1,000 or
less shall be redeemed in part. Notice of redemption shall be mailed by first
class mail at least 30 but not more than 60 days before the redemption date to
each holder of Notes to be redeemed at its registered address. If any Note is
to be redeemed in part only, the notice of redemption that relates to such
Note shall state the portion of the principal amount thereof to be redeemed. A
new Note in principal amount equal to the unredeemed portion thereof will be
issued in the name of the holder thereof upon cancellation of the original
Note. On and after the redemption date, interest ceases to accrue on Notes or
portions of them called for redemption.
CERTAIN COVENANTS
Restricted Payments
The Indenture will provide that the Company will not, and will not permit
any of its Restricted Subsidiaries to, directly or indirectly: (i) declare or
pay any dividend or make any distribution on account of the Company's or any
of its Restricted Subsidiaries' Equity Interests (other than (x) dividends or
distributions payable in Equity Interests (other than Disqualified Stock) of
the Company or such Subsidiary or (y) dividends or distributions payable to
the Company or any Wholly Owned Subsidiary of the Company, or (z) pro rata
dividends or pro rata distributions payable by a Restricted Subsidiary); (ii)
purchase, redeem or otherwise acquire or retire for value any Equity Interests
of the Company or any Restricted Subsidiary or other Affiliate of the Company
(other than any such Equity Interests owned by the Company or any Wholly Owned
Subsidiary of the Company); (iii) voluntarily purchase, redeem or otherwise
acquire or retire for value any Indebtedness that is subordinated to the Notes
or (iv) make any Restricted Investment (all such payments and other actions
set forth in clauses (i) through (iv) above being collectively referred to as
"Restricted Payments"), unless, at the time of such Restricted Payment:
(a) no Default or Event of Default shall have occurred and be continuing
or would occur as a consequence thereof; and
(b) such Restricted Payment, together with the aggregate of all other
Restricted Payments made by the Company and its Restricted Subsidiaries
after the Issuance Date (including Restricted Payments permitted by clauses
(ii) through (ix) of the next succeeding paragraph), is less than the sum
of (x) the difference between Cumulative EBITDA and 1.5 times Cumulative
Interest Expense plus (y) Capital Stock Sale Proceeds plus (z) cash
received by the Company or a Restricted Subsidiary from a Non-Restricted
Subsidiary (other than cash which is or is required to be repaid or
returned to such Non-Restricted Subsidiary); provided, however, that to the
extent that any Restricted Investment that was made after the date of the
Indenture is sold for cash or otherwise liquidated or repaid for cash, the
amount credited pursuant to this clause (z) shall be the lesser of (A) the
cash received with respect to such sale, liquidation or repayment of such
Restricted Investment (less the cost of such sale, liquidation or
repayment, if any) and (B) the initial amount of such Restricted
Investment.
The foregoing provisions will not prohibit (i) the payment of any dividend
within 60 days after the date of declaration thereof, if at said date of
declaration such payment would have complied with the provisions of the
Indenture; (ii) (x) the redemption, repurchase, retirement or other
acquisition of any Equity Interests of the Company or any Restricted
Subsidiary or (y) an Investment in any Person, in each case, in exchange for,
or out of the proceeds of, the substantially concurrent sale (other than to a
Restricted Subsidiary of the Company) of other Equity Interests (other than
any Disqualified Stock) of the Company provided that the Company delivers to
the Trustee: (1) with respect to any transaction involving in excess of $1
million, a resolution of the Board of
50
<PAGE>
Directors set forth in an Officers' Certificate certifying that such
transaction is approved by a majority of the directors on the Board of
Directors; and (2) with respect to any transaction involving in excess of $10
million, an opinion as to the fairness to the Company or such Subsidiary from
a financial point of view issued by an investment banking firm of national
standing with high yield experience, together with an Officers' Certificate to
the effect that such opinion complies with this clause (2); (iii) Investments
by the Company or any Restricted Subsidiary in a Non-Controlled Subsidiary
which (A) has no Indebtedness on a consolidated basis other than Indebtedness
incurred to finance the purchase of equipment used in a Cable Business, (B)
has no restrictions (other than restrictions imposed or permitted by the
Indenture or the indentures governing the Other Qualified Notes or the
Applicable Notes or any other instrument governing unsecured indebtedness of
the Company which is pari passu with the Notes) on its ability to pay
dividends or make any other distributions to the Company or any of its
Restricted Subsidiaries, (C) is or will be a Cable Business and (D) uses the
proceeds of such Investment for constructing a Cable Business or the working
capital needs of a Cable Business; (iv) the redemption, purchase, defeasance,
acquisition or retirement of Indebtedness that is subordinated to the Notes
(including premium, if any, and accrued and unpaid interest) made by exchange
for, or out of the proceeds of the substantially concurrent sale (other than
to a Restricted Subsidiary of the Company) of, (A) Equity Interests of the
Company or (B) Refinancing Indebtedness permitted to be incurred under the
"Incurrence of Indebtedness and Issuance of Preferred Stock" covenant; (v)
Investments by the Company or any Restricted Subsidiary in a Non-Controlled
Subsidiary which is or will be a Cable Business in an amount not to exceed $80
million in the aggregate plus the sum of (x) cash received by the Company or a
Restricted Subsidiary from a Non-Restricted Subsidiary (other than cash which
is or is required to be repaid or returned to such Non-Restricted Subsidiary)
to the extent such cash has not been utilized to permit Investments pursuant
to (vi) below and (y) Capital Stock Sale Proceeds (excluding the aggregate net
sale proceeds to be received upon conversion of the Convertible Subordinated
Notes) to the extent such Proceeds have not been utilized to permit a
Restricted Payment pursuant to clause (b) in the immediately preceding
paragraph; (vi) Investments by the Company or any Restricted Subsidiary in a
Controlled Subsidiary or Non-Controlled Subsidiary that is or will be a Cable
Related Business in an amount not to exceed $40 million plus cash received by
the Company or a Restricted Subsidiary from a Non-Restricted Subsidiary (other
than cash which is or is required to be repaid or returned to such Non-
Restricted Subsidiary) to the extent such cash has not been utilized to permit
Investments pursuant to (v) above; (vii) the extension by the Company or any
Restricted Subsidiary of trade credit to a Non-Restricted Subsidiary extended
on usual and customary terms in the ordinary course of business, provided that
the aggregate amount of such trade credit shall not exceed $10 million at any
one time; (viii) the payment of cash dividends on the Preferred Stock accruing
on or after February 15, 2004 or any mandatory redemption or repurchase of the
Preferred Stock, in each case, in accordance with the Certificate of
Designation therefor; and (ix) the exchange of all of the outstanding shares
of Preferred Stock for Subordinated Debentures in accordance with the
Certificate of Designation for the Preferred Stock.
Any Investment in a Subsidiary that becomes a Non-Restricted Subsidiary
shall become a Restricted Payment made on such date in the amount of the
greater of (x) the book value of such Subsidiary on the date such Subsidiary
becomes a Non-Restricted Subsidiary and (y) the fair market value of such
Subsidiary on such date as determined (A) in good faith by the Board of
Directors of such Subsidiary if such fair market value is determined to be
less than $10 million and (B) by an investment banking firm of national
standing with high yield underwriting expertise if such fair market value is
determined to be in excess of $10 million.
Not later than the date of making any Restricted Payment (other than those
referred to in sub-clause (vii) of the second paragraph preceding this
paragraph), the Company shall deliver to the Trustee an Officers' Certificate
stating that such Restricted Payment is permitted and setting forth the basis
upon which the calculations required by the covenant "Restricted Payments"
were computed, which calculations may be based upon the Company's latest
available financial statements.
Incurrence of Indebtedness and Issuance of Preferred Stock
The Indenture will provide that the Company will not, and will not permit
any of its Subsidiaries to, directly or indirectly, create, incur, issue,
assume, guaranty or otherwise become directly or indirectly liable with
respect to (collectively, "incur") any Indebtedness (including Acquired Debt)
and that the Company will not issue any
51
<PAGE>
Disqualified Stock and will not permit any of its Subsidiaries to issue any
shares of preferred stock that is Disqualified Stock; provided, however, that
the Company may incur Indebtedness or issue shares of Disqualified Stock and
any of its Subsidiaries may issue shares of preferred stock that is
Disqualified Stock if after giving effect to such issuance or incurrence on a
pro forma basis, the sum of (x) Indebtedness of the Company and its
Subsidiaries, on a consolidated basis, (y) the liquidation value of
outstanding preferred stock of Subsidiaries and (z) the aggregate amount
payable by the Company and its Subsidiaries, on a consolidated basis, upon
redemption of Disqualified Stock to the extent such amount is not included in
the preceding clause (y) shall be less than the product of Annualized Pro
Forma EBITDA for the latest fiscal quarter for which internal financial
statements are available immediately preceding the date on which such
additional Indebtedness is incurred or such Disqualified Stock or preferred
stock is issued multiplied by 7.0, determined on a pro forma basis (including
a pro forma application of the net proceeds therefrom), as if the additional
Indebtedness had been incurred, or the Disqualified Stock or preferred stock
had been issued, as the case may be, at the beginning of such quarter.
The foregoing limitations will not apply to (a) the issuance by any
Subsidiary of preferred stock (other than Disqualified Stock) to the Company,
any Restricted Subsidiary of the Company or the holders of Equity Interests in
any Controlled Subsidiary on a pro rata basis to such holders, (b) the
incurrence of Indebtedness or the issuance of preferred stock by the Company
and its Subsidiaries the proceeds of which are (or the credit support provided
by any such Indebtedness is), in each case, used to finance the construction
and working capital needs of a Cable Business (including, without limitation,
payments made pursuant to any License), the acquisition of Cable Assets or the
Capital Stock of a Qualified Subsidiary, (c) the incurrence by the Company and
its Subsidiaries of additional Indebtedness in an aggregate principal amount
not to exceed $50 million, (d) the incurrence by the Company or any Subsidiary
of Indebtedness issued in exchange for, or the proceeds of which are used to
extend, refinance, renew, replace, or refund Existing Indebtedness or
Indebtedness referred to in clauses (a), (b) or (c) above (the "Refinancing
Indebtedness"); provided, however, that (1) the principal amount of, and any
premium payable in respect of, such Refinancing Indebtedness shall not exceed
the principal amount of Indebtedness so extended, refinanced, renewed,
replaced or refunded (plus the amount of reasonable expenses incurred in
connection therewith); (2) the Refinancing Indebtedness shall have a (A)
Weighted Average Life to Maturity equal to or greater than the Weighted
Average Life to Maturity of, and (B) a stated maturity no earlier than the
stated maturity of, the Indebtedness being extended, refinanced, renewed,
replaced or refunded; and (3) the Refinancing Indebtedness shall be
subordinated in right of payment to the Notes as and to the extent of the
Indebtedness being extended, refinanced, renewed, replaced or refunded, (e)
the incurrence of Non-Recourse Debt by a Non-Restricted Subsidiary, (f) the
issuance of the Preferred Stock or the incurrence by the Company of
Indebtedness represented by the Subordinated Debentures upon (1) the exchange
of the Preferred Stock in accordance with the Certificate of Designation
therefor or (2) issued in lieu of payment of cash interest on the Subordinated
Debentures, (g) Indebtedness under Exchange Rate Contracts (the approval for
which is evidenced by a resolution of the Board of Directors set forth in an
Officers' Certificate delivered to the Trustee), provided that such Exchange
Rate Contracts are entered into in connection with transactions entered into
in the ordinary course of business and hedge not more than the aggregate
principal amount of the Notes and the Deferred Coupon Notes, (h) Indebtedness
under Interest Rate Agreements (the approval for which is evidenced by a
resolution of the Board of Directors set forth in an Officers' Certificate
delivered to the Trustee), provided that the obligations under such agreements
are related to payment obligations on Existing Indebtedness or Indebtedness
otherwise permitted to be incurred pursuant to this paragraph, (i) the
incurrence of Indebtedness between the Company and any Controlled Subsidiary,
between or among Controlled Subsidiaries and between any Controlled Subsidiary
and other holders of Equity Interests of such Controlled Subsidiary (or other
persons providing funding on their behalf) on a pro rata basis and on
substantially identical principal financial terms, provided, however, that if
any such Controlled Subsidiary ceases to be a Controlled Subsidiary or
transfers such Indebtedness (other than to the Company or a Controlled
Subsidiary of the Company), such events shall be deemed, in each case, to
constitute the incurrence of such Indebtedness by the Company or by a
Controlled Subsidiary, as the case may be, at the time of such event, and (j)
Indebtedness of the Company and/or any Subsidiary in respect of performance
bonds of the Company or any Subsidiary or surety bonds provided by the Company
or any Subsidiary received in the ordinary course of business in connection
with the construction or operation of a Cable Business.
52
<PAGE>
Liens
The Indenture will provide that neither the Company nor any of its
Restricted Subsidiaries may directly or indirectly create, incur, assume or
suffer to exist any Lien on any asset now owned or hereafter acquired, or any
income or profits therefrom or assign or convey any right to receive income
therefrom, except: (i) Permitted Liens; (ii) Liens securing Indebtedness and
related obligations incurred under clauses (a), (b) and (c) of the second
paragraph of the "Incurrence of Indebtedness and Issuance of Preferred Stock"
covenant; (iii) Liens on the assets acquired or leased with the proceeds of
Indebtedness permitted to be incurred under the "Incurrence of Indebtedness
and Issuance of Preferred Stock" covenant; and (iv) Liens securing Refinancing
Indebtedness permitted to be incurred under the "Incurrence of Indebtedness
and Issuance of Preferred Stock" covenant; provided that the Refinancing
Indebtedness so issued and secured by such Lien shall not be secured by any
property or assets of the Company or any of its Subsidiaries other than the
property or assets subject to the Liens securing such Indebtedness being
refinanced.
Dividend and Other Payment Restrictions Affecting Subsidiaries
The Indenture will provide that the Company will not, and will not permit
any of its Restricted Subsidiaries to, directly or indirectly, create or
otherwise cause or suffer to exist or become effective any encumbrance or
restriction on the ability of any Restricted Subsidiary to (a)(i) pay
dividends or make any other distributions to the Company or any of its
Subsidiaries (A) on its Capital Stock or (B) with respect to any other
interest or participation in, or measured by, its profits, or (ii) pay any
indebtedness owed to the Company or any of its Subsidiaries or (b) make loans
or advances to the Company or any of its Subsidiaries or (c) transfer any of
its properties or assets to the Company or any of its Subsidiaries, except for
such encumbrances or restrictions existing under or by reason of (i) Existing
Indebtedness as in effect on the Issuance Date, (ii) the Indenture and the
Notes, (iii) any agreement covering or relating to Indebtedness permitted to
be incurred under clause (a), (b) or (c) of the second paragraph of the
"Incurrence of Indebtedness and Issuance of Preferred Stock" covenant,
provided that the provisions of such agreement permit any action referred to
in clause (a) above in aggregate amounts sufficient to enable the payment of
interest and principal and mandatory repurchases pursuant to the terms of the
Indenture and the Notes but provided further that: (x) any such agreement may
nevertheless encumber, prohibit or restrict any action referred to in clause
(a) above if an event of default under such agreement has occurred and is
continuing or would occur as a result of any such action; and (y) any such
agreement may nevertheless contain restrictions limiting the payment of
dividends or the making of any other distributions to all or a portion of
excess cash-flow (or any similar formulation thereof) and subordination
provisions governing Indebtedness owed to the Company or any Restricted
Subsidiary, (iv) applicable law, (v) any instrument governing Indebtedness or
Capital Stock of a person acquired by the Company or any of its Subsidiaries
as in effect at the time of such acquisition (except to the extent such
Indebtedness was incurred in connection with such acquisition), which
encumbrance or restriction is not applicable to any person, or the properties
or assets of any person, other than the person, or the property or assets of
the person, so acquired; provided that the EBITDA of such person is not taken
into account in determining whether such acquisition was permitted by the
terms of the Indenture, (vi) customary nonassignment provisions in leases
entered into in the ordinary course of business and consistent with past
practices, (vii) customary provisions of joint venture or stockholder
agreements, provided that such provisions are determined by a resolution of
the Board of Directors to be, at the time of such determination, customary for
such agreements, (viii) with respect to clause (c) above, purchase money
obligations for property acquired in the ordinary course of business, or (ix)
permitted Refinancing Indebtedness, provided that the restrictions contained
in the agreements governing such Refinancing Indebtedness are no more
restrictive than those contained in the agreements governing the Indebtedness
being refinanced.
Merger, Consolidation or Sale of Assets
The Indenture will provide that the Company may not consolidate or merge
with or into (whether or not the Company is the surviving corporation), or
sell, assign, transfer, lease, convey or otherwise dispose of all or
substantially all of its properties or assets in one or more related
transactions to, another corporation, person or
53
<PAGE>
entity unless (i) the Company is the surviving corporation or the entity or
the person formed by or surviving any such consolidation or merger (if other
than the Company) or to which such sale, assignment, transfer, lease,
conveyance or other disposition shall have been made is a corporation
organized or existing under the laws of England and Wales or of the United
States, any state thereof or the District of Columbia; (ii) the entity or
person formed by or surviving any such consolidation or merger (if other than
the Company) or the entity or person to which such sale, assignment, transfer,
lease, conveyance or other disposition will have been made assumes all the
Obligations (including the due and punctual payment of Additional Amounts (as
defined in the Indenture) if the surviving corporation is a corporation
organized or existing under the laws of England and Wales) of the Company,
pursuant to a supplemental indenture in a form reasonably satisfactory to the
Trustee, under the Notes and the Indenture; (iii) immediately after such
transaction no Default or Event of Default exists; (iv) the Company or any
entity or person formed by or surviving any such consolidation or merger, or
to which such sale, assignment, transfer, lease, conveyance or other
disposition will have been made will have a ratio of Indebtedness to
Annualized Pro Forma EBITDA equal to or less than the ratio of Indebtedness to
Annualized Pro Forma EBITDA of the Company immediately preceding the
transaction provided, however, that if the ratio of Indebtedness to Annualized
Pro Forma EBITDA of the Company immediately preceding such transaction is 6:1
or less, then the ratio of Indebtedness to Annualized Pro Forma EBITDA of the
Company may be 0.5 greater than such ratio immediately preceding such
transaction; and (v) such transaction would not result in the loss of any
material authorization or Material License of the Company or its Subsidiaries.
Additional Amounts; Optional Tax Redemption
The Indenture will provide that the "Payment of Additional Amounts"
provision therein, relating to United Kingdom withholding and other United
Kingdom taxes, and the "Optional Tax Redemption" provision therein, relating
to the Company's option to redeem the Notes under certain circumstances if
Additional Amounts (as defined in the Indenture) are payable, apply to the
Notes. The Indenture will provide that Additional Amounts will only become
payable if the Company becomes, or a successor to the Company is, a
corporation organized or existing under the laws of England and Wales and,
subject to certain exceptions to be specified in the Indenture, any deduction
for or on account of any present or future taxes, assessments or other
governmental charges of the United Kingdom shall be required in respect of any
amounts to be paid by the Company under the Notes.
Transactions with Affiliates
The Indenture will provide that the Company will not, and will not permit
any of its Restricted Subsidiaries to, sell, lease, transfer or otherwise
dispose of any of its properties or assets to, or purchase any property or
assets from, or enter into any contract, agreement, understanding, loan,
advance or guarantee with, or for the benefit of, any Affiliate (each of the
foregoing, an "Affiliate Transaction"), unless (a) such Affiliate Transaction
is on terms that are no less favorable to the Company or the relevant
Subsidiary than those that could have been obtained in a comparable
transaction by the Company or such Subsidiary with an unrelated person and (b)
the Company delivers to the Trustee (i) with respect to any Affiliate
Transaction involving aggregate payments in excess of $1 million or any series
of Affiliate Transactions with an Affiliate involving aggregate payments in
excess of $1 million, a resolution of the Board of Directors set forth in an
Officers' Certificate certifying that such Affiliate Transaction complies with
clause (a) above and such Affiliate Transaction is approved by a majority of
the disinterested directors on the Board of Directors and (ii) with respect to
any Affiliate Transaction or any series of Affiliate Transactions involving
aggregate payments in excess of $10 million, an opinion as to the fairness to
the Company or such Subsidiary from a financial point of view issued by an
investment banking firm of national standing with high yield experience
together with an Officers' Certificate to the effect that such opinion
complies with this clause (ii); provided, however, that notwithstanding the
foregoing provisions, the following shall not be deemed to be Affiliate
Transactions: (i) any employment agreement entered into by the Company or any
of its Subsidiaries in the ordinary course of business and consistent with the
past practice of the Company or its predecessor or such Subsidiary; (ii)
transactions between or among the Company and/or its Restricted Subsidiaries;
(iii) transactions permitted by the provisions of the Indenture described
above under the covenant
54
<PAGE>
"Restricted Payments"; (iv) Liens permitted under the Liens covenant which are
granted by the Company or any of its Subsidiaries to an unrelated person for
the benefit of the Company or any other Subsidiary of the Company; (v) any
transaction pursuant to an agreement in effect on the Issuance Date; and (vi)
the incurrence of Indebtedness by a Controlled Subsidiary where such
Indebtedness is owed to the holders of the Equity Interests of such Controlled
Subsidiary on a pro rata basis and on substantially identical principal
financial terms.
Reports
Whether or not required by the rules and regulations of the Commission, so
long as any Notes are outstanding, the Company will file with the Commission
and furnish to the holders of Notes all quarterly and annual financial
information required to be contained in a filing with the Commission on Forms
10-Q and 10-K (or the equivalent thereof in the event the Company becomes a
corporation organized under the laws of England and Wales), including a
"Management's Discussion and Analysis of Results of Operations and Financial
Condition" and, with respect to the annual information only, a report thereon
by the Company's certified independent accountants, in each case, as required
by the rules and regulations of the Commission as in effect on the Issuance
Date.
EVENTS OF DEFAULT AND REMEDIES
The Indenture will provide that each of the following constitutes an Event
of Default: (i) default for 30 days in the payment when due of interest (and
Additional Amounts, if applicable) on the Notes; (ii) default in payment when
due of principal on the Notes; (iii) failure by the Company to comply with the
provisions described under the covenants "Change of Control," "Restricted
Payments" or "Incurrence of Indebtedness and Issuance of Preferred Stock";
(iv) failure by the Company for 60 days after notice to comply with certain
other covenants and agreements contained in the Indenture or the Notes; (v)
default under any mortgage, indenture or instrument under which there may be
issued or by which there may be secured or evidenced any Indebtedness for
money borrowed by the Company or any of its Restricted Subsidiaries (or the
payment of which is guaranteed by the Company or any of its Restricted
Subsidiaries), whether such Indebtedness or guarantee now exists, or is
created after the Issuance Date, which default (a) is caused by a failure to
pay when due principal or interest on such Indebtedness within the grace
period provided in such Indebtedness (which failure continues beyond any
applicable grace period) (a "Payment Default") or (b) results in the
acceleration of such Indebtedness prior to its express maturity and, in each
case, the principal amount of any such Indebtedness, together with the
principal amount of any other such Indebtedness under which there has been a
Payment Default or the maturity of which has been so accelerated, aggregates
$5 million or more; (vi) failure by the Company or any Restricted Subsidiary
of the Company to pay final judgments (other than any judgment as to which a
reputable insurance company has accepted full liability) aggregating in excess
of $5 million, which judgments are not stayed within 60 days after their
entry; (vii) certain events of bankruptcy or insolvency with respect to the
Company or any of its Material Subsidiaries; and (viii) the revocation of a
Material License.
If any Event of Default occurs and is continuing, the Trustee or the holders
of at least 25% in principal amount of the then outstanding Notes may declare
all the Notes to be due and payable immediately. Notwithstanding the
foregoing, in the case of an Event of Default arising from certain events of
bankruptcy or insolvency, with respect to the Company or any Material
Subsidiary, all outstanding Notes will become due and payable without further
action or notice. Holders of the Notes may not enforce the Indenture or the
Notes except as provided in the Indenture. Subject to certain limitations,
holders of a majority in principal amount of the then outstanding Notes may
direct the Trustee in its exercise of any trust or power. The Trustee may
withhold from holders of the Notes notice of any continuing Default or Event
of Default (except a Default or Event of Default relating to the payment of
principal or interest) if it determines that withholding notice is in their
interest.
The holders of a majority in aggregate principal amount of the Notes then
outstanding by notice to the Trustee may on behalf of the holders of all of
the Notes waive any existing Default or Event of Default and its consequences
under the Indenture except a continuing Default or Event of Default in the
payment of interest on, or the principal of, the Notes.
55
<PAGE>
The Company is required to deliver to the Trustee annually a statement
regarding compliance with the Indenture, and the Company is required upon
becoming aware of any Default or Event of Default, to deliver to the Trustee a
statement specifying such Default or Event of Default.
NO PERSONAL LIABILITY OF DIRECTORS, OFFICERS, EMPLOYEES AND SHAREHOLDERS
No director, officer, employee, incorporator or shareholder of the Company,
as such, shall have any liability for any Obligations of the Company under the
Notes or the Indenture or for any claim based on, in respect of, or by reason
of, such Obligations or their creation. Each holder of the Notes by accepting
a Note waives and releases all such liability. The waiver and release are part
of the consideration for issuance of the Notes. Such waiver may not be
effective to waive liabilities under the federal securities laws and it is the
view of the Commission that such a waiver is against public policy.
DEFEASANCE AND DISCHARGE OF THE INDENTURE AND THE NOTES
If the Company irrevocably deposits, or causes to be deposited, in trust
with the Trustee or the Paying Agent, at any time prior to the stated maturity
of the Notes or the date of redemption of all the outstanding Notes, as trust
funds in trust, money or direct noncallable obligations of or guaranteed by
the United States of America in an amount sufficient, in the opinion of a
nationally recognized firm of independent public accountants, (without
reinvestment thereof) to pay timely and discharge the entire principal of the
then outstanding Notes and all interest due thereon to maturity or redemption,
the Indenture shall cease to be of further effect as to all outstanding Notes
("Defeasance") (except, among other things, as to (i) remaining rights of
registration of transfer and substitution and exchange of the Notes, (ii)
rights of holders to receive payment of principal of and interest on the
Notes, and (iii) the rights, obligations and immunities of the Trustee).
In order to exercise Defeasance: (i) the Company shall have delivered to the
Trustee an Opinion of Counsel reasonably acceptable to the Trustee confirming
that (A) the Company has received from, or there has been published by, the
Internal Revenue Service, a ruling or (B) since the date of the Indenture,
there has been a change in the applicable federal income tax law, in either
case to the effect that, and based thereon, such Opinion of Counsel shall
confirm that the holders of the outstanding Notes will not recognize income,
gain or loss for federal income tax purposes as a result of such Defeasance
and will be subject to federal income tax on the same amounts, in the same
manner and at the same times as would have been the case if such Defeasance
had not occurred; (ii) no Event of Default shall have occurred and be
continuing on the date of such deposit (other than an Event of Default
resulting from the borrowing of funds to be applied to such deposit) or
insofar as Events of Default from bankruptcy or insolvency events are
concerned, at any time in the period ending on the 91st day after the date of
deposit; (iii) such Defeasance shall not result in a breach or violation of,
or constitute a default under, any material agreement or instrument (other
than the Indenture) to which the Company or any of its Subsidiaries is a party
or by which the Company or any of its Subsidiaries is bound; (iv) the Company
shall have delivered to the Trustee an Opinion of Counsel to the effect that
after the 91st day following the deposit, the trust funds will not be subject
to the effect of any applicable bankruptcy, insolvency, reorganization or
similar laws affecting creditors' rights generally; (v) the Company shall have
delivered to the Trustee an Officers' Certificate stating that the deposit was
not made by the Company with the intent of preferring the holders of Notes
over the other creditors of the Company with the intent of defeating,
hindering, delaying or defrauding creditors of the Company or others; (vi) the
deposit shall not result in the Company, the Trustee or the trust being
subject to the Investment Company Act of 1940; (vii) holders of the Notes will
have a valid, perfected and unavoidable (under applicable bankruptcy or
insolvency laws), subject to the passage of time referred to in clause (iv)
above, first priority security interest in the trust funds; and (viii) the
Company shall have delivered to the Trustee an Officers' Certificate and an
Opinion of Counsel, each stating that all conditions precedent relating to the
Defeasance have been complied with.
TRANSFER AND EXCHANGE
A holder may transfer or exchange Notes in accordance with the Indenture.
The Registrar and the Trustee may require a holder, among other things, to
furnish appropriate endorsements and transfer documents and the
56
<PAGE>
Company may require a holder to pay any taxes and fees required by law or
permitted by the Indenture. The Company is not required to transfer or
exchange any Note selected for redemption. Also, the Company is not required
to transfer or exchange any Note for a period of 15 days before a selection of
Notes to be redeemed.
The registered holder of a Note will be treated as the owner of it for all
purposes.
AMENDMENT, SUPPLEMENT AND WAIVER
Except as provided in the next succeeding paragraph, the Indenture or the
Notes may be amended or supplemented with the consent of the holders of at
least a majority in principal amount of the then outstanding Notes (including
consents obtained in connection with a tender offer or exchange offer for
Notes), and any existing default or compliance with any provision of the
Indenture or the Notes may be waived with the consent of the holders of a
majority in principal amount of the then outstanding Notes (including consents
obtained in connection with a tender offer or exchange offer for Notes).
Without the consent of each holder affected, an amendment or waiver may not
(with respect to any Notes held by a non-consenting holder of Notes) (i)
reduce the amount of Notes whose holders must consent to an amendment,
supplement or waiver, (ii) reduce the principal of or change the fixed
maturity of any Note or alter the provisions with respect to the redemption of
the Notes, (iii) reduce the rate of or change the time for payment of interest
on any Note, (iv) waive a default in the payment of principal of or interest
on any Notes (except a rescission of acceleration of the Notes by the holders
of at least a majority in aggregate principal amount of the Notes and a waiver
of the payment default that resulted from such acceleration), (v) make any
Note payable in money other than that stated in the Notes, (vi) make any
change in the provisions of the Indenture relating to waivers of past Defaults
or the rights of holders of Notes to receive payments of principal of or
interest on the Notes, (vii) waive a redemption payment with respect to any
Note or (viii) make any change in the foregoing amendment and waiver
provisions.
Notwithstanding the foregoing, without the consent of any holder of Notes,
the Company and the Trustee may amend or supplement the Indenture or the Notes
to cure any ambiguity, defect or inconsistency, to provide for uncertificated
Notes in addition to or in place of certificated Notes, to provide for the
assumption of the Company's obligations to holders of the Notes in the case of
a merger or consolidation, to make any change that would provide any
additional rights or benefits to the holders of the Notes or that does not
adversely affect the legal rights under the Indenture of any such holder, or
to comply with requirements of the Commission in order to maintain the
qualification of the Indenture under the Trust Indenture Act.
CONCERNING THE TRUSTEE
The Indenture contains certain limitations on the rights of the Trustee,
should it become a creditor of the Company, to obtain payment of claims in
certain cases, or to realize on certain property received in respect of any
such claim as security or otherwise. The Trustee will be permitted to engage
in other transactions; however, if it acquires any conflicting interest it
must eliminate such conflict within 90 days, apply to the Commission for
permission to continue or resign.
The holders of a majority in principal amount of the then outstanding Notes
will have the right to direct the time, method and place of conducting any
proceeding for exercising any remedy available to the Trustee, subject to
certain exceptions. The Indenture provides that in case an Event of Default
shall occur (which shall not be cured), the Trustee will be required, in the
exercise of its power, to use the degree of care of a prudent man in the
conduct of his own affairs. Subject to such provisions, the Trustee will be
under no obligation to exercise any of its rights or powers under the
Indenture at the request of any holder of Notes, unless such holder shall have
offered to the Trustee security and indemnity satisfactory to it against any
loss, liability or expense.
The Chase Manhattan Bank is also the trustee for all of the Existing Notes
and is expected to be the trustee for the Subordinated Debentures, if issued.
57
<PAGE>
ADDITIONAL INFORMATION
Anyone who receives this Prospectus may obtain a copy of the Indenture
without charge by writing to the Company, 110 East 59th Street, New York, New
York 10022, Attention: Richard J. Lubasch, Esq., Senior Vice President,
General Counsel and Secretary.
CERTAIN DEFINITIONS
Set forth below are certain defined terms used in the Indenture. Reference
is made to the Indenture for a full definition of all terms, as well as any
other capitalized terms used herein for which no definition is provided.
"Acquired Debt" means, with respect to any specified person, Indebtedness of
any other person existing at the time such other person merged with or into or
became a Subsidiary of such specified person, including Indebtedness incurred
in connection with, or in contemplation of, such other person merging with or
into or becoming a Subsidiary of such specified person.
"Affiliate" of any specified person means any other person directly or
indirectly controlling or controlled by or under direct or indirect common
control with such specified person. For purposes of this definition, "control"
(including, with correlative meanings, the terms "controlling," "controlled
by" and "under common control with"), as used with respect to any person,
shall mean the possession, directly or indirectly, of the power to direct or
cause the direction of the management or policies of such person, whether
through the ownership of voting securities, by agreement or otherwise;
provided, however, that beneficial ownership of 10% or more of the voting
securities of a person shall be deemed to be control.
"Annualized Pro Forma EBITDA" means, with respect to any person, such
person's Pro Forma EBITDA for the latest fiscal quarter multiplied by four.
"Applicable Notes" means the Company's 10 7/8% Senior Deferred Coupon Notes
Due 2003.
"Asset Sale" means (i) any sale, lease, transfer, conveyance or other
disposition of any assets (including by way of a sale-and-leaseback) other
than the sale or transfer of inventory or goods held for sale in the ordinary
course of business (provided that the sale, lease, transfer, conveyance or
other disposition of all or substantially all of the assets of the Company
shall be governed by the provisions of the Indenture described under the
captions "Change of Control" or "Merger, Consolidation or Sale of Assets") or
(ii) any issuance, sale, lease, transfer, conveyance or other disposition of
any Equity Interests of any of the Company's Restricted Subsidiaries to any
person; in either case other than (A) to (w) the Company, (x) any Wholly Owned
Subsidiary, or (y) any Controlled Subsidiary which is a Subsidiary of the
Company on the Issuance Date provided that at the time of and after giving
effect to such issuance, sale, lease, transfer, conveyance or other
disposition to such Controlled Subsidiary, the Company's ownership percentage
in such Controlled Subsidiary is equal to or greater than such percentage on
the Issuance Date or (B) the issuance, sale, transfer, conveyance or other
disposition of Equity Interests of a Controlled Subsidiary in exchange for
capital contributions made on a pro rata basis by the holders of the Equity
Interests of such Controlled Subsidiary.
"Cable Assets" means tangible or intangible assets, licenses (including,
without limitation, Licenses) and computer software used in connection with a
Cable Business.
"Cable Business" means any person directly or indirectly operating, or
owning a license to operate, a cable and/or television and/or telephone and/or
telecommunications system or service principally within the United Kingdom
and/or the Republic of Ireland.
"Cable Controlled Property" means a Cable Controlled Subsidiary or a Cable
Asset held by a Cable Controlled Subsidiary.
"Cable Controlled Subsidiary" means any Controlled Subsidiary which is a
Cable Business.
58
<PAGE>
"Cable Related Business" means a person which directly or indirectly owns or
provides a service or product used in a Cable Business, including, without
limitation, any television programming, production and/or licensing business
or any programming guide or telephone directory business or content or
software related thereto.
"Capital Lease Obligation" means, at the time any determination thereof is
to be made, the amount of the liability in respect of a capital lease that
would at such time be so required to be capitalized on the balance sheet in
accordance with GAAP.
"Capital Stock" means any and all shares, interests, participations, rights
or other equivalents (however designated) of corporate stock, including,
without limitation, partnership interests.
"Capital Stock Sale Proceeds" means the aggregate net sale proceeds
(including the fair market value of property, other than cash, as determined
by an independent appraisal firm) received by the Company from the issue or
sale (other than to a Subsidiary) by the Company of any class of its Capital
Stock after October 14, 1993 (including Capital Stock of the Company issued
after October 14, 1993 upon conversion of or in exchange for other securities
of the Company).
