<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON SEPTEMBER 17, 1998
REGISTRATION NO. 333-
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
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FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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NTL INCORPORATED
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
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<S> <C> <C>
DELAWARE 4899 52-1822078
(STATE OR OTHER JURISDICTION OF (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NUMBER)
</TABLE>
110 EAST 59TH STREET
NEW YORK, NEW YORK 10022
(212) 906-8440
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING
AREA CODE, OR 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
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APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after the Registration Statement becomes effective.
If the only securities being registered on this form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. [ ]
If any of the securities being registered on this form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box. [X]
If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ]
If this form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
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CALCULATION OF REGISTRATION FEE
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PROPOSED
AMOUNT PROPOSED MAXIMUM AMOUNT OF
TITLE OF EACH CLASS OF TO BE MAXIMUM AGGREGATE REGISTRATION
SECURITIES TO BE REGISTERED REGISTERED OFFERING PRICE OFFERING PRICE FEE
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<S> <C> <C> <C> <C>
Common Stock Purchase Warrants........ 863,902 Warrants $20.00 $17,278,040 $5,097.02
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Common Stock, par value $0.01 per
share(2)............................ 863,902 Shares(1) $40.75 $35,204,007 $10,385.18
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</TABLE>
(1) Such number represents the number of shares of Common Stock as are initially
issuable upon exercise of the Warrants registered hereby and, pursuant to
Rule 416 under the Securities Act of 1933, such indeterminate number of
shares of Common Stock as may be issued from time to time upon exercise of
the Warrants by reason of adjustment of the exercise price in certain
contingencies outlined in the Prospectus.
(2) Determined pursuant to Rule 457(c) based on the average of the high and low
prices on the Nasdaq Stock Market's National Market on September 15, 1998.
THE REGISTRANT AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES AS
MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL FILE A
FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT
SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF THE
SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a),
MAY DETERMINE.
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<PAGE> 2
NTL INCORPORATED
FORM S-3
CROSS-REFERENCE SHEET
<TABLE>
<CAPTION>
ITEM NUMBER AND CAPTION HEADING IN PROSPECTUS
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<C> <S> <C>
1. Forepart of the Registration Statement and
Outside Front Cover of Prospectus........ Registration Statement Cover; Outside Front
Cover Page of Prospectus
2. Inside Front and Outside Back Cover Pages
of Prospectus............................ Inside Front and Outside Back Cover Pages
of Prospectus; Available Information
3. Summary Information; Risk Factors and Ratio
of Earnings to Fixed Charges............. Prospectus Summary; Risk Factors; Selected
Consolidated Financial Information
4. Use of Proceeds............................ Use of Proceeds
5. Determination of Offering Price............ Determination of Offering Price
6. Dilution................................... Dilution
7. Selling Security Holders................... *
8. Plan of Distribution....................... Registration Statement Cover Page; Plan of
Distribution
9. Description of Securities to be
Registered................................. Outside Front Cover Page of Prospectus;
Description of Warrants, Description of
Capital Stock; Certain U.S. Federal Income
Tax Considerations
10. Interests of Named Experts and Counsel..... Legal Matters; Experts
11. Material Changes........................... Prospectus Summary; Management's Discussion
and Analysis of Results of Operations and
Financial Condition; Business
12. Incorporation of Certain
Information by Reference................. Available Information; Incorporation of
Certain Documents by Reference
13. Disclosure of Commission Position on
Indemnification for Securities Act
Liabilities.............................. *
</TABLE>
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* Omitted as inapplicable.
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<PAGE> 3
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 AND AMENDMENT DATED SEPTEMBER 17, 1998
PROSPECTUS
863,902 WARRANTS TO PURCHASE ONE SHARE OF COMMON STOCK OF
NTL INCORPORATED
The Prospectus relates to a maximum of 863,902 warrants (the "Warrants"),
each of which entitle the holder to purchase one share of Common Stock, par
value $.01 per share (the "Common Stock"), of NTL Incorporated, a Delaware
corporation (the "Company"), offered hereby and the Common Stock issuable upon
exercise of the Warrants. The Warrants are being offered to each registered
holder of the Company's 12 3/4% Series A Senior Deferred Coupon Notes Due 2005,
11 1/2% Series B Deferred Coupon Notes Due 2006 and 10% Series B Senior Notes
Due 2007 (collectively, the "Notes") at the close of business on September 8,
1998 whose properly executed consent to certain amendments (the "Proposed
Amendments") to the indentures governing the Notes (the "Indentures") is
received in accordance with the terms of a consent solicitation (the "Consent
Solicitation") of such holders set forth in consent solicitation statements of
the Company dated September 17, 1998 (the "Solicitation Statements") and who has
elected in that consent to apply the cash consent payment payable by the Company
pursuant to the terms of the Consent Solicitation in respect of that consent to
purchase the Warrants. Issuance of the Warrants is conditional on (i) receipt by
the Company of the Requisite Consents (as defined) and the Proposed Amendments
being made effective by the execution and delivery of certain supplemental
indentures (the "Supplemental Indentures") between the Company and The Chase
Manhattan Bank (formerly known as Chemical Bank), as trustee under the
Indentures; and (ii) the Registration Statement of which this Prospectus is a
part being effective under the Securities Act of 1933, as amended (the "Act"),
and no stop order suspending the effectiveness of the Registration Statement
having been issued by the Securities and Exchange Commission (the "Commission").
Each Warrant will entitle the holder to purchase one share of Common Stock
at a price per share equal to the "current market price per share of Common
Stock", determined in accordance with the terms of the Warrant Agreement, on the
date of original issuance of the Warrant, subject to adjustment under certain
circumstances. The Warrants will entitle the holders thereof to purchase in the
aggregate up to 863,902 shares of Common Stock, representing 2.1% of the
outstanding Common Stock and 1.3% of the Common Stock on a fully diluted basis
as of the date of the issuance of the Warrants. The Warrants will expire on the
tenth anniversary of the respective date of original issuance of the Warrants).
The exercise of the Warrants will be subject to compliance with applicable
federal and state securities laws. See "Description of the Warrants."
The Common Stock is traded on The Nasdaq Stock Market's National Market
(the "NASDAQ") under the symbol "NTLI." Based on the closing stock price on
September 15, 1998 of $39.875, the total market value of the Common Stock was
approximately $1.65 billion. There is no public market for the Warrants and the
Company does not intend to apply for listing of the Warrants on any securities
exchange or seek the inclusion thereof on the NASDAQ.
SEE "RISK FACTORS" BEGINNING ON PAGE 6 FOR A DISCUSSION OF CERTAIN INFORMATION
THAT SHOULD BE CONSIDERED BY PROSPECTIVE INVESTORS.
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THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION NOR HAS THE 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 , 1998
<PAGE> 4
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 SEC at Room 1024, Judiciary Plaza, 450 Fifth Street, N.W.,
Washington, D.C. 20549 and will also be available for inspection and copying at
the regional offices of the Commission located at 7 World Trade Center, Suite
1300, New York, New York 10048 and at Citicorp Building, 500 West Madison
Street, Suite 1400, Chicago, Illinois 60661. Copies of such material may also be
obtained 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 World Wide Web site at http://www.sec.gov which contains reports,
proxy and information statements and other information regarding registrants
that file electronically with the Commission. In addition, materials filed by
NTL with the NASDAQ may be inspected at the offices of the NASDAQ at 1735 K
Street, N.W., Washington, D.C. 20006.
The Company has filed with the Commission a Registration Statement, of
which this Prospectus is a part, on Form S-3 (herein together with all
amendments and exhibits thereto, called the "Registration Statement") under the
Securities Act with respect to the Warrants being offered by this Prospectus and
the Common Stock issuable upon exercise of the Warrants. This Prospectus does
not contain all the information set forth in the Registration Statement and the
exhibits and schedules 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.
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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, 1997, dated March 30, 1998;
(b) The Company's Quarterly Reports on Form 10-Q for the quarter ended
March 31, 1998, dated May 14, 1998, and the quarter ended June 30, 1998,
dated August 14, 1998;
(c) The Company's Current Reports on Form 8-K, dated February 5, 1998,
March 6, 1998, March 18, 1998, May 29, 1998, June 16, 1998 and August 14,
1998.
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 other subsequently filed document which also is or is deemed to be
incorporated by reference herein modifies or supersedes such statement. Any such
statement so modified or superseded shall not be deemed, except as so modified
or superseded, to constitute a part of this Prospectus.
The Company hereby undertakes to provide without charge to each person to
whom a copy of this Prospectus has been delivered, on the written or oral
request of any such person, a copy of any or all of the documents referred to
above which have been or may be incorporated in this Prospectus by reference
(other
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<PAGE> 5
than certain exhibits). Requests for such copies should be directed to: NTL
Incorporated, 110 East 59th Street, New York, New York 10022, Attention: Richard
J. Lubasch, Esq., telephone (212) 906-8440.
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ENFORCEABILITY OF CIVIL LIABILITIES
A substantial portion of the assets of the Company's subsidiaries are
located in the United Kingdom. As a result, it may not be possible for investors
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 investors 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.
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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 by reference in this Prospectus. 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.
THE CONSENT SOLICITATION
Pursuant to the terms and conditions of (i) a Consent Solicitation
Statement of the Company dated September 17, 1998 (the "12 3/4% Notes
Solicitation Statement") relating to its 12 3/4% Series A Senior Deferred Coupon
Notes Due 2005 (the "12 3/4% Notes"), (ii) a Consent Solicitation of the Company
dated September 17, 1998 (the "11 1/2% Solicitation Statement") relating to the
11 1/2% Series B Senior Deferred Coupon Notes Due 2006 (the "11 1/2% Notes") and
(iii) a Consent Solicitation Statement of the Company dated September 17, 1998
(the "10% Notes Solicitation Statement", and together with the 12 3/4%
Solicitation Statement and the 11 1/2% Solicitation Statement, the "Solicitation
Statements") relating to the 10% Series B Senior Notes Due 2007 (the "10%
Notes", and together with the 12 3/4% Notes and the 11 1/2% Notes, the "Notes"),
the Company is soliciting (the "Consent Solicitation") the consents (the
"Consents") of registered holders of the Notes to certain proposed amendments
(the "Proposed Amendments") to the indenture governing the 12 3/4% Notes, dated
as of April 20, 1995, as amended by a First Supplemental Indenture, dated as of
January 22, 1996 (the "12 3/4% Indenture"), between the Company and The Chase
Manhattan Bank (formerly known as Chemical Bank) ("Chase"), as trustee (the
"Trustee"), the indenture governing the 11 1/2% Notes, dated January 30, 1996
(the "11 1/2% Indenture"), between the Company and the Trustee, and the
indenture governing the 10% Notes, dated February 12, 1997, between the Company
and the Trustee (the "10% Indenture" and, together with the 12 3/4% Indenture
and the 11 1/2% Indenture, the "Indentures"). In general, the Proposed
Amendments would permit the acquisition of Comcast UK Cable Partners Limited
("Comcast UK") and Diamond Cable Communications plc ("Diamond") using equity of
the Company, permit the completion of the acquisition of certain assets of
Vision Networks III B.V. ("Vision Networks"), permit the Company to obtain more
favorable terms under its Credit Facility and allow for the creation of
Unrestricted Subsidiaries. The Proposed Amendments will also make certain
conforming and other changes to the Indentures. The purpose and effect of the
Consent Solicitation and the Proposed Amendments are more fully described in the
Solicitation Statements.
If the Proposed Amendments are effected, the Company will make a payment (a
"Consent Payment") to each registered holder of Notes (the "Registered Holders")
as of the close of business on September 8, 1998 (the "Record Date"), whose
properly completed and executed Consent is received prior to the Expiration Date
(as defined below) and not revoked by following the procedure for revoking
Consents described in the Solicitation Statements. The Consent Payment will be
$10.00 in cash for each $1,000 in principal amount at maturity of Notes with
respect to which a Consent to the Proposed Amendments is received and not
revoked as aforesaid. Each Registered Holder who so consents is given the option
to elect, on the form of Consent, to apply the Consent Payment to purchase a
half (0.5) Warrant for each $1,000 in principal amount at maturity of Notes with
respect to which a Consent to the Proposed Amendments is received and not
revoked as aforesaid. The Warrants are being offered pursuant to, upon the terms
and subject to the conditions set forth in, this Prospectus. The Consent Payment
and the Warrants are collectively referred to herein as the "Consent
Consideration."
4
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THE COMPANY'S OBLIGATION TO PAY THE CONSENT CONSIDERATION IS CONTINGENT
UPON (I) RECEIPT OF THE VALID AND UNREVOKED CONSENT OF THE REGISTERED HOLDERS OF
AT LEAST A MAJORITY IN AGGREGATE PRINCIPAL AMOUNT AT MATURITY OF THE NOTES
OUTSTANDING ON THE RECORD DATE (THE "REQUISITE CONSENTS") AND THE EXECUTION AND
DELIVERY OF THE CERTAIN SUPPLEMENTAL INDENTURES CONTAINING THE PROPOSED
AMENDMENTS OR THE PROPOSED AMENDMENTS AS MODIFIED IN ACCORDANCE WITH THE
PROCEDURES DESCRIBED IN THE SOLICITATION STATEMENTS AND (II) IN THE CASE OF THE
ISSUANCE OF THE WARRANTS, THE REGISTRATION STATEMENT OF WHICH THIS PROSPECTUS IS
A PART REMAINING EFFECTIVE UNDER THE ACT AND NO STOP ORDER SUSPENDING OR
WITHDRAWING THE EFFECTIVENESS OF THE REGISTRATION STATEMENT HAVING BEEN ISSUED
BY THE COMMISSION.
Consents will not be effective unless completed in accordance with the
instructions set forth therein and returned to the Trustee in accordance with
the Solicitation Statements no later than 5:00 P.M., New York City time, on
October 6, 1998, unless extended (the "Expiration Date"). UNDER THE TERMS OF THE
CONSENT SOLICITATION, HOLDERS WHO DO NOT DELIVER A PROPERLY COMPLETED CONSENT ON
OR PRIOR TO THE EXPIRATION DATE WILL NOT BE ENTITLED TO RECEIVE ANY CONSENT
CONSIDERATION, BUT WILL BE BOUND BY THE PROPOSED AMENDMENTS IF THEY BECOME
EFFECTIVE.
5
<PAGE> 8
THE OFFERING
Securities Offered............ Warrants to purchase one share of the Company's
Common Stock, par value $.01 per share (the
"Common Stock"), issued pursuant and subject to
a warrant agreement dated October 6, 1998 (the
"Warrant Agreement") between the Company and
Chase as Warrant Agent, and shares of Common
Stock issuable upon exercise of such Warrants.
See "Description of Warrants".
Number of Warrants and
Shares........................ 863,902 Warrants to purchase an aggregate of
863,902 shares of Common Stock, representing
approximately 1.3% of Common Stock on a fully
diluted basis as of the time of the closing of
the offering.
Warrant Offering Price........ $20.00 per Warrant. Payment of the offering
price shall be made by application of the
Consent Payment.
Warrant Exercise Price........ Each Warrant will entitle the holder thereof to
purchase one share of Common Stock
(collectively, the "Warrant Shares") at a price
per share equal to the Current Market Price of
such shares, determined in accordance with the
terms of the Warrant Agreement, on the date of
issuance of the Warrants, subject to adjustment
under certain circumstances (the "Exercise
Price"). The "Current Market Price," determined
in accordance with the Warrant Agreement, shall
be the average of the Quoted Prices of the
Common Stock for 10 consecutive trading days
before the date of issuance of the Warrant. The
"Quoted Price" of the Common Stock is the last
reported sales price of the Common Stock as
reported by the NASDAQ. Payment of the Exercise
Price may be made in the form of cash or by
certified or official bank check payable to the
order of the Company.
Exercise Period............... The Warrants will be exercisable at any time on
or after the date of their issuance and prior
to 5:00 p.m., New York City time, on the date
that is the tenth anniversary of the date of
issuance of the Warrants. The exercise of the
Warrants also will be subject to applicable
federal and state securities laws. See
"Description of Warrants."
Use of Proceeds............... The proceeds to be received by the Company from
the issuance and sale of the Warrants will
reduce the amount of cash which would otherwise
be used to fund the Consent Payment. The net
proceeds from the receipt of the Exercise Price
on exercise of the Warrants will be used to
finance the construction and working capital
requirements of the Company's residential cable
television and residential and business
cable/telephone or telecommunications services
and other general corporate purposes.
RISK FACTORS
Prospective purchasers of the Warrants should consider carefully all of the
information set forth in this Prospectus and, in particular, should evaluate the
matters set forth under "Risk Factors" for risks involved with an investment in
the Warrants and the Warrant Shares.
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<PAGE> 9
RISK FACTORS
Prospective investors should consider carefully all of the information set
forth in this Prospectus and, in particular, should evaluate the following risks
before deciding whether or not to elect to apply the Consent Payment to which
they may be entitled under the Consent Solicitations to purchase Warrants or to
exercise the Warrants.
