<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A INFORMATION
JOINT PROXY STATEMENT PURSUANT TO SECTION 14(a)
OF THE SECURITIES
EXCHANGE ACT OF 1934
Filed by the Registrant [X]
Filed by a party other than the Registrant [ ]
Check the appropriate box:
<TABLE>
<S> <C>
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
</TABLE>
NTL INCORPORATED
COMCAST UK CABLE PARTNERS LIMITED
- --------------------------------------------------------------------------------
(Name of Registrant as Specified in its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[ ] No fee required.
[X] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
Common Stock, par value $.01 per share, of NTL Incorporated ("NTL
Common Stock"); and Class D Redeemable Preferred Stock, par value $.01
per share, of NTL Incorporated ("NTL Class D Stock").
(2) Aggregate number of securities to which transaction applies:
18,764,173 shares of NTL Common Stock (shares of NTL Class D Stock may
be issued in lieu of a portion of the NTL Common Stock).
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11. The filing fee has been calculated
in accordance with Rules 14a-6(i)(1) and Rule 0-11(a)(4) and (c) under
the Exchange Act and is equal to 1/50 of 1% of the product of (i) the
average of the high and low prices for a share of NTL Common Stock on
the NASDAQ ($41.75) on May 27, 1998 and (ii) 18,764,173, the maximum
number of shares of NTL Common Stock to which transaction applies.
(4) Proposed maximum aggregate value of transaction: $783,404,223
(5) Total fee paid: $156,681.00.
[X] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
-------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
-------------------------------------------------------------------------
(3) Filing Party:
-------------------------------------------------------------------------
(4) Date Filed:
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<PAGE> 2
NTL INCORPORATED
110 EAST 59TH STREET
NEW YORK, NEW YORK 10022
SEPTEMBER 30, 1998
Dear Stockholders:
You are cordially invited to attend a Special Meeting of the Stockholders
of NTL Incorporated ("NTL") to be held at 10:00 a.m., local time, on Thursday,
October 29, 1998 at the Essex House Hotel, 160 Central Park South, Hyde Park
Suite, New York, New York 10019 (the "Special Meeting").
The purpose of the Special Meeting is to consider:
- A proposal to approve the issuance (the "Share Issuance") of shares of
NTL Common Stock pursuant to an Agreement and Plan of Amalgamation, dated as of
February 4, 1998, as amended (the "Amalgamation Agreement"), among NTL, a
subsidiary of NTL ("Sub"), and Comcast UK Cable Partners Limited, a Bermuda
corporation ("Partners"), pursuant to which, among other things, Sub will be
amalgamated with Partners under Bermuda law (the "Amalgamation").
- A proposal to amend the Restated Certificate of Incorporation of NTL to
increase the maximum number of authorized shares of NTL Common Stock from
100,000,000 to 400,000,000 shares and to increase the maximum number of
authorized shares of preferred stock, par value $.01 per share, of NTL from
2,500,000 to 10,000,000 shares (the "Shares Amendment").
On August 14, 1998, NTL and Partners entered into a settlement agreement
(the "TeleWest Agreement") with TeleWest Communications plc ("TeleWest") with
respect to, among other things, TeleWest's rights to purchase either or both of
Partners' interests in Birmingham Cable Corporation Limited ("Birmingham Cable")
and Cable London PLC ("Cable London"), which represent approximately 17% and
31%, respectively, of the value of Partners in the Amalgamation. Pursuant to the
TeleWest Agreement, Partners' interest in Birmingham Cable will be sold to
TeleWest immediately prior to the Amalgamation, and either Partners' interest in
Cable London will be sold to TeleWest, or TeleWest's interest in Cable London
will be sold to Partners, after the Amalgamation. Accordingly, in the
Amalgamation, each of the issued and outstanding Class A Common Shares and Class
B Common Shares of Partners, other than shares held by NTL, any subsidiary of
NTL or any subsidiary of Partners and shares held by shareholders of Partners,
if any, who properly exercise their dissenters' rights under Bermuda law, will
be cancelled in consideration for the receipt of .3745 shares of NTL Common
Stock. Cash will be paid in lieu of any fractional share of NTL Common Stock.
The consideration to be received by shareholders of Partners in the Amalgamation
will be unaffected by the outcome of either the sale of Partners' interest in
Cable London or the purchase of TeleWest's interest in Cable London.
FOR THE REASONS DESCRIBED IN THE ACCOMPANYING JOINT PROXY STATEMENT/
PROSPECTUS, YOUR BOARD OF DIRECTORS (i) HAS DETERMINED THAT THE AMALGAMATION AND
THE SHARE ISSUANCE ARE IN THE BEST INTERESTS OF NTL AND ITS STOCKHOLDERS, (ii)
HAS APPROVED THE AMALGAMATION AGREEMENT AND (iii) RECOMMENDS THAT YOU VOTE IN
FAVOR OF THE APPROVAL OF THE SHARE ISSUANCE AT THE SPECIAL MEETING. IN ADDITION,
YOUR BOARD OF DIRECTORS HAS APPROVED, AND RECOMMENDS THAT YOU VOTE IN FAVOR OF
THE APPROVAL OF, THE SHARES AMENDMENT AT THE SPECIAL MEETING.
In determining that the Amalgamation is in the best interests of NTL and
its stockholders and to recommend approval of the Share Issuance, your Board of
Directors has carefully reviewed and considered a number of factors, including
the legal and financial terms of the relevant agreements and the opinion of
Donaldson, Lufkin & Jenrette Securities Corporation, NTL's financial advisor,
described in the accompanying Joint Proxy Statement/Prospectus.
Consummation of the Amalgamation is subject to certain conditions,
including the approval of the Share Issuance by stockholders of NTL, the
approval and adoption of the Amalgamation and the Amalgamation Agreement and the
transactions contemplated thereby by shareholders of Partners, the receipt of
certain bondholder consents and the receipt of certain approvals from
governmental and regulatory authorities.
If you have any questions prior to the Special Meeting or need further
assistance, please call our proxy solicitor, D.F. King & Co., Inc., at (800)
347-4750.
<PAGE> 3
The enclosed Notice and Joint Proxy Statement/Prospectus contain details
concerning the matters described above. We urge you to read and consider these
documents carefully. Whether or not you plan to attend the Special Meeting,
please be sure to sign, date and return the enclosed proxy card in the enclosed,
postage-paid envelope as promptly as possible so that your shares may be
represented at the Special Meeting and voted in accordance with your wishes. It
is important that your shares be represented at the Special Meeting. Your vote
is important regardless of the number of shares you own.
Very truly yours,
/s/ GEORGE S. BLUMENTHAL
GEORGE S. BLUMENTHAL
Chairman of the Board
<PAGE> 4
NTL INCORPORATED
110 EAST 59TH STREET
NEW YORK, NEW YORK 10022
------------------------
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD ON THURSDAY, OCTOBER 29, 1998
------------------------
To the Stockholders of NTL Incorporated:
NOTICE IS HEREBY GIVEN that a Special Meeting of Stockholders of NTL
Incorporated, a Delaware corporation ("NTL"), will be held at 10:00 a.m., local
time, on Thursday, October 29, 1998, at the Essex House Hotel, 160 Central Park
South, Hyde Park Suite, New York, New York 10019 (the "Special Meeting"), for
the following purposes:
1. To consider and vote upon a proposal to approve the issuance of
shares (the "Share Issuance") of common stock, par value $.01 per share, of
NTL (the "NTL Common Stock") pursuant to an Agreement and Plan of
Amalgamation, dated as of February 4, 1998, as amended (the "Amalgamation
Agreement"), among NTL, NTL (Bermuda) Limited, a Bermuda corporation and a
wholly-owned subsidiary of NTL ("Sub"), and Comcast UK Cable Partners
Limited, a Bermuda corporation ("Partners"), pursuant to which, among other
things, Sub will be amalgamated with Partners (the "Amalgamation").
Approval of the Share Issuance by stockholders of NTL is a condition to the
consummation of the Amalgamation. The Share Issuance, the Amalgamation and
the Amalgamation Agreement are more fully described in the accompanying
Joint Proxy Statement/Prospectus, and a copy of the Amalgamation Agreement
is attached as Annex A thereto.
2. To consider and vote upon a proposal to amend the Restated
Certificate of Incorporation of NTL to increase the maximum number of
authorized shares of NTL Common Stock from 100,000,000 to 400,000,000
shares and to increase the maximum number of authorized shares of preferred
stock, par value $.01 per share, of NTL from 2,500,000 to 10,000,000 shares
(the "Shares Amendment").
3. To transact such other business as may properly come before the
Special Meeting.
Approval of the Share Issuance requires the affirmative vote of the holders
of a majority of the votes cast on the Share Issuance at the Special Meeting.
Approval of the Shares Amendment requires the affirmative vote of the holders of
a majority of the outstanding shares of NTL Common Stock. Only stockholders of
record at the close of business on Thursday, September 17, 1998 are entitled to
notice of, and to vote at, the Special Meeting. A complete list of such
stockholders will be available for examination by any stockholder of NTL for any
purpose related to the Special Meeting, during normal business hours at the
offices of NTL in New York, New York for ten days prior to the Special Meeting.
The Board of Directors of NTL unanimously recommends that stockholders vote
in favor of the Share Issuance at the Special Meeting. In addition, the Board of
Directors of NTL unanimously recommends that stockholders vote in favor of the
Shares Amendment at the Special Meeting.
Whether or not you plan to attend the Special Meeting, you are urged to
mark, date and sign the enclosed proxy and return it promptly so that your vote
can be recorded. If you are present at the meeting and desire to do so, you may
revoke your proxy and vote in person.
By Order of the Board of Directors,
/s/ RICHARD J. LUBASCH
RICHARD J. LUBASCH
Secretary
Dated: September 30, 1998
PLEASE COMPLETE, DATE, SIGN AND PROMPTLY RETURN YOUR PROXY IN THE
ENCLOSED ENVELOPE, WHETHER OR NOT YOU PLAN TO ATTEND THE SPECIAL MEETING IN
PERSON. YOU MAY REVOKE YOUR PROXY IN THE MANNER DESCRIBED IN THE ACCOMPANYING
JOINT PROXY STATEMENT/PROSPECTUS AT ANY TIME BEFORE THE PROXY HAS BEEN VOTED AT
THE SPECIAL MEETING.
<PAGE> 5
COMCAST UK CABLE PARTNERS LIMITED
CLARENDON HOUSE
2 CHURCH STREET WEST
HAMILTON, HM 11, BERMUDA
SEPTEMBER 30, 1998
DEAR SHAREHOLDERS:
You are cordially invited to attend a Special General Meeting of the
Shareholders of Comcast UK Cable Partners Limited ("Partners") to be held at
Comcast Corporation, 1500 Market Street, 33rd Floor, in Philadelphia,
Pennsylvania, on Thursday, October 29, 1998 at 10:00 a.m., local time (the
"Special General Meeting").
The purpose of the Special General Meeting is to consider and, if thought
fit, to approve the Agreement and Plan of Amalgamation, dated as of February 4,
1998, as amended (the "Amalgamation Agreement"), among NTL Incorporated, a
Delaware corporation ("NTL"), a subsidiary of NTL ("Sub"), and Partners,
pursuant to which, among other things, Sub will be amalgamated with Partners
(the "Amalgamation"), and shareholders of Partners will receive .3745 shares of
NTL Common Stock for each of Partners' Class A Common Shares or Class B Common
Shares (together, the "Partners Common Shares").
Among the assets of Partners are ownership interests in Cable London PLC
("Cable London") and Birmingham Cable Corporation Limited ("Birmingham Cable").
On August 14, 1998, Partners and NTL entered into a settlement agreement (the
"TeleWest Agreement") with TeleWest Communications plc ("TeleWest") with respect
to, among other things, TeleWest's rights to purchase (the "Purchase Rights")
either or both of Partners' ownership interests in Birmingham Cable and Cable
London, which represent approximately 17% and 31%, respectively, of the value of
Partners in the Amalgamation. Pursuant to the TeleWest Agreement, Partners'
interest in Birmingham Cable will be sold to TeleWest immediately prior to the
Amalgamation, and either Partners' ownership interest in Cable London will be
sold to TeleWest, or TeleWest's ownership interest in Cable London will be sold
to Partners, after the Amalgamation. Accordingly, in the Amalgamation, each
issued and outstanding Partners Common Share, other than shares held by NTL, any
subsidiary of NTL or any subsidiary of Partners and Partners Common Shares held
by the shareholders, if any, who properly exercise their dissenters' rights
under Bermuda law, will be cancelled in consideration for the receipt of .3745
shares of NTL Common Stock. Cash will be paid in lieu of any fractional share of
NTL Common Stock. The consideration to be received by shareholders of Partners
in the Amalgamation will be unaffected by the outcome of either the sale of
Partners' ownership interest in Cable London or the purchase of TeleWest's
ownership interest in Cable London.
FOR THE REASONS DESCRIBED IN THE ACCOMPANYING JOINT PROXY STATEMENT/
PROSPECTUS, YOUR BOARD OF DIRECTORS (i) HAS DETERMINED THAT THE AMALGAMATION IS
IN THE BEST INTERESTS OF PARTNERS AND ITS SHAREHOLDERS AS A GENERAL BODY, (ii)
HAS APPROVED THE AMALGAMATION AGREEMENT AND (iii) RECOMMENDS THAT YOU VOTE IN
FAVOR OF THE APPROVAL OF THE AMALGAMATION AT THE SPECIAL GENERAL MEETING.
In determining that the Amalgamation is in the best interests of Partners
and its shareholders as a general body and to recommend approval of the
Amalgamation, your Board of Directors has carefully reviewed and considered the
terms and conditions of the Amalgamation Agreement, as well as a number of other
factors, including the opinion, dated February 4, 1998, of HSBC Investment Bank
plc to the effect that, based upon and subject to the various considerations set
forth therein, as of the date of such opinion, the consideration to be paid in
connection with the Amalgamation to holders of Class A Common Shares is fair
from a financial point of view. The full text of such opinion is set forth as
Annex E to the accompanying Joint Proxy Statement/Prospectus.
Consummation of the Amalgamation is subject to certain conditions,
including the approval of the issuance of shares of NTL Common Stock pursuant to
the Amalgamation in accordance with the terms of the Amalgamation Agreement by
stockholders of NTL, the approval and adoption of the Amalgamation and the
Amalgamation Agreement and the transactions contemplated thereby by shareholders
of Partners, the receipt of certain bondholder consents and the receipt of
certain approvals from governmental and regulatory
<PAGE> 6
authorities. In this regard, you should note that shareholders of Partners
entitled to cast 83.8% of the total votes to be cast have already agreed to vote
in favor of the Amalgamation Agreement.
If you have any questions prior to the Special General Meeting or need
further assistance, please call our proxy solicitor, D.F. King & Co., Inc. at
(800) 758-7358.
The enclosed Notice and Joint Proxy Statement/Prospectus contain details
concerning the Amalgamation. We urge you to read and consider these documents
carefully. Whether or not you plan to attend the Special General Meeting, please
be sure to sign, date and return the enclosed proxy card in the enclosed,
postage-paid, envelope as promptly as possible so that your shares may be
represented at the Special General Meeting and voted in accordance with your
wishes. It is important that your shares be represented at the Special General
Meeting. Your vote is important regardless of the number of shares you own.
Very truly yours,
/s/ RALPH J. ROBERTS
RALPH J. ROBERTS
Chairman of the Board
<PAGE> 7
COMCAST UK CABLE PARTNERS LIMITED
CLARENDON HOUSE
2 CHURCH STREET WEST
HAMILTON, HM 11, BERMUDA
NOTICE OF SPECIAL GENERAL MEETING
TO BE HELD ON THURSDAY, OCTOBER 29, 1998
Notice is hereby given that a Special General Meeting (the "Special General
Meeting") of Comcast UK Cable Partners Limited ("Partners") will be held on
Thursday, October 29, 1998 at 10:00 a.m., local time, at Comcast Corporation,
1500 Market Street, 33rd Floor, in Philadelphia, Pennsylvania, for the following
purposes:
1. To consider and, if thought fit, to approve the Agreement and Plan
of Amalgamation, dated February 4, 1998, as amended (the "Amalgamation
Agreement"), among NTL Incorporated, a Delaware corporation ("NTL"), NTL
(Bermuda) Limited, a Bermuda corporation and a wholly-owned subsidiary of
NTL ("Sub"), and Partners, pursuant to which Sub will amalgamate with
Partners (the "Amalgamation"), and the issued and outstanding Class A
Common Shares, par value L.01 per share (the "Class A Common Shares"), and
Class B Common Shares, par value L.01 per share (the "Class B Common
Shares" and, together with the Class A Common Shares, the "Partners Common
Shares"), of Partners, other than Partners Common Shares held by NTL, any
subsidiary of NTL or any subsidiary of Partners and Partners Common Shares
held by the shareholders, if any, who properly exercise their dissenters'
rights under Bermuda law, will be cancelled in consideration for the
receipt of the consideration provided for in the Amalgamation Agreement.
2. To transact such other incidental business as may properly come
before the Special General Meeting or any adjournment or postponement
thereof.
The close of business on Thursday, September 17, 1998 has been fixed as the
record date for receiving notice of the Special General Meeting. All holders of
Partners Common Shares entered in the registrar of members of Partners at that
time are entitled to notice of, and all holders of Partners Common Shares
entered in the registrar of members of Partners at the date of the Special
General Meeting are entitled to vote at, the Special General Meeting and any
adjournment or postponement thereof.
The Board of Directors of Partners has unanimously determined that the
Amalgamation is in the best interests of Partners and its shareholders, and
recommends that you vote in favor of the approval of the Amalgamation Agreement.
In making such determination, the Board of Directors considered a number of
factors, including among other things, the opinion, dated February 4, 1998, of
HSBC Investment Bank plc, Partner's financial advisor, to the effect that, as of
such date and based upon and subject to certain matters stated in the opinion,
the consideration to be issued in the Amalgamation is fair to the holders of the
Class A Common Shares from a financial point of view. The full text of such
opinion is set forth as Annex E to the accompanying Joint Proxy Statement/
Prospectus. For the purposes of Section 106 of the Bermuda Companies Act 1981,
as amended, it has been determined that the fair value of the Partners Common
Shares is at least $10.00 per share.
Holders of Partners Common Shares who do not vote in favor of the
Amalgamation have the right to apply to the Supreme Court of Bermuda within one
month of the date of this notice for an appraisal of the fair value of their
shares. See "THE AMALGAMATION -- Rights of Dissenting Shareholders" in the
accompanying Joint Proxy Statement/Prospectus.
All shareholders are cordially invited to attend the Special General
Meeting. Whether or not you plan to attend the Special General Meeting, the
Board of Directors urges you to sign, date and return promptly the enclosed
proxy in the postage-paid envelope provided. The proxies are solicited by the
Board of Directors. The return of the proxy will not affect your right to vote
in person if you do attend the Special General Meeting. Further information
regarding the Special General Meeting and the Amalgamation is set forth in the
accompanying Joint Proxy Statement/Prospectus and the annexes thereto.
BY ORDER OF THE BOARD OF DIRECTORS
/s/ STANLEY L. WANG
STANLEY L. WANG
Secretary
September 30, 1998
<PAGE> 8
NTL INCORPORATED
AND
COMCAST UK CABLE PARTNERS LIMITED
JOINT PROXY STATEMENT
------------------------
NTL INCORPORATED
PROSPECTUS
SHARES OF COMMON STOCK,
PAR VALUE $.01 PER SHARE
SHARES OF CLASS D REDEEMABLE PREFERRED STOCK,
PAR VALUE $.01 PER SHARE
------------------------
This Joint Proxy Statement/Prospectus is being furnished to the holders of
common stock, par value $.01 per share (the "NTL Common Stock"), of NTL
Incorporated, a Delaware corporation ("NTL"), in connection with the
solicitation of proxies by the Board of Directors of NTL (the "NTL Board") for
use at a Special Meeting of Stockholders of NTL to be held at 10:00 a.m., local
time, at the Essex House Hotel, 160 Central Park South, Hyde Park Suite, New
York, New York 10019, on Thursday, October 29, 1998, and at any adjournments or
postponements thereof (the "NTL Special Meeting").
This Joint Proxy Statement/Prospectus is also being furnished to the holders
of the Class A Common Shares, par value L.01 per share (the "Class A Common
Shares"), and the holders of the Class B Common Shares, par value L.01 per share
(the "Class B Common Shares" and, together with the Class A Common Shares, the
"Partners Common Shares") of Comcast UK Cable Partners Limited, a Bermuda
corporation ("Partners"), in connection with the solicitation of proxies by the
Board of Directors of Partners (the "Partners Board") for use at a Special
General Meeting of Shareholders of Partners to be held at Comcast Corporation,
1500 Market Street, 33rd Floor, in Philadelphia, Pennsylvania, on Thursday,
October 29, 1998, and at any adjournments or postponements thereof (the
"Partners Special General Meeting").
This Joint Proxy Statement/Prospectus relates to the Agreement and Plan of
Amalgamation, dated as of February 4, 1998, as amended (the "Amalgamation
Agreement"), among NTL, NTL (Bermuda) Limited, a Bermuda corporation and a
wholly-owned subsidiary of NTL ("Sub"), and Partners which provides for the
amalgamation of Sub with Partners (the "Amalgamation"), with the separate
existence of Sub and Partners continuing in the form of the company resulting
from the Amalgamation (the "Amalgamated Company").
On August 14, 1998, NTL and Partners entered into a settlement agreement
(the "TeleWest Agreement") with TeleWest Communications plc ("TeleWest") and
TeleWest Communications Holdings Limited ("TeleWest Holdings") with respect to,
among other things, TeleWest's rights to purchase (the "Purchase Rights") either
or both of Partners' interests in Birmingham Cable Corporation Limited
("Birmingham Cable") and Cable London PLC ("Cable London"). Pursuant to the
TeleWest Agreement, Partners' interest in Birmingham Cable (the "Birmingham
Cable Equity Interest") will be sold to TeleWest immediately prior to the
Amalgamation, and either Partners' interest in Cable London (the "Cable London
Equity Interest" and, together with the Birmingham Cable Equity Interest, the
"Equity Interests") will be sold to TeleWest, or TeleWest's interest in Cable
London will be sold to Partners, after the Amalgamation. Accordingly, in the
Amalgamation, each Partners Common Share outstanding immediately prior to the
Effective Time (as defined herein), other than shares held by NTL, any
subsidiary of NTL or any subsidiary of Partners and Partners Common Shares held
by the shareholders, if any, who properly exercise their dissenters' rights
under Bermuda law, will be cancelled in consideration for the receipt of .3745
(the "Exchange Ratio") shares of NTL Common Stock which would be valued at
approximately $16.81, based on the September 29, 1998 composite closing price of
$44.875 per share of NTL Common Stock, as reported on the Nasdaq National Market
(the "NASDAQ"). Cash will be paid in lieu of any fractional share of NTL Common
Stock. See "THE AMALGAMATION AGREEMENT -- Cancellation of Shares" and "THE
TELEWEST AGREEMENT."
If, due to a breach of the TeleWest Agreement, the sale of the Birmingham
Cable Equity Interest pursuant to the TeleWest Agreement is not consummated
prior to the closing of the Amalgamation (the "Closing"), the status of the
Birmingham Cable Equity Interest will be "Unresolved" for purposes of the
Amalgamation, and shareholders of Partners may receive, at NTL's option, .3108
shares of NTL Common Stock, as well as .0637 shares of NTL Class D Redeemable
Preferred Stock (the "NTL Class D Stock") equal to a portion of the
consideration allocable to the Birmingham Cable Equity Interest in lieu of the
Exchange Ratio. If issued, the NTL Class D Stock would have the same voting and
dividend rights as the NTL Common Stock and would be expected to be listed for
trading on the NASDAQ. Following the sale of the Birmingham Cable Equity
Interest to TeleWest pursuant to the TeleWest Agreement, such shares of NTL
Class D Stock, if issued, will be exchanged for NTL Common Stock on a
one-for-one basis. Cash will be paid in lieu of any fractional share of NTL
Class D Stock. See "THE AMALGAMATION -- General." TeleWest is a cable television
provider in the United Kingdom (the "UK") with different franchise areas than
those of NTL and a co-owner with Partners of interests in Birmingham Cable and
Cable London.
The consummation of the Amalgamation is subject to, among other things, (i)
the approval of the issuance of shares of NTL Common Stock pursuant to the
Amalgamation in accordance with the terms of the Amalgamation Agreement (the
"Share Issuance") by the affirmative vote of the holders of a majority of the
votes cast on the Share Issuance at the NTL Special Meeting; (ii) the approval
of the Amalgamation at the Partners Special General Meeting by the affirmative
vote of the holders of a majority of the total votes able to be cast at general
meetings of Partners; and (iii) the receipt of certain governmental and
regulatory approvals. A copy of the Amalgamation Agreement is attached hereto as
Annex A. In this regard, since shareholders of Partners entitled to cast 83.8%
of the total vote entitled to be cast at the Partners Special General Meeting
have agreed to vote in favor of the Amalgamation, the Partners Shareholder
Approval is assured.
This Joint Proxy Statement/Prospectus is also being furnished to
stockholders of NTL in connection with the solicitation of proxies by the NTL
Board from holders of NTL Common Stock for use at the NTL Special Meeting to
vote upon a proposal to amend the Restated Certificate of Incorporation of NTL
to increase the maximum number of authorized shares of NTL Common Stock from
100,000,000 to 400,000,000 shares and to increase the maximum number of
authorized shares of preferred stock, par value $.01 per share, of NTL from
2,500,000 to 10,000,000 shares (the "Shares Amendment"). Approval of the Shares
Amendment requires the affirmative vote of the holders of a majority of the
outstanding shares of NTL Common Stock.
This Joint Proxy Statement/Prospectus also constitutes the Prospectus of NTL
filed as part of a Registration Statement on Form S-4 (the "Registration
Statement") with the Securities and Exchange Commission (the "SEC") under the
Securities Act of 1933, as amended (the "Securities Act"), relating to the
shares of NTL Common Stock constituting the Share Issuance. It is anticipated
that approximately 18.8 million shares of NTL Common Stock will be issued in the
Share Issuance assuming that shareholders of Partners receive .3745 shares of
NTL Common Stock in the Amalgamation, representing approximately 31.2% of the
shares of NTL Common Stock expected to be outstanding after giving effect to the
consummation of the Amalgamation. The Registration Statement also relates to the
shares of NTL Class D Stock which may be received as partial consideration by
holders of Partners Common Shares in connection with the Amalgamation in the
event that the sale of the Birmingham Cable Equity Interest pursuant to the
TeleWest Agreement is not consummated prior to the Closing. If NTL Class D Stock
is to be issued as part of the consideration in the Amalgamation, it is
anticipated that approximately 3.2 million shares of NTL Class D Stock will be
issued, representing 100% of the shares of such stock expected to be outstanding
after giving effect to the consummation of the Amalgamation. See "THE
AMALGAMATION AGREEMENT -- Cancellation of Shares."
(Cover page of Joint Proxy Statement/Prospectus continues on next page)
<PAGE> 9
(Continuation of cover page of Joint Proxy Statement/Prospectus)
The NTL Common Stock is quoted and traded on the NASDAQ under the symbol
"NTLI." The Class A Common Shares are traded in the over-the-counter market and
are quoted on the NASDAQ under the symbol "CMCAF." There is no established
public trading market for the Class B Common Shares. On February 4, 1998, the
last trading day prior to the public announcement of the execution of the
Amalgamation Agreement, the composite closing prices of the NTL Common Stock and
the Class A Common Shares, as reported on the NASDAQ, were $32.000 per share and
$9.250 per share, respectively. On September 29, 1998, the last trading day
prior to the date of this Joint Proxy Statement/Prospectus, the composite
closing prices of the NTL Common Stock and the Class A Common Shares, as
reported on the NASDAQ, were $44.875 per share and $15.875 per share,
respectively.
This Joint Proxy Statement/Prospectus and the accompanying form of proxy are
first being sent to stockholders of NTL and shareholders of Partners on or about
Wednesday, September 30, 1998.
In reviewing this Joint Proxy Statement/Prospectus, stockholders of NTL and
shareholders of Partners should carefully consider the matters described under
the heading "RISK FACTORS" on page 32.
------------------------
THE SECURITIES TO BE ISSUED IN CONNECTION WITH THE AMALGAMATION HAVE NOT BEEN
APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE
SECURITIES COMMISSION, NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR
ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF
THIS JOINT PROXY STATEMENT/PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
------------------------
The date of this Joint Proxy Statement/Prospectus is September 30, 1998.
<PAGE> 10
No person has been authorized to give any information or to make any
representations with respect to matters described in this Joint Proxy
Statement/Prospectus other than those contained or incorporated by reference
herein, and, if given or made, such information or representations must not be
relied upon as having been authorized by either NTL or Partners. This Joint
Proxy Statement/Prospectus does not constitute an offer to sell or the
solicitation of an offer to buy any securities, nor does it constitute the
solicitation of a proxy in any jurisdiction to or from any person to whom or
from whom it is unlawful to make any such offer or solicitation in such
jurisdiction. Neither the delivery of this Joint Proxy Statement/Prospectus nor
any distribution of securities hereunder shall, under any circumstances, create
any implication that there has been no change in the information set forth
herein or in the affairs of NTL or Partners since the date hereof.
As used in this Joint Proxy Statement/Prospectus, unless the context
otherwise requires, the term "NTL" refers to NTL Incorporated and its
consolidated subsidiaries and partnership and the term "Partners" refers to
Comcast UK Cable Partners Limited and its subsidiaries. All information
regarding NTL and its subsidiaries in this Joint Proxy Statement/Prospectus has
been supplied by NTL, and all information regarding Partners and its
subsidiaries has been supplied by Partners.
AVAILABLE INFORMATION
NTL and Partners are subject to the informational requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and in
accordance therewith file reports, proxy statements and other information with
the SEC. Such reports, proxy statements and other information 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 at the
following Regional Offices of the SEC: 7 World Trade Center, Suite 1300, New
York, New York 10048 and Citicorp Center, 500 West Madison Street, Suite 1400,
Chicago, Illinois 60661. Copies of such material may also be obtained at
prescribed rates from the Public Reference Section of the SEC at 450 Fifth
Street, N.W., Washington, D.C. 20549. The SEC 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 SEC. In addition, materials filed by NTL and Partners with the NASDAQ
may be inspected at the offices of the NASDAQ at 1735 K Street, N.W.,
Washington, D.C. 20006.
This Joint Proxy Statement/Prospectus does not contain all the information
set forth in the Registration Statement, certain parts of which have been
omitted pursuant to the rules and regulations of the SEC. Reference is made to
the Registration Statement and the exhibits thereto for further information.
Such additional information may be obtained from the SEC's principal office in
Washington, D.C., as set forth above. Statements contained or incorporated by
reference herein concerning the provisions of any agreement or other document
filed as an exhibit to the Registration Statement or otherwise filed with the
SEC are not necessarily complete, and readers are referred to the copy so filed
for more detailed information, each such statement being qualified in its
entirety by such reference.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
NTL incorporates by reference herein the following documents heretofore
filed by it with the SEC pursuant to the Exchange Act:
1. NTL's Annual Report on Form 10-K for the year ended December 31, 1997,
dated March 30, 1998;
2. NTL's Current Reports on Form 8-K, dated February 5, 1998 (filed on
February 6, 1998), March 6, 1998 (filed on March 9, 1998), March 18,
1998 (filed on March 20, 1998), May 29, 1998 (filed on June 2, 1998),
June 16, 1998 (filed on June 16, 1998) and August 14, 1998 (filed on
August 18, 1998); and
3. NTL's Quarterly Reports on Form 10-Q for the quarters ended March 31,
1998, dated May 14, 1998, and June 30, 1998, dated August 14, 1998.
2
<PAGE> 11
Partners incorporates by reference herein the following documents
heretofore filed by it with the SEC pursuant to the Exchange Act:
1. Partners' Annual Report on Form 10-K for the year ended December 31,
1997, dated March 25, 1998;
2. Partners' Current Reports on Form 8-K, dated February 5, 1998 (filed on
February 10, 1998), May 28, 1998 (filed on June 4, 1998) and August 14,
1998 (filed on August 19, 1998);
3. Partners' Quarterly Reports on Form 10-Q for the quarters ended March
31, 1998, dated May 14, 1998, and June 30, 1998, dated August 14, 1998;
and
4. The description of Partners' capital stock which is contained in
Partners' Registration Statement, dated September 2, 1994, including any
amendment or reports filed for the purpose of updating such description.
All reports and other documents filed by either NTL or Partners pursuant to
Section 13(a), 13(c), 14 or 15(d) of the Exchange Act subsequent to the date of
this Joint Proxy Statement/Prospectus and prior to the date of the NTL Special
Meeting or the Partners Special General Meeting, as the case may be, shall be
deemed to be incorporated by reference herein and to be a part hereof from the
dates of filing of such reports and documents. 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 Joint Proxy Statement/
Prospectus to the extent that a statement contained herein, or in any other
subsequently filed document which also is incorporated or deemed to be
incorporated by reference herein, modifies or supersedes the earlier statement.
Any statement so modified or superseded shall not be deemed, except as so
modified or superseded, to constitute a part of this Joint Proxy
Statement/Prospectus.
THIS JOINT PROXY STATEMENT/PROSPECTUS INCORPORATES BY REFERENCE DOCUMENTS
THAT ARE NOT PRESENTED HEREIN OR DELIVERED HEREWITH. COPIES OF SUCH DOCUMENTS
(OTHER THAN EXHIBITS THERETO WHICH ARE NOT SPECIFICALLY INCORPORATED BY
REFERENCE HEREIN) ARE AVAILABLE, WITHOUT CHARGE, TO ANY PERSON, INCLUDING ANY
BENEFICIAL OWNER, TO WHOM THIS JOINT PROXY STATEMENT/PROSPECTUS IS SENT, UPON
WRITTEN OR ORAL REQUEST TO, IN THE CASE OF DOCUMENTS RELATING TO NTL, NTL
INCORPORATED, 110 EAST 59TH STREET, NEW YORK, NEW YORK 10022, ATTENTION: RICHARD
J. LUBASCH, TELEPHONE (212) 906-8440 AND, IN THE CASE OF DOCUMENTS RELATING TO
PARTNERS, COMCAST UK CABLE PARTNERS LIMITED, CLARENDON HOUSE, 2 CHURCH STREET
WEST, HAMILTON, HM 11, BERMUDA, ATTENTION: COMPANY SECRETARY, TELEPHONE (441)
295-5950. IN ORDER TO ENSURE DELIVERY OF DOCUMENTS PRIOR TO THE NTL SPECIAL
MEETING OR THE PARTNERS SPECIAL GENERAL MEETING, AS THE CASE MAY BE, ANY SUCH
REQUEST SHOULD BE MADE NOT LATER THAN MONDAY, OCTOBER 19, 1998.
------------------------
FORWARD-LOOKING STATEMENTS
When used in this Joint Proxy Statement/Prospectus or in documents
incorporated by reference herein with respect to NTL and Partners, the words
"estimate," "project," "intend," "expect" and similar expressions are intended
to identify forward-looking statements. Readers are cautioned not to place undue
reliance on these forward-looking statements, which speak only as of the date of
this Joint Proxy Statement/Prospectus or as of the date of such other documents.
Actual results may differ materially from those contemplated in such projections
and forward-looking statements. Important assumptions and factors that could
cause actual results to differ materially from those contemplated or projected,
forecast, estimated or budgeted in or expressed or implied by such projections
and forward-looking statements include: (i) those specified in the "RISK
FACTORS" section; (ii) industry trends; (iii) the ability of NTL and Partners 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; (iv) assumptions about customer acceptance, churn rates,
overall market penetration and competition from providers of alternative
services, and availability, terms and deployment of capital; (v) general
economic and business conditions in the United States and the UK; and (vi) NTL's
ability to integrate and successfully operate acquired businesses, including,
without limitation, Partners. Other factors and assumptions not identified above
were also involved in the derivation of these forward-looking statements, and
the failure of such other assumptions to be realized, as well as other factors,
may also cause actual results to differ materially from those projected. Neither
NTL nor Partners assumes any obligation to update such forward-looking
statements to reflect actual results, changes in assumptions or changes in other
factors affecting such forward-looking statements.