"Cash Equivalents" means (i) United States dollars or British pounds
sterling, (ii) securities issued or directly and fully guaranteed or insured
by the United States or United Kingdom government or any agency or
instrumentality thereof having maturities of not more than six months and one
day from the date of acquisition, (iii) certificates of deposit and eurodollar
time deposits with maturities of six months or less from the date of
acquisition, bankers' acceptances with maturities not exceeding six months and
overnight bank deposits, in each case with any commercial bank(s) domiciled in
the United States, the United Kingdom or the Republic of Ireland having
capital and surplus in excess of $500 million, (iv) repurchase obligations
with a term of not more than seven days for underlying securities of the types
described in clauses (ii) and (iii) entered into with any financial
institution meeting the qualifications specified in clause (iii) above and (v)
commercial paper rated P-1 or the equivalent thereof by Moody's or A-1 or the
equivalent thereof by S&P and in each case maturing within six months and one
day after the date of acquisition.
"Change of Control" means (i) the sale, lease or transfer of all or
substantially all of the assets of the Company to any "person" or "group"
(within the meaning of Sections 13(d)(3) and 14(d)(2) of the Exchange Act or
any successor provision to either of the foregoing, including any group acting
for the purpose of acquiring, holding or disposing of securities within the
meaning of Rule 13d-5(b)(1) under the Exchange Act) (other than any Permitted
Holder), (ii) the approval by the requisite stockholders of the Company of a
plan of liquidation or dissolution of the Company, (iii) any "person" or
"group" (within the meaning of Sections 13(d) and 14(d)(2) of the Exchange Act
or any successor provision to either of the foregoing, including any group
acting for the purpose of acquiring, holding or disposing of securities within
the meaning of Rule 13d-5(b)(1) under the Exchange Act), other than any
Permitted Holder, becomes the "beneficial owner" (as defined in Rule 13d-3
under the Exchange Act) of more than 50% of the total voting power of all
classes of the voting stock of the Company and/or warrants or options to
acquire such voting stock, calculated on a fully diluted basis, unless, as a
result of such transaction, the ultimate direct or indirect ownership of the
Company is substantially the same immediately after such transaction as it was
immediately prior to such transaction, or (iv) during any period of two
consecutive years, individuals who at the beginning of such period constituted
the Company's Board of Directors (together with any new directors whose
election or appointment by such board or whose nomination for election by the
shareholders of the Company was approved by a vote of a majority of the
directors then still in office who were either directors at the beginning of
such period or whose election or nomination for election was previously so
approved) cease for any reason to constitute a majority of the Company's Board
of Directors then in office.
"Change of Control Triggering Event" means the occurrence of both a Change
of Control and a Ratings Decline.
59
<PAGE>
"Consolidated Interest Expense" means, for any person, for any period, the
amount of interest in respect of Indebtedness (including amortization of
original issue discount, amortization of debt issuance costs, and non-cash
interest payments on any Indebtedness and the interest portion of any deferred
payment obligation and after taking into account the effect of elections made
under any Interest Rate Agreement, however denominated, with respect to such
Indebtedness), the amount of Redeemable Dividends, Restricted Subsidiary
Preferred Stock Dividends and the interest component of rentals in respect of
any capital lease obligation paid, in each case whether accrued or scheduled
to be paid or accrued by such person and its Subsidiaries (other than Non-
Restricted Subsidiaries) during such period to the extent such amounts were
deducted in computing Consolidated Net Income, determined on a consolidated
basis in accordance with GAAP. For purposes of this definition, interest on a
capital lease obligation shall be deemed to accrue at an interest rate
reasonably determined by such person to be the rate of interest implicit in
such capital lease obligation in accordance with GAAP consistently applied.
"Consolidated Net Income" means, with respect to any person for any period,
the aggregate of the Net Income of such person and its Subsidiaries (other
than Non-Restricted Subsidiaries) for such period, on a consolidated basis,
determined in accordance with GAAP; provided, that (i) the Net Income of any
person that is not a Subsidiary or that is accounted for by the equity method
of accounting shall be included only to the extent of the amount of dividends
or distributions paid to the referent person or a Wholly Owned Subsidiary,
(ii) the Net Income of any person that is a Subsidiary (other than a
Subsidiary of which at least 80% of the Capital Stock having ordinary voting
power for the election of directors or other governing body of such Subsidiary
is owned by the referent person directly or indirectly through one or more
Subsidiaries) shall be included only to the extent of the amount of dividends
or distributions paid to the referent person or a Wholly Owned Subsidiary,
(iii) the Net Income of any person acquired in a pooling of interests
transaction for any period prior to the date of such acquisition shall be
excluded and (iv) the cumulative effect of a change in accounting principles
shall be excluded.
"Controlled Subsidiary" means any Restricted Subsidiary of the Company in
which the Company has significant influence over budgetary, dividend and
capitalization decisions.
"Convertible Subordinated Notes" means the Company's 7 1/4% Convertible
Subordinated Notes issued pursuant to an indenture dated as of April 20, 1995,
between the Company and The Chase Manhattan Bank (formerly known as Chemical
Bank), as trustee, and the Company's 7% Convertible Subordinated Notes issued
pursuant to an indenture dated as of June 12, 1996 also between the Company
and The Chase Manhattan Bank (formerly known as Chemical Bank), as trustee.
"Cumulative EBITDA" means the cumulative EBITDA of the Company from and
after the Issuance Date to the end of the fiscal quarter immediately preceding
the date of a proposed Restricted Payment, or, if such cumulative EBITDA for
such period is negative, minus the amount by which such cumulative EBITDA is
less than zero; provided, however, that EBITDA of Non-Restricted Subsidiaries
shall not be included.
"Cumulative Interest Expense" means the aggregate amount of Consolidated
Interest Expense paid, accrued or scheduled to be paid or accrued by the
Company from the Issuance Date to the end of the fiscal quarter immediately
preceding a proposed Restricted Payment, determined on a consolidated basis in
accordance with GAAP.
"Default" means any event that is or with the passage of time or the giving
of notice or both would be an Event of Default.
"Deferred Coupon Notes" means the Applicable Notes, the 12 3/4% Notes and
the 11 1/2% Notes.
"Disqualified Stock" means any Capital Stock which, by its terms (or by the
terms of any security into which it is convertible or for which it is
exchangeable), or upon the happening of any event, matures or is
60
<PAGE>
mandatorily redeemable, pursuant to a sinking fund obligation or otherwise, or
redeemable at the option of the holder thereof, in whole or in part, on or
prior to the date on which the Notes mature.
"EBITDA" means, for any person, for any period, an amount equal to (A) the
sum of (i) Consolidated Net Income for such period (exclusive of any gain or
loss realized in such period upon an Asset Sale), plus (ii) the provision for
taxes for such period based on income or profits to the extent such income or
profits were included in computing Consolidated Net Income and any provision
for taxes utilized in computing net loss under clause (i) hereof, plus (iii)
Consolidated Interest Expense for such period, plus (iv) depreciation for such
period on a consolidated basis, plus (v) amortization of intangibles for such
period on a consolidated basis, plus (vi) any other non-cash item reducing
Consolidated Net Income for such period, minus (B) all non-cash items
increasing Consolidated Net Income for such period, all for such person and
its Subsidiaries determined in accordance with GAAP consistently applied.
"Equity Interests" means Capital Stock and all warrants, options or other
rights to acquire Capital Stock (but excluding any Indebtedness that is
convertible into, or exchangeable for Capital Stock).
"Exchange Rate Contract" means, with respect to any person, any currency
swap agreements, forward exchange rate agreements, foreign currency futures or
options, exchange rate collar agreements, exchange rate insurance and other
agreements or arrangements, or combination thereof, the principal purpose of
which is to provide protection against fluctuations in currency exchange
rates. An Exchange Rate Contract may also include an Interest Rate Agreement.
"Existing Indebtedness" means Indebtedness of the Company and its
Subsidiaries in existence on the Issuance Date, until such amounts are repaid,
including, without limitation, the Existing Notes.
"Existing Notes" means the Deferred Coupon Notes and the Convertible
Subordinated Notes.
"GAAP" means generally accepted accounting principles set forth in the
opinions and pronouncements of the Accounting Principles Board of the American
Institute of Certified Public Accountants and statements and pronouncements of
the Financial Accounting Standards Board or in such other statements by such
other entity as approved by a significant segment of the accounting
profession, which are in effect on the Issuance Date and are applied on a
consistent basis.
"Guarantee" means a guarantee (other than by endorsement of negotiable
instruments for collection in the ordinary course of business), direct or
indirect, in any manner (including, without limitation, letters of credit and
reimbursement agreements in respect thereof), of all or any part of any
Indebtedness.
"Indebtedness" means, with respect to any person, any indebtedness of such
person, whether or not contingent, in respect of borrowed money or evidenced
by bonds, notes, debentures or similar instruments or letters of credit (or
reimbursement agreements in respect thereof) or representing the balance
deferred and unpaid of the purchase price of any property (including pursuant
to capital leases and sale-and-leaseback transactions) or representing any
hedging obligations under an Exchange Rate Contract or an Interest Rate
Agreement, except any such balance that constitutes an accrued expense or
trade payable, if and to the extent any of the foregoing indebtedness (other
than obligations under an Exchange Rate Contract or an Interest Rate
Agreement) would appear as a liability upon a balance sheet of such person
prepared in accordance with GAAP, and also includes, to the extent not
otherwise included, the Guarantee of items which would be included within this
definition.
"Interest Rate Agreement" means, for any person, any interest rate swap
agreement, interest rate cap agreement, interest rate collar agreement or
other similar agreement the principal purpose of which is to protect the party
indicated therein against fluctuations in interest rates.
"Investment Grade" means BBB- or higher by S&P or Baa3 or higher by Moody's
or the equivalent of such ratings by S&P or Moody's. In the event that the
Company shall be permitted to select any other Rating Agency, the equivalent
of such ratings by such Rating Agency shall be used.
61
<PAGE>
"Investments" means, with respect to any person, all investments by such
person in other persons (including Affiliates) in the forms of loans
(including Guarantees), advances or capital contributions (excluding
commission, travel and similar advances and loans, joint property ownership
and other arrangements, in each case, made to officers and employees made in
the ordinary course of business), purchases or other acquisitions for
consideration of Indebtedness, Equity Interests or other securities and all
other items that are or would be classified as investments on a balance sheet
prepared in accordance with GAAP.
"Issuance Date" means the date on which the Notes are first authenticated
and issued.
"License" means any license issued or awarded pursuant to the Broadcasting
Act 1990, the Cable and Broadcasting Act 1984, the Telecommunications Act 1984
or the Wireless Telegraphy Act 1948 (in each case, as such Acts may, from time
to time be, amended, modified or re-enacted) (or equivalent statutes of any
jurisdiction) to operate or own a Cable Business.
"Lien" means, with respect to any asset, any mortgage, lien, pledge, charge,
security interest or encumbrance of any kind in respect of such asset, whether
or not filed, recorded or otherwise perfected under applicable law (including
any conditional sale or other title retention agreement, any lease in the
nature thereof, any option or other agreement to sell or give a security
interest in and any filing of or agreement to give any financing statement
under the Uniform Commercial Code (or equivalent statutes) of any
jurisdiction).
"Long Distance/Microwave Assets" means any assets, tangible or intangible,
choate or inchoate, primarily used in the business conducted by OCOM
Corporation in the United States as of the Issuance Date.
"Material License" means a License held by the Company or any of its
Subsidiaries which License at the time of determination covers a number of Net
Households which equals or exceeds 5% of the aggregate number of Net
Households covered by all of the Licenses held by the Company and its
Subsidiaries at such time.
"Material Subsidiary" means (i) OCOM, Cable Tel UK Group, Inc. (formerly
known as OCOM Sub II, Inc.), NTLIH, NTL Group Limited, CableTel Surrey
Limited, CableTel Cardiff Limited, CableTel Glasgow, CableTel Newport and
CableTel Kirklees and (ii) any other Subsidiary of the Company which is a
"significant subsidiary" as defined in Rule 1-02(v) of Regulation S-X under
the Securities Act of 1933 and the Exchange Act, as amended (as such
Regulation is in effect on the date hereof).
"Monetize" means a strategy with respect to Capital Stock that generates an
amount of cash equal to the fair value of such Capital Stock.
"Moody's" means Moody's Investors Service, Inc. and its successors.
"Net Households" means the product of (i) the number of households covered
by a License in the United Kingdom and (ii) the percentage of the entity
holding such License which is owned directly or indirectly by the Company.
"Net Income" means, with respect to any person for a specific period, the
net income (loss) of such person during such period, determined in accordance
with GAAP, excluding, however, any gain (but not loss) during such period,
together with any related provision for taxes on such gain (but not loss),
realized during such period in connection with any Asset Sale (including,
without limitation, dispositions pursuant to sale-and-leaseback transactions),
and excluding any extraordinary gain (but not loss) during such period,
together with any related provision for taxes on such extraordinary gain (but
not loss).
"Net Proceeds" means the aggregate cash proceeds received by the Company or
any of its Subsidiaries in respect of any Asset Sale, net of the direct costs
relating to such Asset Sale (including, without limitation, legal, accounting
and investment banking fees, and sales commissions) and any relocation
expenses incurred as a result thereof, taxes paid or payable as a result
thereof (after taking into account any available tax credits or deductions and
any tax sharing arrangements), amounts required to be applied to the repayment
of Indebtedness secured by a
62
<PAGE>
Lien on the asset or assets the subject of such Asset Sale and any reserve for
adjustment in respect of the sale price of such asset or assets.
"Non-Controlled Subsidiary" means an entity which is not a Controlled
Subsidiary.
"Non-Recourse Debt" means Indebtedness or that portion of Indebtedness (a)
as to which none of the Company, nor any of Restricted Subsidiary: (i)
provides credit support (including any undertaking, agreement or instrument
which would constitute Indebtedness); (ii) is directly or indirectly liable;
or (iii) constitutes the lender; and (b) no default with respect to which
(including any rights which the holders thereof may have to take enforcement
action against a Non-Restricted Subsidiary) would permit (upon notice, lapse
of time or both) any holder of any other Indebtedness of the Company or any
Restricted Subsidiary to declare a default on such other Indebtedness or cause
the payment thereof to be accelerated or payable prior to its stated maturity.
"Non-Restricted Subsidiary" means a Subsidiary that (a) at the time of its
designation as a Non-Restricted Subsidiary has not acquired any assets (other
than as specifically permitted by the "Restricted Payments" covenant), at any
previous time, directly or indirectly from the Company or any of its
Subsidiaries, (b) has no Indebtedness other than Non-Recourse Debt and (c)
that at the time of such designation, after giving pro forma effect to such
designation, the ratio of Indebtedness to Annualized Pro Forma EBITDA of the
Company is equal to or less than the ratio of Indebtedness to Annualized Pro
Forma EBITDA of the Company immediately preceding such designation, provided,
however, that if the ratio of Indebtedness to Annualized Pro Forma EBITDA of
the Company immediately preceding such designation is 6:1 or less, then the
ratio of Indebtedness to Annualized Pro Forma EBITDA of the Company may be 0.5
greater than such ratio immediately preceding such designation.
"Obligations" means any principal, interest, penalties, fees,
indemnifications, reimbursements, damages and other liabilities payable under
the documentation governing any Indebtedness.
"Other Qualified Notes" means any outstanding senior indebtedness of the
Company issued pursuant to an indenture having a provision substantially
similar to the Asset Sale Offer provision contained in the Indenture
(including, without limitation, the Company's 12 3/4% Notes and the Company's
11 1/2% Notes).
"Permitted Designee" means (i) a spouse or a child of a Permitted Holder,
(ii) trusts for the benefit of a Permitted Holder or a spouse or child of a
Permitted Holder, (iii) in the event of the death or incompetence of a
Permitted Holder, his estate, heirs, executor, administrator, committee or
other personal representative or (iv) any person so long as a Permitted Holder
owns at least 50% of the voting power of all classes of the voting stock of
such person.
"Permitted Holders" means George S. Blumenthal, J. Barclay Knapp and their
Permitted Designees.
"Permitted Investments" means (a) any Investments in the Company or in a
Cable Controlled Property or in a Qualified Subsidiary (including, without
limitation, (i) Guarantees of Indebtedness of the Company, a Cable Controlled
Subsidiary or a Qualified Subsidiary, (ii) Liens securing such Indebtedness or
Guarantees or (iii) the payment of any balance deferred and unpaid of the
purchase price of any Qualified Subsidiary); (b) any Investments in Cash
Equivalents; (c) Investments by the Company in Indebtedness of a counter-party
to an Exchange Rate Contract for hedging British pounds sterling/U.S. dollars
exchange risk that are made, for purposes other than speculation, in
connection with such contract to hedge not more than the aggregate principal
amount of the Notes and the Deferred Coupon Notes; and (d) Investments by the
Company or any Subsidiary of the Company in a person, if as a result of such
Investment (i) such person becomes a Cable Controlled Subsidiary or (ii) such
person is merged, consolidated or amalgamated with or into, or transfers or
conveys substantially all of its assets to, or is liquidated into, the Company
or a Wholly Owned Subsidiary of the Company.
"Permitted Liens" means (a) Liens in favor of the Company; (b) Liens on
property of a person existing at the time such person is merged into or
consolidated with the Company or any Subsidiary of the Company; provided, that
such Liens were in existence prior to the contemplation of such merger or
consolidation and do
63
<PAGE>
not secure any property or assets of the Company or any of its Subsidiaries
other than the property or assets subject to the Liens prior to such merger or
consolidation; (c) liens imposed by law, such as carriers', warehousemen's and
mechanics' liens and other similar liens arising in the ordinary course of
business which secure payment of obligations not more than sixty (60) days
past due or are being contested in good faith and by appropriate proceedings;
(d) Liens existing on the Issuance Date; (e) Liens for taxes, assessments or
governmental charges or claims that are not yet delinquent or that are being
contested in good faith by appropriate proceedings promptly instituted and
diligently concluded; provided, that any reserve or other appropriate
provision as shall be required in conformity with GAAP shall have been made
therefor and (f) easements, rights of way, restrictions and other similar
easements, licenses, restrictions on the use of properties or minor
imperfections of title that, in the aggregate, are not material in amount, and
do not in any case materially detract from the properties subject thereto or
interfere with the ordinary conduct of the business of the Company or its
Subsidiaries.
"Pro Forma EBITDA" means for any Person, for any period, the EBITDA of such
person as determined on a consolidated basis in accordance with GAAP after
giving effect to the following: (i) if, during or after such period, such
person or any of its Subsidiaries shall have made any Asset Sale, Pro Forma
EBITDA of such person and its Subsidiaries for such period shall be reduced by
an amount equal to the Pro Forma EBITDA (if positive) directly attributable to
the assets which are the subject of such Asset Sale for the period or
increased by an amount equal to the Pro Forma EBITDA (if negative) directly
attributable thereto for such period and (ii) if, during or after such period,
such person or any of its Subsidiaries completes an acquisition of any person
or business which immediately after such acquisition is a Subsidiary of such
person or whose assets are held directly by such person or a Subsidiary of
such person, Pro Forma EBITDA shall be computed so as to give pro forma effect
to the acquisition of such person or business; and provided further that, with
respect to the Company, all of the foregoing references to "Subsidiary" or
"Subsidiaries" shall be deemed to refer only to a "Restricted Subsidiary" or
"Restricted Subsidiaries" of the Company.
"Qualified Cable Asset" shall mean an asset used in a cable system or a
telephone system using a cable infrastructure.
"Qualified Subsidiary" means a Wholly Owned Subsidiary, or an entity that
will become a Wholly Owned Subsidiary after giving effect to the transaction
being considered, that at the time of and after giving effect to the
consummation of the transaction under consideration, (i) is a Cable Business
or holds only Cable Assets, (ii) has no Indebtedness (other than Indebtedness
being incurred to consummate such transaction) and (iii) has no encumbrances
or restrictions (other than such encumbrances or restrictions imposed or
permitted by the Indenture, the indentures governing the Deferred Coupon Notes
or any other instrument governing unsecured indebtedness of the Company which
is pari passu with the Notes) on its ability to pay dividends or make any
other distributions to the Company or any of its Subsidiaries.
"Rating Agencies" means (i) S&P, (ii) Moody's and (iii) if S&P or Moody's or
both shall not make a rating of the Notes publicly available, a nationally
recognized securities rating agency or agencies, as the case may be, selected
by the Company, which shall be substituted for S&P or Moody's or both, as the
case may be.
"Rating Category" means (i) with respect to S&P, any of the following
categories: BB, B, CCC, CC, C and D (or equivalent successor categories), (ii)
with respect to Moody's, any of the following categories: Ba, B, Caa, Ca, C
and D (or equivalent successor categories) and (iii) the equivalent of any
such category of S&P or Moody's used by another Rating Agency. In determining
whether the rating of the Notes has decreased by one or more gradations,
gradations within Rating Categories (+ and - for S&P; 1, 2 and 3 for Moody's;
or the equivalent gradations for another Rating Agency) shall be taken into
account (e.g., with respect to S&P, a decline in a rating from BB to BB-, as
well as from BB- to B+, will constitute a decrease of one gradation).
"Rating Date" means that date which is 90 days prior to the earlier of (x) a
Change of Control and (y) public notice of the occurrence of a Change of
Control or of the intention by the Company or any Permitted Holder to effect a
Change of Control.
64
<PAGE>
"Ratings Decline" means the occurrence of any of the following events on, or
within six months after, the date of public notice of the occurrence of a
Change of Control or of the intention of the Company or any Person to effect a
Change of Control (which period shall be extended so long as the rating of any
of the Company's debt securities is under publicly announced consideration for
possible downgrade by any of the Rating Agencies): (a) in the event that any
of the Company's debt securities rated by both of the Rating Agencies on the
Rating Date as Investment Grade, the rating of such securities by either of
the Rating Agencies shall be below Investment Grade, (b) in the event that any
of the Company's debt securities are rated by either, but not both, of the
Rating Agencies on the Rating Date as Investment Grade, the rating of such
securities by both of the Rating Agencies shall be below Investment Grade, or
(c) in the event any of the Company's debt securities are rated below
Investment Grade by both of the Rating Agencies on the Rating Date, the rating
of such securities by either Rating Agency shall be decreased by one or more
gradations (including gradations within Rating Categories as well as between
Rating Categories).
"Redeemable Dividend" means, for any dividend with regard to Disqualified
Stock, the quotient of the dividend divided by the difference between one and
the maximum statutory federal income tax rate (expressed as a decimal number
between 1 and 0) then applicable to the issuer of such Disqualified Stock.
"Restricted Investment" means an Investment other than a Permitted
Investment.
"Restricted Subsidiary" means any Subsidiary of the Company which is not a
Non-Restricted Subsidiary.
"Restricted Subsidiary Preferred Stock Dividend" means, for any dividend
with regard to preferred stock of a Restricted Subsidiary, the quotient of the
dividend divided by the difference between one and the maximum statutory
federal income tax rate (expressed as a decimal number between 1 and 0) then
applicable to the issuer of such preferred stock.
"S&P" means Standard & Poor's Ratings Group and its successors.
"Subsidiary" means any corporation, association or other business entity of
which more than 50% of the total voting power of shares of Capital Stock
entitled (without regard to the occurrence of any contingency) to vote in the
election of directors, managers or trustees thereof is at the time owned or
controlled, directly or indirectly, by any person or one or more of the other
Subsidiaries of that person or a combination thereof.
"Weighted Average Life to Maturity" means, when applied to any Indebtedness
at any date, the number of years obtained by dividing (a) the sum of the
products obtained by multiplying (x) the amount of each then remaining
installment, sinking fund, serial maturity or other required payments of
principal, including payment at final maturity, in respect thereof, by (y) the
number of years (calculated to the nearest one-twelfth) that will elapse
between such date and the making of such payment, by (b) the then outstanding
principal amount of such Indebtedness.
"Wholly Owned Subsidiary" means, at any time, a Restricted Subsidiary all of
the Capital Stock of which (except directors' qualifying shares) is at the
time owned directly or indirectly by the Company.
65
<PAGE>
DESCRIPTION OF PREFERRED STOCK AND SUBORDINATED DEBENTURES
THE PREFERRED STOCK
The designations, preferences and relative, participating, optional or other
special rights, qualifications and restrictions (collectively, the
"Designations") of the Old Preferred Stock are set forth in a Certificate of
Designation in respect of the Preferred Stock dated February 12, 1997 (the
"Certificate of Designation"). A copy of the Certificate of Designation has
been filed as an exhibit to the Registration Statement of which this
Prospectus is a part. The Designations of the New Preferred Stock are also set
forth in the Certificate of Designation, and holders of the New Preferred
Stock are referred to the Certificate of Designation for a statement thereof.
The summary contained herein of certain provisions of the New Preferred Stock
does not purport to be complete and is qualified in its entirety by reference
to the provisions of the Certificate of Designation relating thereto, the form
of which may be obtained from the Company.
As used in this "Description of Preferred Stock and Subordinated
Debentures," the "Company" means NTL Incorporated (formerly International
CableTel Incorporated) and not any of its Subsidiaries and "Preferred Stock"
refers to the Old Preferred Stock and the New Preferred Stock, unless the
context otherwise requires.
GENERAL
The Company is authorized to issue 2,500,000 shares of preferred stock,
$0.01 par value per share. As of the date this Prospectus, 780 shares of 5%
Non-voting Convertible Preferred Stock, Series A (the "Convertible Preferred
Stock") and 100,000 shares of Old Preferred Stock are outstanding. The
Certificate of Incorporation of the Company authorizes the Board of Directors
of the Company, without stockholder approval, to issue preferred stock from
time to time in one or more series, with such designations, preferences and
relative, participating, optional or other special rights, qualifications,
limitations or restrictions as may be determined by the Board of Directors.
The Board of Directors of the Company has adopted resolutions for the issuance
of 100,000 shares of Old Preferred Stock (and any additional shares of such
stock issued from time to time in lieu of cash dividends) and filed on
February 12, 1997 the Certificate of Designation with the Secretary of State
of the State of Delaware as required by Delaware law. Subject to certain
conditions, the Preferred Stock will be exchangeable for Subordinated
Debentures at the option of the Company on any Dividend Payment Date (as
defined). The New Preferred Stock, when issued in exchange for Old Preferred
Stock in accordance with the terms of the Exchange Offer, will be fully paid
and non-assessable, and the holders of New Preferred Stock will not have any
subscription or preemptive rights related thereto. Continental Stock Transfer
& Trust Company has agreed to be the transfer agent and registrar for the
Preferred Stock (the "Registrar").
Each share of Preferred Stock has a liquidation preference of $1,000. The
liquidation preference of the Preferred Stock is not necessarily indicative of
the price at which shares of the Preferred Stock will actually trade after
their issuance, and the Preferred Stock may trade at prices below its
liquidation preference. The market price of the Preferred Stock can be
expected to fluctuate with changes in the financial markets and economic
conditions, the financial condition and prospects of the Company and other
factors that generally influence the market prices of securities.
RANKING
With respect to dividend rights and rights on liquidation, winding up and
dissolution of the Company, the Preferred Stock ranks: (i) senior to (a) all
classes of common stock of the Company, (b) the Junior Preferred Stock, (c)
the Series A Preferred Stock and (d) each other class of capital stock or
series of preferred stock issued by the Company after the Issuance Date the
terms of which specifically provide that such class or series will rank junior
to the Preferred Stock as to dividend distributions and distributions upon
liquidation, winding up and dissolution of the Company or junior to or on a
parity with any class of common stock of the Company or which do not specify
their rank (the securities described in this clause (i), collectively "Junior
Securities"); (ii) on a parity with each class of capital stock or series of
preferred stock issued by the Company after the Issuance Date the terms of
which specifically provide that such class or series will rank on a parity
with the Preferred Stock as
66
<PAGE>
to dividend distributions and distributions upon liquidation, winding up and
dissolution of the Company (the securities described in this clause (ii),
collectively "Parity Securities"); and (iii) junior to each other class of
capital stock or other series of preferred stock issued by the Company after
the Issuance Date the terms of which specifically provide that such series
will rank senior to the Preferred Stock as to dividend distributions and
distributions upon liquidation, winding up and dissolution of the Company (the
securities described in this clause (iii), collectively "Senior Securities").
The Preferred Stock is subject to the issuance of Junior Securities, Parity
Securities and Senior Securities; provided, however, that the Company may not
issue any Parity Securities or Senior Securities without the approval of the
holders of a majority of the shares of Preferred Stock then outstanding,
voting as a separate class, except that without the approval of any holders of
Preferred Stock, the Company may issue or have outstanding shares of Parity
Securities (other than Disqualified Capital Stock) issued from time to time in
exchange for, or all of the proceeds of which are used to redeem or
repurchase, any or all of the shares of Preferred Stock.
DIVIDENDS
Holders of outstanding shares of Preferred Stock will be entitled to
receive, when, as and if declared by the Board of Directors of the Company,
out of funds legally available therefor, dividends on the Preferred Stock, at
a rate equal to 13% per annum ($130 per share). Dividends will accrue from the
Issuance Date and will be payable quarterly in arrears on February 15, May 15,
August 15 and November 15 of each year (each, a "Dividend Payment Date"),
commencing on May 15, 1997. Dividends, whether or not earned or declared, will
accrue without interest until declared and paid, which declaration may be for
all or part of the accrued dividends. Dividends accruing on or prior to
February 15, 2004 may, at the option of the Company, be paid (i) in cash, (ii)
by the issuance of such number of additional fully paid and nonassessable
shares (including fractional shares) of Preferred Stock equal to the amount of
such dividends then payable divided by $1,000 or (iii) in any combination of
the foregoing. The Company does not expect to pay dividends on the Preferred
Stock in cash on or prior to February 15, 2004. The Company's ability to pay
cash dividends on the Preferred Stock is limited by the indentures governing
the Deferred Coupon Notes and may be subject to limitations placed by the
Potential Credit Facilities and any other future agreements of the Company.
See "Risk Factors--Restrictions on Ability to Pay Dividends or Make Payments
on Preferred Stock." In the event that the Company fails to pay dividends
(including any special dividends described under "Registration Rights"), the
sole remedy available to holders of Preferred Stock will be the election of
directors as set forth under "--Voting Rights."
Each dividend on the Preferred Stock will be payable to the holders of
record of the Preferred Stock as they appear on the stock books of the Company
on such record date as may be fixed by the Board of Directors of the Company,
which record date will not be less than 10 nor more than 60 days prior to the
applicable Dividend Payment Date. All dividends paid with respect to shares of
Preferred Stock shall be paid pro rata to the holders thereof. Dividends will
cease to accrue in respect of shares of the Preferred Stock on the Exchange
Date (as defined below) or on the date of their earlier redemption or
repurchase by the Company, unless the Company fails to issue the appropriate
aggregate principal amount of Subordinated Debentures in respect of the
Preferred Stock on the Exchange Date or fails to pay the relevant redemption
or repurchase price on the date fixed for redemption or repurchase.
No full dividends may be declared or paid or funds set apart for the payment
of dividends on any Parity Securities for any period unless all accrued
dividends have been or contemporaneously are declared and paid in full or
declared and, if payable in cash, a sum in cash is set apart sufficient for
such payment on the Preferred Stock. If all accrued dividends have not been so
paid, the Preferred Stock will share dividends pro rata with the Parity
Securities based upon the relative liquidation preference of the outstanding
shares of the Preferred Stock and such Parity Securities. No dividends may be
declared or paid, nor may funds be set aside for such payment, on Junior
Securities, except dividends on Junior Securities which are paid in additional
Junior Securities (other than Disqualified Capital Stock), and no Parity
Securities or Junior Securities may be repurchased, redeemed or otherwise
retired, nor may funds be set apart for such payment, if all accrued dividends
have not been paid (or deemed to have been paid) on the Preferred Stock. For
purposes of this Description of Preferred Stock and Exchange Debentures,
"Disqualified Capital Stock" means any capital stock which, by its terms (or
by the terms
67
<PAGE>
of any security into which it is convertible or for which it is exchangeable),
or upon the happening of any event, matures or is mandatorily redeemable,
pursuant to a sinking fund obligation or otherwise, or redeemable at the
option of the holder thereof, in whole or in part, on or prior to February 15,
2009.
Accrued dividends may be declared and paid at any time, without reference to
any regular Dividend Payment Date, to holders of record, not more than sixty
(60) days prior to payment thereof, as may be fixed by the Board of Directors
of the Company.
Dividends payable on the Preferred Stock for any period less than a year
shall be computed on the basis of a 360-day year of twelve 30-day months and
the actual number of days elapsed in the period for which payable.
REDEMPTION OF PREFERRED STOCK
Optional. The Preferred Stock is redeemable for cash (subject to legal
availability of funds therefor), at the option of the Company, in whole at any
time or in part from time to time, at the following redemption prices
(expressed as percentages of the liquidation preference thereof) if redeemed
during the 12-month period commencing on February 15 of the year set forth
below, plus, in each case, all accrued and unpaid dividends (including an
amount in cash equal to a prorated dividend from the last Dividend Payment
Date immediately prior to the redemption date):
<TABLE>
<CAPTION>
REDEMPTION
YEAR PRICE
---- ----------
<S> <C>
2002........................................................... 106.500%
2003........................................................... 104.333%
2004........................................................... 102.167%
2005 and thereafter............................................ 100.000%
</TABLE>
In the event of a partial redemption of the Preferred Stock, the shares to
be redeemed will be selected on a pro rata basis, except that the Company may
redeem all shares of Preferred Stock held by any holder of fewer than 10
shares (or all shares of Preferred Stock owned by any holder who would hold
less than 10 shares as a result of such redemption), as determined by the
Company. No partial redemption of the Preferred Stock may be authorized or
made unless prior thereto all accrued dividends thereon shall have been paid
in cash or declared and a sum set apart for such payment. The indentures
governing the Deferred Coupon Notes restrict the Company's ability to redeem
the Preferred Stock, and the Potential Credit Facilities and any other future
agreements of the Company may contain similar provisions.
The Company may also redeem all of the Preferred Stock upon a Change of
Control Call Event. See "--Change of Control Put and Call."
Mandatory. On February 15, 2009, the Company will be required, subject to
legal availability of funds therefor, to redeem all outstanding shares of
Preferred Stock at a price equal to the liquidation preference thereof plus an
amount in cash equal to all accrued and unpaid dividends (including an amount
equal to a prorated dividend from the last Dividend Payment Date immediately
prior to the date of redemption). The indentures governing the Deferred Coupon
Notes restrict the Company's ability to redeem the Preferred Stock at
maturity. The Potential Credit Facilities and other future agreements of the
Company may prohibit the Company from redeeming the Preferred Stock at
maturity. See "Risk Factors--Restrictions on Ability to Pay Dividends or Make
Payments on Preferred Stock."
Procedure for Redemption. On and after a redemption date, unless the Company
defaults in the payment of the applicable redemption price (or the related
accrued and unpaid dividends), dividends will cease to accrue with respect to
shares of Preferred Stock called for redemption and all rights of holders of
such shares will terminate except for the right to receive the redemption
price (and the related accrued and unpaid dividends) without interest. The
Company will send a written notice of redemption by first class mail, postage
prepaid, at least 15 days and not more than 60 days prior to the date fixed
for any redemption to each holder of record at its
68
<PAGE>
registered address on the record date fixed for such redemption; provided,
however, that no failure to give such notice nor any deficiency therein shall
affect the validity of the procedure for the redemption of any shares of
Preferred Stock to be redeemed except as to the holder or holders to whom the
Company has failed to give said notice or except as to the holder or holders
whose notice was defective. If any Preferred Stock is to be redeemed in part
only, the notice of redemption that relates to such Preferred Stock will state
the number of shares thereof to be redeemed. Shares of Preferred Stock that
have been issued and reacquired in any manner, including shares purchased or
redeemed or exchanged, will (upon compliance with any applicable provisions of
Delaware law) have the status of authorized but unissued shares of preferred
stock of the Company undesignated as to series and may, with any and all other
authorized but unissued shares of preferred stock of the Company, be
designated or redesignated and issued or reissued, as the case may be, as part
of any series of preferred stock of the Company, except that such shares may
not be reissued or sold as shares of the Preferred Stock (other than in
payment of dividends on the Preferred Stock).