ADVERSE CONSEQUENCES OF LEVERAGE
The Company is and, for the foreseeable future will continue to be, highly
leveraged. At June 30, 1998, the accrued value of the Company's total long-term
indebtedness (including the Company's 13% Senior Redeemable Exchangeable
Preferred Stock (the "13% Preferred")) was approximately $3.1 billion,
representing approximately 104% of total capitalization. In connection with the
Company's acquisition of certain assets of Vision Networks, the Company borrowed
L275 million in June 1998 from Chase under an eight-year term loan facility,
dated October 17, 1997 (the "New Credit Facility"), as amended, between Chase
and NTL (UK) Group, Inc., and the Company intends to borrow an additional L200
million under the New Credit Facility to complete such acquisition. The
indentures governing the existing indebtedness of the Company permit the Company
and its subsidiaries to incur substantial indebtedness. The ability of the
Company and its subsidiaries to make scheduled payments under present and future
indebtedness will depend upon, among other things, the Company's and its
subsidiaries' ability to complete the build-out of the franchises on a timely
and cost effective basis, the Company's ability to access the earnings of its
subsidiaries (which may be subject to significant contractual and legal
limitations), the future operating performance of the Company and its
subsidiaries and the Company's ability to refinance its indebtedness when
necessary. Each of these factors is to a large extent subject to economic,
financial, competitive, regulatory and other factors that are beyond the
Company's and its subsidiaries' control. See "-- Network Construction Costs;
Need for Additional Financing," "-- Holding Company Structure; Dependence Upon
Cash Flow from Subsidiaries" and "-- Uncertainty of Construction Progress and
Costs."
The New Credit Facility contains, and future agreements and debt
instruments may 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 the Company's 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 or to engage in other business activities, such as
acquisitions, which may be in the interest of the Company.
The acquisition of Comcast UK will result in a change of control under the
L200 million bank facility of Comcast UK Holdings Limited, a wholly-owned
subsidiary of Comcast UK (the "Comcast UK Facility"). Upon a change of control,
all amounts outstanding under the Comcast UK Facility will become immediately
due and payable. At June 30, 1998, there was L86 million outstanding under the
Comcast UK Facility. Although Comcast UK had substantial cash reserves of L92.3
million at June 30, 1998, there can be no assurance that such funds will be
available to repay the Comcast UK Facility or that the Company will be able to
refinance the Comcast UK Facility.
The degree to which the Company is leveraged could have important
consequences to stockholders, 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 the Company's
business;
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<PAGE> 10
(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, in the event of a change of control or
certain asset sales, be obligated to offer to repurchase its outstanding debt
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.
NETWORK CONSTRUCTION COSTS; NEED FOR ADDITIONAL FINANCING
Following the completion of the acquisitions of Comcast UK, Diamond and
certain assets of Vision Networks, the development, construction and operations
of the combined telecommunications networks of the Company, will continue to
require substantial capital. 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
other obligations as they fall due. The Company intends to fund a portion of the
requirements referred to in this paragraph from cash, cash equivalents and
marketable securities on hand, and funds internally generated by the operations
of the Company's subsidiaries. However, the Company estimates that significant
amounts of additional funding will be necessary to meet these requirements.
There can be no assurance that (i) additional financing will be obtained or will
be available on acceptable terms, (ii) actual construction costs will not exceed
the amount estimated or that additional funding substantially in excess of the
amounts estimated will not be required, (iii) conditions precedent to advances
under future credit facilities will be satisfied when funds are required, (iv)
the Company will not acquire additional businesses that would require additional
capital, (v) the Company and its subsidiaries will be able to generate
sufficient cash from operations to meet capital requirements, debt service and
other obligations when required, (vi) the Company will be able to access such
cash flow or (vii) the Company's subsidiaries will not incur losses from their
exposure to exchange rate fluctuations or be adversely affected by interest rate
fluctuations. The Company does not have any firm additional financing plans to
address the foregoing at this time, except as described below.
Pursuant to an amendment to the New Credit Facility, as amended, dated June
16, 1998, entered into as a result of the acquisition of certain assets of
Vision Networks, Chase's commitment under the New Credit Facility has been
reduced to the L475 million that the Company requires for the cash portion of
the purchase price. The Company borrowed L275 million in June 1998 to complete
the first stage of such acquisition. The Company intends to borrow the remaining
L200 million and will issue L75 million in a new pay-in-kind Preferred Stock of
the Company to complete the final stage of the such acquisition. Chase has
committed to make available to the Company a L480 million senior secured credit
facility upon the repayment in full of the L475 million Vision Networks
acquisition facility and subject to the renegotiations of the New Credit
Facility structure and pricing. The Company is required to repay the amount
outstanding under the L475 million Vision Networks acquisition facility on
January 31, 1999, which may be extended in certain circumstances to June 30,
1999.
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 outstanding indebtedness of the Company and its
subsidiaries. Accordingly, the Company will be required to consider a number of
measures, including (i) refinancing all or a portion of such indebtedness, (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
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<PAGE> 11
respect to the Company's indebtedness. 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.
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 UK, 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 existing indebtedness of the Company 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.
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.
Consequently, prior to and following the acquisitions of Comcast UK and Diamond,
the Company will hold 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 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.
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 UK company
is, under applicable UK law, prohibited from paying dividends unless such
payments are made out of profits available for distribution ("distributable
profits"), 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 UK
may impose a withholding tax on payments of interest and advance corporation tax
on distributions (of interest, dividends or otherwise) by UK subsidiaries of the
Company.
In addition, the terms of the New Credit Facility limit, and the terms of
existing and future indebtedness of the Company's subsidiaries may limit, the
payment of dividends, loans or other distributions to the Company. In the
absence of a default, the New Credit Facility generally permits payments to the
Company to pay the interest and principal of existing indebtedness of the
Company.
As of June 30, 1998, the total liabilities of the Company's subsidiaries
was approximately $863 million. 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 New Credit Facility
and a substantial portion of the Company's and its subsidiaries' future
indebtedness are 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 stockholders of the Company, 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
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<PAGE> 12
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, the
New Credit Facility requires 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 New Credit Facility have been and will be subordinated to
the rights of the lenders under the New Credit Facility pursuant to
subordination agreements with such lenders.
The principal fixed assets of the Company's subsidiaries are cable
headends, cable television and telecommunications distribution equipment,
telecommunications switches and customer equipment, transmission towers, masts
and antennas and the sites on which they are located. The value of a substantial
portion of these fixed assets is derived from their employment in the Company's
and its subsidiaries' businesses. 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.
OPERATING LOSSES
The Company had net (loss) for the six months ended June 30, 1998 and 1997
and for the years ended December 31, 1997, 1996, 1995, 1994 and 1993 of $(198.0
million), $(173.4 million), $(333.1 million), $(254.5 million), $(90.8 million),
$(29.6 million) and $(11.1 million), respectively. As of June 30, 1998, the
Company's accumulated deficit was $915.0 million.
The development of the business of the Company to date has resulted in
significant expenditures, and the continued construction and expansion of each
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
"-- Network Construction Costs; Need for Additional Financing." Moreover, such a
failure would adversely affect the Company's ability to pay the required
payments on its indebtedness and the 13% Preferred. See "-- Potential Adverse
Consequences of Leverage," "-- Network Construction Costs; Need for Additional
Financing" and "-- Holding Company Structure; Dependence Upon Cash Flow from
Subsidiaries."
REQUIREMENT TO MEET BUILD MILESTONES
The telecommunications license for each franchise contains specific
construction milestones. Under the terms of its current telecommunications
licenses, by the end of 2005 the Company is required to construct cable
television systems passing an aggregate of approximately 2,090,000 premises
(residential and business).
The Office of Telecommunications ("OFTEL") has the authority to modify the
construction milestones in the licenses other than the Northern Ireland and
Gwent and Glamorgan local delivery operator licenses (in respect of which the
Independent Television Commission (the "ITC") is the relevant authority for
modifying construction milestones). Based on current network construction, the
Company believes that it will be able to satisfy its milestones in the future,
but there can be no assurance that such milestones will be met. See "-- Network
Construction Costs; Need for Additional Financing" and "-- Uncertainty of
Construction Progress and Costs."
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<PAGE> 13
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.
UNCERTAINTY OF CONSTRUCTION PROGRESS AND COSTS
At December 31, 1997, construction of the Company's network had passed in
excess of 48% of its final regulatory milestone requirements for all its
franchises. Successful construction and development of the combined 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 "-- Network Construction Costs; 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.
SIGNIFICANT COMPETITION
The Company faces significant competition from established and new
competitors in the areas of residential telephony, business telecoms services
and cable television. The Company believes that competition will intensify in
each of these business areas, particularly business telecommunications.
Residential Telephony. The Company competes primarily with British
Telecommunications plc ("BT") in providing telephone services to residential
customers. BT, formerly the only major national public telephone operator
("PTO") in the UK, has an established market presence, fully built networks and
resources substantially greater than those of NTL. According to OFTEL, at March
31, 1997, nearly 90% of UK 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
telecommunications services of the Company. The Company believes that value for
money is currently one of the most important factors influencing the decision of
UK customers to switch from BT 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 Company. 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.
On February 8, 1996, the DTI announced the award of two licences 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
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<PAGE> 14
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. 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. The
Company's Radio Communications group may enable the Company to benefit from the
growth in this technology. There can be no assurance, however, that the Company
will be able to compete successfully with BT or such other telecommunications
operators.
The Company believes that it has a competitive advantage in the residential
market because of its ability to offer integrated telephone, CATV,
telecommunications services (including interactive and on-line services) and
dual product packages designed to encourage customers to subscribe to multiple
services. However, there can be no assurance that this competitive advantage
will continue. Indeed, the UK recently announced that BT and all other operators
would be permitted to provide and convey CATV services throughout the UK from
January 1, 2001. In addition, all areas currently unfranchised will be opened to
general competition, rather than awarded as exclusive franchises, from now
onwards.
British Sky Broadcasting ("BSkyB") currently markets telecommunications
services on an indirect access basis (which involves the customer dialing
additional digits before the normal telephone number to divert calls onto
another operator's network). In addition, it has proposed a joint venture with
BT, Midland Bank and Matsushita, known as British Interactive Broadcasting
("BiB"), to enter the interactive digital services market. BiB is currently
under review by the competition directorate of the European Commission. Given
the respective market positions of BT and BSkyB, the Company believes that, if
the two companies successfully combine their respective marketing strengths, the
resulting combination would provide significant competition to cable operators
including the Company.
Business Telecommunications. BT is also the Company's principal competitor
in providing business telecommunications services. In addition, the Company
competes with C&WC, Energis Communications Limited, a subsidiary of the National
Grid Company plc ("Energis"), Scottish Telecom in Scotland and with other
companies that have been granted telecommunications licenses such as WorldCom
and Colt and the new non-network based resellers, such as Citibell. 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
if C&WC, Energis and other new market entrants compete aggressively. Most of
these competitors have substantial resources and there can be no assurance that
these or other competitors will not expand their businesses in the Company's
existing markets or that the Company will be able to continue to compete
successfully with such competitors in the business telecommunications market.
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. In addition, pay television and pay-per-view
services offered by the Company compete to varying degrees with other
communications and entertainment media, including home video, cinema exhibition
of feature films, live theater and newly emerging multimedia services.
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" services under their existing licenses. The Company
expects that, in the future, it may face competition from programming provided
by video-on-demand services, including those that may be provided by PTOs with
national licenses, as well as (after 2001) from companies which seek to provide
CATV services in the Company's franchises under the recently announced change of
government policy.
The Broadcasting Act 1996 provides for the regulation of digital
terrestrial television ("DTT") that will initially provide an additional 18 or
more new terrestrial channels serving between 60% and 90% of the UK's
population. Some of the channels are reserved for digital simultaneous
broadcasting by the existing terrestrial broadcasters. The introduction of DTT,
as well as digital satellite television, will provide both additional
programming sources as well as increased competition for the Company and its
subsidiaries. There can be no
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<PAGE> 15
assurance that satisfactory (or any) terms of carriage will be obtained by the
Company for digital satellite programs or channels.
The full extent to which existing or future competitors using existing or
developing media will compete with cable television systems may not be known for
several years. There can be no assurance, however, that existing, proposed or as
yet undeveloped technologies will not become dominant in the future and render
cable television systems less profitable or even obsolete.
Broadcast Services. In February 1997, the UK Government sold the Home
Service and World Service transmission businesses of the British Broadcasting
Corporation (the "BBC") to a consortium led by Castle Tower Corporation ("CTI").
There can be no assurance that the Company will not encounter significant
competition from CTI (as successor to the BBC) for its transmission business
from expiration of the Company's current contracts with the Independent
Television ("ITV") contractors and Channel 4 and the Welsh Fourth Channel
("S4C").
LIMITED ACCESS TO PROGRAMMING
The Company's ability to make competitive offerings of cable television
services is dependent on their ability to obtain access to programming at a
reasonable cost. While various sources of programming are available to cable
system operators in the UK, 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 UK 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 4 million
subscribers in the UK. 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.
The Company, like many other cable operators, obtains most of its
programming through arrangements with BSkyB and other programming suppliers
which are not reflected in signed written agreements. To date, 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.
Because of the factors described in the preceding paragraphs, there can be
no assurance that their 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 UK are regulated
and supervised by various governmental bodies, the ITC, the Department of
Culture, Media and Sport, the Radio Communications Agency, the Radio Authority
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 activities of the Company and those of its competitors, such as
licensing requirements, changes in price regulation and deregulation of
interconnection arrangements, could have a material adverse effect on the
Company.
A substantial portion of the Company's business is also subject to
regulation. In particular, the prices that the Company 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
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<PAGE> 16
the formal modification to the Company's Telecommunications Act License to deal
with the new price control for the television transmission services provided by
the Company to the ITV companies, Channel 4 and S4C. Under the new arrangements,
the total revenues receivable by the Company for such services (excluding
certain insignificant items) could not exceed L53.15 million in 1997 and,
thereafter through 2002, will be adjusted annually by the Retail Prices Index
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 UK 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 their cable network
infrastructure to other service providers, which could have material adverse
effect on the Company.
MANAGEMENT OF GROWTH AND EXPANSION
The Company has experienced rapid growth and development in a relatively
short period of time and plans to 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.
DEPENDENCE UPON KEY PERSONNEL
The Company's businesses are managed by a small number of key executive
officers, the loss of one or more of whom could have a material adverse effect
on the Company. The Company believes that its future success will depend in
large part on its continued ability to attract and retain highly skilled and
qualified personnel. The Company has not entered into written employment
contracts or non-compete agreements with, nor has it obtained life insurance
policies covering, such key executive officers. Certain senior managers of the
Company also serve as members of senior management of other companies in the
telecommunications business.
RISKS OF RAPID TECHNOLOGICAL CHANGES
The telecommunications industry is subject to rapid and significant changes
in technology and the effect of technological changes on the businesses of the
Company cannot be predicted. 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
"-- Network Construction Costs; Need for Additional Financing."
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 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. The Company has entered into an
option agreement to hedge some of the risk of exchange rate fluctuations related
to debt service and corporate expenses.
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RISKS OF LIMITED INSURANCE COVERAGE
The Company obtains insurance of the type and in the amounts that they
believe are customary in the UK for similar companies. Consistent with this
practice, they do not insure the underground portion of their cable network.
Accordingly, any catastrophe affecting a significant portion of a system's
underground cable network could result in substantial uninsured losses.
LACK OF PUBLIC MARKET FOR THE WARRANTS
The Warrants are new securities for which there currently is no market and
are being offered only to the holders of the Notes. The Company does not intend
to apply for listing of the Warrants on any securities exchange or to seek
approval for quotation through any automated quotation system. Accordingly,
there can be no assurance as to the development or liquidity of any market for
the Warrants.
USE OF PROCEEDS
The proceeds received by the Company from the issuance and sale of the
Warrants will reduce the amount of cash which would otherwise be used to fund
the Consent Payment. The net proceeds received by the Company from the payment
of the Exercise Price upon exercise of the Warrants will be used to finance the
construction and working capital requirements of the Company's residential cable
television and residential and business cable/telephony services in the United
Kingdom and for other general corporate purposes.
PRICE RANGE OF COMMON STOCK
The Common Stock is quoted and traded on the Nasdaq Stock Market's National
Market (the "NASDAQ") under the symbol "NTLI." From October 14, 1993 through
March 26, 1997, the Common Stock was quoted and traded on the NASDAQ under the
symbol "ICTL." The following table sets forth, for the periods indicated, the
high and low reported sale prices per share of Common Stock, as reported on the
NASDAQ.