3
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TABLE OF CONTENTS
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AVAILABLE INFORMATION....................................... 2
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE............. 2
FORWARD-LOOKING STATEMENTS.................................. 3
GLOSSARY OF DEFINED TERMS................................... 8
SUMMARY..................................................... 15
The Companies............................................. 15
The NTL Special Meeting................................... 16
The Partners Special General Meeting...................... 16
The Amalgamation and the Amalgamation Agreement........... 17
The TeleWest Agreement.................................... 24
Certain Agreements Related to the Amalgamation............ 25
Stockholders' Comparative Rights.......................... 25
Proposal for Shares Amendment............................. 26
Recent Developments....................................... 26
Summary Historical Financial Data of NTL.................. 27
Summary Historical Financial Data of Partners, Birmingham
Cable, Cable London and Cambridge Cable................ 28
Summary Pro Forma Financial Data.......................... 30
Summary Pro Forma Per Share and Other Data................ 31
RISK FACTORS................................................ 32
Risks to NTL of the Uncertainty of the Outcome of the
Cable London "Shoot-Out"............................... 32
Fixed Ratios Despite Change in Relative Stock Prices...... 32
Partners' Inability to Control Cable London............... 32
Rights Relating to Control of Partners by Comcast; Voting
Agreements............................................. 33
Risks to Shareholders of Partners Resulting from
Differences in Stockholder Rights...................... 33
Risks Associated with the NTL Class D Stock............... 33
Uncertainties in Integrating Operations and Achieving Cost
Savings................................................ 34
Necessity of Receiving Governmental Approvals and Debt
Consents Prior to the Amalgamation..................... 34
Risks Related to Partners Indenture....................... 34
Potential Adverse Consequences of Leverage of NTL......... 35
Network Construction Costs of NTL, the Partners Operating
Companies and ComTel; Need for Additional Financing.... 36
Holding Company Structure of NTL and Partners; Dependence
Upon Cash Flow from Subsidiaries....................... 37
Operating Losses of NTL and Partners...................... 39
Deficiency of Earnings to Fixed Charges and Earnings to
Combined Fixed Charges and Preferred Stock Dividends of
NTL.................................................... 39
Requirement of NTL and the Partners Operating Companies to
Meet Build Milestones.................................. 39
Uncertainty of Construction Progress and Costs............ 40
Significant Competition for NTL and the Partners Operating
Companies.............................................. 40
Limited Access of NTL and the Partners Operating Companies
to Programming......................................... 42
Possible Changes in Government Regulation................. 42
NTL's Dependence Upon Site Sharing Arrangement............ 43
NTL's Dependence Upon ITV and Other Contracts............. 43
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Risks Relating to NTL's Management of Growth and
Expansion.............................................. 43
Dependence Upon Key Personnel of NTL...................... 44
Risks of Rapid Technological Changes on Business of NTL
and the Partners Operating Companies................... 44
Currency Risk............................................. 44
Risks of Limited Insurance Coverage....................... 44
SELECTED HISTORICAL FINANCIAL DATA OF NTL................... 45
SELECTED HISTORICAL FINANCIAL DATA OF PARTNERS, BIRMINGHAM
CABLE, CABLE LONDON AND CAMBRIDGE CABLE................... 47
UNAUDITED PRO FORMA FINANCIAL DATA.......................... 49
THE NTL SPECIAL MEETING..................................... 57
Purpose, Time and Place................................... 57
Record Date; Voting Rights................................ 57
Quorum.................................................... 57
Required Vote............................................. 57
Proxies................................................... 57
THE PARTNERS SPECIAL GENERAL MEETING........................ 59
Purpose, Time and Place................................... 59
Record Date; Voting Rights................................ 59
Quorum.................................................... 59
Required Vote............................................. 59
Dissenters' Rights........................................ 60
Proxies................................................... 60
THE AMALGAMATION............................................ 61
General................................................... 61
Purchase Rights Relating to Partners' Interests in
Birmingham Cable and Cable London...................... 62
Background of the Amalgamation............................ 64
NTL's Reasons for the Amalgamation; Recommendation of the
NTL Board.............................................. 66
Opinion of NTL's Financial Advisor........................ 67
Partners' Reasons for the Amalgamation; Recommendation of
the
Partners Board......................................... 71
Opinion of Partners' Financial Advisor.................... 73
Directors and Officers.................................... 79
Interests of Certain Persons in the Amalgamation.......... 79
Accounting Treatment...................................... 80
Governmental and Regulatory Approvals..................... 80
The Debt Consents......................................... 82
Restrictions on Sales of Shares by Affiliates............. 82
Material Tax Consequences of the Amalgamation............. 82
Stock Exchange Listing.................................... 84
Rights of Dissenting Shareholders......................... 84
THE AMALGAMATION AGREEMENT.................................. 85
Cancellation of Shares.................................... 85
Exchange Agent; Procedures for Exchange of Certificates... 87
No Fractional Shares...................................... 88
Representations and Warranties............................ 89
Conduct of Business Pending the Amalgamation.............. 90
No Solicitation........................................... 92
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Partners Incentive Plans.................................. 93
Employee Benefits......................................... 94
Indemnification and Insurance............................. 94
Conditions Precedent to the Amalgamation.................. 95
Additional Agreements..................................... 96
Termination............................................... 97
Fees and Expenses......................................... 98
Amendment................................................. 98
Extension; Waiver......................................... 98
THE TELEWEST AGREEMENT...................................... 99
CERTAIN AGREEMENTS RELATED TO THE AMALGAMATION.............. 104
Voting Agreements......................................... 104
The Registration Rights Agreement......................... 105
Lock-Up Agreements........................................ 106
MARKET PRICE DATA AND DIVIDENDS............................. 107
DESCRIPTION OF NTL CAPITAL STOCK............................ 108
General................................................... 108
NTL Common Stock.......................................... 108
NTL Preferred Stock....................................... 108
Section 203 of the DGCL................................... 113
Transfer Agent and Registrar.............................. 114
NTL Rights Agreement...................................... 114
COMPARISON OF THE RIGHTS OF STOCKHOLDERS OF NTL AND
SHAREHOLDERS OF PARTNERS.................................. 116
General................................................... 116
Authorized Capital........................................ 116
Special Meetings of Stockholders.......................... 116
Stockholder Action by Consent............................. 116
Amendments to Charter..................................... 117
Inspection of Books and Records; Shareholder and
Stockholder Lists...................................... 117
Voting Rights with Respect to Extraordinary Corporate
Transactions........................................... 117
Dissenters' Rights........................................ 118
Derivative Suits.......................................... 118
Tender Offer Statutes..................................... 119
NTL Rights Agreement...................................... 119
Number of Directors; Election of Directors; Removal;
Vacancies.............................................. 120
Advance Notice of Director Nominations.................... 120
Limitations on Director Liability......................... 120
Indemnification of Directors and Officers................. 121
PROPOSAL FOR SHARES AMENDMENT............................... 122
BUSINESS OF NTL............................................. 124
Residential Telecoms and Television Services.............. 124
National Telecoms Services................................ 125
Broadcast Services........................................ 126
BUSINESS OF PARTNERS........................................ 127
Partners Operating Companies' Systems..................... 127
Revenue Sources........................................... 128
RECENT DEVELOPMENTS......................................... 129
Diamond................................................... 129
ComTel.................................................... 129
Redemption of 10 7/8% Notes............................... 129
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STOCK OWNERSHIP............................................. 130
LEGAL MATTERS............................................... 131
EXPERTS..................................................... 131
STOCKHOLDER PROPOSALS....................................... 132
INDEX TO FINANCIAL STATEMENTS............................... F-1
ANNEX A AMALGAMATION AGREEMENT.............................. A-1
ANNEX B AMENDMENT NO. 1 TO AMALGAMATION AGREEMENT........... B-1
ANNEX C AMENDMENT NO. 2 TO AMALGAMATION AGREEMENT........... C-1
ANNEX D OPINION OF DONALDSON, LUFKIN & JENRETTE SECURITIES
CORPORATION......................................... D-1
ANNEX E OPINION OF HSBC INVESTMENT BANK PLC................. E-1
ANNEX F VOTING AGREEMENTS................................... F-1
ANNEX G FORM OF REGISTRATION RIGHTS AGREEMENT............... G-1
ANNEX H FORMS OF LOCK-UP AGREEMENTS......................... H-1
ANNEX I CERTIFICATE OF DESIGNATION, NTL CLASS D STOCK....... I-1
ANNEX J FORM OF PROXY CARD WITH RESPECT TO PARTNERS......... J-1
ANNEX K FORM OF PROXY CARD WITH RESPECT TO NTL.............. K-1
ANNEX L TELEWEST AGREEMENT.................................. L-1
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<PAGE> 16
GLOSSARY OF DEFINED TERMS
"Acceptance Period" shall mean the 30-day period following the Offer Notice
in which TeleWest may accept or decline the Offer by notice to Partners.
"Acquiring Person" shall mean, for purposes of the Rights Agreement, a
person or group of affiliated or associated persons who has acquired, or
obtained the right to acquire, beneficial ownership of 15% or more of the
outstanding shares of NTL Common Stock.
"Acquisition" shall mean the acquisition of shares of Cable London by
either TeleWest or Partners pursuant to the TeleWest Agreement.
"Adjusted SAR" shall mean certain SARs of Partners which pursuant to the
Amalgamation Agreement shall be adjusted such that after the Effective Time,
each such SAR will represent a right to receive an amount of cash, on the same
terms and conditions as were previously applicable under such SAR, without
regard to any provision reducing the period of exercise of such SAR pursuant to
the cessation of service as a director of Partners, equal to the amount by which
the Fair Market Value (as defined in the Partners SAR Plan) per share of NTL
Common Stock multiplied by the Exchange Ratio (rounded to the nearest cent)
exceeds a base price per share of NTL Common Stock equal to the base price for
the Partners Class A Common Share subject to such SAR.
"Amalgamated Company" shall mean the company resulting from the
Amalgamation.
"Amalgamation" shall mean the amalgamation under Bermuda law of Sub with
Partners.
"Amalgamation Adjusted Option" shall mean certain employee stock options of
Partners which pursuant to the Amalgamation Agreement shall be adjusted such
that after the Effective Time, each such option will represent an option to
acquire, on the same terms and conditions as were previously applicable under
such option, the number of shares of NTL Common Stock equal to the number of
Partners Common Shares subject to such option, multiplied by the Exchange Ratio
(such product rounded up to the nearest whole number), at an exercise price per
share of NTL Common Stock (rounded down to the nearest whole cent) equal to (i)
the aggregate exercise price for Partners Common Shares otherwise purchasable
pursuant to such option divided by (ii) the aggregate number of whole shares of
NTL Common Stock deemed to be subject to such option in accordance with the
foregoing.
"Amalgamation Agreement" shall mean the Agreement and Plan of Amalgamation,
dated as of February 4, 1998, as amended, among NTL, Sub and Partners.
"BBC" shall mean the British Broadcasting Corporation.
"Birmingham Cable" shall mean Birmingham Cable Corporation Limited.
"Birmingham Cable Completion" shall mean the date of completion of the
obligations required for the sale and purchase of Partners' ownership interest
in Birmingham Cable and Partners' rights and interests in the Birmingham Cable
Loans and Fees pursuant to the TeleWest Agreement.
"Birmingham Cable Equity Interest" shall mean Partners' 27.5% interest in
Birmingham Cable.
"Birmingham Cable Loans and Fees" shall mean, pursuant to the TeleWest
Agreement, certain subordinated loans and fees due from Birmingham Cable and its
subsidiaries.
"BSkyB" shall mean British Sky Broadcasting.
"BT" shall mean British Telecommunications plc.
"Cable London" shall mean Cable London PLC.
"Cable London Completion" shall mean the date of completion of the
obligations required for the sale and purchase of the ownership interests of
either Partners or TeleWest in Cable London and the rights and interests of
Partners or TeleWest in the Cable London Loans and Fees pursuant to the TeleWest
Agreement.
"Cable London Equity Interest" shall mean Partners' 50% interest in Cable
London.
8
<PAGE> 17
"Cable London Loan and Fees" shall mean, pursuant to the TeleWest
Agreement, certain subordinated loans and fees from Cable London and its
subsidiaries due to either Partners, Comcast UK Cable or TeleWest and any of
their respective subsidiaries and parent undertakings.
"Cable London Sale Shares" shall mean the shares of Cable London held by
either TeleWest or Partners to be sold pursuant to the TeleWest Agreement.
"Cambridge Cable" shall mean Cambridge Holding Company Limited.
"CATV" shall mean cable television.
"CCC" shall mean Comcast Cellular Corporation, an affiliate of Partners.
"Certificate of Amalgamation" shall mean the certificate of amalgamation
duly issued by the Bermuda Registrar of Companies.
"Certificates" shall mean the certificates which immediately prior to the
Effective Time represented outstanding Partners Common Shares.
"Chase" shall mean The Chase Manhattan Bank.
"Chemical" shall mean Chemical Investment Bank Limited.
"CIBC" shall mean the Canadian Imperial Bank of Commerce.
"Class A Common Shares" shall mean the Class A Common Shares, par value
L.01 per share, of Partners.
"Class B Common Shares" shall mean the Class B Common Shares, par value
L.01 per share, of Partners.
"Closing" shall mean the closing of the Amalgamation.
"Closing Date" shall mean the date of the Closing which shall be 10:00
a.m., Eastern time, on a date to be specified by the parties to the Amalgamation
Agreement.
"Code" shall mean the Internal Revenue Code of 1986, as amended.
"Comcast" shall mean Comcast Corporation.
"Comcast UK Consulting" shall mean Comcast UK Consulting, Inc.
"Comcast Voting Agreement" shall mean the Voting Agreement executed by
Comcast in connection with the Amalgamation.
"Companies Act" shall mean the Bermuda Companies Act 1981, as amended.
"ComTel" shall mean the collective operations of ComTel Limited and
Telecential Communications.
"ComTel Agreement" shall mean the acquisition agreement, dated June 16,
1998, between NTL and Vision Networks III B.V., a wholly-owned subsidiary of
Royal PTT Nederland NV (KPN), for the acquisition of ComTel.
"Confidentiality Agreement" shall mean the Confidentiality Agreement, dated
March 10, 1997, between NTL and Partners.
"Co-Owner" shall mean either Partners or TeleWest in connection with the
Co-Ownership Agreement.
"Co-Ownership Agreement" shall mean the Co-Ownership Agreement, dated March
12, 1990, as amended and supplemented, to which Partners and TeleWest are
parties.
"Corporate Documents" shall mean the NTL Restated Certificate, the Partners
Charter, the NTL By-laws and the Partners Bye-laws.
"Court" shall mean the Supreme Court of Bermuda.
"CUKCP Cable London Loans and Fees" shall mean, pursuant to the TeleWest
Agreement, certain subordinated loans and fees due to Partners and Comcast UK
Consulting and any of their respective subsidiaries and parent undertakings from
Cable London and its subsidiaries.
9
<PAGE> 18
"Debt Consents" shall mean the Partners Consent, the consent or effective
waiver of the holders of a majority amount of the 12 3/4% Notes, the 11 1/2%
Notes and the 10% Notes.
"Determination Time" shall mean the fifth business day prior to the
Effective Time.
"D.F. King" shall mean D.F. King & Co., Inc., NTL's and Partners' proxy
solicitor.
"DGCL" shall mean the Delaware General Corporation Law.
"Diamond" shall mean Diamond Cable Communications Plc.
"Diamond Agreement" shall mean the Share Exchange Agreement, dated as of
June 16, 1998, among NTL and the shareholders of Diamond set forth therein.
"Dissenting Shareholder" shall mean any holder of Partners Common Shares
who does not vote in favor of the Amalgamation, is not satisfied that he has
been offered the fair value of his shares and within one month of the giving of
notice of the Partners Special General Meeting applies to the Court to appraise
the fair value of his shares.
"Dissenting Shares" shall mean the Partners Common Shares owned by a
Dissenting Shareholder.
"DLJ" shall mean Donaldson, Lufkin & Jenrette Securities Corporation.
"DLJ Opinion" shall mean the written opinion of DLJ, dated February 3,
1998, to the NTL Board to the effect that, as of such date, and based upon and
subject to the assumptions, limitations and qualifications set forth in such
opinion, the Exchange Ratio was fair to NTL from a financial point of view.
"DTH" shall mean direct-to-home.
"DTT" shall mean digital terrestrial television.
"EC" shall mean the European Commission.
"Effective Time" shall mean the effective time of the Amalgamation.
"11.20% Debentures" shall mean Partners' 11.20% Senior Discount Debentures
Due 2007.
"11 1/2% Notes" shall mean NTL's 11 1/2% Senior Deferred Coupon Notes Due
2006.
"EMCG" shall mean East Midlands Cable Group Limited.
"End Date" shall mean November 4, 1998, unless extended pursuant to the
Amalgamation Agreement.
"Energis" shall mean Energis Communications Limited, a subsidiary of the
National Grid Company plc.
"Equity Interest Proceeds" shall mean, with respect to Partners' interests
in Cable London and Birmingham Cable, the pro rata net proceeds (i.e., the net
amount received for the relevant equity interest (without regard to debt, loans
from Partners to Birmingham Cable and Cable London or the debt component (i.e.,
face amount and accrued and unpaid interest)) of any convertible security) from
the consummation of the sale of the relevant interest under the applicable
Purchase Rights less the Tax Adjustment (as defined in the Amalgamation
Agreement), provided that, in the case of Partners' interest in Cable London,
such amount shall be adjusted as follows: (i) if the convertible debt in Cable
London has been converted prior to or in connection with the exercise of the
Purchase Rights relating to Partners' interest in Cable London, the Equity
Interest Proceeds shall be decreased by an amount equal to the debt component of
Partners' share of such convertible debt and (ii) if such convertible debt has
not been converted prior to or in connection with the exercise of such Purchase
Right, the Equity Interest Proceeds shall be increased by an amount equal to the
value of Partners' share of such convertible debt (less the debt component of
such convertible debt).
"Equity Interests" shall mean the Cable London Equity Interest and the
Birmingham Cable Equity Interest.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as amended.
"Exchange Ratio" shall mean the ratio of .3745 shares of NTL Common Stock
for each Partners Common Share.
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<PAGE> 19
"Exercised" shall mean, with respect to a Purchase Right, that as of the
Determination Time such Purchase Right has been effectively exercised by
TeleWest other than in connection with a Negotiated TeleWest Transaction.
"EU" shall mean the European Union.
"Guarantees" shall mean all guarantees, indemnities, counter-indemnities
and letters of comfort given to any third party by Partners as of the date of
the TeleWest Agreement in respect of any liability or obligation of Birmingham
Cable.
"Holdings" shall mean Comcast U.K. Holdings, Inc., an indirect,
wholly-owned subsidiary of Comcast.
"HSBC" shall mean HSBC Investment Bank plc.
"HSBC Opinion" shall mean the written opinion of HSBC, dated February 4,
1998, to the Partners Board to the effect that, as of such date, the
consideration to be paid in connection with the Amalgamation to holders of Class
A Common Shares (other than NTL and its affiliates) is fair from a financial
point of view to such holders, subject to the limitations described therein.
"HSR Act" shall mean the Hart-Scott-Rodino Antitrust Improvements Act of
1976, as amended.
"ITC" shall mean the Independent Television Commission.
"ITV" shall mean Independent Television.
"Long Stop Date" shall mean, pursuant to the TeleWest Agreement, 90 days
after the end of the Acceptance Period.
"MediaOne" shall mean MediaOne Cable Communications Limited.
"Minister" shall mean the Bermuda Minister of Finance.
"NASDAQ" shall mean the Nasdaq National Market.
"Negotiated TeleWest Transaction" shall mean an agreement, arrangement or
understanding between NTL and Partners, on the one hand, and TeleWest, on the
other hand, directly or indirectly relating to the Purchase Rights or the
Birmingham Cable Equity Interest or the Cable London Equity Interest.
"New Credit Facility" shall mean the eight-year term loan facility, dated
October 17, 1997, and amended as of June 16, 1998, between Chase and NTL (UK)
Group, Inc.
"NTL" shall mean NTL Incorporated.
"NTL 13% Preferred" shall mean NTL's 13% Senior Redeemable Exchangeable
Preferred Stock.
"NTL Average Stock Price" shall mean the average of the high and low sales
prices of NTL Common Stock on the NASDAQ for each of the five trading days
ending on the trading day prior to the date of determination.
"NTL Board" shall mean the Board of Directors of NTL.
"NTL By-laws" shall mean the By-laws of NTL.
"NTL Capital Stock," as used in the Amalgamation Agreement, shall mean the
NTL Common Stock, the NTL Class C Stock and the NTL Class D Stock.
"NTL Class C Stock" shall mean the NTL Class C Redeemable Preferred Stock.
"NTL Class D Stock" shall mean the NTL Class D Redeemable Preferred Stock.
"NTL Common Stock" shall mean the common stock, par value $.01 per share,
of NTL.
"NTL Preferred Stock" shall mean the preferred stock, par value $.01 per
share, of NTL.
"NTL Record Date" shall mean the close of business on Thursday, September
17, 1998.
"NTL Restated Certificate" shall mean the Restated Certificate of
Incorporation of NTL.
"NTL Special Meeting" shall mean the Special Meeting of Stockholders of NTL
to be held at 10:00 a.m., local time, on Thursday, October 29, 1998, at the
Essex House Hotel, 160 Central Park South, Hyde Park Suite, New York, New York
10019 and any adjournments or postponements thereof.
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"Offer" shall mean, pursuant to the TeleWest Agreement, an offer by
Partners to sell to TeleWest Partners' ownership interest in Cable London and
Partners' rights and interests in the Cable London Loans and Fees.
"Offer Notice" shall mean a notice from Partners to TeleWest of an offer to
sell Partners' ownership interest in Cable London and Partners' rights and
interests in the Cable London Loans and Fees pursuant to the TeleWest Agreement.
"OFTEL" shall mean the Office of Telecommunications.
"Partners" shall mean Comcast UK Cable Partners Limited.
"Partners Board" shall mean the Board of Directors of Partners.
"Partners Bye-laws" shall mean the Bye-laws of Partners.
"Partners Charter" shall mean the Memorandum of Association of Partners.
"Partners Common Shares" shall mean the Class A Common Shares and the Class
B Common Shares.
"Partners Consent" shall mean the consent of the holders of a majority
amount of the 11.20% Debentures.
"Partners Facility" shall mean the bank facility of UK Holdings.
"Partners Incentive Plans" shall mean the Partners SAR Plan and the
Partners Stock Plan.
"Partners Operating Companies" shall mean Partners' interests in four
operations: Birmingham Cable, in which Partners owns a 27.5% interest, Cable
London, in which Partners owns a 50% interest, Cambridge Cable, in which
Partners owns a 100% interest, and two companies holding the franchises for
Darlington and Teesside, in which Partners owns a 100% interest.
"Partners Record Date" shall mean the close of business on Thursday,
September 17, 1998.
"Partners SAR Plan" shall mean Partners' 1995 Stock Appreciation Rights
Plan.
"Partners Shareholder Approval" shall mean the required affirmative vote of
the holders of a majority of the total votes able to be cast at general meetings
of Partners at the Partners Special General Meeting.
"Partners Special General Meeting" shall mean the Special General Meeting
of Shareholders of Partners to be held 10:00 a.m., local time, at Comcast
Corporation, 1500 Market Street, 33rd Floor, in Philadelphia, Pennsylvania, on
Thursday, October 29, 1998, and any adjournments or postponements thereof.
"Partners Stock Plan" shall mean Partners' 1995 Stock Option Plan.
"Partners Takeover Proposal" shall mean any inquiry, proposal or offer from
any person relating to any direct or indirect acquisition or purchase of a
business that constitutes 10% or more of the net revenues, net income or the
assets of Partners and its subsidiaries, taken as a whole, or 10% or more of any
equity securities of Partners, any tender offer or exchange offer that if
consummated would result in any person beneficially owning any equity securities
of Partners, or any merger, consolidation, business combination,
recapitalization, liquidation, dissolution or similar transaction involving
Partners (or any Partners subsidiary whose business constitutes 10% or more of
the net revenues, net income or the assets of Partners and its subsidiaries,
taken as a whole) or the Partners Common Shares, other than the transactions
contemplated by the Amalgamation Agreement.
"PTO" shall mean public telephone operator.
"Purchaser" shall mean, pursuant to the TeleWest Agreement, either TeleWest
or Partners, as purchaser of the other party's ownership interest in Cable
London and rights and interests in the Cable London Loans and Fees.
"Purchase Rights" shall mean the rights of TeleWest to acquire the Equity
Interests under certain circumstances.
"Registration Rights Agreement" shall mean the registration rights
agreement among NTL, Comcast and Warburg, Pincus pursuant to which NTL will be
obligated to register for resale the shares of NTL Common Stock issued to
Holdings and Warburg, Pincus as consideration in the Amalgamation.
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<PAGE> 21
"Registration Statement" shall mean the Registration Statement on Form S-4
filed with the SEC in connection with the Amalgamation.
"Required British Approvals" shall mean the approvals of certain British
governmental entities which are a condition to the consummation of the
Amalgamation.
"Required Consents" shall mean the consents from certain third parties,
including the Debt Consents and the Partners Consent, which are a condition to
the consummation of the Amalgamation.
"Resolved" shall mean, with respect to a Purchase Right, that as of the
Determination Time, such Purchase Right is no longer of legal effect (i.e., such
right has been (i) waived or (ii) has not been exercised in accordance with its
terms and, in the opinion of recognized counsel of the jurisdiction of the
governing law of such right, is of no further legal force or effect) or NTL and
Partners have entered into a Negotiated TeleWest Transaction with respect to
such Purchase Right.
"Restraints" shall mean any judgment, order, decree, statute, law,
ordinance, rule or regulation, entered or enacted, promulgated, enforced or
issued by any court or other governmental entity of competent jurisdiction or
other legal restraint or prohibition which prevents the consummation of the
Amalgamation or which otherwise is reasonably likely to have a material adverse
effect on Partners or NTL.
"Rights Agreement" shall mean the Rights Agreement, dated as of October 13,
1993, between NTL and Continental Stock Transfer & Trust Company.
"Rights Preferred Stock" shall mean NTL's Series A Junior Participating
Preferred Stock.
"SARs" shall mean the stock appreciation rights outstanding under the
Partners SAR Plan.
"SDH" shall mean synchronous digital hierarchy.
"SEC" shall mean the Securities and Exchange Commission.
"Securities Act" shall mean the Securities Act of 1933, as amended.
"Shares Amendment" shall mean the proposed amendment to the NTL Restated
Certificate to increase the maximum number of authorized shares of NTL Common
Stock from 100,000,000 to 400,000,000 shares and to increase the maximum number
of authorized shares of NTL Preferred Stock from 2,500,000 to 10,000,000 shares.
"Share Exchange" shall mean the exchange of one share of NTL Common Stock
for each four issued and outstanding Ordinary Shares and for each deferred share
of Diamond pursuant to the Diamond Agreement.
"Share Issuance" shall mean the issuance by NTL of shares of NTL Common
Stock pursuant to the Amalgamation in accordance with the terms of the
Amalgamation Agreement.
"Shoot-out Approvals" shall mean certain third-party and regulatory
approvals and consent which are a condition to the Cable London Completion.
"Shoot-out Period" shall mean, pursuant to the TeleWest Agreement, the
period commencing on the date which is the earlier of (i) six months after (A)
the Closing Date of the Amalgamation or (B) if earlier, December 31, 1998, and
(ii) the earlier of (A) the date on which a public announcement is made of a
firm intention to make a recommended offer for the ordinary shares of TeleWest
(other than those owned or contracted to be acquired by the offeror or persons
acting in concert with the offeror) or of a merger between NTL and a third party
where NTL is not the surviving entity whether or not, in either case, subject to
the satisfaction of any pre-conditions, and (B) the completion of any such offer
or merger, whether or not recommended, and ending at midnight on the date which
is three months thereafter (both dates inclusive).
"Special Resolution" shall mean the special resolution to Cable London's
articles of association providing that, among other things, the Amalgamation
will not be deemed or constitute a change of control of Partners thereunder.
"Stockholder Approval" shall mean the required affirmative vote of the
holders of a majority of the votes cast on the Share Issuance at the NTL Special
Meeting.
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<PAGE> 22
"Sub" shall mean NTL (Bermuda) Limited, a Bermuda corporation and a
wholly-owned subsidiary of NTL.
"Sum" shall mean the cash sum specified in the Offer Notice with respect to
Partners' ownership interest in Cable London and Partners' rights and interests
in the Cable London Loans and Fees.
"Superior Partners Takeover Proposal" shall mean any bona fide Partners
Takeover Proposal for at least a majority of the outstanding Partners Common
Shares on terms the Partners Board determines in its good faith judgment (taking
into account the advice of its financial advisor, all of the terms and
conditions of such Partners Takeover Proposal and the conditions to
consummation) are more favorable and provide greater value to Partners and all
of its shareholders than the Amalgamation Agreement and the Amalgamation taken
as a whole.
"Teesside" shall mean the two Partners Operating Companies holding the
franchises for Darlington and Teesside, England.
"TeleWest" shall mean TeleWest Communications plc.
"TeleWest Agreement" shall mean the Agreement in Respect of the Rights of
First Refusal Relating to Birmingham Cable and Cable London, dated August 14,
1998, between NTL, Partners, TeleWest and TeleWest Communications Holdings
Limited.
"TeleWest Cable London Loans and Fees" shall mean, pursuant to the TeleWest
Agreement, certain subordinated loans and fees due to TeleWest and any of their
respective subsidiaries and parent undertakings from Cable London and its
subsidiaries.
"TeleWest Holdings" shall mean TeleWest Communications Holdings Limited.
"10% Notes" shall mean NTL's 10% Series B Senior Notes Due 2007.
"10 7/8% Notes" shall mean NTL's 10 7/8% Senior Deferred Coupon Notes Due
2003.
"Transfer" shall mean, with respect to either Co-Owner in connection with
the Co-Ownership Agreement, any sale, assignment, transfer, pledge or other
disposition of, or direct or indirect (including by virtue of any change in
control) encumbrance of, all or any part of the shares of Birmingham Cable
beneficially owned by such Co-Owner.
"12 3/4% Notes" shall mean NTL's 12 3/4% Senior Deferred Coupon Notes Due
2005.
"UK" shall mean the United Kingdom.
"UK Holdings" shall mean Comcast UK Holdings Limited.
"Vendor" shall mean, pursuant to the TeleWest Agreement, either TeleWest or
Partners, as seller of its ownership interest in Cable London and its rights and
interests in the Cable London Loans and Fees.
"Voting Agreements" shall mean the Warburg, Pincus Voting Agreement and the
Comcast Voting Agreement.
"Warburg, Pincus" shall mean Warburg, Pincus Investors, L.P.
"Warburg, Pincus Voting Agreement" shall mean the Voting Agreement executed
by Warburg, Pincus in connection with the Amalgamation.
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<PAGE> 23
SUMMARY
The following is a summary of certain information contained elsewhere in
this Joint Proxy Statement/Prospectus. It is not, and is not intended to be,
complete in itself. Reference is made to, and this summary is qualified in its
entirety by, the more detailed information contained elsewhere in this Joint
Proxy Statement/Prospectus, including the Annexes hereto which are a part of
this Joint Proxy Statement/Prospectus. Stockholders of NTL and shareholders of
Partners are encouraged to read carefully all of the information contained in
this Joint Proxy Statement/Prospectus.
STOCKHOLDERS OF NTL AND SHAREHOLDERS OF PARTNERS SHOULD CONSIDER CAREFULLY
THE INFORMATION SET FORTH HEREIN UNDER THE HEADING "RISK FACTORS" IN ADDITION TO
THE OTHER INFORMATION PRESENTED HEREIN.
THE COMPANIES
NTL. NTL is a leading communications company in the UK, providing
residential, business and wholesale customers with the following services: (i)
Residential Telecoms and Televisions Services, including residential telephony,
cable television ("CATV") and Internet access services; (ii) National Telecoms
Services, including national business telecoms, national and international
carrier telecommunications, and satellite and radio communications services; and
(iii) Broadcast Services, including digital and analog television and radio
broadcast transmission services.
NTL provides its broad range of services over local, national and
international network infrastructure. NTL operates (i) advanced local broadband
networks serving entire communities throughout NTL's regional franchise areas,
(ii) the UK's first synchronous digital hierarchy ("SDH") backbone
telecommunications network, as well as satellite earth stations and radio
communications facilities from NTL's tower sites across the UK and (iii) a
broadcast transmission network which provides national, regional and local
analog and digital transmission services to customers throughout the UK.
In March 1997, NTL changed its name from International CableTel
Incorporated ("ICTI") to NTL Incorporated to reflect the integration of the
services provided by NTL following its acquisition of NTL Group Limited in 1996,
and to capitalize on NTL Group Limited's 30-year history in the UK as a provider
of reliable communications services.
The mailing address and telephone number of the principal executive offices
of NTL is 110 East 59th Street, New York, New York 10022 and (212) 906-8440. NTL
was incorporated in April 1993 under the laws of the State of Delaware. See
"BUSINESS OF NTL."
Partners. Partners, an indirectly controlled subsidiary of Comcast
Corporation ("Comcast"), was incorporated in 1992 to develop, construct, manage
and operate the interests of Comcast in the UK cable and telecommunications
industry. As of June 30, 1998, Partners had interests in four operations (the
"Partners Operating Companies"): Birmingham Cable, in which Partners owns a
27.5% interest, Cable London, in which Partners owns a 50% interest, Cambridge
Holding Company Limited ("Cambridge Cable"), in which Partners owns a 100%
interest, and two companies holding the franchises for Darlington and Teesside,
England ("Teesside"), in which Partners owns a 100% interest. On December 8,
1997, Partners formed Comcast UK Holdings Limited, a wholly-owned subsidiary
incorporated in Bermuda ("UK Holdings"), in order to secure a financing
arrangement to primarily fund capital expenditures and working capital
requirements at Cambridge Cable and Teesside.
The mailing address and telephone number of the principal executive offices
of Partners is Clarendon House, 2 Church Street West, Hamilton, HM 11, Bermuda
and (441) 295-5950. Partners was incorporated in September 1992 under Bermuda
law. See "BUSINESS OF PARTNERS."
Sub. Sub was incorporated in Bermuda on February 4, 1998, solely for the
purpose of consummating the Amalgamation and the other transactions contemplated
by the Amalgamation Agreement. Sub engages in no other business.
The mailing address and telephone number of the principal executive offices
of Sub is Cedar House, 41 Cedar Avenue, Hamilton, HM 12, Bermuda and (441)
295-2244.
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<PAGE> 24
THE NTL SPECIAL MEETING
Purpose, Time and Place. The NTL Special Meeting will be held at 10:00
a.m., local time, on Thursday, October 29, 1998, at the Essex House Hotel, 160
Central Park South, Hyde Park Suite, New York, New York 10019, to consider and
vote upon (i) a proposal to approve the Share Issuance (defined above as the
issuance of shares of NTL Common Stock pursuant to the Amalgamation in
accordance with the terms of the Amalgamation Agreement) and (ii) a proposal to
approve the Shares Amendment. Holders of NTL Common Stock will also consider and
vote upon all other matters as may properly be brought before the NTL Special
Meeting. See "THE NTL SPECIAL MEETING -- Purpose, Time and Place."
Record Date. Only holders of record of NTL Common Stock at the close of
business on Thursday, September 17, 1998 (the "NTL Record Date") will be
entitled to notice of, and to vote at, the NTL Special Meeting. On such date,
there were 41,390,544 outstanding shares of NTL Common Stock, held by 539
holders of record. Each such share entitles the registered holder thereof to one
vote. See "THE NTL SPECIAL MEETING -- Record Date; Voting Rights."
Quorum. The holders of a majority of the shares of NTL Common Stock
outstanding and entitled to vote must be present in person or by proxy at the
NTL Special Meeting in order for a quorum to be present. Abstentions and broker
non-votes will be treated as shares of NTL Common Stock that are present and
entitled to vote for purposes of determining the presence of a quorum at the NTL
Special Meeting. See "THE NTL SPECIAL MEETING -- Quorum."
Required Vote. Approval of the Share Issuance at the NTL Special Meeting
requires the affirmative vote of the holders of a majority of the votes cast on
the Share Issuance (the "NTL Stockholder Approval"). Approval of the Shares
Amendment at the NTL Special Meeting requires the affirmative vote of the
holders of a majority of the outstanding shares of NTL Common Stock. Under
applicable Delaware law, in determining whether the Share Issuance has received
the requisite number of affirmative votes, abstentions and broker non-votes will
be disregarded and will have no effect on the outcome of the vote, and in
determining whether the Shares Amendment has received the requisite number of
affirmative votes, abstentions and broker non-votes will have the effect of
negative votes. As of the NTL Record Date, directors and executive officers of
NTL and their affiliates were the beneficial owners of an aggregate of 3,308,310
(approximately 8%) of the shares of NTL Common Stock then outstanding and
eligible to vote. It is expected that all of such shares will be voted for
approval of the Share Issuance and the Shares Amendment. See "THE NTL SPECIAL
MEETING -- Required Vote."
Proxies. Any stockholder of NTL who executes and returns a proxy may
revoke it at any time before it is voted at the NTL Special Meeting by (i)
delivering to the Secretary of NTL, prior to the NTL Special Meeting, a written
notice of revocation bearing a later date or time than the date or time of the
proxy being revoked, (ii) submitting a duly executed proxy bearing a later date
or time than the date or time of the proxy being revoked or (iii) voting in
person at the NTL Special Meeting. A stockholder's attendance at the NTL Special
Meeting will not by itself revoke a proxy given by such stockholder. See "THE
NTL SPECIAL MEETING -- Proxies."
THE PARTNERS SPECIAL GENERAL MEETING
Purpose, Time and Place. The Partners Special General Meeting will be held
at 10:00 a.m., local time, on Thursday, October 29, 1998, at Comcast
Corporation, 1500 Market Street, 33rd Floor, in Philadelphia, Pennsylvania, to
consider and, if thought fit, vote to approve the Amalgamation. Holders of
Partners Common Shares will also consider and vote upon all other matters as may
properly be brought before the Partners Special General Meeting. See "THE
PARTNERS SPECIAL GENERAL MEETING -- Purpose, Time and Place."
Record Date. Only holders of record of Partners Common Shares entered in
the registrar of members of Partners at the close of business on Thursday,
September 17, 1998 (the "Partners Record Date") are entitled to notice of the
Partners Special General Meeting. All holders of Partners Common Shares entered
in the registrar of members of Partners on the date of the Partners Special
General Meeting are entitled to vote at the Partners Special General Meeting. As
of June 30, 1998, there were outstanding 37,231,997 Class A
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<PAGE> 25
Common Shares, held by 28 registered holders, and 12,872,605 Class B Common
Shares, all of which were held by Comcast U.K. Holdings, Inc., an indirect,
wholly-owned subsidiary of Comcast ("Holdings"). The Class A Common Shares and
the Class B Common Shares vote together. Each registered holder of Class A
Common Shares is entitled to one vote per share, and each registered holder of
Class B Common Shares is entitled to ten votes per share. See "THE PARTNERS
SPECIAL GENERAL MEETING -- Record Date; Voting Rights."
Quorum. The presence in person or by proxy of shareholders of Partners
entitled to cast at least 50% of the total votes able to be cast at general
meetings of Partners will constitute a quorum for purposes of the Partners
Special General Meeting. See "THE PARTNERS SPECIAL GENERAL MEETING -- Quorum."
Accordingly, the presence in person or by proxy at the Partners Special General
Meeting of Holdings and Warburg, Pincus Investors, L.P., a Delaware limited
partnership ("Warburg, Pincus") will constitute a quorum, since Holdings is
entitled to cast approximately 77.6% of the total votes to be cast at general
meetings of Partners and Warburg, Pincus is entitled to cast approximately 6.2%
of the total votes to be cast at general meetings of Partners. See "CERTAIN
RELATED AGREEMENTS -- Voting Agreements."
Required Vote. Approval of the Amalgamation at the Partners Special
General Meeting requires the affirmative vote of the holders of a majority of
the total votes able to be cast at general meetings of Partners (the "Partners
Shareholder Approval"). Under Bermuda law, only votes cast in favor of a
resolution count as affirmative votes. Votes which are withheld, represented by
broker nonvotes or which abstain from voting are counted for quorum purposes
only. Holdings, based on its ownership of 100% of the Class B Common Shares, is
entitled to cast approximately 77.6% of the total votes to be cast at the
Partners Special General Meeting, and Warburg, Pincus, based on its ownership of
approximately 27.5% of the outstanding Class A Common Shares, is entitled to
cast approximately 6.2% of the total votes to be cast at the Partners Special
General Meeting. Accordingly, pursuant to the Voting Agreements (as defined
herein), the Partners Shareholder Approval is assured, notwithstanding any vote
of any other holders of Partners Common Shares. See "CERTAIN RELATED
AGREEMENTS -- Voting Agreements." As of June 30, 1998, directors and executive
officers of Partners and their affiliates were the beneficial owners of an
aggregate of less than 1% of the Class A Common Shares then outstanding and
eligible to vote.
Proxies. Any shareholder of Partners who executes and returns a proxy may
revoke it at any time before it is voted at the Partners Special General Meeting
by (i) delivering to the Secretary of Partners, prior to the Partners Special
General Meeting, a written notice of revocation bearing a later date or time
than the date or time of the proxy being revoked, (ii) submitting a duly
executed proxy bearing a later date or time than the date or time of the proxy
being revoked or (iii) voting in person at the Partners Special General Meeting.
See "THE PARTNERS SPECIAL GENERAL MEETING -- Proxies."
THE AMALGAMATION AND THE AMALGAMATION AGREEMENT
General. At the effective time of the Amalgamation (the "Effective Time"),
Sub will be amalgamated with Partners, in accordance with the applicable
provisions of the Bermuda Companies Act 1981, as amended (the "Companies Act"),
and the separate existence of Sub and Partners will thereupon continue in the
form of the Amalgamated Company. At and after the Amalgamation, the Amalgamated
Company will operate under the name of "NTL (Bermuda) Limited" and continue as a
wholly-owned subsidiary of NTL under the provisions of the Companies Act and
other applicable Bermuda law.
The Amalgamation will become effective at such time as a certificate of
amalgamation (the "Certificate of Amalgamation") is duly issued by the Bermuda
Registrar of Companies, or at such later time as may be designated by the
parties in the Certificate of Amalgamation as the Effective Time. The Closing
will take place at 10:00 a.m., Eastern time, on a date to be specified by the
parties to the Amalgamation Agreement (the "Closing Date"), which will be no
later than the second business day after the satisfaction or waiver of certain
conditions set forth in the Amalgamation Agreement, unless another time or date
is agreed to by such parties. See "THE AMALGAMATION -- General."
On August 14, 1998, NTL and Partners entered into the TeleWest Agreement
with respect to, among other things, the Purchase Rights. Pursuant to the
TeleWest Agreement, the Birmingham Cable Equity
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Interest will be sold to TeleWest immediately prior to the Amalgamation, and the
status of the Cable London Equity Interest has been "Resolved" for purposes of
the Amalgamation. See "THE TELEWEST AGREEMENT." Accordingly, when the sale of
the Birmingham Cable Equity Interest is consummated prior to the Closing (as
provided in the TeleWest Agreement), each Partners Common Share will be
cancelled in consideration for the receipt of .3745 shares of NTL Common Stock.
See "THE AMALGAMATION AGREEMENT -- Cancellation of Shares."
If, due to a breach of the TeleWest Agreement, the sale of the Birmingham
Cable Equity Interest pursuant to the TeleWest Agreement is not consummated
prior to the Closing, the status of the Birmingham Cable Equity Interest will be
"Unresolved" for purposes of the Amalgamation, and shareholders of Partners may
receive, at NTL's option, .3108 shares of NTL Common Stock, as well as .0637
shares of NTL Class D Stock equal to a portion of the consideration allocable to
the Birmingham Cable Equity Interest in lieu of the Exchange Ratio. For the
purpose of determining the consideration payable to shareholders of Partners in
the event the Purchase Right relating to Birmingham Cable is Unresolved at the
Determination Time, NTL and Partners have agreed that of the .3745 shares of NTL
Common Stock to be issued in consideration for the cancellation of each Partners
Common Share, .1161 shares and .0637 shares represent the percentages allocable
to Cable London and Birmingham Cable, respectively. Such percentages suggest a
notional valuation of the Cable London Equity Interest of 31% and the Birmingham
Cable Equity Interest of 17%, relative to the aggregate value of Partners as a
whole. At NTL's sole discretion, if the Purchase Right relating to Birmingham
Cable is Unresolved, NTL may elect to issue the allocated percentage of shares
of NTL Common Stock based on the Exchange Ratio (i.e., .0637 shares, based on
the allocation of 17% of the consideration to Birmingham Cable) in lieu of NTL
Class D Stock. However, NTL currently does not intend to elect to issue NTL
Common Stock in lieu of the NTL Class D Stock allocated to the Birmingham Cable
Equity Interest.