EXCHANGE
On any Dividend Payment Date, the Company may, at its option, subject to
certain conditions, exchange the Preferred Stock, in whole but not in part,
for the Subordinated Debentures. See "--The Subordinated Debentures" below for
a summary of the terms of the Subordinated Debentures. Holders of Preferred
Stock so exchanged will be entitled to receive $1.00 in principal amount of
Subordinated Debentures for each $1.00 of liquidation preference of Preferred
Stock held by such holder at the time of exchange. In connection with any such
exchange, dividends on shares of Preferred Stock exchanged which have accrued
on or prior to February 15, 2004 which have not been paid as of the Exchange
Date will be paid, at the Company's option, in cash or in additional
Subordinated Debentures in an equivalent principal amount of such accrued and
unpaid dividends. Dividends on any shares of Preferred Stock accruing after
February 15, 2004 which have not been paid as of the Exchange Date must be
paid in cash on the Exchange Date. Interest will accrue on Subordinated
Debentures from the Exchange Date. On the date fixed for exchange, all
dividends on the Preferred Stock will cease to accrue, the rights of the
holders of the Preferred Stock as stockholders of the Company with respect to
the shares exchanged will cease and the person or persons entitled to receive
the Subordinated Debentures issuable upon exchange will be treated as the
registered holder or holders of such Subordinated Debentures. Subordinated
Debentures issued in exchange for Preferred Stock will be issued in principal
amounts of $1,000 and integral multiples thereof to the extent possible, and
will also be issued in principal amounts of less than $1,000 so that each
holder of Preferred Stock will receive certificates representing the entire
amount of Subordinated Debentures to which its shares of Preferred Stock
entitle it; provided, however, that the Company may, at its option, pay cash
in lieu of issuing a Subordinated Debenture in a principal amount less than
$1,000. The Company will mail to each holder of record of the shares of
Preferred Stock written notice of its intention to exchange the Preferred
Stock for Subordinated Debentures at least 30 and not more than 60 days prior
to the Exchange Date. Each notice must state (i) the Exchange Date, (ii) the
place or places where certificates for shares of Preferred Stock are to be
surrendered for exchange into Subordinated Debentures, (iii) that dividends on
the shares of Preferred Stock to be exchanged will cease to accrue on the
Exchange Date and (iv) that interest on the Subordinated Debentures shall
accrue from the Exchange Date whether or not certificates for shares of
Preferred Stock are surrendered for exchange on such Exchange Date.
Under applicable provisions of the Federal bankruptcy law or comparable
provisions of state fraudulent transfer law, if at the time of the Company's
payment of dividends on, redemption of, or issuance of Subordinated Debentures
in exchange for, Preferred Stock, (i) the Company is insolvent or rendered
insolvent by reason thereof or (ii) the Company is engaged in a business or
transaction for which the Company's remaining assets constitute unreasonably
small capital or (iii) the Company intends to incur or believes that it will
incur debts beyond its ability to pay such debts as they mature, then the
relevant distribution to holders of Preferred Stock could be avoided in whole
or in part as a fraudulent conveyance and such holders could be required to
return the same or equivalent amounts to or for the benefit of existing or
future creditors of the Company. The measure of insolvency for purposes of the
foregoing will vary depending on the law of the jurisdiction which is being
applied. Generally, the Company would be considered insolvent if the sum of
its debts, including
69
<PAGE>
contingent liabilities, was greater than the fair saleable value of its assets
at a fair valuation or if the present fair saleable value of its assets was
less than the amount that would be required to pay its probable liability on
its existing debts, including contingent liabilities, as they become absolute
and matured.
The indentures governing the Deferred Coupon Notes limit the Company's
ability to exchange the Preferred Stock for Subordinated Debentures, and the
Potential Credit Facilities and any other future agreements of the Company may
contain similar provisions.
LIQUIDATION PREFERENCE
Upon any voluntary or involuntary liquidation, dissolution or winding up of
the Company, holders of Preferred Stock then outstanding will be entitled to
be paid, out of the assets of the Company available for distribution to its
stockholders, an amount in cash equal to the liquidation preference thereof,
plus an amount in cash equal to accrued and unpaid dividends thereon, if any,
to the date fixed for liquidation, dissolution or winding up (including an
amount in cash equal to a prorated dividend from the last Dividend Payment
Date to the date fixed for liquidation, dissolution or winding up), before any
distribution is made on any Junior Securities, including, without limitation,
any common stock of the Company. Except as provided in the preceding sentence,
holders of Preferred Stock shall not be entitled to any distribution in the
event of liquidation, dissolution or winding up of the Company. If upon any
voluntary or involuntary liquidation, dissolution or winding up of the
Company, the application of all amounts available for payments with respect to
the Preferred Stock and all other Parity Securities would not result in
payment in full of the Preferred Stock and such other Parity Securities,
holders of the Preferred Stock and the Parity Securities will share equally
and ratably in any distribution of assets of the Company in proportion to the
full liquidation preference to which each is entitled. After payment in full
of the liquidation preference to which holders of Preferred Stock are
entitled, such holders will not be entitled to any further participation in
any distribution of assets of the Company. However, neither the sale,
conveyance, exchange or transfer (for cash, shares of stock, securities or
other consideration) of all or substantially all of the property or assets of
the Company nor the consolidation or merger of the Company with one or more
corporations will itself be deemed to be a voluntary or involuntary
liquidation, dissolution or winding up of the Company.
The Certificate of Designation does not contain any provision requiring
funds to be set aside to protect the liquidation preference of the Preferred
Stock, although such liquidation preference will be substantially in excess of
the par value of such shares of the Preferred Stock. In addition, the Company
is not aware of any provision of Delaware law or any controlling decision of
the courts of the State of Delaware that requires a restriction upon the
surplus of the Company solely because the liquidation preference of the
Preferred Stock will exceed the par value. Consequently, there will be no
restriction upon the surplus of the Company solely because the liquidation
preference of the Preferred Stock will exceed the par value thereof, and there
will be no remedies available to holders of the Preferred Stock before or
after the payment of any dividend, other than in connection with the
liquidation of the Company, solely by reason of the fact that such dividend
would reduce the surplus of the Company solely because the liquidation
preference of the Preferred Stock will exceed the par value.
CHANGE OF CONTROL PUT AND CALL
The Certificate of Designation provides that, upon the occurrence of a
Change of Control Triggering Event, the Company shall notify each holder of
Preferred Stock in writing of such occurrence and shall make an offer to
purchase (the "Change of Control Offer") such holder's shares of Preferred
Stock at a purchase price in cash (the "Change of Control Offer Price") equal
to 101% of the liquidation preference of the Preferred Stock plus accrued and
unpaid dividends (including an amount equal to a prorated dividend from the
last Dividend Payment Date immediately prior to the Change of Control Payment
Date (as defined herein)). For purposes of this section, "Change of Control
Triggering Event" has substantially the same meaning as in the Indenture.
The Certificate of Designation provides that not later than 90 days
following the date upon which the Change of Control Triggering Event occurred,
the Company must send, by first class mail, a notice to holders of
70
<PAGE>
Preferred Stock at their last registered address, with a copy to the
Registrar, which notice shall govern the terms of the Change of Control Offer.
Notice of an event giving rise to a Change of Control Triggering Event shall
be given on the same date and in the same manner to all holders of Preferred
Stock. Such notice shall state, among other things, the purchase date, which
must be no earlier than 30 days nor later than 60 days from the date such
notice is mailed, other than as may be required by law (the "Change of Control
Payment Date"); provided, however, that there shall be no right of any holder
to require the Company to repurchase such holder's shares of Preferred Stock
until the earlier of the date on which all of the Deferred Coupon Notes have
been repaid or have matured. Each Change of Control Offer is required to
remain open for at least 20 business days or such longer period as may be
required by law.
Notwithstanding the foregoing, prior to the mailing of the notice of a
Change of Control Offer referred to above, the Company shall (i) within 60
days following a Change of Control Triggering Event, either (a) repay in full
all Indebtedness, and terminate all commitments, under the Potential Credit
Facilities to the extent required upon a change of control pursuant to the
terms thereof (or offer to repay in full all such Indebtedness and terminate
all such commitments and repay all such Indebtedness owed to each lender which
has accepted such offer and terminate all such commitments of each such
lender), or (b) obtain the requisite consents under the Potential Credit
Facilities to permit the repurchase of the Preferred Stock as provided above
and (ii) within 90 days following a Change of Control Triggering Event,
purchase all Senior Notes (or permitted refinancings thereof) which it is
required to purchase by reason of such change of control pursuant to the
provisions of the indenture therefor. The Company shall first comply with the
covenant described in the immediately preceding sentence before it shall be
required to repurchase Preferred Stock pursuant to the provisions described
above.
None of the provisions in the Certificate of Designation relating to a
Change of Control Offer are waivable by the Board of Directors of the Company.
The Company could in the future enter into certain transactions, including
certain recapitalizations of the Company, that would not constitute a Change
of Control Triggering Event under the Preferred Stock, but would increase the
amount of Indebtedness outstanding at such time. If a Change of Control
Triggering Event were to occur, there can be no assurance that the Company
would have sufficient funds to pay the purchase price for the Preferred Stock
that the Company is required to purchase. In the event that the Company is
required to purchase outstanding shares of Preferred Stock pursuant to a
Change of Control Offer, the Company expects that it would need to seek third-
party financing to the extent it does not have available funds to meet its
purchase obligations. However, there can be no assurance that the Company
would be able to obtain such financing. In addition, the Company will be
prohibited under the indentures governing the Deferred Coupon Notes from
purchasing the Preferred Stock pursuant to a Change of Control Offer.
The Company must comply with Rules 13e-4 and 14e-4 and 14e-1 under the
Exchange Act and other provisions of state and federal securities laws and
regulations thereunder to the extent applicable in connection with a Change of
Control Offer.
In addition, upon a Change of Control Call Event, the Company will have the
option to redeem all (but not less than all) of the outstanding shares of
Preferred Stock at a redemption price equal to 100% of the liquidation
preference thereof plus the Applicable Premium, plus accrued and unpaid
dividends to the date of repurchase; provided, however, no such redemption
shall be consummated except contemporaneously with or after the merger,
consolidation or business combination referred to in the definition of Change
of Control Call Event. Notice of any such redemption pursuant to this
paragraph must be given no later than 90 days following the date upon which
the Change of Control Call Event occurred (or no later than 10 days after the
date on which a notice of a Change of Control Offer must be mailed pursuant to
provisions described above if the events giving rise to the Change of Control
Call Event also give rise to a Change of Control Triggering Event), and the
purchase date must be within 30 days of the date of notice.
"Applicable Premium" means, with respect to any share of Preferred Stock,
the greater of (x) 1.0% of the liquidation preference thereof and (y) the
excess, if any, of (a) the present value of dividends accruing until and
including February 15, 2002 (assuming payment thereof in cash on the
applicable dividend payment date) and
71
<PAGE>
the liquidation preference and any applicable optional redemption premium
therefor payable on such date for such share (in each case assuming payment
thereof on February 15, 2002), computed using a discount rate equal to the
Treasury Rate plus 100 basis points over (b) the sum of the liquidation
preference of such share plus accrued and unpaid dividends to the redemption
date.
"Change of Control Call Event" means the entering by the Company into a
binding agreement providing for a merger, consolidation or business
combination of the Company with another corporation, association or other
entity, which agreement provides that upon consummation thereof that the
holders of the Company's common stock will own less than 80% of the voting and
economic power of the entity, if any, in which holders of the Company's common
stock will hold equity interests immediately following consummation of any
such transaction.
"Treasury Rate" means the yield to maturity at the time of computation of
United States Treasury securities with a constant maturity (as compiled and
published in the most recent Federal Reserve Statistical Release H.15 (519)
which has become publicly available at least two business days prior to the
date fixed for redemption of the Preferred Stock (or, if such Statistical
Release is no longer published, any publicly available source of similar
data)) most nearly equal to the then remaining period to the date scheduled
for the mandatory redemption of the Preferred Stock; provided, however, that
if such period is not equal to the constant maturity of a United States
Treasury security for which a weekly average yield is given, the Treasury Rate
shall be obtained by linear interpolation (calculated to the nearest one-
twelfth of a year) from the weekly average yields of United States Treasury
securities for which such yields are given, except that if the period to the
date scheduled for the mandatory redemption of the Preferred Stock is less
than one year, the weekly average yield on actually traded United States
Treasury securities adjusted to a constant maturity of one year shall be used.
VOTING RIGHTS
Holders of the Preferred Stock will have no general voting rights, except as
otherwise required under Delaware law or as set forth in the Certificate of
Designation. The Certificate of Designation provides that if (a) dividends on
the Preferred Stock are in arrears and unpaid (or if after February 15, 2004,
such dividends are not paid in cash) for six quarterly periods (whether or not
consecutive), (b) the Company fails to effect a redemption of the Preferred
Stock when required by, and in accordance with, the provisions described under
"Redemption of Preferred Stock--Mandatory" or (c) the Company fails to make an
offer to purchase all of the outstanding shares of Preferred Stock following a
Change of Control Triggering Event, if such offer to purchase is required by
the provisions set forth above under "--Change of Control Put and Call," or
fails to purchase all of the shares of Preferred Stock validly tendered
pursuant thereto (each such event described in clauses (a) through (c) above
being referred to herein as a "Voting Rights Triggering Event"), then the
number of directors constituting the Board of Directors of the Company will be
increased by two and the holders of the majority of the then outstanding
shares of Preferred Stock, voting separately as a class, will be entitled to
elect the two additional directors. Such voting rights will continue until
such time as, in the case of a default under clause (a), all accrued dividends
on the Preferred Stock are paid in full and, in all other cases, any failure,
breach or default referred to in clause (b) or (c) is remedied, at which time
the term of any directors elected pursuant to the provisions of this paragraph
shall immediately terminate. Any vacancy occurring in the office of a director
elected by holders of the Preferred Stock may be filled by the remaining
director elected by such holders unless and until such vacancy shall be filled
by such holders. Regardless of the number of Voting Rights Triggering Events,
in no event shall the holders of Preferred Stock have the right to elect and
have serve more than two members of the Board of Directors of the Company at
any one time.
In any case in which the holders of Preferred Stock shall be entitled to
vote as described herein or pursuant to Delaware law, each holder of shares of
Preferred Stock shall be entitled to one vote for each share of Preferred
Stock held.
The Certificate of Designation also provides that the Company shall not,
without the affirmative vote or consent of holders of a majority of the shares
of Preferred Stock then outstanding, voting or consenting, as the
72
<PAGE>
case may be, separately as one class, (i) create, authorize or issue any class
of Senior Securities or Parity Securities or (ii) amend the Certificate of
Designation so as to affect adversely the specified rights, preferences,
privileges or voting rights of holders of Preferred Stock or authorize the
issuance of any additional shares of Preferred Stock (other than in payment of
dividends on the Preferred Stock); provided, however, that the Company may,
without the approval of any holders of Preferred Stock, issue or have
outstanding shares of Parity Securities (other than Disqualified Capital
Stock) issued from time to time in exchange for, or all of the proceeds of
which are used to redeem or repurchase, any or all of the shares of Preferred
Stock. The holders of a majority of the outstanding shares of Preferred Stock,
voting or consenting, as the case may be, separately as one class, may waive
compliance with any provision of the Certificate of Designation.
The Certificate of Designation also provides that, except as set forth in
the preceding paragraph, neither (a) the creation, authorization or issuance
of any shares of Junior Securities, Parity Securities or Senior Securities,
including the designation of a series thereof within the existing class of
Preferred Stock, nor (b) the increase or decrease in the amount of authorized
capital stock of any class, including any preferred stock, shall require the
consent of any holders of Preferred Stock or shall be deemed to affect
adversely the rights, preferences, privileges or voting rights of shares of
Preferred Stock.
Without the affirmative vote or consent of holders of a majority of the
issued and outstanding shares of Preferred Stock, voting or consenting, as the
case may be, as one class, the Company shall not, in a single transaction or
series of related transactions, consolidate or merge with or into, or sell,
assign, transfer, lease, convey or otherwise dispose of all or substantially
all of its assets to, another Person or adopt a plan of liquidation unless:
(A) either (i) the Company is the surviving or continuing Person or (2) the
Person (if other than the Company) formed by such consolidation or into which
the Company is merged or the Person that acquires by conveyance, transfer or
lease the properties and assets of the Company as an entirety or substantially
as an entirety or, in the case of a plan of liquidation, the Person to which
assets of the Company have been transferred, shall be a corporation,
partnership or trust organized and existing under the laws of the United
States or any State thereof or the District of Columbia; (B) the Preferred
Stock shall be converted into or exchanged for and shall become shares of such
successor, transferee or resulting Person, having in respect of such
successor, transferee or resulting Person the same powers, preferences and
relative, participating, optional or other special rights and the
qualifications, limitations or restrictions thereon, that the Preferred Stock
had immediately prior to such transaction; and (C) the Company has delivered
to the transfer agent for the Preferred Stock prior to the consummation of the
proposed transaction an Officers' Certificate and an Opinion of Counsel, each
stating that such consolidation, merger or transfer complies with the terms
hereof and that all conditions precedent herein relating to such transaction
have been satisfied. For purposes of the foregoing, the transfer (by lease,
assignment, sale or otherwise, in a single transaction or series of related
transactions) of all or substantially all of the properties or assets of one
or more subsidiaries of the Company, the Capital Stock of which constitutes
all or substantially all of the properties and assets of the Company shall be
deemed to be the transfer of all or substantially all of the properties and
assets of the Company.
Under Delaware law, the holders of Preferred Stock are entitled to vote
separately as a class upon a proposed amendment to the Certificate of
Designation, whether or not entitled to vote thereon by the Certificate of
Incorporation, if the amendment would increase or decrease the aggregate
number of authorized shares of such class, increase or decrease the par value
of the shares of such class, or alter or change the powers, preferences or
special rights of the shares of the Preferred Stock so as to affect them
adversely.
REPORTS
The provisions of the Certificate of Designation relating to reports are
substantially the same as the provisions of the Indenture relating to such
matters. For a description thereof, see "Description of Notes--Certain
Covenants--Reports."
73
<PAGE>
THE SUBORDINATED DEBENTURES
GENERAL
The Subordinated Debentures will, if and when issued, be issued under an
indenture (the "Subordinated Debenture Indenture"), to be dated as of the date
of first issuance (the "Exchange Date") of the Subordinated Debentures,
between the Company and The Chase Manhattan Bank, as trustee (the
"Subordinated Debenture Trustee"). The following summary of certain provisions
of the Subordinated Debenture Indenture does not purport to be complete and is
qualified in its entirety by reference to the Subordinated Debenture
Indenture, including the definitions of certain terms therein. Capitalized
terms not defined herein have substantially the same meanings as under
"Description of Notes."
PRINCIPAL, MATURITY AND INTEREST
The Subordinated Debentures will accrue interest at 13% per annum from the
Exchange Date or from the most recent interest payment date to which interest
has been paid or duly provided for. Interest will be payable semiannually on
February 15 and August 15 of each year, beginning on the first such date to
occur after the Exchange Date, to the holders of record on the immediately
preceding February 1 and August 1, respectively. Interest on the Subordinated
Debentures accruing on or prior to February 15, 2004 may, at the option of the
Company, be paid in cash, by issuing additional Subordinated Debentures in an
aggregate principal amount equal to the amount of such interest or in any
combination thereof. Interest on the Subordinated Debentures accruing after
February 15, 2004 must be paid in cash. Interest on overdue principal and (to
the extent permitted by law) on overdue installments of interest will accrue
at a rate equal to the rate borne by the Subordinated Debentures. Interest
will be computed on the basis of a 360-day year comprised of twelve 30-day
months.
The Subordinated Debentures will be payable both as to principal and
interest at the office or agency of the Company maintained for such purpose
within the City and State of New York or, at the option of the Company,
payment of interest may be made by check mailed to the holders of the
Subordinated Debentures at their respective addresses set forth in the
register of holders of Subordinated Debentures or, if a holder so requests, by
wire transfer of immediately available funds to an account previously
specified in writing by such holder to the Company and the Subordinated
Debenture Trustee. Until otherwise designated by the Company, the Company's
office or agency in New York will be the office of the Subordinated Debenture
Trustee maintained for such purpose. The Subordinated Debentures will mature
on February 15, 2009 and will be issued in registered form, without coupons.
OPTIONAL REDEMPTION
Except as referred to herein under "--Covenants--Additional Amounts;
Optional Tax Redemption," the Subordinated Debentures are not redeemable at
the Company's option prior to February 15, 2002. Thereafter, the Subordinated
Debentures will be subject to redemption at the option of the Company, in
whole or in part, upon not less than 30 nor more than 60 days' notice, at the
redemption prices (expressed as percentages of principal amount) set forth
below plus accrued and unpaid interest thereon to the applicable redemption
date, if redeemed during the twelve-month period beginning on February 15 of
the years indicated below.
<TABLE>
<CAPTION>
YEAR PERCENTAGE
---- ----------
<S> <C>
2002........................................................... 106.500%
2003........................................................... 104.333%
2004........................................................... 102.167%
2005 and thereafter............................................ 100.000%
</TABLE>
CHANGE OF CONTROL
The portions of the Subordinated Debenture Indenture relating to a Change of
Control Offer upon a Change of Control Triggering Event will be substantially
the same as the provisions of the Indenture relating to such matters. For a
summary description of those provisions and potential limitations on the
Company's ability to consummate a Change of Control Offer, see "Description of
Notes--Change of Control."
74
<PAGE>
SELECTION AND NOTICE
If less than all of the Subordinated Debentures are to be redeemed at any
time, selection of Subordinated Debentures for redemption will be made by the
Subordinated Debenture Trustee in compliance with the requirements of the
principal national securities exchange, if any, on which the Subordinated
Debentures are listed, or, in the absence of such requirements or if the
Subordinated Debentures are not so listed, on a pro rata basis, provided that
no Subordinated Debentures of $1,000 or less shall be redeemed in part. Notice
of redemption shall be mailed by first class mail at least 30 but not more
than 60 days before the redemption date to each holder of Subordinated
Debentures to be redeemed at its registered address. If any Subordinated
Debenture is to be redeemed in part only, the notice of redemption that
relates to such Subordinated Debenture shall state the portion of the
principal amount thereof to be redeemed. A new Subordinated Debenture in
principal amount equal to the unredeemed portion thereof will be issued in the
name of the holder thereof upon cancellation of the original Subordinated
Debenture. On and after the redemption date, interest ceases to accrue on
Subordinated Debentures or portions of them called for redemption.
SUBORDINATION
The Subordinated Debentures will be subordinate in right of payment to all
existing and future Senior Debt. At December 31, 1996, after giving effect to
the Offering, the Company would have had approximately $2,132 million of
Senior Debt outstanding.
The payment of the principal of, interest on or any other amounts due on the
Subordinated Debentures will be subordinated in right of payment to the prior
payment in full of all Senior Debt of the Company. No payment on account of
principal, redemption, interest or any other amounts due on the Subordinated
Debentures, including, without limitation, any payments on the Change of
Control Offer, and no redemption, purchase or other acquisition of the
Subordinated Debentures may be made unless (i) full payment of amounts then
due on all Senior Debt have been made or duly provided for pursuant to the
terms of the instrument governing such Senior Debt, and (ii) at the time for,
or immediately after giving effect to, any such payment, redemption, purchase
or other acquisition, there shall not exist under any Senior Debt or any
agreement pursuant to which any Senior Debt has been issued, any default which
shall not have been cured or waived and which shall have resulted in the full
amount of such Senior Debt being declared due and payable. In addition, the
Subordinated Debenture Indenture will provide that if any of the holders of
any issue of Senior Debt notify (the "Payment Blockage Notice") the Company
and the Subordinated Debenture Trustee that a default has occurred giving the
holders of such Senior Debt the right to accelerate the maturity thereof, no
payment on account of principal, redemption, interest or any other amounts due
on the Subordinated Debentures and no purchase, redemption or other
acquisition of the Subordinated Debentures will be made for the period (the
"Payment Blockage Period") commencing on the date notice is received and
ending on the earlier of (A) the date on which such event of default shall
have been cured or waived or (B) 180 days from the date notice is received.
Notwithstanding the foregoing, only one Payment Blockage Notice with respect
to the same event of default or any other events of default existing and known
to the person giving such notice at the time of such notice on the same issue
of Senior Debt may be given during any period of 360 consecutive days unless
such event of default or such other events of default have been cured or
waived for a period of not less than 90 consecutive days. No new Payment
Blockage Period may be commenced by the holders of Senior Debt during any
period of 360 consecutive days unless all events of default which triggered
the preceding Payment Blockage Period have been cured or waived.
Upon any distribution of its assets in connection with any dissolution,
winding-up, liquidation or reorganization of the Company or acceleration of
the principal amount due on the Subordinated Debentures because of an Event of
Default, all Senior Debt must be paid in full before the holders of the
Subordinated Debentures are entitled to any payments whatsoever.
If payment of Subordinated Debentures is accelerated because of an Event of
Default, the Company or the Subordinated Debenture Trustee shall promptly
notify the holders of Senior Debt or the trustee(s) for such Senior Debt of
the acceleration. The Company may not pay the Subordinated Debentures until
five days after such
75
<PAGE>
holders or trustee(s) of Senior Debt receive notice of such acceleration and,
thereafter, may pay the Subordinated Debentures only if the subordination
provisions of the Subordinated Debenture Indenture otherwise permit payment at
that time.
As a result of these subordination provisions, in the event of the Company's
insolvency, holders of the Subordinated Debentures may recover ratably less
than general creditors of the Company.
"Senior Debt" means the principal of, interest on and other amounts due on
(i) Indebtedness of the Company, whether outstanding on the date of the
Subordinated Debenture Indenture or thereafter created, incurred, assumed or
guaranteed by the Company in compliance with the Subordinated Debenture
Indenture, for money borrowed from banks or other financial institutions; (ii)
Indebtedness of the Company, whether outstanding on the date of the
Subordinated Debenture Indenture or thereafter created, incurred, assumed or
guaranteed by the Company in compliance with the Subordinated Debenture
Indenture, including, without limitation, the Senior Notes and (iii)
Indebtedness of the Company under interest rate swaps, caps or similar hedging
agreements and foreign exchange contracts, currency swaps or similar
agreements; unless, in the instrument creating or evidencing or pursuant to
which Indebtedness under (i) or (ii) is outstanding, it is expressly provided
that such Indebtedness is not senior in right of payment to the Subordinated
Debentures. Senior Debt includes, with respect to the obligations described in
clause (i) and (ii) above, interest accruing, pursuant to the terms of such
Senior Debt, on or after the filing of any petition in bankruptcy or for
reorganization relating to the Company, whether or not post-filing interest is
allowed in such proceeding, at the rate specified in the instrument governing
the relevant obligation. Notwithstanding anything to the contrary in the
foregoing, Senior Debt shall not include: (a) Indebtedness of or amounts owed
by the Company for compensation to employees, or for goods or materials
purchased in the ordinary course of business, or for services; or (b)
Indebtedness of the Company to a Subsidiary of the Company.
"Senior Notes" means the Deferred Coupon Notes and the Notes.
In addition, the Subordinated Debentures, if and when issued, will be
effectively subordinated to all then existing and future indebtedness and
commitments of the Company's subsidiaries. As of December 31, 1996, such
subsidiaries had approximately $626 million of total liabilities including
approximately $240 million of indebtedness.
CERTAIN COVENANTS
RESTRICTED PAYMENTS
The provisions of the Subordinated Debenture Indenture relating to
Restricted Payments will be substantially the same as the provisions of the
Indenture relating to such matters, except that the Subordinated Debenture
Indenture will permit any Restricted Payment if any of the Senior Notes or
Designated Notes is outstanding and such Restricted Payment is then permitted
under the indenture for each issue of Senior Notes and Designated Notes
outstanding. For a summary of those provisions, see "Description of Notes--
Certain Covenants--Restricted Payments."
"Designated Notes" means any issue of notes originally issued in a
registered public offering or an offering pursuant to Rule 144A under the
Securities Act in an aggregate principal amount of not less than $100 million,
which notes were issued to refinance, replace or refund any of the Senior
Notes.
INCURRENCE OF INDEBTEDNESS AND ISSUANCE OF PREFERRED STOCK
The provisions of the Subordinated Debenture Indenture relating to
incurrence of Indebtedness and issuance of Preferred Stock will be
substantially the same as the provisions of the Indenture relating to such
matters, except that (i) the Subordinated Debenture Indenture will permit any
such incurrence or issuance if any of the Senior Notes or Designated Notes is
outstanding and such Restricted Payment is then permitted under the indenture
for each issue of Senior Notes and Designated Notes outstanding and (ii) the
Annualized Pro Forma EBITDA ratio test in the Subordinated Debenture Indenture
will be 8.0 instead of 7.0 as in the Indenture. For a summary of those
provisions, see "Description of Notes--Certain Covenants--Incurrence of
Indebtedness and Issuance of Preferred Stock."
76
<PAGE>
TRANSACTIONS WITH AFFILIATES
The provisions of the Subordinated Debenture Indenture relating to
transactions with Affiliates will be substantially the same as the provisions
of the Indenture relating to such matters. For a summary of those provisions,
see "Description of Notes--Certain Covenants--Transactions with Affiliates."
MERGER, CONSOLIDATION OR SALE OF ASSETS
The provisions of the Subordinated Debenture Indenture relating to merger,
consolidation or sale of all or substantially all assets will be substantially
the same as the provisions of the Indenture relating to such matters. For a
summary of those provisions, see "Description of Notes--Certain Covenants--
Merger, Consolidation or Sale of Assets."
REPORTS
The provisions of the Subordinated Debenture Indenture relating to reports
will be substantially the same as the provisions of the Indenture relating to
such matters. For a summary of those provisions, see "Description of Notes--
Certain Covenants--Reports."
ADDITIONAL AMOUNTS; OPTIONAL TAX REDEMPTION
The provisions of the Subordinated Debenture Indenture relating to
additional amounts and optional tax redemption will be substantially the same
as the provisions of the Indenture relating to such matters. For a summary of
those provisions, see "Description of Notes--Certain Covenants--Additional
Amounts; Optional Tax Redemption."
EVENTS OF DEFAULT AND REMEDIES
The provisions of the Subordinated Debenture Indenture relating to events of
default and remedies will be substantially the same as the provisions of the
Indenture relating to such matters. For a summary of those provisions, see
"Description of Notes--Events of Default and Remedies."
OTHER
The subsections "No Personal Liability of Directors, Officers, Employees and
Shareholders," "Defeasance and Discharge of the Indenture and the Notes,"
"Transfer and Exchange," "Amendment, Supplement and Waiver," "Concerning the
Trustee" and "Additional Information" in the "Description of Notes" apply to
the Subordinated Debentures, the Subordinated Debenture Indenture and the
Subordinated Debenture Trustee mutatis mutandis.
77
<PAGE>
REGISTRATION RIGHTS
The following summary of the registration rights provided in the
Registration Rights Agreements, the Old Notes and the Certificate of
Designation does not purport to be complete. It is qualified in its entirety
by reference to the terms of the registration rights set forth in the
Registration Rights Agreements, the Old Notes and the Certificate of
Designation.
Holders of New Securities are not generally entitled to any registration
rights with respect to such New Securities. Pursuant to the Registration
Rights Agreements, holders of Old Securities are entitled to certain
registration rights. Under the Registration Rights Agreements, the Company
agreed to file with the Commission a registration statement (the "Exchange
Offer Registration Statement") on the appropriate form under the Securities
Act with respect to an offer to exchange the Old Notes and Old Preferred Stock
for New Notes and New Preferred Stock, respectively, registered under the
Securities Act with terms substantially identical to those of the Old Notes
and Old Preferred Stock, respectively. Upon the effectiveness of the Exchange
Offer Registration Statement, the Company will offer to the holders of
Transfer Restricted Securities (as defined below) pursuant to the Exchange
Offer, who are able to make certain representations with respect to the Notes
or the Preferred Stock, the opportunity to exchange their Transfer Restricted
Securities for New Securities. If (i) the Company is not permitted to
consummate the Exchange Offer because the Exchange Offer is not permitted by
applicable law or Commission policy or (ii) any holder of Transfer Restricted
Securities notifies the Company within the specified time period that (A) it
is prohibited by law or Commission policy from participating in the Exchange
Offer or (B) that it may not resell the New Securities acquired by it in the
Exchange Offer to the public without delivering a prospectus and the
prospectus contained in the Exchange Offer Registration Statement is not
appropriate or available for such resales or (C) that it is a broker-dealer
and owns Old Securities acquired directly from the Company or an affiliate of
the Company, the Company will file with the Commission a shelf registration
statement (a "Shelf Registration Statement") to cover resales of the
applicable Securities by the holders thereof who satisfy certain conditions
relating to the provision of information in connection with the Shelf
Registration Statement. The Company will use its best efforts to cause the
applicable Registration Statement to be declared effective as promptly as
possible by the Commission. For purposes of the foregoing, "Transfer
Restricted Securities" means each Old Security until (i) the date on which
such Old Security has been exchanged by a person other than a broker-dealer
for an Exchange Security in the Exchange Offer, (ii) following the exchange by
a broker-dealer in the Exchange Offer of an Old Security for a New Security,
the date on which such New Security is sold to a purchaser who receives from
such broker-dealer on or prior to the date of such sale a copy of the
prospectus contained in the Exchange Offer Registration Statement, (iii) the
date on which such Old Security has been effectively registered under the
Securities Act and disposed of in accordance with the Shelf Registration
Statement, (iv) the date on which such Old Security is distributed to the
public pursuant to Rule 144 under the Act (or any similar provision then in
effect) or is saleable pursuant to Rule 144(k) under the Act or (v) the date
upon which such Old Security ceases to be outstanding.
The Registration Rights Agreements provide that (i) the Company will use its
best efforts to have the Exchange Offer Registration Statement declared
effective by the Commission on or before June 12, 1997, (ii) unless the
Exchange Offer would not be permitted by applicable law or Commission policy,
the Company will commence the Exchange Offer and use its best efforts to issue
on or before July 22, 1997, New Securities in exchange for all Old Securities
tendered prior thereto in the Exchange Offer and (iii) if obligated to file
the Shelf Registration Statement, the Company will use its best efforts to
file the Shelf Registration Statement with the Commission as promptly as
practicable after such filing obligation arises and to cause the Shelf
Registration to be declared effective by the Commission on or before July 22,
1997. If (a) the Exchange Offer Registration Statement is not declared
effective on or before June 12, 1997 or (b) the Company fails to consummate
the Exchange Offer or a Shelf Registration Statement is not declared
effective, in each case, on or before July 22, 1997 (each such event referred
to in clauses (a) and (b) above, a "Registration Default"), then the Company
will pay special interest pursuant to provisions of the Old Notes (the
"Special Interest") or special dividends pursuant to provisions in the
Certificate of Designation the "Special Dividends" and, together with the
Special Interest, the "Special Payments"), as the case may be, to each holder
of the applicable Old Securities. Special
78
<PAGE>
Interest or Special Dividends, as the case may be, will accrue from and
including (i) June 13, 1997 in the case of clause (a) above, and (ii) July 23,
1997 in the case of clause (b) above (each period after those dates being an
"Accrual Period"), at a rate per annum equal to 0.50% of the principal amount
or liquidation preference, as applicable, of the Old Securities (determined
daily). The amount of the Special Interest or Special Dividends, as
applicable, will increase by an additional 0.50% of the principal amount or
liquidation preference, as applicable, of the Old Securities with respect to
each subsequent applicable Accrual Period until all Registration Defaults have
been cured, up to a maximum amount of Special Interest or Special Dividends,
as applicable, of 1.50% per annum of the principal amount or liquidation
preference, as applicable, (determined daily). All accrued Special Interest or
Special Dividends, as applicable, will be paid by the Company on each Interest
Payment Date or Dividend Payment Date, as applicable, to the applicable Global
Security holder by wire transfer of immediately available funds or by federal
funds check and to holders of Certificated Securities by wire transfer to the
accounts specified by them or by mailing checks to their registered addresses
if no such accounts have been specified. Following the cure of all
Registration Defaults, the accrual of special interest or special dividends
will cease.
If a Shelf Registration Statement is declared effective pursuant to the
terms of the Registration Rights Agreements, and the Company fails to keep
such Registration Statement continuously effective for the period required by
the Registration Rights Agreements, then from such time as the Shelf
Registration Statement is no longer effective until the earlier of (i) the
date that the Shelf Registration Statement is again deemed effective, (ii)
February 12, 2000 or (iii) the date as of which all of the Transfer Restricted
Securities are sold pursuant to the Shelf Registration Statement, Special
Interest pursuant to provisions of the Old Notes or Special Dividends pursuant
to provisions in the Certificate of Designation, as applicable, shall accrue
at a rate per annum equal to 0.50% of the principal amount or liquidation
preference, as applicable, of the Old Securities (determined daily) (1.00%
thereof if the Shelf Registration Statement is no longer effective for 30 days
or more). Such Special Interest or Special Dividends, as the case may be,
shall be payable in cash semiannually in arrears on each February 15 and
August 15, commencing August 15, 1997, to the holders of record on the
immediately preceding February 1 and August 1, respectively, in the case of
the Old Notes and in cash or in additional shares of Preferred Stock or a
combination thereof quarterly in arrears in the case of the Old Preferred
Stock on each February 15, May 15, August 15, and November 15, commencing May
15, 1997, to the holders of record on the immediately preceding February 1,
May 1, August 1 and November 1, respectively. The Company is permitted to
suspend use of the prospectus that is part of any Shelf Registration Statement
during certain periods of time and in certain circumstances relating to
pending corporate developments and public filings with Commission and similar
events.