<TABLE>
<CAPTION>
1995 HIGH LOW
- ---- ---- ----
<S> <C> <C>
First Quarter............................................... $26 5/8 $20 1/4
Second Quarter.............................................. 26 1/4 20 1/4
Third Quarter............................................... 28 7/8 24 3/8
Fourth Quarter.............................................. 28 1/4 23 5/8
</TABLE>
<TABLE>
<CAPTION>
1996
- ----
<S> <C> <C>
First Quarter............................................... $30 1/8 $21 5/8
Second Quarter.............................................. 34 1/8 27 3/4
Third Quarter............................................... 30 22 5/8
Fourth Quarter.............................................. 28 1/4 22 5/8
</TABLE>
<TABLE>
<CAPTION>
1997
- ----
<S> <C> <C>
First Quarter............................................... $26 3/4 $18 1/8
Second Quarter.............................................. 27 1/4 19
Third Quarter............................................... 27 7/8 20 1/8
Fourth Quarter.............................................. 29 3/8 25 1/4
</TABLE>
<TABLE>
<CAPTION>
1998
- ----
<S> <C> <C>
First Quarter............................................... $45 3/4 $26 3/4
Second Quarter.............................................. 53 1/2 37 5/8
Third Quarter (through , 1998)....................
</TABLE>
On September 15, 1998, the closing sale price per share of the Common
Stock, as reported on the NASDAQ, was $39.875. As of September 15, 1998, there
were approximately 535 record holders of the Common Stock. This figure does not
reflect beneficial ownership of shares held in nominee name.
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<PAGE> 18
DIVIDEND POLICY
Since its inception, the Company has never paid cash dividends on its
Common Stock. Pursuant to the indentures relating to the Senior Notes, certain
limitations apply to, and the Proposed Credit Facilities or any other credit
facility may restrict, the future payment of dividends on the Company's capital
securities. In addition, the Company does not currently intend to pay cash
dividends in the foreseeable future on shares of the Company's capital stock as
it intends to retain earnings to fund construction of the systems and the growth
of its business.
DETERMINATION OF OFFERING PRICE
The offering price and Exercise Price of the Warrants were determined by
the Company after discussions with a holder of the Notes concerning the Consent
Solicitation.
DILUTION
As of June 30, 1998, the negative net tangible book value of the Common
Stock was approximately ($679.3 million), or ($16.45) per currently outstanding
share. The negative net tangible book value per currently outstanding share of
Common Stock has been determined by dividing the net tangible book value of the
Company attributable to the Common Stock by the number of shares of Common Stock
outstanding as of June 30, 1998. The sale of a Warrant in lieu of a cash Consent
Payment does not affect the Company's net tangible book value. After giving
effect to the sale by the Company of 863,902 shares of Common Stock upon
exercise of the Warrants and assuming net proceeds of $40.75 per Warrant, the
adjusted negative net tangible book value of the Common Stock as of June 30,
1998 decreases to approximately ($644.1 million), or ($15.28) per currently
outstanding share of Common Stock. Accordingly, the present stockholders of the
Company would sustain an immediate decrease of $1.17 per share of Common Stock
in negative net tangible book value and the purchasers of the Common Stock
offered hereby upon exercise of the Warrants would sustain an immediate dilution
of $56.03 per share of Common Stock from the Exercise Price. The foregoing
calculations do not give effect to the exercise of any outstanding rights to
acquire Common Stock inasmuch as such conversion and/or exercise would be
anti-dilutive.
DESCRIPTION OF WARRANTS
The Warrants will be issued pursuant to a Warrant Agreement (the "Warrant
Agreement") between the Company and Chase, as Warrant Agent (the "Warrant
Agent"), a form of which is filed as an Exhibit to the Registration Statement of
which the Prospectus is a part. The following summary of certain provisions of
the Warrant Agreement does not purport to be complete and is qualified in its
entirety by reference to the Warrant Agreement, including the definitions
therein of certain terms used below.
GENERAL
Each Warrant, when exercised, will entitle the holder thereof to receive
one fully paid and nonassessable share of the Common Stock (the "Warrant
Shares") at an initial exercise price per share equal to the Current Market
Price of such share, determined in accordance with the Warrant Agreement, on the
date of original issuance of the Warrants, subject to adjustment (the "Exercise
Price"). The Exercise Price and the number of Warrant Shares are both subject to
adjustment in certain cases referred to below. The Warrants will entitle the
holders thereof to purchase, in the aggregate, up to 863,902 Warrant Shares, or
approximately 2.1% of the outstanding Common Stock and 1.3% of the Common Stock
on a fully diluted basis as of the date of the issuance of the Warrants.
The Warrants will be exercisable at any time after their date of issuance
and prior to 5:00 p.m., New York City time on the date that is the tenth
anniversary of the date of original issuance of the Warrants. The exercise and
transfer of the Warrants will be subject to applicable federal and state
securities laws.
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The Warrants may be exercised by surrendering to the Company the warrant
certificates evidencing the Warrants to be exercised with the accompanying form
of election to purchase properly completed and executed, together with payment
of the Exercise Price. Payment of the Exercise Price may be made in the form of
cash or by certified or official bank check payable to the order of the Company.
Upon surrender of the warrant certificate and payment of the Exercise Price, the
Company will deliver or cause to be delivered, to or upon the written order of
such holder, stock certificates representing the number of whole shares of
Common Stock to which the holder is entitled. If less than all of the Warrants
evidenced by a warrant certificate are to be exercised, a new warrant
certificate will be issued for the remaining number of Warrants.
No fractional shares of Common Stock will be issued upon exercise of the
Warrants. The Company will pay to the holder of the Warrant at the time of
exercise an amount in cash equal to the current market value of any such
fractional share of Common Stock less a corresponding fraction of the Exercise
Price.
The holders of the Warrants will have no right to vote on matters submitted
to the stockholders of the Company and will have no right to receive dividends.
The holders of the Warrants will not be entitled to share in the assets of the
Company in the event of liquidation, dissolution or the winding up of the
Company. In the event a bankruptcy or reorganization is commenced by or against
the Company, a bankruptcy court may hold that unexercised Warrants are executory
contracts which may be subject to rejection by the Company with approval of the
bankruptcy court, and the holders of the Warrants may, even if sufficient funds
are available, receive nothing or a lesser amount as a result of any such
bankruptcy case than they would be entitled to if they had exercised their
Warrants prior to the commencement of any such case.
In the event of a taxable distribution to holders of Common Stock that
results in an adjustment to the number of shares of Common Stock or other
consideration for which a Warrant may be exercised, the holders of the Warrants
may, in certain circumstances, be deemed to gave received a distribution subject
to United States federal income tax as a dividend. See "Certain Federal Income
Tax Considerations".
ADJUSTMENTS
The number of shares of Common Stock purchasable upon exercise of Warrants
and the Exercise Price will be subject to adjustments in certain events
including: (i) the payment by the Company of dividends (and other distributions)
on its Common Stock in Common Stock; (ii) subdivisions, combinations and
reclassifications of the Common Stock, (iii) the issuance to all holders of
Common Stock of rights, options or warrants entitling them to subscribe for
Common Stock or securities convertible into, or exchangeable or exercisable for,
Common Stock within sixty (60) days after the record date for such issuance of
rights, options or warrants at an offering price (or with an initial conversion,
exchange or exercise price) which is less than the current market price per
share (as defined) of Common Stock, (iv) the distribution to all holders of
Common Stock of any of the Company's assets (including cash), debt securities,
preferred stock or any rights or warrants to purchase any such securities
(excluding (a) those rights and warrants referred to in clause (iii) above; (b)
securities convertible into or exchangeable for shares of Common Stock referred
to in clause (vi) below; (c) a dividend payable in shares of Common Stock; and
(d) cash dividends that do not exceed 5% of the current market price of the
Common Stock), (v) the issuance of shares of Common Stock for a consideration
per share less than the then current market price per share of Common Stock
(excluding securities issued in transactions referred to in clauses (i) through
(iv) above and certain other issuances of Common Stock specified in the Warrant
Agreement), (vi) the issuance of securities convertible into or exchangeable for
Common Stock for a conversion or exchange price plus consideration received upon
issuance less than the then current market price per share of Common Stock
(excluding securities issued in transactions referred to in clauses (iii) or
(iv) above and certain other issuances of convertible securities) specified in
the Warrant Agreement and (vii) certain other events that could have the effect
of depriving holders of the Warrants of the benefit of all or a portion of the
purchase rights evidenced by the Warrants.
No adjustment in the Exercise Price will be required unless such adjustment
would require an increase or decrease of at least one percent (1%) in the
Exercise Price; provided, however, that any adjustment that is not made will be
carried forward and taken into account in any subsequent adjustment.
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<PAGE> 20
In the case of certain consolidations or mergers of the Company, or the
sale of all or substantially all of the assets of the Company to another
corporation, each Warrant will thereafter be exercisable for the right to
receive the kind and amount of securities, cash, or property to which such
holder would have been entitled as a result of such consolidation, merger or
sale had the Warrants been exercised immediately prior thereto.
DESCRIPTION OF CAPITAL STOCK
AUTHORIZED CAPITAL STOCK
The authorized capital stock of the Company consists of 100,000,000 shares
of Common Stock, and 2,500,000 shares of preferred stock, par value $.01 per
share (the "Preferred Stock"). At the close of business on September 15, 1998:
(i) approximately 41,383,000 shares of Common Stock were issued and outstanding;
(ii) no shares of Common Stock were held by the Company in its treasury; (iii)
approximately 121,000 shares of the Company's 13% Preferred were issued and
outstanding; (iv) 1,000,000 shares of Series A Junior Participating Preferred
Stock (the "Rights Preferred Stock") were reserved for issuance pursuant to the
Rights Agreement, dated as of October 13, 1993 (the "Rights Agreement"), between
the Company and Continental Stock Transfer & Trust Company, as Rights Agent; (v)
approximately 7,261,000 shares of Common Stock were reserved for issuance
pursuant to the conversion of the 7% Convertible Subordinated Notes Due 2008
(vi) approximately 939,000 shares of Common Stock were reserved for issuance
upon the exercise of certain warrants; and (vii) approximately 15,547,000 shares
of Common Stock were reserved for issuance pursuant to various Company employee
and director stock options.
COMMON STOCK
The holders of Common Stock are entitled to one vote for each share held of
record on all matters submitted to a vote of the stockholders of the Company and
do not have cumulative voting rights in the election of directors. Holders of
Common Stock are entitled to receive ratably such dividends as may from time to
time be declared by the Company's Board of Directors out of funds legally
available therefor. In the event of a liquidation, dissolution or winding of the
Company, holders of Common Stock would be entitled to share ratably in all
assets of the Company available for distribution to holders of Common Stock
remaining after payment of liabilities and liquidation preference of any
outstanding Preferred Stock. Holders of Common Stock have no preemptive rights
and have no rights to convert their Common Stock into any other securities, and
there are no redemption provisions with respect to such shares. All of the
outstanding shares of Common Stock are fully paid and nonassessable.
PREFERRED STOCK
The Company's Board of Directors has the authority to issue Preferred Stock
in one or more series and to fix as to any such series the designation, title,
voting powers and any other preferences, and relative, participating, optional
or other special rights and qualifications, limitations or restrictions, without
any further vote or action by the stockholders of the Company.
13% Preferred. The 13% Preferred ranks prior to the Common Stock and
Rights Preferred Stock with respect to dividend rights and rights on
liquidation, winding up and dissolution, and each share of 13% Preferred has a
liquidation preference of $1,000. Holders of shares of 13% Preferred are
entitled to receive, when, as and if declared by the Company's Board of
Directors, quarterly dividends per share at a rate of 13% per annum ($130 per
share). Dividends accruing on or prior to February 15, 2004 may, at the
Company's option, be paid in cash, by issuing additional shares of 13% Preferred
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. The Company may redeem any or all of the
13% Preferred on or after February 15, 2002 at declining redemption prices as
set forth in the certificate of designation with respect to the 13% Preferred,
plus accrued and unpaid dividends to the date of redemption. The Company must
redeem all outstanding shares of 13% Preferred on February 15, 2009 at a price
equal to 100% of the liquidation preference thereof, plus accrued and unpaid
dividends to the date of redemption.
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Holders of 13% Preferred have no general voting rights, except as otherwise
required under Delaware law and except in certain circumstances as set forth in
the certificate of designation with respect to the 13% Preferred including (i)
amending certain rights of the holders of the 13% Preferred Stock and (ii) the
issuance of any class of equity securities that ranks on a parity with or senior
to the 13% Preferred, other than additional shares of the 13% Preferred issued
in lieu of cash dividends or parity securities issued to finance the redemption
by the Company of the 13% Preferred. In addition, if (i) dividends are in
arrears for six quarterly periods (whether or not consecutive) or (ii) the
Company fails to make a mandatory redemption or an offer to purchase all of the
outstanding shares of 13% Preferred Stock following a Change of Control
Triggering Event (as defined in the certificate of designation with respect to
the 13% Preferred) as required or fails to pay pursuant to such redemption or
offer, holders of a majority of the outstanding shares of 13% Preferred, voting
as a class, will be entitled to elect two directors to the Company's Board of
Directors. In the event of a Change of Control Triggering Event, the Company
will, subject to certain conditions, offer to purchase all outstanding shares of
13% Preferred Stock at a purchase price equal to 101% of the liquidation
preference thereof, plus accrued and unpaid dividends to the date of purchase.
Moreover, in the event of a Change of Control Call Event (as defined in the
certificate of designation with respect to the 13% Preferred), the Company will
have the option to redeem all of the outstanding shares of 13% Preferred Stock
at a redemption price equal to 100% of the liquidation preference thereof plus
the applicable premium and accrued and unpaid dividends to the date of
repurchase.
On any scheduled dividend payment date, the Company may, at its option,
exchange all, but not less than all, of the shares of 13% Preferred then
outstanding into the Company's 13% Series B Subordinated Exchange Debentures Due
2009.
TRANSFER AGENT AND REGISTRAR
The transfer agent and registrar for the Common Stock is Continental Stock
Transfer & Trust Company.
CERTAIN SPECIAL CHARTER PROVISIONS
The Amended and Restated Certificate of Incorporation of the Company (the
"Charter") 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 hereinafter
defined) proposed by an "Interested Stockholder" (as hereinafter 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
or (ii) a series of conditions are satisfied requiring, in summary, the
following: (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 (x) 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
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became an Interested Stockholder (the "Determination Date"), whichever is higher
or (y) the fair market value per share of Common Stock on the announcement date
or Determination Date, whichever is higher, in either case appropriately
adjusted for any stock dividend, stock split, combination of shares or similar
event (non-cash consideration is treated similarly) and (B) certain "procedural"
requirements are complied with, such as the Consent 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: (i) merger or
consolidation of the Company on 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; (ii) 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; (iii) the adoption of any plan or
proposal for the liquidation or dissolution of the Company proposed by or on
behalf of an Interested Stockholder (or an affiliate thereof); or (iv) 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 Company's Board of
Directors, while such person is a member of the Company's Board of Directors,
who is not an Affiliate or Associate or representative of the Interested
Stockholder and was a member of the Company's 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
Company's 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 Charter. The Charter
provides that the provisions set forth in this section under the heading
"Certain Special Charter Provisions" may not be repealed or amended in any
respect, unless such action is approved by the affirmative vote of the holders
or not less than two-thirds of the voting power of the Company. The requirement
of an increased stockholder vote is designed to prevent a stockholder who
controls a majority of the voting power of the Company 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 Company's Board of Directors adopted the Rights
Agreement. The Rights Agreement provides that one Right will be issued with each
share of the Common Stock issued (whether originally issued or from the
Company's treasury) on or after the date of the Merger and prior to the Rights
Distribution Date (as hereinafter defined). The Rights are not exercisable until
the Rights Distribution Date and will expire at the close of business on the
date which is 10 years from the date of the Distribution 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
Rights Preferred Stock at a purchase price of $100.00.
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Except as described below, the Rights will be evidenced by all the Common
Stock certificates will be distributed. 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% or more of the outstanding shares of the
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.
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 Rights 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. In the event of liquidation, the holders of
the Rights Preferred Stock will be entitled to a minimum preferential
liquidation payment of $1.00 per share and will be entitled to an aggregate
payment of 100 times the payment made per share of the Common Stock. Each share
of Rights 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 Rights
Preferred Stock will be entitled to receive 100 times the amount received per
share of the Common Stock. These rights are protected by customary antidilution
provisions. Because of the nature of the Rights Preferred Stock's dividend,
liquidation and voting rights, the value of one one-hundredth of a share of
Rights 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
Company's 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's 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% or more of the Company's
assets 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 Company's Board of Directors ordering
redemption of the Rights, the Rights will terminate and the only right of the
holders of the Rights will be to receive the $.01 redemption price.
Until a Right is exercised, the holder thereof, as such, all 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,
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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 Company's
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
Company's 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 Company's Board of Directors.
The effect of the Rights may be to inhibit a change in control of the Company
(including through a third party tender offer at a price which reflects a
premium to then prevailing trading prices) that may be beneficial to the
Company's stockholders.