If issued, the NTL Class D Stock will be a class of preferred stock of NTL
and will remain outstanding for an indeterminate period of time until the sale
of the Birmingham Cable Equity Interest. Following such sale, shares of NTL
Class D Stock, if issued, will be exchanged for NTL Common Stock on a
one-for-one basis. While outstanding, any shares of NTL Class D Stock will
generally have the same voting and dividend rights as shares of NTL Common
Stock, would be subject to redemption as described below, and would be expected
to be listed for trading on the NASDAQ.
Subject to the foregoing, assuming that each shareholder of Partners will
receive .3745 shares of NTL Common Stock for each Partners Common Share, it is
anticipated that approximately 18.8 million shares of NTL Common Stock will be
issued in connection with the Share Issuance, representing approximately 31.2%
of the shares of NTL Common Stock expected to be outstanding after giving effect
to the consummation of the Amalgamation. If NTL Class D Stock is issued as part
of the consideration, it is anticipated that approximately 3.2 million shares of
NTL Class D Stock will be issued in connection with the Amalgamation,
representing 100% of the shares of such stock expected to be outstanding after
giving effect to the consummation of the Amalgamation.
NTL does not presently have sufficient shares of preferred stock authorized
in the event the NTL Class D Stock is issued using the exchange ratio referred
to above. NTL is seeking the approval of the Shares Amendment to increase the
authorized shares of preferred stock in order to permit the issuance of the NTL
Class D Stock using such ratio. However, obtaining the necessary NTL stockholder
approval for such increase in authorized shares of preferred stock is not a
condition to the Amalgamation. If stockholder approval of the Shares Amendment
is not obtained, NTL and Partners will agree to any necessary adjustments, which
may include the issuance of depositary shares that replicate the terms of the
NTL Class D Stock described above or adjusting the number of shares of NTL Class
D Stock (with corresponding changes to the terms of such shares) to ensure that
shareholders of Partners receive the intended benefits and rights of such NTL
Class D Stock described above.
Based on the September 29, 1998 closing price of $44.875 per share of NTL
Common Stock as reported on the NASDAQ, the aggregate value of the consideration
in connection with the Amalgamation will be approximately $843.7 million. In
addition, assuming that each shareholder of Partners will receive .3745
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<PAGE> 27
shares of NTL Common Stock for each Partners Common Share, each shareholder will
receive the equivalent of (i) based on the September 29, 1998 composite closing
price of $44.875 per share of NTL Common Stock, as reported on the NASDAQ,
approximately $16.81 per Partners Common Share; (ii) based on the lowest
reported sales price of $35.500 per share of NTL Common Stock for the year
through September 29, 1998, as reported on the NASDAQ, approximately $13.29 per
Partners Common Share; and (iii) based on the highest reported sales price of
$65.000 per share of NTL Common Stock for the year through September 29, 1998,
as reported on the NASDAQ, approximately $24.34 per Partners Common Share.
Partners may terminate the Amalgamation Agreement at any time prior to the
Effective Time and the receipt of the Partners Shareholder Approval if, as of a
date not more than 10 business days prior to the Partners Special General
Meeting, the NTL Average Stock Price (as defined herein) determined as of such
date is less than $26.70 such that the purchase price per Partners Common Share
falls below $10.00, subject to NTL's right to adjust the Exchange Ratio such
that the shareholders of Partners would receive an amount of NTL Common Stock
having a value of $10.00 for each Partners Common Share. See "THE AMALGAMATION
AGREEMENT -- Termination." NTL has no such right to terminate the Amalgamation
Agreement in the event that the price of NTL Common Stock increased, in which
case the effective purchase price per Partners Common Share would increase.
Purchase Rights Relating to Partners' Interests in Birmingham Cable and
Cable London. Partners and TeleWest are parties to a Co-Ownership Agreement,
dated March 12, 1990, as amended and supplemented (the "Co-Ownership
Agreement"), which sets forth certain agreements and arrangements regarding
their respective investments in Birmingham Cable. Under the terms of the
Co-Ownership Agreement, neither Partners nor TeleWest (each, a "Co-Owner") may
sell, assign, transfer, pledge or otherwise dispose of, or encumber, directly or
indirectly (including by virtue of any change in control of such Co-Owner), all
or any part of any shares of capital stock of Birmingham Cable beneficially
owned by such Co-Owner, without first offering the other Co-Owner the right to
purchase the shares of Birmingham Cable beneficially owned by such Co-Owner.
Consummation of the Amalgamation will result in a change in control (as defined
in the Co-Ownership Agreement) of Partners and, accordingly, subject to the
terms and conditions of the Co-Ownership Agreement, TeleWest has the right to
acquire the Birmingham Cable Equity Interest. On February 6, 1998, Partners
notified TeleWest of its intent to Transfer (as defined herein) the Birmingham
Cable Equity Interest as a result of the proposed Amalgamation. This
notification triggered TeleWest's right to acquire the Birmingham Cable Equity
Interest, subject to the terms and conditions set forth in the Co-Ownership
Agreement. Pursuant to the Co-Ownership Agreement, upon determination of the
appraised value per share of Birmingham Cable, the shares of Birmingham Cable
beneficially owned by Partners are deemed to be offered to TeleWest for a fixed
cash price per share equal to the appraised value, and TeleWest has 30 days
after such determination to accept such offer. If TeleWest accepts, the cash
price is payable in full upon the consummation of the change of control of
Partners (i.e., at the Effective Time). If TeleWest does not accept the offer
within the allotted 30-day period, the shares of Birmingham Cable may be
Transferred pursuant to the change of control. See "THE AMALGAMATION -- Purchase
Rights Relating to Partners' Interests in Birmingham Cable and Cable
London -- Birmingham Cable."
On April 16, 1998, TeleWest announced that, subject to the valuations
determined for the Equity Interests and the availability of financing, it
proposed to exercise its rights to acquire the Equity Interests. As of May 26,
1998, the Co-Owners had not been able to agree upon the fair market value of the
Birmingham Cable Equity Interest or upon a disinterested independent qualified
investment banking firm to determine the fair market value thereof. On May 26,
1998, TeleWest requested that the Philadelphia office of the American
Arbitration Association select an appraiser to determine the fair market value
of the Birmingham Cable Equity Interest, and by letter dated June 8, 1998, the
Philadelphia office of the American Arbitration Association selected Merge
Master Company of Springfield, New Jersey to conduct such appraisal. Although
such firm had begun its appraisal process, on August 14, 1998, pursuant to the
TeleWest Agreement, NTL, Partners and TeleWest agreed upon a fair market value
of the Birmingham Cable Equity Interest, thereby effectively terminating such
appraisal process. See "THE TELEWEST AGREEMENT -- Sale of Birmingham Cable
Equity Interest -- Notification to Appraiser."
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<PAGE> 28
Pursuant to the TeleWest Agreement, TeleWest and Partners have passed a
special resolution to Cable London's articles of association which, for purposes
of the Amalgamation, effectively has eliminated the Purchase Right of TeleWest
with respect to Cable London. See "THE AMALGAMATION -- Purchase Rights Relating
to Partners' Interests in Birmingham Cable and Cable London -- Cable London" and
"THE TELEWEST AGREEMENT -- Other Actions with Respect to Cable London." The
TeleWest Agreement generally provides that, at any time during the period of
approximately six to nine months following the Closing Date of the Amalgamation,
Partners will either sell the Cable London Equity Interest to TeleWest or
purchase TeleWest's 50% ownership interest in Cable London. See "RISK
FACTORS -- Risks to NTL of the Uncertainty of the Outcome of the Cable London
'Shoot-out"' and "THE TELEWEST AGREEMENT -- Cable London
"Shoot-out" -- Procedure." The consideration to be received by shareholders of
Partners in the Amalgamation will be unaffected by the outcome of either the
sale of the Cable London Equity Interest or the purchase of TeleWest's interest
in Cable London.
Cancellation of Shares. Upon consummation of the Amalgamation, each
outstanding Partners Common Share, other than shares held by NTL, any subsidiary
of NTL or any subsidiary of Partners and Partners Common Shares held by
shareholders, if any, who properly exercise their dissenters' rights under
Bermuda law, will be cancelled in consideration for the receipt of the
Amalgamation consideration. See "THE AMALGAMATION AGREEMENT -- Cancellation of
Shares."
No Fractional Shares. No fractional shares of NTL Common Stock or NTL
Class D Stock will be issued in the Amalgamation. Holders of Partners Common
Shares will be paid cash in lieu of such fractional shares. See "THE
AMALGAMATION AGREEMENT -- No Fractional Shares."
Recommendation of the NTL Board. The NTL Board has unanimously determined
that the Amalgamation and the Share Issuance are in the best interests of NTL
and its stockholders and has approved the Amalgamation Agreement and the Shares
Amendment. THE NTL BOARD UNANIMOUSLY RECOMMENDS THAT THE STOCKHOLDERS OF NTL
VOTE IN FAVOR OF THE SHARE ISSUANCE AND THE SHARES AMENDMENT AT THE NTL SPECIAL
MEETING. The NTL Board's recommendation is based upon a number of factors
described in this Joint Proxy Statement/Prospectus. See "THE
AMALGAMATION -- NTL's Reasons for the Amalgamation; Recommendation of the NTL
Board."
Opinion of NTL's Financial Advisor. Donaldson, Lufkin & Jenrette
Securities Corporation ("DLJ") has acted as financial advisor to NTL in
connection with the Amalgamation and has delivered its written opinion, dated
February 3, 1998 (the "DLJ Opinion"), to the NTL Board to the effect that, as of
such date, and based upon and subject to the assumptions, limitations and
qualifications set forth in such opinion, the Exchange Ratio was fair to NTL
from a financial point of view. As discussed with the NTL Board, at the time of
the rendering of the DLJ Opinion, DLJ assumed that the Exchange Ratio would be
.3745 and that the Purchase Rights relating to Birmingham Cable and Cable London
would not be Exercised (as defined under "THE AMALGAMATION
AGREEMENT -- Cancellation of Shares"). The full text of the DLJ Opinion, which
sets forth a description of the procedures followed, assumptions made, matters
considered and limitations on the review undertaken in connection with such
opinion, is attached hereto as Annex D and should be read carefully in its
entirety. The DLJ Opinion was prepared for the NTL Board and addresses only the
fairness of the Exchange Ratio to NTL from a financial point of view, does not
address any other aspect of the Amalgamation or any related matters and does not
constitute a recommendation to any stockholder as to how such stockholder should
vote at the NTL Special Meeting. See "THE AMALGAMATION -- Opinion of NTL's
Financial Advisor."
Recommendation of the Partners Board. The Partners Board has unanimously
determined that the Amalgamation is in the best interests of Partners and its
shareholders and has approved the Amalgamation Agreement. THE PARTNERS BOARD
RECOMMENDS THAT THE SHAREHOLDERS OF PARTNERS VOTE IN FAVOR OF APPROVAL OF THE
AMALGAMATION AT THE PARTNERS SPECIAL GENERAL MEETING. The Partners Board's
recommendation is based upon a number of factors described in this Joint Proxy
Statement/Prospectus. See "THE AMALGAMATION -- Partners' Reasons for the
Amalgamation; Recommendation of the Partners Board."
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<PAGE> 29
Opinion of Partners' Financial Advisor. HSBC Investment Bank plc ("HSBC")
has acted as financial advisor to Partners in connection with the Amalgamation.
On February 4, 1998, at a meeting of the Partners Board, HSBC delivered its oral
opinion to the Partners Board to the effect that, as of such date, the
consideration to be paid in connection with the Amalgamation to holders of Class
A Common Shares (other than NTL and its affiliates) is fair from a financial
point of view to such holders, subject to the limitations described in the
written opinion of HSBC, dated February 4, 1998 (the "HSBC Opinion"), which
confirmed the oral opinion of HSBC. In rendering such opinion, HSBC has assumed
that, in the event that the Purchase Rights relating to Cable London and/or
Birmingham Cable have not been Resolved as of the Determination Time, (i) the
net proceeds per Class A Common Share ultimately received by a shareholder of
Partners upon exercise of such Purchase Right(s) will not be materially
different from the respective proportions of the consideration set forth in the
Amalgamation Agreement and (ii) if the net proceeds per Class A Common Share are
paid in NTL Common Stock, the market value of the NTL Common Stock paid as
consideration to shareholders of Partners will be equal to such net proceeds. In
addition, if as of the Determination Time, the Purchase Right relating to
Birmingham Cable remains Unresolved, HSBC has assumed that any NTL Class D Stock
issued to a shareholder of Partners will be redeemed by NTL in accordance with
the terms thereof. The full text of the HSBC Opinion, which sets forth a
description of the procedures followed, assumptions made, matters considered and
limitations on the review undertaken in connection with such opinion, is
attached hereto as Annex E and should be read carefully in its entirety. The
HSBC Opinion is directed to the Partners Board and relates only to the fairness
from a financial point of view of the consideration to be paid to holders of
Class A Common Shares (other than NTL and its affiliates) in the Amalgamation.
The HSBC Opinion does not address any other aspect of the Amalgamation or any
related matters and does not constitute a recommendation to any shareholder as
to how such shareholder should vote at the Partners Special General Meeting. See
"THE AMALGAMATION -- Opinion of Partners' Financial Advisor."
Directors and Officers. The Amalgamation Agreement provides that the
directors and officers (and resident representative, if any) of Sub at the
Effective Time will, from and after the Effective Time, be the directors and
officers (and resident representative, if any), respectively, of the Amalgamated
Company until their successors have been duly elected or appointed or qualified
or until their earlier death, resignation or removal in accordance with the
Companies Act and the bye-laws of the Amalgamated Company. See "THE
AMALGAMATION -- Directors and Officers."
Accounting Treatment. The Amalgamation will be accounted for by NTL under
the purchase method of accounting in accordance with Accounting Principles Board
Opinion No. 16, "Business Combinations," as amended. Under this method of
accounting, the purchase price will be allocated to assets acquired and
liabilities assumed based on their estimated fair values. See "THE
AMALGAMATION -- Accounting Treatment."
Conditions Precedent to the Amalgamation. The obligations of Partners, Sub
and NTL to effect the Amalgamation are subject, among other things, to the
satisfaction or waiver on or prior to the Closing Date of certain conditions,
including without limitation, (i) the obtaining of the Partners Shareholder
Approval and the NTL Stockholder Approval; (ii) the obtaining of the consent of
the Bermuda Minister of Finance (the "Minister") to the Amalgamation; (iii) the
obtaining of the Required British Approvals (as defined herein); (iv) the
obtaining of all other governmental and regulatory approvals required to be
obtained by Partners, NTL or any of their subsidiaries, except where the failure
to obtain such approvals is not reasonably expected to have a material adverse
effect (as defined in the Amalgamation Agreement) on the Amalgamated Company and
its prospective subsidiaries, taken as a whole, or which will not result in a
material violation of any laws; (v) the absence of any Restraint (as defined
herein) in effect which prevents the consummation of the Amalgamation or which
otherwise is reasonably likely to have a material adverse effect on Partners or
NTL; (vi) the effectiveness of the Registration Statement and the absence of any
stop order or proceeding seeking a stop order suspending such effectiveness;
(vii) the quotation on the NASDAQ, subject only to official notice of issuance,
of the shares of NTL Common Stock constituting the Share Issuance and the shares
of NTL Common Stock issuable upon exercise of the Amalgamation Adjusted Options
(as defined herein); and (viii) the obtaining of all required consents (the
"Required Consents") from certain third
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<PAGE> 30
parties, which include the consent of the holders of a majority amount of
Partners' 11.20% Senior Discount Debentures Due 2007 (the "11.20% Debentures")
and the consent or effective waiver of the holders of a majority amount of NTL's
12 3/4% Senior Deferred Coupon Notes Due 2005 (the "12 3/4% Notes"), NTL's
11 1/2% Senior Deferred Coupon Notes Due 2006 (the "11 1/2% Notes") and NTL's
10% Series B Senior Notes Due 2007 (the "10% Notes"). See "THE
AMALGAMATION -- The Debt Consents."
The obligation of NTL to effect the Amalgamation is also subject to, among
other things, the satisfaction or waiver of the following conditions: (i) the
representations and warranties of Partners set forth in the Amalgamation
Agreement being true and correct both when made and at and as of the Closing
Date, as if made at and as of such time (except to the extent expressly made as
of an earlier date, in which case as of such date), except where the failure of
such representations and warranties to be so true and correct (without giving
effect to any limitation as to "materiality" or "material adverse effect" set
forth therein) does not have, and is not likely to have, individually or in the
aggregate, a material adverse effect on NTL or Partners; (ii) Partners having
performed in all material respects all obligations required by the Amalgamation
Agreement to be performed by it at or prior to the Closing Date; (iii) there
having not occurred, as of the Closing Date, any material adverse change (as
defined in the Amalgamation Agreement) relating to Partners from the date of the
Amalgamation Agreement; (iv) each of Comcast and Warburg, Pincus having agreed
to a "lock-up" agreement with NTL preventing them from selling, transferring or
disposing of any interest in the consideration received by them in the
Amalgamation for a period of 150 days after the Closing Date; and (v) the number
of Dissenting Shares (as defined herein) having not been more than 5% of the
total issued and outstanding Class A Common Shares.
The obligation of Partners to effect the Amalgamation is also subject to
the satisfaction or waiver of the following conditions: (i) the representations
and warranties of NTL set forth in the Amalgamation Agreement being true and
correct both when made and at and as of the Closing Date, as if made at and as
of such time (except to the extent expressly made as of an earlier date, in
which case as of such date), except where the failure of such representations
and warranties to be so true and correct (without giving effect to any
limitation as to "materiality" or "material adverse effect" set forth therein)
does not have, and is not likely to have, individually or in the aggregate, a
material adverse effect on NTL; (ii) NTL having performed in all material
respects all obligations required by the Amalgamation Agreement to be performed
by it at or prior to the Closing Date; (iii) there having not occurred, as of
the Closing Date, any material adverse change relating to NTL from the date of
the Amalgamation Agreement; and (iv) NTL having entered into a registration
rights agreement (the "Registration Rights Agreement") with Comcast and Warburg,
Pincus. See "THE AMALGAMATION AGREEMENT -- Conditions Precedent to the
Amalgamation."
No Solicitation. Pursuant to the Amalgamation Agreement, Partners has
agreed that, prior to the Effective Time, it will not, nor will it permit any of
its subsidiaries to, nor will it authorize or permit any of its directors,
officers or employees or any investment banker, financial advisor, attorney,
accountant or other representative retained by it or any of its subsidiaries to,
directly or indirectly through another person, (i) solicit, initiate or
encourage or take any other action designed to facilitate, any inquiries or the
making of any proposal which constitutes any Partners Takeover Proposal (as
defined herein) or (ii) participate in any discussions or negotiations regarding
any Partners Takeover Proposal or furnish any nonpublic information relating to
Partners and its subsidiaries to any person that may be considering making, or
has made, a Partners Takeover Proposal, provided that, Partners may, in response
to an unsolicited written proposal from a third party regarding a Partners
Takeover Proposal, engage in the activities specified in clause (ii) if (A) the
Partners Board has determined in good faith, after obtaining and taking into
account the advice of outside counsel, that such action is required for the
Partners Board to comply with its fiduciary duties under applicable law and (B)
Partners has received from such third party an executed confidentiality
agreement with terms not materially less favorable to NTL than those contained
in the Confidentiality Agreement, dated March 10, 1997, between NTL and Partners
(the "Confidentiality Agreement"). See "THE AMALGAMATION AGREEMENT -- No
Solicitation."
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Termination of the Amalgamation Agreement; Fees and Expenses. The
Amalgamation Agreement may be terminated at any time prior to the Effective Time
and, subject to certain exceptions, whether before or after the Partners
Shareholder Approval or the NTL Stockholder Approval:
(i) by mutual written consent of NTL and Partners;
(ii) by either NTL or Partners if (A) the Amalgamation has not been
consummated by November 4, 1998 (the "End Date"), provided that pursuant to the
Amalgamation Agreement such date may be extended under certain circumstances,
(B) the Partners Shareholder Approval has not been obtained, (C) the NTL
Stockholder Approval has not been obtained or (D) any Restraint which prevents
the consummation of the Amalgamation or which otherwise is reasonably likely to
have a material adverse effect on Partners or NTL is in effect and has become
final and nonappealable;
(iii) by either NTL or Partners if the other party has breached or failed
to perform in any material respect any of its representations, warranties,
covenants or other agreements contained in the Amalgamation Agreement, which
breach or failure to perform would give rise to the failure of a condition set
forth in the Amalgamation Agreement, and such condition is incapable of being
satisfied by the End Date; and
(iv) by Partners, prior to receipt of the Partners Shareholder Approval,
if, (A) as of a date not more than ten business days before the Partners Special
General Meeting, the average of the high and low sales prices of NTL Common
Stock on the NASDAQ (the "NTL Average Stock Price") determined as of such date
is less than $26.70, (B) notice has been provided to NTL under the Amalgamation
Agreement of an intent to terminate and (C) within five business days of receipt
of such notice, NTL has not offered (by notice to Partners) to increase the
Exchange Ratio such that the value of the consideration to be received in the
Amalgamation shall be $10.00 per Partners Common Share or more at such time.
See "THE AMALGAMATION AGREEMENT -- Termination." The Amalgamation Agreement
provides that all fees and expenses incurred in connection with the
Amalgamation, the Amalgamation Agreement and the transactions contemplated by
the Amalgamation Agreement will be paid by the party incurring such fees or
expenses, whether or not the Amalgamation is consummated. See "THE AMALGAMATION
AGREEMENT -- Fees and Expenses."
Governmental and Regulatory Approvals. NTL and Partners are aware of no
U.S. federal, state or local government permits, licenses or regulatory
approvals material to their respective businesses that must be obtained for
consummation of the Amalgamation, other than compliance with federal and state
securities laws. The Amalgamation is not subject to the pre-merger notification
provisions of the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as
amended (the "HSR Act").
The consummation of the Amalgamation is conditioned upon certain regulatory
approvals, including approval by the Minister to the Amalgamation and the
Required British Approvals.
Under the Amalgamation Agreement, NTL and Partners have agreed to use best
efforts to obtain all necessary actions or nonactions, waivers, consents and
approvals from governmental entities and to make all necessary registrations and
filings with any governmental entity in order to consummate the Amalgamation.
While NTL and Partners believe that they will receive the requisite regulatory
approvals for the Amalgamation, there can be no assurance as to the timing of
such approvals or the ability of the companies to obtain such approvals on
satisfactory terms or otherwise. It is a condition to the parties' respective
obligations to consummate the Amalgamation that all necessary consents,
approvals and actions of, filings with and notices to any governmental entity be
obtained. See "THE AMALGAMATION -- Governmental and Regulatory Approvals."
Material Tax Consequences of the Amalgamation. Davis Polk and Wardwell,
U.S. counsel to Partners, has opined as to the material tax consequences of the
Amalgamation. In the opinion of Davis Polk and Wardwell, regardless of whether
non-dissenting U.S. Holders of Partners Common Shares receive solely NTL Common
Stock or NTL Common Stock and NTL Class D Stock in consideration for the
cancellation of their Partners Common Shares, gain or loss will be recognized on
the exchange only with respect to cash received in
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lieu of fractional shares. For a further discussion of the tax consequences of
the Amalgamation, see "THE AMALGAMATION -- Material Tax Consequences of the
Amalgamation."
Dissenters' Rights. Under the Companies Act, any holder of Partners Common
Shares who does not vote in favor of the Amalgamation and who is not satisfied
that he has been offered the fair value of his shares may within one month of
the giving of the notice of the Partners Special General Meeting apply to the
Supreme Court of Bermuda (the "Court") to appraise the fair value of his shares
(such a shareholder, a "Dissenting Shareholder," and such shares, "Dissenting
Shares"). There is no right of appeal from an appraisal by the Court. Such
holder will receive the value appraised by the Court only if the Amalgamation is
completed. A summary of the relevant provisions of the Companies Act is
contained herein under the heading "THE AMALGAMATION -- Rights of Dissenting
Shareholders."
Risk Factors. For a description of certain significant considerations in
connection with the Amalgamation and related matters described in this Joint
Proxy Statement/Prospectus, see "RISK FACTORS."
THE TELEWEST AGREEMENT
Sale of the Birmingham Cable Equity Interest. Subject to the terms and
conditions of the TeleWest Agreement, Partners has agreed to sell, and TeleWest
has agreed to purchase, the Birmingham Cable Equity Interest for L125 million in
cash, as well as Partners' right to, and interest in, the Birmingham Cable Loans
and Fees (as defined herein) for L5 million in cash (or L2.5 million if the
Amalgamation does not occur on or prior to the completion of the obligations
required for such sale and purchase (the "Birmingham Cable Completion") with a
further L2.5 million to be paid upon the Closing of the Amalgamation). The
Birmingham Cable Completion will occur immediately prior to the Closing of the
Amalgamation or, if the Amalgamation occurs before October 16, 1998, on October
16, 1998, provided, that if the Closing of the Amalgamation has not taken place
by December 31, 1998, the Birmingham Cable Completion will occur on December 31,
1998. See "THE TELEWEST AGREEMENT -- Sale of the Birmingham Cable Equity
Interest."
Cable London "Shoot-out." The TeleWest Agreement provides that at any time
during the Shoot-out Period (as defined herein), Partners may give notice, and
not later than the end of the Shoot-out Period Partners shall give notice (the
"Offer Notice"), to TeleWest offering to sell to TeleWest the Cable London
Equity Interest and all of the rights and interests of Partners and its
subsidiaries in the CUKCP Cable London Loans and Fees (as defined herein) for
the cash sum (the "Sum") specified in the Offer Notice on the terms and
conditions set forth in the TeleWest Agreement (the "Offer"). If Partners fails
to give the Offer Notice prior to the end of the Shoot-out Period, then Partners
will be deemed to have delivered an Offer Notice for a Sum equal to L100
million. For purposes of the TeleWest Agreement and this Joint Proxy Statement/
Prospectus, "Shoot-out Period" means the period commencing on the date which is
the earlier of (i) six months after (A) the Closing Date of the Amalgamation or
(B) if earlier, December 31, 1998, and (ii) the earlier of (A) the date on which
a public announcement is made of a firm intention to make a recommended offer
for the ordinary shares of TeleWest (other than those owned or contracted to be
acquired by the offeror or persons acting in concert with the offeror) or of a
merger between NTL and a third party where NTL is not the surviving entity
whether or not, in either case, subject to the satisfaction of any
pre-conditions, and (B) the completion of any such offer or merger whether or
not recommended, and ending at midnight on the date which is three months
thereafter (both dates inclusive).
Pursuant to the TeleWest Agreement, TeleWest will have 30 days (the
"Acceptance Period") in which to accept or decline the Offer by notice to
Partners. If TeleWest accepts the Offer, Partners will sell, and will procure
that its subsidiaries will sell, subject to and conditional upon the receipt or
waiver of certain third-party and regulatory approvals, to TeleWest, and
TeleWest will purchase from Partners or any of its subsidiaries, the Cable
London Equity Interest, as of the date of completion of the obligations required
for such sale and purchase (the "Cable London Completion"), as well as their
respective rights and interests in the CUKCP Cable London Loans and Fees, at the
Sum specified in the Offer Notice. If TeleWest declines the Offer or gives no
notice within the Acceptance Period, TeleWest will sell, and will procure that
its subsidiaries and MediaOne Cable Communications Limited ("MediaOne") will
sell, subject to and
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conditional upon the receipt or waiver of the required approvals, to Partners,
and Partners will purchase from TeleWest or any of its subsidiaries, all of the
shares in the capital of Cable London owned and to be owned, or in which
TeleWest has an interest, at the Cable London Completion, as well as the
respective rights and interests of TeleWest and its subsidiaries in the TeleWest
Cable London Loans and Fees (as defined herein), at the Sum specified in the
Offer Notice.
If, as referred to in the preceding paragraph, either TeleWest or Partners
(the "Purchaser") becomes obliged or agrees to purchase the shares in Cable
London which are owned by the other (the "Vendor"), the sale of such shares (the
"Cable London Sale Shares") will be completed on such date as the Purchaser may
specify upon at least 10 business days' prior notice to the Vendor. If the Cable
London Completion has not occurred within 90 days after the end of the
Acceptance Period (the "Long Stop Date"), the Purchaser will no longer be
entitled to purchase the Cable London Sale Shares and the relevant Cable London
Loans and Fees unless it elects, by prior written notice to the Vendor, to delay
the date of the Cable London Completion by a period of up to a further 90 days
from the Long Stop Date. If the Purchaser exercises such option, it shall pay to
the Vendor at the Cable London Completion an amount equal to 5% of the Sum for
every 30 days (or part thereof) by which the date for the Cable London
Completion is extended from the Long Stop Date up to a maximum of 90 days. If
the Cable London Sale Shares have not been purchased by the end of the
prescribed period, the Purchaser will no longer be entitled to purchase the
Cable London Sale Shares or the relevant Cable London Loan and Fees, and the
Vendor will then have the option (to be exercised and completed within 60 days)
to purchase the Cable London Sale Shares and the relevant Cable London Loan and
Fees from the Purchaser for an amount equal to 70% of the Sum. Such option will
be the only remedy of the Vendor for any failure by the Purchaser to acquire the
Cable London Sale Shares and the relevant Cable London Loans and Fees. See "THE
TELEWEST AGREEMENT -- Cable London "Shoot-out"."
CERTAIN AGREEMENTS RELATED TO THE AMALGAMATION
Voting Agreements. On February 4, 1998, each of Warburg, Pincus and
Comcast entered into a voting agreement (the "Voting Agreements") with NTL
pursuant to which, among other things, each has agreed that it will, and, in the
case of Comcast, that it will cause its subsidiaries to, vote in favor of the
Amalgamation Agreement. As of June 30, 1998, Warburg, Pincus, based on its
ownership of approximately 27.5% of the outstanding Class A Common Shares, is
entitled to cast approximately 6.2% of the total votes to be cast at the
Partners Special General Meeting, and Holdings, based on its ownership of 100%
of the Class B Common Shares, is entitled to cast approximately 77.6% of the
total votes to be cast at the Partners Special General Meeting. Accordingly, the
Partners Shareholder Approval is assured, notwithstanding the vote of any other
holders of Partners Common Shares. See "CERTAIN AGREEMENTS RELATED TO THE
AMALGAMATION -- Voting Agreements."
The Registration Rights Agreement. The Amalgamation Agreement requires
that, on or prior to the Closing Date, NTL will enter into the Registration
Rights Agreement with Comcast and Warburg, Pincus, pursuant to which NTL will be
obligated to register for resale the shares of NTL Common Stock issued to
Holdings and Warburg, Pincus as consideration in the Amalgamation. See "CERTAIN
AGREEMENTS RELATED TO THE AMALGAMATION -- The Registration Rights Agreement."
Lock-Up Agreements. The Amalgamation Agreement requires that, on or prior
to the Closing Date, each of Comcast and Warburg, Pincus enter into a "lock-up"
agreement with NTL preventing them from selling, transferring or disposing of
any interest in the consideration received by them in the Amalgamation for a
period of 150 days after the Closing Date. See "CERTAIN AGREEMENTS RELATED TO
THE AMALGAMATION -- Lock-Up Agreements."
STOCKHOLDERS' COMPARATIVE RIGHTS
The rights of shareholders of Partners are currently governed by the
Memorandum of Association of Partners (the "Partners Charter") and the Bye-laws
of Partners (the "Partners Bye-laws") and Bermuda corporate law. At the
Effective Time, shareholders of Partners will become stockholders of NTL and
their rights as stockholders will be governed by the NTL Restated Certificate
and the By-laws of NTL (the "NTL
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By-laws") and Delaware corporate law. See "COMPARISON OF THE RIGHTS OF
STOCKHOLDERS OF NTL AND SHAREHOLDERS OF PARTNERS."
PROPOSAL FOR SHARES AMENDMENT
At the NTL Special Meeting, stockholders of NTL will be asked to consider
and vote upon a proposal to approve the Shares Amendment which would amend the
NTL Restated Certificate to increase the maximum number of authorized shares of
NTL Common Stock from 100,000,000 to 400,000,000 shares and to increase the
maximum number of authorized shares of NTL Preferred Stock (as defined herein)
from 2,500,000 to 10,000,000 shares. See "PROPOSAL FOR SHARES AMENDMENT."
RECENT DEVELOPMENTS
On June 16, 1998, NTL entered into an acquisition agreement (the "Diamond
Agreement") with the shareholders of Diamond Cable Communications, plc
("Diamond"). Pursuant to the Diamond Agreement, on the closing date of the
Diamond transaction, NTL will transfer to each shareholder of Diamond one share
of NTL Common Stock for each four issued and outstanding ordinary shares, par
value 2.5p per share, and each deferred share, par value 25p per share, of
Diamond. However, the Diamond Agreement provides for adjustment of such
consideration as follows: (i) if the closing date occurs within four months of
the date of the Diamond Agreement, and the average sales price of the NTL Common
Stock, as calculated pursuant to the Diamond Agreement, is $52.00 or more, the
number of shares of NTL Common Stock to be transferred for each four ordinary
shares will be decreased such that the value of such consideration will not
exceed $52.00 (the "Maximum Average Stock Price"), and (ii) if the closing date
does not occur within such four-month period, the Maximum Average Stock price
will increase by $.50 on October 16, 1998, and on each monthly anniversary date
thereafter until the closing date. The Diamond Agreement provides that
approximately 15.2 million shares of NTL Common Stock will be issued in
connection with the Diamond transaction. Following the Amalgamation and prior to
the Diamond transaction, shareholders of Partners will have an ownership
interest in NTL of approximately 31%, and, in the event that the Diamond
transaction is consummated, shareholders of Partners will have an ownership
interest in NTL of approximately 25%. The consummation of the Diamond
transaction is subject to, among other things, the approval by the stockholders
of NTL of the issuance of shares of NTL Common Stock in accordance with the
terms of the Diamond Agreement. See "RECENT DEVELOPMENTS -- Diamond."
Pursuant to an acquisition agreement (the "ComTel Agreement"), dated June
16, 1998, with Vision Networks III B.V., a wholly-owned subsidiary of Royal PTT
Nederland NV (KPN), NTL acquired the operations of ComTel Limited and
Telecential Communications (collectively, "ComTel") for a total of approximately
L550 million in two stages. In the first stage, NTL acquired certain of the
ComTel properties for L275 million in cash. In the second stage, which was
completed on September 22, 1998, NTL acquired the remaining ComTel properties
for L200 million in cash and L75 million in NTL Preferred Stock. Such NTL
Preferred Stock has a pay-in-kind coupon of 9.9%, will mature in 2008 and is
redeemable within 15 months for NTL Common Stock valued at market, new NTL
convertible preferred securities or cash. The consummation of the ComTel
acquisition did not require a vote of the stockholders of NTL. See "RECENT
DEVELOPMENTS -- ComTel."
On June 10, 1998, NTL provided to the trustee of the 10 7/8% Notes a notice
that NTL will redeem such Notes on October 15, 1998. Pending such redemption,
NTL has used cash on hand to deposit in trust with such trustee an amount equal
to approximately $218.6 million (103.107% of accreted value) to pay the
redemption price (including principal) on such 10 7/8% Notes, thereby defeasing
certain of its obligations under the indenture governing such 10 7/8% Notes. In
July 1998, using funds so deposited with the trustee, NTL purchased from one
holder for $65 million a portion of the 10 7/8% Notes with an accreted value of
$62.2 million. See "RECENT DEVELOPMENTS -- Redemption of 10 7/8% Notes."
26
<PAGE> 35
SUMMARY HISTORICAL FINANCIAL DATA OF NTL
The following table sets forth summary financial data for the six months
ended June 30, 1998 and 1997 and for each of the five years in the period ended
December 31, 1997. This information has been derived from, and should be read in
conjunction with, the consolidated financial statements and notes thereto
included or incorporated by reference herein.
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30, YEAR ENDED DECEMBER 31,
--------------------- ------------------------------------------------------
1998 1997 1997 1996(1) 1995 1994 1993
--------- --------- --------- --------- -------- -------- --------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Operating revenues........... $ 302,106 $ 221,639 $ 491,755 $ 228,343 $ 33,741 $ 13,745 $ 10,078
(Loss) before extraordinary
item...................... (197,974) (173,435) (328,557) (254,454) (90,785) (29,573) (11,076)
Net (loss)................... (197,974) (173,435) (333,057) (254,454) (90,785) (29,573) (11,076)
Basic and diluted net (loss)
per common share:
(Loss) before extraordinary
item(2)................... (5.79) (5.56) (10.60) (8.20) (3.01) (.98) (.83)
Net (loss) per common
share(2).................. (5.79) (5.56) (10.74) (8.20) (3.01) (.98) (.83)
Weighted average number of
common shares used in the
computation of basic and
diluted net loss per
common share(2)........... 35,448 32,091 32,117 31,041 30,190 30,175 13,327
Ratio of earnings to fixed
charges(3)................ -- -- -- -- -- -- --
</TABLE>
<TABLE>
<CAPTION>
AS OF AS OF DECEMBER 31,
JUNE 30, ----------------------------------------------------------
1998 1997 1996(1) 1995 1994 1993
---------- ---------- ---------- ---------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Working capital (deficiency)........ $ 248,713 $ (51,916) $ 242,102 $ 76,128 $251,544 $410,421
Fixed assets, net................... 2,279,636 1,756,985 1,459,528 639,674 191,725 36,422
Total assets........................ 4,163,828 2,421,639 2,454,611 1,010,669 664,366 594,976
Long-term debt...................... 3,020,012 2,015,057 1,732,168 513,026 143,488 130,553
Senior Redeemable Exchangeable
Preferred Stock.................. 116,086 108,534 -- -- -- --
Shareholders' equity (deficiency)... (66,519) (61,668) 328,114 339,257 436,534 452,402
</TABLE>
- ---------------
(1) In May 1996, NTL purchased NTL Group Limited for an aggregate purchase
price of approximately $439,000,000, including goodwill of approximately
$263,000,000. The net assets and results of operations of NTL Group Limited
are included in the consolidated financial statements from the date of the
acquisition.
(2) After giving retroactive effect to the four-for-three stock split by way of
stock dividend paid in August 1995. NTL did not declare or pay any cash
dividends during the years indicated.
(3) Fixed charges consist of interest expense, including capitalized interest,
amortization of fees related to debt financing and rent expense deemed to
be interest. The fixed charges coverage deficiency amounted to $107.2
million, $355.4 million, $257.1 million, $105.4 million, $31.8 million and
$10.4 million for the six months ended June 30, 1998 and for the years
ended December 31, 1997, 1996, 1995, 1994 and 1993, respectively. For the
six months ended June 30, 1998 and for the year ended December 31, 1997,
NTL's earnings were insufficient to cover combined fixed charges and
preferred stock dividends by $114.6 million and $367.4 million.
27
<PAGE> 36
SUMMARY HISTORICAL FINANCIAL DATA OF PARTNERS,
BIRMINGHAM CABLE, CABLE LONDON AND CAMBRIDGE CABLE
The following table sets forth summary historical consolidated financial
data for each of Partners, Birmingham Cable and Cable London for the six months
ended June 30, 1998 and 1997 and for each of the five years in the period ended
December 31, 1997. Such data have been derived from, and should be read in
conjunction with, the consolidated financial statements for each of Partners,
Birmingham Cable and Cable London and notes thereto included or incorporated by
reference herein. Prior to March 31, 1996, Partners accounted for its interests
in Cambridge Cable under the equity method. Beginning on March 31, 1996, the
financial position and results of operations of Cambridge Cable were
consolidated with those of Partners.