Holders of Old Securities will be required to make certain representations
to the Company (as described in the Registration Rights Agreements) in order
to participate in the Exchange Offer and will be required to deliver
information to be used in connection with the Shelf Registration Statement and
to provide comments on the Shelf Registration Statement within the time
periods set forth in the Registration Rights Agreements in order to have their
Old Securities included in the Shelf Registration Statement and benefit from
the provisions regarding Special Interest pursuant to provisions of the Old
Notes or Special Dividends pursuant to provisions in the Certificate of
Designation, as set forth above.
79
<PAGE>
DESCRIPTION OF CERTAIN INDEBTEDNESS
The following summarizes the principal terms of certain indebtedness of the
Company (other than the Notes). It does not purport to be complete and is
subject to, and is qualified in its entirety by reference to, all the
provisions of the indenture or agreement governing the relevant indebtedness,
copies of which are filed as exhibits to the Registration Statement of which
this Prospectus is a part.
<TABLE>
<CAPTION>
7% 7 1/4% 11 1/2% 12 3/4%
CONVERTIBLE CONVERTIBLE SERIES B SENIOR SERIES A SENIOR 10 7/8%
SUBORDINATED SUBORDINATED DEFERRED COUPON DEFERRED COUPON SENIOR DEFERRED
NOTES NOTES NOTES NOTES COUPON NOTES
----------------- ------------------ ------------------ ------------------ -------------------
<S> <C> <C> <C> <C> <C>
Net Proceeds ($)........ 267,437,000 186,065,000 582,000,000 145,125,000 119,797,000
Issue Date.............. June 12, 1996 April 20, 1995 January 30, 1996 April 20, 1995 October 14, 1993
Issue Price (1)......... 100% 100% 57.155% 53.995% 58.873%
Aggregate Principal
Amount ($)............. 275,000,000 191,750,000 1,050,000,000 277,803,500 212,000,000
Maturity Date........... June 15, 2008 April 15, 2005 February 1, 2006 April 15, 2005 October 15, 2003
Interest Rate (2)....... 7% 7 1/4% 11 1/2% 12 3/4% 10 7/8%
Interest Payment Dates.. June 15 & April 15 & February 1 and April 15 and April 15 and
December 15 from October 15 from August 1 from October 15 from October 15 from
December 15, 1996 October 15, 1995 August 11, 2001 October 15, 2000 April 15, 1999
Earliest Optional
Redemption Date (3).... June 15, 1999 April 15, 1998 February 1, 2001 April 15, 2000 October 15, 1998
Redemption Price (4).... 104.9% in 1999 to 105.08% in 1998 to 105.75% in 2001 to 103.64% in 2000 to 103.107% in 1998 to
100% in 2006 100.73% in 2004 100% in 2003 100% in 2002 100% in 2000
Conversion Price ($)
(5).................... 37.875 27.56 N/A N/A N/A
Senior/Subordinated..... Subordinated Subordinated Senior Senior Senior
</TABLE>
- --------
(1) Percent. of Aggregate Principal Amount at maturity.
(2) Percent. per annum.
(3) Earliest Optional Redemption Date is the first date when the notes are
redeemable at the Company's option.
(4) Expressed as a percentage of principal amount plus, in each case, accrued
and unpaid interest thereon to the applicable redemption date.
(5) This is the conversion price per share of the Company's common stock,
adjusted for the four-for-three stock split in August 1995 and subject to
further adjustments in certain events.
The following five paragraphs summarize the principal provisions of the
indentures governing the Deferred Coupon Notes and the Convertible Notes.
These paragraphs should be read in conjunction with the table that appears
above. Capitalized terms used in these paragraphs refer, with respect to any
series of notes, to the item specified opposite the relevant capitalized term
under the column for that series of notes. "Relevant Indenture" means the
indenture (as amended) governing a series of notes.
THE DEFERRED COUPON NOTES
The Deferred Coupon Notes were issued on their Issue Date at a discount to
their Aggregate Principal Amount equal to the Issue Price to generate the Net
Proceeds. The Deferred Coupon Notes accrete at a rate equal to the Interest
Rate, compounded semi-annually, to the Aggregate Principal Amount by the fifth
anniversary of the Issue Date. Cash interest on the Deferred Coupon Notes does
not accrue until the fifth anniversary of the Issue Date. Thereafter, the
Deferred Coupon Notes accrue interest in cash at the Interest Rate on the
principal amount of the Deferred Coupon Notes and is payable semiannually on
the Interest Payment Dates, to holders of record on the fifteenth day
immediately preceding the relevant Interest Payment Date. The Deferred Coupon
Notes mature on the Maturity Date. The Deferred Coupon Notes are redeemable,
at the option of the Company at any time, in whole or in part, on or after the
Earliest Optional Redemption Date at the redemption prices set forth in the
Relevant Indenture, plus any accrued unpaid interest to the date of
redemption. The 12 3/4% Notes and the 11 1/2% 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 Relevant Indenture) are payable.
In those
80
<PAGE>
circumstances, the Deferred Coupon Notes to be repurchased must be repurchased
at 100% of Accreted Value (as defined in the Relevant Indenture) if they are
redeemed before the Earliest Option at Redemption Date or at the principal
amount of the Deferred Coupon Notes if they redeemed after the Earliest
Optional Payment Date plus, in each case, accrued and unpaid interest. Upon a
Change of Control (as defined in the Relevant Indenture), holders of the
Deferred Coupon Notes will have the right to require the Company to repurchase
all or any part of the Deferred Coupon Notes at a repurchase price equal to
101% of the Accreted Value (as defined in the Relevant Indenture) on any
repurchase date before the fifth anniversary of the Issue Date or 101% of the
principal amount thereof plus accrued and unpaid interest to any repurchase
date on or after that fifth anniversary, if any. Subject to certain
conditions, the Company will be obligated to offer to purchase the Deferred
Coupon Notes and Other Qualified Senior Notes (as defined in the Relevant
Indenture) with the Excess Proceeds of certain Asset Sales at a redemption
price of 100% of the Accreted Value on any purchase date before the fifth
anniversary of the Issue Date or 100% of the principal amount thereof plus, in
each case, accrued and unpaid interest to any purchase date on or after that
fifth anniversary, if any. Such an offer is required to be made, first, to the
holders of the 10 7/8% Notes and, second, to all holders of the 12 3/4% Notes,
the 11 1/2% Notes and Other Qualified Notes on a pro rata basis according to
their respective accreted values or, as the case may be, their respective
principal amounts. The Relevant 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. Each Relevant Indenture contains provisions regarding events
of default, acceleration and remedies that are substantially similar to the
corresponding provisions relating to the Old Notes and the New Notes. See
"Description of Notes--Events of Default and Remedies."
Each series of Deferred Coupon 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.
THE CONVERTIBLE NOTES
Cash interest on the Convertible Notes is payable semiannually on the
Interest Payment Date. The Convertible Notes mature on the Maturity Date. The
Convertible Notes are convertible at the option of the holder thereof at any
time after 90 days following the Issue Date and prior to the Maturity Date,
unless previously redeemed, into shares of Common Stock of the Company, at the
Conversion Price, subject to further adjustment in certain events. The
Convertible Notes are redeemable, in whole or in part, at the option of the
Company, at any time on or after the Earliest Optional Redemption Date, at the
redemption prices set forth in the Relevant Indenture. Upon a Change of
Control (as defined in the Relevant Indenture) holders of the Convertible
Notes will have the right to require the Company to purchase all or any part
of the 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 Relevant Indentures contain certain restrictions with respect to, among
other things, certain Asset Sales (as defined in the Relevant Indenture),
payment of Additional Amounts (as defined in the Relevant Indenture) and
mergers and consolidations. Each Relevant Indenture contains provisions
regarding events of default, acceleration and remedies that are substantially
similar to the corresponding provisions relating to the Old Notes and the New
Notes. See "Description of Notes--Events of Default and Remedies."
Each series of Convertible Notes are unsecured obligations of the Company,
subordinated in right of payment to all existing and future Senior Debt (as
defined in the Relevant Indenture) of the Company including, without
limitation, the Senior Notes.
On July 18, 1995, the Commission declared effective the Company's shelf
registration statement (Registration No. 33-92792) relating to the resale of
the 7 1/4% Convertible Notes and the Common Stock issuable upon conversion the
7 1/4% Convertible Notes. On September 13, 1996, the Commission declared
effective the Company's shelf registration statement (Registration No. 333-
07879) relating to the resale of the 7% Convertible Notes and the Common Stock
issuable upon conversion thereof by the holders thereof.
81
<PAGE>
THE NTLIH FACILITIES
The following summary of the principal terms of the NTLIH Facilities
Agreement (as defined below) does not purport to be complete and is,
therefore, qualified in its entirety by reference to the NTLIH Facilities
Agreement, a copy of which is an exhibit to the Registration Statement of
which this Prospectus is a part.
General. On March 28, 1996, NTLIH entered into an agreement (the "NTLIH
Facilities Agreement") with Chase Investment Bank Limited as arranger of a
syndicate of lenders (the "Lenders") and The Chase Manhattan Bank, N.A., a
predecessor of The Chase Manhattan Bank (the "Facility Agent"), pursuant to
which the Lenders agreed, subject to the terms thereof, to lend NTLIH up to
(Pounds)165 million aggregate principal amount. The NTLIH Facilities are
comprised of a term loan facility of (Pounds)140 million (the "Term Loan
Facility" and any loans thereunder, the "Term Loans") and a revolving credit
facility of up to (Pounds)25 million (the "Revolving Credit Facility" and,
together with the Term Loan Facility, the "NTLIH Facilities"). The Term Loans
were made available to finance the acquisition of NTL Group, acquisition costs
and expenses; the Revolving Credit Facility may be used to finance capital
expenditure and working capital requirements of the NTLIH group. Up to
(Pounds)2 million is available under the Revolving Credit Facility by way of
standby letters of credit to guarantee overdraft and other working capital
facilities made available by any clearing bank to NTLIH. 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 NTLIH group).
Repayment and Interest. Any amounts outstanding under the Revolving Credit
Facility on December 31, 1997 (the end of the availability period) will be
converted to Term Loans.
The amount outstanding under the Term Loan Facility at December 31, 1997
must be repaid at the rate of a quarter of: (i) 5% of such amount on each
quarterly payment date during 1998; (ii) 20% of such amount on each quarterly
payment date during 1999; (iii) 22% of such amount on each quarterly payment
date during 2000; (iv) 25% of such amount on each quarterly payment date
during 2001; and (v) 28% of such amount on each quarterly payment date during
2002.
Loans under the NTLIH 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 NTLIH Facilities require that amounts outstanding thereunder be prepaid
and the commitment of its Lenders thereunder be reduced in certain
circumstances. In particular, the NTLIH Facilities require that 50% of any
Excess Cash Flow (as defined in the NTLIH Facilities Agreement) of NTLIH and
its subsidiaries shall be applied to prepay amounts outstanding under the Term
Loan Facility. NTLIH may prepay the Term Loan Facility at 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 NTLIH in respect
of loans under the NTLIH Facilities will be secured by, among other things,
guarantees given by NTL Group Limited and certain of its subsidiaries and
first ranking fixed and floating charges over present and future assets
(subject to certain exceptions) of NTLIH, NTL Group Limited and certain of its
subsidiaries. The NTLIH Facilities do not, therefore, provide for the Lenders
to have recourse to the assets of the Company other than the assets of NTLIH
and its subsidiaries including without limitation, an unsecured right of NTLIH
against the Company under the undertaking relating to the Further Payment
referred to above under "--Repayment and Interest."
82
<PAGE>
Covenants. The NTLIH Facilities Agreement contains various financial and
other covenants, including covenants with respect to NTLIH and certain of its
subsidiaries relating to maximum Total Debt to Operating Cash Flow (as defined
in the NTLIH Facilities Agreement), fixed charge coverage, net worth and pro-
forma debt service ratios. The NTLIH Facilities Agreement also includes
covenants which restrict the ability of NTLIH 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 and 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 NTLIH's group to be subordinated on
the terms of subordination agreements to the claims of the Lenders. NTLIH's
ability to borrow under the Revolving Credit Facility 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 NTLIH Facilities
becoming immediately due and payable.
Conditions Precedent. NTLIH'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, and no event of
default or potential event of default by certain members of NTLIH's group.
Events of Default. The NTLIH Facilities Agreement contains 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 NTLIH and certain of its subsidiaries, a change of control of NTLIH,
termination of the BBC site sharing agreements, licenses and certain material
commercial contracts, the occurrence of a material adverse change in the
business, assets, financial or trading position of the NTLIH or failure by the
Company to comply with its undertakings to the Lenders and NTLIH. The
occurrence of any event of default could result in all amounts outstanding
under the NTLIH Facilities becoming immediately due and payable.
THE POTENTIAL CREDIT FACILITIES
The Company has recently resumed discussions with commercial banks regarding
the arrangement of certain potential credit facilities (the "Potential Credit
Facilities") to provide up to an aggregate of approximately (Pounds)500
million (approximately $782 million) additional credit for the working capital
and construction needs of the existing business of the Company and its
subsidiaries. The Company is also discussing with the same commercial banks
the arrangement of additional credit to finance capital expenditure which may
be incurred if the Company secures contracts to transmit DTT. The arrangement
of the Potential 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 Potential 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 banks and (v) nothing occurring or arising which might adversely affect
the banks' ability to syndicate the Potential Credit Facilities. The Company
can give no assurance that any such conditions will be satisfied or that the
Potential Credit Facilities will be entered into on acceptable commercial
terms or at all. See "Risk Factors--Potential Adverse Consequences of
Leverage," and "Risk Factors--Need for Additional Financing."
The Company expects that the Potential 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 Potential Credit Facilities has occurred and is continuing
and restricting the payments of such dividends to a portion of excess cash
flow. Indebtedness under each of the Potential 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.
83
<PAGE>
DESCRIPTION OF CAPITAL STOCK
The following summary description of the capital stock of the Company (other
than the Preferred Stock) does not purport to be complete. It is qualified in
its entirety by reference to: (i) the Company's Restated Certificate of
Incorporation, as amended, (the "Charter"); (ii) to the Company's By-laws and
the Rights Agreement (as defined); and (iii) the Company's Certificate of
Designations in respect of the Convertible Preferred Stock dated October 7,
1996. Each of the foregoing may be obtained from the Company.
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 March 31, 1997 there were approximately 32,097,000 shares of Common
Stock outstanding. As of March 31, 1997 approximately 6,958,000 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 6,817,000 additional shares of Common Stock were reserved
for issuance upon exercise of options and approximately 1,010,000 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 the Convertible Preferred Stock issued by the Company on October
7, 1996 in connection with the Newport Acquisition.
As of March 31, 1997, 2,000 shares of Convertible Preferred Stock have been
authorized for issuance, 780 of which were issued in connection with the
Company's purchase of all the interests that it did not already own in
CableTel Newport. See "--The Convertible 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 "NTLI." 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 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.
84
<PAGE>
THE CONVERTIBLE 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 "Convertible 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 Convertible Preferred Stock are set forth in a
Certificate of Designations of Preferred Stock dated October 7, 1996. Each
share of the Convertible Preferred Stock has a stated value of $100,000 (the
"Stated Value"), subject to certain exceptions.
Voting Rights. The holders of the Convertible 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 Convertible 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 Convertible Preferred Stock or (ii)
reclassify the outstanding shares of the Convertible 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 Convertible Preferred Stock
as to dividend rights, rights of redemption or rights on liquidation.
Dividend Rights. The holders of the Convertible 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 Convertible 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 Convertible 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
Convertible 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 Convertible Preferred
Stock. If the Company elects to make 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 Convertible 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 Convertible Preferred Stock and any other class or
series of the Company's capital stock with ranks on a parity basis with the
Convertible Preferred Stock (collectively, "Parity Stock"). In addition,
subject to certain exceptions specified in the Certificate of Designations, as
long as any shares of Convertible 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
Convertible Preferred Stock and each other share of Parity Stock.
The Company's Redemption Rights. The Company has the right, exercisable at
any time, to redeem all or some of the Convertible 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
85
<PAGE>
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 Convertible Preferred Stock has the right,
prior to 5 days before a redemption date, to convert shares of the Convertible
Preferred Stock into such number of shares of Common Stock as is equal to the
aggregate Stated Value of the shares of Convertible Preferred Stock
surrendered for conversion divided by the greater of (i) $40.00 (as adjusted
pursuant to the antidilution provisions of the Convertible 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 Convertible 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 Convertible 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 Convertible 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 Convertible Preferred
Stock in cash equal to the amount equal to (i) Stated Value per share of the
Convertible 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 Convertible 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 Convertible Preferred Stock and the liquidation preference payable
to all other parity preferred stock, then the holders of Convertible 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 Convertible 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 Convertible 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 Convertible Preferred
Stock) of the Company or its successor by merger or consolidation which is
issuable to each holder of Convertible 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 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
86
<PAGE>
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 Convertible Preferred Stock prior to the occurrence of such Non-
Change Reorganization and on a basis such that the holders of Convertible
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
87
<PAGE>
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 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 of 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 October 13, 1993 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
October 13, 2003 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.
88
<PAGE>
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.
89
<PAGE>
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.
90
<PAGE>
CERTAIN FEDERAL INCOME TAX CONSIDERATIONS
The following is a discussion of the material U.S. federal income tax
consequences associated with (i) the exchange of the Old Notes and Old
Preferred Stock for the New Notes and the New Preferred Stock, respectively,
and (ii) the purchase, ownership and disposition of New Preferred Stock and
Subordinated Debentures to initial holders of New Preferred Stock. In respect
of the foregoing clause (ii), this summary only addresses the tax consequences
to a person that acquires New Preferred Stock in the Exchange Offer and that
is (i) an individual citizen or resident of the United States, (ii) a
corporation or partnership organized in or under the laws of the United States
or any state thereof or the District of Columbia, (iii) an estate the income
of which is subject to United States federal income tax regardless of source
or (iv) a trust whose administration is subject to the primary supervision of
a United States court and which has one or more United States fiduciaries who
have the authority to control all substantial decisions of the trust. This
summary does not address all tax consequences that may be applicable to a
holder of New Preferred Stock or Subordinated Debentures, nor does it address
the tax consequences to (a) persons that may be subject to special treatment
under United States federal income tax law, such as banks, insurance
companies, thrift institutions, regulated investment companies, real estate
investment trusts, tax-exempt organizations and dealers in securities or
currencies, (b) persons that will hold New Preferred Stock or Subordinated
Debentures as part of a position in a "straddle" or as part of a "hedging,"
"conversion" or other integrated investment transaction for federal income tax
purposes or (c) persons that do not hold New Preferred Stock or Subordinated
Debentures as capital assets.
This summary is based upon the Internal Revenue Code of 1986, as amended
(the "Code"), Treasury regulations, Internal Revenue Service ("IRS") rulings
and pronouncements and judicial decisions as of the date hereof, all of which
are subject to change at any time. Such changes may be applied retroactively
in a manner that could cause the tax consequences to vary substantially from
the consequences described below, possibly adversely affecting a beneficial
owner of New Preferred Stock or Subordinated Debentures. The authorities on
which this summary is based are subject to various interpretations, and it is
therefore possible that the federal income tax treatment of the purchase,
ownership and disposition of New Preferred Stock or Subordinated Debentures
may differ from the treatment described below. No rulings have been or will be
sought from the IRS regarding any matter discussed below.
EACH HOLDER SHOULD CONSULT HIS OR HER TAX ADVISOR TO DETERMINE THE FEDERAL,
STATE, LOCAL AND ANY OTHER TAX CONSEQUENCES TO SUCH HOLDER OF THE EXCHANGE OF
NEW SECURITIES FOR OLD SECURITIES PURSUANT TO THE EXCHANGE OFFER AND THE
PURCHASE, OWNERSHIP AND DISPOSITION OF NOTES, PREFERRED STOCK OR SUBORDINATED
DEBENTURES.
EXCHANGE OF OLD SECURITIES FOR NEW SECURITIES
There should be no federal income tax consequences to Holders who exchange
Old Notes and Old Preferred Stock for New Notes and New Preferred Stock,
respectively, pursuant to the Exchange Offer, and any such Holder should have
the same tax basis and holding period in the New Notes or New Preferred Stock,
as the case may be, as such Holder had in the Old Notes or Old Preferred
Stock, as the case may be, immediately before such exchange.
CLASSIFICATION OF PREFERRED STOCK
Although the characterization of an instrument as debt or equity involves a
facts and circumstances determination that cannot be predicted with certainty,
the Preferred Stock should be treated as stock for federal income tax
purposes. Accordingly, the Company intends to treat the Preferred Stock as
stock for federal income tax purposes, and the remainder of this discussion
assumes that such treatment will be respected.
91
<PAGE>
DISTRIBUTION ON PREFERRED STOCK
Distributions on the Preferred Stock, whether paid in cash or in additional
shares of Preferred Stock (the "Dividend Shares") will be taxable as ordinary
dividend income to the extent the cash amount or fair market value of the
Dividend Shares on the date of distribution does not exceed the Company's
current or accumulated earnings and profits (as determined for federal income
tax purposes). To the extent that the amount of a distribution on the
Preferred Stock exceeds the Company's current or accumulated earnings and
profits (as determined for federal income tax purposes), the distribution will
be treated as a return of capital, thus reducing the holder's tax basis in
such Preferred Stock. The amount of any such excess distribution that is
greater than the holder's adjusted tax basis in the Preferred Stock will be
taxed as capital gain and will be long-term capital gain if the holder's
holding period for such Preferred Stock exceeds one year. There can be no
assurance that the Company will have sufficient earnings and profits (as
determined for federal income tax purposes) to cause distributions on the
Preferred Stock in 1997 or thereafter to be treated as dividends for federal
income tax purposes. Current projections made by the Company, which cannot be
relied upon with certainty, indicate that the Company will not have sufficient
earnings and profits for distributions on the Preferred Stock to be treated as
dividends for federal income tax purposes. For purposes of the remainder of
this discussion, the term "dividend" refers to a distribution paid out of
allocable earnings and profits, unless the context indicates otherwise.
A stockholder's initial tax basis in any Dividend Shares distributed by the
Company will be equal to the fair market value of such Dividend Shares on
their date of distribution. A stockholder's holding period for such Dividend
Shares will not include such stockholder's holding period for the shares of
Preferred Stock with respect to which the Dividend Shares were distributed.
Dividends received by corporate holders will be eligible for the 70%
dividends-received deduction under Section 243 of the Code, subject to
limitations generally applicable to the dividends-received deduction,
including those contained in Sections 246 and 246A of the Code and the
corporate alternative minimum tax. The 70% dividends-received deduction may be
reduced if a holder's shares of Preferred Stock are debt-financed. Under
Section 246(c) of the Code, the 70% dividends-received deduction will not be
available with respect to dividends on stock that is held for 45 days or less
(90 days in the case of a dividend on preferred stock attributable to a period
or periods aggregating more than 366 days). The length of time that a holder
is deemed to have held stock for these purposes is reduced for periods during
which the holder's risk of loss with respect to the stock is diminished by
reason of the existence of certain options, contracts to sell, short sales or
other similar transactions. Section 246(c) also denies the 70% dividends-
received deduction to the extent that a corporate holder is under an
obligation with respect to substantially similar or related property to make
payments corresponding to the dividend received.
Under Section 1059 of the Code, the tax basis of Preferred Stock that has
been held by a corporate shareholder for two years or less (ending on the
earlier of the date on which the Company declares, announces or agrees to the
payment of an actual or constructive dividend) is reduced (but not below zero)
by the non-taxed portion of an "extraordinary dividend" for which a dividends-
received deduction is allowed. To the extent a corporate holder's tax basis
would have been reduced below zero but for the foregoing limitation, such
holder must increase the amount of gain recognized on the ultimate sale or
exchange of such Preferred Stock. Generally, an "extraordinary dividend" is a
dividend that (i) equals or exceeds 5% of the holder's adjusted basis in the
Preferred Stock (treating all dividends having ex-dividend dates within an 85-
day period as a single dividend) or (ii) exceeds 20% of the holder's adjusted
basis in the Preferred Stock (treating all dividends having ex-dividend dates
within a 365-day period as a single dividend). If an election is made by the
holder, under certain circumstances the fair market value of the Preferred
Stock as of the day before the ex-dividend date may be substituted for the
holder's basis in applying these tests.
Special rules exist with respect to extraordinary dividends for "qualified
preferred dividends," which are any fixed dividends payable with respect to
any share of stock which (i) provides for fixed preferred dividends payable
not less frequently than annually and (ii) is not in arrears as to dividends
at the time the holder acquires such stock. A qualified preferred dividend
does not include any dividend payable with respect to any share if the
92
<PAGE>
actual rate of return of such stock for the period the stock has been held by
the holder receiving the dividend exceeds 15%. Corporate stockholders are
urged to consult their tax advisors with respect to the possible application
of Section 1059 of the Code to their ownership and disposition of Preferred
Stock.
PREFERRED STOCK DISCOUNT
The Preferred Stock is subject to mandatory redemption on February 15, 2009
(the "Mandatory Redemption"). In addition, subject to certain restrictions,
the Preferred Stock is redeemable at any time on or after February 15, 2002 at
the option of the Company at specified redemption prices (the "Optional
Redemption"). See "Description of Preferred Stock and Subordinated
Debentures--Optional Redemption." Pursuant to Section 305(c) of the Code,
holders of Preferred Stock may be required to treat a portion of the
difference between the Preferred Stock's issue price and its redemption price
as constructive distributions of property includable in income on a periodic
basis. For purposes of determining whether such constructive distribution
treatment applies, the Mandatory Redemption and the Optional Redemption are
treated separately. Constructive distribution treatment is required if either
(or both) of these tests is satisfied.
Section 305(c) of the Code provides that the entire amount of a redemption
premium with respect to preferred stock that is subject to mandatory
redemption is treated as being distributed to the holders of such preferred
stock on an economic accrual basis. Preferred stock generally is considered to
have redemption premium for this purpose if the price at which it must be
redeemed (the "Redemption Price") exceeds its issue price (its fair market
value on the date of its issuance) by more than a de minimis amount. For this
purpose, such excess (the "Preferred Stock Discount") will be treated as zero
if it is less than 1/4 of 1% of the Redemption Price multiplied by the number
of complete years from the date of issuance of the stock until the date the
stock must be redeemed. Preferred Stock Discount is taxable as a constructive
distribution to the holder (treated as a dividend to the extent of the
Company's current and accumulated earnings and profits and otherwise subject
to the treatment described above for distributions) over the term of the
preferred stock using a constant interest rate method similar to that
described below for accruing original issue discount ("OID"). See "--Original
Issue Discount."
Since the issue price of the Preferred Stock (including any Dividend Shares)
will be equal to its fair market value on the date of its issuance, it is
possible, depending on the Preferred Stock's value at that time, that the
Preferred Stock will be issued with a redemption premium in excess of the de
minimis safe harbor. In such event, as noted above, holders of Preferred Stock
(including any Dividend Shares) would be required to treat such premium as a
constructive distribution (subject to possible inclusion in income as
described above) in advance of receiving cash attributable to such income.
Pursuant to Section 305(c) of the Code and the regulations thereunder,
Preferred Stock Discount will arise due to the Optional Redemption feature
only if, based on all of the facts and circumstances as of the date the
Preferred Stock is issued, redemption pursuant to the Optional Redemption were
more likely than not to occur. Even if redemption were more likely than not to
occur, however, constructive distribution treatment would not result if this
redemption premium were solely in the nature of a penalty for premature
redemption. For this purpose, a penalty for premature redemption is a premium
paid as a result of the changes in economic or market conditions over which
neither the issuer nor the holder has control, such as changes in prevailing
dividend rates. The regulations provide a safe harbor pursuant to which
constructive distribution treatment will not result from an issuer call right
if the issuer and the holder are unrelated, there are no arrangements that
effectively require the issuer to redeem the stock and exercise of the option
to redeem would not reduce the yield of the stock. The Company does not
believe that the Optional Redemption would be treated as more likely than not
to be exercised under these rules.
Dividend Shares received by holders of Preferred Stock may bear Preferred
Stock Discount depending upon the issue price of such shares (i.e., the fair
market value of the Dividend Shares on the date of their issuance). If shares
of Preferred Stock (including Dividend Shares) bear Preferred Stock Discount,
such shares generally will have different tax characteristics from other
shares of Preferred Stock and might trade separately, which might adversely
affect the liquidity of such shares.
93
<PAGE>
CLASSIFICATION OF SUBORDINATED DEBENTURES
Although the characterization of an instrument as debt or equity involves a
facts and circumstances determination that cannot be predicted with certainty,
the Subordinated Debentures should be treated as debt for federal income tax
purposes. Accordingly, the Company intends to treat the Subordinated
Debentures as debt for federal income tax purposes, and the remainder of this
discussion assumes such treatment will be respected.
REDEMPTION AND EXCHANGE OF PREFERRED STOCK
A redemption of shares of Preferred Stock for cash or in exchange for
Subordinated Debentures will be a taxable event.
A redemption of shares of Preferred Stock for cash generally will be treated
as a sale or exchange if the holder does not own, actually or constructively
within the meaning of Section 318 of the Code, any stock of the Company other
than the redeemed Preferred Stock. If a holder does own, actually or
constructively, such other stock (including Preferred Stock not redeemed), a
redemption of Preferred Stock may be treated as a dividend to the extent of
the Company's current or accumulated earnings and profits (as determined for
federal income tax purposes). Such dividend treatment would not apply if the
redemption were "not essentially equivalent to a dividend" with respect to the
holder under Section 302(b)(1) of the Code. A distribution to a holder will be
"not essentially equivalent to a dividend" if it results in a "meaningful
reduction" in the holder's stock interest in the Company. For this purpose, a
redemption of Preferred Stock that results in a reduction in the proportionate
interest in the Company (taking into account any ownership of Common Stock and
any stock constructively owned) of a holder whose relative stock interest in
the Company is minimal and who exercises no control over corporate affairs
should be regarded as a meaningful reduction in the holder's stock interest in
the Company.
If the redemption of the Preferred Stock for cash is not treated as a
distribution taxable as a dividend, the redemption will result in capital gain
or loss equal to the difference between the amount of cash received and the
holder's adjusted tax basis in the Preferred Stock redeemed.
A redemption of Preferred Stock in exchange for Subordinated Debentures will
be subject to the same general rules as a redemption for cash, except that the
holder would have capital gain or loss equal to the difference between the
issue price of the Subordinated Debentures received and the holder's adjusted
tax basis in the Preferred Stock redeemed. If neither the Preferred Stock nor
the Subordinated Debentures are regularly traded on an established securities
market, gain realized on the redemption of Preferred Stock may qualify for
installment sale treatment. The issue price of the Subordinated Debentures
would be determined in the manner described below for purposes of computing
original issue discount (if any) on the Subordinated Debentures. See the
discussion below under "--Original Issue Discount."
If a redemption of Preferred Stock is treated as a distribution that is
taxable as a dividend, the amount of the distribution will be measured by the
amount of cash or the issue price of the Subordinated Debentures, as the case
may be, received by the holder. The holder's adjusted tax basis in the
redeemed Preferred Stock will be transferred to any remaining stock holdings
in the Company. If the holder does not retain any ownership in the Company,
the holder may lose such basis entirely. Under the "extraordinary dividend"
provision of Section 1059 of the Code, a corporate holder may, under certain
circumstances, be required to reduce its basis in its remaining shares of
stock of the Company (and possibly recognize gain upon a disposition of such
shares) to the extent the holder claims the 70% dividends-received deduction
with respect to the dividend.
Depending upon a holder's particular circumstances, the tax consequences of
holding Subordinated Debentures may be less advantageous than the tax
consequences of holding Preferred Stock because, for example, payments of
interest on the Subordinated Debentures will not be eligible for any
dividends-received deduction that may be available to corporate holders
assuming sufficient earnings and profits.
94
<PAGE>
ORIGINAL ISSUE DISCOUNT
In the event that Preferred Stock is exchanged for Subordinated Debentures,
and the stated redemption price at maturity of such Subordinated Debentures
exceeds their issue price by more than a de minimis amount, the Subordinated
Debentures will be treated as having OID equal to the entire amount of such
excess. If the Subordinated Debentures are deemed to be traded on an
established securities market on or at any time during the 60-day period
ending 30 days after their issue date, the issue price of the Subordinated
Debentures will be their fair market value as determined as of their issue
date. Subject to certain limitations described in regulations, the
Subordinated Debentures will be deemed to be traded on an established
securities market if, among other things, price quotations are readily
available from dealers, brokers or traders. Similarly, if the Preferred Stock,
but not the Subordinated Debentures issued and exchanged therefor, is deemed
to be traded on an established securities market at the time of the exchange,
then the issue price of each Subordinated Debenture should be the fair market
value of the Preferred Stock exchanged therefor at the time of the exchange.
The Preferred Stock generally will be deemed to be traded on an established
securities market, if it appears on a system of general circulation that
provides a reasonable basis to determine fair market value based either on
recent price quotations or recent sales transactions. In the event that
neither the Preferred Stock nor the Subordinated Debentures are deemed to be
traded on an established securities market, the issue price of the
Subordinated Debentures will be their stated principal amount unless (i) the
Subordinated Debentures do not bear "adequate stated interest" within the
meaning of Section 1274 of the Code, in which case the issue price will be
their "imputed principal amount," which generally is the sum of the present
values of all payments due under the Subordinated Debentures, discounted from
the date of payment to their issue date at the appropriate "applicable federal
rate," or (ii) the Subordinated Debentures are issued in a so-called
"potentially abusive situation" as defined in regulations under Section 1274
of the Code (including a situation involving a recent sales transaction), in
which case the issue price of such Subordinated Debentures generally will be
the fair market value of the Preferred Stock surrendered in exchange therefor.
The stated redemption price at maturity of the Subordinated Debentures will
equal the total of all payments required to be made thereon, other than
payments of qualified stated interest. Qualified stated interest generally is
stated interest that is unconditionally payable in cash or other property
(other than debt instruments of the issuer) at least annually at a single
fixed rate. Therefore, Subordinated Debentures that are issued when the
Company has the option to pay interest thereon for certain periods in
additional Subordinated Debentures will be treated as having been issued
without any qualified stated interest; in that event, the sum of all interest
payable pursuant to the stated interest rate on such Subordinated Debentures
over the entire term would be treated as OID and included in income under a
constant yield method by the holder, and the holder would not treat the
receipt of stated interest on the Subordinated Debentures as interest for
federal income tax purposes.
An additional Subordinated Debenture (a "Secondary Debenture") issued in
payment of interest with respect to an initially issued Subordinated Debenture
(an "Initial Debenture") will not be considered as a payment made on the
Initial Debenture and will be aggregated with the Initial Debenture for
purposes of computing and accruing OID on the Initial Debenture. As between
the Initial Debenture and the Secondary Debenture, the adjusted issue price of
the Initial Debenture would be allocated between the Initial Debenture and the
Secondary Debenture in proportion to their respective principal amounts. That
is, upon the issuance of a Secondary Debenture with respect to an Initial
Debenture, the Initial Debenture and the Secondary Debenture derived from the
Initial Debenture are treated as initially having the same adjusted issue
price and inherent amount of OID per dollar of principal amount. The Initial
Debenture and the Secondary Debenture derived therefrom would be treated as
having the same yield to maturity. Similar treatment would be applied when
additional Subordinated Debentures are issued on Secondary Debentures.
In the event the Subordinated Debentures are not issued with OID because
they are issued at a time when the Company does not have the option to pay
interest thereon in additional Subordinated Debentures and the redemption
price of the Subordinated Debentures does not exceed their issue price by more
than a de minimis amount, stated interest would be included in income by a
holder in accordance with such holder's usual method of accounting.