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CERTAIN U.S. FEDERAL INCOME TAX CONSIDERATIONS
The following is a discussion of certain anticipated U.S. Federal income
tax consequences of the ownership of the Warrants as of the date hereof. It
deals only with Warrants held as capital assets by initial purchasers that are
United States holders and does not deal with special situations, such as those
of foreign persons, dealers in securities, financial institutions, life
insurance companies, holders whose "functional currency" is not the U.S. dollar,
or special rules with respect to certain "straddle" or hedging transactions. The
discussion below is based upon the Internal Revenue Code of 1986, as amended,
and regulations, rulings and judicial decisions thereunder as of the date
hereof, and such authorities may be repealed or modified (including
retroactively) so as to result in Federal income tax consequences different from
those discussed below. HOLDERS CONSIDERING AN INVESTMENT IN THE WARRANTS ARE
URGED TO CONSULT THEIR TAX ADVISORS CONCERNING THE FEDERAL INCOME TAX
CONSIDERATIONS THAT MAY BE SPECIFIC TO THEM AS WELL AS ANY TAX CONSEQUENCES
ARISING UNDER THE LAWS OF ANY OTHER TAXING JURISDICTION.
Exercise or Lapse of Warrants. Generally, a holder will not recognize gain
or loss on the exercise of a Warrant (except to the extent cash is received in
lieu of fractional shares). The Warrant Shares acquired on exercise will have an
adjusted tax basis equal to the sum of the exercise price plus the holder's
adjusted tax basis in the Warrant. The holding period for the Warrant Shares
will not include the period during which the Warrant was held and will begin on
the day after the date on which the Warrant is exercised. A holder who allows a
Warrant to lapse unexercised generally will recognize a loss in an amount equal
to the holder's adjusted tax basis in the Warrant. Such loss generally will be
capital loss, provided that the Warrant Shares issuable upon exercise of such
Warrants would have been a capital asset if acquired by the holder, and will be
long-term capital loss if the Warrant has been held by the holder for more than
one year on the date of lapse.
Sale or Exchange of Warrants. Generally, any sale or exchange of Warrants
will result in taxable gain or loss equal to the difference between the amount
of cash or other property received and the holder's adjusted tax basis in the
Warrant. Any such gain or loss generally will be capital gain or loss, provided
that the Warrant Shares issuable upon exercise of such Warrants would have been
a capital asset if acquired by the holder, and will be long-term capital gain or
loss if the Warrant has been held by the holder for more than one year. However,
it is possible that the Internal Revenue Service could take the position that a
sale of Warrants to the Company does not constitute a sale for Federal income
tax purposes and that any gain or loss thereon is ordinary.
Adjustments. Adjustments to the number of shares of Warrant Shares that
may be purchased upon the exercise of a Warrant or to the Exercise Price, or the
failure to make such adjustments, could result in constructive distributions to
the holders of the Warrants which could be taxable as dividends, even though no
cash or property would be actually received by the holders of Warrants.
PLAN OF DISTRIBUTION
The Company is offering the Warrants to the Registered Holders of the Notes
whose properly completed and executed Consent is received on or prior to the
Expiration Date and who has elected in that Consent to apply the cash Consent
Payment in respect of that Consent to purchase the Warrants.
The Warrants and the Common Stock issuable upon exercise thereof may be
sold from time to time in one or more transactions at fixed prices, at
prevailing market prices at the time of sale, at varying prices determined at
the time of sale or at negotiated prices. The sale of the Warrants and the
Common Stock issuable upon exercise thereof may be effected in transactions
(which may involve crosses or block transactions) (i) on any national securities
exchange or quotation service on which the Warrants or the Common Stock may be
listed or quoted at the time of sale, (ii) in the over-the-counter market, (iii)
in transactions otherwise than on such exchanges or in the over-the-counter
market or (iv) through the writing of options.
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To comply with the securities laws of certain jurisdictions, if applicable,
the Warrants and the Common Stock issuable upon exercise of the Warrants will be
offered or sold in such jurisdictions only through registered or licensed
brokers or dealers. In addition, in certain jurisdictions the Warrants and the
Common Stock issuable upon exercise of the Warrants may not be offered or sold
unless they have been registered or qualified for sale in such jurisdictions or
any exemption from registration or qualification is available and is complied
with.
Pursuant to the Warrant Agreement, substantially all of the expenses of the
registration, offering and sale of the Warrants to the Electing Holders and the
issuance of the Common Stock upon exercise thereof will be paid by the Company,
including, without limitation, Commission filing fees and expenses, expenses of
compliance with state securities or "blue sky" laws.
LEGAL MATTERS
The validity of the Warrants and the shares of Common Stock issuable upon
exercise thereof will be passed upon for the Company by Skadden, Arps, Slate,
Meagher & Flom LLP, New York, New York, special counsel to the Company.
EXPERTS
The consolidated financial statements and schedule of the Company appearing
in the Company's Annual Report (Form 10-K) for the year ended December 31, 1997,
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.
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NO DEALER, SALESMAN 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 OR ANY OF ITS AGENTS. 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. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER OR CONSENT
SOLICITATION BY ANYONE IN ANY JURISDICTION IN WHICH SUCH OFFER OR CONSENT
SOLICITATION IS NOT AUTHORIZED OR IN WHICH THE PERSON MAKING SUCH OFFER OR
CONSENT SOLICITATIONS IS NOT QUALIFIED TO DO SO OR TO ANYONE TO WHOM IT IS
UNLAWFUL TO MAKE SUCH CONSENT SOLICITATION.
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TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
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<S> <C>
Available Information............... 2
Incorporation of Certain Documents
by Reference...................... 2
Enforceability of Civil
Liabilities....................... 3
Prospectus Summary.................. 4
Risk Factors........................ 7
Use of Proceeds..................... 15
Price Range of Common Stock......... 15
Dividend Policy..................... 16
Determination of Offering Price..... 16
Dilution............................ 16
Description of Warrants............. 16
Description of Capital Stock........ 18
Certain U.S. Federal Income Tax
Considerations.................... 23
Plan of Distribution................ 23
Legal Matters....................... 24
Experts............................. 24
</TABLE>
- ------------------------------------------------------
- ------------------------------------------------------
- ------------------------------------------------------
- ------------------------------------------------------
NTL INCORPORATED
863,902 WARRANTS TO PURCHASE
ONE SHARE
OF COMMON STOCK
------------------------
PROSPECTUS
------------------------
DATED , 1998
- ------------------------------------------------------
- ------------------------------------------------------
<PAGE> 28
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following is an itemization of all expenses (subject to future
contingencies) incurred or expected to be incurred by the Company in connection
with the Offering.
<TABLE>
<S> <C>
SEC registration fee...................................... $ *
Nasdaq Listing Fee........................................ *
Legal fees and expenses................................... *
Accounting fees and expenses.............................. *
Printing and engraving fees............................... *
Warrant Exchange Agent fees............................... *
Miscellaneous expenses.................................... *
--------
Total................................................... *
========
</TABLE>
- ---------------
* To be filed by amendment.
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS
As permitted by Section 102 of the Delaware General Corporation Law (the
"DGCL"), the Company's Amended and Restated Certificate of Incorporation
eliminates a director's personal liability for monetary damages to the Company
and its stockholders arising from a breach or alleged breach of a director's
fiduciary duty except for liability under Section 174 of the DGCL or liability
for a breach of the director's duty of loyalty to the Company or its
stockholders, for acts or omissions not in good faith or which involve
intentional misconduct or a knowing violation of law or for any transaction in
which the director derived an improper personal benefit. The effect of this
provision in the certificate of incorporation is to eliminate the rights of the
Company and its stockholders (through stockholders, derivative suits on behalf
of the Company) to recover monetary damages against a director for breach of
fiduciary duty as a director (including breaches resulting from negligent or
grossly negligent behavior) except in the situations described above.
The Company's Restated 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
II-1
<PAGE> 29
in which such action was brought shall determine that despite the adjudication
of liability such person is fairly and reasonably entitled to indemnify 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 bylaws and these Indemnity Agreements, the Company must
indemnify an Indemnitee to the fullest extent permitted by the DGCL for losses
and expenses incurred in connection with actions in which the indemnitee is
involved by reason of having been a director or officer of the Company. The
Company is also obligated to advance expenses an indemnitee may incur in
connection with such actions before any resolution of the action.
ITEM 16. EXHIBITS
The following exhibits are filed as part of this Registration Statement:
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
- ----------- -----------
<C> <S>
3.1 Restated Certificate of Incorporation of the Registrant, as
amended by the Certificate of Amendment, dated June 5, 1996*
3.2 Restated By-laws of the Registrant**
4.1 Form of Warrant Agreement by and between the Registrant and
The Chase Manhattan Bank
4.2 Form of Warrant Certificate (included in Exhibit 4.1)
4.3 Specimen of Common Stock Certificate of the Registrant**
5.1 Opinion of Skadden, Arps, Slate, Meagher & Flom LLP as to
the legality of the securities being registered hereby+
23.1 Consent of Ernst & Young LLP
23.2 Consent of Skadden, Arps, Slate, Meagher & Flom LLP
(included in Exhibit 5.1)+
24 Powers of Attorney (included in the signature pages to the
Registration Statement)
</TABLE>
- ---------------
* Incorporated by reference to the Registrant's Registration Statement on Form
S-3, File No. 333-07879.
** Incorporated by reference from the Registrant's Registration Statement on
Form S-1, File No. 33-63570.
+ To be filed by an amendment.
ITEM 17. UNDERTAKINGS
(A) The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act, each filing of the
Registrant's annual report pursuant to section 13(a) or section 15(d) of the
Securities Exchange Act (and, where applicable, each filing of an employee
benefit plan's annual report pursuant to section 15(d) of the Securities
Exchange Act) that is incorporated by reference in the Registration Statement
shall be deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.
(B) Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers and controlling persons of the
registrant pursuant to the foregoing provisions, or otherwise, the registrant
has been advised that in the opinion of the Commission such indemnification is
against public
II-2
<PAGE> 30
policy as expressed in the Securities Act and is, therefore, unenforceable. In
the event that a claim for indemnification against such liabilities (other than
the payment by the Registrant of expenses incurred or paid by a director,
officer or controlling person of the Registrant in the successful defense of any
action, suit or proceeding) is asserted by such director, officer or controlling
person in connection with the securities being registered, the Registrant will,
unless in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the
Securities Act and will be governed by the final adjudication of such issue.
(C) The undersigned registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities
Act, the information omitted from the form of prospectus filed as part of
this Registration Statement in reliance upon Rule 430A and contained in a
form of prospectus filed by the registrant pursuant to Rule 424(b)(1) or
(4) or 497(h) under the Securities Act shall be deemed to be part of this
Registration Statement as of the time it was declared effective.
(2) For the purposes of determining any liability under the Securities
Act, each post-effective amendment that contains a form of prospectus shall
be deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.
(D) The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this Registration Statement to include
any material information with respect to the plan of distribution not
previously disclosed in the Registration Statement or any material change
to such information in the Registration Statement;
(2) That, for the purpose of determining any liability under the
Securities Act, each such post-effective amendment shall be deemed to be a
new registration statement relating to the securities offered therein, and
the offering of such securities at that time shall be deemed to be the
initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.
II-3
<PAGE> 31
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the
Registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements for filing on Form S-3 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of New York, State of New York, on the 17th day of
September, 1998.
NTL INCORPORATED
By /s/ RICHARD J. LUBASCH
--------------------------------------
Richard J. Lubasch
Senior Vice President-
General Counsel and Secretary
POWER OF ATTORNEY
Each person whose signature appears below hereby authorizes Richard J.
Lubasch, George S. Blumenthal, J. Barclay Knapp and Gregg Gorelick and each and
any one of them, as attorneys-in-fact and agents, with full powers of
substitution, to sign on his or her behalf, individually and in the capacities
stated below, and to file any and all amendments (including post-effective
amendments) to this Registration Statement with the Securities and Exchange
Commission, granting said attorneys-in-fact and agents full power and authority
to perform any other act or benefit of the undersigned required to be done in
the premises.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
/s/ GEORGE S. BLUMENTHAL Chairman of the Board, September 17, 1998
- ------------------------------------------------ Treasurer and Director
George S. Blumenthal
/s/ J. BARCLAY KNAPP President, Chief Executive and September 17, 1998
- ------------------------------------------------ Financial Officer and
J. Barclay Knapp Director
/s/ GREGG GORELICK Vice President -- Controller September 17, 1998
- ------------------------------------------------
Gregg Gorelick
/s/ SIDNEY R. KNAFEL Director September 17, 1998
- ------------------------------------------------
Sidney R. Knafel
/s/ TED H. MCCOURTNEY Director September 17, 1998
- ------------------------------------------------
Ted H. McCourtney
/s/ DEL MINTZ Director September 17, 1998
- ------------------------------------------------
Del Mintz
/s/ ALAN J. PATRICOF Director September 17, 1998
- ------------------------------------------------
Alan J. Patricof
/s/ WARREN POTASH Director September 17, 1998
- ------------------------------------------------
Warren Potash
/s/ MICHAEL S. WILLNER Director September 17, 1998
- ------------------------------------------------
Michael S. Willner
</TABLE>
<PAGE> 1
===============================================================================
WARRANT AGREEMENT
Dated as of ___________, 1998
by and between
NTL INCORPORATED
and
THE CHASE MANHATTAN BANK
as Warrant Agent
===============================================================================
<PAGE> 2
WARRANT AGREEMENT
TABLE OF CONTENTS(1)
<TABLE>
<CAPTION>
Page
<S> <C> <C>
SECTION 1. Appointment of Warrant Agent.................................................. 2
SECTION 2. Issuance of Warrants.......................................................... 2
SECTION 3. Warrant Certificates.......................................................... 2
SECTION 4. Execution of Warrant Certificates............................................. 2
SECTION 5. Registration and Countersignature............................................. 3
SECTION 6. Registration of Transfers and Exchanges....................................... 3
SECTION 7. Terms of Warrants; Exercise of Warrants....................................... 4
SECTION 8. Reports....................................................................... 6
SECTION 9. Payment of Taxes.............................................................. 7
SECTION 10. Mutilated or Missing Warrant Certificates..................................... 7
SECTION 11. Reservation of Warrant Shares................................................. 7
SECTION 12. Obtaining Stock Exchange Listings............................................. 8
SECTION 13. Adjustment of Exercise Price and Number of Warrant Shares
Issuable...................................................................... 8
(a) Adjustment for Change in Capital Stock................................. 8
(b) Adjustment for Rights Issue............................................ 9
(c) Adjustment for Other Distributions..................................... 10
(d) Adjustment for Common Stock Issue...................................... 11
(e) Adjustment for Convertible Securities Issue............................ 13
(f) Current Market Price................................................... 16
(g) Consideration Received................................................. 16
(h) When De Minimis Adjustment May Be Deferred............................. 17
</TABLE>
- --------
(1) This Table of Contents does not constitute a part of this Agreement or
have any bearing upon the interpretation of any of its terms or
provisions.
i
<PAGE> 3
<TABLE>
<CAPTION>
Page
<S> <C> <C>
(i) When No Adjustment Required............................................ 17
(j) Notice of Adjustment................................................... 17
(k) Voluntary Reduction.................................................... 17
(l) Reorganization of the Company.......................................... 18
(m) The Company Determination Final........................................ 19
(n) Warrant Agent's Disclaimer............................................. 19
(o) When Issuance or Payment May Be Deferred............................... 19
(p) Adjustment in Number of Shares......................................... 19
(q) Form of Warrants....................................................... 20
SECTION 14. No Dilution or Impairment..................................................... 20
SECTION 15. Fractional Interests.......................................................... 21
SECTION 16. Notices to Warrant Holders.................................................... 21
SECTION 17. Merger, Consolidation or Change of Name of Warrant Agent...................... 23
SECTION 18. Warrant Agent................................................................. 23
SECTION 19. Registration Statement........................................................ 26
(a) Shelf Registration of Warrant Shares................................... 26
(b) Registration Expenses.................................................. 26
SECTION 20. Change of Warrant Agent....................................................... 26
SECTION 21. Notices to the Company and Warrant Agent...................................... 27
SECTION 22. Supplements and Amendments.................................................... 28
SECTION 23. Successors.................................................................... 28
SECTION 25. Governing Law; Jurisdiction................................................... 28
SECTION 26. Benefits of This Agreement.................................................... 29
SECTION 27. Counterparts.................................................................. 29
SECTION 28. Further Assurances............................................................ 29
EXHIBIT A
Form of Initial Warrant Certificate............................................................... A-1
</TABLE>
ii
<PAGE> 4
WARRANT AGREEMENT dated as of __________, 1998, between NTL
INCORPORATED, a Delaware corporation (the "Company"), and THE CHASE MANHATTAN
BANK, a New York banking corporation, as Warrant Agent (the "Warrant Agent").