Partners
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30, YEAR ENDED DECEMBER 31,
--------------------- --------------------------------------------------------
1998 1997 1997 1996 1995 1994 1993
--------- --------- --------- --------- --------- --------- --------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Service income................ L 36,027 L 25,205 L 55,603 L 31,358 L 1,530 L -- L --
Consulting fee income......... 561 496 1,059 1,070 1,313 1,356 1,248
Operating loss................ (8,524) (12,907) (22,604) (24,553) (11,809) (2,824) (1,124)
Equity in net losses of
affiliates.................. (11,185) (10,314) (21,359) (18,432) (23,677) (16,289) (13,143)
Net loss...................... (31,777) (33,648) (67,356) (40,575) (28,962) (16,266) (13,183)
Net loss per share(1)......... (0.63) (0.67) (1.34) (.84) (0.70) (0.54) (0.50)
AS OF AS OF DECEMBER 31,
JUNE 30, --------------------------------------------------------
1998 1997 1996 1995 1994 1993
--------- --------- --------- --------- --------- --------
BALANCE SHEET DATA:
Total assets.................. L 513,521 L 445,854 L 484,370 L 431,889 L 254,739 L 95,239
Noncurrent liabilities........ 344,985 247,970 216,027 207,978 9,106
Contributed capital........... 359,049 359,049 359,049 287,810 287,863 127,162
Accumulated deficit........... (219,150) (187,373) (120,017) (79,442) (50,480) (34,214)
</TABLE>
Birmingham Cable
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30, YEAR ENDED DECEMBER 31,
--------------------- ------------------------------------------------------
1998 1997 1997 1996 1995 1994 1993
--------- --------- --------- --------- -------- -------- --------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Service income................. L 37,975 L 31,800 L 67,166 L 52,472 L 39,004 L 27,505 L 18,345
Operating loss................. (5,043) (8,880) (15,825) (11,694) (11,345) (9,674) (7,864)
Net loss....................... (19,078) (15,364) (30,826) (20,378) (14,279) (9,293) (8,967)
AS OF AS OF DECEMBER 31,
JUNE 30, ------------------------------------------------------
1998 1997 1996 1995 1994 1993
--------- --------- --------- -------- -------- --------
BALANCE SHEET DATA:
Total assets................. L 257,306 L 260,035 L 325,646 L331,589 L160,044 L119,018
Noncurrent liabilities....... 182,306 165,413 188,863 185,864 6,222 4,989
</TABLE>
28
<PAGE> 37
Cable London
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30, YEAR ENDED DECEMBER 31,
-------------------- ----------------------------------------------------
1998 1997 1997 1996 1995 1994 1993
--------- -------- -------- -------- -------- -------- --------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS
DATA:
Service income.............. L 32,178 L 24,693 L 52,816 L 40,091 L 30,277 L 21,830 L 14,403
Operating loss.............. (4,005) (6,491) (12,711) (13,906) (13,808) (10,524) (9,863)
Net loss.................... (11,530) (11,879) (25,168) (21,241) (17,675) (11,354) (11,304)
AS OF AS OF DECEMBER 31,
JUNE 30, ----------------------------------------------------
1998 1997 1996 1995 1994 1993
-------- -------- -------- -------- -------- --------
BALANCE SHEET DATA:
Total assets.............. L200,212 L195,693 L170,123 L136,450 L104,994 L 85,648
Noncurrent liabilities.... 189,958 173,038 60,831 73,772 27,659 21,118
</TABLE>
Cambridge Cable(2)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------------------------------
1997 1996 1995 1994 1993
-------- -------- -------- -------- --------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS
DATA:
Service income............. L 6,401 L 20,585 L 12,064 L 3,571
Operating loss............. (2,133) (12,838) (8,807) (7,437)
Net loss................... (4,419) (20,398) (12,223) (7,930)
</TABLE>
<TABLE>
<CAPTION>
AS OF DECEMBER 31,
----------------------------------------------------
1997 1996 1995 1994 1993
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Total assets............. L118,885 L 99,275 L 56,799
Noncurrent liabilities... 109,662 74,916 22,163
</TABLE>
- ---------------
(1) For 1993 and 1994, net loss per share has been presented on a pro forma
basis as if the restructuring of Partners' equity in September 1994 and the
conversion of the redeemable convertible preference shares issued in
connection with the acquisition of Teesside were outstanding for all periods
presented.
(2) Prior to March 31, 1996, Partners owned 50% of Cambridge Cable and accounted
for this interest under the equity method. As of March 31, 1996, Partners
owned 100% of Cambridge Cable and consolidated the financial position and
results of operations of Cambridge Cable beginning on March 31, 1996. The
1996 results of operations information for Cambridge Cable is for the three
months ended March 31, 1996.
29
<PAGE> 38
SUMMARY PRO FORMA FINANCIAL DATA
In addition to the Amalgamation, on June 16, 1998, NTL agreed to acquire
substantially all of the operations owned by ComTel UK Finance B.V. ("ComTel").
The acquisition of Partners requires stockholder approvals, as described in
this Joint Proxy Statement/Prospectus. Therefore, the following pro forma
financial data gives effect to such acquisitions as if the ComTel and Partners
acquisitions occur without giving effect to the Diamond acquisition.
The following table sets forth pro forma financial data for the six months
ended June 30, 1998 and for the year ended December 31, 1997, after giving
effect to the acquisitions. Partners currently owns a 27.5% interest in
Birmingham Cable and a 50% interest in Cable London. This information should be
read in conjunction with the pro forma condensed combined financial data
included herein. See "UNAUDITED PRO FORMA FINANCIAL DATA."
<TABLE>
<CAPTION>
SIX MONTHS ENDED YEAR ENDED
JUNE 30, 1998 DECEMBER 31, 1997
---------------- -----------------
<S> <C> <C>
INCOME STATEMENT DATA:
Operating revenues........................................ $ 433,704 $ 667,534
Net (loss)................................................ (361,424) (615,508)
BASIC AND DILUTED NET (LOSS) PER COMMON SHARE:
Net (loss) per common share............................... (6.93) (12.58)
Weighted average number of common shares used in the
computation of basic and diluted net loss per common
share.................................................. 54,212 50,881
</TABLE>
<TABLE>
<CAPTION>
AS OF
JUNE 30, 1998
--------------
<S> <C>
BALANCE SHEET DATA:
Working capital........................................... $ 317,564
Fixed assets, net......................................... 3,402,057
Total assets.............................................. 6,075,193
Shareholders' equity...................................... 658,932
</TABLE>
30
<PAGE> 39
SUMMARY PRO FORMA PER SHARE AND OTHER DATA
The following table presents the net loss and book value per share of NTL
and Partners, on a pro forma basis for NTL and an equivalent pro forma basis for
Partners. Pro forma data for NTL was derived by combining the historical
financial statements of NTL, ComTel and Partners' historical financial
information, giving effect to the acquisitions using the purchase method of
accounting. Equivalent pro forma information for Partners is presented on an
equivalent share basis, which reflects NTL's pro forma amounts multiplied by an
assumed exchange ratio of shares of NTL Common Stock for each Partners Common
Share, based on the closing price of NTL Common Stock on February 4, 1998 of
$32.00 per share. See the footnotes to "UNAUDITED PRO FORMA FINANCIAL DATA" for
assumptions used.
Pro forma income statement-related per share amounts have been prepared as
if the Amalgamation had occurred at the beginning of the earliest period
presented. Pro forma book value per share amounts give effect to the
Amalgamation as though it had been consummated on the date indicated.
The information set forth below should be read in conjunction with the
"UNAUDITED PRO FORMA FINANCIAL DATA" included herein and the respective audited
consolidated financial statements and notes thereto of NTL and Partners which
are also included herein.
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
JUNE 30, YEARS ENDED DECEMBER 31,
---------- ---------------------------
1998 1997 1996 1995
---------- ------- ------ ------
<S> <C> <C> <C> <C>
HISTORICAL:
NTL COMMON STOCK
Net loss per share
Historical........................................ $(5.79) $(10.74) $(8.20) $(3.01)
Book value per share (at end of period)
Historical........................................ (1.61) (1.91) 10.23 11.24
PARTNERS COMMON SHARES
Net loss per share
Historical........................................ (1.05) (2.20) (1.31) (1.11)
Book value per share (at end of period)
Historical........................................ 4.65 5.65 8.48 7.83
PRO FORMA COMTEL AND PARTNERS:
NTL COMMON STOCK
Net loss per share
Pro forma......................................... (6.93) (12.58)
Book value per share (at end of period)
Pro forma......................................... 10.97
PARTNERS COMMON SHARES
Net loss per share
Equivalent Pro forma.............................. (2.60) (4.71)
Book value per share (at end of period)
Equivalent Pro forma.............................. 4.11
</TABLE>
31
<PAGE> 40
RISK FACTORS
In considering whether to approve the Share Issuance or to approve the
Amalgamation, as the case may be, the stockholders of NTL and the shareholders
of Partners should consider, among other things, the following matters, as
applicable.
RISKS TO NTL OF THE UNCERTAINTY OF THE OUTCOME OF THE CABLE LONDON "SHOOT-OUT"
Under the terms of the TeleWest Agreement, until it is determined whether
or not TeleWest opts to purchase the Cable London Equity Interest for the cash
Sum specified in the Offer Notice from Partners, the nature of the assets that
will ultimately be owned by NTL following the Cable London Completion will
remain partially uncertain. If, subject to the terms and conditions of the
TeleWest Agreement, TeleWest accepts the Offer by Partners to purchase the Cable
London Equity Interest and Partners sells such interest to TeleWest, following
the Cable London Completion, NTL would ultimately own Partners' interests in
Cambridge Cable and the two companies holding the franchises for Darlington and
Teesside, England, but neither Partners' 27.5% interest in Birmingham Cable nor
Partners' 50% interest in Cable London. Conversely, NTL could ultimately own
Partners' interests in Cambridge Cable, the two companies holding the franchises
for Darlington and Teesside, England, and a 100% ownership interest in Cable
London as a result of the TeleWest Agreement.
FIXED RATIOS DESPITE CHANGE IN RELATIVE STOCK PRICES
The Exchange Ratio and the related ratios representing the consideration
allocable to the Equity Interests and the remainder of Partners' business are
expressed in the Amalgamation Agreement as fixed ratios. Accordingly, the
Exchange Ratio and the related ratios representing the consideration allocable
to the Equity Interests and the remainder of Partners' business will not be
adjusted in the event of any increase or decrease in the price of either the NTL
Common Stock or the Class A Common Shares. However, Partners may terminate the
Amalgamation Agreement at any time prior to the Effective Time and the receipt
of the Partners Shareholder Approval if, as of a date not more than 10 business
days before the Partners Special General Meeting, the NTL Average Stock Price
determined as of such date is less than $26.70 such that the purchase price per
Partners Common Share falls below $10.00, subject to NTL's right to adjust the
Exchange Ratio such that the shareholders of Partners would receive an amount of
NTL Common Stock having a value of $10.00 for each Partners Common Share. NTL
has no such right to terminate the Amalgamation Agreement in the event that the
price of NTL Common Stock increases, in which case the effective purchase price
per Partners Common Share would increase. The price of NTL Common Stock at the
Effective Time will vary from its price at the date of this Joint Proxy
Statement/Prospectus and at the date of the NTL Special Meeting and the Partners
Special General Meeting. Such variations may be the result of changes in the
business, operations or prospects of NTL or Partners, market assessments of the
likelihood that the Amalgamation will be consummated and the timing thereof,
regulatory considerations, general market and economic conditions and other
factors. Because the Effective Time may occur at a date later than the NTL
Special Meeting and the Partners Special General Meeting, there can be no
assurance that the price of NTL Common Stock on the date of the NTL Special
Meeting and the Partners Special General Meeting will be indicative of its price
at the Effective Time. The Effective Time will occur as soon as practicable
following the NTL Special Meeting and the Partners Special General Meeting and
the satisfaction or waiver of the other conditions set forth in the Amalgamation
Agreement. Stockholders of NTL and shareholders of Partners are urged to obtain
current market quotations for the NTL Common Stock and the Class A Common
Shares. See "THE AMALGAMATION AGREEMENT -- Termination."
PARTNERS' INABILITY TO CONTROL CABLE LONDON
Partners has, for financial, operating and other reasons, invested in
Birmingham Cable and Cable London with strategic and financial partners.
Although Partners has been active in the management of Birmingham Cable and
Cable London, its minority voting power and/or the voting power or veto rights
of its partners has precluded Partners from affirmatively controlling Birmingham
Cable and Cable London and has required consent of the partners to cause
dividends or other distributions to be made. Moreover, during the Shoot-out
Period, Partners' partial interest precludes Partners from affirmatively
controlling Cable London.
32
<PAGE> 41
RIGHTS RELATING TO CONTROL OF PARTNERS BY COMCAST; VOTING AGREEMENTS
Partners' voting shares are divided into two classes with different voting
rights. Holders of Class A Common Shares are entitled to one vote per share
whereas holders of Class B Common Shares are entitled to ten votes per share.
Both classes vote together as a single class on all matters submitted to a vote
of shareholders, except when class voting is required by the Companies Act.
Comcast indirectly owns all of the Class B Common Shares. Class B Common Shares
may be converted, at the option of the holder, into Class A Common Shares on a
one-for-one basis. Comcast is not required to convert its Class B Common Shares
at any time including in connection with a sale to an unrelated third party and
therefore may transfer to such third party the shares that carry ten votes per
share. Comcast beneficially owns 100% of the outstanding Class B Common Shares
(approximately 25.7% of the total number of outstanding Partners Common Shares)
and controls 77.6% of the total voting power of all outstanding Partners Common
Shares. Therefore, Comcast has the voting power to control all matters requiring
the approval of shareholders of Partners voting as a single class.
On February 4, 1998, each of Warburg, Pincus and Comcast entered into the
Voting Agreements with NTL pursuant to which, among other things, each has
agreed that it will, and, in the case of Comcast, that it will cause its
subsidiaries to, vote in favor of the Amalgamation Agreement at the Partners
Special General Meeting. See "CERTAIN AGREEMENTS RELATED TO THE
AMALGAMATION -- Voting Agreements."
RISKS TO SHAREHOLDERS OF PARTNERS RESULTING FROM DIFFERENCES IN STOCKHOLDER
RIGHTS
Partners is a Bermuda company and, accordingly, is governed by the
Companies Act. The Companies Act differs in certain material respects from laws
generally applicable to U.S. corporations and their shareholders, including
those provisions relating to mergers and similar arrangements, shareholder's
suits, indemnification of directors and inspection of corporate records. As a
result of the Amalgamation, shareholders of Partners will no longer own Partners
Common Shares and will become stockholders of NTL. Accordingly, after the
Amalgamation, the rights of former shareholders of Partners will be governed by
the NTL Restated Certificate, the NTL By-laws and Delaware corporate law and
will consequently be different, and in certain respects, less favorable, than
their rights prior to the Amalgamation. In particular, (i) shareholder action
may generally be taken by written consent of the shareholders of Partners if all
shareholders who would be entitled to attend and vote at a meeting consent,
whereas stockholder action may not be taken by written consent of the
stockholders of NTL; (ii)shareholders of Partners may convene special general
meetings of shareholders, whereas the NTL By-laws provide that special meetings
of stockholders may be called only by the NTL Board, the Chairman of the Board
or the President of NTL; (iii) pursuant to certain provisions of the NTL
Restated Certificate, the approval by affirmative vote of two-thirds of all the
voting stock of NTL is required for certain extraordinary transactions and
certain amendments to the NTL Restated Certificate, whereas such similar actions
generally require a lesser vote of the shareholders of Partners; and (iv) the
NTL Restated Certificate provides for the NTL Board to be divided into three
classes, while the Partners By-laws do not provide for a classified Partners
Board. See "COMPARISON OF RIGHTS OF STOCKHOLDERS OF NTL AND SHAREHOLDERS OF
PARTNERS."
RISKS ASSOCIATED WITH THE NTL CLASS D STOCK
If, due to a breach of the TeleWest Agreement, the sale of the Birmingham
Cable Equity Interest pursuant to the TeleWest Agreement is not consummated
prior to the Closing, shares of NTL Class D Stock representing the Birmingham
Cable Equity Interest may be issued, at NTL's option, to shareholders of
Partners as part of the consideration in the Amalgamation. If issued, the NTL
Class D Stock will remain outstanding until the sale of the Birmingham Cable
Equity Interest. It is uncertain how long the NTL Class D Stock will remain
outstanding. Following the sale of the Birmingham Cable Equity Interest, each
share of NTL Class D Stock, if issued, will be exchanged by NTL for one share of
NTL Common Stock.
Although NTL is obligated to use best efforts to cause the NTL Class D
Stock to be approved for quotation on the NASDAQ subject to official notice of
issuance prior to the 60th day following the Closing Date if such stock is then
outstanding, such quotation is not a condition to the Closing. Accordingly, if
the
33
<PAGE> 42
NTL Class D Stock has been issued as part of the consideration in the
Amalgamation, there can be no assurances as to whether or when the NTL Class D
Stock will be approved for quotation on the NASDAQ and whether the absence of
quotation on the NASDAQ will adversely affect the market value or liquidity
thereof. Moreover, there can be no assurances as to the market value or the
liquidity of such stock.
UNCERTAINTIES IN INTEGRATING OPERATIONS AND ACHIEVING COST SAVINGS
The consolidation of functions and the integration of departments, systems
and procedures present significant management challenges. There can be no
assurance that such actions will be successfully accomplished as rapidly as
currently expected. Moreover, although the primary purpose of such actions will
be to realize direct cost savings and other operating efficiencies, there can be
no assurance of the extent to which such cost savings and other efficiencies
will be achieved.
NECESSITY OF RECEIVING GOVERNMENTAL APPROVALS AND DEBT CONSENTS PRIOR TO THE
AMALGAMATION
The consummation of the Amalgamation is conditioned upon, among other
things, the making and obtaining of certain filings with, notifications to and
authorizations and approvals of, various governmental agencies, particularly
certain British regulatory entities, with respect to the transactions
contemplated by the Amalgamation Agreement. There can be no assurance as to the
timing of such approvals or the ability of the companies to obtain such
approvals on satisfactory terms or otherwise. See "THE
AMALGAMATION -- Governmental and Regulatory Approvals."
The consummation of the Amalgamation is also conditioned upon the receipt
of the Required Consents, which include the consent of the holders of a majority
amount of Partners' 11.20% Debentures and the consent or effective waiver of the
holders of a majority amount of NTL's 12 3/4% Notes, NTL's 11 1/2% Notes and
NTL's 10% Notes. There can be no assurance as to the timing of such consents or
the ability of the companies to obtain such consents on satisfactory terms or
otherwise. See "THE AMALGAMATION -- The Debt Consents" and "RECENT
DEVELOPMENTS -- Redemption of 10 7/8% Notes."
RISKS RELATED TO PARTNERS INDENTURE
In November 1995, Partners received net proceeds of approximately L186.9
million ($291.1 million) from the sale of its 11.20% Debentures in a public
offering ($517.3 million principal at maturity). The Accreted Value of the
11.20% Debentures was L239.5 million and L229.2 million as of June 30, 1998 and
December 31, 1997, respectively. "Accreted Value" means the sum of (i) the
initial public offering price of each Debenture and (ii) the portion of the
excess of the principal amount of each Debenture over such initial offering
price which shall have been authorized by Partners in accordance with GAAP
through such end date, such amount to be so amortized on a daily basis and
compounded semi-annually at the rate of 11.20% per annum from November 15, 1995
to November 15, 2000. After November 15, 2000, interest will be paid in cash on
each May 15 and November 15 through November 15, 2007.
Under the Indenture, any sale of the Birmingham Cable Equity Interest or
the Cable London Equity Interest to TeleWest pursuant to the TeleWest Agreement
may be deemed to be an Asset Sale (as defined in the Indenture). If the proceeds
from any such sale are neither used to pay Restricted Subsidiary Indebtedness
nor invested in Replacement Assets (each, as defined in the Indenture), Partners
may be obligated to make an offer to purchase all or a portion of the
outstanding 11.20% Debentures, (A) in the case of 11.20% Debentures purchased
prior to November 15, 2000, at a price of 100% of the Accreted Value thereof
(determined at the date of purchase) and (B) in the case of 11.20% Debentures
purchased on or after November 15, 2000, 100% of the principal amount at
maturity thereof, plus accrued and unpaid interest thereon, if any, to the date
of purchase.
In accordance with the terms of such Asset Sale provision in the Indenture,
NTL plans to apply any cash proceeds received as consideration for the sale of
Birmingham Cable or Cable London pursuant to the TeleWest Agreement within 365
days of the receipt thereof, to an investment in Replacement Assets. The
Indenture provides that Replacement Assets include properties and assets (other
than cash or any capital stock or other security) that will be used in a
Cable/Telecommunication Business of Partners or any
34
<PAGE> 43
Restricted Subsidiary. If the proceeds from any sale of the Birmingham Cable
Equity Interest or the Cable London Equity Interest are not invested in
Replacement Assets, Partners (or Sub, as successor obligor to Partners) would be
required to make an offer to repurchase the 11.20% Debentures at 100% of the
Accreted Value thereof (L239.5 million as of June 30, 1998). The amount of the
11.20% Debentures repurchased would be equal to the amount of proceeds not
invested in Replacement Assets. Such an offer to repurchase would be funded by
cash proceeds from the Asset Sale, and the aggregate amount of funds that would
be required to make such repurchase would be based on the amount of such cash
proceeds.
In addition, the Amalgamation will constitute a "Change of Control", and
the occurrence of both a Change of Control and a Rating Decline (as defined in
the Indenture) would constitute a "Change of Control Triggering Event." Upon the
occurrence of a Change of Control Triggering Event, each holder of 11.20%
Debentures would have the right to require Partners to repurchase its 11.20%
Debentures in cash at a purchase price equal to 101% of the Accreted Value
thereof (determined at the date of purchase) if such purchase is prior to
November 15, 2000, or 101% of the principal amount at maturity thereof, plus
accrued and unpaid interest thereon, if any, to the date of purchase if such
purchase is on or after November 15, 2000. The 11.20% Debentures are currently
rated below Investment Grade by both Rating Agencies, and on June 17, 1998, the
11.20% Debentures were put on negative credit watch by Standard & Poor's Rating
Group. If a Change of Control Triggering Event occurs in connection with the
Amalgamation, Sub (as successor obligor to Partners) would be required to make
an offer to repurchase the 11.20% Debentures at an approximate purchase price of
L241.9 million, based on the Accreted Value as of June 30, 1998. Such an offer
would be funded by refinancing in an amount equal to such purchase price, but no
assurances can be made that such refinancing would be available or upon what
terms such refinancing would be obtained.
The Indenture related to the 11.20% Debentures also contains other
covenants, including a limitation on restricted payments which would restrict
the ability of Partners to make dividends or distributions to NTL in respect of
Partners capital stock or to purchase, redeem, acquire or retire for value such
stock and a limitation on transactions with affiliates, which would limit
transactions between NTL and Partners. These provisions could impact the optimal
or effective financial and operational integration of NTL and Partners after the
Amalgamation.
POTENTIAL ADVERSE CONSEQUENCES OF LEVERAGE OF NTL
NTL is and, following the consummation of the Amalgamation will continue to
be, highly leveraged. At June 30, 1998, the accrued value of NTL's total
long-term indebtedness (including NTL's 13% Senior Redeemable Exchangeable
Preferred Stock (the "NTL 13% Preferred")) was approximately $3.1 billion,
representing approximately 102% of total capitalization. The accrued value of
Partners' total long-term indebtedness, including long-term debt due to
shareholder, was L342 million at June 30, 1998, representing 71% of total
capitalization. "Long-term debt due to shareholder" consists of 9% Subordinated
Notes payable to Holdings, an indirect, wholly-owned subsidiary of Comcast,
which are due in 1999. The accreted value of the 9% Subordinated Notes was
L11,775,000 and L11,272,000 as of June 30, 1998 and December 31, 1997,
respectively. In connection with NTL's acquisition of ComTel, NTL borrowed L275
million in June 1998 from The Chase Manhattan Bank ("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 NTL intends to borrow an
additional L200 million under the New Credit Facility to complete such
acquisition. The indentures governing the existing indebtedness of NTL and the
11.20% Debentures permit NTL and Partners and their respective subsidiaries to
incur substantial indebtedness. The ability of NTL and its subsidiaries to make
scheduled payments under present and future indebtedness will depend upon, among
other things, NTL's and its subsidiaries' ability to complete the build-out of
the franchises on a timely and cost effective basis, NTL's ability to access the
earnings of its subsidiaries (which may be subject to significant contractual
and legal limitations), the future operating performance of NTL and its
subsidiaries and NTL'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 NTL's and its
subsidiaries' control. See "-- Network Construction Costs of NTL, the Partners
Operating Companies and ComTel; Need for Additional Financ-
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ing," "-- Holding Company Structure of NTL and Partners; 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
NTL to maintain certain financial ratios, restrict or prohibit the payment of
dividends and other distributions to NTL by its subsidiaries, restrict asset
sales and dictate the use of proceeds from the sale of assets. Although NTL
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 NTL, could limit the ability of NTL to
respond to market conditions or meet extraordinary capital needs or otherwise
could restrict corporate activities and the ability of certain subsidiaries of
NTL to make payments to NTL which might otherwise fund NTL's obligations as they
fall due. See "-- Holding Company Structure of NTL and Partners; Dependence Upon
Cash Flow from Subsidiaries." There can be no assurance that such restrictions
will not adversely affect NTL'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 NTL.
The Amalgamation will result in a change of control under the L200 million
UK Holdings bank facility (the "Partners Facility"). Upon a change of control,
all amounts outstanding under the Partners Facility will become immediately due
and payable. At June 30, 1998, there was L86 million outstanding under the
Partners Facility. Although Partners 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 Partners Facility or that NTL will be able to refinance
the Partners Facility.
The degree to which NTL is leveraged could have important consequences to
stockholders, including the following: (i) increasing NTL's vulnerability to
adverse changes in general economic conditions or increases in prevailing
interest rates; (ii) limiting NTL'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 NTL's business; (iii) requiring a substantial
portion of NTL'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
NTL's and its subsidiaries' exposure to increases in interest rates given that
certain of NTL's and its subsidiaries' borrowings may be at variable rates of
interest.
In addition, NTL 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 NTL will have the financial
resources necessary or otherwise be able to repurchase those securities in such
circumstances.
NETWORK CONSTRUCTION COSTS OF NTL, THE PARTNERS OPERATING COMPANIES AND COMTEL;
NEED FOR ADDITIONAL FINANCING
The development, construction and operations of the combined
telecommunications networks of NTL, the Partners Operating Companies and ComTel
will continue to require substantial capital. In addition, NTL, Partners and
ComTel will require significant amounts of capital to finance the other capital
expenditures and the cost of operations of NTL, its subsidiaries and joint
ventures and meet all their other obligations as they fall due. NTL 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 NTL's subsidiaries. However, NTL 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)
NTL will not acquire additional businesses that would require additional
capital, (v) NTL and its subsidiaries will be able to generate sufficient cash
from operations to meet capital requirements, debt service and other obligations
when required, (vi) NTL will be able to access such cash flow or (vii) NTL's
subsidiaries will not incur losses from
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<PAGE> 45
their exposure to exchange rate fluctuations or be adversely affected by
interest rate fluctuations. NTL 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 ComTel acquisition, Chase's commitment
under the New Credit Facility has been reduced to the L475 million that NTL
requires for the cash portion of the purchase price. NTL borrowed L275 million
in June 1998 to complete the first stage of the ComTel acquisition. NTL intends
to borrow the remaining L200 million and will issue L75 million in a new NTL
pay-in-kind Preferred Stock to complete the final stage of the ComTel
acquisition upon the completion of certain corporate reorganizations within
ComTel. Chase has committed to make available to NTL a L480 million senior
secured credit facility upon the repayment in full of the L475 million ComTel
acquisition facility and subject to the renegotiations of the New Credit
Facility structure and pricing. NTL is required to repay the amount outstanding
under the L475 million ComTel acquisition facility on January 31, 1999, which
may be extended in certain circumstances to June 30, 1999.
Management does not anticipate that NTL and its subsidiaries will generate
sufficient cash flow from operations to repay at maturity the entire principal
amount of the outstanding indebtedness of NTL and its subsidiaries. Accordingly,
NTL 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 NTL may
undertake and the ability of NTL to accomplish those measures will depend on the
financial condition of NTL and its subsidiaries at the time, as well as a number
of factors beyond the control of NTL and its subsidiaries, including prevailing
economic and market conditions and financial, business and other factors. No
assurance can be given that any of the foregoing measures can be accomplished,
or can be accomplished in sufficient time to make timely payments with respect
to NTL's indebtedness. In addition, there can be no assurance that any such
measures can be accomplished on terms which are favorable to NTL and its
subsidiaries.
NTL 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. NTL 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 NTL and its subsidiaries to finance such transactions. There can be no
assurances that such transactions will occur. The indentures governing the
existing NTL indebtedness 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 OF NTL AND PARTNERS; DEPENDENCE UPON CASH FLOW
FROM SUBSIDIARIES
NTL and Partners are holding companies that conduct their operations
through their direct and indirect wholly-owned subsidiaries and affiliated joint
ventures. Consequently, prior to and following the Amalgamation, NTL will hold
no significant assets other than its investments in and advances to its
subsidiaries and affiliated joint ventures. NTL is, therefore, dependent upon
its receipt of sufficient funds from its subsidiaries and affiliated joint
ventures to meet its own obligations. The ability of NTL to benefit in the
distribution of any assets of any of NTL'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 NTL, to the prior claims of the creditors of
any other persons directly or indirectly owning such subsidiary or joint
venture.
Each of NTL'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
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<PAGE> 46
its net profits for the fiscal year in which the dividend is declared or for the
immediately preceding fiscal year. Each of NTL'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 NTL's subsidiaries to
declare dividends and the ability of NTL's subsidiaries to make payments to NTL
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 NTL.
In addition, the terms of the New Credit Facility limit, and the terms of
existing and future indebtedness of NTL's subsidiaries may limit, the payment of
dividends, loans or other distributions to NTL. In the absence of a default, the
New Credit Facility generally permits payments to NTL to pay the interest and
principal of existing indebtedness of NTL.
As of June 30, 1998, the total liabilities of NTL's subsidiaries and the
Partners Operating Companies (defined above as the following four operations in
which Partners has an interest: (i) Birmingham Cable, in which Partners owns a
27.5% interest; (ii) Cable London, in which Partners owns a 50% interest; (iii)
Cambridge Cable, in which Partners owns a 100% interest; and (iv) two companies
holding franchises for Darlington and Teesside, in which Partners owns a 100%
interest) were approximately $863 million and $1,039 million, respectively. Of
the $1,039 million of the Partners Operating Companies' liabilities, $346
million was attributable to the Partners Operating Companies not subject to the
Purchase Rights. Under UK corporate law, none of the Partners Operating
Companies may declare or pay dividends except from its distributable profits.
Partners does not anticipate that the Partners Operating Companies will have
such distributable profits for the foreseeable future. In addition, the
covenants of the Indenture governing the 11.20% Debentures restrict, condition
or prohibit Partners from incurring additional indebtedness. In light of NTL's
strategy of continued growth, in part through acquisitions, NTL and its
subsidiaries may incur substantial indebtedness in the future. Borrowings under
the New Credit Facility and a substantial portion of NTL's and its subsidiaries'
future indebtedness are expected to be secured by liens and other security
interests over the assets of NTL's subsidiaries and NTL's equity interests in
NTL's subsidiaries. In addition, the ability of NTL and, therefore, the
stockholders of NTL, to benefit from distributions of assets of NTL'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 NTL or its subsidiaries. Any right of NTL to receive assets of any subsidiary
upon such subsidiary's liquidation or reorganization will be structurally
subordinated to the claims of that subsidiary's creditors, except to the extent
that NTL is itself recognized as an unsubordinated creditor of such subsidiary.
However, to the extent that NTL is so recognized, the claims of NTL 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 NTL and may otherwise be
challenged by third parties in a liquidation or reorganization proceeding. In
addition, the New Credit Facility requires NTL to subordinate its right to
repayment of indebtedness outstanding between it and the borrower under such
agreement or any other subsidiary of NTL to the rights of the lenders under the
agreement. In particular, the rights of NTL 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 NTL'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 NTL'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 NTL'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.
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OPERATING LOSSES OF NTL AND PARTNERS
NTL 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, NTL's
accumulated deficit was $915.0 million. Partners had net (loss) for the six
months ended June 30, 1998 and 1997 and for the years ended December 31, 1997,
1996 and 1995 of L(31.8 million), L(33.6 million), L(67.4 million), L(40.6
million) and L(29.0 million), respectively. As of June 30, 1998 and December 31,
1997, Partners' accumulated deficit was L219.2 million and L187.4 million,
respectively.
The development of the businesses of NTL and Partners 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. NTL also
expects to incur substantial additional operating losses, and there can be no
assurance that NTL will achieve or sustain profitability in the future. Failure
to become profitable could adversely affect NTL's ability to sustain operations
and obtain additional required funds. See "-- Network Construction Costs of NTL,
the Partners Operating Companies and ComTel; Need for Additional Financing."
Moreover, such a failure would adversely affect NTL's ability to pay the
required payments on its indebtedness, the 11.20% Debentures and the NTL 13%
Preferred. See "-- Potential Adverse Consequences of Leverage of NTL,"
"-- Network Construction Costs of NTL, the Partners Operating Companies and
ComTel; Need for Additional Financing" and "-- Holding Company Structure of NTL
and Partners; Dependence Upon Cash Flow from Subsidiaries."
DEFICIENCY OF EARNINGS TO FIXED CHARGES AND EARNINGS TO COMBINED FIXED CHARGES
AND PREFERRED STOCK DIVIDENDS OF NTL
For the six months ended June 30, 1998 and the years ended December 31,
1997, 1996, 1995, 1994 and 1993, NTL's earnings were insufficient to cover fixed
charges by approximately $107.2 million, $355.4 million, $257.1 million, $105.4
million, $31.8 million and $10.4 million, respectively. NTL's earnings for the
six months ended June 30, 1998 and the year ended December 31, 1997 were
insufficient to cover combined fixed charges and preferred stock dividends by
$114.6 million and $367.4 million, respectively. Fixed charges consist of
interest expense, including capitalized interest, amortization of fees related
to debt financing and rent expense deemed to be interest.
REQUIREMENT OF NTL AND THE PARTNERS OPERATING COMPANIES 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 NTL is required to construct cable television
systems passing an aggregate of approximately 2,090,000 premises (residential
and business) and the Partners Operating Companies are required to construct
approximately 1,600,000 premises. The Partners Operating Companies not subject
to the Purchase Rights are required to construct approximately 750,000 premises
by 2005.
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, each
of NTL and Partners 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 of NTL, the Partners Operating Companies and
ComTel; Need for Additional Financing" and "-- Uncertainty of Construction
Progress and Costs."
If NTL 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 NTL. Generally, not all of the Partners Operating Companies have met the
build milestones contained in their licenses on an interim basis. In such
instances, OFTEL historically has amended or agreed to amend the Partners
Operating Companies' licenses so that the Partners Operating Companies are
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<PAGE> 48
or would be in substantial compliance with the revised build schedules contained
in the licenses. However, there can be no assurance that OFTEL will agree to
amend the licenses in the future.
UNCERTAINTY OF CONSTRUCTION PROGRESS AND COSTS
At December 31, 1997, construction of NTL's network had passed in excess of
48% of its final regulatory milestone requirements for all its franchises, and
the construction of the Partners Operating Companies' network had passed over
75% of its final regulatory milestone requirements for all of its franchises
(53% for the Partners Operating Companies not subject to the Purchase Rights).
Successful construction and development of the combined network will depend on,
among other things, NTL'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 NTL. 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 of NTL, the Partners Operating Companies and ComTel; Need for Additional
Financing" above or that additional funding substantially in excess of that
amount will not be required.
In building its network, NTL 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 NTL's franchise areas due to existing underground
utility infrastructure. In addition, NTL is responsible for restoring the
surface area after its underground construction is completed. Although NTL 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 NTL will be able to construct its network in a
timely manner or at a reasonable cost.
SIGNIFICANT COMPETITION FOR NTL AND THE PARTNERS OPERATING COMPANIES
NTL and the Partners Operating Companies face significant competition from
established and new competitors in the areas of residential telephony, business
telecoms services and cable television. NTL believes that competition will
intensify in each of these business areas, particularly business
telecommunications.
Residential Telephony. NTL and the Partners Operating Companies compete
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. NTL's growth in telecommunications
services, therefore, depends upon its ability to convince BT's customers to
switch to telecommunications services of NTL and the Partners Operating
Companies. NTL 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 NTL 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, NTL 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 NTL. In
addition to BT, other telecommunications competitors which may have
substantially greater resources than those of NTL could prevent NTL from
increasing its share of the residential telecommunications market.
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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
Northern Ireland and create potential additional competition for NTL's
residential telephony services in certain remote rural areas of NTL's Northern
Ireland franchise. NTL also competes with mobile networks. This technology could
grow to become a competitive threat to NTL's networks, particularly if call
charges are reduced further on the mobile networks. NTL's Radio Communications
group may enable NTL to benefit from the growth in this technology. There can be
no assurance, however, that NTL will be able to compete successfully with BT or
such other telecommunications operators.
NTL 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, NTL believes that, if the two
companies successfully combine their respective marketing strengths, the
resulting combination would provide significant competition to cable operators
including NTL.
Business Telecommunications. BT is also NTL's principal competitor in
providing business telecommunications services. In addition, NTL 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, NTL 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 NTL
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 NTL's existing markets or that NTL will be able to
continue to compete successfully with such competitors in the business
telecommunications market.
CATV. NTL'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 NTL 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. NTL 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 NTL'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 NTL and its
subsidiaries. There can be no
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assurance that satisfactory (or any) terms of carriage will be obtained by NTL
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 NTL will not encounter significant competition
from CTI (as successor to the BBC) for its transmission business from expiration
of NTL's current contracts with the Independent Television ("ITV") contractors
and Channel 4 and the Welsh Fourth Channel ("S4C"). See " -- NTL's Dependence
Upon Site Sharing Arrangement" and " -- NTL's Dependence Upon ITV and Other
Contracts."
LIMITED ACCESS OF NTL AND THE PARTNERS OPERATING COMPANIES TO PROGRAMMING
The ability of NTL and the Partners Operating Companies 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 NTL and the Partners Operating Companies by operating a DTH satellite
service that provides programming, including programming that is also offered by
NTL and the Partners Operating Companies, 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.
NTL and the Partners Operating Companies, like many other cable operators,
obtain most of their programming through arrangements with BSkyB and other
programming suppliers which are not reflected in signed written agreements. To
date, neither NTL nor the Partners Operating Companies has had a formal contract
with BSkyB, although NTL has been in discussions with BSkyB for some time. There
can be no assurance that NTL will be able to enter into a definitive agreement
with BSkyB, that the terms of such definitive agreement will not be less
favorable to NTL than the current arrangement, or that BSkyB will continue to
supply programming to NTL on reasonable commercial terms or at all. Moreover,
NTL 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 NTL or the Partners Operating Companies are required to pay for
BSkyB or other programming could have a material adverse effect on NTL and the
Partners Operating Companies.
Because of the factors described in the preceding paragraphs, there can be
no assurance that their current programming will continue to be available to NTL
and the Partners Operating Companies on acceptable commercial terms, or at all.
POSSIBLE CHANGES IN GOVERNMENT REGULATION
The principal business activities of NTL and the Partners Operating
Companies 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 NTL and the Partners
Operating Companies and those of their competitors, such as licensing
requirements, changes in price regulation and deregulation of interconnection
arrangements, could have a material adverse effect on NTL and the Partners
Operating Companies.
42
<PAGE> 51
A substantial portion of NTL's business is also subject to regulation. In
particular, the prices that NTL may charge the ITV companies, Channel 4 and S4C
for television transmissions services are subject to price controls imposed by
OFTEL. On December 24, 1996, the Director General of OFTEL issued the formal
modification to NTL's Telecommunications Act License to deal with the new price
control for the television transmission services provided by NTL to the ITV
companies, Channel 4 and S4C. Under the new arrangements, the total revenues
receivable by NTL for such services (excluding certain insignificant items)
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"), NTL and the Partners
Operating Companies 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 NTL and its subsidiaries and the Partners Operating
Companies to provide access to their cable network infrastructure to other
service providers, which could have material adverse effect on NTL and the
Partners Operating Companies.