95
<PAGE>
BOND PREMIUM ON SUBORDINATED DEBENTURES
If Preferred Stock is exchanged for Subordinated Debentures and the issue
price of such Subordinated Debentures exceeds the amount payable at the
maturity date (or earlier call date, if appropriate) of the Subordinated
Debentures, such excess will be deductible by the holder of the Subordinated
Debentures as amortizable bond premium over the term of the Subordinated
Debentures (taking into account earlier call dates, as appropriate), under a
yield-to-maturity formula, only if an election by the holder under Section 171
of the Code is made or is already in effect. This election is revocable only
with the consent of the IRS and applies to all obligations owned or
subsequently acquired by the holder. To the extent the excess is deducted as
amortizable bond premium, the holder's adjusted tax basis in the Subordinated
Debentures will be reduced. Except as may otherwise be provided in future
regulations, under the Code the amortizable bond premium will be treated as an
offset to interest income on the Subordinated Debentures rather than as a
separate deduction item.
REDEMPTION OR SALE OF SUBORDINATED DEBENTURES
Generally, any redemption or sale of Subordinated Debentures by a holder
would result in taxable gain or loss equal to the difference between the
amount of cash received (except to the extent that cash received is
attributable to accrued, but previously untaxed, interest) and the holder's
tax basis in the Subordinated Debentures. The tax basis of a holder who
receives a Subordinated Debenture in exchange for Preferred Stock generally
will be equal to the issue price of the Subordinated Debenture on the date the
Subordinated Debenture is issued, plus any OID on the Subordinated Debenture
included in the holder's income prior to sale or redemption of the
Subordinated Debenture, reduced by any amortizable bond premium applied
against the holder's income prior to sale or redemption of the Subordinated
Debenture and by payments other than payments of "qualified stated interest."
Such gain or loss would be long-term capital gain or loss if the holder's
holding period exceeded one year.
EXCHANGE OR REGISTRATION OF THE PREFERRED STOCK OR SUBORDINATED DEBENTURES
Following the closing of the Offering, the Company agreed to effect an offer
to exchange the Old Preferred Stock for New Preferred Stock that would be
substantially identical in all material respects to the Old Preferred Stock,
except that the New Preferred Stock would be registered and therefore would
not be subject to transfer restriction. Alternatively, the Company may file a
Shelf Registration Statement with respect to the Preferred Stock which, if
effective, would permit its resale. If the Preferred Stock is exchanged for
Subordinated Debentures, the foregoing provisions will be applicable to
Subordinated Debentures.
HIGH YIELD DISCOUNT OBLIGATIONS
Sections 163(e) and 163(i) of the Code provide rules that affect the tax
treatment of certain high-yield discount obligations ("HYDOs"). The
Subordinated Debentures may constitute HYDOs if their yield-to-maturity
exceeds by more than five percentage points the applicable federal rate (the
"AFR") for instruments with a similar maturity in effect for the calendar
month in which the Subordinated Debentures are issued. If the Subordinated
Debentures are HYDOs, the Company may not deduct any OID that accrues with
respect to the Subordinated Debentures until it pays such amount in cash.
In addition, to the extent that the Subordinated Debentures' yield-to-
maturity exceeds the relevant AFR by more than six percentage points, then (i)
a portion of such interest corresponding to the yield in excess of six
percentage points above the AFR will not be deductible by the Company at any
time and (ii) a corporate holder may be entitled to treat the portion of the
interest that is not deductible by the Company as a dividend, which may then
qualify for the dividends-received deduction provided by Section 243 of the
Code (subject to applicable limitations). In such event, corporate holders of
Subordinated Debentures should consult with their tax advisors as to the
applicability of the dividends-received deduction. It is not possible to
determine at the present time whether a Subordinated Debenture will be treated
as a HYDO.
96
<PAGE>
BACKUP WITHHOLDING
In general, a noncorporate holder of Preferred Stock or Subordinated
Debentures will be subject to backup withholding at the rate of 31% with
respect to reportable payments of dividends, interest or OID accrued with
respect to, or the proceeds of a sale, exchange or redemption of, Preferred
Stock or Subordinated Debentures, as the case may be, if the holder fails to
provide a taxpayer identification number or certification of exempt status or
fails to report in full dividend and interest income and receives certain
notices to that effect from the IRS. Amounts paid as backup withholding do not
constitute an additional tax and may be credited against the holder's federal
income tax liabilities.
SUBSEQUENT PURCHASERS
The foregoing does not discuss special rules which may affect the treatment
of subsequent purchasers of Preferred Stock or Subordinated Debentures. For
example, the market discount provisions of the Code may require a subsequent
purchaser of a Subordinated Debenture at a market discount to treat all or a
portion of any gain recognized upon sale or other disposition of the
Subordinated Debenture as ordinary income and to defer a portion of any
interest expense that would otherwise be deductible on any indebtedness
incurred or maintained to purchase or carry such Subordinated Debenture until
the holder disposes of the Subordinated Debenture in a taxable transaction.
POSSIBLE TAX LAW CHANGES
Holders should be aware that in recent years legislation has been proposed
in Congress and by the President which, if enacted in its proposed form, would
affect the above summary of the federal income tax consequences. For example,
on February 6, 1997, President Clinton's budget proposal (the "Proposal") was
released. The Proposal includes, among other things, a provision that would
reduce the corporate dividends-received deduction from 70% to 50% when the
corporate holder owned less than 20% (by vote and value) of the stock of the
issuer. In addition, the Proposal would deny a corporate holder a dividends-
received deduction if certain holding period requirements are not satisfied
over a 46-day (or a 91-day period for certain dividends on preferred stock)
period immediately before or immediately after the holder becomes entitled to
receive the dividend. The Proposal would also amend Section 1059 of the Code
to require immediate gain recognition whenever, and to the extent that, the
non-taxed portion of an extraordinary dividend exceeds the holder's tax basis
in the stock with respect to which the extraordinary dividend is received. The
Proposal would further amend Section 1059 of the Code to provide that a
corporate shareholder will recognize gain immediately with respect to any
redemption transaction treated in whole or in part as a dividend (under the
rules described above under "--Redemption and Exchange of Preferred Stock")
when the non-taxed portion of the dividend exceeds the basis of the stock
surrendered, if the redemption transaction is treated as a dividend due to
options of the Company being counted as stock ownership under the constructive
ownership rules of Section 318 of the Code. It is impossible to predict
whether the Proposal or other legislation will be enacted and in what form.
Holders should consult their tax advisors concerning the Proposal and other
possible changes to the tax laws.
97
<PAGE>
PLAN OF DISTRIBUTION
Each broker-dealer who holds Old Securities for its own account as a result
of market-making activities or other trading activities and who receives New
Securities in exchange for Old Securities pursuant to the Exchange Offer may
be a statutory underwriter and must acknowledge that it will deliver a
prospectus in connection with any resale of such New Securities. This
Prospectus, as it may be amended or supplemented from time to time, may be
used by a broker-dealer in connection with resales of New Securities received
in exchange for Old Securities where such Old Securities were acquired as a
result of market-making activities or other trading activities. The Company
acknowledges and each holder, other than a broker-dealer, must acknowledge
that it is not engaged in, does not intend to engage in, and has no
arrangement or understanding with any person to participate in a distribution
of New Securities. The Company has agreed that starting on the Expiration Date
and ending on the close of business on the 180th day following the Expiration
Date, it will make this Prospectus, as amended or supplemented, available to
any broker-dealer for use in connection with any such resale.
The Company will not receive any proceeds from any sale of New Securities by
broker-dealers. New Securities received by broker-dealers for their own
account pursuant to the Exchange Offer may be sold from time to time in one or
more transactions in the over-the-counter market, in negotiated transactions,
through the writing of options on the New Securities or a combination of such
methods of resale, at market prices prevailing at the time of resale, at
prices related to such prevailing market prices or negotiated prices. Any such
resale may be made directly to purchasers or to or through brokers or dealers
who may receive compensation in the form of commissions or concessions from
any such broker-dealer and/or the purchasers of any such New Securities. Any
broker-dealer that resells New Securities that were received by it for its own
account pursuant to the Exchange Offer and any broker or dealer that
participates in a distribution of such New Securities may be deemed to be an
"underwriter" within the meaning of the Securities Act and any profit on any
such resale of New Securities and any commissions or concessions received by
any such persons may be deemed to be underwriting compensation under the
Securities Act. The Letters of Transmittal state that by acknowledging that it
will deliver and by delivering a prospectus, a broker-dealer will not be
deemed to admit that it is an "underwriter" within the meaning of the
Securities Act.
For a period of 180 days after the Expiration Date, the Company will
promptly send additional copies of this Prospectus and any amendment or
supplement to this Prospectus to any broker-dealer that requests such
documents in the Letter of Transmittal.
The Company has agreed to pay all expenses incident to the Exchange Offer
(including the expenses of one counsel for the holders of the Notes and one
counsel for the holders of the Preferred Stock) other than commissions or
concessions of any brokers or dealers and will indemnify the holders of the
Securities (including any broker-dealers) against certain liabilities,
including liabilities under the Securities Act.
98
<PAGE>
BOOK-ENTRY; DELIVERY AND FORM
DEPOSITORY PROCEDURES
DTC has advised the Company that DTC is a limited-purpose trust company
created to hold securities for its participating organizations (collectively,
the "Participants") and to facilitate the clearance and settlement of
transactions in those securities between the Participants through electronic
book-entry changes in accounts of the Participants. The Participants include
securities brokers and dealers (including the Initial Purchaser), banks, trust
companies, clearing corporations and certain other organizations. Access to
DTC's system is also available to other entities such as banks, brokers,
dealers and trust companies that clear through or maintain a custodial
relationship with a Participant, either directly or indirectly (collectively,
the "Indirect Participants"). Persons who are not Participants may
beneficially own securities held by or on behalf of DTC only through the
Participants or the Indirect Participants. The ownership interest and transfer
of ownership interest of each actual purchaser of each security held by or on
behalf of DTC are recorded on the records of the Participants and the Indirect
Participants.
DTC has also advised the Company that pursuant to procedures established by
it, (i) upon deposit of the Global Securities, DTC will credit the accounts of
Participants designated by the Initial Purchaser with portions of the
principal amount of the Global Securities representing the Notes or the number
of shares of Preferred Stock and (ii) ownership of such interests in the
Global Securities will be shown on, and the transfer of ownership thereof will
be effected only through, records maintained by DTC (with respect to the
Participants) or by the Participants and the Indirect Participants (with
respect to other owners of beneficial interests in the Global Securities).
The laws of some states require that certain persons take physical delivery
in definitive form of securities that they own. Consequently, the ability to
transfer beneficial interests in a Global Security to such persons may be
limited to that extent. Because DTC can act only on behalf of the
Participants, which in turn act on behalf of the Indirect Participants and
certain banks, the ability of a person having beneficial interests in a Global
Security to pledge such interests to persons or entities that do not
participate in the DTC system, or otherwise take actions in respect of such
interests, may be affected by the lack of a physical certificate evidencing
such interests.
EXCEPT AS DESCRIBED BELOW, OWNERS OF INTERESTS IN THE GLOBAL SECURITIES WILL
NOT HAVE SECURITIES REGISTERED IN THEIR NAMES, WILL NOT RECEIVE PHYSICAL
DELIVERY OF SECURITIES IN CERTIFICATED FORM AND WILL NOT BE CONSIDERED THE
REGISTERED OWNERS OR HOLDERS OF NOTES UNDER THE INDENTURE OR OF SHARES OF
PREFERRED STOCK UNDER THE CERTIFICATE OF DESIGNATION FOR ANY PURPOSE.
BENEFICIAL INTERESTS IN PREFERRED STOCK MAY NOT BE HELD THROUGH EUROCLEAR OR
CEDEL.
THE EXCHANGE
New Securities exchanged for Old Securities through the Book-Entry Transfer
Facility may be represented by one or more Global Securities (the "New Global
Securities"). One New Global Security will be issued with respect to each $200
million aggregate principal amount of the New Notes and one Global Security
will be issued in respect of the New Preferred Stock. The New Global
Securities will be deposited on the date of the closing of the Exchange Offer
(the "Closing Date") with the Trustee in the case of the New Notes and the
Registrar in the case of the New Preferred Stock, in each case as custodian of
DTC and pursuant to a FAST Balance Certificate Agreement between the Trustee
or the Registrar, as the case may be, and DTC and registered in the name of
Cede & Co., as nominee of DTC (such nominee being referred to herein as the
"Global Security Holder").
New Securities exchanged for Old Securities which are in the form of
registered definitive certificates (the "Certificated Securities") will be
issued in the form of Certificated Securities. Such Certificated Securities
may, unless the New Global Securities has previously been exchanged for
Certificated Securities, be exchanged for an interest in the New Global
Securities representing the principal amount of New Securities being
transferred.
99
<PAGE>
The Company expects that pursuant to procedures established by DTC, (i) upon
deposit of the New Global Securities, DTC or its custodian will credit the
accounts of Participants with portions of the principal amount of the New
Global Securities and (ii) ownership of the New Securities evidenced by the
New Global Securities will be shown on, and the transfer of ownership thereof
will be effected only through, records maintained by DTC (with respect to the
interests of Participants), Participants and Indirect Participants. The laws
of some states require that certain persons take physical delivery in
definitive form of securities that they own. Consequently, the ability to
transfer New Securities evidenced by the New Global Securities will be limited
to such extent.
So long as the Global Security Holder is the registered owner of any New
Securities, the Global Security Holder will be considered the sole holder of
any New Security evidenced by the New Global Securities. Beneficial owners of
interests in New Securities evidenced by the New Global Securities will not be
considered the owners or holders thereof for any purpose, including with
respect to the giving of any directions, instructions or approvals to the
Trustee or Registrar, as applicable, thereunder. Neither the Company nor the
Trustee or Registrar will have any responsibility or liability for any aspect
of the records of DTC or for maintaining, supervising or reviewing any records
of DTC relating to the New Securities (including, without limitation, the
beneficial ownership of interests in the New Securities).
Payments in respect of the principal and interest or dividends, as
applicable, on any New Securities registered in the name of the Global
Security Holder on the applicable record date will be payable by the Trustee
or Registrar, as applicable, to or at the direction of the Global Security
Holder in its capacity as a registered holder thereof. The Company and the
Trustee or Registrar, as applicable, may treat the persons in whose names New
Securities, including the New Global Securities, are registered as the owners
thereof for the purpose of receiving such payments. Consequently, neither the
Company nor the Trustee or Registrar, as applicable, has or will have any
responsibility or liability for the payment of such amounts to beneficial
owners of New Securities. The Company believes, however, that it is the policy
of DTC to immediately credit the accounts of the relevant Participants with
such payments, in accordance with their respective holdings shown on the
records of DTC. Payments by Participants to be beneficial owners of New
Securities will be governed by standing instructions and customary practice
and will be the responsibility of Participants or Indirect Participants (and
not the responsibility of DTC, the Trustee, Registrar or the Company).
Subject to certain conditions, any person having a beneficial interest in
the New Global Securities may, upon request to the Trustee or Registrar, as
the case may be, exchange such beneficial interest for New Securities in the
form of Certificated Securities. Upon any such issuance, the Trustee or
Registrar, as the case may be, is required to register such Certificated
Securities in the name of, and cause the same to be delivered to, such person
or persons (or the nominee of any thereof). In addition, If (i) the Company
notifies the Trustee or Registrar, as the case may be, in writing that DTC is
no longer willing or able to act as a depositary and the Company is unable to
locate a qualified successor within 90 days, (ii) the Company, as its option,
notifies the Trustee or Registrar, as the case may be, in writing that it
elects to cause the issuance of Securities in the form of Certificated
Securities, or (iii) the liquidation or bankruptcy of the Company, then, upon
surrender by the New Global Security Holder of its New Global Securities, New
Securities in such form will be issued to each person that the New Global
Security Holder and DTC identify as being the beneficial owner of the related
New Securities.
Neither the Company, the Trustee nor the Registrar will be liable for any
delay by the New Global Security Holder or DTC in identifying the beneficial
owners of New Securities and the Company, the Trustee and Registrar may
conclusively rely on, and will be protected in relying on, instructions from
the New Global Security Holder or DTC for all purposes.
Although the Company expects that DTC will agree to the foregoing procedures
in order to facilitate transfers of interests in the New Global Securities
among participants of DTC, it is under no obligation to perform or continue to
perform such procedures, and such procedures may be discontinued at any time.
Neither the Company, the Trustee nor the Registrar will have any
responsibility for the performance by DTC, the
100
<PAGE>
Participants or the Indirect Participants of their respective obligations
under the rules and procedures governing their operations.
Except for trades in the Notes involving only Euroclear and CEDEL
participants, interests in the New Global Securities will trade in DTC's Same-
Day Funds Settlement System and secondary market trading activity in such
interests will therefore settle in immediately available funds, subject in all
cases to the rules and procedures of DTC and the Participants.
Transfers between Participants in DTC will be effected in accordance with
DTC's procedures and will be settled in same-day funds. Transfers in respect
of the Notes between accountholders in Euroclear and CEDEL will be effected in
the ordinary way in accordance with their respective rules and operating
procedures.
Cross-market transfers in respect of the Notes between the account holders
in DTC, on the one hand, and account holders in Euroclear or CEDEL, on the
other hand, will be effected through DTC in accordance with DTC's rules on
behalf of Euroclear or CEDEL, as the case may be, by its respective
depository; however, such cross-market transactions will require delivery of
instructions to Euroclear or CEDEL, as the case may be, by the counterparty in
such system in accordance with the rules and procedures and within the
established deadlines (Brussels time) of such system. Euroclear or CEDEL, as
the case may be, will, if the transaction in respect of the Notes meets its
settlement requirements, deliver instructions to its respective depository to
take action to effect final settlement on its behalf by delivering or
receiving interests in the New Global Security in respect of the Notes in DTC,
and making or receiving payment in accordance with normal procedures for same-
day funds settlement applicable to DTC. Euroclear and CEDEL account holders
may not deliver instructions directly to the depositories for Euroclear or
CEDEL
Because of time zone differences, the securities account of a Euroclear or
CEDEL account holder purchasing an interest in a New Global Security in
respect of the Notes from an account holder in DTC will be credited, and any
such crediting will be reported to the relevant Euroclear or CEDEL
participant, during the securities settlement processing day (which must be a
business day for Euroclear or CEDEL) immediately following the settlement date
of DTC. Cash received in Euroclear or CEDEL as a result of sales of interests
in a New Global Security in respect of the Notes by or through a Euroclear or
CEDEL account holder to a Participant in DTC will be received with value on
the settlement date of DTC but will be available in the relevant Euroclear or
CEDEL cash account only as of the business day for Euroclear or CEDEL
following DTC's settlement date.
DTC has advised the Company that it will take any action permitted to be
taken by a holder of Securities only at the direction of one or more
Participants to whose account with DTC interests in the Global Securities are
credited and only in respect of such portion of the aggregate principal amount
of the Securities as to which such Participant or Participants has or have
given such direction. However, if any of the events described under "--
Exchange of Book Entry Securities for Certificated Securities" occurs, DTC
reserves the right to exchange the New Global Securities for New Securities in
certificated form and to distribute such New Securities to its Participants.
The information in this section concerning DTC, Euroclear and CEDEL and
their book-entry systems has been obtained from sources that the Company
believes to be reliable, but the Company takes no responsibility for the
accuracy thereof.
Although DTC, Euroclear and CEDEL have agreed to the foregoing procedures to
facilitate transfers of interests in the New Global Securities (in respect of
the Notes only in the case of Euroclear and CEDEL) among account holders in
DTC and account holders of Euroclear and CEDEL, they are under no obligation
to perform or to continue to perform such procedures, and such procedures may
be discontinued at any time. None of the Company, the Initial Purchasers, the
Registrar, the Exchange Agents or the Trustee nor any agent of the Company,
the Initial Purchasers, the Registrar, the Exchange Agents or the Trustee will
have any responsibility for the performance by DTC, Euroclear or CEDEL or
their respective participants, indirect participants or account holders of
their respective obligations under the rules and procedures governing their
operations.
101
<PAGE>
EXCHANGE OF BOOK-ENTRY SECURITIES FOR CERTIFICATED SECURITIES
A New Global Security is exchangeable for definitive New Securities in
registered certificated form if (i) DTC (x) notifies the Company that it is
unwilling or unable to continue as depository for the New Global Security and
the Company thereupon fails to appoint a successor depository within 90 days
or (y) has ceased to be a clearing agency registered under the Exchange Act,
(ii) the Company, at its option, notifies the Trustee or Registrar, as the
case may be, in writing that it elects to cause the issuance of the New
Securities in certificated form or (iii) there shall have occurred and be
continuing a Default or an Event of Default with respect to the New
Securities. In all cases, certificated New Securities delivered in exchange
for any New Global Security or beneficial interests therein will be registered
in the names, and issued in any approved denominations, requested by or on
behalf of the depository (in accordance with its customary procedures).
LEGAL MATTERS
The validity of the issuance of the New Securities will be passed upon by
Skadden, Arps, Slate, Meagher & Flom LLP, New York, New York, special counsel
for the Company.
EXPERTS
The consolidated financial statements and schedule of NTL Incorporated
(formerly International CableTel Incorporated) and subsidiaries appearing in
NTL Incorporated's Annual Report (Form 10-K) for the year ended December 31,
1996, 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 and schedule are
incorporated herein by reference in reliance upon such report given upon the
authority of such firm as experts in accounting and auditing.
ENFORCEABILITY OF CIVIL LIABILITIES
A substantial majority of the assets of the Company are located outside the
United States. As a result, it may not be possible for holders of the
Securities to realize in the United States upon judgments of courts of the
United States predicated upon the civil liability under the federal securities
laws of the United States. The United States and England do not currently have
a treaty providing for the reciprocal recognition and enforcement of judgments
(other than arbitration awards) in civil and commercial matters. Therefore, a
final judgment for the payment of a fixed debt or sum of money rendered by any
United States court based on civil liability, whether or not predicated solely
upon the United States federal securities laws, would not automatically be
enforceable in England. In order to enforce in England a United States
judgment, proceedings must be initiated by way of common law action before a
court of competent jurisdiction in England. An English court will, subject to
what is said below, normally order summary judgment on the basis that there is
no defense to the claim for payment and will not reinvestigate the merits of
the original dispute. In such an action, an English court will treat the
United States judgment as creating a valid debt upon which the judgment
creditor could bring an action for payment, as long as (i) the United States
court had jurisdiction over the original proceeding, (ii) the judgment is
final and conclusive on the merits, (iii) the judgment does not contravene
English public policy, (iv) the judgment must not be for a tax, penalty or a
judgment arrived at by doubling, trebling or otherwise multiplying a sum
assessed as compensation for the loss or damage sustained and (v) the judgment
has not been obtained by fraud or in breach of the principles of natural
justice. Based on the foregoing, there can be no assurance that Holders of
Securities will be able to enforce in England judgments in civil and
commercial matters obtained in any United States court. There is doubt as to
whether an English court would impose civil liability in an original action
predicated solely upon the United States federal securities laws brought in a
court of competent jurisdiction in England.
102
<PAGE>
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<S> <C>
Pro forma Condensed Consolidated Statement of Operations (Unaudited)..... F-2
Pro forma Condensed Consolidated Statement of Operations for the year
ended December 31, 1996 (Unaudited)..................................... F-3
Notes to Pro forma Condensed Consolidated Statement of Operations (Unau-
dited).................................................................. F-4
</TABLE>
F-1
<PAGE>
NTL INCORPORATED
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS--(UNAUDITED)
In May 1996, a wholly owned subsidiary of NTL Incorporated ("the Company"),
entered into agreements (the "Agreements") to acquire all of the issued and
outstanding stock of NTL Group Limited (together with its subsidiaries, the
"NTL Group") in exchange for (i) cash of approximately (Pounds)200,000,000,
(ii) an additional cash payment of (Pounds)17,100,000 in October 1996, and
(iii) an agreement to pay (Pounds)35,000,000, subject to reduction, 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 acquisition has been accounted
for as a purchase. Accordingly, the excess of the purchase price over the fair
value of the net assets acquired has been recorded as goodwill and is being
amortized over 30 years.
The Company obtained from the former shareholders of NTL Group Limited
representations and warranties concerning the commercial and financial
position of NTL Group and certain contingent liabilities and other obligations
of NTL Group. The Company has the right to reduce the payment of
(Pounds)35,000,000 to the former NTL Group Limited shareholders in the event
that these representations and warranties are found to be untrue or
inaccurate. Any such reduction will be determined in accordance with, and
subject to the limitations set forth in, the Agreements either by agreement
being reached between the parties or, failing agreement, by the determination
of an appropriately qualified expert or a court of law. As the aggregate
amount of such reductions can not exceed (Pounds)35,000,000, the Company has
no further rights or recourse against the sellers for claims for damages for
breaches of representations and warranties in excess of (Pounds)35,000,000.
The Company is not currently aware of any reason that the payment will be
reduced. In the event that the payment to the former shareholders of NTL Group
Limited is reduced because of claims under the representations and warranties,
or in the event that unknown liabilities exceed (Pounds)35,000,000 or arise
after the (Pounds)35,000,000 payment is made, such events will be accounted
for in accordance with Statement of Financial Accounting Standards ("SFAS")
No. 38, "Accounting for Pre-acquisition Contingencies of Purchased
Enterprises."
The following unaudited pro forma condensed consolidated statement of
operations of the Company gives effect to the Agreements and the Financing. In
accordance with SFAS No. 52, the statement of operations has been translated
into dollars using the average exchange rate for the year ended December 31,
1996 ((Pounds)1 = $1.5616). The NTL Group historical statement of operations
has been adjusted to reflect U.S. GAAP. The unaudited pro forma condensed
consolidated statement of operations for the year ended December 31, 1996
gives effect of the Agreements and Financing as if they had occurred at the
beginning of the period. The pro forma statement of operations has been
prepared by the Company's management. The pro forma statement of operations
may not be indicative of the results that actually would have occurred if the
transactions had been in effect on the date indicated or which may be obtained
in the future. The pro forma statement of operations should be read in
conjunction with the consolidated financial statements and notes of the
Company which are incorporated herein by reference.
F-2
<PAGE>
NTL INCORPORATED
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS--(UNAUDITED)
FOR THE YEAR ENDED DECEMBER 31, 1996
(IN THOUSANDS)
<TABLE>
<CAPTION>
NTL
HISTORICAL GROUP ADJUSTMENTS PRO FORMA
---------- ------- ----------- ---------
<S> <C> <C> <C> <C>
Revenues.......................... $ 228,343 $61,295 $ 289,638
Costs and expenses:
Operating expenses.............. 144,315 31,453 175,768
Selling, general and administra-
tive........................... 114,992 7,536 122,528
Franchise fees.................. 13,117 -- 13,117
Corporate expenses.............. 14,899 -- 14,899
Depreciation and amortization... 98,653 3,878 $ 4,207 (a) 106,738
--------- ------- ------- ---------
Total costs and expenses.......... 385,976 42,867 4,207 433,050
--------- ------- ------- ---------
Income (loss) from operations..... (157,633) 18,428 (4,207) (143,412)
Interest (expense)................ (137,032) (1,670) (6,749)(b) (145,451)
Interest and other income......... 36,042 684 -- 36,726
--------- ------- ------- ---------
Income (loss) before provision for
income taxes and
minority interests............... (258,623) 17,442 (10,956) (252,137)
Benefit (provision) for income
taxes............................ (7,653) (3,255) 3,255 (c) (7,653)
--------- ------- ------- ---------
Income (loss) before minority in-
terests.......................... (266,276) 14,187 (7,701) (259,790)
Minority interests................ 11,822 -- -- 11,822
--------- ------- ------- ---------
Net income (loss)................. $(254,454) $14,187 $(7,701) $(247,968)
========= ======= ======= =========
Net (loss) per share.............. $ (8.20) -- -- $ (7.99)
========= ======= ======= =========
Weighted average number of shares
used in calculation
of earnings per share............ 31,041 -- -- 31,041
========= ======= ======= =========
</TABLE>
F-3
<PAGE>
NTL INCORPORATED
NOTES TO PRO FORMA CONDENSED CONSOLIDATED
STATEMENT OF OPERATIONS--(UNAUDITED)
For purposes of determining the effect of the Agreements and Financing on
the Company's Condensed Consolidated Statement of Operations for the year
ended December 31, 1996, the following pro forma adjustments have been made:
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31, 1996
------------------
(IN THOUSANDS)
<S> <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........ $ (4,207)
(b) Interest expense on debt at 9.25% per annum for the
short term debt and 7.91% per annum for the long term
debt (the rates in effect at the consummation of the
Financing)(1)........................................ $(8,488)
Less interest on NTL debt retired...................... 1,739
--------
(6,749)
(c) Estimated tax benefit from filing for group relief... 3,255
--------
$(7,701)
========
</TABLE>
The excess of the fair value over the book value of the property and
equipment of approximately (Pounds)64,000,000 is being depreciated over the
estimated lives of such property (50 years for the tower structures and 10
years for equipment).
<TABLE>
<S> <C> <C>
The goodwill was computed as follows:
Cash paid to shareholders and to financial institutions
((Pounds)203,601,000)...................................... $348,667,000
Cost and expenses of acquisition............................ 3,696,000
Additional payment (October 1996) ((Pounds)17,100,000)...... 29,284,000
Further additional payment (May 1997) ((Pounds)35,000,000).. 59,938,000
------------ ---
Total..................................................... 441,585,000
Book value of net assets acquired........................... 69,558,000
Excess of fair value of property and equipment over book
value...................................................... 108,985,000
------------
Goodwill.................................................. $263,042,000
============
</TABLE>
- --------
(1) Each 1/8% per annum change in the interest rate would change interest
expense by $390,000 for the year ended December 31, 1996.
F-4
<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 IN CONNECTION WITH THE OFFER MADE BY THIS PROSPECTUS AND, IF GIVEN
OR MADE, SUCH INFORMATION OR 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 AS OF
WHICH INFORMATION IS GIVEN IN THIS PROSPECTUS. THIS PROSPECTUS DOES NOT CONSTI-
TUTE AN OFFER OR SOLICITATION BY ANYONE IN ANY JURISDICTION IN WHICH SUCH OFFER
OR SOLICITATION IS NOT AUTHORIZED OR IN WHICH THE PERSON MAKING SUCH OFFER OR
SOLICITATION IS NOT QUALIFIED TO DO SO OR TO ANY PERSON TO WHOM IT IS UNLAWFUL
TO MAKE SUCH SOLICITATION.
-----------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
Available Information...................................................... 3
Incorporation of Certain Documents by Reference............................ 3
Prospectus Summary......................................................... 5
Risk Factors............................................................... 15
The Exchange Offer......................................................... 30
Use of Proceeds............................................................ 37
Exchange Rates............................................................. 37
Capitalization............................................................. 38
Selected Consolidated Financial Information................................ 39
The Company................................................................ 41
Description of Notes....................................................... 45
Description of Preferred Stock and Subordinated Debentures................. 66
Registration Rights........................................................ 78
Description of Certain Indebtedness ....................................... 80
Description of Capital Stock............................................... 84
Certain Federal Income Tax
Considerations............................................................ 91
Plan of Distribution....................................................... 98
Book-Entry; Delivery and Form.............................................. 99
Legal Matters.............................................................. 102
Experts.................................................................... 102
Enforceability of Civil Liabilities........................................ 102
Index to Financial Statements.............................................. F-1
</TABLE>
UNTIL . (90 DAYS AFTER THE DATE OF THIS PROSPECTUS) DEALERS AFFECTING
TRANSACTIONS IN THE NEW SECURITIES, WHETHER OR NOT PARTICIPATING IN THE
EXCHANGE OFFER, MAY BE REQUIRED TO DELIVER A PROSPECTUS. THIS OBLIGATION IS IN
ADDITION TO THE OBLIGATION OF DEALERS TO DELIVER A PROSPECTUS WHEN ACTING AS
UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR SUBSCRIPTIONS.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
LOGO
$400,000,000
10% SERIES B SENIOR NOTES DUE 2007
250,000 SHARES OF 13% SERIES B SENIOR
REDEEMABLE EXCHANGEABLE PREFERRED STOCK
$250,000,000 13% SERIES B SUBORDINATED EXCHANGE DEBENTURES DUE 2009
--------------------------
PROSPECTUS
--------------------------
, 1997
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN THE PROSPECTUS
ITEM 20. 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 (the "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 (the "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 attorney's 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
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.
II-1
<PAGE>
ITEM 21. EXHIBITS.