WHEREAS, pursuant to the terms and conditions of (i) a Consent
Solicitation Statement of the Company dated September 17, 1998 (the "12 3/4%
Notes Consent Solicitation") relating to its 12 3/4% Series A Senior Deferred
Coupon Notes Due 2005 (the "12 3/4% Notes"), (ii) a Consent Solicitation of the
Company dated September 17, 1998 (the "11 1/2% Notes Consent Solicitation")
relating to the 11 1/2% Series B Senior Deferred Coupon Notes Due 2006 (the "11
1/2% Notes") and (iii) a Consent Solicitation Statement of the Company dated
September 17, 1998 (the "10% Notes Consent Solicitation", and together with the
12 3/4% Notes Consent Solicitation and the 11 1/2% Notes Consent Solicitation,
the "Consent Solicitation") relating to its 10% Series B Senior Notes Due 2007
(the "10% Notes", and together with the 12 3/4% Notes and the 11 1/2% Notes, the
"Notes"), the registered holders of the Notes were given the right to elect to
apply the consent payments payable by the Company pursuant to the Consent
Solicitation to purchase the Warrants hereinafter described (the "Warrants"), to
purchase shares of Common Stock, par value $.01 per share (the "Common Stock"),
of the Company (the Common Stock issuable upon exercise of the Warrants being
referred to herein as the "Warrant Shares"); and
WHEREAS, each Warrant entitles the holder of the Warrant, upon
exercise to receive from the Company, as adjusted as provided herein, one fully
paid and nonassessable share of Common Stock of the Company at the Exercise
Price (as defined herein) and accordingly, a maximum of 863,902 Warrants are
being offered pursuant to, and upon the terms and conditions set forth in, the
prospectus (the "Prospectus") of the Company which forms part of a registration
statement on Form S-3 dated _________, 1998, filed by the Company with the
Securities and Exchange Commission (the "SEC") under the Securities Act of 1933,
as amended (the "Act") (such registration statement, as amended, being referred
to herein as the "Registration Statement"); and
WHEREAS, the Warrants shall bear the legend set forth in the
form of Warrant Certificate in Exhibit A attached hereto (the "Warrant Legend")
subject to the terms of the Warrant Agreement; and
WHEREAS, the Company desires the Warrant Agent to act on
behalf of the Company, and the Warrant Agent is willing so to act, in connection
with the issuance of Warrant certificates and other matters as provided herein.
NOW, THEREFORE, in consideration of the premises and the
mutual agreements herein set forth, the parties hereto agree as follows:
<PAGE> 5
SECTION 1. Appointment of Warrant Agent. The Company hereby
appoints the Warrant Agent to act as agent for the Company in accordance with
the instructions set forth hereinafter in this Agreement, and the Warrant Agent
hereby accepts such appointment
SECTION 2. Issuance of Warrants. Warrants shall be originally
issued, in accordance with Section 5, to each registered holder of the Notes as
of September 8, 1998 who elected in a properly executed consent to certain
amendments of the indenture governing the 12 3/4% Notes (the "12 3/4%
Indenture"), the indenture governing the 11 1/2% Notes (the "11 1/2% Indenture")
or the indenture governing the 10% Notes (the "10% Indenture", and together with
the 12 3/4% Indenture and the 11 1/2% Indenture, the "Indentures"), prior to the
expiration date of the Consent Solicitation, to apply the cash payment payable
in respect of that consent to purchase the Warrants (each such registered
holder, an "Electing Holder"). Issuance of the Warrants is conditional on (i)
the Registration Statement being declared effective by the SEC and no stop order
suspending the effectiveness of the Registration Statement having been issued by
the SEC and (ii) the Warrant Agent receiving from each Electing Holder a
confirmation, completed and executed in a manner reasonably satisfactory to the
Company, acknowledging receipt of the Prospectus and confirming that Electing
Holder's election to apply the cash payment to purchase Warrants.
SECTION 3. Warrant Certificates. The certificates evidencing
the Warrants to be delivered pursuant to this Agreement shall be in registered
form only and shall be substantially in the form set forth in Exhibit A attached
hereto.
SECTION 4. Execution of Warrant Certificates. Warrant
certificates shall be signed on behalf of the Company by its Chairman of the
Board, Chief Executive Officer, President or Vice President and Secretary or an
Assistant Secretary under its corporate seal. Each such signature upon the
Warrant certificates may be in the form of a facsimile signature of the present
or any future Chairman of the Board, Chief Executive Officer, President or Vice
President and Secretary or Assistant Secretary and may be imprinted or otherwise
reproduced on the Warrant certificates and for that purpose the Company may
adopt and use the facsimile signature of any person who shall have been Chairman
of the Board, Chief Executive Officer, President or Vice President and Secretary
or Assistant Secretary, notwithstanding the fact that at the time the Warrant
certificates shall be countersigned and delivered or disposed of he or she shall
have ceased to hold such office, so long as, and the Company hereby represents
that, under the Company's charter and by-laws, any Warrants or Warrant Shares so
issued would be validly issued. The seal of the Company may be in the form of a
facsimile thereof and may be impressed, affixed, imprinted or otherwise
reproduced on the Warrant certificates.
2
<PAGE> 6
In case any officer of the Company who shall have signed any
of the Warrant certificates shall cease to be such officer before the Warrant
certificates so signed shall have been countersigned by the Warrant Agent, or
disposed of by the Company, such Warrant certificates nevertheless may be
countersigned and delivered or disposed of as though such person had not ceased
to be such officer of the Company; so long as, and the Company hereby represents
that, under the Company's charter and by-laws, any Warrants or Warrant Shares so
issued would be validly issued; and any Warrant certificate may be signed on
behalf of the Company by any person who, at the actual date of the execution of
such Warrant certificate, shall be a proper officer of the Company to sign such
Warrant certificate, although at the date of the execution of this Warrant
Agreement any such person was not such officer, so long as, and the Company
hereby represents that, under the Company's charter and by-laws, any Warrants or
Warrant Shares so issued would be validly issued.
Warrant certificates shall be dated the date of
countersignature by the Warrant Agent and shall represent one or more whole
Warrants.
SECTION 5. Registration and Countersignature. The Warrant
Agent, on behalf of the Company, shall number and register the Warrant
certificates in a register as they are issued by the Company.
Warrant certificates shall be manually countersigned by the
Warrant Agent and shall not be valid for any purpose unless so countersigned.
The Warrant Agent shall, upon written instructions of the Chairman of the Board,
Chief Executive Officer, President, Vice President and Secretary or Assistant
Secretary of the Company, initially countersign and deliver Warrants entitling
the holders thereof to purchase not more, nor less, than the number of Warrant
Shares referred to above in the first recital hereof (but subject to adjustment
as hereinafter provided) and shall countersign and deliver Warrants as otherwise
provided in this Agreement.
The Company and the Warrant Agent may deem and treat the
registered holder(s) of the Warrant certificates as the absolute owner(s)
thereof (notwithstanding any notation of ownership or other writing thereon made
by anyone), for all purposes, and neither the Company nor the Warrant Agent
shall be affected by any notice to the contrary.
SECTION 6. Registration of Transfers and Exchanges. The
Warrant Agent shall from time to time register the transfer of any outstanding
Warrant certificates upon the records to be maintained by it for that purpose,
upon surrender thereof accompanied by a written instrument or instruments of
transfer in form satisfactory to the Warrant Agent, duly executed by the
registered holder or holders thereof or by the duly appointed legal
representative thereof or by a
3
<PAGE> 7
duly authorized attorney. Upon any such registration of transfer, a new Warrant
certificate shall be issued to the transferee(s) and the surrendered Warrant
certificate shall be cancelled by the Warrant Agent. Cancelled Warrant
certificates shall thereafter be disposed of by the Company in accordance with
applicable law.
Warrant certificates may be exchanged at the option of the
holder(s) thereof, when surrendered to the Warrant Agent at its office for
another Warrant certificate or other Warrant certificates of like tenor and
representing in the aggregate a like number of Warrants. Warrant certificates
surrendered for exchange shall be cancelled by the Warrant Agent. Such cancelled
Warrant certificates shall then be disposed of by the Company in accordance with
applicable law.
No service charge shall be made for any transfer or exchange
of Warrant certificates, but the Company may require payment of a sum sufficient
to cover any stamp or other governmental charge or tax that may be imposed in
connection with any such transfer or exchange.
The Warrant Agent is hereby authorized to countersign, in
accordance with the provisions of this Section 6, the new Warrant certificates
issued pursuant to the provisions of this Section 6.
SECTION 7. Terms of Warrants; Exercise of Warrants. Subject to
the terms of this Agreement, each Warrant holder shall have the right, which may
be exercised from the date of original issuance of the Warrant certificates
pursuant to the terms of this Agreement and prior to 5:00 p.m. New York city
time on the tenth anniversary thereof (the "Expiration Date"), to exercise each
Warrant and receive from the Company the number of fully paid and nonassessable
Warrant Shares which the holder may at the time be entitled to receive on
exercise of such Warrants and payment of the Exercise Price (as herein defined)
then in effect for such Warrant Shares; provided, however, that no Warrant
holder shall be entitled to exercise such holder's Warrants at any time unless
at the time of exercise the Registration Statement is effective under the Act,
and no stop order suspending the effectiveness of the Registration Statement has
been issued by the SEC; and provided, further, that if the Company or a holder
of Warrants reasonably believes (as evidenced by notice to the Warrant Agent of
such belief) that the exercise of any Warrant requires prior compliance with the
Hart-Scott-Rodino Antitrust Improvements Act of 1976 and the rules and
regulations thereunder, any such exercise shall be contingent upon such prior
compliance as evidenced by notice from the Company to the Warrant Agent of such
compliance. Each Warrant, when exercised will entitle the holder thereof to
purchase one fully paid and nonassessable share of Common Stock at the Exercise
Price. Each Warrant not exercised prior to the Expiration Date shall become void
and all rights thereunder and all rights in respect thereof under this Agreement
shall cease as of such time.
4
<PAGE> 8
Save as expressly provided otherwise in this Agreement, no adjustments as to
dividends will be made upon exercise of the Warrants.
A Warrant may be exercised upon surrender to the Company at
the principal corporate trust office of the Warrant Agent referred to in Section
21 (the "Warrant Agent Office") of the certificate or certificates evidencing
the Warrants to be exercised with the form of election to purchase on the
reverse thereof duly filled in and signed, which signature shall be guaranteed
by an "eligible guarantor" as defined in the regulations promulgated under the
Securities and Exchange Act of 1934, as amended (the "Exchange Act"), and upon
payment to the Warrant Agent for the account of the Company of the exercise
price of $[______](2) (the "Exercise Price"), as adjusted as herein provided,
for each Warrant Share then exercised. Payment of the aggregate Exercise Price
shall be made (i) in United States dollars or (ii) by certified or official bank
check payable to the order of the Company.
Subject to the provisions of Section 9 hereof, upon such
surrender of Warrants and payment of the Exercise Price, the Company shall issue
and cause to be delivered with all reasonable dispatch to or upon the written
order of the holder and in such name or names, as the Warrant holder may
designate, a certificate or certificates for the number of full Warrant Shares
issuable upon the exercise of such Warrants together with cash as provided in
Section 15 hereof; provided, however, that if any consolidation, merger or lease
or sale of assets is proposed to be effected by the Company as described in
subsection (l) of Section 13 hereof, or a tender offer or an exchange offer for
shares of Common Stock of the Company shall be made, upon such surrender of
Warrants and payment of the Exercise Price as aforesaid, the Company shall, as
soon as possible, but in any event not later than two business days thereafter,
issue and cause to be delivered the full number of Warrant Shares issuable upon
the exercise of such Warrants in the manner described in this sentence together
with cash as provided in Section 15 hereof. Such certificate or certificates
shall be deemed to have been issued and any person so designated to be named
therein shall be deemed to have become a holder of record of such Warrant Shares
as of the date of the surrender of such Warrants and payment of the Exercise
Price. No fractional shares shall be issued upon exercise of any Warrants in
accordance with Section 15 hereof.
The Warrants shall be exercisable, at the election of the
holders thereof, either in full or from time to time in part (in whole shares)
and, in the event that a certificate evidencing Warrants is exercised in respect
of fewer than all of the Warrant Shares issuable on such exercise at any time
prior to the date of
- --------
(2) The initial Exercise Price shall be the current market price per share
of Common Stock (determined in accordance with Section 13(f)) on the
date of original issuance of the Warrants.
5
<PAGE> 9
expiration of the Warrants, a new certificate evidencing the remaining Warrant
or Warrants will be issued, and the Warrant Agent is hereby irrevocably
authorized to countersign and to deliver the required new Warrant certificate or
certificates pursuant to the provisions of this Section and of Section 5 hereof,
and the Company, whenever required by the Warrant Agent, will supply the Warrant
Agent with Warrant certificates duly executed on behalf of the Company for such
purpose.
All Warrant certificates surrendered upon exercise of Warrants
shall be cancelled by the Warrant Agent. Such cancelled Warrant certificates
shall then be disposed of by the Company in accordance with applicable law. The
Warrant Agent shall account promptly to the Company with respect to Warrants
exercised and concurrently pay to the Company all monies received by the Warrant
Agent for the purchase of the Warrant Shares through the exercise of such
Warrants.
The Warrant Agent shall keep copies of this Agreement, the SEC
Reports (as defined below) and any notices given or received hereunder available
for inspection by the holders of the Warrants during normal business hours at
its office. The Company shall supply the Warrant Agent from time to time with
such numbers of copies of this Agreement as the Warrant Agent may request.
SECTION 8. Reports. So long as any of the Warrants remain
outstanding, the Company shall cause copies of all quarterly and annual
financial reports and of the information, documents and other reports (or copies
of such portions of any of the foregoing as the SEC may by rules and regulations
prescribe) that the Company is required to file with the SEC pursuant to Section
13 or 15(d) of the Exchange Act in effect on the date of this Agreement ("SEC
Reports") to be filed with the Warrant Agent and mailed to the holders of
Warrants who have previously delivered to the Company or the Warrant Agent a
written request for SEC Reports, in each case, within 15 days after filing with
the SEC. If the Company is not subject to the requirements of Section 13 or
15(d) of the Exchange Act, the Company shall nevertheless continue to cause SEC
Reports, in form and substance (including footnotes) substantially the same as
those that it would be required to file pursuant to Section 13 or 15(d) of the
Exchange Act as in effect on the date of this Agreement if it were then subject
to the requirements of either such Section, to be so filed with the SEC for
public availability (unless the SEC will not accept such a filing) and with the
Warrant Agent and mailed to the holders of Warrants, in each case, within the
same time periods as would have applied (including under the preceding sentence)
had the Company then been subject to the requirements of Section 13 or 15(d) of
the Exchange Act. The Company shall make all such information available to
investors, securities analysts and broker dealers who request it in writing.
6
<PAGE> 10
SECTION 9. Payment of Taxes. No service charge shall be made
to any holder of a Warrant for any exercise, exchange or registration of
transfer of Warrant certificates, and the Company will pay all documentary stamp
taxes attributable to the initial issuance of Warrant Shares upon the exercise
of Warrants; provided, however, that the Company shall not be required to pay
any tax or taxes which may be payable in respect of any transfer involved in the
issue of any Warrant certificates or any certificates for Warrant Shares in a
name other than that of the registered holder of a Warrant certificate
surrendered upon the exercise of a Warrant, and the Company shall not be
required to issue or deliver such Warrant certificates unless or until the
person or persons requesting the issuance thereof shall have paid to the Company
the amount of such tax or shall have established to the satisfaction of the
Company that such tax has been paid.
SECTION 10. Mutilated or Missing Warrant Certificates. If any
of the Warrant certificates shall be mutilated, lost, stolen or destroyed, the
Company shall issue and the Warrant Agent shall countersign, in exchange and
substitution for and upon cancellation of the mutilated Warrant certificate, or
in lieu of and substitution for the Warrant certificate lost, stolen or
destroyed, a new Warrant certificate of like tenor and representing an
equivalent number of Warrants, but only upon receipt of evidence reasonably
satisfactory to the Company and the Warrant Agent of such loss, theft or
destruction of such Warrant certificate and such indemnity and security therefor
as is customary and reasonably satisfactory to them, if requested. Applicants
for such substitute Warrant shall also comply with such other reasonable
regulations and pay such other reasonable charges as the Company or the Warrant
Agent may prescribe.
SECTION 11. Reservation of Warrant Shares. The Company will at
all times reserve and keep available, free from preemptive rights, out of the
aggregate of its authorized but unissued Common Stock, for the purpose of
enabling it to satisfy any obligation to issue Warrant Shares upon exercise of
Warrants, the maximum number of shares of Common Stock which may then be
deliverable upon the exercise of all outstanding Warrants.
The Company or the transfer agent for the Common Stock and
every subsequent transfer agent for any shares of the Company's capital stock
issuable upon the exercise of any of the rights of purchase represented by the
Warrants as aforesaid (the "Transfer Agent") will be irrevocably authorized and
directed at all times to reserve such number of authorized shares as shall be
required for such purpose. The Company will keep a copy of this Agreement on
file with the Transfer Agent for any shares of the Company's capital stock
issuable upon the exercise of the rights of purchase represented by the
Warrants. The Warrant Agent is hereby irrevocably authorized to requisition from
time to time from such Transfer Agent the stock certificates required to honor
outstanding Warrants upon exercise thereof in accordance with the terms of this
Agreement.