NTL'S DEPENDENCE UPON SITE SHARING ARRANGEMENT
As a result of, among other factors, a natural shortage of potential
transmission sites and the difficulties in obtaining planning permission for
erection of further masts, CTI and NTL have made arrangements to share a large
number of sites. Under the present arrangements, one of the parties (the
"Station Owner") is the owner, lessee or licensee of each site and the other
party (the "Sharer") is entitled to request a license to use certain facilities
at that site. Each site license granted pursuant to the site sharing agreement
is for an initial period expiring on December 31, 2005 (subject to title and to
the continuation in force of the site sharing agreement) and provides that, if
requested by the Sharer, it will be extended for further periods. The site
sharing agreement and each site license provide for the Station Owner to be paid
a commercial license fee and for the Sharer to be responsible, in normal
circumstances, for the costs of accommodation and equipment used exclusively by
it. Either party may terminate the agreement by 5 years' notice in writing to
the other expiring on December 31, 2005 or at any date which is a date 10 years
or a multiple of 10 years after December 31, 2005. Although NTL does not
anticipate that the site sharing agreement or the site licenses will be
terminated, there can be no assurance that such a termination will not occur.
Termination of the site sharing agreements would have a material adverse effect
on NTL's business.
NTL'S DEPENDENCE UPON ITV AND OTHER CONTRACTS
NTL's broadcast business is substantially dependent upon contracts with the
ITV companies, Channel 4/S4C and Vodafone for the provision of transmission
services. The prices that NTL may charge these companies for television
transmission services are subject to regulation by OFTEL. See "-- Possible
Changes in Government Regulation." The contracts with the ITV contractors and
Channel 4/S4C terminate on December 31, 2002. Although historically the ITV
contractors and Channel 4/S4C have renewed their contracts with NTL, there can
be no assurance that they will do so upon expiration of the current contracts,
that they will not negotiate terms for NTL's provision of transmission services
on a basis less favorable to NTL or that they will not seek to obtain from third
parties a portion of the transmission services currently provided by NTL. The
loss of any one of these contracts could have a material adverse effect on NTL.
RISKS RELATING TO NTL'S MANAGEMENT OF GROWTH AND EXPANSION
NTL 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 NTL's financial and management controls, increased marketing
activities and the training of new personnel.
43
<PAGE> 52
Failure to manage its rapid growth and development successfully could have a
material adverse effect on NTL.
DEPENDENCE UPON KEY PERSONNEL OF NTL
NTL'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 NTL. NTL
believes that its future success will depend in large part on its continued
ability to attract and retain highly skilled and qualified personnel. NTL 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 NTL also serve as members of senior
management of other companies in the telecommunications business.
RISKS OF RAPID TECHNOLOGICAL CHANGES ON BUSINESSES OF NTL AND THE PARTNERS
OPERATING COMPANIES
The telecommunications industry is subject to rapid and significant changes
in technology and the effect of technological changes on the businesses of NTL
and the Partners Operating Companies cannot be predicted. However, the cost of
implementation of emerging and future technologies could be significant, and
NTL's ability to fund such implementation will depend on its ability to obtain
additional financing. See "-- Network Construction Costs of NTL, the Partners
Operating Companies and ComTel; Need for Additional Financing."
CURRENCY RISK
After the Amalgamation, to the extent that NTL 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, NTL's
revenues are generated primarily in British pounds sterling while its interest
and principal obligations with respect to most of NTL's existing indebtedness
are payable in United States dollars. While NTL may consider entering into
transactions to hedge the risk of exchange rate fluctuations, there can be no
assurance that NTL will engage in such transactions, or, if NTL 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 NTL. NTL has
entered into an option agreement to hedge some of the risk of exchange rate
fluctuations related to debt service and corporate expenses.
RISKS OF LIMITED INSURANCE COVERAGE
NTL and the Partners Operating Companies obtain 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.
44
<PAGE> 53
SELECTED HISTORICAL FINANCIAL DATA OF NTL
The following table sets forth selected financial data for the six months
ended June 30, 1998 and 1997 and for each of the five years in the period ended
December 31, 1997. This information has been derived from, and should be read in
conjunction with, the consolidated financial statements and notes thereto
included or incorporated by reference herein.
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30, YEAR ENDED DECEMBER 31,
--------------------- ------------------------------------------------------
1998 1997 1997 1996(1) 1995 1994 1993
--------- --------- --------- --------- -------- -------- --------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Operating revenues... $ 302,106 $ 221,639 $ 491,755 $ 228,343 $ 33,741 $ 13,745 $ 10,078
(Loss) before
extraordinary
item............... (197,974) (173,435) (328,557) (254,454) (90,785) (29,573) (11,076)
Net (loss)........... (197,974) (173,435) (333,057) (254,454) (90,785) (29,573) (11,076)
Basic and diluted net
(loss) per common
share:
(Loss) before
extraordinary
item(2)............ (5.79) (5.56) (10.60) (8.20) (3.01) (.98) (.83)
Net (loss) per common
share(2)........... (5.79) (5.56) (10.74) (8.20) (3.01) (.98) (.83)
Weighted average
number of common
shares used in the
computation of
basic and diluted
net loss per common
share(2)........... 35,448 32,091 32,117 31,041 30,190 30,175 13,327
Ratio of earnings to
fixed charges(3)... -- -- -- -- -- -- --
</TABLE>
<TABLE>
<CAPTION>
AS OF
JUNE 30, AS OF DECEMBER 31,
---------- ----------------------------------------------------------
1998 1997 1996(1) 1995 1994 1993
---------- ---------- ---------- ---------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Working capital
(deficiency)............... $ 248,713 $ (51,916) $ 242,102 $ 76,128 $251,544 $410,421
Fixed assets, net............. 2,279,636 1,756,985 1,459,528 639,674 191,725 36,422
Total assets.................. 4,163,828 2,421,639 2,454,611 1,010,669 664,366 594,976
Long-term debt................ 3,020,012 2,015,057 1,732,168 513,026 143,488 130,553
Senior Redeemable Exchangeable
Preferred Stock............ 116,086 108,534 -- -- -- --
Shareholders' equity
(deficiency)............... (66,519) (61,668) 328,114 339,257 436,534 452,402
</TABLE>
- ---------------
(1) In May 1996, NTL purchased NTL Group Limited for an aggregate purchase
price of approximately $439,000,000, including goodwill of approximately
$263,000,000. The net assets and results of operations of NTL Group Limited
are included in the consolidated financial statements from the date of the
acquisition.
(2) After giving retroactive effect to the four-for-three stock split by way of
stock dividend paid in August 1995. NTL did not declare or pay any cash
dividends during the years indicated.
45
<PAGE> 54
(3) Fixed charges consist of interest expense, including capitalized interest,
amortization of fees related to debt financing and rent expense deemed to
be interest. The fixed charges coverage deficiency amounted to $107.2
million, $355.4 million, $257.1 million, $105.4 million, $31.8 million and
$10.4 million for the six months ended June 30, 1998 and for the years
ended December 31, 1997, 1996, 1995, 1994 and 1993, respectively. For the
six months ended June 30, 1998 and for the year ended December 31, 1997,
NTL's earnings were insufficient to cover combined fixed charges and
preferred stock dividends by $114.6 million and $367.4 million.
46
<PAGE> 55
SELECTED HISTORICAL FINANCIAL DATA OF PARTNERS, BIRMINGHAM CABLE, CABLE LONDON
AND CAMBRIDGE CABLE
The following table sets forth selected historical consolidated financial
data for each of Partners, Birmingham Cable and Cable London for the six months
ended June 30, 1998 and 1997 and for each of the five years in the period ended
December 31, 1997. Such data have been derived from, and should be read in
conjunction with, the consolidated financial statements and notes thereto
included or incorporated by reference herein. Prior to March 31, 1996, Partners
accounted for its interests in Cambridge Cable under the equity method.
Beginning on March 31, 1996, the financial position and results of operations of
Cambridge Cable were consolidated with those of Partners.
Partners
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30, YEAR ENDED DECEMBER 31,
--------------------- ------------------------------------------------------
1998 1997 1997 1996 1995 1994 1993
--------- --------- --------- --------- -------- -------- --------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Service income....................... L 36,027 L 25,205 L 55,603 L 31,358 L 1,530 L L
Consulting fee income................ 561 496 1,059 1,070 1,313 1,356 1,248
Operating loss....................... (8,524) (12,907) (22,604) (24,553) (11,809) (2,824) (1,124)
Equity in net losses of affiliates... (11,185) (10,314) (21,359) (18,432) (23,677) (16,289) (13,143)
Net loss............................. (31,777) (33,648) (67,356) (40,575) (28,962) (16,266) (13,183)
Net loss per share(1)................ (0.63) (0.67) (1.34) (.84) (0.70) (0.54) (0.50)
</TABLE>
<TABLE>
<CAPTION>
AS OF AS OF DECEMBER 31,
JUNE 30, ------------------------------------------------------
1998 1997 1996 1995 1994 1993
--------- --------- --------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Total assets......................... L 513,521 L 445,854 L 484,370 L431,889 L254,739 L 95,239
Noncurrent liabilities............... 344,985 247,970 216,027 207,978 9,106
Contributed capital.................. 359,049 359,049 359,049 287,810 287,863 127,162
Accumulated deficit.................. (219,150) (187,373) (120,017) (79,442) (50,480) (34,214)
</TABLE>
Birmingham Cable
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30, YEAR ENDED DECEMBER 31,
--------------------- ------------------------------------------------------
1998 1997 1997 1996 1995 1994 1993
--------- --------- --------- --------- -------- -------- --------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Service income....................... L 37,975 L 31,800 L 67,166 L 52,472 L 39,004 L 27,505 L 18,345
Operating loss....................... (5,043) (8,880) (15,825) (11,694) (11,345) (9,674) (7,864)
Net loss............................. (19,078) (15,364) (30,826) (20,378) (14,279) (9,293) (8,967)
</TABLE>
<TABLE>
<CAPTION>
AS OF AS OF DECEMBER 31,
JUNE 30, ------------------------------------------------------
1998 1997 1996 1995 1994 1993
--------- --------- --------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Total assets....................... L 257,306 L 260,035 L 325,646 L331,589 L160,044 L119,018
Noncurrent liabilities............. 182,306 165,413 188,863 185,864 6,222 4,989
</TABLE>
47
<PAGE> 56
Cable London
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30, YEAR ENDED DECEMBER 31,
-------------------- --------------------------------------------------
1998 1997 1997 1996 1995 1994 1993
-------- --------- -------- ------- -------- -------- -------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Service income............................. L 32,178 L 24,693 L 52,816 L40,091 L 30,277 L 21,830 L14,403
Operating loss............................. (4,005) (6,491) (12,711) (13,906) (13,808) (10,524) (9,863)
Net loss................................... (11,530) (11,879) (25,168) (21,241) (17,675) (11,354) (11,304)
</TABLE>
<TABLE>
<CAPTION>
AS OF AS OF DECEMBER 31,
JUNE 30, ---------------------------------------------------
1998 1997 1996 1995 1994 1993
--------- -------- -------- -------- -------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Total assets............................ L200,212 L195,693 L170,123 L136,450 L104,994 L85,648
Noncurrent liabilities.................. 189,958 173,038 60,831 73,772 27,659 21,118
</TABLE>
Cambridge Cable(2)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------------------------------
1997 1996 1995 1994 1993
------- -------- -------- -------- -------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Service income........................... L 6,401 L 20,585 L 12,064 L 3,571
Operating loss........................... (2,133) (12,838) (8,807) (7,437)
Net loss................................. (4,419) (20,398) (12,223) (7,930)
</TABLE>
<TABLE>
<CAPTION>
AS OF DECEMBER 31,
-------------------------------------------------
1997 1996 1995 1994 1993
------- -------- -------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Total assets............................ L118,885 L99,275 L56,799
Noncurrent liabilities.................. 109,662 74,916 22,163
</TABLE>
- ---------------
(1) For 1993 and 1994, net loss per share has been presented on a pro forma
basis as if the restructuring of Partners' equity in September 1994 and the
conversion of the redeemable convertible preference shares issued in
connection with the acquisition of Teesside were outstanding for all periods
presented.
(2) Prior to March 31, 1996, Partners owned 50% of Cambridge Cable and accounted
for this interest under the equity method. As of March 31, 1996, Partners
owned 100% of Cambridge Cable and consolidated the financial position and
results of operations of Cambridge Cable beginning on March 31, 1996. The
1996 results of operations information for Cambridge Cable is for the three
months ended March 31, 1996.
48
<PAGE> 57
UNAUDITED PRO FORMA FINANCIAL DATA
In addition to the Amalgamation, on June 16, 1998, NTL agreed to acquire
substantially all of the operations of ComTel in a two-part transaction in
exchange for approximately L550 million. The first part of the transaction
closed on June 16, 1998 and was financed using funds available under the New
Credit Facility. The second part of the transaction closed on September 22,
1998.
The unaudited pro forma financial data presented herein give effect to the
acquisitions of Partners and ComTel. The pro forma financial data is based on
the historical financial statements of Partners, ComTel and NTL. The balance
sheet data reflects the translation of all UKL denominated amounts at the June
30, 1998 rate of $1.6667 = L1.00. The statements of operations data reflects the
translation of all UKL denominated amounts at the average rate for the six
months ended June 30, 1998 and the year ended December 31, 1997 of
$1.6498 = L1.00 and $1.638 = L1.00, respectively.
The acquisitions have been accounted for in the pro forma financial data
using the purchase method of accounting. Accordingly, the assets acquired and
liabilities assumed have been recorded at their estimated fair values, which are
subject to further adjustment based upon appraisals and other analyses.
Management of NTL does not currently expect future adjustments from these
analyses, if any, to be material to the unaudited pro forma financial
statements.
The consummation of the acquisitions requires the consent of certain third
parties, which include the consent of the holders of a majority amount of
Partners' 11.20% Debentures and the consent or effective waiver of the holders
of a majority amount of NTL's 12 3/4% Notes, 11 1/2% Notes and 10% Notes. The
pro forma financial data assumes that such consents will be obtained. In the
event that NTL or Partners makes cash payments or gives other consideration in
exchange for consents, the consideration will be accounted for as additional
deferred financing costs and amortized over the remaining term of the debt.
The pro forma financial statements also do not give effect to the following
financing transactions:
(i) In June 1998, NTL provided to the trustee of the 10 7/8% Notes a notice
that NTL will redeem such 10 7/8% Notes on October 15, 1998. Pending
such redemption, NTL has deposited in trust with such trustee
$218,586,840 from cash on hand to pay the redemption price for such
10 7/8% Notes on October 15, 1998;
(ii) In May 1998, the 780 outstanding shares of 5% Non-voting Convertible
Preferred Stock, Series A were converted into 1,950,000 shares of NTL
Common Stock;
(iii) In April 1998, all of NTL's 7 1/4% Convertible Subordinated Notes Due
2005 were converted into 6,957,500 shares of NTL's Common Stock;
(iv) The additional interest to be incurred from NTL's issuance of new
Notes in March 1998, for which NTL received net proceeds of
approximately $1.25 billion after discounts, commissions and expenses.
NTL has used and intends to use the net proceeds to finance the
construction, capital expenditure and working capital requirements
(including, without limitation, debt service and repayment
obligations) of NTL and, potentially, refinance existing indebtedness.
In addition, a portion of the net proceeds may also be used to make
acquisitions of businesses or assets related to NTL's business.
Interest expense would have increased by $31.8 million and $137.3
million for the six months ended June 30, 1998 and the year ended
December 31, 1997, respectively had the notes been issued at the
beginning of the period.
The unaudited pro forma condensed combined statements of operations for the
six months ended June 30, 1998 and for the year ended December 31, 1997 give
effect to the acquisitions as if they had been consummated on January 1, 1997.
The unaudited pro forma condensed combined balance sheet as of June 30, 1998
gives effect to the acquisitions as if they had been consummated on June 30,
1998.
Partners currently owns the Birmingham Cable Equity Interest and the Cable
London Equity Interest. Partners accounts for the Equity Interests using the
equity method. The following pro forma financial data gives effect to the
issuance of .3745 shares of NTL Common Stock for each Partners Common Share as a
49
<PAGE> 58
result of the TeleWest Agreement assuming consummation of the sale of Partners'
ownership interest in Birmingham Cable to TeleWest prior to or concurrently with
the Amalgamation.
The TeleWest Agreement provides that at any time during the Shoot-out
Period, Partners (at the time owned by NTL) may give notice to TeleWest of an
offer to sell to TeleWest the Cable London Equity Interest and related assets
for the cash Sum specified in the Offer Notice. If Partners fails to give the
Offer Notice prior to the end of the Shoot-out Period, Partners will be deemed
to have delivered an Offer Notice for a Sum equal to L100 million.
TeleWest will have 30 days in which to accept or decline the Offer. If
TeleWest accepts the Offer, Partners will sell to TeleWest the Cable London
Equity Interest and related assets at the Sum specified in the Offer Notice. If
TeleWest declines the Offer, TeleWest will sell to Partners (at the time owned
by NTL) all of the shares in the capital of Cable London owned by TeleWest at
the Sum specified in the Offer Notice.
The pro forma financial statements do not give effect to the sale of the
Cable London Equity Interest to TeleWest or Partners' purchase of TeleWest's
shares in the capital of Cable London, as management is currently unable to
determine the probable outcome of "Shoot out" procedure. The effect of the sale
or purchase of an interest in Cable London would not be a material to the Pro
Forma Condensed Combined Statements of Operations. The effect of the sale of the
Cable London Equity Interest by Partners would be to reduce Partners' investment
in Cable London and increase cash by the amount of the proceeds. The effect of
Partners' purchase of all of TeleWest's shares in capital of Cable London would
be to reduce Partners' cash and increase the amount of Partners' investment in
Cable London.
The pro forma adjustments are based upon available information and
assumptions that the management of NTL believes are reasonable at the time made.
The unaudited pro forma condensed combined financial statements do not purport
to present the financial position or results of operations of NTL had the
acquisitions occurred on the dates specified, nor are they necessarily
indicative of the financial position or results of operations that may be
achieved in the future. The unaudited pro forma condensed combined statements of
operations do not reflect any adjustments for synergies that NTL expects to
realize commencing upon consummation of the acquisitions. No assurances can be
made as to the amount of cost savings or revenue enhancements, if any, that may
be realized.
The unaudited pro forma financial statements should be read in conjunction
with the consolidated financial statements and notes of NTL, Partners and ComTel
appearing elsewhere in this Joint Proxy Statement/Prospectus.
50
<PAGE> 59
NTL INCORPORATED
PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
(UNAUDITED)
FOR THE SIX MONTHS ENDED JUNE 30, 1998
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
NTL COMTEL PARTNERS
(HISTORICAL) (HISTORICAL) (HISTORICAL) ADJUSTMENTS PRO FORMA
------------ ------------ ------------ ----------- ---------
<S> <C> <C> <C> <C> <C>
REVENUES........................... $ 302,106 $ 71,756 $ 60,363 $ (521)D $ 433,704
COSTS AND EXPENSES
Operating expenses................. 155,354 30,724 19,405 205,483
Selling, general and administrative
expenses......................... 113,527 39,826 28,370 181,723
Franchise fees..................... 12,506 12,506
Corporate expenses................. 7,779 7,779
Management fees.................... 2,425 2,425
Depreciation and amortization...... 95,567 42,844 24,226 7,369C 170,006
--------- -------- -------- -------- ---------
384,733 113,394 74,426 7,369 579,922
--------- -------- -------- -------- ---------
Operating loss..................... (82,627) (41,638) (14,063) (7,890) (146,218)
OTHER INCOME (EXPENSE)
Interest and other income.......... 23,478 1,097 7,406 31,981
Interest expense................... (141,622) (32,793) (28,718) (25,981)F (229,114)
Other.............................. 2,797 (12,603) 1,402 (8,404)
Equity in net losses of
affiliates....................... (18,453) 8,784E (9,669)
--------- -------- -------- -------- ---------
Net loss........................... (197,974) (85,937) (52,426) (25,087) (361,424)
Preferred stock dividends.......... (7,397) (6,838)G (14,235)
--------- -------- -------- -------- ---------
Net loss available to common
shareholders..................... $(205,371) $(85,937) $(52,426) $(31,925) $(375,659)
========= ======== ======== ======== =========
Net loss per common share -- basic
and fully diluted................ $ (5.79) $ (6.93)
========= =========
Weighted average shares
outstanding...................... 35,448 18,764B 54,212
========= ======== =========
</TABLE>
51
<PAGE> 60
NTL INCORPORATED
PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
(UNAUDITED)
FOR THE YEAR ENDED DECEMBER 31, 1997
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
NTL COMTEL PARTNERS
(HISTORICAL) (HISTORICAL) (HISTORICAL) ADJUSTMENTS PRO FORMA
------------ ------------ ------------ ----------- ---------
<S> <C> <C> <C> <C> <C>
REVENUES.......................... $ 491,775 $ 84,010 $ 92,812 $ (1,063)D $ 667,534
COSTS AND EXPENSES
Operating expenses................ 301,644 36,349 32,144 370,137
Selling, general and
administrative expenses......... 169,133 55,546 50,532 275,211
Franchise fees.................... 23,587 23,587
Corporate expenses................ 18,324 18,324
Nonrecurring charges.............. 20,642 20,642
Management fees................... 5,248 5,248
Depreciation and amortization..... 150,509 53,405 41,913 15,547C 261,374
--------- --------- --------- -------- ---------
683,839 145,300 129,837 15,547 974,523
--------- --------- --------- -------- ---------
Operating loss.................... (192,064) (61,290) (37,025) (16,610) (306,989)
OTHER INCOME (EXPENSE)
Interest and other income......... 28,415 3,343 11,890 43,648
Interest expense.................. (202,570) (44,298) (41,348) (72,410)F (360,626)
Other............................. 22,071 10,727 (8,860) 23,938
Equity in net losses of
affiliates...................... (10,033) (34,986) 14,113E (30,906)
--------- --------- --------- -------- ---------
Loss before income taxes.......... (344,148) (101,551) (110,329) (74,907) (630,935)
Income tax benefit................ 15,591 (164) 15,427
--------- --------- --------- -------- ---------
Net loss.......................... (328,557) (101,715) (110,329) (74,907) (615,508)
Preferred stock dividends......... (11,978) (12,621)G (24,599)
--------- --------- --------- -------- ---------
Net loss available to common
shareholders.................... $(340,535) $(101,715) $(110,329) $(87,528) $(640,107)
========= ========= ========= ======== =========
Net loss per common shares --basic
and fully diluted............... $ (10.60) $ (12.58)
========= =========
Weighted average shares
outstanding..................... 32,117 18,764B 50,881
========= ======== =========
</TABLE>
52
<PAGE> 61
NTL INCORPORATED
PRO FORMA CONDENSED COMBINED BALANCE SHEET
JUNE 30, 1998
(IN THOUSANDS)
<TABLE>
<CAPTION>
NTL COMTEL PARTNERS
(HISTORICAL) (HISTORICAL) (HISTORICAL) ADJUSTMENTS PRO FORMA
------------ ------------ ------------ ----------- ----------
<S> <C> <C> <C> <C> <C>
ASSETS:
Current Assets:
Cash and cash equivalents....... $ 804,285 $ 19,195 $153,861 $216,671B $1,194,012
Other current assets............ 467,080 209,283 17,672 694,035
---------- -------- -------- -------- ----------
Total current assets.............. 1,271,365 228,478 171,533 216,671 1,888,047
Investment in affiliates.......... 89,970 (35,701)B 54,269
Fixed assets, net................. 2,279,636 491,897 507,433 123,091B 3,402,057
Intangible assets, net............ 518,117 261,544 75,975 (253,842)B 601,794
Other assets, net................. 94,710 10,974 23,342F 129,026
---------- -------- -------- -------- ----------
Total assets.................... $4,163,828 $981,919 $855,885 $ 73,561 $6,075,193
========== ======== ======== ======== ==========
LIABILITIES AND SHAREHOLDERS'
EQUITY
Current liabilities:
Other current liabilities....... $ 358,726 $140,080 $ 42,556 $ 26,682F $ 568,044
Current portion of long-term
debt and capital leases....... 663,926 3,238 333,340B 1,000,504
Due to affiliates............... 1,935 1,935
---------- -------- -------- -------- ----------
Total current liabilities..... 1,022,652 140,080 47,729 360,022 1,570,483
Long-term debt.................... 3,020,012 551,169 3,571,181
Other............................. 902 4,192 5,094
Deferred income taxes............. 70,695 63,097B 133,792
Long-term debt, due to
shareholder..................... 19,625 19,625
Senior redeemable exchangeable
preferred stock................. 116,086 116,086
Shareholders' equity:
Debt not assumed................ 516,187 (516,187)
Preferred stock................. 125,003B 125,003
Common stock and additional
paid-in capital............... 721,388 600,448B 1,321,836
Acquired company equity......... 325,652 233,170 (558,822)B
Accumulated other comprehensive
income........................ 127,119 127,119
Deficit......................... (915,026) (915,026)
---------- -------- -------- -------- ----------
(66,519) 841,839 233,170 (349,558) 658,932
---------- -------- -------- -------- ----------
Total liabilities and
shareholders' equity............ $4,163,828 $981,919 $855,885 $ 73,561 $6,075,193
========== ======== ======== ======== ==========
</TABLE>
53
<PAGE> 62
NTL INCORPORATED
PRO FORMA ADJUSTMENTS
(IN THOUSANDS)
<TABLE>
<S> <C> <C> <C>
A CONSENT PAYMENTS................................... $ --
=========
</TABLE>
<TABLE>
<CAPTION>
COMTEL(1)
---------------------
ACQUIRED ACQUIRED
JUNE SEPTEMBER
PARTNERS' 1998 1998
--------- -------- ---------
<S> <C> <C> <C>
B PURCHASE PRICE AND ALLOCATION
PURCHASE PRICE
Partners series A shares outstanding..................... 37,232
Partners series B shares outstanding..................... 12,873
---------
Total shares outstanding............................ 50,105
Exchange ratio........................................... 0.3745
---------
NTL Shares to be issued............................. 18,764
NTL closing price on date prior to
announcement........................................... $ 32.00
---------
Preferred stock (L75,000,000)............................ -- 125,003
Short-term debt (L200,000,000)........................... -- 333,340
--------- ---------
Subtotal................................................. 600,448 458,343
Fees..................................................... 3,340
--------- ---------
Purchase Price........................................... 600,448 461,683
Net assets at June 30, 1998.............................. (233,170) (841,839)
Intangibles at June 30, 1998............................. 75,975 261,544
Investment in Birmingham................................. 35,701 --
Proceeds from proposed sale of Birmingham................ (216,671) --
--------- ---------
Excess of Purchase Price over net tangible assets
acquired............................................... $ 262,283 $205,981 $(118,612)
========= ======== =========
ALLOCATED TO
Fixed assets............................................. $ 74,178 $ 38,456 $ 48,913
Intangible assets........................................ 251,202 167,525 (167,525)
Deferred taxes........................................... (63,097) -- --
--------- -------- ---------
$ 262,283 $205,981 $(118,612)
========= ======== =========
</TABLE>
The intangible assets arising from the Partners' acquisition will include
customer lists, the excess of the fair value over historical cost of investment
in Cable London, and license acquisition costs. The amount of each individual
intangible is not currently determinable. The amounts of each intangible will be
determined based on appraisals and other analyses. The amortization period for
each may vary, although it is assumed in Pro Forma Adjustment C following that
15 years is a representative blended amortization period.
54
<PAGE> 63
NTL INCORPORATED
PRO FORMA ADJUSTMENTS
(IN THOUSANDS)
<TABLE>
<CAPTION>
COMTEL
---------------------
ACQUIRED ACQUIRED
JUNE SEPTEMBER
PARTNERS' 1998 1998
--------- -------- ---------
<S> <C> <C> <C>
C AMORTIZATION AND DEPRECIATION
For the six months ended June 30, 1998:
Depreciation of fixed asset allocation (over 7
years).............................................. $ 5,299 $ 2,747 $ 3,494
Amortization of intangibles (over 15 years)............ 8,374 5,584 (5,584)
Historical amortization of intangibles................. (5,027) -- (7,518)
--------- -------- ---------
$ 8,646 $ 8,331 $ (9,608)
========= ======== =========
For the year ended December 31, 1997:
Depreciation of fixed asset allocation (over 7
years).............................................. $ 10,597 $ 5,494 6,988
Amortization of intangibles (over 15 years)............ 16,747 11,168 (11,168)
Historical amortization of intangibles................. (9,244) -- (15,035)
--------- -------- ---------
$ 18,100 $ 16,662 $ (19,215)
========= ======== =========
D CONSULTING REVENUE
Partners' consulting fee income earned under consulting
agreement with Birmingham which will cease upon the
sale of Birmingham
For the six months ended June 30, 1998................... $ 521
=========
For the year ended December 31, 1997..................... $ 1,063
=========
E EQUITY IN NET LOSS
Partner's equity in the net loss of Birmingham that will
no longer be recorded after the sale of Birmingham.
For the six months ended June 30, 1998................... $ 8,784
=========
For the year ended December 31, 1997..................... $ 14,113
=========
</TABLE>
55
<PAGE> 64
NTL INCORPORATED
PRO FORMA ADJUSTMENTS
(IN THOUSANDS)
<TABLE>
<CAPTION>
COMTEL
---------------------
ACQUIRED ACQUIRED
JUNE SEPTEMBER
PARTNERS' 1998 1998
--------- -------- ---------
<S> <C> <C> <C>
F INTEREST EXPENSE
Interest on Debt Not Assumed
For the six months ended June 30, 1998................. $ (32,793)
=========
For the year ended December 31, 1997................... $ (44,298)
=========
Interest on the New Credit Facility utilized to acquire
ComTel(2)
(L475,000,000 at 12% per Annum)
For the six months ended June 30, 1998................. $ 47,019
=========
For the year ended December 31, 1997................... $ 93,366
=========
Amortization of fees on the New Credit Facility recorded
as deferred financing costs (such fees are at 3% per
annum)
For the six months ended June 30, 1998................. $ 11,755
=========
For the year ended December 31, 1997................... $ 23,342
=========
Net Statement of Operations Impact
For the six months ended June 30, 1998................. $ 25,981
=========
For the year ended December 31, 1997................... $ 72,410
=========
Balance Sheet Impact at June 30, 1998.................... $ 23,342
=========
G PREFERRED STOCK DIVIDEND
Dividends at 9.9% on the preferred stock to be issued in
the ComTel acquisition
For the six months ended June 30, 1998................. $ 6,838
=========
For the year ended December 31, 1997................... $ 12,621
=========
</TABLE>
- ---------------
(1) On June 16, 1998, NTL agreed to acquire substantially all of the operations
of ComTel in a two-part transaction in exchange for approximately L550
million. The first part of the transaction closed on June 16, 1998 and was
financed using funds available under the New Credit Facility. The second
part of the transaction closed on September 22, 1998.
(2) The New Credit Facility bears interest at LIBOR, plus 3% per annum
increasing by .25% per annum each month beginning three months after the
first drawdown to a maximum of 4% per annum, and matures on January 31,
1999, subject to extension to June 30, 1999.
56
<PAGE> 65
THE NTL SPECIAL MEETING
PURPOSE, TIME AND PLACE
This Joint Proxy Statement/Prospectus is being furnished to holders of NTL
Common Stock in connection with the solicitation of proxies by the NTL Board for
use at the NTL Special Meeting to be held at 10:00 a.m., local time, on
Thursday, October 29, 1998, at the Essex House Hotel, 160 Central Park South,
Hyde Park Suite, New York, New York 10019, and any adjournment or postponement
thereof.
At the NTL Special Meeting, the stockholders of NTL will consider and vote
upon a proposal to approve the Share Issuance and the Shares Amendment. Holders
of NTL Common Stock will also be asked to consider and vote upon such other
business as may properly come before the NTL Special Meeting.
The NTL Board has unanimously determined that the Amalgamation and the
Share Issuance are in the best interests of NTL and its stockholders and has
approved the Amalgamation Agreement and the Shares Amendment. THE NTL BOARD
UNANIMOUSLY RECOMMENDS THAT THE STOCKHOLDERS OF NTL VOTE IN FAVOR OF THE SHARE
ISSUANCE AND THE SHARES AMENDMENT AT THE NTL SPECIAL MEETING. See "THE
AMALGAMATION -- NTL's Reasons for the Amalgamation; Recommendation of the NTL
Board."
RECORD DATE; VOTING RIGHTS
Only holders of record of NTL Common Stock at the close of business on the
NTL Record Date, Thursday, September 17, 1998, are entitled to receive notice
of, and to vote at, the NTL Special Meeting. On the NTL Record Date, there were
41,390,544 outstanding shares of NTL Common Stock, held by 539 holders of
record. Each such share entitles the registered holder thereof to one vote.
QUORUM
The holders of a majority of the shares of NTL Common Stock outstanding and
entitled to vote must be present in person or represented by proxy at the NTL
Special Meeting in order for a quorum to be present. Abstentions and broker
non-votes will be treated as shares of NTL Common Stock that are present and
entitled to vote for purposes of determining the presence of a quorum at the NTL
Special Meeting.
REQUIRED VOTE
Approval of the Share Issuance requires the affirmative vote of the holders
of a majority of the votes cast with respect to the Share Issuance at the NTL
Special Meeting. Approval of the Shares Amendment requires the affirmative vote
of the holders of a majority of the outstanding shares of NTL Common Stock.
Under applicable Delaware law, in determining whether the Share Issuance has
received the requisite number of affirmative votes, abstentions and broker
non-votes will be disregarded and will have no effect on the outcome of the
vote, and in determining whether the Shares Amendment has received the requisite
number of affirmative votes, abstentions and broker non-votes will have the
effect of negative votes.
As of the NTL Record Date, directors and executive officers of NTL and
their affiliates were the beneficial owners of an aggregate of 3,308,310
(approximately 8%) of the shares of NTL Common Stock then outstanding and
eligible to vote. All such directors and executive officers of NTL are expected
to vote for approval of the Share Issuance and the Shares Amendment.
PROXIES
All shares of NTL Common Stock represented by properly executed proxies
that are received in time for the NTL Special Meeting and which have not been
revoked will be voted in accordance with the instructions indicated in such
proxies. If no instructions are indicated, such shares will be voted in favor of
the Share Issuance. In addition, the persons designated in such proxies will
have the discretion to vote on matters incident to the conduct of the NTL
Special Meeting. If NTL proposes to adjourn the NTL Special Meeting,
57
<PAGE> 66
the persons named in the enclosed proxy card will vote all shares for which they
have authority (other than those that have been voted against the Share
Issuance) in favor of such adjournment.
The grant of a proxy on the enclosed NTL proxy card does not preclude a
stockholder from voting in person at the NTL Special Meeting. A stockholder may
revoke a proxy at any time prior to its exercise by (i) delivering to the
Secretary of NTL, prior to the NTL Special Meeting, a written notice of
revocation bearing a later date or time than the proxy, (ii) delivering to the
Secretary of NTL a duly executed proxy bearing a later date or time than the
revoked proxy or (iii) attending the NTL Special Meeting and voting in person.
Attendance at the NTL Special Meeting will not in and of itself constitute the
revocation of a proxy.
NTL will bear the cost of solicitation of proxies from its stockholders. In
addition to solicitation by mail, the directors, officers and employees of NTL
and its subsidiaries may solicit proxies from stockholders of NTL by telephone,
telegram or in person. Arrangements will also be made with brokerage houses and
other custodians, nominees and fiduciaries for the forwarding of solicitation
material to the beneficial owners of stock held of record by such persons, and
NTL will reimburse such custodians, nominees and fiduciaries for their
reasonable out-of-pocket expenses in connection therewith.
In addition, NTL has retained D.F. King & Co., Inc. ("D.F. King") to assist
NTL in the solicitation of proxies from stockholders in connection with the NTL
Special Meeting. D.F. King will receive a fee of $5,000 as compensation for its
services and reimbursement of its out-of-pocket expenses in connection
therewith. NTL has agreed to indemnify D.F. King against certain liabilities
arising out of or in connection with its engagement.
58
<PAGE> 67
THE PARTNERS SPECIAL GENERAL MEETING
PURPOSE, TIME AND PLACE
This Joint Proxy Statement/Prospectus is being furnished to holders of
Partners Common Shares in connection with the solicitation of proxies by the
Partners Board for use at the Partners Special General Meeting to be held at
10:00 a.m., local time, on Thursday, October 29, 1998, at Comcast Corporation,
1500 Market Street, 33rd Floor, in Philadelphia, Pennsylvania, and any
adjournment or postponement thereof.
At the Partners Special General Meeting, the shareholders of Partners will
be asked to consider and vote upon a proposal to approve the Amalgamation. In
addition, the shareholders of Partners will receive and adopt the financial
statements of Partners and the auditors' report thereon for the fiscal year
ended December 31, 1997, as contained in Partners' Annual Report on Form 10-K.
Shareholders of Partners will also be asked to consider and vote upon all other
matters as may properly be brought before the Partners Special Meeting.
The Partners Board has unanimously determined that the Amalgamation is in
the best interests of Partners and its shareholders and has approved the
Amalgamation Agreement. THE PARTNERS BOARD RECOMMENDS THAT THE SHAREHOLDERS OF
PARTNERS VOTE IN FAVOR OF APPROVAL OF THE AMALGAMATION AND THE ABOVE PROPOSALS
AT THE PARTNERS SPECIAL GENERAL MEETING. See "THE AMALGAMATION -- Partners'
Reasons for the Amalgamation; Recommendation of the Partners Board." For a
discussion of the interests that certain directors and executive officers of
Partners have with respect to the Amalgamation in addition to their interests as
shareholders of Partners generally, and information regarding the treatment of
options to purchase Partners Common Shares and other equity-based awards and
other rights of certain members of the Partners Board, see "THE
AMALGAMATION -- Interests of Certain Persons in the Amalgamation," "THE
AMALGAMATION AGREEMENT -- Partners Incentive Plans," " -- Employee Benefits,"
and " -- Indemnification and Insurance." Such interests, together with other
relevant factors, were considered by the Partners Board in making its
recommendation and approving the Amalgamation Agreement.
RECORD DATE; VOTING RIGHTS
Only holders of record of Partners Common Shares entered in the registrar
of members of Partners at the close of business on the Partners Record Date,
Thursday, September 17, 1998, are entitled to receive notice of the Partners
Special General Meeting. All holders of Partners Common Shares entered in the
registrar of members of Partners on the date of the Partners Special General
Meeting are entitled to vote at the Partners Special General Meeting. As of June
30, 1998, there were outstanding 37,231,997 Class A Common Shares, held by 28
registered holders, and 12,872,605 Class B Common Shares, all of which were held
by Holdings. The Class A Common Shares and the Class B Common Shares vote
together. Each registered holder of Class A Common Shares is entitled to one
vote per share, and each registered holder of Class B Common Shares is entitled
to ten votes per share.
QUORUM
The presence in person or by proxy of shareholders of Partners representing
at least 50% of the total votes able to be cast at general meetings of Partners
will constitute a quorum for purposes of the Partners Special General Meeting.
Accordingly, the presence in person or by proxy at the Partners Special General
Meeting of Holdings and Warburg, Pincus will constitute a quorum, since Holdings
is entitled to cast approximately 77.6% of the total votes to be cast at general
meetings of Partners and Warburg, Pincus is entitled to cast approximately 6.2%
of the total votes to be cast at general meetings of Partners. See "CERTAIN
AGREEMENTS RELATED TO THE AMALGAMATION -- Voting Agreements."
REQUIRED VOTE
Approval of the Amalgamation at the Partners Special General Meeting
requires the affirmative vote of the holders of a majority of the total votes
able to be cast at general meetings of Partners. Under Bermuda law, only votes
cast in favor of a resolution count as affirmative votes. Votes which are
withheld, represented by
59
<PAGE> 68
broker non-votes or which abstain from voting are counted for quorum purposes
only. Holdings, based on its ownership of 100% of the Class B Common Shares, is
entitled to cast approximately 77.6% of the total votes to be cast at the
Partners Special General Meeting, and Warburg, Pincus, based on its ownership of
approximately 27.5% of the outstanding Class A Common Shares, is entitled to
cast approximately 6.2% of the total votes to be cast at the Partners Special
General Meeting. Accordingly, pursuant to the Voting Agreements, the Partners
Shareholder Approval is assured, notwithstanding any vote of any other holders
of Partners Common Shares. See "CERTAIN AGREEMENTS RELATED TO THE
AMALGAMATION -- Voting Agreements." As of June 30, 1998, directors and executive
officers of Partners and their affiliates were the beneficial owners of an
aggregate of less than 1% of the Class A Common Shares then outstanding and
eligible to vote.