The following exhibits are filed as part of this Registration Statement:
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
----------- -----------
<C> <S>
1.1 Purchase Agreement, dated February 7, 1997, by and among the
Company and Donaldson, Lufkin & Jenrette Securities Corporation,
Chase Securities Inc. and Merrill Lynch, Pierce, Fenner & Smith
Incorporated, with respect to the Old Securities(12)
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(2)
2.2 Deed of Irrevocable undertaking dated March 28, 1996 by and among
Addroute Limited, certain shareholders in the NTL Group Limited,
NTL Group Limited and International CableTel Incorporated(8)
2.3 Form of Offer Document dated March 28, 1996 of Addroute Limited
for NTL Group Limited(8)
2.4 Deed of Adjustment dated March 28, 1996 by and among Addroute
Limited and Mercury Asset Management plc.(8)
2.5 Share Exchange Agreement, dated as of August 30, 1996, by and
among the Company, B/G Co., Booth American Company, Columbia
Management, Inc. and Robert T. Goad(10)
2.6 Share Purchase Agreement, dated October 7, 1996, by and among the
Company, South Wales Electricity plc and Swalec Telco Investment
Limited(10)
3.1 Restated Certificate of Incorporation of the Company, as amended
by the Certificate of Amendment, dated June 5, 1996(9)
3.2 Restated By-laws of the Company(2)
4.1 Indenture, dated as of February 12, 1997, by and between the
Company and The Chase Manhattan Bank, as Trustee, with respect to
the Notes(12)
4.2 Certificate of Designation, dated February 12, 1997, with respect
to the Preferred Stock(12)
4.3 Form of Indenture between the Company and The Chase Manhattan
Bank, as Trustee, with respect to the Subordinated Debentures(12)
4.4 Registration Rights Agreement, dated February 12, 1997, by and
among the Company and Donaldson, Lufkin & Jenrette Securities
Corporation, Chase Securities Inc. and Merrill Lynch, Pierce,
Fenner & Smith Incorporated with respect to the Notes(12)
4.5 Registration Rights Agreement, dated February 12, 1997, by and
among the Company and Donaldson, Lufkin & Jenrette Securities
Corporation, Chase Securities Inc. and Merrill Lynch, Pierce,
Fenner & Smith Incorporated with respect to the Preferred
Stock(12)
4.6 Form of Notes (included in Exhibit 4.1)
4.7 Form of Preferred Stock(12)
4.8 Form of Subordinated Debentures (included in Exhibit 4.3)
4.9 Indenture, dated as of June 12, 1996, by and between the Company
and Chemical Bank, as Trustee, with respect to the 7% Convertible
Notes(9)
4.10 Registration Rights Agreement, dated June 12, 1996, by and among
the Company and Donaldson, Lufkin & Jenrette Securities
Corporation and Salomon Brothers Inc, with respect to the 7%
Convertible Notes(9)
4.11 Indenture, dated as of January 30, 1996, by and among the Company
and Chemical Bank, as Trustee, with respect to the 11 1/2%
Notes(8)
</TABLE>
II-2
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
----------- -----------
<C> <S>
4.12 Registration Rights Agreement, dated January 30, 1996, by and
among the Company and Donaldson, Lufkin & Jenrette Securities
Corporation, Salomon Brothers Inc and Chase Securities, Inc., with
respect to the 11 1/2% Notes(8)
4.13 Indenture, dated as of April 20, 1995, by and among the Company
and Chemical Bank, as Trustee, with respect to the 12 3/4%
Notes(3)
4.14 First Supplemental Indenture, dated as of January 22, 1996, by and
among the Company and Chemical Bank, as Trustee with respect to
the Indenture included as Exhibit 4.13(8)
4.15 Registration Agreement, dated April 13, 1995 by and among the
Company and Salomon Brothers Inc, Donaldson, Lufkin & Jenrette
Securities Corporation and Goldman, Sachs & Co., with respect to
the 12 3/4% Notes(3)
4.16 Indenture, dated as of April 20, 1995, by and among the Company
and Chemical Bank, as Trustee, with respect to the 7 1/4%
Convertible Notes(4)
4.17 Registration Agreement, dated April 12, 1995, by and among the
Company and Salomon Brothers Inc, Donaldson, Lufkin & Jenrette
Securities Corporation and Goldman Sachs & Co., with respect to
the 7 1/4% Convertible Notes(4)
4.18 Indenture, dated as of October 1, 1993, by and among the Company
and Chemical Bank, as Trustee with respect to the 10 7/8% Senior
Notes(5)
4.19 First Supplemental Indenture, dated January 23, 1996, by and among
the Company and Chemical Bank, as Trustee, with respect to the
Indenture included as Exhibit 4.18(8)
4.20 Rights Agreement, dated as of October 1, 1993, between the Company
and Continental Transfer & Trust Company, as Rights Agent(2)
5.1 Opinion of Skadden, Arps, Slate, Meagher & Flom LLP as to the
legality of the securities being registered hereby
10.1 Subscription Agreement dated as of April 8, 1993, by and among
Insight Communications Company U.K., L.P. ("Insight"), OCOM and
the Company(2)
10.2 Amendment to Subscription Agreement, dated as of May 28, 1993, by
and among Insight, OCOM and the Company(2)
10.3 Letter Agreement, dated as of April 27, 1993, by and among
Insight, OCOM and the Company(2)
10.4 Letter Agreement, dated July 16, 1993, by and among Insight, OCOM
and the Company(2)
10.5 Agreement dated as of May 28, 1993 between Insight and OCOM(2)
10.6 Form of Non-Competition Agreement(2)
10.7 Compensation Plan--International CableTel Inc. 1993 Stock Option
Plan(2)
10.8 Compensation Plan--International CableTel Inc. 1993 Non-Employee
Director Stock Option Plan(2)
10.9 Compensation Plan--OCOM Corporation 1991 Stock Option Plan(2)
10.10 Form of Director and Officer Indemnity Agreement (together with a
schedule of executed Indemnity Agreements)(3)
10.11 Corporate Services Agreement, dated July 1, 1991, among CCL, New
Par, a Delaware general partnership constituting the CCI/AirTouch
Joint Venture, and OCOM (formerly known as LDCO)(3)
10.12 Tax Sharing Agreement, dated July 1, 1991, between CCI and OCOM
(formerly known as LDCO)(3)
10.13 Service Agreement, dated May 1, 1992, between OCOM and LCI(3)
10.14 The NTLIH Facilities Agreement, dated March 28, 1996, by and among
NTLIH (formerly Addroute Limited), Chase Investment Bank Limited
and The Chase Manhattan Bank, N.A.(8)
</TABLE>
II-3
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
----------- -----------
<C> <S>
10.15 Deed of Undertaking of the Registrant to NTLIH (formerly Addroute
Limited) dated March 28, 1996 in relation to the Further
Payment(8)
11.1 Computation of Per Share Earnings(12)
12.1 Computation of Ratio of Earnings to Fixed Charges and Combined
Fixed Charges and Preferred Stock Dividends*
21.1 Subsidiaries of the Company(12)
23.1 Consent of Ernst & Young, LLP
23.2 Consent of Skadden, Arps, Slate, Meagher & Flom LLP (included in
Exhibit 5.1)
24.1 Powers of Attorney (included in the signature pages to the
Registration Statement)*
24.2 Power of Attorney of Warren Potash
25.1 Form T-1 Statement of Eligibility of Trustee*
99.1 Form of Letter of Transmittal in respect of the Notes
99.2 Form of Letter of Transmittal in respect of the Preferred Stock
99.3 Certificate of Designation, dated October 7, 1996, in respect of
the Company's Convertible Preferred Stock(11)
99.4 Prescribed Diffusion Service License, dated July 21, 1987, issued
to British Cable Services Limited (now held by CableTel Surrey and
Hampshire Limited) for the area of West Surrey and East Hampshire,
England(6)
99.5 Prescribed Diffusion Service License, dated December 3, 1990,
issued to Clyde Cablevision (renamed CableTel Glasgow) for the
area of Inverclyde, Scotland(6)
99.6 Prescribed Diffusion Service License, dated December 3, 1990,
issued to Clyde Cablevision (renamed CableTel Glasgow) for the
area of Bearsden and Milngavie, Scotland(6)
99.7 Prescribed Diffusion Service License, dated December 3, 1990,
issued to Newport Cablevision Limited (renamed CableTel Newport)
for the area of Newport, Wales(6)
99.8 Prescribed Diffusion Service License, dated July 10, 1984, issued
to Clyde Cablevision (renamed CableTel Glasgow) for the area of
North Glasgow and Clydebank, Strathclyde, Scotland(6)
99.9 Prescribed Diffusion Service License, dated December 3, 1990,
issued to Clyde Cablevision (renamed CableTel Glasgow) for the
area of Greater Glasgow, Scotland(6)
99.10 Prescribed Diffusion Service License, dated December 3, 1990,
issued to Clyde Cablevision (renamed CableTel Glasgow) for the
area of Paisley and Renfrew, Scotland(6)
99.11 Prescribed Diffusion Service License, dated December 3, 1990,
issued to Cable and Satellite Television Holdings Ltd (renamed
CableTel West Glamorgan Limited) for the area of West Glamorgan,
Wales(6)
99.12 Prescribed Diffusion Service License, dated December 3, 1990,
issued to British Cable Services Limited for the area of Cardiff
and Penarth, Wales (now held by CableTel Cardiff Limited)(6)
99.13 Prescribed Diffusion Service License, dated December 3, 1990,
issued to Kirklees Cable (renamed CableTel Kirklees) for the area
of Huddersfield and Dewsbury, West Yorkshire, England(6)
99.14 Prescribed Diffusion Service License, dated December 3, 1990,
issued to CableVision Communications Company of Hertfordshire Ltd
(renamed CableTel Hertfordshire Limited) for the area of
Broxbourne and East Hertfordshire, England(6)
99.15 Prescribed Diffusion Service License, dated December 3, 1990,
issued to CableVision Communications Company Ltd (renamed CableTel
Central Hertfordshire Limited) for the area of Central
Hertfordshire, England(6)
</TABLE>
II-4
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
----------- -----------
<C> <S>
99.16 Prescribed Diffusion Service License, dated March 26, 1990, issued
to CableVision Bedfordshire Limited (renamed CableTel Bedfordshire
Ltd.) for the area of Luton and South Bedfordshire(6)
99.17 Prescribed Diffusion Service License, dated December 3, 1990,
issued to CableVision North Bedfordshire Ltd (renamed CableTel
North Bedfordshire Ltd.) for the area of North Bedfordshire,
England(6)
99.18 Local Delivery Service License, dated October 2, 1995, issued to
CableTel Northern Ireland Limited for Northern Ireland(6)
99.19 Local Delivery Service License, dated December 6, 1995, issued to
CableTel South Wales Limited for Glamorgan and Gwent, Wales(6)
99.20 Local Delivery Service License, dated March 13, 1991, issued to
Maxwell Cable TV Limited for Pembroke Dock, Dyfed, Wales (now held
by Metro South Wales Limited)(6)
99.21 Local Delivery Service License, dated March 15, 1991, issued to
Maxwell Cable TV Limited for Camarthen, Wales (now held by Metro
South Wales Limited)(6)
99.22 Local Delivery Service License, dated March 15, 1991, issued to
Maxwell Cable TV Limited for Milford Haven, Wales (now held by
Metro South Wales Limited)(6)
99.23 Local Delivery Service License, dated March 15, 1991, issued to
Maxwell Cable TV Limited for Cwmgors (Amman Valley), West
Glamorgan, Wales(6)
99.24 Local Delivery Service License, dated March 15, 1991, issued to
Maxwell Cable TV Limited for Ammanford, West Glamorgan, Wales(6)
99.25 Local Delivery Service License, dated March 15, 1991, issued to
Maxwell Cable TV Limited for Brecon, Gwent, Wales(6)
99.26 Local Delivery Service License, dated March 15, 1991, issued to
Maxwell Cable TV Limited for Haverfordwest, Preseli, Wales(6)
99.27 Local Delivery Service License, dated March 15, 1991, issued to
Maxwell Cable TV Limited for Neyland, Preseli, Wales (now held by
Metro South Wales Limited)(6)
99.28 License, dated January 11, 1991, issued to Cablevision
Communications Company of Hertfordshire Ltd (renamed CableTel
Hertfordshire Limited) for the Hertford, Cheshunt and Ware (Lea
Valley) cable franchise, England(6)
99.29 License, dated December 8, 1990, issued to Cablevision
Communications Company Limited for Central Hertfordshire (renamed
CableTel Central Hertfordshire Limited), England(6)
99.30 License, dated August 23, 1989, issued to Cablevision Bedfordshire
Limited for Bedford and surrounding areas, England(6)
99.31 License, dated January 9, 1991, issued to Cablevision North
Bedfordshire Ltd for North Bedfordshire, England(6)
99.32 License, dated January 29, 1991, issued to Clyde Cablevision
(renamed CableTel Glasgow) for the Inverclyde Cable Franchise,
Scotland(6)
99.33 License, dated January 29, 1991, issued to Clyde Cablevision
(renamed CableTel Glasgow) for the Bearsden and Milngavie Cable
Franchise, Scotland(6)
99.34 License, dated January 29, 1991, issued to Clyde Cablevision
(renamed CableTel Glasgow) for the Paisley and Renfrew Cable
Franchise, Scotland(6)
99.35 License, dated June 7, 1985, issued to Clyde Cablevision Ltd
(renamed CableTel Glasgow) for North West Glasgow and Clydebank,
Scotland(6)
</TABLE>
II-5
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
----------- -----------
<C> <S>
99.36 License, dated January 29, 1991, issued to Clyde Cablevision
(renamed CableTel Glasgow) for the Greater Glasgow cable
franchise, Scotland(6)
99.37 License, dated October 13, 1993, issued to Insight Communications
Cardiff Limited (renamed CableTel Cardiff Limited) for Cardiff,
Wales(6)
99.38 License, dated January 22, 1991, issued to Newport Cablevision
Limited (renamed CableTel Newport), for Newport Cable franchise
Wales(6)
99.39 License, dated May 18, 1990, issued to Cable and Satellite
Television Holdings Limited (renamed CableTel West Glamorgan) for
West Glamorgan, Wales(6)
99.40 License, dated December 20, 1990, issued to Kirklees Cable
(renamed CableTel Kirklees) for the Huddersfield and Dewsbury
cable franchise, England(6)
99.41 License, dated October 13, 1993, issued to Insight Communications
Guildford Limited (renamed CableTel Surrey and Hampshire Limited)
for the West Surrey/East Hampshire (Guildford) Cable Franchise,
England(6)
99.42 License, dated January 20, 1995, issued to CableTel Bedfordshire
Ltd. for the area of South Bedfordshire, England(6)
99.43 License, dated January 20, 1995, issued to CableTel North
Bedfordshire Ltd. for the area of Bedford, England(6)
99.44 License, dated January 20, 1992, issued to Cable and Satellite
Television Holdings Limited (renamed CableTel West Glamorgan
Limited) for the area of Swansea, Neath and Port Talbot, Wales(6)
99.45 License, dated January 20, 1995, issued to Cabletel Hertfordshire
Ltd. for the area of Hertford, Cheshunt and Ware (Lea Valley),
England(6)
99.46 License, dated January 20, 1995, issued to Cabletel Central
Hertfordshire Ltd. for the area of Central Hertfordshire,
England(6)
99.47 License, dated July 21, 1995, issued to CableTel Kirklees(6)
99.48 License, dated June 8, 1995, issued to CableTel Bedfordshire
Ltd.(6)
99.49 License, dated October 27, 1995, issued to Metro South Wales
Limited for the area of Neyland, Wales(6)
99.50 License, dated October 27, 1995, issued to Metro South Wales
Limited for the area of Cwmgors, Wales(6)
99.51 License, dated October 27, 1995, issued to Metro South Wales
Limited for the area of Ammanford, Wales(6)
99.52 License, dated October 27, 1995, issued to Metro South Wales
Limited for the area of Carmarthen, Wales(6)
99.53 License, dated October 27, 1995, issued to Metro South Wales
Limited for the area of Haverfordwest, Wales(6)
99.54 License, dated October 27, 1995, issued to Metro South Wales
Limited for the area of Pembroke Dock, Wales(6)
99.55 License, dated October 27, 1995, issued to Metro South Wales
Limited for the area of Milford Haven, Wales(6)
99.56 License, dated October 27, 1995, issued to CableTel South Wales
Limited for the area of Glamorgan and Gwent, Wales(6)
99.57 License, dated January 26, 1996, issued to Cabletel South Wales
Limited, for part of the Glamorgan area(6)
</TABLE>
II-6
<PAGE>
- --------
(1) Incorporated by reference from the Company's Form 8-K, filed with the
Commission on April 12, 1995.
(2) Incorporated by reference from the Company's Registration Statement on
Form S-1, File No. 33-63570.
(3) Incorporated by reference from the Company's Registration Statement on
Form S-4, File No. 33-92794.
(4) Incorporated by reference from the Company's Registration Statement on
Form S-3, File No. 33-92792.
(5) Incorporated by reference from the Company's Registration Statement on
Form S-1, File No. 33-63572.
(6) Incorporated by reference from the Company's Form 8-K, filed with the
Commission on March 20, 1996.
(7) Incorporated by reference from the Company's Form 10-K, filed with the
Commission on March 22, 1996.
(8) Incorporated by reference to the Company's Registration Statement on Form
S-4, File No. 333-1010.
(9) Incorporated by reference to the Company's Registration Statement on Form
S-3, File No. 333-07879.
(10) Incorporated by reference to the Company's Registration Statement on Form
S-3, File No. 333-16751.
(11) Incorporated by reference to the Company's Current Report on Form 8-K,
filed on October 9, 1996.
(12) Incorporated by reference to the Company's Annual Report on Form 10-K,
filed with the Commission on March 28, 1997.
* Previously filed as part of this Registration Statement.
ITEM 22. UNDERTAKINGS
The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
registrant's annual report pursuant to Section 13(a) or 15(d) of the
Securities Exchange Act of 1934 (and, where applicable, each filing of an
employee benefit plan's annual report pursuant to Section 15(d) of the
Securities Exchange Act of 1934) 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
of 1933 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 of 1933 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 to respond to requests for
information that is incorporated by reference into the prospectus pursuant to
Item 4, 10(b), 11, or 13 of this form, within one business day of receipt of
such request, and to send the incorporated documents by first class mail or
other equally prompt means. This includes information contained in documents
filed subsequent to the effective date of the registration statement through
the date of responding to the request.
The undersigned registrant hereby undertakes to supply by means of a post-
effective amendment all information concerning a transaction, and the company
being acquired involved therein, that was not the subject of and included in
the registration statement when it became effective.
The undersigned registrant hereby undertakes to file an application for the
purpose of determining the eligibility of the trustee to act under subsection
(a) of Section 310 of the Trust Indenture Act in accordance with the rules and
regulations prescribed by the Commission under Section 305(b)(2) of the Trust
Indenture Act.
II-7
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THE REGISTRANT
HAS DULY CAUSED THIS AMENDMENT TO THE 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 22ND DAY OF MAY, 1997.
NTL Incorporated
/s/ Richard J. Lubasch
By: __________________________________
RICHARD J. LUBASCH SENIOR VICE
PRESIDENT--GENERAL COUNSEL AND
SECRETARY
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
Chairman of the
* Board and May 22, 1997
- ------------------------------------ Treasurer
GEORGE S. BLUMENTHAL
President, Chief
* Executive and May 22, 1997
- ------------------------------------ Financial Officer
J. BARCLAY KNAPP and Director
Vice President--
* Controller May 22, 1997
- ------------------------------------
GREGG GORELICK
Director
* May 22, 1997
- ------------------------------------
SIDNEY R. KNAFEL
Director
* May 22, 1997
- ------------------------------------
TED H. MCCOURTNEY
Director
* May 22, 1997
- ------------------------------------
DEL MINTZ
Director
* May 22, 1997
- ------------------------------------
ALAN J. PATRICOF
Director
* May 22, 1997
- ------------------------------------
WARREN POTASH
Director
* May 22, 1997
- ------------------------------------
MICHAEL S. WILLNER
/s/ Richard J. Lubasch
*By: __________________________
NAME:RICHARD J. LUBASCH
ATTORNEY-IN-FACT
DATED: MAY 22, 1997
II- 8
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION PAGE NO.
----------- ----------- --------
<C> <S> <C>
1.1 Purchase Agreement, dated February 7, 1997, by and
among the Company and Donaldson, Lufkin & Jenrette
Securities Corporation, Chase Securities Inc. and
Merrill Lynch, Pierce, Fenner & Smith Incorporated,
with respect to the Old Securities(12)
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(2)
2.2 Deed of Irrevocable undertaking dated March 28, 1996 by
and among Addroute Limited, certain shareholders in the
NTL Group Limited, NTL Group Limited and International
CableTel Incorporated(8)
2.3 Form of Offer Document dated March 28, 1996 of Addroute
Limited for NTL Group Limited(8)
2.4 Deed of Adjustment dated March 28, 1996 by and among
Addroute Limited and Mercury Asset Management plc.(8)
2.5 Share Exchange Agreement, dated as of August 30, 1996,
by and among the Company, B/G Co., Booth American
Company, Columbia Management, Inc. and Robert T.
Goad(10)
2.6 Share Purchase Agreement, dated October 7, 1996, by and
among the Company, South Wales Electricity plc and
Swalec Telco Investment Limited(10)
3.1 Restated Certificate of Incorporation of the Company,
as amended by the Certificate of Amendment, dated June
5, 1996(9)
3.2 Restated By-laws of the Company(2)
4.1 Indenture, dated as of February 12, 1997, by and
between the Company and The Chase Manhattan Bank, as
Trustee, with respect to the Notes(12)
4.2 Certificate of Designation, dated February 12, 1997,
with respect to the Preferred Stock(12)
4.3 Form of Indenture between the Company and The Chase
Manhattan Bank, as Trustee, with respect to the
Subordinated Debentures(12)
4.4 Registration Rights Agreement, dated February 12, 1997,
by and among the Company and Donaldson, Lufkin &
Jenrette Securities Corporation, Chase Securities Inc.
and Merrill Lynch, Pierce, Fenner & Smith Incorporated
with respect to the Notes(12)
4.5 Registration Rights Agreement, dated February 12, 1997,
by and among the Company and Donaldson, Lufkin &
Jenrette Securities Corporation, Chase Securities Inc.
and Merrill Lynch, Pierce, Fenner & Smith Incorporated
with respect to the Preferred Stock(12)
4.6 Form of Notes (included in Exhibit 4.1)
4.7 Form of Preferred Stock(12)
4.8 Form of Subordinated Debentures (included in Exhibit
4.3)
4.9 Indenture, dated as of June 12, 1996, by and between
the Company and Chemical Bank, as Trustee, with respect
to the 7% Convertible Notes(9)
4.10 Registration Rights Agreement, dated June 12, 1996, by
and among the Company and Donaldson, Lufkin & Jenrette
Securities Corporation and Salomon Brothers Inc, with
respect to the 7% Convertible Notes(9)
4.11 Indenture, dated as of January 30, 1996, by and among
the Company and Chemical Bank, as Trustee, with respect
to the 11 1/2% Notes(8)
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION PAGE NO.
----------- ----------- --------
<C> <S> <C>
4.12 Registration Rights Agreement, dated January 30, 1996,
by and among the Company and Donaldson, Lufkin &
Jenrette Securities Corporation, Salomon Brothers Inc
and Chase Securities, Inc., with respect to the 11 1/2%
Notes(8)
4.13 Indenture, dated as of April 20, 1995, by and among the
Company and Chemical Bank, as Trustee, with respect to
the 12 3/4% Notes(3)
4.14 First Supplemental Indenture, dated as of January 22,
1996, by and among the Company and Chemical Bank, as
Trustee with respect to the Indenture included as
Exhibit 4.13(8)
4.15 Registration Agreement, dated April 13, 1995 by and
among the Company and Salomon Brothers Inc, Donaldson,
Lufkin & Jenrette Securities Corporation and Goldman,
Sachs & Co., with respect to the 12 3/4% Notes(3)
4.16 Indenture, dated as of April 20, 1995, by and among the
Company and Chemical Bank, as Trustee, with respect to
the 7 1/4% Convertible Notes(4)
4.17 Registration Agreement, dated April 12, 1995, by and
among the Company and Salomon Brothers Inc, Donaldson,
Lufkin & Jenrette Securities Corporation and Goldman
Sachs & Co., with respect to the 7 1/4% Convertible
Notes(4)
4.18 Indenture, dated as of October 1, 1993, by and among
the Company and Chemical Bank, as Trustee with respect
to the 10 7/8% Senior Notes(5)
4.19 First Supplemental Indenture, dated January 23, 1996,
by and among the Company and Chemical Bank, as Trustee,
with respect to the Indenture included as Exhibit
4.18(8)
4.20 Rights Agreement, dated as of October 1, 1993, between
the Company and Continental Transfer & Trust Company,
as Rights Agent(2)
5.1 Opinion of Skadden, Arps, Slate, Meagher & Flom LLP as
to the legality of the securities being registered
hereby
10.1 Subscription Agreement dated as of April 8, 1993, by
and among Insight Communications Company U.K., L.P.
("Insight"), OCOM and the Company(2)
10.2 Amendment to Subscription Agreement, dated as of May
28, 1993, by and among Insight, OCOM and the Company(2)
10.3 Letter Agreement, dated as of April 27, 1993, by and
among Insight, OCOM and the Company(2)
10.4 Letter Agreement, dated July 16, 1993, by and among
Insight, OCOM and the Company(2)
10.5 Agreement dated as of May 28, 1993 between Insight and
OCOM(2)
10.6 Form of Non-Competition Agreement(2)
10.7 Compensation Plan--International CableTel Inc. 1993
Stock Option Plan(2)
10.8 Compensation Plan--International CableTel Inc. 1993
Non-Employee Director Stock Option Plan(2)
10.9 Compensation Plan--OCOM Corporation 1991 Stock Option
Plan(2)
10.10 Form of Director and Officer Indemnity Agreement
(together with a schedule of executed Indemnity
Agreements)(3)
10.11 Corporate Services Agreement, dated July 1, 1991, among
CCL, New Par, a Delaware general partnership
constituting the CCI/AirTouch Joint Venture, and OCOM
(formerly known as LDCO)(3)
10.12 Tax Sharing Agreement, dated July 1, 1991, between CCI
and OCOM (formerly known as LDCO)(3)
10.13 Service Agreement, dated May 1, 1992, between OCOM and
LCI(3)
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION PAGE NO.
----------- ----------- --------
<C> <S> <C>
10.14 The NTLIH Facilities Agreement, dated March 28, 1996,
by and among NTLIH (formerly Addroute Limited), Chase
Investment Bank Limited and The Chase Manhattan Bank,
N.A.(8)
10.15 Deed of Undertaking of the Registrant to NTLIH
(formerly Addroute Limited) dated March 28, 1996 in
relation to the Further Payment(8)
11.1 Computation of Per Share Earnings(12)
12.1 Computation of Ratio of Earnings to Fixed Charges and
Combined Fixed Charges and Preferred Stock Dividends*
21.1 Subsidiaries of the Company(12)
23.1 Consent of Ernst & Young, LLP
23.2 Consent of Skadden, Arps, Slate, Meagher & Flom LLP
(included in Exhibit 5.1)
24.1 Powers of Attorney (included in the signature pages to
the Registration Statement)*
24.2 Power of Attorney of Warren Potash
25.1 Form T-1 Statement of Eligibility of Trustee*
99.1 Form of Letter of Transmittal in respect of the Notes
99.2 Form of Letter of Transmittal in respect of the
Preferred Stock
99.3 Certificate of Designation, dated October 7, 1996, in
respect of the Company's Convertible Preferred
Stock(11)
99.4 Prescribed Diffusion Service License, dated July 21,
1987, issued to British Cable Services Limited (now
held by CableTel Surrey and Hampshire Limited) for the
area of West Surrey and East Hampshire, England(6)
99.5 Prescribed Diffusion Service License, dated December 3,
1990, issued to Clyde Cablevision (renamed CableTel
Glasgow) for the area of Inverclyde, Scotland(6)
99.6 Prescribed Diffusion Service License, dated December 3,
1990, issued to Clyde Cablevision (renamed CableTel
Glasgow) for the area of Bearsden and Milngavie,
Scotland(6)
99.7 Prescribed Diffusion Service License, dated December 3,
1990, issued to Newport Cablevision Limited (renamed
CableTel Newport) for the area of Newport, Wales(6)
99.8 Prescribed Diffusion Service License, dated July 10,
1984, issued to Clyde Cablevision (renamed CableTel
Glasgow) for the area of North Glasgow and Clydebank,
Strathclyde, Scotland(6)
99.9 Prescribed Diffusion Service License, dated December 3,
1990, issued to Clyde Cablevision (renamed CableTel
Glasgow) for the area of Greater Glasgow, Scotland(6)
99.10 Prescribed Diffusion Service License, dated December 3,
1990, issued to Clyde Cablevision (renamed CableTel
Glasgow) for the area of Paisley and Renfrew,
Scotland(6)
99.11 Prescribed Diffusion Service License, dated December 3,
1990, issued to Cable and Satellite Television Holdings
Ltd (renamed CableTel West Glamorgan Limited) for the
area of West Glamorgan, Wales(6)
99.12 Prescribed Diffusion Service License, dated December 3,
1990, issued to British Cable Services Limited for the
area of Cardiff and Penarth, Wales (now held by
CableTel Cardiff Limited)(6)
99.13 Prescribed Diffusion Service License, dated December 3,
1990, issued to Kirklees Cable (renamed CableTel
Kirklees) for the area of Huddersfield and Dewsbury,
West Yorkshire, England(6)
99.14 Prescribed Diffusion Service License, dated December 3,
1990, issued to CableVision Communications Company of
Hertfordshire Ltd (renamed CableTel Hertfordshire
Limited) for the area of Broxbourne and East
Hertfordshire, England(6)
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION PAGE NO.
----------- ----------- --------
<C> <S> <C>
99.15 Prescribed Diffusion Service License, dated December 3,
1990, issued to CableVision Communications Company Ltd
(renamed CableTel Central Hertfordshire Limited) for
the area of Central Hertfordshire, England(6)
99.16 Prescribed Diffusion Service License, dated March 26,
1990, issued to CableVision Bedfordshire Limited
(renamed CableTel Bedfordshire Ltd.) for the area of
Luton and South Bedfordshire(6)
99.17 Prescribed Diffusion Service License, dated December 3,
1990, issued to CableVision North Bedfordshire Ltd
(renamed CableTel North Bedfordshire Ltd.) for the area
of North Bedfordshire, England(6)
99.18 Local Delivery Service License, dated October 2, 1995,
issued to CableTel Northern Ireland Limited for
Northern Ireland(6)
99.19 Local Delivery Service License, dated December 6, 1995,
issued to CableTel South Wales Limited for Glamorgan
and Gwent, Wales(6)
99.20 Local Delivery Service License, dated March 13, 1991,
issued to Maxwell Cable TV Limited for Pembroke Dock,
Dyfed, Wales (now held by Metro South Wales Limited)(6)
99.21 Local Delivery Service License, dated March 15, 1991,
issued to Maxwell Cable TV Limited for Camarthen, Wales
(now held by Metro South Wales Limited)(6)
99.22 Local Delivery Service License, dated March 15, 1991,
issued to Maxwell Cable TV Limited for Milford Haven,
Wales (now held by Metro South Wales Limited)(6)
99.23 Local Delivery Service License, dated March 15, 1991,
issued to Maxwell Cable TV Limited for Cwmgors (Amman
Valley), West Glamorgan, Wales(6)
99.24 Local Delivery Service License, dated March 15, 1991,
issued to Maxwell Cable TV Limited for Ammanford, West
Glamorgan, Wales(6)
99.25 Local Delivery Service License, dated March 15, 1991,
issued to Maxwell Cable TV Limited for Brecon, Gwent,
Wales(6)
99.26 Local Delivery Service License, dated March 15, 1991,
issued to Maxwell Cable TV Limited for Haverfordwest,
Preseli, Wales(6)
99.27 Local Delivery Service License, dated March 15, 1991,
issued to Maxwell Cable TV Limited for Neyland,
Preseli, Wales (now held by Metro South Wales
Limited)(6)
99.28 License, dated January 11, 1991, issued to Cablevision
Communications Company of Hertfordshire Ltd (renamed
CableTel Hertfordshire Limited) for the Hertford,
Cheshunt and Ware (Lea Valley) cable franchise,
England(6)
99.29 License, dated December 8, 1990, issued to Cablevision
Communications Company Limited for Central
Hertfordshire (renamed CableTel Central Hertfordshire
Limited), England(6)
99.30 License, dated August 23, 1989, issued to Cablevision
Bedfordshire Limited for Bedford and surrounding areas,
England(6)
99.31 License, dated January 9, 1991, issued to Cablevision
North Bedfordshire Ltd for North Bedfordshire,
England(6)
99.32 License, dated January 29, 1991, issued to Clyde
Cablevision (renamed CableTel Glasgow) for the
Inverclyde Cable Franchise, Scotland(6)
99.33 License, dated January 29, 1991, issued to Clyde
Cablevision (renamed CableTel Glasgow) for the Bearsden
and Milngavie Cable Franchise, Scotland(6)
99.34 License, dated January 29, 1991, issued to Clyde
Cablevision (renamed CableTel Glasgow) for the Paisley
and Renfrew Cable Franchise, Scotland(6)
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION PAGE NO.
----------- ----------- --------
<C> <S> <C>
99.35 License, dated June 7, 1985, issued to Clyde
Cablevision Ltd (renamed CableTel Glasgow) for North
West Glasgow and Clydebank, Scotland(6)
99.36 License, dated January 29, 1991, issued to Clyde
Cablevision (renamed CableTel Glasgow) for the Greater
Glasgow cable franchise, Scotland(6)
99.37 License, dated October 13, 1993, issued to Insight
Communications Cardiff Limited (renamed CableTel
Cardiff Limited) for Cardiff, Wales(6)
99.38 License, dated January 22, 1991, issued to Newport
Cablevision Limited (renamed CableTel Newport), for
Newport Cable franchise Wales(6)
99.39 License, dated May 18, 1990, issued to Cable and
Satellite Television Holdings Limited (renamed CableTel
West Glamorgan) for West Glamorgan, Wales(6)
99.40 License, dated December 20, 1990, issued to Kirklees
Cable (renamed CableTel Kirklees) for the Huddersfield
and Dewsbury cable franchise, England(6)
99.41 License, dated October 13, 1993, issued to Insight
Communications Guildford Limited (renamed CableTel
Surrey and Hampshire Limited) for the West Surrey/East
Hampshire (Guildford) Cable Franchise, England(6)
99.42 License, dated January 20, 1995, issued to CableTel
Bedfordshire Ltd. for the area of South Bedfordshire,
England(6)
99.43 License, dated January 20, 1995, issued to CableTel
North Bedfordshire Ltd. for the area of Bedford,
England(6)
99.44 License, dated January 20, 1992, issued to Cable and
Satellite Television Holdings Limited (renamed CableTel
West Glamorgan Limited) for the area of Swansea, Neath
and Port Talbot, Wales(6)
99.45 License, dated January 20, 1995, issued to Cabletel
Hertfordshire Ltd. for the area of Hertford, Cheshunt
and Ware (Lea Valley), England(6)
99.46 License, dated January 20, 1995, issued to Cabletel
Central Hertfordshire Ltd. for the area of Central
Hertfordshire, England(6)
99.47 License, dated July 21, 1995, issued to CableTel
Kirklees(6)
99.48 License, dated June 8, 1995, issued to CableTel
Bedfordshire Ltd.(6)
99.49 License, dated October 27, 1995, issued to Metro South
Wales Limited for the area of Neyland, Wales(6)
99.50 License, dated October 27, 1995, issued to Metro South
Wales Limited for the area of Cwmgors, Wales(6)
99.51 License, dated October 27, 1995, issued to Metro South
Wales Limited for the area of Ammanford, Wales(6)
99.52 License, dated October 27, 1995, issued to Metro South
Wales Limited for the area of Carmarthen, Wales(6)
99.53 License, dated October 27, 1995, issued to Metro South
Wales Limited for the area of Haverfordwest, Wales(6)
99.54 License, dated October 27, 1995, issued to Metro South
Wales Limited for the area of Pembroke Dock, Wales(6)
99.55 License, dated October 27, 1995, issued to Metro South
Wales Limited for the area of Milford Haven, Wales(6)
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION PAGE NO.
----------- ----------- --------
<C> <S> <C>
99.56 License, dated October 27, 1995, issued to CableTel
South Wales Limited for the area of Glamorgan and
Gwent, Wales(6)
99.57 License, dated January 26, 1996, issued to Cabletel
South Wales Limited, for part of the Glamorgan area(6)
</TABLE>
- --------
(1) Incorporated by reference from the Company's Form 8-K, filed with the
Commission on April 12, 1995.
(2) Incorporated by reference from the Company's Registration Statement on
Form S-1, File No. 33-63570.
(3) Incorporated by reference from the Company's Registration Statement on
Form S-4, File No. 33-92794.
(4) Incorporated by reference from the Company's Registration Statement on
Form S-3, File No. 33-92792.
(5) Incorporated by reference from the Company's Registration Statement on
Form S-1, File No. 33-63572.
(6) Incorporated by reference from the Company's Form 8-K, filed with the
Commission on March 20, 1996.
(7)Incorporated by reference from the Company's Form 10-K, filed with the
Commission on March 22, 1996.
(8) Incorporated by reference to the Company's Registration Statement on Form
S-4, File No. 333-1010.
(9) Incorporated by reference to the Company's Registration Statement on Form
S-3, File No. 333-07879.
(10) Incorporated by reference to the Company's Registration Statement on Form
S-3, File No. 333-16751.
(11) Incorporated by reference to the Company's Current Report on Form 8-K,
filed on October 9, 1996.
(12) Incorporated by reference to the Company's Annual Report on Form 10-K,
filed with the Commission on March 28, 1997.
* Previously filed as part of this Registration Statement.
<PAGE>
EXHIBIT 5.1
SKADDEN, ARPS, SLATE, MEAGHER & FLOM LLP
919 THIRD AVENUE
NEW YORK, NEW YORK 10022-3897
TEL: (212) 735-3000
FAX: (212) 735-2000
May 22, 1997
NTL Incorporated
110 East 59th Street, 26th Floor
New York, New York 10022
Re: NTL Incorporated
Registration Statement on Form S-4
----------------------------------
Ladies and Gentlemen:
We have acted as special counsel to NTL Incorporated, a Delaware
corporation (formerly known as International CableTel Incorporated) (the
"Company"), in connection with the public offering by the Company of up to (i)
$400,000,000 aggregate principal amount of the Company's 10% Series B Senior
Notes Due 2007 (the "New Notes") to be issued under the Indenture dated as of
February 12, 1997 (the "Senior Notes Indenture") by and between the Company and
The Chase Manhattan Bank, as trustee (the "Senior Notes Trustee"), in exchange
for a like principal amount of the Company's 10% Senior Notes Due 2007 (the "Old
Notes" and, together with the New Notes, the "Notes"), as contemplated by the
Registration Rights Agreement dated February 12, 1997 (the "Senior Notes
Registration Rights Agreement") by and among the Company, Donaldson, Lufkin &
Jenrette Securities Corporation ("DLJ"), Chase Securities Inc. ("Chase") and
Merrill Lynch, Pierce, Fenner & Smith Incorporated ("Merrill Lynch"), (ii)
100,000 shares of the Company's 13% Series B Senior Redeemable Exchangeable
Preferred Stock, par value $0.01 per share (the "Exchange Preferred Stock"), to
be issued in exchange for a like number of shares of the Company's 13% Senior
Redeemable Exchangeable Pre-
<PAGE>
NTL Incorporated
May 22, 1997
Page 2
ferred Stock, par value $0.01 per share (the "Old Preferred Stock"), as
contemplated by the Registration Rights Agreement dated February 12, 1997 by and
among the Company, DLJ, Chase and Merrill Lynch (the "Preferred Stock
Registration Rights Agreement"), and (iii) an additional 150,000 shares of the
Company's 13% Series B Senior Redeemable Exchangeable Preferred Stock, par value
$0.01 per share (the "PIK Preferred Stock" and, together with the Exchange
Preferred Stock, the "New Preferred Stock" and, together with the Old Preferred
Stock, the "Preferred Stock"), issuable from time to time in lieu of cash
dividends on the Preferred Stock. Subject to certain conditions, the Preferred
Stock may be exchanged for the Company's 13% Series B Subordinated Exchange
Debentures Due 2009 (the "Subordinated Debentures"). The Subordinated
Debentures are issuable under an indenture (the "Subordinated Debenture
Indenture") proposed to be entered into between the Company and The Chase
Manhattan Bank, as trustee (the "Subordinated Debenture Trustee").