7
<PAGE> 11
The Company will supply such Transfer Agent with duly executed certificates for
such purposes and will provide or otherwise make available any cash which may be
payable as provided in Section 15 hereof. The Company will furnish such Transfer
Agent a copy of all notices of adjustments and certificates related thereto,
transmitted to each holder pursuant to Section 16 hereof.
Before taking any action which would cause an adjustment
pursuant to Section 13 hereof to reduce the Exercise Price below the then par
value (if any) of the Warrant Shares, the Company will take all corporate action
necessary, in the opinion of its counsel (which may be counsel employed by the
Company), in order that the Company may validly and legally issue fully paid and
nonassessable Warrant Shares at the Exercise Price as so adjusted.
The Company covenants that all Warrant Shares which may be
issued upon exercise of Warrants will be, upon payment of the Exercise Price and
issuance thereof, fully paid, nonassessable, free of preemptive rights and free
from all taxes, liens, charges and security interests with respect to the issue
thereof.
SECTION 12. Obtaining Stock Exchange Listings. The Company
shall also from time to time take all action necessary so that the Warrant
Shares, immediately upon their issuance upon the exercise of Warrants, will be
listed on the Nasdaq Stock Market National Market or such other principal
securities exchanges, interdealer quotation systems and markets within the
United States of America, if any, on which other shares of Common Stock are then
listed or quoted.
SECTION 13. Adjustment of Exercise Price and Number of Warrant
Shares Issuable. The Exercise Price and the number of Warrant Shares issuable
upon the exercise of each Warrant are subject to adjustment from time to time
upon the occurrence of the events enumerated in this Section 13. For purposes of
this Section 13, "Common Stock" means the Common Stock and any other stock of
the Company, however designated, for which the Warrants may be exercisable.
(a) Adjustment for Change in Capital Stock.
If, after the date of this Agreement, the Company:
(1) pays a dividend or makes a distribution on its
Common Stock in shares of its Common Stock;
(2) subdivides its outstanding shares of Common Stock
into a greater number of shares;
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<PAGE> 12
(3) combines its outstanding shares of Common Stock
into a smaller number of shares;
(4) makes a distribution on its Common Stock in
shares of its capital stock other than Common Stock; or
(5) issues by reclassification of its Common Stock
any shares of its capital stock,
then the Exercise Price and the number and kind of shares of capital stock of
the Company issuable upon the exercise of a Warrant shall be proportionately
adjusted so that the holder of any Warrant thereafter exercised may receive the
aggregate number and kind of shares of capital stock of the Company which he
would have owned immediately following such action if such Warrant had been
exercised immediately prior to such action.
The adjustment shall become effective immediately after the
record date in the case of a dividend or distribution and immediately after the
effective date in the case of a subdivision, combination or reclassification.
If after an adjustment a holder of a Warrant upon exercise may
receive shares of two or more classes or series of capital stock of the Company,
the Company shall determine the allocation of the adjusted Exercise Price
between the classes or series of capital stock based on the relative fair market
values (determined in good faith by the Board of Directors of the Company) of
such class or classes of capital stock. After such allocation, the exercise
privilege and the Exercise Price of each class or series of capital stock shall
thereafter again be subject to adjustment on the terms applicable to Common
Stock in this Section 13.
Such adjustment shall be made successively whenever any event
listed above shall occur.
(b) Adjustment for Rights Issue.
If, after the date of this Agreement, the Company distributes
any options, warrants or other rights (however classified) to all holders of its
Common Stock entitling them for a period expiring within 60 days after the
record date mentioned below to purchase shares of Common Stock or securities
convertible into, or exchangeable or exercisable for, Common Stock at a price
per share (or with an initial conversion, exchange or exercise price) less than
the current market price per share on that record date, the Exercise Price shall
be adjusted in accordance with the following formula:
9
<PAGE> 13
N x P
O + -----
M
E' = E x -----------
O + N
where:
E' = the adjusted Exercise Price.
E = the current Exercise Price.
O = the number of shares of Common Stock outstanding on the
record date.
N = the number of additional shares of Common Stock offered.
P = the offering price per share of the additional shares.
M = the current market price per share of Common Stock on the
record date.
The adjustment shall be made successively whenever any such
options, warrants or other rights (however classified) are issued and shall
become effective immediately after the record date for the determination of
stockholders entitled to receive the options, warrants or other rights (however
classified). If at the end of the period during which such rights, options or
warrants are exercisable, not all options, warrants or other rights (however
classified) shall have been exercised, the Exercise Price shall be immediately
readjusted to what it would have been if "N" in the above formula had been the
number of shares actually issued.
(c) Adjustment for Other Distributions.
If, after the date of this Agreement, the Company distributes
to all holders of its Common Stock, or securities convertible into, or
exchangeable for, Common Stock (other than, in the case of such securities,
pursuant to the stated terms of such securities) any of its assets (including
cash), debt securities, preferred stock or any options, warrants or other rights
to purchase debt securities, assets or other securities of the Company, the
Exercise Price shall be adjusted in accordance with the following formula:
10
<PAGE> 14
M - F
E' = E x -------
M
where:
E' = the adjusted Exercise Price.
E = the current Exercise Price.
M = the current market price per share of Common Stock on the
record date mentioned below.
F = the fair market value on the record date of the assets,
securities, rights or warrants applicable to one share of
Common Stock. The Board of Directors shall determine the
fair market value.
The adjustment shall be made successively whenever any such
distribution is made and shall become effective immediately after the record
date for the determination of stockholders entitled to receive the distribution.
This subsection (c) does not apply to: (i) options, warrants
or other rights referred to in subsection (b) of this Section 13; (ii)
securities convertible into or exchangeable for shares of Common Stock referred
to in sub-section (e) of this Section 13; (iii) a dividend payable in shares of
Common Stock, or (iv) any cash dividend that, when added to all other cash
dividends paid in the 12 months prior to the declaration date of such dividend
(excluding any such other dividend included in a previous adjustment of the
Exercise Price pursuant to this sub-section (c)), does not exceed 5% of the
current market price of such Common Stock.
(d) Adjustment for Common Stock Issue.
If, after the date of this Agreement, the Company issues
shares of Common Stock for a consideration per share less than the current
market price per share of Common Stock on the date the Company fixes the
offering price of such additional shares, the Exercise Price shall be adjusted
in accordance with the formula:
P
O + -----
M
E' = E x -----------
A
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<PAGE> 15
E' = the adjusted Exercise Price.
E = the then current Exercise Price.
O = the number of shares of Common Stock outstanding
immediately prior to the issuance of such additional shares.
P = the aggregate consideration received for the issuance of
such additional shares.
M = the current market price per share of Common Stock on the
date of issuance of such additional shares.
A = the number of shares of Common Stock outstanding
immediately after the issuance of such additional shares.
The adjustment shall be made successively whenever any such
issuance is made, and shall become effective immediately after such issuance.
This subsection (d) does not apply to:
(1) any of the transactions described in subsections
(a), (b) and (c) of this Section 13,
(2) the exercise of Warrants or other warrants
outstanding on the date of this Agreement, or the conversion or
exchange of other securities outstanding on the date of this Agreement
which are convertible into or exchangeable for Common Stock,
(3) Common Stock issued to the Company's employees,
consultants or directors under bona fide stock option or purchase plans
or benefit plans adopted or assumed by the Board of Directors or the
Company's Compensation Committee,
(4) Common Stock issuable upon the exercise of rights
or warrants issued to the holders of Common Stock for which adjustment
was made previously pursuant to subsections (b) or (c) of this Section
13,
(5) Common Stock issued to shareholders of any person
which merges into the Company in proportion to their stock holdings of
such person immediately prior to such merger, upon such merger,
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<PAGE> 16
(6) Common Stock issued in a bona fide public
offering pursuant to a firm commitment underwriting,
(7) Common Stock issued in a bona fide private
placement through a placement agent or a bona fide private offering
through initial purchasers pursuant to an exemption from, or in
transactions not subject to, the registration requirements of the Act
and applicable state securities laws, where the placement agent or, as
the case may be, each of the initial purchasers is a member firm of the
National Association of Securities Dealers, Inc. to persons that are
not Affiliates (as defined in the Indentures) of the Company (except to
the extent that any discount from the current market price attributable
to restrictions on transferability of the Common Stock, as determined
in good faith by the Board of Directors and described in a Board
resolution which shall be filed with the Warrant Agent, shall exceed
15%),
(8) Common Stock issued to Affiliates of the Company
simultaneous with, and resulting in at least the same net proceeds per
share of Common Stock to the Company as, an issuance referred to in
paragraphs (6) or (7) of this Section 13(d), provided that Affiliates
of the Company do not purchase in the aggregate more than 15% of the
shares of Common Stock issued pursuant to paragraph (7) of this Section
13(d),
(9) Such shares of Common Stock as may become
issuable upon the exercise of any of the securities referred to in the
paragraphs (1) through (4) of this Section 13(d) by reason of
adjustments required pursuant to anti-dilution provisions applicable to
such securities as in effect on the date hereof, but only if and to the
extent that such adjustments are required as the result of the original
issuance of the Warrants, or
(10) Such shares of Common Stock as may become
issuable upon the exercise of any of the securities referred to in the
paragraphs (2) through (4) of this Section 13(d) by reason of
adjustments required pursuant to anti-dilution provisions applicable to
such securities as in effect on the date hereof, in order to reflect
any subdivision or combination of Common Stock, by reclassification or
otherwise, or any dividend on Common Stock payable in Common Stock.
(e) Adjustment for Convertible Securities Issue.
If, after the date of this Agreement, the Company issues any
securities convertible into or exchangeable for Common Stock (other than
securities issued in transactions described in subsections (a), (b) and (c) of
this
13
<PAGE> 17
Section 13) for a consideration per share of Common Stock initially deliverable
upon conversion or exchange of such securities less than the current market
price per share of Common Stock on the date of issuance of such securities, the
Exercise Price shall be adjusted in accordance with this formula:
where:
P
O + -----
M
E(1) = E x -----------
O + D
E(1) = the adjusted Exercise Price.
E = the then current Exercise Price.
O = the number of shares of Common Stock outstanding
immediately prior to the issuance of such securities.
P = the aggregate consideration received for the issuance of
such securities.
M = the current market price per share on the date of issuance
of such securities.
D = the maximum number of shares of Common Stock deliverable
upon conversion of or in exchange for such securities at the
initial conversion or exchange rate.
The adjustment shall be made successively whenever any such
issuance is made, and shall become effective immediately after such issuance,
provided that (a) no further adjustment of the Exercise Price shall be made upon
the subsequent issue or sale of shares of Common Stock upon the conversion or
exchange of such convertible securities, except in the case of any such
convertible securities which contain provisions requiring an adjustment,
subsequent to the date of the issue or sale thereof, of the number of shares of
Common Stock issuable upon the conversion or exchange of such convertible
securities by reason of (x) a change of control of the Company, (y) the
acquisition by any Person or group of Persons of any specified number or
percentage of the voting securities of the Company or (z) any similar event or
occurrence, each such case to be deemed hereunder to involve a separate issuance
of shares of Common Stock, or convertible securities, as the case may be; and
(b) if such convertible securities by
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<PAGE> 18
their terms provide, with the passage of time or otherwise, for any increase in
the consideration payable to the Company, or decrease in the number of shares of
common stock issuable, upon the exercise, conversion or exchange thereof (by
change of rate or otherwise), the Exercise Price computed upon the original
issue, sale, grant or assumption thereof, and any subsequent adjustments based
thereon, shall, upon any such increase or decrease becoming effective, be
recomputed to reflect such increase or decrease insofar as it affects the rights
of conversion or exchange under such convertible securities, which are
outstanding at such time.
If all of the Common Stock deliverable upon conversion or
exchange of such securities has not been issued when such securities are no
longer outstanding, then the Exercise Price shall promptly be readjusted to the
Exercise Price that would then be in effect had the adjustment upon the issuance
of such securities been made on the basis of the actual number of shares of
Common Stock issued upon conversion or exchange of such securities.
This subsection (e) does not apply to:
(1) convertible securities issued to shareholders of
any person which merges into the Company, or with a subsidiary of the
Company, in proportion to their stock holdings of such person
immediately prior to such merger, upon such merger,
(2) convertible securities issued in a bona fide
public offering pursuant to a firm commitment underwriting;
(3) convertible securities issued in a bona fide
private placement through a placement agent or a bona fide private
offering through initial purchasers pursuant to an exemption from, or
in transactions not subject to, the registration requirements of the
Act and applicable state securities laws, where the placement agent or,
as the case may be, each of the initial purchasers is a member firm of
the National Association of Securities Dealers, Inc. (except to extent
that any discount from the current market price attributable to
restrictions on transferability of Common Stock issuable upon
conversion, as determined in good faith by the Board of Directors and
described in a resolution of the Board of Directors which shall be
filed with the Warrant Agent, shall exceed 15%) or
(4) stock options issued to the Company's employees,
consultants or directors under bona fide stock option or purchase plans
or benefit plans adopted or assumed by the Board of Directors or the
Company's Compensation Committee.
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<PAGE> 19
(f) Current Market Price.
All references in subsections (b), (c), (d) and (e) of this
Section 13 and in Section 15 to "the current market price per share of Common
Stock" on any date mean the average of the Quoted Prices of the Common Stock for
30 consecutive trading days commencing 45 trading days before the date in
question. The "Quoted Price" of the Common Stock is the last reported sales
price of the Common Stock as reported by the Nasdaq Stock Market's National
Market ("Nasdaq") or if the Common Stock is listed on a securities exchange, the
last reported sales price of the Common Stock on such exchange which shall be
for consolidated trading if applicable to such exchange, or if not so reported
or listed, the last reported bid price of the Common Stock. If prices of the
Common Stock are not so reported or the Common Stock is not quoted on Nasdaq or
listed on a securities exchange, then the references in those subsections to
"the current market price per share of Common Stock" shall mean the fair market
value of a share of Common Stock as determined by the Board of Directors of the
Company on such basis as it in good faith considers appropriate (without regard
to any illiquidity or minority discounts).
(g) Consideration Received.
For purposes of any computation respecting consideration
received pursuant to subsections (d) and (e) of this Section 13, the following
shall apply:
(1) in the case of the issuance of shares of Common
Stock for cash, the consideration shall be the amount of such cash,
provided that in no case shall any deduction be made for any
commissions, discounts or other expenses incurred by the Company for
any underwriting of the issue or otherwise in connection therewith;
(2) in the case of the issuance of shares of Common
Stock for a consideration in whole or in part other than cash, the
consideration other than cash shall be deemed to be the fair market
value thereof as determined in good faith by the disinterested members
of the Board of Directors (irrespective of the accounting treatment
thereof), whose determination shall be conclusive (absent manifest
error), and described in a resolution of the Board of Directors which
shall be filed with the Warrant Agent; and
(3) in the case of the issuance of securities
convertible into or exchangeable for shares, the aggregate
consideration received therefor shall be deemed to be the consideration
received by the Company for the issuance of such securities plus the
additional minimum consideration, if any, to be received by the Company
upon the conversion
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<PAGE> 20
or exchange thereof (the consideration in each case to be determined in
the same manner as provided in clauses (1) and (2) of this subsection).
(h) When De Minimis Adjustment May Be Deferred.
No adjustment in the Exercise Price need be made unless the
adjustment would require an increase or decrease of at least l% in the Exercise
Price. Any adjustments that are not made shall be carried forward and taken into
account in any subsequent adjustment.
All calculations under this Section 13 shall be made to the
nearest cent or to the nearest 1/100th of a share, as the case may be.
(i) When No Adjustment Required.
No adjustment need be made for a transaction referred to in
subsections (a), (b), (c), (d) or (e) of this Section 13 if Warrant holders are
to participate in the transaction on a basis and with notice that the Board of
Directors determines to be fair and appropriate in light of the basis and notice
on which holders of Common Stock participate in the transaction.
No adjustment need be made for rights to purchase Common Stock
purchased at the fair market value thereof (determined in good faith by the
Board of Directors of the Company) pursuant to any of the Company's plans for
reinvestment of dividends or interest.
No adjustment need be made for a change in the par value, or
from par value to no par value, or from no par value to par value, of the Common
Stock.
To the extent the Warrants become convertible into cash, no
adjustment need be made thereafter as to the cash. Interest will not accrue on
the cash.
(j) Notice of Adjustment.
Whenever the Exercise Price is adjusted, the Company shall
provide the notices required by Section 16 hereof.
(k) Voluntary Reduction.
The Company from time to time may, as the Board of Directors
deems appropriate, reduce the Exercise Price by any amount for any period of
time if the period is at least 20 days and if the reduction is irrevocable
during the
17
<PAGE> 21
period; provided, however, that in no event may the Exercise Price be less than
the par value of a share of Common Stock.
Whenever the Exercise Price is reduced, the Company shall mail
to Warrant holders a notice of the reduction. The Company shall mail the notice
at least 15 days before the date the reduced Exercise Price takes effect. The
notice shall state the reduced Exercise Price and the period it will be in
effect.