DISSENTERS' RIGHTS
Under the Companies Act, any Dissenting Shareholder may within one month of
the giving of the notice of the Partners Special General Meeting apply to the
Court to appraise the fair value of such holder's shares. There is no right of
appeal from an appraisal by the Court. Such holder will receive the value
appraised by the Court only if the Amalgamation is completed. See "THE
AMALGAMATION -- Rights of Dissenting Shareholders."
PROXIES
All Class A Common Shares represented by properly executed proxies that are
received in time for the Partners Special General Meeting and that have not been
revoked will be voted in accordance with the instructions indicated in such
proxies. If no instructions are indicated, such shares will be voted in favor of
the Amalgamation. In addition, the persons designated in such proxies will have
discretion to vote on any matters incident to the conduct of the Partners
Special General Meeting. If Partners proposes to adjourn the Partners Special
General Meeting, the persons named in the enclosed proxy card will vote all
shares for which they have authority (other than those that have been voted
against the Amalgamation) in favor of such adjournment.
The grant of a proxy on the enclosed Partners proxy card does not preclude
a shareholder from voting in person at the Partners Special General Meeting. A
shareholder may revoke a proxy at any time prior to its exercise by (i)
delivering to the Secretary of Partners at least one hour prior to the Partners
Special General Meeting a written notice of revocation bearing a later date or
time than the proxy, (ii) delivering to the Secretary of Partners at least one
hour prior to the Partners Special General Meeting a duly executed proxy bearing
a later date or time than the revoked proxy or (iii) attending the Partners
Special General Meeting and voting in person. Attendance at the Partners Special
General Meeting will not in and of itself constitute the revocation of a proxy.
Partners will bear the cost of solicitation of proxies from its
shareholders. In addition to solicitation by mail, the directors, officers and
employees of Partners and its subsidiaries may solicit proxies from shareholders
of Partners by telephone, telegram or in person. Arrangements will also be made
with brokerage houses and other custodians, nominees and fiduciaries for the
forwarding of solicitation material to the beneficial owners of shares held of
record by such persons, and Partners will reimburse such custodians, nominees
and fiduciaries for their reasonable out-of-pocket expenses in connection
therewith.
In addition, Partners has retained D.F. King to assist Partners in the
solicitation of proxies from shareholders in connection with the Partners
Special General Meeting. D.F. King will receive a fee of $4,500 as compensation
for its services and reimbursement of its out-of-pocket expenses in connection
therewith.
IN CONNECTION WITH THE PARTNERS SPECIAL GENERAL MEETING, HOLDERS OF
PARTNERS COMMON SHARES SHOULD NOT RETURN TO PARTNERS ANY SHARE CERTIFICATES WITH
THEIR PROXIES.
60
<PAGE> 69
THE AMALGAMATION
The Amalgamation Agreement is included in its entirety in this Joint Proxy
Statement/Prospectus as Annex A and is incorporated herein by reference. The
underlying documents, copies of which have been filed as exhibits to Partners'
Annual Report on Form 10-K for the year ended December 31, 1997, and a copy of
the Form of Certificate of Designation, Preferences and Rights of Class D Junior
Participating Preferred Stock of NTL is also incorporated herein by reference.
We urge shareholders of Partners and stockholders of NTL to read such documents.
GENERAL
At the Effective Time, Sub will be amalgamated with Partners, with the
separate existence of Sub and Partners continuing in the form of the Amalgamated
Company. At and after the Effective Time, the Amalgamated Company will operate
under the name of "NTL (Bermuda) Limited" and continue under the provisions of
the Companies Act and other applicable Bermuda law.
On August 14, 1998, NTL and Partners entered into the TeleWest Agreement
with respect to, among other things, the Purchase Rights. Pursuant to the
TeleWest Agreement, the Birmingham Cable Equity Interest will be sold to
TeleWest immediately prior to the Amalgamation, and the status of the Cable
London Equity Interest has been Resolved for purposes of the Amalgamation. See
"THE TELEWEST AGREEMENT." Accordingly, when the sale of the Birmingham Cable
Equity Interest is consummated prior to the Closing (as provided in the TeleWest
Agreement), each Partners Common Share will be cancelled in consideration for
the receipt of .3745 shares of NTL Common Stock. See "THE AMALGAMATION
AGREEMENT -- Cancellation of Shares."
If, due to a breach of the TeleWest Agreement, the sale of the Birmingham
Cable Equity Interest pursuant to the TeleWest Agreement is not consummated
prior to the Closing, the status of the Birmingham Cable Equity Interest will be
Unresolved for purposes of the Amalgamation, and shareholders of Partners may
receive, at NTL's option, .3108 shares of NTL Common Stock, as well as .0637
shares of NTL Class D Stock equal to a portion of the consideration allocable to
the Birmingham Cable Equity Interest in lieu of the Exchange Ratio. For the
purpose of determining the consideration payable to shareholders of Partners in
the event the Purchase Right relating to Birmingham Cable is Unresolved at the
Determination Time, NTL and Partners have agreed that of the .3745 shares of NTL
Common Stock to be issued in consideration for the cancellation of each Partners
Common Share, .1161 shares and .0637 shares represent the percentages allocable
to Cable London and Birmingham Cable, respectively. Such percentages suggest a
notional valuation of the Cable London interest of 31% and the Birmingham Cable
interest of 17%, relative to the aggregate value of Partners as a whole. At
NTL's sole discretion, if the Purchase Right relating to Birmingham Cable is
Unresolved, NTL may elect to issue the allocated percentage of shares of NTL
Common Stock based on the Exchange Ratio (i.e., .0637 shares, based on the
allocation of 17% of the consideration to Birmingham Cable) in lieu of NTL Class
D Stock. However, NTL currently does not intend to elect to issue NTL Common
Stock in lieu of the NTL Class D Stock allocated to the Birmingham Cable Equity
Interest.
If issued, the NTL Class D Stock will be a class of preferred stock of NTL
and will remain outstanding for an indeterminate period of time until the sale
of the Birmingham Cable Equity Interest. Following such sale, shares of NTL
Class D Stock, if issued, will be exchanged for NTL Common Stock on a
one-for-one basis. While outstanding, any shares of NTL Class D Stock will
generally have the same voting and dividend rights as shares of NTL Common
Stock, would be subject to redemption as described below, and would be expected
to be listed for trading on the NASDAQ.
Subject to the foregoing, assuming that each shareholder of Partners will
receive .3745 shares of NTL Common Stock for each Partners Common Share, it is
anticipated that approximately 18.8 million shares of NTL Common Stock will be
issued in connection with the Share Issuance, representing approximately 31.2%
of the shares of NTL Common Stock expected to be outstanding after giving effect
to the consummation of the Amalgamation. If NTL Class D Stock is issued as part
of the consideration it is anticipated that approximately 3.2 million shares of
NTL Class D Stock will be issued in connection with the Share Issuance,
61
<PAGE> 70
representing 100% of the shares of such stock expected to be outstanding after
giving effect to the consummation of the Amalgamation.
NTL does not presently have sufficient shares of preferred stock authorized
in the event the NTL Class D Stock is issued using the exchange ratio referred
to above. NTL is seeking the approval of the Shares Amendment to increase the
authorized shares of preferred stock in order to permit the issuance of the NTL
Class D Stock using such ratio. However, obtaining the necessary NTL stockholder
approval for such increase in authorized shares of preferred stock is not a
condition to the Amalgamation. If stockholder approval of the Shares Amendment
is not obtained, NTL and Partners will agree to any necessary adjustments, which
may include the issuance of depositary shares that replicate the terms of the
NTL Class D Stock described above or adjusting the number of shares of NTL Class
D Stock (with corresponding changes to the terms of such shares) to ensure that
shareholders of Partners receive the intended benefits and rights of such NTL
Class D Stock described above.
PURCHASE RIGHTS RELATING TO PARTNERS' INTERESTS IN BIRMINGHAM CABLE AND CABLE
LONDON
Partners owns the Birmingham Cable Equity Interest and the Cable London
Equity Interest. As a result of the proposed Amalgamation, TeleWest, which owns
a 27.5% interest in Birmingham Cable and a 50% interest in Cable London, had
Purchase Rights to acquire the Equity Interests. However, pursuant to the
TeleWest Agreement, Partners' interest in Birmingham Cable will be sold to
TeleWest immediately prior to the Amalgamation, and the status of Partners'
interest in Cable London has been Resolved for purposes of the Amalgamation. See
"THE TELEWEST AGREEMENT."
Birmingham Cable. Partners and TeleWest are parties to the Co-Ownership
Agreement which sets forth certain agreements and arrangements regarding their
respective investments in Birmingham Cable. Under the terms of the Co-Ownership
Agreement, neither Co-Owner may sell, assign, transfer, pledge or otherwise
dispose of, or encumber directly or indirectly (including by virtue of any
change in control of such Co-Owner) (collectively, a "Transfer"), all or any
part of the shares of Birmingham Cable beneficially owned by such Co-Owner,
without first offering the other Co-Owner the right to purchase the shares of
Birmingham Cable beneficially owned by such Co-Owner. Consummation of the
Amalgamation will result in a change in control (as defined in the Co-Ownership
Agreement) of Partners and, accordingly, subject to the terms and conditions of
the Co-Ownership Agreement, TeleWest had the right to acquire the Birmingham
Cable Equity Interest.
Under the terms of the Co-Ownership Agreement, if the proposed Transfer is
due to a change in control, the Co-Owner who intends to Transfer its shares of
Birmingham Cable is obligated to notify the other Co-Owner of such intention and
the shares of Birmingham Cable owned by such Co-Owner are deemed to be offered
to the other Co-Owner, upon determination of the appraised value of such shares,
for purchase at a fixed cash price equal to the appraised value of such shares,
payable in full upon consummation of the change in control. For purposes of the
Co-Ownership Agreement, the "appraised value" means the fair market value of the
relevant shares of Birmingham Cable as agreed to in good faith, by the
Co-Owners. If the Co-Owners are unable to agree on the fair market value, the
Co-Ownership Agreement provides for the appraised value to be determined
pursuant to the following procedure. Within 10 days after notice from one
Co-Owner that it intends to Transfer its shares of Birmingham Cable as a result
of a change in control, the Co-Owners shall attempt to agree upon the selection
of a disinterested independent qualified investment banking firm or other
appraiser to determine the fair market value per share of Birmingham Cable based
on all relevant facts (including, without limitation, the terms of the
applicable change in control, which terms shall be disclosed to the appraiser
and the other Co-Owner). If the Co-Owners are able to agree upon an appraiser,
such appraiser shall be instructed to furnish a written appraisal within 30 days
of its selection. If the Co-Owners are unable to agree upon the selection of an
appraiser within such 10-day period, upon the request of either Co-Owner, an
appraiser shall be selected by the American Arbitration Association, which
appraiser shall be instructed to furnish a written appraisal within 30 days of
its selection. The determination of the fair market value per share of
Birmingham Cable pursuant to the appraisal procedure shall be final, conclusive
and binding upon the Co-Owners, absent a showing of fraud.
Upon determination of the appraised value per share of Birmingham Cable,
the shares of Birmingham Cable beneficially owned by the Co-Owner that are the
subject of the intended Transfer are deemed to be
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offered to the other Co-Owner for a fixed cash price per share equal to the
appraised value. For a period of 30 days after determination of the appraised
value, the other Co-Owner shall have the option to accept the offer. If such
other Co-Owner accepts the offer, the cash price will be payable in full upon
the consummation of the change of control of Partners (i.e., at the Effective
Time). If such other Co-Owner does not accept the offer within such 30-day
period, the shares of Birmingham Cable may be Transferred pursuant to the change
of control.
On February 6, 1998, Partners notified TeleWest of its intent to Transfer
its shares of Birmingham Cable as a result of the proposed Amalgamation. On
April 16, 1998, TeleWest announced that, subject to the value determined by the
appraisal procedure and the availability of financing, it proposed to exercise
its right to acquire the Birmingham Cable Equity Interest. As of May 26, 1998,
the Co-Owners had not been able to agree upon the fair market value of the
Birmingham Cable Equity Interest or upon a disinterested independent qualified
investment banking firm to determine the fair market value thereof. On May 26,
1998, TeleWest requested that the American Arbitration Association select an
appraiser to determine the fair market value of the Birmingham Cable Equity
Interest, and by letter dated June 8, 1998, the Philadelphia office of the
American Arbitration Association selected Merge Master Company to conduct such
appraisal. Although such firm had begun its appraisal process, on August 14,
1998, pursuant to the TeleWest Agreement, NTL, Partners and TeleWest agreed upon
a fair market value of the Birmingham Cable Equity Interest, thereby effectively
terminating such appraisal process. See "THE TELEWEST AGREEMENT -- Sale of
Birmingham Cable Equity Interest -- Notification to Appraiser."
Cable London. Prior to the passage of the Special Resolution pursuant to
the TeleWest Agreement, under the terms of Cable London's articles of
association, a change in control of Partners gave rise to a deemed offer by
Partners, as at the date of such change in control, of all of the shares of
Cable London to TeleWest. Consummation of the Amalgamation would have resulted
in a change of control (as defined in Cable London's articles of association) of
Partners and, accordingly, subject to the provisions of Cable London's articles
of association, TeleWest would have had the right to acquire the Cable London
Equity Interest. In contrast to TeleWest's right to acquire the Birmingham Cable
Equity Interest, which has already been triggered, TeleWest's right to acquire
the Cable London Equity Interest would not have been triggered until the
Amalgamation had been consummated.
The price payable for the shares of Cable London would have been the price
which the directors of Cable London determined to be the fair market value
thereof as at the date of the deemed offer between a willing seller and a
willing buyer contracting on arm's length terms, having regard to the fair value
of Cable London's business as a going concern. Cable London's articles of
association do not specify any time period within which the directors of Cable
London are required to make their determination of fair value. Once the fair
value of Partners' interest in Cable London had been determined, TeleWest would
have had 28 days to determine whether to accept the offer to purchase the Cable
London Equity Interest for cash at the determined fair value. The board of
directors of Cable London currently consists of seven members, certain of whom
have been appointed by Partners and by TeleWest and certain of whom are
considered to be independent. Pursuant to the TeleWest Agreement, however,
TeleWest and Partners have passed the Special Resolution to Cable London's
articles of association which provides, among other things, that the
Amalgamation will not be deemed to constitute a change of control of Partners
thereunder. Accordingly, for purposes of the Amalgamation, such resolution
effectively has eliminated the Purchase Right of TeleWest with respect to Cable
London. See "THE TELEWEST AGREEMENT -- Other Actions with Respect to Cable
London."
On April 16, 1998, TeleWest announced that, subject to the value determined
by the directors of Cable London and the availability of financing, it proposed
to exercise its right to acquire the Cable London Equity Interest. However, on
August 14, 1998, NTL, Partners, TeleWest and TeleWest Holdings entered into the
TeleWest Agreement pursuant to which at any time during the Shoot-out Period
following the Closing Date, Partners will notify TeleWest of the price at which
it is willing to sell the Cable London Equity Interest to TeleWest. Following
such notification, TeleWest shall either accept such offer and purchase the
Cable London Equity Interest from Partners at such price or decline such offer
and sell its 50% ownership interest in Cable London to Partners at such price.
See "THE TELEWEST AGREEMENT."
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Certain Agreements Between NTL and Partners Relating to the Purchase
Rights. Pursuant to the Amalgamation Agreement, NTL and Partners have agreed to
consult with each other as to any actions to be taken in connection with the
Purchase Rights. In this regard, NTL and Partners have agreed, among other
things, that NTL shall have the primary role in any negotiations in respect of
the Purchase Rights. See "THE AMALGAMATION AGREEMENT -- Additional
Agreements -- Purchase Rights."
BACKGROUND OF THE AMALGAMATION
During 1996, Partners began looking at its long-term strategic
alternatives, given the state of the UK cable television and telephony industry
generally. In October 1996, various third parties announced their intention to
create C&WC, which would become the largest franchise group in the UK cable
television and telephony industry. Following this announcement, Partners
determined to accelerate its decision making process with respect to its
strategic alternatives in light of the then current industry conditions and the
accelerated speed at which industry consolidation was occurring.
In October 1996, HSBC was retained as Partners' investment banker for the
purpose of evaluating and recommending possible strategic alternatives to
enhance Partners' long-term competitive position. In considering Partners'
strategic alternatives, the management of Partners and the Partners Board
believed that, given the consolidation that was occurring in the UK cable
television and telephony industry and the fact that Partners was one of the
smaller companies in this industry, the possibility of increasing shareholder
value in the long-term as an independent participant in this industry might be
limited and that Partners should explore the possibility of combining with a
third party.
In this regard, in late 1996 and the first half of 1997, Partners and its
representatives contacted various third parties (including NTL) to ascertain
their level of interest in a possible transaction and to obtain indications of
the potential value of such a transaction to shareholders of Partners. During
this time, Partners and its representatives also distributed a limited amount of
confidential information to parties who expressed an interest in a possible
transaction. While Partners and its representatives had discussions with several
third parties (including NTL), these discussions never proceeded beyond a
preliminary stage. Representatives of Partners had further discussions with
representatives of NTL in August 1997 but were unable to reach agreement on the
structure and terms of a possible transaction. During September and October
1997, there were occasional contacts between representatives of Partners and
NTL, but no progress was made toward a possible transaction.
In the fall of 1997, Partners determined that a possible transaction with a
third party was unlikely in the near-term and initiated discussions with a bank
group to arrange bank financing for further construction of its wholly-owned
properties in Cambridge and Teesside and, in December 1997, Partners closed on a
L200 million bank facility.
In early December 1997, Partners and NTL resumed discussions and, on
December 11, 1997, representatives of Partners met with representatives of NTL,
discussed certain issues relating to a possible acquisition of Partners by NTL
and agreed that it would be advisable for NTL to conduct an extensive review of
Partners to be in a better position to determine whether Partners and NTL could
agree upon the structure and financial terms on which a transaction might be
effected. During late December 1997 and early January 1998, NTL proceeded with
its due diligence review and, at the same time, representatives of Partners and
NTL continued their discussions concerning the structure and financial terms of
a possible transaction.
In early January 1998, NTL raised concerns about proceeding with
discussions with Partners unless the Purchase Rights were resolved in the
context of the overall consideration to be paid to shareholders of Partners.
From this period until February 2, 1998, the date on which the Partners Board
approved the Amalgamation Agreement, there were extensive negotiations between
NTL and Partners about both the consideration to be paid and the method with
which the Purchase Rights would be dealt.
In mid-January 1998, NTL stated that it was unwilling to continue
negotiations concerning a possible transaction unless Partners entered into a
letter agreement (the "Exclusivity Letter") with NTL that (i) would require
Partners to negotiate with NTL on an exclusive basis through February 28, 1998
and (ii) in the event that Partners entered into an agreement regarding a
transaction with a third party other than NTL prior to June 30, 1998, would
require Partners to make a payment to NTL of $20.0 million.
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At a meeting held on January 29, 1998, the Partners Board considered and
approved the Exclusivity Letter. In approving the Exclusivity Letter, the
Partners Board considered, among other things, Partners' strategic alternatives,
the condition of the UK cable television and telephony industry generally and
Partners in particular, the fact that the existence of third party options to
acquire Partners' ownership interests in Cable London and Birmingham Cable in
the event of a change of control created uncertainty for potential purchasers
and affected Partners' salability, the fact that the efforts that had been made
in the past year to locate other potential purchasers had been unsuccessful, the
discussions to date with NTL regarding a possible transaction, the fact that NTL
was unwilling to continue negotiations without the Exclusivity Letter, and the
proposed terms and conditions of the Exclusivity Letter. In approving the
Exclusivity Letter, the Partners Board did not consider or approve a specific
transaction with NTL and, accordingly, no financial terms regarding the
Amalgamation were agreed to by the Partners Board.
On January 29, 1998, following the meeting of the Partners Board,
representatives of Partners and NTL met again and signed the Exclusivity Letter.
The Exclusivity Letter did not represent a binding agreement with respect to
entering into or the terms of a potential transaction with NTL. At the time of
the execution of the Exclusivity Letter, the parties determined to continue,
subject to completion of their reviews of each other's business and the approval
of their respective Boards of Directors, the negotiation of the financial terms
and documentation of an amalgamation transaction on the basis of a fixed
exchange ratio and mechanics to deal with the effects of the Purchase Rights on
the consideration to be received in the Amalgamation similar to those adopted in
the Amalgamation Agreement.
From January 29, 1998, through the signing of the Amalgamation Agreement on
February 4, 1998, representatives of Partners and NTL negotiated the
Amalgamation Agreement. The Amalgamation Agreement was approved by the Partners
Board at a meeting held on February 2, 1998 and by the NTL Board at a meeting
held on February 3, 1998. The Amalgamation Agreement was signed on February 4,
1998 and announced on the morning of February 5, 1998.
On January 29, 1998, the date on which the Exclusivity Letter was executed,
the composite closing prices of the NTL Common Stock and the Class A Common
Shares, as reported on the NASDAQ, were $32.250 per share and $9.438 per share,
respectively. On February 2, 1998, the date on which the Partners Board approved
the Amalgamation Agreement, the composite closing prices of the NTL Common Stock
and the Class A Common Shares, as reported on the NASDAQ, were $31.938 per share
and $9.438 per share, respectively. On February 3, 1998, the date on which the
NTL Board approved the Amalgamation Agreement, the composite closing prices of
the NTL Common Stock and the Class A Common Shares, as reported on the NASDAQ,
were $31.875 per share and $9.563 per share, respectively. On February 4, 1998,
the date on which the Amalgamation Agreement was executed, the composite closing
prices of the NTL Common Stock and the Class A Common Shares, as reported on the
NASDAQ, were $32.000 per share and $9.250 per share, respectively.
On February 6, 1998, Partners notified TeleWest of its intent to Transfer
its shares of Birmingham Cable as a result of the proposed Amalgamation. On
April 16, 1998, TeleWest announced that, subject to the value determined by the
appraisal procedure and the availability of financing, it proposed to exercise
its right to acquire the Birmingham Cable Equity Interest. As of May 26, 1998,
the Co-Owners had not been able to agree upon the fair market value of the
Birmingham Cable Equity Interest or upon a disinterested independent qualified
investment banking firm to determine the fair market value thereof.
On May 28, 1998, NTL, Sub and Partners amended the Amalgamation Agreement
to extend the deadline for the consummation of the Amalgamation from August 4,
1998 to October 5, 1998, subject to certain exceptions. A copy of such amendment
to the Amalgamation Agreement is attached hereto as Annex B.
On May 26, 1998, TeleWest requested that the American Arbitration
Association select an appraiser to determine the fair market value of the
Birmingham Cable Equity Interest, and by letter dated June 8, 1998, the
Philadelphia office of the American Arbitration Association selected Merge
Master Company to conduct such appraisal. Although such firm had begun its
appraisal process, on August 14, 1998, NTL, Partners, TeleWest and TeleWest
Holdings entered into the TeleWest Agreement relating to Partners' ownership
interest in Birmingham Cable, Partners' and TeleWest's respective ownership
interests in Cable London and
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certain other related matters. Also on such date, the Amalgamation Agreement was
amended to provide that, among other things: (i) the deadline for the
consummation of the Amalgamation has been extended from October 5, 1998 to
November 4, 1998, subject to certain exceptions as described under "THE
AMALGAMATION AGREEMENT -- Termination;" (ii) NTL and Sub expressly consent to
the TeleWest Agreement and the transactions contemplated thereby, and if the
Amalgamation is not consummated, Partners will be entitled to exercise all of
its rights under the TeleWest Agreement without any obligation to NTL; and (iii)
as a result of the TeleWest Agreement, (A) the Purchase Right relating to
Birmingham Cable has been "Resolved," provided, that if, as of the Closing, the
Birmingham Cable Completion shall not have taken place or shall not be taking
place contemporaneously with the Closing, such Purchase Right shall be deemed to
be "Unresolved" and (B) the Purchase Right relating to Cable London has been
"Resolved." A copy of such amendment to the Amalgamation Agreement is attached
hereto as Annex C.
NTL'S REASONS FOR THE AMALGAMATION; RECOMMENDATION OF THE NTL BOARD
THE NTL BOARD HAS UNANIMOUSLY DETERMINED THAT THE AMALGAMATION AND THE
SHARE ISSUANCE ARE IN THE BEST INTERESTS OF NTL AND ITS STOCKHOLDERS AND HAS
APPROVED THE AMALGAMATION AGREEMENT. THE NTL BOARD UNANIMOUSLY RECOMMENDS THAT
THE STOCKHOLDERS OF NTL VOTE IN FAVOR OF THE SHARE ISSUANCE AND THE SHARES
AMENDMENT AT THE NTL SPECIAL MEETING.
NTL believes that the UK telecommunications industry is experiencing a
period of consolidation, which is driven in part by the need for companies to
increase their overall size in order to take advantage of increased market
penetration and network capacity utilization. In line with this general trend,
NTL views growth through strategic acquisitions and combinations as an important
aspect of its business development program.
In particular, NTL believes that the Amalgamation will provide NTL with the
opportunity to achieve certain strategic and financial benefits including (i)
improved operating performance and reduced operating costs, (ii) an enhanced
return on its national telecoms assets through increased network capacity
utilization, (iii) increased penetration in the national business telecoms
market by expanding its local presence and increasing its geographic coverage
and (iv) benefits of scale in equipment procurement and programming acquisition.
In reaching its determination with respect to the Amalgamation and the
Share Issuance, the NTL Board consulted with management, as well as its
advisors, and considered the following potential benefits:
(i) the fact that the currently favorable conditions in the UK
telecommunications industry would make the integration of the two companies
easier at this time than in a negative period of a cycle;
(ii) the combination of the businesses, operations, financial
strengths, earnings and prospects of each of NTL and Partners will likely
create a combined company with greater financial stability, purchasing
power, marketing infrastructure and other advantages associated with
greater scale;
(iii) the significant potential enhancement of the strategic and
market position of the combined company beyond that achievable by NTL
alone, including an increase in NTL's local presence by more than 75%;
(iv) the detailed financial analyses and presentation of DLJ to the
NTL Board in connection with the NTL Board's consideration of the
Amalgamation Agreement, and the DLJ Opinion to the effect that, as of such
date and based upon and subject to the assumptions, limitations and
qualifications set forth in such opinion, the Exchange Ratio was fair to
NTL from a financial point of view (see "-- Opinion of NTL's Financial
Advisor"); and
(v) the opportunity, with a larger platform, for continued growth
through strategic acquisitions.
The NTL Board also considered a number of potentially negative factors,
including: (i) the inherent challenges to effecting the Amalgamation and the
attendant risk that management resources may be diverted from other strategic
opportunities and from operational matters for an extended period of time; (ii)
the likelihood of obtaining the Required British Approvals and the Required
Consents; (iii) the risk that the
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Amalgamation would not be consummated; (iv) the impact of the Amalgamation on
the customers and employees of each company; and (v) the risk that the market's
perception of the combined company may not be as favorable as currently
anticipated. In the NTL Board's view, these considerations were not sufficient,
either individually or collectively, to outweigh the benefits of the proposed
combination of the businesses of NTL and Partners.
At a special meeting of the NTL Board on February 3, 1998, the NTL Board
received presentations concerning and reviewed the terms of the Amalgamation
Agreement and the Amalgamation with members of NTL's management and its legal
and financial advisors. In particular, DLJ presented a summary of its analyses
in connection with the DLJ Opinion, which assumed, among other things, no
Exercise of the Purchase Rights and that the Exchange Ratio would be .3745. See
"-- Opinion of NTL's Financial Advisor." In considering the analysis prepared by
DLJ and the DLJ Opinion, the NTL Board recognized the limitations of such
assumptions but believed that, despite the uncertainty, approval of the
Amalgamation Agreement was in the best interests of NTL and its stockholders. As
a result of its review of the Amalgamation Agreement and the Amalgamation, the
NTL Board had a thorough understanding of the potential outcomes with respect to
the Purchase Rights and the strategic implications of such outcomes for NTL,
including the possibility that either or both Purchase Rights may, in fact, have
been Exercised, resulting in NTL's inability to acquire the related Equity
Interest(s) pursuant to the Amalgamation. In light of such an understanding, the
NTL Board still unanimously determined that the Amalgamation and the Share
Issuance are in the best interests of, NTL and its stockholders. ACCORDINGLY,
THE NTL BOARD HAS UNANIMOUSLY APPROVED THE AMALGAMATION AGREEMENT AND RECOMMENDS
THAT THE STOCKHOLDERS OF NTL VOTE IN FAVOR OF THE SHARE ISSUANCE AT THE NTL
SPECIAL MEETING.
In addition, in reaching its conclusions, the NTL Board considered, among
other things, (i) the judgment, advice and analyses of its management with
respect to the strategic, financial and operational benefits of the
Amalgamation, based in part on the business, financial, accounting and legal due
diligence investigations performed with respect to Partners; (ii) information
concerning the financial condition, results of operations, prospects, businesses
and stock price performance of NTL and Partners; (iii) current industry,
economic and market conditions; (iv) the potential synergies, efficiencies and
cost-savings as a result of the combination of NTL's and Partners' operations,
including the elimination of redundant costs at the corporate level; (v) the
express terms and conditions of the Amalgamation Agreement, which are viewed as
providing an equitable basis for the Amalgamation from the standpoint of NTL;
and (vi) the historical market prices and trading information with respect to
the NTL Common Stock and Partners Common Shares.
The foregoing discussion of the information and factors considered and
given weight by the NTL Board is not intended to be exhaustive. In view of the
variety of factors considered in connection with its evaluation of the
Amalgamation, the NTL Board did not find it practicable to and did not quantify
or otherwise assign relative weights to the specific factors considered in
reaching its determination. In addition, individual members of the NTL Board may
have given different weights to different factors.
OPINION OF NTL'S FINANCIAL ADVISOR
NTL engaged DLJ to act as financial advisor to NTL and to provide a
fairness opinion in connection with the transactions contemplated by the
Amalgamation Agreement based upon DLJ's qualifications, expertise and
reputation, as well as DLJ's prior investment banking relationship and
familiarity with NTL. On February 3, 1998, DLJ delivered its written opinion to
the NTL Board to the effect that, as of such date, and based upon and subject to
the assumptions, limitations and qualifications set forth in such opinion, the
Exchange Ratio was fair to NTL from a financial point of view.
THE FULL TEXT OF THE DLJ OPINION IS SET FORTH AS ANNEX D HERETO AND SHOULD
BE READ CAREFULLY IN ITS ENTIRETY FOR ASSUMPTIONS MADE, PROCEDURES FOLLOWED,
OTHER MATTERS CONSIDERED AND LIMITS OF THE REVIEW BY DLJ.
THE DLJ OPINION WAS PREPARED FOR THE NTL BOARD AND ADDRESSES ONLY THE
FAIRNESS OF THE EXCHANGE RATIO TO NTL FROM A FINANCIAL POINT OF VIEW AND DOES
NOT CONSTITUTE A RECOMMENDATION TO ANY STOCKHOLDER OF NTL AS TO
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HOW SUCH STOCKHOLDER SHOULD VOTE AT THE NTL SPECIAL MEETING. THE DLJ OPINION
DOES NOT CONSTITUTE AN OPINION AS TO THE PRICE AT WHICH THE NTL COMMON STOCK
WILL ACTUALLY TRADE AT ANY TIME. THE DLJ OPINION DOES NOT ADDRESS THE RELATIVE
MERITS OF THE AMALGAMATION AND THE OTHER BUSINESS STRATEGIES BEING CONSIDERED BY
THE NTL BOARD, NOR DOES IT ADDRESS THE NTL BOARD'S DECISION TO PROCEED WITH THE
AMALGAMATION.
DLJ was selected to render an opinion in connection with the Amalgamation
based upon DLJ's qualifications, expertise and reputation, including the fact
that DLJ, as part of its investment banking business, is regularly engaged in
the valuation of businesses and their securities in connection with mergers and
acquisitions, underwritings, sales and distributions of listed and unlisted
securities, private placements and valuations for corporate and other purposes.
The type and amount of consideration was determined in arm's length
negotiations between NTL and Partners. Except as set forth herein, no
restrictions or limitations were imposed upon DLJ with respect to the
investigations made or the procedures followed by DLJ in rendering the DLJ
Opinion.
In arriving at the DLJ Opinion, DLJ reviewed the February 2, 1998 draft of
the Amalgamation Agreement, including the exhibits thereto, as well as financial
and other information that was publicly available or furnished to DLJ by NTL and
Partners, including information provided during discussions with NTL's
management. Included in the information provided during discussions with NTL's
management were certain financial projections for NTL and Partners prepared by
the management of NTL and certain financial projections for Birmingham Cable and
Cable London supplied by the management of NTL. In addition, DLJ compared
certain financial and securities data of NTL and Partners with that of various
other companies whose securities are traded in public markets, reviewed the
historical stock prices of the Partners Common Shares and NTL Common Stock,
reviewed prices and premiums paid in certain other business combinations and
conducted such other financial studies, analyses and investigations as DLJ
deemed appropriate for purposes of rendering the DLJ Opinion.
In rendering the DLJ Opinion, DLJ relied upon and assumed the accuracy and
completeness of all of the financial and other information that was available to
it from public sources, that was provided to or discussed with it by NTL or
NTL's representatives or that was otherwise reviewed by DLJ. DLJ relied upon the
estimates of the management of NTL of the operating improvements achievable as a
result of the Amalgamation and upon its discussion of such improvements with the
management of NTL. DLJ also assumed that the financial projections supplied to
DLJ were reasonably prepared and reflected the best currently available
estimates and judgments of the management of NTL as to the future operating and
financial performance of NTL, Partners, Birmingham Cable and Cable London,
respectively. In rendering the DLJ Opinion, DLJ did not assume any
responsibility for making any independent valuation of any assets or liabilities
of NTL, Partners, Birmingham Cable or Cable London, or for making any
independent verification of any of the information reviewed by DLJ. In addition,
DLJ relied as to certain legal matters on advice of counsel to NTL. With the
consent of NTL, DLJ assumed that the Exchange Ratio would be .3745 and that the
Purchase Rights relating to Birmingham Cable and Cable London would not be
exercised.
The DLJ Opinion is necessarily based on economic, market, financial and
other conditions as they exist on, and on information made available to DLJ as
of, the date thereof. DLJ does not have any obligation to update, revise or
reaffirm the DLJ Opinion.
The following is a summary of the analyses presented by DLJ to the NTL
Board at its February 3, 1998 meeting. All analyses discussed below, unless
otherwise indicated, (i) assume the Exchange Ratio is calculated using a per
share NTL Common Stock price of $31.94, based on the closing price of the NTL
Common Stock on February 2, 1998, (ii) assume no exercise of the Purchase
Rights, (iii) exclude any potential cost savings that may be achievable as a
result of the Amalgamation and (iv) assume an exchange rate of 1.612 U.S.
dollars per U.K. pound.
Common Stock Performance Analysis. DLJ's analysis of the performance of
NTL Common Stock consisted of a historical analysis of closing prices and
trading volumes for the period from December 29, 1995
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through February 2, 1998. During this time period, NTL Common Stock reached a
high of $33.25 per share and a low of $18.25 per share. On February 2, 1998, the
closing price of NTL Common Stock was $31.94 per share.
DLJ's analysis of the performance of Partners Common Shares consisted of a
historical analysis of closing prices and trading volumes for the period from
December 29, 1995 through February 2, 1998. During this time period, the
Partners Common Shares reached a high of $14.25 per share and a low of $8.88 per
share. On February 2, 1998, the closing price of the Partners Common Shares was
$9.44 per share.
DLJ also analyzed the historical relationship between the trading prices of
NTL Common Stock and Partners Common Shares for the period from December 29,
1995 through February 2, 1998. The average ratio of the closing price of
Partners Common Shares to that of NTL Common Stock for the aforementioned time
period was .4629, with a minimum ratio of .2890 and a maximum ratio of .6267.
Comparable Company Analysis. To provide contextual data and comparative
market information, DLJ analyzed the operating performance of Partners at the
Exchange Ratio relative to NTL, TeleWest and General Cable (collectively, the
"Comparable Companies"). Historical financial information used in connection
with the ratios provided below with respect to Partners and the Comparable
Companies is as of September 30, 1997, the most recent financial statements
publicly available for each company as of the date of the DLJ Opinion. DLJ
examined certain publicly available financial data, including (a) "Adjusted
Enterprise Value" (defined as market value of common equity plus book value of
proportionate debt and preferred stock less proportionate cash, plus, in the
case of NTL, proportionate interest in certain license fees to be paid, less
option proceeds and, in the case of NTL, less the value of non-cable businesses
which were valued at a multiple of 5.6x estimated calendar year 1997 earnings
before interest, taxes, depreciation and amortization ("EBITDA") for NTL's
broadcasting business and a multiple of 31.0x estimated calendar year 1997
EBITDA for NTL's telecommunications business) per "Equity Home" (defined as the
number of homes in the franchise areas) and (b) "Franchise Value" (defined as
Adjusted Enterprise Value less gross property, plant and equipment invested) per
Equity Home. DLJ noted that as of February 2, 1998, the Comparable Companies
were trading at (i) a range of $680 to $1,134 Adjusted Enterprise Value per
Equity Home, compared with Partners which, at the Exchange Ratio, would be
valued at $938 Adjusted Enterprise Value per Equity Home and (ii) a range of
($13) to $469 Franchise Value per Equity Home, compared with Partners which, at
the Exchange Ratio, would be valued at $211 Franchise Value per Equity Home.
No company utilized in the comparable company analysis is identical to
Partners. Accordingly, an analysis of the results of the foregoing necessarily
involves complex considerations and judgments concerning differences in
financial and operating characteristics of the Comparable Companies and Partners
and other factors that could affect the public trading value of the Comparable
Companies. Mathematical analysis such as determining the average may not in
itself be a meaningful method of using comparable company data.
Premium Analysis. DLJ derived an acquisition valuation for Partners based
on premiums offered in merger and acquisition transactions ranging from $500
million to $1.0 billion in size and announced between January 1, 1995 and
February 2, 1998. DLJ's analysis indicated that for the transactions reviewed,
the average premiums offered to the market price of the acquired company one
day, one week and one month prior to announcement were: 29.1%, 34.0% and 40.4%,
respectively, for stock transactions, 27.1%, 36.3% and 45.7%, respectively, for
cash transactions, and 27.7%, 34.8% and 42.4%, respectively, for all
transactions. Applying the above premiums to the closing price of Partners
Common Shares one day, one week and one month prior to February 2, 1998, implies
an acquisition valuation range of approximately $12.07 to $14.48 per Partners
Common Share.
Discounted Cash Flow Analysis. In addition, DLJ performed a discounted
cash flow ("DCF") analysis for the five-year period commencing January 1, 1998
and ending December 31, 2004 based on the stand-alone unlevered free cash flows
of Partners, without giving effect to the exercise of any Purchase Rights or any
potential cost savings that may be achievable as a result of the Amalgamation.
Unlevered free cash flows were calculated as the after-tax operating earnings of
Partners, plus depreciation and amortization and other non-cash items, plus (or
minus) net changes in working capital, minus projected capital expenditures. DLJ
calculated terminal values by applying a range of estimated multiples of EBITDA
of 8.5x to 13.5x to the
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projected EBITDA of Partners in 2004. The unlevered free cash flows and terminal
values were then discounted to the present using a range of discount rates of
12.5% to 17.5% representing an estimated range of the weighted average cost of
capital of Partners. Based on this analysis, DLJ calculated per share equity
values of Partners Common Shares ranging from $10.50 to $33.09.
Accretion/Dilution Analysis. DLJ also analyzed the pro forma effects on
the equity value per share of NTL Common Stock (based on DCF analyses as of
December 31, 1997) resulting from the Amalgamation. This analysis used a
discount rate of 15.0% and terminal values calculated using a terminal multiple
of 11.5x applied to the projected EBITDA for NTL on a stand-alone basis and pro
forma for the Amalgamation for each of the years ending December 31, 2003, 2004
and 2005. The analysis indicated that the Amalgamation is anticipated to be
dilutive to NTL's stand-alone equity value per share by 7.9%, 5.7% and 3.4%,
respectively.