This opinion is delivered in accordance with the requirements of Item
601(b)(5) of Regulation S-K under the Securities Act of 1933, as amended (the
"Act").
In connection with this opinion, we have examined and are familiar
with originals or copies, certified or otherwise identified to our satisfaction,
of: (i) the Company's Registration Statement on Form S-4 (File No. 333-25577)
filed with the Securities and Exchange Commission (the "Commission") on April
21, 1997 under the Act, and as amended by Amendment No. 1 thereto filed on May
22, 1997 (such Registration Statement, as so amended, being hereinafter referred
to as the "Registration Statement"); (ii) an executed copy of the Senior Notes
Registration Rights Agreement; (iii) an executed copy of the Preferred Stock
Registration Rights Agreement; (iv) an executed copy of the Senior Notes
Indenture; (v) the form of the Subordinated Debenture Indenture filed as an
<PAGE>
NTL Incorporated
May 22, 1997
Page 3
exhibit to the Registration Statement; (vi) a specimen certificate representing
shares of the New Preferred Stock; (vii) the form of certificate evidencing the
New Notes; (viii) the form of certificate evidencing the Subordinated
Debentures; (ix) the Restated Certificate of Incorporation of the Company, as
presently in effect; (x) the By-laws of the Company, as presently in effect;
(xi) certain resolutions of the Board of Directors of the Company relating to
the issuance of the Notes, Preferred Stock and Subordinated Debentures; (xii)
the Form T-1 of the Senior Notes Trustee filed as an exhibit to the Registration
Statement; and (xiii) the Certificate of Designation dated as of February 12,
1997 in respect of the Preferred Stock (the "Certificate of Designation"). The
documents referred to in clauses (ii) through (viii) above are hereinafter
referred to as the "Operative Documents". We have also examined originals or
copies, certified or otherwise identified to our satisfaction, of such records
of the Company and such agreements, certificates of public officials,
certificates of officers or other representatives of the Company and others, and
such other documents, certificates and records as we have deemed necessary or
appropriate as a basis for the opinions set forth herein.
In our examination, we have assumed the legal capacity of all natural
persons, the genuineness of all signatures, the authenticity of all documents
submitted to us as originals, the conformity to original documents of all
documents submitted to us as certified, conformed or photostatic copies and the
authenticity of the originals of such latter documents. In making our
examination of documents executed by parties other than the Company, we have
assumed that such parties had the power, corporate or other, to enter into and
perform all obligations thereunder and have also assumed the due authorization
by all requisite action, corporate or other, and execution and delivery by such
parties of such documents and the
<PAGE>
NTL Incorporated
May 22, 1997
Page 4
validity and binding effect thereof. We have also assumed that the execution
and delivery by the Company of the Senior Notes Indenture and the Subordinated
Debenture Indenture and the performance of its obligations thereunder do not
and will not violate or constitute a default under (i) any agreement or
instrument to which the Company or its properties is subject (except that we do
not make the assumption set forth in this clause (i) with respect to the
Company's Restated Certificate of Incorporation, By-laws and the Operative
Documents), (ii) any law, rule, or regulation to which the Company or its
properties is subject (except that we do not make the assumption set forth in
this clause (ii) with respect to the Delaware General Corporation Law (the
"DGCL") and those laws, rules and regulations of the State of New York and of
the United States of America which, in our experience, are normally applicable
to transactions of the type contemplated by the Operative Documents, but without
our having made any special investigation concerning any other laws, rules or
regulations), (iii) any judicial or regulatory order or decree of any govern-
mental authority or (iv) any consent, approval, license, authorization or
validation of, or filing, recording or registration with any governmental
authority. We have further assumed that (i) the Registration Statement will be
declared effective by the Commission under the Act, (ii) the Senior Notes
Indenture will have been duly qualified under the Trust Indenture Act of 1939,
as amended (the "TIA"), and (iii) the Subordinated Debenture Indenture will have
been duly qualified under the TIA. As to any facts material to the opinions
expressed herein which we have not independently established or verified, we
have relied upon statements and representations of officers and other
representatives of the Company and others.
The opinions expressed herein assume that there is no change in the
DGCL and other applicable laws from
<PAGE>
NTL Incorporated
May 22, 1997
Page 5
those in effect on the date hereof, and we advise you that we are under no duty
or obligation to inform you of any such change.
Members of our firm are admitted to the bar in the State of New York
and we do not express any opinion as to the laws of any other jurisdiction other
than the DGCL. Capitalized terms used but not otherwise defined herein shall
have the meanings ascribed to them in the Registration Statement.
Based upon and subject to the foregoing and the limitations,
qualifications, exceptions and assumptions set forth herein, we are of the
opinion that:
1. When (i) all of the conditions precedent set forth in the Senior
Notes Indenture with respect to the issuance, execution, authentication and
delivery of the New Notes have been complied with and (ii) the New Notes have
been duly executed and authenticated in accordance with the terms of the Senior
Notes Indenture and have been delivered upon consummation of the Exchange Offer
against receipt of the Old Notes surrendered in exchange therefor in accordance
with the terms of the Exchange Offer and the Senior Notes Indenture, the New
Notes will constitute valid and binding obligations of the Company enforceable
against the Company in accordance with their terms, except to the extent that
(a) enforcement thereof may be limited by (1) bankruptcy, insolvency,
reorganization, moratorium, fraudulent conveyance or other similar laws now or
hereafter in effect relating to creditors' rights generally and (2) general
principles of equity (regardless of whether enforceability is considered in a
proceeding at law or in equity) and (b) the waiver contained in Section 4.04 of
the Senior Notes Indenture may be deemed unenforceable.
<PAGE>
NTL Incorporated
May 22, 1997
Page 6
2. When the certificates representing the Exchange Preferred Stock in
the form of the specimen certificate examined by us have been signed by, or in
the name of, the Company in accordance with Section 158 of the DGCL and manually
signed by an authorized officer of the transfer agent and registrar and have
been delivered upon consummation of the Exchange Offer against receipt of the
Old Preferred Stock surrendered in exchange therefor in accordance with the
terms of the Exchange Offer, the Exchange Preferred Stock will be validly
issued, fully paid and nonassessable.
3. When (i) dividends in PIK Preferred Stock have been duly and
validly declared and paid on the Preferred Stock by the Board of Directors of
the Company in accordance with the DGCL and the Certificate of Designation,
(ii) all other requirements of the DGCL in respect of such dividends have been
complied with by the Company and its Board of Directors and (iii) the certifi-
cates representing the PIK Preferred Stock in the form of the specimen
certificate examined by us have been signed by, or in the name of, the Company
in accordance with Section 158 of the DGCL and manually signed by an authorized
officer of the transfer agent and registrar, the PIK Preferred Stock will be
validly issued, fully paid and nonassessable.
4. When (i) the Subordinated Debenture Indenture is duly executed
by the Company and the Subordinated Debenture Trustee in the form examined by
us, (ii) all of the conditions precedent set forth in the Subordinated Debenture
Indenture with respect to the issuance, execution, authentication and delivery
of the Subordinated Debentures have been complied with, (iii) the Subordinated
Debentures have been duly executed and authenticated in accordance with the
terms of the Subordinated Debenture Indenture and (iv) the Subordinated
Debentures have been delivered in exchange for the Preferred Stock in
<PAGE>
NTL Incorporated
May 22, 1997
Page 7
accordance with the provisions of the Certificate of Designation, the
Subordinated Debentures will constitute valid and binding obligations of the
Company enforceable against the Company in accordance with their terms, except
to the extent that (a) enforcement thereof may be limited by (1) bankruptcy,
insolvency, reorganization, moratorium, fraudulent conveyance or other similar
laws now or hereafter in effect relating to creditors' rights generally and (2)
general principles of equity (regardless of whether enforceability is
considered in a proceeding at law or in equity) and (b) the waiver contained
in Section 4.04 of the Subordinated Debenture Indenture may be deemed
unenforceable.
We hereby consent to the filing of this opinion with the Commission as
an exhibit to the Registration Statement. We also consent to the reference to
our firm under the caption "Legal Matters" in the prospectus which constitutes a
part of the Registration Statement. In giving such consent, we do not thereby
admit that we are in category of persons whose consent is required under Section
7 of the Act or the rules and regulations of the Commission.
Very truly yours,
/s/ Skadden, Arps, Slate, Meagher & Flom LLP
<PAGE>
EXHIBIT 23.1
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the captions "Experts" and
"Selected Consolidated Financial Information" in Amendment No. 1 to the
Registration Statement (Form S-4 No. 333-25577) and related Prospectus of NTL
Incorporated and to the incorporation by reference therein of our report dated
March 27, 1997, with respect to the consolidated financial statements and
schedule of NTL Incorporated included in its Annual Report (Form 10-K) for the
year ended December 31, 1996, filed with the Securities and Exchange Commission.
ERNST & YOUNG LLP
New York, New York
May 21, 1997
<PAGE>
Exhibit 24.2
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 of them, as attorney-in-fact and agents, with full powers and substitution,
to sign on his or her behalf, individually and in the capacity 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.
SIGNATURE TITLE DATE
--------- ----- ----
/s/ Warren Potash
- -------------------- Director April 18, 1997
Warren Potash
<PAGE>
EXHIBIT 99.1
LETTER OF TRANSMITTAL
NTL INCORPORATED
OFFER FOR ALL OUTSTANDING
10% SENIOR NOTES DUE 2007
IN EXCHANGE FOR
10% SERIES B SENIOR NOTES DUE 2007
PURSUANT TO THE PROSPECTUS, DATED . , 1997
THIS EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M. NEW YORK CITY TIME, ON . ,
1997, UNLESS EXTENDED (THE "EXPIRATION DATE"). TENDERS MAY BE WITHDRAWN
PRIOR TO 5:00 P.M., NEW YORK CITY TIME, ON THE EXPIRATION DATE.
Delivery To: The Chase Manhattan Bank, as Exchange Agent
<TABLE>
<S> <C> <C>
By Facsimile: By Mail, By Hand and
Overnight Courier: Confirm by Telephone:
(212) 638-7380 The Chase Manhattan Bank Carlos Esteves: (212) 638-0828
(212) 344-9367 Corporate Trust-Securities Window Sharon Lewis: (212) 638-0454
Room 234-North Building
55 Water Street
New York, New York 10041
</TABLE>
Delivery of this instrument to an address other than as set forth above, or
transmission of this Letter of Transmittal via facsimile other than as set
forth above, will not constitute a valid delivery of this Letter of
Transmittal.
The undersigned acknowledges that he or she has received and reviewed a
prospectus dated . , 1997 (the "Prospectus") of NTL Incorporated (formerly
known as International CableTel Incorporated), a Delaware corporation (the
"Company"), and this letter of transmittal (the "Letter"), which together
constitute the Company's offer (the "Exchange Offer") to exchange an aggregate
principal amount of up to $400,000,000 of 10% Series B Senior Notes Due 2007
(the "New Notes") of the Company for a like principal amount of the issued and
outstanding 10% Senior Notes Due 2007 (the "Old Notes" and, together with the
New Notes, the "Notes") of the Company from the holders thereof. Capitalized
terms used but not defined herein have the meanings given to them in the
Prospectus.
For each Old Note accepted for exchange and not validly withdrawn, the holder
of such Old Note will receive a New Note having a principal amount equal to
that of the surrendered Old Note. If the Exchange Offer is not consummated by
July 22, 1997, interest will accrue (in addition to the stated interest on the
Old Notes) from and including July 23, 1997. Such additional interest (the
"Special Interest") will be payable in cash semiannually in arrears each
February 15 and August 15, commencing August 15, 1997 to holders of record on
the immediately preceding February 1 and August 1, respectively, at a rate per
annum equal to 0.50% of the principal amount of the Old Notes (determined
daily). The aggregate amount of Special Interest payable pursuant to the above
provisions will in no event exceed 1.50% per annum of the principal amount
(determined daily). Upon the consummation of the Exchange Offer after July 22,
1997, the Special Interest payable on the Old Notes from the date of such
consummation will cease to accrue. Following the consummation of the Exchange
Offer, the interest terms shall revert to the original terms set forth in the
Notes. Holders of Old Notes accepted for exchange will be deemed to have waived
the right to receive any other payments or accrued interest on the Old Notes.
The Company reserves the right, at any time or from time to time, to extend the
Exchange Offer at its discretion, in which event the term "Expiration Date"
shall mean the latest time and date to which the Exchange Offer is extended.
The Company shall notify the holders of the Old Notes of any extension by means
of a press release or other public announcement prior to 9:00 a.m., New York
City time, on the next business day after the previously scheduled Expiration
Date.
<PAGE>
This Letter is to be completed by a holder of Old Notes either if
certificates for such Old Notes are to be forwarded herewith or if a tender is
to be made by book-entry transfer to the account maintained by the Exchange
Agent at The Depository Trust Company (the "Book-Entry Transfer Facility")
pursuant to the procedures set forth in the Prospectus under "The Exchange
Offer--Book-Entry Transfer" and an Agent's Message is not delivered. Tenders by
book-entry transfer may also be made by delivering an Agent's Message in lieu
of this Letter. The term "Agent's Message" means a message, transmitted by the
Book-Entry Transfer Facility to and received by the Exchange Agent and forming
a part of a Book-Entry Confirmation (as defined below), which states that the
Book-Entry Transfer Facility has received an express acknowledgment from the
tendering Participant, which acknowledgment states that such Participant has
received and agrees to be bound by, and makes each of the representations and
warranties contained in, this Letter and that the Company may enforce this
Letter against such Participant. Holders of Old Notes whose certificates are
not immediately available, or who are unable to deliver their certificates or
confirmation of the book-entry tender of their Old Notes into the Exchange
Agent's account at the Book-Entry Transfer Facility (a "Book-Entry
Confirmation") and all other documents required by this Letter to the Exchange
Agent on or prior to the Expiration Date, must tender their Old Notes according
to the guaranteed delivery procedures set forth in the Prospectus under "The
Exchange Offer--Guaranteed Delivery Procedures." See Instruction 1. Delivery of
documents to the Book-Entry Transfer Facility does not constitute delivery to
the Exchange Agent.
The undersigned has completed the appropriate boxes below and signed this
Letter to indicate the action the undersigned desires to take with respect to
the Exchange Offer.
List below the Old Notes to which this Letter relates. If the space provided
below is inadequate, the certificate numbers and principal amount of Old Notes
should be listed on a separate signed schedule affixed hereto.
DESCRIPTION OF OLD NOTES
<TABLE>
- -------------------------------------------------------------------------------------------
<CAPTION>
1 2 3
- -------------------------------------------------------------------------------------------
AGGREGATE
PRINCIPAL PRINCIPAL
NAME(S) AND ADDRESS(ES) OF REGISTERED HOLDER(S) CERTIFICATE AMOUNT OF AMOUNT
(PLEASE FILL IN, IF BLANK) NUMBER(S)* OLD NOTE(S) TENDERED**
- -------------------------------------------------------------------------------------------
<S> <C> <C> <C>
----------------------------------------------
----------------------------------------------
----------------------------------------------
TOTAL
- -------------------------------------------------------------------------------------------
</TABLE>
* Need not be completed if Old Notes are being tendered by book-entry
transfer.
** Unless otherwise indicated in this column, a holder will be deemed to
have tendered ALL of the Old Notes represented by the Old Notes
indicated in column 2. See Instruction 2. Old Notes tendered hereby must
be in denominations of principal amount of $1,000 and any integral
multiple thereof. See Instruction 1.
[_] CHECK HERE IF TENDERED OLD NOTES ARE BEING DELIVERED BY BOOK-ENTRY TRANSFER
MADE TO THE ACCOUNT MAINTAINED BY THE EXCHANGE AGENT WITH THE BOOK-ENTRY
TRANSFER FACILITY AND COMPLETE THE FOLLOWING:
Name of Tendering Institution _______________________________________________
Account Number _______________________ Transaction Code Number _____________
By crediting the Old Notes to the Exchange Agent's account at the Book-Entry
Transfer Facility in accordance with the Book-Entry Transfer Facility's
Automated Tender Offer Program ("ATOP") and by complying with applicable ATOP
procedures with respect to the Exchange Offer, including transmitting to the
Exchange Agent a computer-generated message (an "Agent's Message") in which the
holder of the Old Notes acknowledges and agrees to be bound by the terms of,
and makes the representations and warranties contained in, this Letter, the
participant in the Book-Entry Transfer Facility confirms on behalf of itself
and the beneficial owners of such Old Notes all provisions of this Letter
(including any representations and warranties) applicable to it and such
beneficial owner as fully as if it had completed the information required
herein and executed and transmitted this Letter to the Exchange Agent.
<PAGE>
[_] CHECK HERE IF TENDERED OLD NOTES ARE BEING DELIVERED PURSUANT TO A NOTICE OF
GUARANTEED DELIVERY PREVIOUSLY SENT TO THE EXCHANGE AGENT AND COMPLETE THE
FOLLOWING:
Name(s) of Registered Holder(s) _____________________________________________
Window Ticket Number (if any) _______________________________________________
Date of Execution of Notice of Guaranteed Delivery __________________________
Name of Institution which guaranteed delivery _______________________________
IF DELIVERY BY BOOK-ENTRY TRANSFER, COMPLETE THE FOLLOWING:
Account Number _______________________ Transaction Code Number _____________
Name of Tendering Institution _______________________________________________
[_] CHECK HERE IF TENDERED OLD NOTES ARE ENCLOSED HEREWITH.
[_] CHECK HERE IF YOU ARE A BROKER-DEALER AND WISH TO RECEIVE 10 ADDITIONAL
COPIES OF THE PROSPECTUS AND 10 COPIES OF ANY AMENDMENTS OR SUPPLEMENTS
THERETO.
Name: _______________________________________________________________________
Address: ____________________________________________________________________
_______________________________________________________________________
PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY
Ladies and Gentlemen:
Upon the terms and subject to the conditions of the Exchange Offer, the
undersigned hereby tenders to the Company the aggregate principal amount of Old
Notes indicated above. Subject to, and effective upon, the acceptance for
exchange of the Old Notes tendered hereby, the undersigned hereby sells,
assigns and transfers to, or upon the order of, the Company all right, title
and interest in and to such Old Notes as are being tendered hereby.
The undersigned hereby represents and warrants that the undersigned has full
power and authority to tender, sell, assign and transfer the Old Notes tendered
hereby and that the Company will acquire good and unencumbered title thereto,
free and clear of all liens, restrictions, charges and encumbrances and not
subject to any adverse claim when the same are accepted by the Company. The
undersigned hereby irrevocably constitutes and appoints the Exchange Agent its
agent and attorney-in-fact with full power of substitution, for purposes of
delivering this Letter and the Old Notes to the Company. The Power of Attorney
granted in this paragraph shall be deemed irrevocable from and after the
Expiration Date and coupled with an interest. The undersigned hereby further
represents that any New Notes acquired in exchange for Old Notes tendered
hereby will have been acquired in the ordinary course of business of the person
receiving such New Notes, whether or not such person is the undersigned, that
neither the holder of such Old Notes nor any such other person is engaged in,
or intends to engage in, or has an arrangement or understanding with any person
to participate in, the distribution (within the meaning of the Securities Act
of 1933, as amended (the "Securities Act")) of such New Notes and that neither
the holder of such Old Notes nor any such other person is an "affiliate," as
defined in Rule 405 under the Securities Act, of the Company.
The undersigned also acknowledges that this Exchange Offer is being made by
the Company in reliance on an interpretation by the staff of the Securities and
Exchange Commission (the "SEC"), as set forth in no-action letters issued to
third parties, that the New Notes issued in exchange for the Old Notes pursuant
to the Exchange Offer may be offered for resale, resold and otherwise
transferred by holders thereof (other than any such holder that is an
"affiliate" of the Company within the meaning of Rule 405 under the Securities
Act), without compliance with the registration and prospectus delivery
provisions of the Securities Act, provided that such New Notes are acquired in
the ordinary course of such holders' business and such holders have no
arrangement with any person to participate in the distribution (within the
meaning of the Securities Act) of such New Notes. If the undersigned is not a
broker-dealer, the undersigned represents that it is not engaged in, and does
not intend to engage in, and has no arrangement or understanding with any
person to participate in, a distribution (within the meaning of the Securities
Act) of New Notes. If the undersigned is a broker-dealer that will receive New
Notes for its own account in exchange for Old Notes that were acquired as a
result of market-making activities or other trading activities, it acknowledges
that it will deliver a prospectus meeting the requirements of the Securities
Act in connection with any resale of such New Notes; however, by so
acknowledging and by delivering a prospectus, the undersigned will not be
deemed to admit that it is an "underwriter" within the meaning of the
Securities Act. The undersigned acknowledges that in reliance on an
interpretation by the staff of the SEC, a
<PAGE>
broker-dealer may fulfill his prospectus delivery requirements with respect to
the New Notes (other than a resale of an unsold allotment from the original
sale of the Old Notes) with the Prospectus which constitutes part of this
Exchange Offer.
The undersigned will, upon request, execute and deliver any additional
documents deemed by the Company to be necessary or desirable to complete the
sale, assignment and transfer of the Old Notes tendered hereby. All authority
conferred or agreed to be conferred in this Letter and every obligation of the
undersigned hereunder shall be binding upon the successors, assigns, heirs,
executors, administrators, trustees in bankruptcy and legal representatives of
the undersigned and shall not be affected by, and shall survive, the death or
incapacity of the undersigned. The tender may be withdrawn only in accordance
with the procedures set forth in "The Exchange Offer--Withdrawal Rights"
section of the Prospectus.
Unless otherwise indicated herein in the box entitled "Special Issuance
Instructions" below, please deliver the New Notes (and, if applicable,
substitute certificates representing Old Notes for any Old Notes not
exchanged) in the name of the undersigned or, in the case of a book-entry
delivery of Old Notes, please credit the account indicated above maintained at
the Book-Entry Transfer Facility. Similarly, unless otherwise indicated under
the box entitled "Special Delivery Instructions" below, please send the New
Notes (and, if applicable, substitute certificates representing Old Notes for
any Old Notes not exchanged) to the undersigned at the address shown above in
the box entitled "Description of Old Notes."
THE UNDERSIGNED, BY COMPLETING THE BOX ENTITLED "DESCRIPTION OF OLD NOTES"
ABOVE AND SIGNING THIS LETTER, WILL BE DEEMED TO HAVE TENDERED THE OLD NOTES
AS SET FORTH IN SUCH BOX ABOVE.
SPECIAL ISSUANCE INSTRUCTIONS SPECIAL DELIVERY INSTRUCTIONS
(SEE INSTRUCTIONS 3 AND 4)
(SEE INSTRUCTIONS 3 AND 4)
To be completed ONLY if To be completed ONLY if
certificates for Old Notes not certificates for Old Notes not
exchanged and/or New Notes are to exchanged and/or New Notes are to
be issued in the name of someone be sent to someone other than the
other than the person or persons person or persons whose
whose signature(s) appear(s) on signature(s) appear(s) on this
the Letter below, or if Old Notes Letter below or to such person or
delivered by book-entry transfer persons at an address other than
which are not accepted for shown in the box entitled
exchange are to be returned by "Description of Old Notes" on
credit to an account maintained this Letter above.
at the Book-Entry Transfer
Facility other than the account
indicated above.
Mail: New Notes and/or Old Notes
to:
Name(s)...........................
(PLEASE TYPE OR PRINT)
Issue: New Notes and/or Old
Notes to:
..................................
Name(s)........................... (PLEASE TYPE OR PRINT)
(PLEASE TYPE OR PRINT)
Address...........................
.................................. ..................................
(PLEASE TYPE OR PRINT)
(ZIP CODE)
Address...........................
..................................
(ZIP CODE)
(COMPLETE SUBSTITUTE FORM W-9)
[_] Credit unexchanged Old Notes
delivered by book-entry
transfer to the Book-Entry
Transfer Facility account set
forth below.
__________________________________
(BOOK-ENTRY TRANSFER FACILITY
ACCOUNT NUMBER, IF APPLICABLE)
IMPORTANT: THIS LETTER OR A FACSIMILE HEREOF OR AN AGENT'S MESSAGE IN LIEU
THEREOF (TOGETHER WITH THE CERTIFICATES FOR OLD NOTES OR A BOOK-ENTRY
CONFIRMATION AND ALL OTHER REQUIRED DOCUMENTS OR THE NOTICE OF GUARANTEED
DELIVERY) MUST BE RECEIVED BY THE EXCHANGE AGENT PRIOR TO 5:00 P.M., NEW YORK
CITY TIME, ON THE EXPIRATION DATE.
PLEASE READ THIS ENTIRE LETTER OF TRANSMITTAL
CAREFULLY BEFORE COMPLETING ANY BOX ABOVE.
<PAGE>
PLEASE SIGN HERE
(TO BE COMPLETED BY ALL TENDERING HOLDERS)
(COMPLETE ACCOMPANYING SUBSTITUTE FORM W-9 ON REVERSE SIDE)
Dated:
x ..................... ............. , 1997
x ..................... ............. , 1997
SIGNATURE(S) OF DATE
OWNER
Area Code and Telephone Number...............
This Letter must be signed by the registered
holder(s) as the name(s) appear(s) on the
certificate(s) for the Old Notes hereby tendered or
on a security position listing or by any person(s)
authorized to become registered holder(s) by
endorsements and documents transmitted herewith. If
signature is by a trustee, executor, administrator,
guardian, officer or other person acting in a
fiduciary or representative capacity, please set
forth full title. See Instruction 3.
Name(s):.....................................
.............................................
(PLEASE TYPE OR PRINT)
Capacity:....................................
Address:.....................................
.............................................
(INCLUDING ZIP CODE)
SIGNATURE GUARANTEE
(IF REQUIRED BY INSTRUCTION 3)
Signature(s) Guaranteed by an Eligible
Institution:
................................
(AUTHORIZED SIGNATURE)
.............................................
(TITLE)
.............................................
(NAME AND FIRM)
Dated:
<PAGE>
INSTRUCTIONS
FORMING PART OF THE TERMS AND CONDITIONS OF THE EXCHANGE OFFER FOR THE
10% SENIOR NOTES DUE 2007 IN EXCHANGE FOR THE
10% SERIES B SENIOR NOTES DUE 2007 OF NTL INCORPORATED
1. DELIVERY OF THIS LETTER AND NOTES; GUARANTEED DELIVERY PROCEDURES.
This Letter is to be completed by holders (which term, for purposes of the
Exchange Offer, includes any participant in the Book-Entry Transfer Facility
system whose name appears on a security position listing as the holder of such
Old Notes) either if certificates are to be forwarded herewith or if tenders
are to be made pursuant to the procedures for delivery by book-entry transfer
set forth in the Prospectus under "The Exchange Offer--Book-Entry Transfer" and
an Agent's Message is not delivered. Tenders by book-entry transfer may also be
made by delivering an Agent's Message in lieu of this Letter. The term "Agent's
Message" means a message, transmitted by the Book-Entry Transfer Facility to
and received by the Exchange Agent and forming a part of a Book-Entry
Confirmation, which states that the Book-Entry Transfer Facility has received
an express acknowledgment from the tendering Participant, which acknowledgment
states that such Participant has received and agrees to be bound by, and makes
the representations and warranties contained in, this Letter and that the
Company may enforce this Letter against such Participant. Certificates for all
physically tendered Old Notes, or Book-Entry Confirmation, as the case may be,
as well as a properly completed and duly executed Letter (or facsimile hereof
or Agent's Message in lieu thereof) and any other documents required by this
Letter, must be received by the Exchange Agent at the address set forth herein
on or prior to the Expiration Date, or the tendering holder must comply with
the guaranteed delivery procedures set forth below. Old Notes tendered hereby
must be in denominations of principal amount of $1,000 and any integral
multiple thereof.
Holders whose certificates for Old Notes are not immediately available or who
cannot deliver their certificates and all other required documents to the
Exchange Agent on or prior to the Expiration Date, or who cannot complete the
procedure for book-entry transfer on a timely basis, may tender their Old Notes
pursuant to the guaranteed delivery procedures set forth in the Prospectus
under "The Exchange Offer--Guaranteed Delivery Procedures." Pursuant to such
procedures, (i) such tender must be made through an Eligible Institution, (ii)
prior to the Expiration Date, the Exchange Agent must receive from such
Eligible Institution a properly completed and duly executed Notice of
Guaranteed Delivery, substantially in the form provided by the Company (by
telegram, telex, facsimile transmission, mail or hand delivery), setting forth
the name and address of the holder of Old Notes and the amount of Old Notes
tendered, stating that the tender is being made thereby and guaranteeing that
within five New York Stock Exchange ("NYSE") trading days after the date of
execution of the Notice of Guaranteed Delivery, the certificates for all
physically tendered Old Notes, or a Book-Entry Confirmation, together with a
properly completed and duly executed Letter (or facsimile thereof or Agent's
Message in lieu thereof) with any required signature guarantees and any other
documents required by the Letter will be deposited by the Eligible Institution
with the Exchange Agent, and (iii) the certificates for all physically tendered
Old Notes, in the proper form for transfer, or Book-Entry Confirmation, as the
case may be, together with a properly completed and duly executed Letter (or
facsimile thereof or Agent's Message in lieu thereof) with any required
signature guarantees and all other documents required by this Letter, are
received by the Exchange Agent within five NYSE trading days after the date of
execution of the Notice of Guaranteed Delivery.
The method of delivery of this Letter, the Old Notes and all other required
documents is at the election and risk of the tendering holders, but the
delivery will be deemed made only when actually received or confirmed by the
Exchange Agent. If Old Notes are sent by mail, it is suggested that the mailing
be made sufficiently in advance of the Expiration Date to permit delivery to
the Exchange Agent prior to 5:00 p.m., New York City time, on the Expiration
Date.
See the Prospectus under "The Exchange Offer."
2. PARTIAL TENDERS (NOT APPLICABLE TO HOLDERS WHO TENDER BY BOOK-ENTRY
TRANSFER).
If less than all of the Old Notes evidenced by a submitted certificate are to
be tendered, the tendering holder(s) should fill in the aggregate principal
amount of Old Notes to be tendered in the box above entitled "Description of
Old Notes--Principal Amount Tendered." A reissued certificate representing the
balance of nontendered Old Notes will be sent to such tendering holder, unless
otherwise provided in the appropriate box on this letter, promptly after the
Expiration Date. ALL OF THE OLD NOTES DELIVERED TO THE EXCHANGE AGENT WILL BE
DEEMED TO HAVE BEEN TENDERED UNLESS OTHERWISE INDICATED.
3. SIGNATURES ON THIS LETTER; BOND POWERS AND ENDORSEMENTS; GUARANTEE OF
SIGNATURES.
If this Letter is signed by the Holder of the Old Notes tendered hereby, the
signature must correspond exactly with the name as written on the face of the
certificates or on the Book-Entry Transfer Facility's security position listing
as the holder of such Old Notes without any change whatsoever.
<PAGE>
If any tendered Old Notes are owned of record by two or more joint owners,
all of such owners must sign this Letter.
If any tendered Old Notes are registered in different names on several
certificates, it will be necessary to complete, sign and submit as many
separate copies of this Letter as there are different registrations of
certificates.
When this Letter is signed by the registered holder or holders of the Old
Notes specified herein and tendered hereby, no endorsements of certificates or
separate bond powers are required. If, however, the New Notes are to be issued,
or any untendered Old Notes are to be reissued, to a person other than the
registered holder, then endorsements of any certificates transmitted hereby or
separate bond powers are required. Signatures on such certificate(s) or bond
powers must be guaranteed by a participant in a securities transfer association
recognized signature program.
If this Letter is signed by a person other than the registered holder or
holders of any certificate(s) specified herein, such certificate(s) must be
endorsed or accompanied by appropriate bond powers, in either case signed
exactly as the name or names of the registered holder or holders appear(s) on
the certificate(s) and signatures on such certificate(s) or bond powers must be
guaranteed by an Eligible Institution.
If this Letter or any certificates or bond powers are signed by trustees,
executors, administrators, guardians, attorneys-in-fact, officers of
corporations or others acting in a fiduciary or representative capacity, such
persons should so indicate when signing, and, unless waived by the Company,
proper evidence satisfactory to the Company of their authority to so act must
be submitted.
ENDORSEMENTS ON CERTIFICATES FOR OLD NOTES OR SIGNATURES ON BOND POWERS
REQUIRED BY THIS INSTRUCTION 3 MUST BE GUARANTEED BY A FIRM WHICH IS A MEMBER
OF A REGISTERED NATIONAL SECURITIES EXCHANGE OR A MEMBER OF THE NATIONAL
ASSOCIATION OF SECURITIES DEALERS, INC. OR BY A COMMERCIAL BANK OR TRUST
COMPANY HAVING AN OFFICE OR CORRESPONDENT IN THE UNITED STATES (AN "ELIGIBLE
INSTITUTION").
SIGNATURES ON THIS LETTER NEED NOT BE GUARANTEED BY AN ELIGIBLE INSTITUTION,
PROVIDED THE OLD NOTES ARE TENDERED: (I) BY A REGISTERED HOLDER OF OLD NOTES
WHO HAS NOT COMPLETED THE BOX ENTITLED "SPECIAL ISSUANCE INSTRUCTIONS" OR
"SPECIAL DELIVERY INSTRUCTIONS" ON THIS LETTER OR (II) FOR THE ACCOUNT OF AN
ELIGIBLE INSTITUTION.
4. SPECIAL ISSUANCE AND DELIVERY INSTRUCTION.
Tendering holders of Old Notes should indicate in the applicable box the name
and address to which New Notes issued pursuant to the Exchange Offer and/or
substitute certificates evidencing Old Notes not exchanged are to be issued or
sent, if different from the name or address of the person signing this Letter.
In the case of issuance in a different name, the employer identification or
social security number of the person named must also be indicated. Holders
tendering Old Notes by book-entry transfer may request that Old Notes not
exchanged be credited to such account maintained at the Book-Entry Transfer
Facility as such holder may designate hereon. If no such instructions are
given, such Old Notes not exchanged will be returned to the name or address of
the person signing this Letter.
5. TAX IDENTIFICATION NUMBER.
Federal income tax law generally requires that a tendering holder whose Old
Notes are accepted for exchange must provide the Company (as payor) with such
holder's correct Taxpayer Identification Number ("TIN") on Substitute Form W-9
below, which in the case of a tendering holder who is an individual, is his or
her social security number. If the Company is not provided with the current TIN
or an adequate basis for an exemption, such tendering holder may be subject to
a $50 penalty imposed by the Internal Revenue Service. In addition, delivery to
such tendering holder of New Notes may be subject to backup withholding in an
amount equal to 31% of all reportable payments made after the exchange. If
withholding results in an overpayment for taxes, a refund may be obtained.
Exempt holders of Old Notes (including, among others, all corporations and
certain foreign individuals) are not subject to these backup withholding and
reporting requirements. See the enclosed Guidelines of Certification of
Taxpayer Identification Number on Substitute Form W-9 (the "W-9 Guidelines")
for additional instructions.
To prevent backup withholding, each tendering holder of Old Notes must
provide its correct TIN by completing the "Substitute Form W-9" set forth
below, certifying that the TIN provided is correct (or that such holder is
awaiting a TIN) and that (i) the holder is exempt from backup withholding, (ii)
the holder has not been notified by the Internal Revenue Service that such
holder is subject to a backup withholding as a result of a failure to report
all interest or dividends or (iii) the Internal Revenue Service has notified
the holder that such holder is no longer subject to backup withholding. If the
tendering holder of Old Notes is a nonresident alien or foreign entity not
subject to backup withholding, such holder must give the Company a completed
Form W-8, Certificate of Foreign Status. These forms may be obtained from the
Exchange Agent. If the Old Notes are in more than one name or are not in the
name of the
<PAGE>
actual owner, such holder should consult the W-9 Guidelines for information on
which the TIN to report. If such holder does not have a TIN, such holder should
consult the W-9 Guidelines for instructions on applying for a TIN, check the
box in Part 2 of the Substitute Form W-9 and write "applied for" in lieu of its
TIN. Note: Checking this box and writing "applied for" on the form means that
such holder has already applied for a TIN or that such holder intends to apply
for one in the near future. If such holder does not provide its TIN to the
Company within 60 days, backup withholding will begin and continue until such
holder furnishes its TIN to the Company.