A reduction of the Exercise Price pursuant to this Section
13(k), other than a reduction which the Company has irrevocably committed will
be in effect for so long as any Warrants are outstanding, does not change or
adjust the Exercise Price otherwise in effect for purposes of subsections (a),
(b), (c), (d) and (e) of this Section 13.
(l) Reorganization of the Company.
(1) If the Company consolidates or merges with or
into, or transfers or leases all or substantially all of its assets to,
any person, upon consummation of such transaction the Warrants shall
automatically become exercisable for the kind and amount of securities,
cash or other assets which the holder of a Warrant would have owned
immediately after the consolidation, merger, transfer or lease if the
holder had exercised the Warrant immediately before the effective date
of the transaction. Concurrently with the consummation of such
transaction, the corporation formed by or surviving any such
consolidation or merger if other than the Company, or the person to
which such sale or conveyance shall have been made (any such person,
the "Successor Guarantor"), shall enter into a supplemental Warrant
Agreement so providing and further providing for adjustment which shall
be as nearly equivalent as may be practical to the adjustments provided
for in this Section 13. The Successor Guarantor shall mail to Warrant
holders a notice describing the supplemental Warrant Agreement. If the
issuer of securities deliverable upon exercise of Warrants under the
supplemental Warrant Agreement is an affiliate of the formed,
surviving, transferee or lessee corporation, that issuer shall join in
the supplemental Warrant Agreement .
(2) Notwithstanding paragraph (1) of this Section
13(l), in the case of any merger, reverse stock split, or other
transaction in which the publicly held Common Stock shall be converted
into the right to receive a consideration consisting solely of cash,
(A) this Warrant Agreement and each Warrant shall terminate and (B)
each holder of a Warrant, without having to take any other action than
the surrendering of such Warrant to the Company, shall receive an
amount equal to the amount (if any) by which the price per share
payable to, or which would be received by, any public
18
<PAGE> 22
holder of Common Stock in connection with such transaction exceeds the
Exercise Price effective at that time.
(3) If this subsection (l) applies, subsections (a),
(b), (c), (d) and (e) of this Section 13 do not apply.
(m) The Company Determination Final.
Any determination that the Company or the Board of Directors
must make pursuant to subsection (c), (d), (e), (f), (g) or (i) of this Section
13 is (absent manifest error) conclusive if such determination is made in good
faith.
(n) Warrant Agent's Disclaimer.
The Warrant Agent has no duty to determine when an adjustment
under this Section 13 or Section 14 should be made, how it should be made or
what it should be. The Warrant Agent has no duty to determine whether any
provisions of a supplemental Warrant Agreement under subsection (l) of this
Section 13 are correct. The Warrant Agent makes no representation as to the
validity or value of any securities or assets issued upon exercise of Warrants.
The Warrant Agent shall not be responsible for the Company's failure to comply
with this Section 13 or Section 14.
(o) When Issuance or Payment May Be Deferred.
In any case in which this Section 13 shall require that an
adjustment in the Exercise Price be made effective as of a record date for a
specified event, the Company may elect to defer until the occurrence of such
event (i) issuing to the holder of any Warrant exercised after such record date
the Warrant Shares and other capital stock of the Company, if any, issuable upon
such exercise over and above the Warrant Shares and other capital stock of the
Company, if any, issuable upon such, exercise on the basis of the Exercise Price
and (ii) paying to such holder any amount in cash in lieu of a fractional share
pursuant to Section 15 hereof; provided, however, that the Company shall deliver
to such holder a due bill or other appropriate instrument evidencing such
holder's right to receive such additional Warrant Shares, other capital stock
and cash upon the occurrence of the event requiring such adjustment.
(p) Adjustment in Number of Shares.
Upon each adjustment of the Exercise Price pursuant to this
Section 13, each Warrant outstanding prior to the making of the adjustment in
the Exercise Price shall thereafter evidence the right to receive upon payment
of the adjusted
19
<PAGE> 23
Exercise Price that number of shares of Common Stock (calculated to the nearest
hundredth) obtained from the following formula:
E
N' = N x ----
E'
where:
N' = the adjusted number of Warrant Shares issuable upon
exercise of a Warrant by payment of the adjusted Exercise
Price.
N = the number of Warrant Shares previously issuable upon
exercise of a Warrant by payment of the Exercise Price prior
to adjustment.
E' = the adjusted Exercise Price.
E = the Exercise Price prior to adjustment.
(q) Form of Warrants.
Irrespective of any adjustments in the Exercise Price or the
number or kind of shares purchasable upon the exercise of the Warrants, Warrants
theretofore or thereafter issued may continue to express the same price and
number and kind of shares as are stated in the Warrants initially issuable
pursuant to this Agreement.
SECTION 14. No Dilution or Impairment. (a) If any event shall
occur as to which the provisions of Section 13 are not strictly applicable but
the failure to make any adjustment would adversely affect the purchase rights
represented by the Warrants in accordance with the essential intent and
principles of such Section, then, in each such case, the Company shall appoint a
firm of independent certified public accountants of recognized national standing
(which may be the regular auditors of the Company), which shall give their
opinion upon the adjustment, if any, on a basis consistent with the essential
intent and principles established in Section 13, necessary to preserve, without
dilution or impairment, the purchase rights, represented by this Warrant. Upon
receipt of such opinion, the Company will promptly mail a copy thereof to the
Warrant Agent and the holders of the Warrants and shall make the adjustments
described therein.
(b) The Company will not, by amendment of its certificate of
incorporation or through any consolidation, merger, reorganization, transfer of
assets, dissolution, issue or sale of securities or any other voluntary action,
avoid
20
<PAGE> 24
or seek to avoid the observance or performance of any of the terms of the
Warrants, but will at all times in good faith assist in the carrying out of all
such terms and in the taking of all such action as may be necessary or
appropriate in order to protect the rights of the holder of the Warrants against
dilution or other impairment. Without limiting the generality of the foregoing,
the Company (i) will take all such action as may be necessary or appropriate in
order that the Company may validly and legally issue fully paid and
nonassessable shares of Common Stock on the exercise of the Warrants from time
to time outstanding and (ii) will not take any action which results in any
adjustment of the Exercise Price if the total number of Warrant Shares issuable
after the action upon the exercise of all of the Warrants would exceed the total
number of shares of Common Stock then authorized by the Company's certificate of
incorporation and available for the purposes of issue upon such exercise. A
consolidation, merger, reorganization or transfer of assets involving the
Company covered by Section 13(l) shall not be prohibited by or require any
adjustment under this Section 14.
SECTION 15. Fractional Interests. The Company shall not be
required to issue fractional Warrant Shares on the exercise of Warrants. If more
than one Warrant shall be presented for exercise in full at the same time by the
same holder, the number of full Warrant Shares which shall be issuable upon the
exercise thereof shall be computed on the basis of the aggregate number of
Warrant Shares purchasable on exercise of the Warrants so presented. If any
fraction of a Warrant Share would, except for the provisions of this Section 15,
be issuable on the exercise of any Warrants (or specified portion thereof), the
Company shall notify the Warrant Agent in writing of the Amount to be paid in
lieu of the fraction of a Warrant Share and concurrently pay or provide to the
Warrant Agent for repayment to the Warrant holder an amount in cash equal to the
product of (i) such fraction of a Warrant Share and (ii) the difference of the
current market price of a share of Common Stock over the Exercise Price.
SECTION 16. Notices to Warrant Holders. Upon any adjustment of
the Exercise Price pursuant to Section 13 hereof, the Company shall within 15
days thereafter (i) cause to be filed with the Warrant Agent a certificate of a
firm of independent public accountants of recognized national standing selected
by the Board of Directors of the Company (which may be the regular auditors of
the Company) setting forth the Exercise Price after such adjustment and setting
forth in reasonable detail the method of calculation and the facts upon which
such calculations are based and setting forth the number of Warrant Shares (or
portion thereof) issuable after such adjustment in the Exercise Price, upon
exercise of a Warrant and payment of the adjusted Exercise Price, which
certificate shall be conclusive evidence of the correctness of the matters set
forth therein, and (ii) cause to be given to each of the registered holders of
the Warrant certificates at such registered holder's address appearing on the
Warrant register written notice of such adjustments by first-class mail, postage
prepaid. Where appropriate, such
21
<PAGE> 25
notice may be given in advance and included as a part of the notice required to
be mailed under the other provisions of this Section 16.
In case:
(a) The Company shall authorize the issuance to all holders of
shares of Common Stock of options, warrants or other rights (howsoever
classified) to subscribe for or purchase shares of Common Stock or of any other
subscription rights or warrants; or
(b) The Company shall authorize the distribution to all
holders of shares of Common Stock of evidences of its indebtedness or assets
(other than cash dividends or cash distributions payable out of consolidated
earnings or earned surplus or dividends payable in shares of Common Stock or
distributions referred to in subsection (a) of Section 13 hereof); or
(c) of any consolidation or merger to which the Company is a
party and for which approval of any shareholders of the Company is required, or
of the conveyance or transfer of the properties and assets of the Company
substantially as an entirety, or of any reclassification or change of Common
Stock issuable upon exercise of the Warrants (other than a change in par value,
or from par value to no par value, or from no par value to par value, or as a
result of a subdivision or combination), or a tender offer or exchange offer for
shares of Common Stock; or
(d) of the voluntary or involuntary dissolution, liquidation
or winding up of the Company; or
(e) The Company proposes to take any action (other than
actions of the character described in Section 13(a)) which would require an
adjustment of the Exercise Price pursuant to Section 13; then, in each case, the
Company shall cause to be filed with the Warrant Agent and shall cause to be
given to each of the registered holders of the Warrant certificates at his
address appearing on the Warrant register, at least 20 days (or 10 days in any
case specified in clauses (a) or (b) above) prior to the applicable record date
hereinafter specified, or promptly in the case of events for which there is no
record date, by first-class mail, postage prepaid, a written notice stating (i)
the date as of which the holders of record of shares of Common Stock to be
entitled to receive any such rights, options, warrants or distribution are to be
determined, or (ii) the initial expiration date set forth in any tender offer or
exchange offer for shares of Common Stock, or (iii) the date on which any such
consolidation, merger, conveyance, transfer, dissolution, liquidation or winding
up is expected to become effective or consummated, and the date as of which it
is expected that holders of record of shares of Common Stock shall be entitled
to exchange such shares for
22
<PAGE> 26
securities or other property, if any, deliverable upon such reclassification,
consolidation, merger, conveyance, transfer, dissolution, liquidation or winding
up. The failure to give the notice required by this Section 16 or any defect
therein shall not affect the legality or validity of any distribution, right,
option, warrant, consolidation, merger, conveyance, transfer, lease,
dissolution, liquidation or winding up, or the vote upon any action.
Nothing contained in this Agreement or in any of the Warrant
Certificates shall be construed as conferring upon the holders thereof the right
to vote or to consent or to receive notice as shareholders in respect of the
meetings of shareholders or the election of Directors of the Company or any
other matter, or any rights whatsoever as shareholders of the Company.
SECTION 17. Merger, Consolidation or Change of Name of Warrant
Agent. Any corporation into which the Warrant Agent may be merged or converted
or with which it may be consolidated, or any corporation resulting from any
merger, conversion or consolidation to which the Warrant Agent shall be a party,
or any corporation succeeding to all or substantially all of the corporate trust
or agency business of the Warrant Agent, shall be the successor to the Warrant
Agent hereunder without the execution or filing of any paper or any further act
on the part of any of the parties hereto. If, at the time such successor to the
Warrant Agent by merger or consolidation succeeds to the agency created by this
Agreement, any of the Warrant certificates shall have been countersigned but not
delivered, any such successor to the Warrant Agent may adopt the
countersignature of the original Warrant Agent; and if, at that time any of the
Warrant certificates shall not have been countersigned, any such successor to
the Warrant Agent may countersign such Warrant certificates either in the name
of the predecessor Warrant Agent or in the name of the successor to the Warrant
Agent; and in all such cases such Warrant certificates shall have the full force
and effect provided in the Warrant certificates in this Agreement.
SECTION 18. Warrant Agent. The Warrant Agent undertakes the
duties and obligations imposed by this Agreement upon the following terms and
conditions, by all of which the Company and the holders of Warrants, by their
acceptance thereof, shall be bound:
(a) The statements contained herein and in the Warrant
Certificates shall be taken as statements of the Company. The Warrant
Agent assumes no responsibility for the correctness of any of the same
except such as describe the Warrant Agent or action taken or to be
taken by it. The Warrant Agent assumes no responsibility with respect
to the distribution of the Warrant certificates except as herein
otherwise provided.
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<PAGE> 27
(b) The Warrant Agent shall not be responsible for any failure
of the Company to comply with any of the covenants contained in this
Agreement or in the Warrant certificates to be complied with by the
Company.
(c) The Warrant Agent may consult at any time with counsel
satisfactory to it (who may be counsel for the Company) and the Warrant
Agent shall incur no liability or responsibility to the Company or to
any holder of any Warrant certificate in respect of any action taken,
suffered or omitted by it hereunder in good faith and in accordance
with the opinion or the advice of such counsel.
(d) The Warrant Agent shall incur no liability or
responsibility to the Company or to any holder of any Warrant
certificate for any action taken in reliance on any Warrant
certificate, certificate of shares, notice, resolution, waiver,
consent, order, certificate, or other paper, document or instrument
believed by it to be genuine and to have been signed, sent or presented
by the proper party or parties. The Warrant Agent shall not be bound by
any notice or demand, or any waiver, modification, termination or
revision of this Agreement or any of the terms hereof, unless evidenced
by a writing between the Company and the Warrant Agent.
(e) The Company agrees to pay to the Warrant Agent reasonable
compensation for all services rendered by the Warrant Agent in the
execution of this Agreement, to reimburse the Warrant Agent for all
expenses (including reasonable counsel fees), taxes (including
withholding taxes) and governmental charges and other charges of any
kind and nature incurred by the Warrant Agent in the execution,
delivery and performance of its responsibilities under this Agreement
and to indemnify the Warrant Agent and save it harmless against any and
all liabilities, including judgments, costs and counsel fees, for
anything done or omitted by the Warrant Agent in the execution,
delivery and performance of its responsibilities under this Agreement
except as a result of its negligence or bad faith.
(f) The Warrant Agent, shall be under no obligation to
institute any action, suit or legal proceeding or to take any other
action likely to involve expense unless the Company or one or more
registered holders of Warrant certificates shall furnish the Warrant
Agent with reasonable security and indemnity for any costs and expenses
which may be incurred, but this provision shall not affect the power of
the Warrant Agent to take such action as it may consider proper,
whether with or without any such security or indemnity. All rights of
action under this Agreement or under any of the Warrants may be
enforced by the Warrant Agent without the
24
<PAGE> 28
possession of any of the Warrant certificates or the production thereof
at any trial or other proceeding relative thereto, and any such action,
suit or proceeding instituted by the Warrant Agent shall be brought in
its name as Warrant Agent and any recovery of judgment shall be for the
ratable benefit of the registered holders of the Warrants, as their
respective rights or interests may appear.
(g) Except as required by law, the Warrant Agent, and any
stockholder, director, officer or employee of the Warrant Agent, may
buy, sell or deal in any of the Warrants or other securities of the
Company or become pecuniarily interested in any transaction in which
the Company may be interested, or contract with or lend money to the
Company or otherwise act as fully and freely as though it were not
Warrant Agent under this Agreement. Nothing herein shall preclude the
Warrant Agent from acting in any other capacity for the Company or for
any other legal entity.
(h) The Warrant Agent shall act hereunder solely as agent for
the Company, and its duties shall be determined solely by the express
provisions hereof. The Warrant Agent shall not be liable for anything
which it may do or refrain from doing in connection with this
Agreement, except for its own negligence or bad faith, provided, that,
in no event shall the Warrant Agent be liable for special, indirect or
consequential loss or damage of any kind whatsoever (including but not
limited to lost profits), even if the Warrant Agent has been advised of
the likelihood of such loss or damage and regardless of the form of
action.
(i) The Warrant Agent shall not at any time be under any duty
or responsibility to any holder of any Warrant certificate to make or
cause to be made any adjustment of the Exercise Price or number of the
Warrant Shares or other securities or property deliverable as provided
in this Agreement, or to determine whether any facts exist which may
require any of such adjustments, or with respect to the nature or
extent of any such adjustments, when made, or with respect to the
method employed in making the same. The Warrant Agent shall not be
accountable with respect to the validity or value or the kind or amount
of any Warrant Shares or of any securities or property which may at any
time be issued or delivered upon the exercise of any Warrant or with
respect to whether any such Warrant Shares or other securities will
when issued be validly issued and fully paid and nonassessable, and
makes no representation with respect thereto.
25
<PAGE> 29
SECTION 19. Registration Statement.
(a) Shelf Registration of Warrant Shares. The Company shall
use its best efforts to keep the Registration Statement continuously effective
until 30 days after the Expiration Date.
(b) Registration Expenses.