Relative Contribution Analysis. DLJ analyzed the relative contributions of
NTL and Partners to the revenues and EBITDA of the pro forma combined entity for
the projected calendar years 1998, 2000, 2002 and 2004, without giving effect to
the exercise of the Purchase Rights and excluding any potential cost savings
that may be achievable as a result of the Amalgamation. Based on the projected
financial information for these calendar years, Partners' revenues in each of
these years would represent 21.9%, 21.0%, 19.6% and 20.7%, respectively, of the
pro forma combined entity, and Partners EBITDA in each of these years would
represent 27.9%, 22.0%, 20.2% and 22.7%, respectively, of the pro forma combined
entity. The shares of NTL Common Stock to be issued to the holders of Partners
Common Shares on a fully diluted basis would represent approximately 27.2% of
the outstanding shares of NTL Common Stock after giving effect to the
Amalgamation at the Exchange Ratio.
The summary set forth above does not purport to be a complete description
of the analyses performed by DLJ, but describes, in summary form, the principal
elements of the analyses contained in the materials presented by DLJ to the NTL
Board in connection with DLJ rendering the DLJ Opinion. The preparation of a
fairness opinion involves various determinations as to the most appropriate and
relevant methods of financial analysis and the application of these methods to
the particular circumstances and, therefore, such an opinion is not readily
susceptible to summary description. Each of the analyses conducted by DLJ was
carried out in order to provide a different perspective on the transaction and
add to the total mix of information available. DLJ did not form a conclusion as
to whether any individual analysis, considered in isolation, supported or failed
to support an opinion as to fairness from a financial point of view. Rather, in
reaching its conclusion, DLJ considered the results of the analyses in light of
each other and ultimately reached its opinion based on the results of the
analyses taken as a whole. DLJ did not place particular reliance or weight on
any individual factor, but instead concluded that its analyses, taken as a
whole, supported its determination. Accordingly, notwithstanding the separate
factors summarized above, DLJ believes that its analyses must be considered as a
whole and that selecting portions of its analysis and the factors considered by
it, without considering all analyses and factors, could create an incomplete or
misleading view of the evaluation process underlying its opinion. In performing
its analyses, DLJ made numerous assumptions with respect to industry
performance, business, regulatory and economic conditions and other matters. In
addition, DLJ assumed the absence of any material change in the UK
telecommunication or cable industries or UK economic conditions, generally. The
analyses performed by DLJ are not necessarily indicative of actual values or
future results, which may be significantly more or less favorable than suggested
by such analyses.
Pursuant to a letter agreement between NTL and DLJ dated February 3, 1998
(the "DLJ Engagement Letter"), NTL has agreed to pay DLJ (i) a retainer fee of
$250,000 payable upon execution of the DLJ Engagement Letter, (ii) a fee of
$1,000,000 payable at the time DLJ notified NTL that it was prepared to deliver
the DLJ Opinion, irrespective of the conclusion reached therein, (iii) a fee of
$100,000 for each update of the DLJ Opinion delivered by DLJ at NTL's request
and (iv) an additional fee of $3,000,000, (against which the amounts paid
pursuant to clauses (i), (ii) and (iii) above will be credited) upon the
consummation of the Amalgamation. In addition, NTL has agreed to reimburse DLJ
for all out-of-pocket expenses (including the reasonable fees and expenses of
its counsel) incurred by DLJ in connection with its engagement, whether or not
the Amalgamation is consummated, and to indemnify DLJ for certain liabilities
and expenses arising out of the Amalgamation or the transactions in connection
therewith, including liabilities
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under federal securities laws. The terms of the fee arrangement with DLJ were
negotiated at arm's length between NTL and DLJ and the NTL Board was aware of
such arrangement.
DLJ provides a full range of financial, advisory and brokerage services and
in the course of its normal trading activities may from time to time effect
transactions and hold positions in the securities of, or options on the
securities of, Partners or its affiliates and/or NTL for its own account and for
the account of its customers.
DLJ has performed investment banking and other services for the Company,
Partners and their affiliates in the past and has been compensated for such
services, including (i) acting as (a) lead manager for the offering in 1996 of
approximately $600 million of the 11 1/2% Notes by ICTI, the Company's
predecessor, (b) ICTI's financial advisor and agent in the 1996 consent
solicitation for approximately $489 million of the 11 1/2% Notes issued by ICTI,
(c) lead manager for the offering in 1996 of approximately $275 million of the
7% Convertible Notes by ICTI, (d) lead manager for the offering in 1997 of
approximately $400 million of the 10% Notes by ICTI, (e) lead manager for the
offering in 1997 of approximately $100 million of the NTL 13% Preferred and (f)
co-lead manager for the offering in 1998 of the Notes by NTL, (ii) acting as (a)
co-manager for the offering in 1996 of approximately $112 million of Class A
Common Shares by Partners, (b) financial adviser in 1996 to Comcast, with
respect to the sale of a 25% interest in Eastern Telelogic Corporation, (c)
co-manager for the offering in 1997 of approximately $1,700 million of Notes by
Comcast Cable Communications, Inc., an affiliate of Partners and (d) lead
manager for the offering in 1997 of approximately $1,000 million of Senior Notes
by Comcast Cellular Holdings, Inc., an affiliate of Partners, and (iii)
providing a valuation opinion in 1997 to Comcast Cellular Corporation ("CCC"),
an affiliate of Partners, with respect to CCC's redemption of its Series A
Senior Participating Zero Coupon Notes due 2000 in an aggregate principal amount
of approximately $500 million and its Series B Senior Participating Zero Coupon
Notes due 2000 in an aggregate principal amount of approximately $500 million.
PARTNERS' REASONS FOR THE AMALGAMATION; RECOMMENDATION OF THE PARTNERS BOARD
THE PARTNERS BOARD HAS UNANIMOUSLY DETERMINED THAT THE AMALGAMATION IS
ADVISABLE AND IN THE BEST INTERESTS OF PARTNERS AND THE HOLDERS OF PARTNERS
COMMON SHARES AS A GENERAL BODY RECOMMENDS THAT THE SHAREHOLDERS OF PARTNERS
VOTE IN FAVOR OF THE AMALGAMATION AT THE PARTNERS SPECIAL GENERAL MEETING.
The Partners Board believes that the Amalgamation will create a premier UK
cable television and telephony company that will be better positioned to compete
effectively in the UK cable television and telephony industry. It believes that
the Amalgamation will provide opportunities to achieve substantial benefits that
might not otherwise be available for the shareholders and customers of Partners.
In particular, Partners believes that the Amalgamated Company will benefit from
the combined financial resources, management and personnel of Partners and NTL,
will have a greater ability to implement marketing and customer service
programs, will have more leverage to negotiate favorable program pricing with
program suppliers, will be more coordinated in its dealings with industry
regulators and other governmental entities and will be better able to capitalize
on growth opportunities in the UK cable television and telephony industry.
In reaching its determination, the Partners Board considered a number of
factors, including the factors set forth in the preceding paragraph and the
following material factors:
(i) the current industry, economic and market conditions, including,
in particular, market sentiment towards the UK cable television and
telephony industry generally and the consolidation trend within this
industry;
(ii) the prospects for Partners as a stand-alone company given the
increased dominance of larger companies with significant scale and greater
financial resources;
(iii) extensive investigation of strategic alternatives by Partners
and HSBC, including continuing as an independent company with growth
through internal expansion, additional investment and acquisitions or the
possibility of Partners merging with another large UK cable television and
telephony company;
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(iv) the fact that the efforts that had been made by Partners and its
representatives during the past year to locate other potential purchasers
had been unsuccessful;
(v) the strategic fit between Partners and NTL;
(vi) the fact that the Exchange Ratio represented a premium of
approximately 30% over the market price of the Class A Common Shares
immediately prior to the announcement of the Amalgamation;
(vii) the fact that the shareholders of Partners would share in the
appreciation in the value of NTL Common Stock if the NTL Average Market
Price were to be greater than $32.00 per share;
(viii) the analysis prepared by HSBC and the HSBC Opinion (see
"-- Opinion of Partners' Financial Advisor");
(ix) the current and historical trading prices and values of the Class
A Common Shares and the NTL Common Stock and the current and historical
trading multiples of other comparable companies;
(x) the strength of the management team of NTL and the financial
condition and business reputation of NTL;
(xi) the existence of the Purchase Rights with respect to the Equity
Interests in the event of a change of control and the fact that the
Amalgamation and the consideration to be issued in the Amalgamation had
been structured to take into account the possible exercise of such Purchase
Rights, before or after the Effective Time; and
(xii) the fact that Comcast, the holder of the Class B Common Shares
which represent approximately 25.7% of the economic interest and
approximately 77.6% of the voting interest in Partners, was in favor of the
Amalgamation and had committed to NTL to vote in favor of the Amalgamation
Agreement at the Partners Special General Meeting (see "THE PARTNERS
SPECIAL GENERAL MEETING -- Required Vote").
In considering the analysis prepared by HSBC and the HSBC Opinion, the
Partners Board also had regard to the principal assumptions underlying the HSBC
Opinion, including that, in the event that the Purchase Rights relating to Cable
London and/or Birmingham Cable have not been Resolved as of the Determination
Time, (i) the net proceeds per Class A Common Share ultimately received by a
shareholder of Partners upon exercise of such Purchase Right(s) will not be
materially different from the respective proportions of the consideration set
forth in the Amalgamation Agreement and (ii) if the net proceeds per Class A
Common Share are paid in NTL Common Stock, the market value of the NTL Common
Stock paid as consideration to shareholders of Partners will be equal to such
net proceeds.
As to the first assumption, the Partners Board considered that the
percentages assigned to Partners' interests in Birmingham Cable and Cable London
were reasonable with respect to the relative value of such interests and,
accordingly, the Partners Board believed such assumption by HSBC to be
reasonable. In this regard, the Partners Board considered, among other things,
that the relative values of such interests, as reflected in a franchise analysis
prepared by HSBC for the Partners Board using valuation methodologies consistent
with those used in connection with the HSBC Opinion, were broadly consistent
with the agreed split of the consideration in the Amalgamation of 17% to
Birmingham Cable and 31% to Cable London. The Partners Board also believed that
HSBC's second assumption was reasonable. The Partners Board was aware that, if
as of the Determination Time, the Purchase Rights are Exercised and the then
current market price of NTL Common Stock is below $30.00 per share, NTL could
elect to pay the Equity Interest Proceeds in shares of NTL Common Stock, and
that the value of such NTL Common Stock received by shareholders of Partners may
be less than the amount of cash that would be received if NTL elected to pay
such proceeds in cash. However, the Partners Board believed that, based on the
current and historical trading prices of NTL Common Stock and its views as to
the benefits of the Amalgamation, it was not unreasonable for HSBC to assume
that NTL Common Stock would be trading at $30.00 per share or more as of the
Determination Time. In any event, the Partners Board considered the possibility
that NTL Common Stock could be trading at less than $30.00 per share and took
such factor into account in determining that the Amalgamation is in the best
interests of Partners and its shareholders as a general body. As a general
matter, the Partners Board also noted
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that HSBC considered in its valuation the fact that Cable London and Birmingham
Cable may be sold pursuant to the Purchase Rights.
The Partners Board also considered (i) the risk that the Amalgamation would
not be consummated, (ii) the effect of the public announcement of the
Amalgamation on customer and supplier relationships, operating results and
ability to retain employees, and on the trading price of the Class A Common
Shares, (iii) the potentially substantial management time and effort that will
be required to consummate the Amalgamation, (iv) the uncertainty created by the
existence of the Purchase Rights as to the consideration to be received by
shareholders of Partners at the Effective Time, including among other things,
the fact that (A) NTL would determine in its sole discretion the consideration
to be received by shareholders of Partners at the Effective Time if the Purchase
Rights had been exercised, or had not yet expired and had not yet been exercised
or waived, (B) shareholders of Partners might receive at the Effective Time not
only NTL Common Stock but also one or two classes of NTL Preferred Stock and (C)
any class of NTL Preferred Stock that was issued as part of the consideration in
the Amalgamation could remain outstanding for an indefinite period of time until
the applicable Purchase Rights had expired or had been exercised or waived (see
"THE AMALGAMATION AGREEMENT -- Cancellation of Shares"), (v) the commitment of
Comcast to vote in favor of the Amalgamation Agreement possibly would have the
effect of discouraging other persons potentially interested in acquiring
Partners and (vi) the provisions of the Amalgamation Agreement do not permit
Partners to terminate the Amalgamation Agreement and enter into a definitive
agreement with a third party in connection with a Superior Partners Takeover
Proposal (as defined herein) (see "THE AMALGAMATION AGREEMENT -- No
Solicitation"). The Partners Board also considered the fact that in the
Amalgamation NTL may not acquire the Birmingham Cable and Cable London
properties, depending on the outcome of the resolution of the Purchase Rights.
In the judgment of the Partners Board, the potential benefits of the
Amalgamation outweigh all these considerations.
In view of the wide variety of factors considered by the Partners Board in
connection with its evaluation of the Amalgamation and the complexity of such
matters, the Partners Board did not consider it practicable to, nor did it
attempt to, quantify, rank or otherwise assign relative weights to the specific
factors it considered in reaching its decision. The Partners Board relied on the
experience and expertise of its financial advisors for quantitative analysis of
the financial terms of the Amalgamation. See "-- Opinion of Partners' Financial
Advisor." In addition, the Partners Board did not undertake to make any specific
determination as to whether any particular factor (or any aspect of any
particular factor) was determinative to its ultimate determination or assign any
particular weight to any factor, but rather conducted a discussion of the
factors described above, including asking questions of Partners' management and
legal and financial advisors, and reached a general consensus that the
Amalgamation was advisable and in the best interests of Partners and its
shareholders as a general body. In considering the factors described above,
individual members of the Partners Board may have given different weight to
different factors.
THE PARTNERS BOARD UNANIMOUSLY RECOMMENDS THAT THE SHAREHOLDERS OF PARTNERS
VOTE IN FAVOR OF THE AMALGAMATION AT THE PARTNERS SPECIAL GENERAL MEETING.
OPINION OF PARTNERS' FINANCIAL ADVISOR
Partners. At the February 4, 1998 meeting of the Partners Board, HSBC
delivered its oral opinion to the Partners Board to the effect that, as of such
date, the proposed consideration to be received by holders of Class A Common
Shares (other than NTL and its affiliates) pursuant to the proposed Amalgamation
Agreement is fair from a financial point of view to such holders, subject to the
limitations described in the HSBC Opinion. HSBC also made an oral presentation
to the Partners Board at that date describing the basis for its oral opinion,
including the valuation methodologies set forth below. HSBC subsequently
delivered to the Partners Board the HSBC Opinion to the effect that, as of such
date, the proposed consideration to be received by holders of the Class A Common
Shares (other than NTL and its affiliates) pursuant to the proposed Amalgamation
Agreement is fair from a financial point of view to such holders, subject to the
limitations described in the HSBC Opinion.
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THE FULL TEXT OF THE HSBC OPINION, WHICH SETS FORTH THE ASSUMPTIONS MADE,
MATTERS CONSIDERED AND LIMITS ON THE REVIEW UNDERTAKEN, IS ATTACHED AS ANNEX E
TO THIS JOINT PROXY STATEMENT/PROSPECTUS AND IS INCORPORATED HEREIN BY
REFERENCE. THE SUMMARY OF THE HSBC OPINION SET FORTH IN THIS JOINT PROXY
STATEMENT/PROSPECTUS IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE FULL TEXT
OF SUCH OPINION. IN ARRIVING AT THE HSBC OPINION, HSBC DID NOT ASCRIBE ONE
SPECIFIC RANGE OF VALUES TO PARTNERS, BUT RATHER MADE ITS DETERMINATION AS TO
FAIRNESS, FROM A FINANCIAL POINT OF VIEW, OF THE CONSIDERATION TO BE RECEIVED BY
THE HOLDERS OF CLASS A COMMON SHARES IN THE AMALGAMATION ON THE BASIS OF THE
FINANCIAL AND COMPARATIVE ANALYSES DESCRIBED BELOW. THE HSBC OPINION IS DIRECTED
ONLY TO THE FAIRNESS OF THE CONSIDERATION TO BE RECEIVED BY HOLDERS OF CLASS A
COMMON SHARES (OTHER THAN NTL AND ITS AFFILIATES) IN THE AMALGAMATION PURSUANT
TO THE AMALGAMATION AGREEMENT FROM A FINANCIAL POINT OF VIEW AND DOES NOT
ADDRESS ANY OTHER ASPECT OF THE AMALGAMATION. IN ARRIVING AT THE HSBC OPINION,
HSBC DID NOT CONSIDER ANY RIGHTS WHICH WARBURG, PINCUS, ONE OF THE HOLDERS OF
CLASS A COMMON SHARES, MAY HOLD IN ADDITION TO ITS RIGHTS AS A HOLDER OF CLASS A
COMMON SHARES. THE HSBC OPINION DOES NOT ADDRESS THE FAIRNESS OF THE
CONSIDERATION TO BE RECEIVED BY HOLDERS OF CLASS B COMMON SHARES. HSBC'S
ENGAGEMENT AND THE HSBC OPINION ARE FOR THE BENEFIT OF THE PARTNERS BOARD, AND
THE HSBC OPINION IS RENDERED IN CONNECTION WITH THE CONSIDERATION BY THE
PARTNERS BOARD OF THE AMALGAMATION. THE HSBC OPINION IS NOT INTENDED TO AND DOES
NOT CONSTITUTE A RECOMMENDATION TO ANY SHAREHOLDER OF PARTNERS AS TO WHETHER
SUCH HOLDER SHOULD VOTE TO APPROVE THE AMALGAMATION AND THE TRANSACTIONS
CONTEMPLATED BY THE AMALGAMATION AGREEMENT. HSBC WAS NOT REQUESTED TO OPINE AS
TO, AND THE HSBC OPINION DOES NOT ADDRESS, PARTNERS' UNDERLYING BUSINESS
DECISION TO PROCEED WITH OR EFFECT THE AMALGAMATION. HOLDERS OF CLASS A COMMON
SHARES ARE URGED TO READ THE HSBC OPINION CAREFULLY AND IN ITS ENTIRETY.
In connection with rendering the HSBC Opinion, HSBC:
(i) reviewed the financial terms and conditions of the Amalgamation
Agreement;
(ii) analyzed certain historical business and financial information
relating to Partners and NTL;
(iii) reviewed various financial forecasts and other data provided to
it by Partners and NTL relating to their respective businesses;
(iv) participated in discussions with members of the senior
managements of Partners and NTL with respect to the business and prospects
of Partners and NTL, and the strategic objectives of each;
(v) reviewed public information with respect to certain other
companies in lines of business it believed to be generally comparable to
those of Partners and NTL;
(vi) reviewed the financial terms of certain business combinations
involving companies in lines of business it believed to be generally
comparable to those of Partners and NTL, and in other industries generally;
(vii) reviewed the historical stock prices and trading volumes of the
Class A Common Shares and the NTL Common Stock;
(viii) held discussions with Partners' attorneys concerning the
results of their due diligence procedures in connection with the
Amalgamation; and
(ix) conducted such other financial studies, analyses and
investigations as it deemed appropriate.
HSBC has relied upon the accuracy and completeness of the financial and
other information reviewed by it for purposes of the HSBC Opinion and has not
assumed any responsibility for any independent verification of such information
or any independent valuation or appraisal of any of the assets or liabilities of
Partners or NTL. In arriving at the HSBC Opinion, HSBC has not conducted a
physical inspection of the properties and facilities of Partners or NTL and has
neither made nor obtained any evaluations or appraisals of the assets or
liabilities of Partners or NTL. With respect to financial forecasts, HSBC has
assumed that they have been reasonably prepared on bases reflecting the best
currently available estimates and judgments of the respective managements of
Partners and NTL as to the future financial performance of Partners and NTL,
respectively. HSBC has relied on the commercial assessment of the directors and
management of both Partners and NTL
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and assumes no responsibility for and expresses no view as to such forecasts or
the assumptions on which they are based. HSBC has not been asked to review the
synergy benefits or additional costs which may arise from the transaction.
The HSBC Opinion is necessarily based on accounting standards, economic,
monetary, market and other conditions as in effect on, and the information made
available to HSBC as of, February 4, 1998. In addition, HSBC has not taken into
account the time value of money to a holder of Class A Common Shares, the tax
consequences of the Amalgamation for a holder of Class A Common Shares or any
change to the currency exchange risk which may arise for a holder of Class A
Common Shares in accepting the consideration to be received in the Amalgamation.
In rendering the HSBC Opinion, HSBC has assumed that the Amalgamation will
be consummated on the terms described in the Amalgamation Agreement, without any
waiver of any material terms or conditions by Partners or the obtaining of any
further consents or approvals from holders of Class A Common Shares, Class B
Common Shares or holders of NTL Common Stock, and that obtaining the necessary
regulatory approvals for the Amalgamation and any further consents or approvals
from holders of Partners' debt securities or holders of NTL's debt securities
will not have a material adverse effect on the Amalgamation, Partners, NTL or
the market price of NTL Common Stock. In addition, HSBC has not been requested
to and does not express any opinion as to the prices at which NTL Common Stock
may trade at any time prior to or following the date of the HSBC Opinion, and
HSBC has not considered the possible effects of any potential offering of
securities by or other transaction involving NTL or the absence thereof on the
market price of NTL Common Stock.
In rendering the HSBC Opinion, HSBC has also assumed that, in the event the
Purchase Rights with respect to the Equity Interests have not been Resolved as
of the Determination Time, (i) the net proceeds per Class A Common Share
ultimately received by a holder of Class A Common Shares upon exercise of such
Purchase Right(s) will not be materially different from the respective
proportions of the consideration to be received in the Amalgamation, as set
forth in the Amalgamation Agreement and (ii) if the net proceeds per Class A
Common Share are paid in NTL Common Stock, the market value of the NTL Common
Stock paid as consideration to holders of Class A Common Shares will be equal to
such net proceeds. In addition, if as of the Determination Time such Purchase
Right(s) remain Unresolved, HSBC has assumed that any NTL Class D Stock issued
to a holder of Class A Common Shares will be redeemed by NTL in accordance with
the terms thereof. See "THE AMALGAMATION AGREEMENT -- Cancellation of Shares."
HSBC is an internationally recognized investment banking firm and is
continually engaged in the valuation of businesses and their securities in
connection with mergers and acquisitions, negotiated underwritings, secondary
distributions of listed and unlisted securities, private placements, leveraged
buyouts and valuations for corporate and other purposes. HSBC was selected to
act as financial adviser to the Partners Board because of its substantial
experience, expertise and reputation in investment banking and mergers and
acquisitions generally, as well as its familiarity with Partners.
HSBC is acting as financial advisor to Partners in connection with the
Amalgamation and will receive a fee for its services, a substantial portion of
which is contingent upon the consummation of the Amalgamation. Pursuant to a
letter agreement dated November 3, 1997 between Partners and HSBC, Partners has
agreed to pay or has paid to HSBC: (i) monthly retainer fees totaling $900,000
paid by Partners under the engagement letter with HSBC dated November 1, 1996,
which will be deductible from the fee (the "Success Fee") that will be payable
to HSBC on successful consummation of the Amalgamation; (ii) an opinion fee of
$500,000 upon the execution of the Amalgamation Agreement and the delivery of
the HSBC Opinion, which will be payable upon the earlier of the Closing and the
termination of the HSBC Engagement Letter, and (iii) the Success Fee, which will
be calculated as set forth in the following sentence. If the offer level for
Partners Common Shares is (x) up to but excluding $17.50 per share, the Success
Fee will be 0.50% of the Transaction Value, (y) from $17.50 up to but excluding
$20.00 per share, the Success Fee will be 0.75% of the Transaction Value, and
(z) $20.00 and above, the Success Fee will be 1.00% of the Transaction Value. As
used in the preceding sentence, "Transaction Value" means the consideration to
be received for the Partners Common Shares in the Amalgamation, plus the
principal amount of all indebtedness (including amounts
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accrued) for borrowed money, less any cash balances held on deposit and
short-term investments in interest bearing securities, as included in the most
recent consolidated balance sheet of Partners prior to the consummation of the
Amalgamation scaled to the proportion which the Partners Common Shares exchanged
bear to the total number of equity securities of Partners. In addition, Partners
has agreed to reimburse HSBC for all reasonable out-of-pocket expenses
(including HSBC's legal fees) incurred in connection with its engagement and to
indemnify HSBC for certain liabilities that may arise out of the rendering of
its services.
In the ordinary course of its business, HSBC actively trades in debt and
equity securities, which may from time to time include those of Partners and
NTL, for its own account and for the accounts of its customers and, accordingly,
may at any time hold a significant long or short position in such securities.
Mr. Jonathan Perry, who is a director of Partners, is Vice Chairman of HSBC. Mr.
Perry has had no involvement in the preparation of the HSBC Opinion.
Special Considerations. The preparation of a fairness opinion is a complex
process and is not necessarily susceptible to partial analysis or summary
description. Selecting portions of the analysis or the summary set forth herein,
without considering the analysis as a whole, could create an incomplete or a
misleading view of the process underlying the HSBC Opinion. HSBC did not
attribute any particular weight to any analysis or factor considered by it. No
company or transaction used in the analyses as a comparison is identical to
Partners or NTL or the transaction contemplated by the Amalgamation Agreement.
The analyses were prepared solely for the purpose of HSBC in providing the HSBC
Opinion to the Partners Board in connection with its consideration of the
Amalgamation and do not purport to be appraisals or to reflect the prices at
which businesses or securities actually may be sold, which may be significantly
more or less favorable than as set forth in the analyses. Similarly, any
estimate of values or forecast of future results contained in the analyses is
not necessarily indicative of actual values or actual future results, which may
be significantly more or less favorable than suggested by such analyses. In
performing its analyses, HSBC assumed that both Partners and NTL would perform
in accordance with financial forecasts provided to HSBC by the managements of
Partners and NTL or their representatives. The actual results achieved by the
Amalgamated Company following the Amalgamation could vary from the projected
results and the variations may be material. See "FORWARD-LOOKING STATEMENTS" and
"RISK FACTORS."
HSBC relied on, and used in its analysis, forecasts for Partners provided
by the management of Partners to HSBC. Those forecasts included revenue, EBITDA
and free cash flow estimates and forecasts for Partners for the period from 1997
to 2006. In addition, HSBC reviewed, in connection with its analysis, forecasts
for NTL that were provided to HSBC by the management of NTL. The forecasts for
NTL that were provided by NTL included revenue, EBITDA and free cash flow
estimates and forecasts for NTL for the period from 1997 to 2005.
The forecasts and other projections furnished to HSBC for each of NTL and
Partners were prepared by the respective managements of each company and
constitute forward-looking statements within the meaning of the Private
Securities Litigation Reform Act of 1995. As a matter of policy, neither NTL nor
Partners publicly discloses internal management forecasts, projections or
estimates of the type furnished to HSBC in connection with its analysis of the
Amalgamation Agreement, and such forecasts, projections and estimates were not
prepared with a view towards public disclosure. These forecasts, projections and
estimates were based on numerous variables and assumptions which are inherently
uncertain and which may not be within the control of the managements of either
NTL or Partners, including, without limitation, factors related to the
integration of NTL and Partners and general economic, regulatory and competitive
conditions. Accordingly, actual results could vary materially from those set
forth in such forecasts, projections and estimates. See "FORWARD-LOOKING
STATEMENTS" and "RISK FACTORS."
In performing its analyses, HSBC made numerous assumptions with respect to
industry performance, general business and economic conditions and other
matters. Such analyses are inherently subject to uncertainty, being based upon
numerous factors or events beyond the control of NTL or Partners or their
respective advisors. Future results or actual values may be materially different
from those forecasts or estimates contained in the analyses. Although in
connection with the delivery of the HSBC Opinion, HSBC also analyzed NTL, the
HSBC Opinion is not a valuation of NTL and does not represent HSBC's view as to
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what the value of NTL Common Stock will be prior to or after consummation of the
Amalgamation. In addition, HSBC noted that, notwithstanding the fact that
holders of Class A Common Shares will receive NTL Common Stock in the
Amalgamation, the trading prices for NTL Common Stock will be significantly
affected by the results of operations and other factors relating to both NTL and
Partners. The HSBC Opinion was one of many factors taken into consideration by
the Partners Board in making its determination to approve the Amalgamation
Agreement. This summary does not purport to be a complete description of the
analyses performed by HSBC.
Financial Analyses. The following is a summary of certain financial and
comparative analyses performed by HSBC in connection with the preparation of the
HSBC Opinion for the Partners Board. The analyses assumed with respect to the
Exchange Ratio that holders of Class A Common Shares will receive .3745 shares
of NTL Common Stock for each Class A Common Share. In addition, holders of Class
A Common Shares are reminded that if the average closing price of NTL Common
Stock for the period (to be mutually agreed upon) ending on an agreed date
before the Closing Date is lower than $26.70, the Partners Board will have the
right to terminate the transaction provided that, prior to the termination of
the transaction, NTL will have the right (but not the obligation) to adjust the
Exchange Ratio such that holders of Class A Common Shares receive $10.00 for
each Class A Common Share in NTL Common Stock (based upon the average closing
price as calculated above). Any per share analyses with respect to Class A
Common Shares prior to the Amalgamation take into account the outstanding Class
A Common Shares as well as the outstanding Class B Common Shares and assume that
the Class B Common Shares rank pari passu in all respects with the Class A
Common Shares.
Historical Stock Trading Analysis. HSBC analyzed the historical trading
prices for Class A Common Shares and NTL Common Stock during the one-year and
three-year periods prior to and ending January 30, 1998, as compared to the
historical trading prices for an index comprised of Partners, NTL, TeleWest and
General Cable. HSBC also analyzed the trading volumes in Class A Common Shares
and NTL Common Stock and the ratio of the price of NTL Common Stock to Class A
Common Shares during the one-year and three-year periods prior to and ending
January 30, 1998.
Comparable Publicly Traded Companies Analysis. HSBC reviewed and compared
certain actual and projected financial, operating and stock market information
on companies in lines of business believed to be comparable to those of Partners
and NTL. HSBC noted that, although there were no public companies with precisely
the same mix of business and financial conditions as Partners, HSBC believed the
most relevant comparable companies to Partners to include TeleWest and General
Cable (the "Partners Comparable Companies"). HSBC also noted that, although
there were no public companies with precisely the same mix of businesses and
financial conditions as NTL, HSBC believed the most relevant comparable
companies to NTL's CATV businesses to include Partners, TeleWest and General
Cable (the "NTL CATV Comparable Companies"), the most relevant comparable
companies to NTL's telecoms businesses to include Energis and Colt (the "NTL
Telecoms Comparable Companies") and the most relevant comparable companies to
NTL's transmission businesses to include BT (the "NTL Transmission Comparable
Company").
This analysis indicated that the franchise value (determined as equity
market value plus net debt less gross property, plant and equipment invested (as
estimated in certain cases by HSBC)) per equity home of the Partners Comparable
Companies ranged from $(84) to $217. This analysis indicated that the enterprise
value (determined as equity market value plus net debt) per equity home passed
of the Partners Comparable Companies ranged from $1,264 to $1,377. This analysis
indicated that the enterprise value per CATV subscriber and the enterprise value
per residential telephony subscriber of the Partners Comparable Companies ranged
from $6,169 to $6,199 and $4,738 to $5,127, respectively. This analysis
indicated that the enterprise value of the Partners Comparable Companies as a
multiple of gross property, plant and equipment (as estimated in certain cases
by HSBC) ranged from 0.9x to 1.3x. The analysis indicated that the enterprise
value of the Partners Comparable Companies as a multiple of 1997 estimated total
revenue ranged from 5.2x to 6.5x and as a multiple of 1998 projected total
revenue ranged from 4.1x to 4.9x. The analysis also indicated that the
enterprise value of the Partners Comparable Companies as a multiple of 1997
estimated EBITDA ranged from 29.5x to 45.4x and as a multiple of 1998 projected
EBITDA ranged from 16.5x to 31.1x.
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The analysis indicated that the enterprise value of the NTL CATV Comparable
Companies as a multiple of 1998 projected total revenue ranged from 4.1x to 4.9x
and as a multiple of the 1999 projected total revenue ranged from 3.4x to 4.2x.
The analysis also indicated that the enterprise value of the NTL CATV Comparable
Companies as a multiple of 1998 projected EBITDA ranged from 16.5x to 34.3x and
as a multiple of the 1999 projected EBITDA ranged from 10.2x to 14.2x. The
analysis indicated that the enterprise value of the NTL Telecoms Comparable
Companies as a multiple of 1998 projected turnover ranged from 5.0x to 10.0x and
as a multiple of 1999 projected turnover was approximately 3.4x. The analysis
indicated that the enterprise value of the NTL Transmission Comparable Company
as a multiple of 1997 estimated turnover was 2.7x, as a multiple of 1998
projected turnover was 2.6x, and as a multiple of 1999 projected turnover was
2.5x. The analysis also indicated that the enterprise value of the NTL
Transmission Comparable Company as a multiple of 1997 estimated EBITDA was 7.2x,
as a multiple of 1998 projected EBITDA was 6.9x and as a multiple of 1999
projected EBITDA was 6.8x.
Based on the foregoing data and other data deemed relevant for the
Comparable Companies and based on projections for Partners provided by the
management of Partners and for NTL by the management of NTL, HSBC performed a
public market valuation analysis. Actual results could vary from such
projections and the variations may be material. See "FORWARD-LOOKING STATEMENTS"
and "RISK FACTORS." This analysis indicated a value reference range of
approximately $8.50 to $12.00 for each Class A Common Share and approximately
$26.50 to $40.50 for each share of NTL Common Stock. As noted above, no company
used in this analysis was identical to Partners or NTL. Accordingly, any
analysis of the value of Partners or NTL based on the Comparable Companies
involved complex considerations and judgments concerning differences in
potential financial and operating characteristics of the Comparable Companies
and other factors in relation to the trading and acquisition values of the
Comparable Companies.
Selected Precedent Transaction Analysis. HSBC reviewed and analyzed
selected financial, operating and stock market information relating to selected
acquisition transactions in the UK cable industry (the "Cable Transactions").
HSBC noted that the reasons for, and circumstances surrounding, each of the
transactions analyzed were diverse, and that the characteristics of such
transactions and the companies involved were not directly comparable to the
Amalgamation or to Partners or NTL.
HSBC performed a private market valuation analysis based on the Cable
Transactions that it deemed relevant. Among other factors, HSBC indicated that
the merger and acquisition transaction environment varies over time because of
macroeconomic factors such as interest rate and equity market fluctuations and
microeconomic factors, such as industry results and growth expectations.
Based on the data for the Cable Transactions and on Partners' number of
equity homes and number of equity homes passed, such analysis indicated a value
reference range of approximately $11.00 to $13.00 for each Class A Common Share.
Actual results could vary from such projections and the variations may be
material. See "FORWARD-LOOKING STATEMENTS" and "RISK FACTORS." As noted above,
no transaction reviewed was identical to the Amalgamation and, accordingly, an
assessment of the results of such analysis necessarily involves complex
considerations and judgments concerning differences in financial and operating
characteristics of Partners and NTL and other factors that would affect the
acquisition value of the companies to which Partners was compared.
Discounted Cash Flow Analysis. Based upon forecasts to 2006 for Partners
provided by Partners' management, HSBC calculated the net present value of the
estimated future consolidated cash flows of Partners. Actual results could vary
from such projections and the variations may be material. See "FORWARD-LOOKING
STATEMENTS" and "RISK FACTORS." Utilizing discount rates of 12.0% to 14.0% and
terminal value multiples of free cash flow of 8.0x to 10.0x, this analysis
implied a net present value per Class A Common Share ranging from approximately
$6.00 to $9.00.
Based upon forecasts to 2005 for NTL provided by NTL's management, HSBC
calculated the net present value of the estimated future consolidated cash flows
of NTL. Actual results could vary from such projections and the variations may
be material. See "FORWARD-LOOKING STATEMENTS" and "RISK FACTORS." Utilizing
discount rates of 12.0% to 14.0% and terminal value multiples of free cash flow
of 8.0x
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to 10.0x, this analysis implied a net present value per share of NTL Common
Stock ranging from approximately $60.00 to $90.00.
HSBC also considered the impact on the net present value of estimated
future consolidated cash flows of NTL of combining certain downside scenarios
with respect to the future performance of its business. Applying a discount rate
of 13.0% and a terminal value multiple of free cash flow of 9.0x suggested a net
present value of the estimated future consolidated cash flows of NTL implied by
these combined downside scenarios of approximately $35.00 per share of NTL
Common Stock.
Contribution Analysis. HSBC considered the contributions of each of
Partners and NTL to the revenue and EBITDA of the Amalgamated Company, without
taking into account any operating, financial or accounting impacts resulting
from the Amalgamation or any synergies. This analysis used Partners management's
estimates and forecasts for Partners for the fiscal years 1997 to 2006 and NTL
management's estimates and forecasts for NTL for the fiscal years 1997 to 2005.
Actual results could vary from such projections and the variations may be
material. See "FORWARD-LOOKING STATEMENTS" and "RISK FACTORS." This analysis
indicated that Partners' contribution to combined revenue was estimated to be
approximately 23% in projected year 1998, approximately 17% in projected year
2001 and approximately 16% in projected year 2004; and to combined EBITDA was
estimated to be approximately 19% in projected year 1998, approximately 15% in
projected year 2001 and approximately 14% in projected year 2004. Based on the
Exchange Ratio and an NTL Common Stock price at February 4, 1998 of $32.00 per
share, current shareholders of Partners would own 31% of the Amalgamated Company
upon consummation of the Amalgamation.
Has/Gets Analysis. HSBC calculated the effect that the Amalgamation could
have on the projected revenue per Class A Common Share and EBITDA per Class A
Common Share on a stand-alone basis before the Amalgamation as compared to the
projected revenue per Class A Common Share and EBITDA per Class A Common Share
for the Amalgamated Company after the Amalgamation. This analysis was based upon
forecasts for Partners provided by Partners' management and forecasts for NTL
provided by NTL's management. These forecasts did not include the realization of
any potential synergies and any fair market value accounting adjustments. Actual
results could vary from such projections and the variations may be material. See
"FORWARD-LOOKING STATEMENTS" and "RISK FACTORS."
This analysis indicated that the Amalgamation would result in increases in
projected 1998, 2001 and 2004 revenue per Class A Common Share. This analysis
also indicated that the Amalgamation would result in increases in projected
1998, 2001 and 2004 EBITDA per Class A Common Share.
DIRECTORS AND OFFICERS
The Amalgamation Agreement provides that the directors and officers (and
resident representative, if any) of Sub at the Effective Time will, from and
after the Effective Time, be the directors and officers (and resident
representative, if any), respectively, of the Amalgamated Company until their
successors have been duly elected or appointed or qualified or until their
earlier death, resignation or removal in accordance with the Companies Act and
the bye-laws of the Amalgamated Company. No current officer or director of
Partners will become an officer or director of the Amalgamated Company or NTL
pursuant to the Amalgamation.
INTERESTS OF CERTAIN PERSONS IN THE AMALGAMATION
Certain directors and executive officers of Partners may be deemed to have
certain interests with respect to the Amalgamation that are in addition to their
interests as shareholders of Partners generally. The Partners Board was aware of
such interests and considered them, among other factors, in recommending the
Amalgamation to the shareholders of Partners and approving the Amalgamation
Agreement.
The Amalgamation Agreement requires NTL, for six years after the Effective
Time and thereafter with respect to any claims during such six-year period, to
indemnify, defend and hold harmless the current or former directors and officers
of Partners and its subsidiaries (each, an "Indemnified Party") against all
costs or expenses (including reasonable attorneys' fees), judgments, fines,
losses, claims, damages or liabilities
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(collectively, "Costs") incurred in connection with any claim, action, suit,
proceeding or investigation, whether civil, criminal, administrative or
investigative, arising out of acts or omissions occurring at or prior to the
Effective Time to the fullest extent that Partners is permitted to indemnify
such persons under the laws of Bermuda and the Partners Bye-laws as in effect on
the date the Amalgamation Agreement, and NTL will advance expenses (including
Costs) as incurred to the fullest extent permitted under applicable law. In
addition, the Amalgamation Agreement requires that, from and after the Effective
Time, directors and officers of Partners who become directors or officers of NTL
or the Amalgamated Company will be entitled to the same indemnity rights and
protections as are afforded to other directors and officers of NTL.
The Amalgamation Agreement also requires NTL, for six years after the
Effective Time, to provide to Partners' current directors and officers liability
insurance covering acts or omissions occurring prior to the Effective Time with
respect to those persons who are currently covered by Comcast's directors' and
officers' liability insurance policy on terms with respect to such coverage and
amount no less favorable than those of such policy in effect on the date of the
Amalgamation Agreement, provided that in no event shall it be required to expend
more than $360,000 in the aggregate to maintain such coverage. See "THE
AMALGAMATION AGREEMENT -- Indemnification and Insurance."