6. TRANSFER TAXES.
The Company will pay all transfer taxes, if any, applicable to the transfer
of Old Notes to it or its order pursuant to the Exchange Offer. If, however,
New Notes and/or substitute Old Notes not exchanged are to be delivered to, or
are to be registered or issued in the name of, any person other than the
registered holder of the Old Notes tendered hereby, or if tendered Old Notes
are registered in the name of any person other than the person signing this
Letter, or if a transfer tax is imposed for any reason other than the transfer
of Old Notes to the Company or its order pursuant to the Exchange Offer, the
amount of any such transfer taxes (whether imposed on the registered holder or
any other person) will be payable by the tendering holder. If satisfactory
evidence of payment of such taxes or exemption therefrom is not submitted
herewith, the amount of such transfer taxes will be billed directly to such
tendering holder.
7. WAIVER OF CONDITIONS.
The Company reserves the absolute right to waive satisfaction of any or all
conditions enumerated in the Prospectus.
8. NO CONDITIONAL TENDERS.
No alternative, conditional, irregular or contingent tenders will be
accepted. All tendering holders of Old Notes, by execution of this Letter or an
Agent's Message in lieu thereof, shall waive any right to receive notice of the
acceptance of their Old Notes for exchange.
Neither the Company, the Exchange Agent nor any other person is obligated to
give notice of any defect or irregularity with respect to any tender of Old
Notes nor shall any of them incur any liability for failure to give any such
notice.
9. MUTILATED, LOST, STOLEN OR DESTROYED OLD NOTES.
Any holder whose Old Notes have been mutilated, lost, stolen or destroyed
should contact the Exchange Agent at the address indicated above for further
instructions.
10. REQUESTS FOR ASSISTANCE OR ADDITIONAL COPIES.
Questions relating to the procedure for tendering, as well as requests for
additional copies of the Prospectus and this Letter, may be directed to the
Exchange Agent, at the address and telephone number indicated above.
<PAGE>
TO BE COMPLETED BY ALL TENDERING HOLDERS
(SEE INSTRUCTION 5)
PAYOR'S NAME: NTL INCORPORATED
PART 1--PLEASE PROVIDE YOUR
TIN IN THE BOX AT RIGHT AND TIN: _________________
CERTIFY BY SIGNING AND (SOCIAL SECURITY
DATING BELOW. NUMBER OR
EMPLOYER IDENTIFICATION
NUMBER)
SUBSTITUTE
FORM W-9
DEPARTMENT OF
THE TREASURY
INTERNAL --------------------------------------------------------
REVENUE PART 2--TIN APPLIED FOR [_]
SERVICE --------------------------------------------------------
PAYOR'S REQUEST FOR TAXPAYER IDENTIFICATION NUMBER
("TIN") AND CERTIFICATION
CERTIFICATION: UNDER THE PENALTIES OF PERJURY, I
CERTIFY THAT
(1) the number shown on this form is my correct
Taxpayer Identification Number (or I am waiting
for a number to be issued to me).
(2) I am not subject to backup withholding either
because: (a) I am exempt from backup withholding,
or (b) I have not been notified by the Internal
Revenue Service (the "IRS") that I am subject to
backup withholding as a result of a failure to
report all interest or dividends, or (c) the IRS
has notified me that I am no longer subject to
backup withholding, and
(3) any other information provided on this form is
true and correct.
SIGNATURE....................... DATE................
- --------------------------------------------------------------------------------
You must cross out item (2) of the above certification if you have been
notified by the IRS that you are subject to backup withholding because of
underreporting of interest or dividends on your tax return and you have not
been notified by the IRS that you are no longer subject to backup
withholding.
YOU MUST COMPLETE THE FOLLOWING CERTIFICATE IF YOU CHECKED THE BOX
IN PART 2 OF SUBSTITUTE FORM W-9
CERTIFICATE OF AWAITING TAXPAYER IDENTIFICATION NUMBER
I certify under penalties of perjury that a Taxpayer Identification Number
has not been issued to me, and either (a) I have mailed or delivered an
application to receive a Taxpayer Identification Number to the appropriate
Internal Revenue Service Center or Social Security Administrative Office or
(b) I intend to mail or deliver an application in the near future. I
understand that if I do not provide a Taxpayer Identification Number by the
time of the exchange, 31 percent of all reportable payments made to me
thereafter will be withheld until I provide a number.
----------------------------------------- -------------------
SIGNATURE DATE
<PAGE>
EXHIBIT 99.2
LETTER OF TRANSMITTAL
NTL INCORPORATED
OFFER FOR ALL OUTSTANDING
13% SENIOR REDEEMABLE EXCHANGEABLE PREFERRED STOCK
IN EXCHANGE FOR
13% SERIES B SENIOR REDEEMABLE EXCHANGEABLE PREFERRED STOCK
PURSUANT TO THE PROSPECTUS, DATED . , 1997
THIS EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M. NEW YORK CITY TIME, ON . ,
1997, UNLESS EXTENDED (THE "EXPIRATION DATE"). TENDERS MAY BE WITHDRAWN
PRIOR TO 5:00 P.M., NEW YORK CITY TIME, ON THE EXPIRATION DATE.
Delivery To: Continental Stock Transfer & Trust Company, as Exchange Agent
By Facsimile: By Mail, By Hand and Overnight Courier: Confirm by Telephone:
(212) 509-5150 Continental Stock Transfer & (212) 509-4000 Ext. 535
Trust Company (for Eligible
2 Broadway, 19th Floor Institutions only)
New York, New York 10004
Delivery of this instrument to an address other than as set forth above, or
transmission of this Letter of Transmittal via facsimile other than as set
forth above, will not constitute a valid delivery of this Letter of
Transmittal.
The undersigned acknowledges that he or she has received and reviewed a
prospectus dated . , 1997 (the "Prospectus") of NTL Incorporated (formerly
known as International CableTel Incorporated), a Delaware corporation (the
"Company"), and this letter of transmittal (the "Letter"), which together
constitute the Company's offer (the "Exchange Offer") to exchange an aggregate
principal amount of up to 100,000 shares of 13% Series B Senior Redeemable
Exchangeable Preferred Stock (the "New Preferred Stock") of the Company for a
like number of shares of the issued and outstanding 13% Senior Redeemable
Exchangeable Preferred Stock (the "Old Preferred Stock" and, together with the
New Preferred Stock, the "Preferred Stock") of the Company from the holders
thereof. Capitalized terms used but not defined herein have the meanings given
to them in the Prospectus.
For each share of Old Preferred Stock accepted for exchange and not validly
withdrawn, the holder of such Old Preferred Stock will receive a share of New
Preferred Stock. If the Exchange Offer is not consummated by July 22, 1997,
special dividends will accrue (in addition to dividends (if any) on the Old
Preferred Stock) from and including July 23, 1997. Such additional special
dividends (the "Special Dividends") will be payable, at the option of the
Company, in cash, in additional shares of Preferred Stock or in any combination
of cash or such shares, quarterly in arrears each February 15, May 15, August
15 and November 15, commencing May 15, 1997, to holders of record on the
immediately preceding February 1, May 1, August 1 and November 1, respectively,
at a rate per annum equal to 0.50% of the liquidation preference of the Old
Preferred Stock (determined daily). The aggregate amount of Special Dividends
payable pursuant to the above provisions will in no event exceed 1.50% per
annum of the liquidation preference (determined daily). Upon the consummation
of the Exchange Offer after July 22, 1997, the Special Dividends payable on the
Old Preferred Stock from the date of such consummation will cease to accrue.
Following the consummation of the Exchange Offer, the dividends (if any)
payable in respect of the Preferred Stock shall revert to those declared by the
Board of Directors of the Company. Holders of Old Preferred Stock accepted for
exchange will be deemed to have waived the right to receive any other payments
or accrued dividends on the Old Preferred Stock. The Company reserves the
right, at any time or from time to time, to extend the Exchange Offer at its
discretion, in which event the term "Expiration Date" shall mean the latest
time and date to which the Exchange Offer is extended. The Company shall notify
the holders of the Old Preferred Stock of any extension by means of a press
release or other public announcement prior to 9:00 a.m., New York City time, on
the next business day after the previously scheduled Expiration Date.
This Letter is to be completed by a holder of Old Preferred Stock either if
certificates for such Old Preferred Stock are to be forwarded herewith or if a
tender is to be made by book-entry transfer to the account maintained by the
Exchange Agent at The Depository Trust Company (the "Book-Entry Transfer
Facility") pursuant to the procedures set forth in the Prospectus under "The
Exchange Offer--Book-Entry Transfer" and an Agent's Message is not delivered.
Tenders by book-entry transfer may also be made by delivering an Agent's
Message in lieu of this Letter. The term "Agent's Message" means a message,
transmitted by the Book-Entry Transfer Facility to and received by the Exchange
Agent and forming a part of a Book-Entry Confirmation (as defined below), which
states that the Book-Entry Transfer Facility has received an express
acknowledgment from the tendering Participant, which acknowledgment states that
such
<PAGE>
Participant has received and agrees to be bound by, and makes each of the
representations and warranties contained in, this Letter and that the Company
may enforce this Letter against such Participant. Holders of Old Preferred
Stock whose certificates are not immediately available, or who are unable to
deliver their certificates or confirmation of the book-entry tender of their
Old Preferred Stock into the Exchange Agent's account at the Book-Entry
Transfer Facility (a "Book-Entry Confirmation") and all other documents
required by this Letter to the Exchange Agent on or prior to the Expiration
Date, must tender their Old Preferred Stock according to the guaranteed
delivery procedures set forth in the Prospectus under "The Exchange Offer--
Guaranteed Delivery Procedures." See Instruction 1. Delivery of documents to
the Book-Entry Transfer Facility does not constitute delivery to the Exchange
Agent.
The undersigned has completed the appropriate boxes below and signed this
Letter to indicate the action the undersigned desires to take with respect to
the Exchange Offer.
List below the Old Preferred Stock to which this Letter relates. If the space
provided below is inadequate, the certificate numbers and number of shares of
Old Preferred Stock should be listed on a separate signed schedule affixed
hereto.
DESCRIPTION OF OLD PREFERRED STOCK
<TABLE>
- -------------------------------------------------------------------------------------------
<CAPTION>
1 2 3
- -------------------------------------------------------------------------------------------
AGGREGATE
NUMBER OF
SHARES OF OLD NUMBER OF
NAME(S) AND ADDRESS(ES) OF REGISTERED HOLDER(S) CERTIFICATE PREFERRED SHARES
(PLEASE FILL IN, IF BLANK) NUMBER(S)* STOCK TENDERED**
- -------------------------------------------------------------------------------------------
<S> <C> <C> <C>
----------------------------------------------
----------------------------------------------
----------------------------------------------
TOTAL
- -------------------------------------------------------------------------------------------
</TABLE>
* Need not be completed if Old Preferred Stock is being tendered by book-
entry transfer.
** Unless otherwise indicated in this column, a holder will be deemed to
have tendered ALL of the Old Preferred Stock represented by the Old
Preferred Stock indicated in column 2. See Instruction 2.
[_] CHECK HERE IF TENDERED OLD PREFERRED STOCK IS BEING DELIVERED BY BOOK-ENTRY
TRANSFER MADE TO THE ACCOUNT MAINTAINED BY THE EXCHANGE AGENT WITH THE BOOK-
ENTRY TRANSFER FACILITY AND COMPLETE THE FOLLOWING:
Name of Tendering Institution _______________________________________________
Account Number _______________________ Transaction Code Number _____________
By crediting the Old Preferred Stock to the Exchange Agent's account at the
Book-Entry Transfer Facility in accordance with the Book-Entry Transfer
Facility's Automated Tender Offer Program ("ATOP") and by complying with
applicable ATOP procedures with respect to the Exchange Offer, including
transmitting to the Exchange Agent a computer-generated message (an "Agent's
Message") in which the holder of the Old Preferred Stock acknowledges and
agrees to be bound by the terms of, and makes the representations and
warranties contained in, this Letter, the participant in the Book-Entry
Transfer Facility confirms on behalf of itself and the beneficial owners of
such Old Preferred Stock all provisions of this Letter (including any
representations and warranties) applicable to it and such beneficial owner as
fully as if it had completed the information required herein and executed and
transmitted this Letter to the Exchange Agent.
<PAGE>
[_]CHECK HERE IF TENDERED OLD PREFERRED STOCK IS BEING DELIVERED PURSUANT TO A
NOTICE OF GUARANTEED DELIVERY PREVIOUSLY SENT TO THE EXCHANGE AGENT AND
COMPLETE THE FOLLOWING:
Name(s) of Registered Holder(s) _____________________________________________
Window Ticket Number (if any) _______________________________________________
Date of Execution of Notice of Guaranteed Delivery __________________________
Name of Institution which guaranteed delivery _______________________________
IF DELIVERY BY BOOK-ENTRY TRANSFER, COMPLETE THE FOLLOWING:
Account Number _______________________ Transaction Code Number _____________
Name of Tendering Institution _______________________________________________
[_]CHECK HERE IF TENDERED OLD PREFERRED STOCK ARE ENCLOSED HEREWITH.
[_]CHECK HERE IF TENDERED OLD PREFERRED STOCK ARE ENCLOSED HEREWITH.
[_]CHECK HERE IF YOU ARE A BROKER-DEALER AND WISH TO RECEIVE 10 ADDITIONAL
COPIES OF THE PROSPECTUS AND 10 COPIES OF ANY AMENDMENTS OR SUPPLEMENTS
THERETO.
Name: _______________________________________________________________________
Address: ____________________________________________________________________
_______________________________________________________________________
PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY
Ladies and Gentlemen:
Upon the terms and subject to the conditions of the Exchange Offer, the
undersigned hereby tenders to the Company the aggregate number of shares of Old
Preferred Stock indicated above. Subject to, and effective upon, the acceptance
for exchange of the Old Preferred Stock tendered hereby, the undersigned hereby
sells, assigns and transfers to, or upon the order of, the Company all right,
title and interest in and to such Old Preferred Stock as are being tendered
hereby.
The undersigned hereby represents and warrants that the undersigned has full
power and authority to tender, sell, assign and transfer the Old Preferred
Stock tendered hereby and that the Company will acquire good and unencumbered
title thereto, free and clear of all liens, restrictions, charges and
encumbrances and not subject to any adverse claim when the same are accepted by
the Company. The undersigned hereby irrevocably constitutes and appoints the
Exchange Agent its agent and attorney-in-fact with full power of substitution,
for purposes of delivering this Letter and the Old Preferred Stock to the
Company. The Power of Attorney granted in this paragraph shall be deemed
irrevocable from and after the Expiration Date and coupled with an interest.
The undersigned hereby further represents that any New Preferred Stock acquired
in exchange for Old Preferred Stock tendered hereby will have been acquired in
the ordinary course of business of the person receiving such New Preferred
Stock, whether or not such person is the undersigned, that neither the holder
of such Old Preferred Stock nor any such other person is engaged in, or intends
to engage in, or has an arrangement or understanding with any person to
participate in, the distribution (within the meaning of the Securities Act of
1933, as amended (the "Securities Act")) of such New Preferred Stock and that
neither the holder of such Old Preferred Stock nor any such other person is an
"affiliate," as defined in Rule 405 under the Securities Act, of the Company.
The undersigned also acknowledges that this Exchange Offer is being made by
the Company in reliance on an interpretation by the staff of the Securities and
Exchange Commission (the "SEC"), as set forth in no-action letters issued to
third parties, that the New Preferred Stock issued in exchange for the Old
Preferred Stock pursuant to the Exchange Offer may be offered for resale,
resold and otherwise transferred by holders thereof (other than any such holder
that is an "affiliate" of the Company within the meaning of Rule 405 under the
Securities Act), without compliance with the registration and prospectus
delivery provisions of the Securities Act, provided that such New Preferred
Stock is acquired in the ordinary course of such holders' business and such
holders have no arrangement with any person to participate in the distribution
(within the meaning of the Securities Act) of such New Preferred Stock. If the
undersigned is not a broker-dealer, the undersigned represents that it is not
engaged in, and does not intend to engage in, and has no arrangement or
understanding with any person to participate in, a distribution (within the
meaning of the Securities Act) of New Preferred Stock. If the undersigned is a
broker-dealer that will receive New Preferred Stock for its own account in
exchange for Old Preferred Stock that were acquired as a result of market-
making activities or other trading activities, it acknowledges that it will
deliver a prospectus meeting the requirements of the Securities Act in
connection with any resale of such New Preferred Stock; however, by so
acknowledging and by delivering a prospectus, the undersigned will not be
deemed to admit that it is an "underwriter" within the meaning of the
Securities Act. The undersigned acknowledges that in reliance on an
interpretation by the staff of the SEC, a broker-dealer may fulfill his
prospectus delivery requirements with respect to the New Preferred Stock (other
than a resale of an unsold allotment from the original sale of the Old
Preferred Stock) with the Prospectus which constitutes part of this Exchange
Offer.
<PAGE>
The undersigned will, upon request, execute and deliver any additional
documents deemed by the Company to be necessary or desirable to complete the
sale, assignment and transfer of the Old Preferred Stock tendered hereby. All
authority conferred or agreed to be conferred in this Letter and every
obligation of the undersigned hereunder shall be binding upon the successors,
assigns, heirs, executors, administrators, trustees in bankruptcy and legal
representatives of the undersigned and shall not be affected by, and shall
survive, the death or incapacity of the undersigned. The tender may be
withdrawn only in accordance with the procedures set forth in "The Exchange
Offer--Withdrawal Rights" section of the Prospectus.
Unless otherwise indicated herein in the box entitled "Special Issuance
Instructions" below, please deliver the New Preferred Stock (and, if
applicable, substitute certificates representing Old Preferred Stock for any
Old Preferred Stock not exchanged) in the name of the undersigned or, in the
case of a book-entry delivery of Old Preferred Stock, please credit the
account indicated above maintained at the Book-Entry Transfer Facility.
Similarly, unless otherwise indicated under the box entitled "Special Delivery
Instructions" below, please send the New Preferred Stock (and, if applicable,
substitute certificates representing Old Preferred Stock for any Old Preferred
Stock not exchanged) to the undersigned at the address shown above in the box
entitled "Description of Old Preferred Stock."
THE UNDERSIGNED, BY COMPLETING THE BOX ENTITLED "DESCRIPTION OF OLD
PREFERRED STOCK" ABOVE AND SIGNING THIS LETTER, WILL BE DEEMED TO HAVE
TENDERED THE OLD PREFERRED STOCK AS SET FORTH IN SUCH BOX ABOVE.
SPECIAL ISSUANCE INSTRUCTIONS SPECIAL DELIVERY INSTRUCTIONS
(SEE INSTRUCTIONS 3 AND 4) (SEE INSTRUCTIONS 3 AND 4)
To be completed ONLY if To be completed ONLY if
certificates for Old Preferred certificates for Old Preferred
Stock not exchanged and/or New Stock not exchanged and/or New
Preferred Stock is to be issued Preferred Stock is to be sent to
in the name of someone other than someone other than the person or
the person or persons whose persons whose signature(s)
signature(s) appear(s) on the appear(s) on this Letter below or
Letter below, or if Old Preferred to such person or persons at an
Stock delivered by book-entry address other than shown in the
transfer which are not accepted box entitled "Description of Old
for exchange are to be returned Preferred Stock" on this Letter
by credit to an account above.
maintained at the Book-Entry
Transfer Facility other than the
account indicated above.
Mail: New Preferred Stock and/or
Old Preferred Stock to:
Issue: New Preferred Stock Name(s)...........................
and/or Old Preferred Stock to: (PLEASE TYPE OR PRINT)
Name(s)........................... ..................................
(PLEASE TYPE OR PRINT) (PLEASE TYPE OR PRINT)
.................................. Address...........................
(PLEASE TYPE OR PRINT)
..................................
Address........................... (ZIP CODE)
..................................
(ZIP CODE)
(COMPLETE SUBSTITUTE FORM W-9)
[_] Credit unexchanged Old
Preferred Stock delivered by
book-entry transfer to the
Book-Entry Transfer Facility
account set forth below.
__________________________________
(BOOK-ENTRY TRANSFER FACILITY
ACCOUNT NUMBER, IF APPLICABLE)
IMPORTANT: THIS LETTER OR A FACSIMILE HEREOF OR AN AGENT'S MESSAGE IN LIEU
THEREOF (TOGETHER WITH THE CERTIFICATES FOR OLD PREFERRED STOCK OR A BOOK-
ENTRY CONFIRMATION AND ALL OTHER REQUIRED DOCUMENTS OR THE NOTICE OF
GUARANTEED DELIVERY) MUST BE RECEIVED BY THE EXCHANGE AGENT PRIOR TO 5:00
P.M., NEW YORK CITY TIME, ON THE EXPIRATION DATE.
PLEASE READ THIS ENTIRE LETTER OF TRANSMITTAL
CAREFULLY BEFORE COMPLETING ANY BOX ABOVE.
<PAGE>
PLEASE SIGN HERE
(TO BE COMPLETED BY ALL TENDERING HOLDERS)
(COMPLETE ACCOMPANYING SUBSTITUTE FORM W-9 ON REVERSE SIDE)
Dated:
x ..................... ............. , 1997
x ..................... ............. , 1997
SIGNATURE(S) OF DATE
OWNER
Area Code and Telephone Number...............
This Letter must be signed by the registered
holder(s) as the name(s) appear(s) on the
certificate(s) for the Old Preferred Stock hereby
tendered or on a security position listing or by any
person(s) authorized to become registered holder(s)
by endorsements and documents transmitted herewith.
If signature is by a trustee, executor,
administrator, guardian, officer or other person
acting in a fiduciary or representative capacity,
please set forth full title. See Instruction 3.
Name(s):.....................................
.............................................
(PLEASE TYPE OR PRINT)
Capacity:....................................
Address:.....................................
.............................................
(INCLUDING ZIP CODE)
SIGNATURE GUARANTEE
(IF REQUIRED BY INSTRUCTION 3)
Signature(s) Guaranteed by
an Eligible Institution: ....................
(AUTHORIZED SIGNATURE)
.............................................
(TITLE)
.............................................
(NAME AND FIRM)
Dated:
<PAGE>
INSTRUCTIONS
FORMING PART OF THE TERMS AND CONDITIONS OF THE EXCHANGE OFFER FOR THE
13% SENIOR REDEEMABLE EXCHANGEABLE PREFERRED STOCK IN EXCHANGE FOR THE
13% SERIES B SENIOR REDEEMABLE EXCHANGEABLE PREFERRED STOCK OF NTL INCORPORATED
1. DELIVERY OF THIS LETTER AND PREFERRED STOCK; GUARANTEED DELIVERY PROCEDURES.
This Letter is to be completed by holders (which term, for purposes of the
Exchange Offer, includes any participant in the Book-Entry Transfer Facility
system whose name appears on a security position listing as the holder of such
Old Preferred Stock) either if certificates are to be forwarded herewith or if
tenders are to be made pursuant to the procedures for delivery by book-entry
transfer set forth in the Prospectus under "The Exchange Offer--Book-Entry
Transfer" and an Agent's Message is not delivered. Tenders by book-entry
transfer may also be made by delivering an Agent's Message in lieu of this
Letter. The term "Agent's Message" means a message, transmitted by the Book-
Entry Transfer Facility to and received by the Exchange Agent and forming a
part of a Book-Entry Confirmation, which states that the Book-Entry Transfer
Facility has received an express acknowledgment from the tendering Participant,
which acknowledgment states that such Participant has received and agrees to be
bound by, and makes the representations and warranties contained in, this
Letter and that the Company may enforce this Letter against such Participant.
Certificates for all physically tendered Old Preferred Stock, or Book-Entry
Confirmation, as the case may be, as well as a properly completed and duly
executed Letter (or facsimile hereof or Agent's Message in lieu thereof) and
any other documents required by this Letter, must be received by the Exchange
Agent at the address set forth herein on or prior to the Expiration Date, or
the tendering holder must comply with the guaranteed delivery procedures set
forth below.
Holders whose certificates for Old Preferred Stock are not immediately
available or who cannot deliver their certificates and all other required
documents to the Exchange Agent on or prior to the Expiration Date, or who
cannot complete the procedure for book-entry transfer on a timely basis, may
tender their Old Preferred Stock pursuant to the guaranteed delivery procedures
set forth in the Prospectus under "The Exchange Offer--Guaranteed Delivery
Procedures." Pursuant to such procedures, (i) such tender must be made through
an Eligible Institution, (ii) prior to the Expiration Date, the Exchange Agent
must receive from such Eligible Institution a properly completed and duly
executed Notice of Guaranteed Delivery, substantially in the form provided by
the Company (by telegram, telex, facsimile transmission, mail or hand
delivery), setting forth the name and address of the holder of Old Preferred
Stock and the amount of Old Preferred Stock tendered, stating that the tender
is being made thereby and guaranteeing that within five New York Stock Exchange
("NYSE") trading days after the date of execution of the Notice of Guaranteed
Delivery, the certificates for all physically tendered Old Preferred Stock, or
a Book-Entry Confirmation, together with a properly completed and duly executed
Letter (or facsimile thereof or Agent's Message in lieu thereof) with any
required signature guarantees and any other documents required by the Letter
will be deposited by the Eligible Institution with the Exchange Agent, and
(iii) the certificates for all physically tendered Old Preferred Stock, in the
proper form for transfer, or Book-Entry Confirmation, as the case may be,
together with a properly completed and duly executed Letter (or facsimile
thereof or Agent's Message in lieu thereof) with any required signature
guarantees and all other documents required by this Letter, are received by the
Exchange Agent within five NYSE trading days after the date of execution of the
Notice of Guaranteed Delivery.
The method of delivery of this Letter, the Old Preferred Stock and all other
required documents is at the election and risk of the tendering holders, but
the delivery will be deemed made only when actually received or confirmed by
the Exchange Agent. If Old Preferred Stock is sent by mail, it is suggested
that the mailing be made sufficiently in advance of the Expiration Date to
permit delivery to the Exchange Agent prior to 5:00 p.m., New York City time,
on the Expiration Date.
See the Prospectus under "The Exchange Offer."
2. PARTIAL TENDERS (NOT APPLICABLE TO HOLDERS WHO TENDER BY BOOK-ENTRY
TRANSFER).
If less than all of the Old Preferred Stock evidenced by a submitted
certificate are to be tendered, the tendering holder(s) should fill in the
aggregate number of shares of Old Preferred Stock to be tendered in the box
above entitled "Description of Old Preferred Stock--Number of Shares Tendered."
A reissued certificate representing the balance of nontendered Old Preferred
Stock will be sent to such tendering holder, unless otherwise provided in the
appropriate box on this letter, promptly after the Expiration Date. ALL OF THE
OLD PREFERRED STOCK DELIVERED TO THE EXCHANGE AGENT WILL BE DEEMED TO HAVE BEEN
TENDERED UNLESS OTHERWISE INDICATED.
3. SIGNATURES ON THIS LETTER; BOND POWERS AND ENDORSEMENTS; GUARANTEE OF
SIGNATURES.
If this Letter is signed by the Holder of the Old Preferred Stock tendered
hereby, the signature must correspond exactly with the name as written on the
face of the certificates or on the Book-Entry Transfer Facility's security
position listing as the holder of such Old Preferred Stock without any change
whatsoever.
<PAGE>
If any tendered Old Preferred Stock is owned of record by two or more joint
owners, all of such owners must sign this Letter.
If any tendered Old Preferred Stock are registered in different names on
several certificates, it will be necessary to complete, sign and submit as many
separate copies of this Letter as there are different registrations of
certificates.
When this Letter is signed by the registered holder or holders of the Old
Preferred Stock specified herein and tendered hereby, no endorsements of
certificates or separate stock powers are required. If, however, the New
Preferred Stock is to be issued, or any untendered Old Preferred Stock is to be
reissued, to a person other than the registered holder, then endorsements of
any certificates transmitted hereby or separate bond powers are required.
Signatures on such certificate(s) or stock powers must be guaranteed by an
Eligible Institution.
If this Letter is signed by a person other than the registered holder or
holders of any certificate(s) specified herein, such certificate(s) must be
endorsed or accompanied by appropriate stock powers, in either case signed
exactly as the name or names of the registered holder or holders appear(s) on
the certificate(s) and signatures on such certificate(s) or stock powers must
be guaranteed by a participant in a securities transfer association recognized
signature program.
If this Letter or any certificates or stock powers are signed by trustees,
executors, administrators, guardians, attorneys-in-fact, officers of
corporations or others acting in a fiduciary or representative capacity, such
persons should so indicate when signing, and, unless waived by the Company,
proper evidence satisfactory to the Company of their authority to so act must
be submitted.
ENDORSEMENTS ON CERTIFICATES FOR OLD PREFERRED STOCK OR SIGNATURES ON STOCK
POWERS REQUIRED BY THIS INSTRUCTION 3 MUST BE GUARANTEED BY A FIRM WHICH IS A
MEMBER OF A REGISTERED NATIONAL SECURITIES EXCHANGE OR A MEMBER OF THE NATIONAL
ASSOCIATION OF SECURITIES DEALERS, INC. OR BY A COMMERCIAL BANK OR TRUST
COMPANY HAVING AN OFFICE OR CORRESPONDENT IN THE UNITED STATES (AN "ELIGIBLE
INSTITUTION").
SIGNATURES ON THIS LETTER NEED NOT BE GUARANTEED BY AN ELIGIBLE INSTITUTION,
PROVIDED THE OLD PREFERRED STOCK IS TENDERED: (I) BY A REGISTERED HOLDER OF OLD
PREFERRED STOCK WHO HAS NOT COMPLETED THE BOX ENTITLED "SPECIAL ISSUANCE
INSTRUCTIONS" OR "SPECIAL DELIVERY INSTRUCTIONS" ON THIS LETTER OR (II) FOR THE
ACCOUNT OF AN ELIGIBLE INSTITUTION.
4. SPECIAL ISSUANCE AND DELIVERY INSTRUCTION.
Tendering holders of Old Preferred Stock should indicate in the applicable
box the name and address to which New Preferred Stock issued pursuant to the
Exchange Offer and/or substitute certificates evidencing Old Preferred Stock
not exchanged are to be issued or sent, if different from the name or address
of the person signing this Letter. In the case of issuance in a different name,
the employer identification or social security number of the person named must
also be indicated. Holders tendering Old Preferred Stock by book-entry transfer
may request that Old Preferred Stock not exchanged be credited to such account
maintained at the Book-Entry Transfer Facility as such holder may designate
hereon. If no such instructions are given, such Old Preferred Stock not
exchanged will be returned to the name or address of the person signing this
Letter.
5. TAX IDENTIFICATION NUMBER.
Federal income tax law generally requires that a tendering holder whose Old
Preferred Stock is accepted for exchange must provide the Company (as payor)
with such holder's correct Taxpayer Identification Number ("TIN") on Substitute
Form W-9 below, which in the case of a tendering holder who is an individual,
is his or her social security number. If the Company is not provided with the
current TIN or an adequate basis for an exemption, such tendering holder may be
subject to a $50 penalty imposed by the Internal Revenue Service. In addition,
delivery to such tendering holder of New Preferred Stock may be subject to
backup withholding in an amount equal to 31% of all reportable payments made
after the exchange. If withholding results in an overpayment for taxes, a
refund may be obtained.
Exempt holders of Old Preferred Stock (including, among others, all
corporations and certain foreign individuals) are not subject to these backup
withholding and reporting requirements. See the enclosed Guidelines of
Certification of Taxpayer Identification Number on Substitute Form W-9 (the "W-
9 Guidelines") for additional instructions.
To prevent backup withholding, each tendering holder of Old Preferred Stock
must provide its correct TIN by completing the "Substitute Form W-9" set forth
below, certifying that the TIN provided is correct (or that such holder is
awaiting a TIN) and that (i) the holder is exempt from backup withholding, (ii)
the holder has not been notified by the Internal Revenue Service that such
holder is subject to a backup withholding as a result of a failure to report
all interest or dividends or (iii) the Internal Revenue Service has notified
the holder that such holder is no longer subject to backup withholding. If the
tendering holder of Old Preferred Stock is a nonresident alien or foreign
entity not subject to backup
<PAGE>
withholding, such holder must give the Company a completed Form W-8,
Certificate of Foreign Status. These forms may be obtained from the Exchange
Agent. If the Old Preferred Stock is in more than one name or are not in the
name of the actual owner, such holder should consult the W-9 Guidelines for
information on which the TIN to report. If such holder does not have a TIN,
such holder should consult the W-9 Guidelines for instructions on applying for
a TIN, check the box in Part 2 of the Substitute Form W-9 and write "applied
for" in lieu of its TIN. Note: Checking this box and writing "applied for" on
the form means that such holder has already applied for a TIN or that such
holder intends to apply for one in the near future. If such holder does not
provide its TIN to the Company within 60 days, backup withholding will begin
and continue until such holder furnishes its TIN to the Company.
6. WAIVER OF CONDITIONS.
The Company reserves the absolute right to waive satisfaction of any or all
conditions enumerated in the Prospectus.
7. NO CONDITIONAL TENDERS.
No alternative, conditional, irregular or contingent tenders will be
accepted. All tendering holders of Old Preferred Stock, by execution of this
Letter or an Agent's Message in lieu thereof, shall waive any right to receive
notice of the acceptance of their Old Preferred Stock for exchange.
Neither the Company, the Exchange Agent nor any other person is obligated to
give notice of any defect or irregularity with respect to any tender of Old
Preferred Stock nor shall any of them incur any liability for failure to give
any such notice.
8. MUTILATED, LOST, STOLEN OR DESTROYED OLD PREFERRED STOCK.
Any holder whose Old Preferred Stock has been mutilated, lost, stolen or
destroyed should contact the Exchange Agent at the address indicated above for
further instructions.
9. REQUESTS FOR ASSISTANCE OR ADDITIONAL COPIES.
Questions relating to the procedure for tendering, as well as requests for
additional copies of the Prospectus and this Letter, may be directed to the
Exchange Agent, at the address and telephone number indicated above.
<PAGE>
TO BE COMPLETED BY ALL TENDERING HOLDERS
(SEE INSTRUCTION 5)
PAYOR'S NAME: NTL INCORPORATED
PART 1--PLEASE PROVIDE YOUR
TIN IN THE BOX AT RIGHT AND TIN: _________________
CERTIFY BY SIGNING AND (SOCIAL SECURITY
DATING BELOW. NUMBER OR
EMPLOYER IDENTIFICATION
NUMBER)
SUBSTITUTE
FORM W-9
DEPARTMENT OF
THE TREASURY
INTERNAL --------------------------------------------------------
REVENUE PART 2--TIN APPLIED FOR [_]
SERVICE --------------------------------------------------------
PAYOR'S REQUEST FOR TAXPAYER IDENTIFICATION NUMBER
("TIN") AND CERTIFICATION
CERTIFICATION: UNDER THE PENALTIES OF PERJURY, I
CERTIFY THAT
(1) the number shown on this form is my correct
Taxpayer Identification Number (or I am waiting
for a number to be issued to me).
(2) I am not subject to backup withholding either
because: (a) I am exempt from backup withholding,
or (b) I have not been notified by the Internal
Revenue Service (the "IRS") that I am subject to
backup withholding as a result of a failure to
report all interest or dividends, or (c) the IRS
has notified me that I am no longer subject to
backup withholding, and
(3) any other information provided on this form is
true and correct.
SIGNATURE....................... DATE................
- --------------------------------------------------------------------------------
You must cross out item (2) of the above certification if you have been
notified by the IRS that you are subject to backup withholding because of
underreporting of interest or dividends on your tax return and you have not
been notified by the IRS that you are no longer subject to backup
withholding.
YOU MUST COMPLETE THE FOLLOWING CERTIFICATE IF YOU CHECKED THE BOX
IN PART 2 OF SUBSTITUTE FORM W-9
CERTIFICATE OF AWAITING TAXPAYER IDENTIFICATION NUMBER
I certify under penalties of perjury that a Taxpayer Identification Number
has not been issued to me, and either (a) I have mailed or delivered an
application to receive a Taxpayer Identification Number to the appropriate
Internal Revenue Service Center or Social Security Administrative Office or
(b) I intend to mail or deliver an application in the near future. I
understand that if I do not provide a Taxpayer Identification Number by the
time of the exchange, 31 percent of all reportable payments made to me
thereafter will be withheld until I provide a number.
----------------------------------------- -------------------
SIGNATURE DATE