All expenses incident to the Company's performance of or
compliance with this Agreement will be borne by the Company, regardless of
whether the Registration Statement becomes effective, including without
limitation: (i) all registration and filing fees and expenses; (ii) all fees and
expenses in compliance with federal securities and state Blue Sky or securities
laws; (iii) all expenses of printing (including printing certificates for the
Warrant Shares and printing of Prospectuses), messenger and delivery services
and telephone calls; (iv) all fees and disbursements of counsel for the Company;
(v) all fees and disbursements of independent certified public accountants of
the Company (including the expenses of any special audit and comfort letters
required by or incident to such performance); and (vi) the Company's internal
expenses (including, without limitation, all salaries and expenses of their
officers and employees performing legal or accounting duties), the expenses of
any annual audit, rating agency fees and the fees and expenses of any person,
including special experts retained by the Company.
(c) Notwithstanding the foregoing, during any consecutive 365-
day period, the Company shall have the privilege to suspend availability of the
Registration Statement for up to two 30 consecutive day periods, except for the
consecutive 30-day period immediately prior to the Expiration Date, if the
Company's Board of Directors in good faith determines in the exercise of its
reasonable judgment that there is a valid business purpose for such suspension.
SECTION 20. Change of Warrant Agent. If the Warrant Agent
shall become incapable of acting as Warrant Agent or shall resign as provided
below, the Company shall appoint a successor to such Warrant Agent. If the
Company shall fail to make such appointment within a period of 30 days after it
has been notified in writing of such incapacity by the Warrant Agent or by the
registered holders of a majority of Warrant certificate, then the registered
holder of any Warrant certificates may apply to any court of competent
jurisdiction for the appointment of a successor to the Warrant Agent. Pending
appointment of a successor to such Warrant Agent, either by the Company or by
such a court, the duties of the Warrant Agent shall be carried out by the
Company. The registered holders of a majority of the unexercised Warrants shall
be entitled at any time to remove the Warrant Agent and appoint a successor to
such Warrant Agent. Such
26
<PAGE> 30
successor to the Warrant Agent need not be approved by the Company or the former
Warrant Agent. After appointment the successor to the Warrant Agent shall be
vested with the same powers, rights, duties and responsibilities as if it had
been originally named as Warrant Agent without further act or deed; but the
former Warrant Agent shall deliver and transfer to the successor to the Warrant
Agent any property at the time held by it hereunder and execute and deliver any
further assurance, conveyance, act or deed necessary for the purpose. Failure to
give any notice provided for in this Section 20, however, or any defect therein,
shall not affect the legality or validity of the appointment of a successor to
the Warrant Agent.
The Warrant Agent may resign at any time and be discharged
from the obligations hereby created by so notifying the Company in writing at
least 30 days in advance of the proposed effective date of its resignation. If
no successor Warrant Agent accepts the engagement hereunder by such time, the
Company shall act as Warrant Agent.
SECTION 21. Notices to the Company and Warrant Agent. Any
notice or demand authorized by this Agreement to be given or made by the Warrant
Agent or by the registered holder of any Warrant certificate to or on the
Company shall be sufficiently given or made when and if deposited in the mail,
first class or registered, postage prepaid, addressed (until another address is
filed in writing by the Company with the Warrant Agent), as follows:
NTL Incorporated
110 East 59th Street
New York, New York 10022
Attention: Richard J. Lubasch, Esq.
with a copy to:
Skadden, Arps, Slate, Meagher & Flom LLP
919 Third Avenue
New York, New York 10022
Attention: Thomas H. Kennedy, Esq.
Any notice pursuant to this Agreement to be given by the
Company or by the registered holder(s) of any Warrant certificate to the Warrant
Agent shall be sufficiently given when and if deposited in the mail, first-class
or registered, postage prepaid, addressed (until another address is filed in
writing by the Warrant Agent with the Company) to the Warrant Agent at the
Warrant Agent Office as follows:
27
<PAGE> 31
The Chase Manhattan Bank
450 West 33rd Street
15th Floor
New York, New York 10001
Attention: Corporate Trustee
Administration Department
Notice may also be given by facsimile transmission (effective
when receipt is acknowledged) or by overnight delivery service (effective the
next business day).
SECTION 22. Supplements and Amendments. The Company and the
Warrant Agent may from time to time supplement or amend this Agreement without
the approval of any holders of Warrant certificates in order to cure any
ambiguity or to correct or supplement any provision contained herein which may
be defective or inconsistent with any other provision herein, or to make any
other provisions in regard to matters or questions arising hereunder which the
Company and the Warrant Agent may deem necessary or desirable and which shall
not in any way adversely affect the interests of the holders of Warrant
certificates. Any amendment or supplement to this Agreement that has a adverse
effect on the interests of holders shall require the written consent of
registered holders of a majority of the then outstanding Warrants (excluding
Warrants held by the Company or any of its affiliates). The consent of each
holder of a Warrant affected shall be required for any amendment pursuant to
which the Exercise Price would be increased or the number of Warrant Shares
purchasable upon exercise of Warrants would be decreased (other than in
accordance with Section 13 or 14 hereof).
SECTION 23. Successors. All the covenants and provisions of
this Agreement by or for the benefit of the Company or the Warrant Agent shall
bind and inure to the benefit of their respective successors and assigns
hereunder.
SECTION 24. Termination. This Agreement shall terminate at
5:00 p.m., New York, New York time on the Expiration Date. Notwithstanding the
foregoing, this Agreement will terminate on such earlier date on which all
outstanding Warrants have been exercised. The provisions of Section 18 hereof
shall survive such termination, and the provisions of Section 19 hereof shall
survive for 30 days after such termination.
SECTION 25. Governing Law; Jurisdiction. This Agreement and
each Warrant certificate issued hereunder shall be deemed to be a contract made
under the laws of the State of New York and for all purposes shall be governed
by and construed in accordance with the internal laws of said State. The parties
hereto irrevocably consent to the jurisdiction of the courts of the State of New
28
<PAGE> 32
York and any federal court located in such state in connection with any action,
suit or proceeding arising out of or relating to this Agreement.
SECTION 26. Benefits of This Agreement. Nothing in this
Agreement shall be construed to give to any person or corporation other than the
Company, the Warrant Agent and the registered holders of the Warrant
certificates any legal or equitable right, remedy or claim under this Agreement;
but this Agreement shall be for the sole and exclusive benefit of the Company,
the Warrant Agent and the registered holders of the Warrant certificates.
SECTION 27. Counterparts. This Agreement may be executed in
any number of counterparts and each of such counterparts shall for all purposes
be deemed to be an original, and all such counterparts shall together constitute
but one and the same instrument.
SECTION 28. Further Assurances. From time to time on and after
the date hereof, the Company shall deliver or cause to be delivered to the
Warrant Agent such further documents and instruments and shall do and cause to
be done such further acts as the Warrant Agent shall reasonably request (it
being understood that the Warrant Agent shall have no obligation to make such
request) to carry out more effectively the provisions and purposes of this
Agreement, to evidence compliance herewith or to assure itself that it is
protected hereunder.
29
<PAGE> 33
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed, as of the day and year first above written.
NTL INCORPORATED
By:
--------------------------------------
Name:
Title:
THE CHASE MANHATTAN BANK, as Warrant
Agent,
By:
--------------------------------------
Name:
Title:
30
<PAGE> 34
Form of Warrant Certificate EXHIBIT A
[Face]
EXERCISABLE ON OR AFTER THE DATE OF THIS CERTIFICATE (IF A REGISTRATION
STATEMENT RELATING TO THE WARRANT SHARES IS IN EFFECT) AND ON OR BEFORE
__________, 2008 [THE TENTH ANNIVERSARY OF THE DATE OF ORIGINAL ISSUANCE OF THE
WARRANTS]
No. _____ CUSIP No. _________ __________ Warrants
WARRANT CERTIFICATE
NTL INCORPORATED
This Warrant Certificate certifies that _________________________________
______________________________, or registered assigns, is the registered holder
of _____________________________________________________________________________
Warrants expiring on __________, 2008, the tenth anniversary of the date of
original issuance of the Warrants (the "Warrants"), to purchase shares of the
Common Stock, par value $.01 (the "Common Stock"), of NTL Incorporated, a
Delaware corporation (the "Company"). Each Warrant entitles the holder upon
exercise at any time from 9:00 a.m. on the date of this Warrant certificate to
5:00 p.m. New York, New York time, on __________, 2008 [the tenth anniversary of
the date of original issuance of the Warrants] to receive from the Company one
fully paid and nonassessable share of Common Stock (each a "Warrant Share") for
each Warrant at the initial exercise price (the "Exercise Price") of $[_____]
per share payable (i) in United States dollars or (ii) by certified or official
bank check to the order of the Company. The Exercise Price and number of Warrant
Shares issuable upon exercise of the Warrants are subject to adjustment upon the
occurrence of certain events set forth in the Warrant Agreement. All capitalized
terms not defined herein shall have the meanings assigned to such terms in the
Warrant Agreement.
No Warrant may be exercised after 5:00 p.m., New York, New
York Time on __________, 2008 [the tenth anniversary of the date of original
issuance of the Warrants] , and to the extent not exercised by such time such
Warrants shall become void.
Reference is hereby made to the further provisions of this
Warrant Certificate set forth on the reverse hereof and such further provisions
shall for all purposes have the same effect as though fully set forth at this
place.
This Warrant Certificate shall not be valid unless
countersigned by the Warrant Agent, as such term is used in the Warrant
Agreement.
This Warrant Certificate shall be governed and construed in
accordance with the internal laws of the State of New York.
IN WITNESS WHEREOF, NTL Incorporated has caused this Warrant
Certificate to be signed by the undersigned Chairman of the Board, Chief
Executive Officer, President or Vice President and the undersigned Secretary or
Assistant Secretary and has caused its corporate seal to be affixed hereunto or
imprinted hereon.
Dated: ______________________________
NTL INCORPORATED
By: _______________________________
Name:
Title:
By: _______________________________
Name:
Title:
Countersigned: (seal)
THE CHASE MANHATTAN BANK,
as Warrant Agent
By: ______________________________
Authorized Officer
<PAGE> 35
Form of Warrant Certificate
[Reverse]
THE COMMON STOCK, PAR VALUE $.01, OF THE COMPANY (THE "COMMON STOCK")
FOR WHICH THIS WARRANT IS EXERCISABLE MAY NOT BE OFFERED OR SOLD IN THE
UNITED STATES ABSENT REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE "ACT") AND ANY APPLICABLE STATE SECURITIES LAWS OR AN
APPLICABLE EXEMPTION FROM REGISTRATION REQUIREMENTS. ACCORDINGLY, NO
WARRANT HOLDER SHALL BE ENTITLED TO EXERCISE SUCH HOLDER'S WARRANTS AT
ANY TIME UNLESS, AT THE TIME OF EXERCISE, (i) A REGISTRATION STATEMENT
UNDER THE ACT RELATING TO THE SHARES OF COMMON STOCK ISSUABLE UPON THE
EXERCISE OF THIS WARRANT (THE "WARRANT SHARES") HAS BEEN FILED WITH,
AND DECLARED EFFECTIVE BY, THE SECURITIES AND EXCHANGE COMMISSION (THE
"SEC"), AND NO STOP ORDER SUSPENDING THE EFFECTIVENESS OF SUCH
REGISTRATION STATEMENT HAS BEEN ISSUED BY THE SEC OR (ii) THE ISSUANCE
OF THE WARRANT SHARES IS PERMITTED PURSUANT TO AN EXEMPTION FROM THE
REGISTRATION REQUIREMENTS OF THE ACT.
By accepting a Warrant Certificate bearing the legend above, each holder shall
be bound by all of the terms and provisions of the Warrant Agreement (a copy of
which is available on request to the Company or the Warrant Agent) as fully and
effectively as if such holder had signed the same.
The Warrants evidenced by this Warrant Certificate are part of
a duly authorized issue of Warrants expiring on __________, 2008 [the tenth
anniversary of the date of original issuance of the Warrants], entitling the
holder upon exercise to receive shares of Common Stock of the Company (the
"Common Stock"), and are issued or to be issued pursuant to a Warrant Agreement
dated as of _______, 1998 (the "Warrant Agreement"), duly executed and delivered
by the Company to The Chase Manhattan Bank, as warrant agent (the "Warrant
Agent"), which Warrant Agreement is hereby incorporated by reference in and made
a part of this instrument and is hereby referred to for a description of the
rights, limitation of rights, obligations, duties and immunities thereunder of
the Warrant Agent, the Company and the holders (the words "holders" or "holder"
meaning the registered holders or registered holder) of the Warrants.
The holder of the Warrants evidenced by this Warrant
Certificate may exercise them by surrendering this Warrant Certificate, with the
form of election to purchase set forth below on this Warrant Certificate
properly completed and executed,
A-2
<PAGE> 36
together with payment of the Exercise Price in accordance with the provisions
set forth on the face of this Warrant Certificate. In the event that upon any
exercise of Warrants evidenced hereby the number of Warrants exercised shall be
less than the total number of Warrants evidenced hereby, there shall be issued
to the holder hereof or his assignee a new Warrant Certificate evidencing the
number of Warrants not exercised. No adjustment shall be made for any dividends
on any Common Stock issuable upon exercise of this Warrant.
The Warrant Agreement provides that upon the occurrence of
certain events the Exercise Price and the number of shares of Common Stock
issuable upon exercise of this Warrant, in each case, set forth on the face
hereof may, subject to certain conditions, be adjusted. If the Exercise Price is
adjusted, the Warrant Agreement provides that the number of shares of Common
Stock issuable upon the exercise of each Warrant may be adjusted. No fractions
of a share of Common Stock will be issued upon the exercise of any Warrant, but
the Company will pay the cash value thereof determined as provided in the
Warrant Agreement.
Warrant Certificates, when surrendered at the principal
corporate trust office of the Warrant Agent by the registered holder thereof in
person or by legal representative or attorney duly authorized in writing, may be
exchanged, in the manner and subject to the limitations provided in the Warrant
Agreement, but without payment of any service charge, for another Warrant
Certificate or Warrant Certificates of like tenor evidencing in the aggregate a
like number of Warrants.
Upon due presentation for registration of transfer of this
Warrant Certificate at the principal corporate trust office of the Warrant Agent
a new Warrant Certificate or Warrant Certificates of like tenor and evidencing
in the aggregate a like number of Warrants shall be issued to the transferee(s)
in exchange for this Warrant Certificate, subject to the limitations provided in
the Warrant Agreement, without charge except for any tax or other governmental
charge imposed in connection therewith.
The Company and the Warrant Agent may deem and treat the
registered holder(s) hereof as the absolute owner(s) of this Warrant Certificate
(notwithstanding any notation of ownership or other writing hereon made by
anyone), for the purpose of any exercise hereof, of any distribution to the
holder(s) hereof, and for all other purposes, and neither the Company nor the
Warrant Agent shall be affected by any notice to the contrary. Neither the
Warrants nor this Warrant Certificate entitles any holder hereof to any rights
of a stockholder of the Company.
A-3
<PAGE> 37
Form of Election to Purchase
(To Be Executed Upon Exercise Of Warrant)
The undersigned hereby irrevocably elects to exercise the
right, represented by this Warrant Certificate, to receive shares of Common
Stock and herewith tenders payment for such shares to the order of NTL
Incorporated in the amount of $_____ per share of Common Stock in accordance
with the terms hereof, in cash or by certified or official bank check to the
order of the Company.
The undersigned requests that a certificate for such shares be
registered in the name _____________________________, whose address is
_______________________________________ and that shares be delivered to ________
______________________ whose address is _______________________________________.
If said number of shares is less than all of the shares of
Common Stock purchasable hereunder, the undersigned requests that a new Warrant
Certificate representing the remaining balance of such shares be registered in
the name of __________________________, whose address is
_____________________________, and that such Warrant Certificate be delivered to
______________________, whose address is ________________________.
Date: _______________
Your Signature: ______________________________________
(Sign exactly as your name appears on the face of this
Warrant)
Signature Guarantee:
A-4
<PAGE> 38
ASSIGNMENT FORM
To assign this Warrant, fill in the form below: (I) or (we) assign and
transfer this Warrant to
_____________________________________________________________
(Insert assignee's soc. sec. or tax I.D. no.)
_____________________________________________________________
_____________________________________________________________
_____________________________________________________________
_____________________________________________________________
(Print or type assignee's name, address and zip code)
and irrevocably appoint ___________________________ to transfer this Warrant on
the books of the Company. The agent may substitute another to act for him.
_____________________________________________________________
Date: __________________
Your Signature: _______________________________________________
(Sign exactly as your name appears on the face of this Warrant)
Signature Guarantee:
A-5
<PAGE> 1
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Experts" in the
Registration Statement (Form S-3) and related Prospectus of NTL Incorporated for
the registration of 863,902 Common Stock Purchase Warrants and 863,902 shares of
its common stock and to the incorporation by reference therein of our report
dated March 20, 1998, with respect to the consolidated financial statements and
schedules of NTL Incorporated included in its Annual Report (Form 10-K) for the
year ended December 31, 1997, filed with the Securities and Exchange
Commission.
/s/ Ernst & Young LLP
ERNST & YOUNG LLP
New York, New York
September 16, 1998