At present, Partners is a party to two employee incentive plans, the 1995
Stock Option Plan (the "Partners Stock Plan") and the 1995 Stock Appreciation
Rights Plan (the "Partners SAR Plan" and, together with the Partners Stock Plan,
the "Partners Incentive Plans"). A total of three Partners employees have
benefits outstanding under the Partners Stock Plan, and a total of two directors
have benefits outstanding under the Partners SAR Plan. See "THE AMALGAMATION
AGREEMENT -- Partners Incentive Plans." In addition, Partners has entered into
employment agreements with a total of nine employees which provide for "stay
bonuses" in the event of a sale or merger. The aggregate value of such stay
bonuses is less than L1 million.
ACCOUNTING TREATMENT
The Amalgamation will be accounted for by NTL under the purchase method of
accounting in accordance with Accounting Principles Board Opinion No. 16,
"Business Combinations," as amended. Under this method of accounting, the
purchase price will be allocated to assets acquired and liabilities assumed
based on their estimated fair values at the Effective Time. Such allocations
will be based upon valuations that have not been finalized. The excess of such
purchase price over the amounts so allocated will be recorded as goodwill.
GOVERNMENTAL AND REGULATORY APPROVALS
NTL and Partners are aware of no U.S. federal, state or local government
permits, licenses or regulatory approvals material to their respective
businesses that must be obtained for consummation of the Amalgamation, other
than compliance with federal and state securities laws. The Amalgamation is not
subject to the pre-merger notification provisions of the HSR Act.
The consummation of the Amalgamation is conditioned upon certain filings
with, notices to and consents, approvals and actions of, various governmental
entities with respect to the transactions contemplated by the Amalgamation
Agreement being made and received prior to the Closing Date unless the failure
to obtain such approvals would not have a material adverse effect on the
Amalgamated Company and its prospective subsidiaries, taken as a whole, or would
not result in a material violation of any laws. Certain of these approvals are
summarized below.
Minister Consent. The Amalgamation Agreement requires that NTL and
Partners will have received, pursuant to a joint application filed by NTL and
Partners, the consent of the Minister to the Amalgamation.
Required British Approvals. The Amalgamation Agreement requires that the
following (collectively, the "Required British Approvals") will have occurred:
(i) NTL will have received a written indication from The Secretary of State for
Trade and Industry (the "DTI") and from the ITC to the effect that the
Amalgamation will not lead to the revocation of any licenses issued pursuant to
the Cable and Broadcasting
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Act 1984 or the Broadcasting Act 1990 (as amended) or the revocation of any of
the telecommunications or wireless telegraphy licenses issued by the DTI
pursuant to the Telecommunications Act 1984 or the Wireless Telegraphy Act 1949
which are held by Partners or any of its subsidiaries or by the Significant
Affiliates, except for any licenses the loss of which would not have a material
adverse effect on the licensee; (ii) NTL will have received written confirmation
from OFTEL that the Director General has not after the date of the Amalgamation
Agreement (A) issued any directions to Partners or any of its subsidiaries or
any Significant Affiliate in connection with their telecommunication licenses
issued pursuant to the Telecommunications Act 1984 or their wireless telegraphy
licenses issued pursuant to the Wireless Telegraphy Act 1949, (B) given notice
to Partners or any of its subsidiaries or any Significant Affiliate of its
intention to make modifications to such licenses (other than modifications which
are to be made to all or substantially all of the licenses issued pursuant to
the Telecommunications Act 1984 or the Wireless Telegraphy Act 1949, as
appropriate) or (C) taken any steps pursuant to Section 18 of the
Telecommunications Act 1984 or the Wireless Telegraphy Act 1948 in relation to
enforcement of any such licenses, except for, in the case of clause (A), such
directions, in the case of clause (B), such modifications, or, in the case of
clause (C), such enforcement steps as would not have a material adverse effect
on the licensee; (iii) NTL will have received written confirmation from the ITC
that the ITC has not after the date of the Amalgamation Agreement (A) issued any
directions to Partners or any of its subsidiaries or any Significant Affiliate
in connection with any license issued pursuant to the Cable and Broadcasting Act
1984 or the Broadcasting Act 1990 (as amended), (B) given notice to Partners or
any of its subsidiaries or any Significant Affiliate of its intention to make
modifications to any such license (other than modifications which are to be made
to all or substantially all of the licenses issued pursuant to the Cable and
Broadcasting Act 1984 or the Broadcasting Act 1990, as the case may be), or (C)
taken any steps in relation to enforcement of any such license, except for, in
the case of clause (A), such directions, in the case of clause (B), such
modifications, or, in the case of clause (C), such enforcement steps as would
not have a material adverse effect on the licensee; (iv) the Office of Fair
Trading will have indicated to NTL either that the Amalgamation does not qualify
for investigation by the Monopolies and Mergers Commission pursuant to the Fair
Trading Act 1973 or that The Secretary of State for Trade and Industry has
decided not to refer the Amalgamation to the Monopolies and Mergers Commission;
and (v) The UK Panel on Takeovers and Mergers will have confirmed to NTL that
the Amalgamation will not give rise to any obligation of NTL or Partners or any
of its subsidiaries or associates to make a mandatory cash offer for the shares
in Cable London not owned by Partners pursuant to the principles laid down in
Note 7 of Rule 9.1 of the U.K. City Code on Takeovers and Mergers.
The Required British Approvals referred to in subsections (i) and (v) above
have been obtained. Confirmation has also been obtained from OFTEL as of April
27, 1998 and from the ITC as of February 24, 1998 in the terms contemplated by
the Required British Approvals referred to in subsections (ii) and (iii) above,
respectively. On June 17, 1998, The Secretary of State for Trade and Industry
issued her decision not to refer the Amalgamation to the Monopolies and Mergers
Commission as referred to in subsection (iv) above. Accordingly, all of the
Required British Approvals have been obtained.
NTL and Partners have agreed to use reasonable best efforts to obtain all
necessary actions or nonactions, waivers, consents and approvals from
governmental entities and to make all necessary registrations and filings with
any governmental entity in order to consummate the Amalgamation. NTL and
Partners have also agreed to (i) take all action necessary to ensure that no
takeover statute or similar statute or regulation (other than the U.K. City Code
on Takeovers and Mergers in relation to Cable London) is or becomes applicable
to the Amalgamation, the Amalgamation Agreement, or any of the other
transactions contemplated by the Amalgamation Agreement and (ii) if any takeover
statute or similar statute or regulation becomes applicable to the Amalgamation,
the Amalgamation Agreement, or any other transaction contemplated by the
Amalgamation Agreement, take all action necessary to ensure that the
Amalgamation and the other transactions contemplated by the Amalgamation
Agreement may be consummated as promptly as practicable on the terms
contemplated by the Amalgamation Agreement and otherwise to minimize the effect
of such statute or regulation on the Amalgamation and the other transactions
contemplated by the Amalgamation Agreement. While NTL and Partners believe that
they will receive the outstanding requisite regulatory approvals for the
Amalgamation, there can be no assurance as to the timing of such approvals or
the ability of the companies to obtain such approvals on satisfactory terms or
otherwise. It is a condition to the parties'
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respective obligations to consummate the Amalgamation that all necessary
consents, approvals and actions of, filings with and notices to any governmental
entity be obtained.
THE DEBT CONSENTS
The consummation of the Amalgamation is conditioned upon, among other
things, receiving the Required Consents, which include the consent of the
holders of a majority amount of the 11.20% Debentures (the "Partners Consent"),
the consent or effective waiver of the holders of a majority amount of the
12 3/4% Notes, 11 1/2% Notes and 10% Notes. On September 17, 1998, NTL commenced
the solicitation of the consents of the holders of the 12 3/4% Notes, 11 1/2%
Notes and 10% Notes, and on September 22, 1998, Partners commenced the
solicitation of the consent of the holders of the 11.20% Debentures.
RESTRICTIONS ON SALES OF SHARES BY AFFILIATES
All shares of NTL Common Stock constituting the Share Issuance will be
freely transferable under the Securities Act, except that shares received by any
person who may be deemed to be an "affiliate" (as used in paragraphs (c) and (d)
of Rule 145 under the Securities Act, including, without limitation, directors
and certain executive officers) of Partners for purposes of such Rule 145 may
not be resold except in transactions permitted by such Rule 145 or as otherwise
permitted under the Securities Act.
The obligation of NTL to effect the Amalgamation is subject to, among other
things, the agreement of each of Comcast and Warburg, Pincus to a "lock-up"
agreement with NTL preventing them from selling, transferring or disposing of
any interest in the consideration received by them in the Amalgamation for a
period of 150 days after the Closing Date. See "THE AMALGAMATION
AGREEMENT -- Conditions Precedent to the Amalgamation."
The obligation of Partners to effect the Amalgamation is subject, among
other things, to NTL having entered into the Registration Rights Agreement with
Comcast and Warburg, Pincus. See "CERTAIN AGREEMENTS RELATED TO THE
AMALGAMATION -- The Registration Rights Agreement."
MATERIAL TAX CONSEQUENCES OF THE AMALGAMATION
In the opinion of Davis Polk and Wardwell, U.S. counsel to Partners, the
discussion under "-- U.S. Federal Income Tax Consequences" discusses the
material U.S. federal income tax consequences of the Amalgamation for U.S.
Holders (as defined herein) of Partners Common Shares held as a capital asset.
The texts of such opinions will be filed as exhibits to the Registration
Statement. In the opinion of Conyers Dill & Pearman, Bermuda counsel to
Partners, the discussion under "-- Bermuda Tax Consequences" discusses the
material Bermuda tax consequences of the Amalgamation. The discussion does not
deal with all possible tax consequences of the Amalgamation and does not purport
to deal with the tax consequences applicable to persons subject to special
rules, such as financial institutions, insurance companies, dealers in
securities, tax-exempt organizations, persons holding the Partners Common Shares
as part of a hedging, straddle or conversion transaction or persons whose
functional currency is not the U.S. dollar. In particular, the discussion does
not address the tax consequences under state or local law or the laws of
countries other than the U.S. and Bermuda. Furthermore, the proper
characterization under U.S. tax law of reorganization transactions accomplished
under foreign law that may not be identical in all legal particulars to merger
and other reorganization transactions accomplished under U.S. laws is a subject
on which there are no authoritative precedent involving transactions similar to
the Amalgamation. The following discussion of U.S. federal income tax matters is
based on the judicial decisions, administrative pronouncements, Treasury
regulations, and interpretations of the foregoing, changes to any of which after
the date herein could apply on a retroactive basis and affect the tax
consequences described herein. EACH SHAREHOLDER OF PARTNERS IS URGED TO CONSULT
SUCH SHAREHOLDER'S OWN TAX ADVISOR TO DETERMINE THE SPECIFIC TAX CONSEQUENCES OF
THE AMALGAMATION.
U.S. Federal Income Tax Consequences
The discussion below is the opinion of Davis Polk and Wardwell, U.S.
counsel to Partners.
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As used herein, the term "U.S. Holder" means for U.S. federal income tax
purposes a beneficial owner of Partners Common Shares that is (i) a citizen or
resident of the U.S., (ii) a corporation, partnership or other entity created or
organized in or under the laws of the U.S. or any state or any political
subdivision thereof or therein, (iii) an estate or trust defined in Section
7701(a)(30) of the Code, or (iv) any other person or entity the income of which
is subject to U.S. federal income taxation regardless of its source.
Due to the contingencies relating to the Purchase Rights, the federal
income tax consequences of the Amalgamation will differ depending on the
consideration received by holders of Partners Common Shares at the Determination
Time.
Receipt of NTL Common Stock. If, at the Determination Time, U.S. Holders
of Partners Common Shares (other than U.S. Holders who exercise their
dissenters' rights) receive solely NTL Common Stock and cash in lieu of
fractional shares in exchange for their Partners Common Shares, the Amalgamation
will be treated as a tax-free reorganization pursuant to Section 368(a) of the
Code. Consequently, the exchange by a U.S. Holder of Partners Common Shares for
shares of NTL Common Sock pursuant to the Amalgamation will have the following
consequences: (i) except for cash received in lieu of a fractional share, no
gain or loss will be recognized upon the exchange of Partners Common Shares;
(ii) with respect to cash received in lieu of a fractional share, a U.S. Holder
will recognize capital gain or loss in an amount equal to the difference between
the cash received and such holder's basis in the fractional share; (iii) the
aggregate basis of shares of NTL Common Stock received will be the same as the
aggregate basis of the Partners Common Shares exchanged therefor (not including
the U.S. Holder's basis in any fractional share); and (iv) the holding period of
shares of NTL Common Stock will include the period during which such U.S. Holder
held the Partners Common Shares exchanged therefor.
Receipt of NTL Class D Stock. If, at the Determination Time, U.S. Holders
of Partners Common Shares (other than U.S. Holders who exercise their
dissenters' rights) receive NTL Common Stock and NTL Class D Stock in exchange
for their Partners Common Shares, the Amalgamation will be treated as a tax-free
reorganization pursuant to Section 368(a) of the Code. If the Amalgamation is so
treated, the consequences to such holders upon the exchange will be the same as
those described above under "-- Receipt of NTL Common Stock."
If the NTL Class D Stock is exchanged for NTL Common Stock, the exchange
will be tax-free and, consequently, (i) except for cash received in lieu of a
fractional share, no gain or loss will be recognized upon the exchange; (ii)
with respect to cash received in lieu of a fractional share, a U.S. Holder will
recognize capital gain or loss in an amount equal to the difference between the
cash received and the holder's basis in the fractional share; (iii) the
aggregate basis of shares of the NTL Common Stock received will be the same as
the aggregate basis of the shares of NTL Class D Stock exchanged therefor (not
including the U.S. Holder's basis in any fractional share); and (iv) the holding
period of shares of the NTL Common Stock will include the period during which
such U.S. Holder held the NTL Class D Stock exchanged therefor.
Bermuda Tax Consequences
The discussion below is the opinion of Conyers Dill & Pearman, Bermuda
counsel to Partners.
At the date of this Joint Proxy Statement/Prospectus, there is no Bermuda
income, corporation or property tax, withholding tax, capital gains tax, capital
transfer tax, estate duty or inheritance tax payable by Partners or holders of
Partners Common Shares other than those holders of Partners Common Shares who
are ordinarily resident in Bermuda. Partners is not subject to stamp or other
similar duty on the issue, transfer or redemption of its shares.
Partners has obtained from the Minister under the Exempted Undertakings Tax
Protection Act 1966 an assurance that, in the event of there being enacted in
Bermuda any legislation imposing tax computed on profits or income or computed
on any capital assets, gain or appreciation or any tax in the nature of estate
duty or inheritance tax, such tax shall not until March 28, 2016 be applicable
to Partners or to its operations, or to the shares, debentures or other
obligations of Partners except insofar as such tax applies to persons ordinarily
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resident in Bermuda and holding such shares, debentures or other obligations of
Partners or any real property or leasehold interests in Bermuda owned by
Partners.
STOCK EXCHANGE LISTING
It is a condition to the consummation of the Amalgamation that the shares
of NTL Common Stock issuable pursuant to the Amalgamation and the shares of NTL
Common Stock issuable upon exercise of Adjusted Options be approved for
quotation on the NASDAQ, subject to official notice of issuance. In addition,
NTL has agreed to use best efforts to cause the NTL Class C Stock and NTL Class
D Stock to be approved for quotation on the NASDAQ, subject to official notice
of issuance, prior to the 60th day following the Closing Date if either or both
of such preferred stocks are then outstanding.
RIGHTS OF DISSENTING SHAREHOLDERS
Any Dissenting Shareholder may within one month of the giving of notice of
the Partners Special General Meeting apply to the Court to appraise the fair
value of such holder's shares. It is a condition to the obligation of NTL to
effect the Amalgamation that the number of Dissenting Shares will not be more
than 5% of the total issued and outstanding Class A Common Shares.
Under the Amalgamation Agreement, the Dissenting Shares will be cancelled
at the Effective Time in consideration for the right to receive such
consideration as may be payable to the Dissenting Shareholders upon completion
of the Amalgamation pursuant to Bermuda law. In the event that a Dissenting
Shareholder fails to perfect, effectively withdraws or otherwise loses any right
to appraisal and payment under Section 106 of the Companies Act, such Dissenting
Shareholder will no longer have any right to appraisal thereunder and will be
entitled to elect to receive the consideration in the Amalgamation.
The relevant portion of Section 106 of the Companies Act is as follows:
(6) Any shareholder who did not vote in favour of the amalgamation and
who is not satisfied that he has been offered fair value for his shares may
within one month of the giving of the notice referred to in subsection (2)
apply to the Court to appraise the fair value of his shares.
(6A) Subject to subsection (6B), within one month of the Court
appraising the fair value of any shares under subsection (6) the company
shall be entitled either: (a) to pay the dissenting shareholder an amount
equal to the value of his shares as appraised by the Court or (b) to
terminate the amalgamation in accordance with subsection (7).
(6B) Where the Court has appraised any shares under subsection (6) and
the amalgamation has proceeded prior to the appraisal then, within one
month of the Court appraising the value of the shares, if the amount paid
to the dissenting shareholder for his shares is less than that appraised by
the Court the amalgamated company shall pay to such shareholder the
difference between the amount paid to him and the value appraised by the
Court.
(6C) No appeal shall lie from an appraisal by the Court under this
section.
(6D) The costs of any application to the Court under this section
shall be in the discretion of the Court.
(7) An amalgamation agreement may provide that at any time before the
issue of a certificate of amalgamation the agreement may be terminated by
the directors of an amalgamating company, notwithstanding approval of the
agreement by the shareholders of all or any of the amalgamating companies.
Pursuant to the Amalgamation Agreement, Partners will give NTL (i) prompt
notice of any written demands for appraisal of Dissenting Shares or withdrawals
of such demands received by Partners and (ii) the opportunity to participate in
and direct all negotiations and proceedings with respect to any such demands.
Partners will not, without the prior written consent of NTL, make any payment
with respect to, or settle, offer to settle or otherwise negotiate, any such
demands.
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THE AMALGAMATION AGREEMENT
The Amalgamation Agreement is included in its entirety as Annex A to this
Joint Proxy Statement/ Prospectus and is incorporated herein by reference. We
urge shareholders of Partners and stockholders of NTL to read such document.
STOCKHOLDERS OF NTL AND SHAREHOLDERS OF PARTNERS SHOULD NOTE THAT THE TELEWEST
AGREEMENT EFFECTIVELY HAS ELIMINATED CERTAIN OF THE POTENTIAL OUTCOMES WITH
RESPECT TO THE PURCHASE RIGHTS CONTEMPLATED BY THE FOLLOWING SUMMARY.
ACCORDINGLY, ALTHOUGH THE FOLLOWING SUMMARY INCLUDES REFERENCES TO NTL CLASS C
STOCK, AS A RESULT OF THE TELEWEST AGREEMENT, SUCH STOCK WILL NOT BE ISSUED AS A
FORM OF CONSIDERATION IN THE AMALGAMATION. See "THE TELEWEST AGREEMENT." For
purposes of this Joint Proxy Statement/Prospectus, the term "Purchase Rights"
refers to the "Rights of First Refusal" described in the Amalgamation Agreement.
CANCELLATION OF SHARES
At the Effective Time, by virtue of the Amalgamation:
(i) each issued and outstanding share, par value L.01 per share, of
Sub will be converted into one share of the Amalgamated Company by virtue
of the Amalgamation and without any action on the part of NTL;
(ii) each Partners Common Share that is owned by NTL, any direct or
indirect wholly-owned subsidiary of NTL or any direct or indirect
wholly-owned subsidiary of Partners, will automatically be cancelled and
will cease to exist, and no consideration will be delivered in
consideration therefor; and
(iii) each issued and outstanding Partners Common Share (other than
Dissenting Shares and shares to be cancelled in accordance with
subparagraph (ii) above) will be cancelled in consideration for the receipt
of .3745 shares of NTL Common Stock; provided, however, that cash will be
paid in lieu of any fractional Partners Common Share. See "-- No Fractional
Shares."
Each holder of a certificate representing any cancelled Partners Common
Shares (other than Dissenting Shares) will cease to have any rights with respect
thereto, except the right to receive, as hereinafter described: (i) a
certificate representing the number of whole shares of NTL Common Stock, NTL
Class C Redeemable Preferred Stock (the "NTL Class C Stock") or NTL Class D
Stock (collectively the "NTL Capital Stock") represented by the consideration to
be received in the Amalgamation, (ii) certain dividends or other distributions
and (iii) cash, without interest, in lieu of any fractional shares of "NTL
Capital Stock". See "-- Exchange Agent; Procedures for Exchange of Certificates"
and "-- No Fractional Shares."
The Amalgamation Agreement provides for certain adjustments of the Exchange
Ratio in the following circumstances:
(i) if, as of the Determination Time, (x) the Purchase Rights relating
to Cable London and Birmingham Cable are of no legal effect (i.e., such
rights have been (A) waived or (B) have not been exercised in accordance
with their terms and, in the opinion of recognized counsel of the
jurisdiction of the governing law of such Purchase Rights, are of no
further legal force or effect), or (y) NTL and Partners have entered into
an agreement, arrangement or understanding with TeleWest and/or General
Cable directly or indirectly relating to the Purchase Rights or ownership
interests in Cable London and Birmingham Cable (either of the circumstances
in (x) or (y) hereinafter referred to as "Resolved"), the Exchange Ratio
will remain in effect;
(ii) if, as of the Determination Time, the Purchase Rights relating to
both Cable London and Birmingham Cable have been effectively exercised
other than pursuant to clause (y) of subparagraph (i) above (such
circumstances hereinafter referred to as "Exercised"), each Partners Common
Share will be cancelled in consideration for the receipt, at NTL's
election, of (A).3745 validly issued, fully paid and nonassessable shares
of NTL Common Stock, (B) .3108 validly issued, fully paid and nonassessable
shares of NTL Common Stock and the Equity Interest Proceeds from the sale
of the interest in Birmingham Cable under the applicable Purchase Rights,
(C).2584 validly issued, fully paid and nonassessable shares of NTL Common
Stock and the Equity Interest Proceeds from the sale of the Cable London
Equity Interest under the applicable Purchase Rights, or (D) .1947 validly
issued, fully paid and nonassessable shares of NTL Common Stock and the
Equity Interest Proceeds from the sale of the
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Equity Interests under the applicable Purchase Rights. Any Equity Interest
Proceeds payable pursuant to this subparagraph (ii) will be payable, at
NTL's election, in cash or in validly issued, fully paid and nonassessable
shares of NTL Common Stock valued at the greater of (1) $30.00 per share
and (2) the NTL Average Stock Price as of the Determination Time;
(iii) if, as of the Determination Time, the Purchase Rights relating
to Birmingham Cable have been Exercised and the Purchase Rights relating to
Cable London have been Resolved, each Partners Common Share will be
cancelled in consideration for the receipt, at NTL's election, of (A) .3745
validly issued, fully paid and nonassessable shares of NTL Common Stock or
(B) .3108 validly issued, fully paid and nonassessable shares of NTL Common
Stock and the Equity Interest Proceeds from the sale of the Birmingham
Cable Equity Interest under the applicable Purchase Rights payable in
accordance with the last sentence of subparagraph (ii) above;
(iv) if, as of the Determination Time, the Purchase Rights relating to
Cable London have been Exercised and the Purchase Rights relating to
Birmingham Cable have been Resolved, each Partners Common Share will be
cancelled in consideration for the receipt, at NTL's election, of (A) .3745
validly issued, fully paid and nonassessable shares of NTL Common Stock or
(B) .2584 validly issued, fully paid and nonassessable shares of NTL Common
Stock and the Equity Interest Proceeds from the sale of the Cable London
Equity Interest under the applicable Purchase Rights payable in accordance
with the last sentence of subparagraph (ii) above;
(v) if, as of the Determination Time, the Purchase Rights relating to
both Cable London and Birmingham Cable remain in legal effect but have not
been Exercised or otherwise Resolved (such circumstance, hereinafter
referred to as "Unresolved"), each Partners Common Share will be cancelled
in consideration for the receipt, at the election of NTL, of either
(x).3745 validly issued, fully paid and nonassessable shares of NTL Common
Stock or (y)(A) .1947 validly issued, fully paid and nonassessable shares
of NTL Common Stock, (B) .1161 (subject to adjustment as set forth in the
Amalgamation Agreement) validly issued, fully paid and nonassessable shares
of NTL Class C Stock, and (C) .0637 (subject to adjustment as set forth in
the Amalgamation Agreement) validly issued, fully paid and nonassessable
shares of NTL Class D Stock;
(vi) if, as of the Determination Time, only the Purchase Rights
relating to Cable London are Unresolved, each Partners Common Share will be
cancelled in consideration for the receipt of (A)(1) if the Purchase Rights
relating to Birmingham Cable have been Resolved, .2584 validly issued,
fully paid and nonassessable shares of NTL Common Stock or (2) if the
Purchase Rights relating to Birmingham Cable have been Exercised, at NTL's
election, (x) .2584 validly issued, fully paid and nonassessable shares of
NTL Common Stock or (y) .1947 validly issued, fully paid and nonassessable
shares of NTL Common Stock and the Equity Interest Proceeds from the sale
of the Birmingham Cable Equity Interest under the applicable Purchase
Rights payable in accordance with the last sentence of subparagraph (ii)
above and (B) .1161 (subject to adjustment as set forth in the Amalgamation
Agreement) validly issued, fully paid and nonassessable shares of NTL Class
C Stock; and
(vii) if, as of the Determination Time, only the Purchase Rights
relating to Birmingham Cable are Unresolved, each Partners Common Share
will be cancelled in consideration for the receipt of (A)(1) if the
Purchase Rights relating to Cable London have been Resolved, .3108 validly
issued, fully paid and nonassessable shares of NTL Common Stock or (2) if
the Purchase Rights relating to Cable London have been Exercised, at NTL's
election, (x) .3108 validly issued, fully paid and nonassessable shares of
NTL Common Stock or (y) .1947 validly issued, fully paid and nonassessable
shares of NTL Common Stock and the Equity Interest Proceeds from the sale
of the Cable London Equity Interest under the applicable Purchase Rights
payable in accordance with the last sentence of subparagraph (ii) above and
(B) .0637 (subject to adjustment as set forth in the Amalgamation
Agreement) validly issued, fully paid and nonassessable shares of NTL Class
D Stock.
If between the date of the Amalgamation Agreement and the Effective Time,
the outstanding number of Partners Common Shares or shares of NTL Common Stock
is changed into a different number of shares, including by reason of any
reclassification, recapitalization, split-up, combination or exchange of shares,
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or any dividend payable in stock or other securities declared thereon with a
record date within such period, the Exchange Ratio or, in the cases of
subparagraphs (i), (ii), (iii), (iv) or (v) above, the number of shares of NTL
Common Stock, NTL Class C Stock and NTL Class D Stock issuable, will be adjusted
accordingly to provide to the holders of Partners Common Shares the same
economic effect as contemplated by the Amalgamation Agreement prior to such
change.
As used in the Amalgamation Agreement and this Joint Proxy
Statement/Prospectus, "Equity Interest Proceeds" means, with respect to the
Equity Interests, the pro rata net proceeds (i.e., the net amount received for
the relevant equity interest (without regard to debt, loans from Partners to
Significant Affiliates or the debt component (i.e., face amount and accrued and
unpaid interest)) of any convertible security) from the consummation of the sale
of the relevant interest under the applicable Purchase Rights less the Tax
Adjustment (as defined herein), provided, that in the case of the Cable London
Equity Interest, such amount shall be adjusted as follows: (i) if the
convertible debt in Cable London has been converted prior to or in connection
with the exercise of the Purchase Rights relating to the Cable London Equity
Interest, the Equity Interest Proceeds shall be decreased by an amount equal to
the debt component of Partners' share of such convertible debt and (ii) if such
convertible debt has not been converted prior to or in connection with the
exercise of such Purchase Right, the Equity Interest Proceeds shall be increased
by an amount equal to the value of Partners' share of such convertible debt
(less the debt component of such convertible debt).
The Amalgamation Agreement provides that as soon as practicable after the
date thereof and prior to the Closing, the parties thereto will use their
reasonable best efforts to agree on a rate (the "Tax Rate") which reflects the
tax which such parties anticipate will be payable by Partners on any transfer of
its interest in a Significant Affiliate pursuant to the applicable Purchase
Rights. As used in the Amalgamation Agreement and this Joint Proxy
Statement/Prospectus, "Tax Adjustment" means a percentage of the gross proceeds
which would be payable under the Tax Rate, without giving effect to any credits
or adjustments available to NTL or Partners or any of their subsidiaries as a
result of factors not related to the dispositions of such interest in the
particular Significant Affiliate.
For a further discussion of the Purchase Rights, see "The
AMALGAMATION -- Purchase Rights Relating to Partners' Interests in Birmingham
Cable and Cable London" and "-- Additional Agreements -- Purchase Rights." For a
description of the NTL Class D Stock, see "DESCRIPTION OF NTL CAPITAL
STOCK -- NTL Preferred Stock."
EXCHANGE AGENT; PROCEDURES FOR EXCHANGE OF CERTIFICATES
Prior to the Effective Time, NTL will designate such bank or trust company
as may be reasonably satisfactory to Partners to act as Exchange Agent (the
"Exchange Agent"). As of the Effective Time, NTL will deposit with the Exchange
Agent, for the benefit of the holders of Partners Common Shares, certificates
representing NTL Capital Stock (such shares of NTL Capital Stock, together with
any dividends or distributions with respect thereto with a record date after the
Effective Time, any Excess Shares (as defined herein) and any cash (including
cash proceeds from the sale of the Excess Shares) payable in lieu of any
fractional shares of NTL Capital Stock being hereinafter referred to as the
"Exchange Fund") issuable pursuant to the Amalgamation Agreement.
Promptly after the Effective Time, the Exchange Agent will mail to each
registered holder of a certificate or certificates other than Dissenting
Shareholders, if any, which immediately prior to the Effective Time represented
outstanding Partners Common Shares (the "Certificates") whose shares were
cancelled in consideration of the receipt of the consideration to be received in
the Amalgamation a letter of transmittal (which shall specify that delivery
shall be effected, and risk of loss and title to the Certificates shall pass,
only upon delivery of the Certificates to the Exchange Agent and shall be in
such form and have such other provisions as Partners and NTL may reasonably
specify) and instructions for use in surrendering the Certificates in exchange
for the consideration to be received in the Amalgamation. Upon surrender of a
Certificate for cancellation to the Exchange Agent, together with such letter of
transmittal, duly executed, and such other documents as may reasonably be
required by the Exchange Agent, the holder of such Certificate will be entitled
to receive in consideration therefor: (i) a certificate representing that number
of
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whole shares of NTL Capital Stock which such holder has the right to receive
pursuant to the Amalgamation Agreement, (ii) certain dividends or other
distributions as hereinafter described and (iii) cash in lieu of any fractional
share of NTL Capital Stock (see "-- No Fractional Shares"). All Certificates so
surrendered will be cancelled. All shares of NTL Capital Stock issued upon the
surrender of Certificates in accordance with the terms of the Amalgamation
Agreement (including the cash paid in respect of any such fractional share or of
any such dividends or distributions) will be deemed to have been issued (and
paid) in full satisfaction of all rights pertaining to the Partners Common
Shares represented by such Certificates; provided, however, that the Amalgamated
Company is obligated to pay any dividends or make any other distributions with a
record date prior to the Effective Time which may have been declared or made by
Partners on such Partners Common Shares which remain unpaid at the Effective
Time.
No dividends or other distributions with respect to NTL Capital Stock with
a record date after the Effective Time will be paid to the holder of any
unsurrendered Certificate with respect to the shares of NTL Common Stock
represented thereby, and, in the case of Certificates representing Partners
Common Shares, no cash payment in lieu of fractional shares will be paid to any
such holder pursuant to the Amalgamation Agreement, and all such dividends,
other distributions and cash in lieu of fractional shares of NTL Capital Stock
will be paid by NTL to the Exchange Agent and will be included in the Exchange
Fund, in each case until the surrender of such Certificate in accordance with
the exchange procedures set forth in the Amalgamation Agreement. Subject to the
effect of applicable escheat or similar laws, following surrender of any such
Certificate there will be paid to the holder of the certificate representing
whole shares of NTL Capital Stock issued in consideration therefor, without
interest, (i) at the time of such surrender, the amount of dividends or other
distributions with a record date after the Effective Time theretofore paid with
respect to such whole shares of NTL Capital Stock and, in the case of
Certificates representing Partners Common Shares, the amount of any cash payable
in lieu of a fractional share of NTL Capital Stock to which such holder is
entitled pursuant to the Amalgamation Agreement and (ii) at the appropriate
payment date, the amount of dividends or other distributions with a record date
after the Effective Time and with a payment date subsequent to such surrender
payable with respect to such whole shares of NTL Capital Stock.
If, after the Effective Time, Certificates are presented to the Amalgamated
Company or the Exchange Agent for any reason, they will be cancelled and
exchanged as described above, except as otherwise provided by law. There will be
no further registration of transfers on the stock transfer books of the
Amalgamated Company of the Partners Common Shares which were outstanding
immediately prior to the Effective Time.
Any portion of the Exchange Fund which remains undistributed to the holders
of the Certificates for six months after the Effective Time will be delivered to
NTL, upon demand, and any holders of the Certificates who have not theretofore
complied with the exchange provisions of the Amalgamation Agreement may
thereafter look only to NTL for payment of their claim for consideration to be
received in the Amalgamation, any dividends or distributions with respect to NTL
Capital Stock and any cash in lieu of fractional shares of NTL Capital Stock.
None of NTL, Sub, Partners, the Amalgamated Company or the Exchange Agent
will be liable to any person in respect of any shares of NTL Capital Stock, any
dividends or distributions with respect thereto, any cash in lieu of fractional
shares of NTL Capital Stock or any cash from the Exchange Fund, in each case
delivered to a public official pursuant to any applicable abandoned property,
escheat or similar law.
The Exchange Agent will invest any cash included in the Exchange Fund, as
directed by NTL, on a daily basis. Any interest and other income resulting from
such investments will be paid to NTL.
SHAREHOLDERS OF PARTNERS SHOULD NOT SEND THEIR CERTIFICATES TO THE EXCHANGE
AGENT WITHOUT A LETTER OF TRANSMITTAL, WHICH WILL BE SENT TO THEM FOLLOWING THE
CONSUMMATION OF THE AMALGAMATION, AND SHOULD NOT RETURN THEIR CERTIFICATES WITH
THE ENCLOSED PROXY.
NO FRACTIONAL SHARES
No certificates or scrip representing fractional shares of NTL Capital
Stock will be issued upon the surrender of Certificates; no dividend or
distribution of NTL will relate to such fractional share interests;
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and such fractional share interests will not entitle the owner thereof to vote
or to any rights of a stockholder of NTL. In lieu of any such fractional shares,
each holder of Partners Common Shares who would otherwise have been entitled
thereto upon the surrender of Certificates will be paid cash (as described
herein).
As promptly as practicable following the Effective Time, the Exchange Agent
will determine the excess of (i) the number of whole shares of NTL Capital Stock
delivered to the Exchange Agent by NTL pursuant to the Amalgamation Agreement
over (ii) the aggregate number of whole shares of NTL Capital Stock to be
distributed to former holders of Partners Common Shares pursuant to the
Amalgamation Agreement (such excess being hereinafter called the "Excess
Shares"). Following the Effective Time, the Exchange Agent will, on behalf of
the former shareholders of Partners, sell the Excess Shares at then prevailing
prices on the NASDAQ, or otherwise in the manner provided in the Amalgamation
Agreement (as described below).
The sale of the Excess Shares by the Exchange Agent will be executed on the
NASDAQ through one or more member firms of the NASDAQ and will be executed in
round lots to the extent practicable. The Exchange Agent will use reasonable
efforts to complete the sale of the Excess Shares as promptly following the
Effective Time as, in the Exchange Agent's sole judgment, is practicable
consistent with obtaining the best execution of such sales in light of
prevailing market conditions. Until the net proceeds of such sale or sales have
been distributed to the holders of Certificates formerly representing Partners
Common Shares, the Exchange Agent will hold such proceeds in trust for such
holders (the "Common Shares Trust"). The Amalgamated Company will pay all
commissions, transfer taxes and other out-of-pocket transaction costs, including
the expenses and compensation of the Exchange Agent incurred in connection with
such sale of the Excess Shares. The Exchange Agent will determine the portion of
the Common Shares Trust to which each former holder of Partners Common Shares is
entitled, if any, by multiplying the amount of the aggregate net proceeds
comprising the Common Shares Trust by a fraction, the numerator of which will be
the amount of the fractional share interest to which such former holder of
Partners Common Shares is entitled (after taking into account all Partners
Common Shares held at the Effective Time by such holder) and the denominator of
which will be the aggregate amount of fractional share interests to which all
former holders of Partners Common Shares are entitled.
Notwithstanding the provisions of the Amalgamation Agreement described in
the two preceding paragraphs, the Amalgamated Company may, at the option of NTL
exercised prior to the Effective Time, in lieu of the issuance and sale of
Excess Shares and the making of the payments hereinabove contemplated, pay each
former holder of Partners Common Shares an amount in cash equal to the product
obtained by multiplying (i) the fractional share interest to which such former
holder (after taking into account all Partners Common Shares held at the
Effective Time by such holder) would otherwise be entitled by (ii) the average
of the average high and low sales prices of the NTL Common Stock on the NASDAQ
for each of the five trading days ending on the trading day prior to the Closing
Date.
As soon as practicable after the determination of the amount of cash, if
any, to be paid to holders of Certificates formerly representing Partners Common
Shares with respect to any fractional share interests, the Exchange Agent will
make available such amounts to such holders of Certificates formerly
representing Partners Common Shares, subject to and in accordance with the
Amalgamation Agreement. See "-- Exchange Agent; Procedures for Exchange of
Certificates."
REPRESENTATIONS AND WARRANTIES
The Amalgamation Agreement contains various representations and warranties
of NTL and Partners customary for transactions of this nature. These include,
among other things, representations and warranties of NTL as to: (i) its due
organization, existence, good standing, organizational documents and similar
corporate matters; (ii) its subsidiaries and affiliates; (iii) its
capitalization; (iv) its authorization, execution, delivery and performance and
the enforceability of the Amalgamation Agreement and related matters; (v)
consents and approvals necessary for consummation of the Amalgamation and the
absence of conflicts, violations, breaches or defaults which result from
compliance by NTL with the provisions of the Amalgamation Agreement; (vi) the
documents and reports filed with the SEC and the accuracy and completeness of
the information contained therein; (vii) the absence of undisclosed liabilities;
(viii) the Registration Statement and this Joint
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Proxy Statement/Prospectus and the accuracy and completeness of the information
contained therein and herein; (ix) the absence of certain material changes or
events since December 31, 1996; (x) compliance with laws, ordinances and
regulations; (xi) litigation; (xii) certain employee benefit and ERISA matters;
(xiii) tax matters; (xiv) voting requirements; (xv) brokers; and (xvi) the
receipt of a fairness opinion from its financial advisor.
Partners' representations and warranties include, among other things, those
as to (i) its due organization, existence, good standing, organizational
documents and similar corporate matters; (ii) its subsidiaries and affiliates;
(iii) its capitalization; (iv) its authorization, execution, delivery and
performance and the enforceability of the Amalgamation Agreement and related
matters; (v) consents and approvals necessary for consummation of the
Amalgamation and the absence of conflicts, violations, breaches or defaults
which result from compliance by Partners with the provisions of the Amalgamation
Agreement; (vi) the documents and reports filed with the SEC and the accuracy
and completeness of the information contained therein; (vii) the absence of
undisclosed liabilities; (viii) financial statements; (ix) the Registration
Statement and this Joint Proxy Statement/Prospectus and the accuracy and
completeness of the information contained therein and herein; (x) the absence of
certain material changes or events since December 31, 1996; (xi) compliance with
laws, ordinances and regulations; (xii) litigation; (xiii) employee benefit
matters; (xiv) tax matters; (xv) voting requirements; (xvi) brokers; (xvii) the
receipt of a fairness opinion from its financial advisor; (xviii) intellectual
property matters; and (xix) certain material contracts.
CONDUCT OF BUSINESS PENDING THE AMALGAMATION
Each of NTL and Partners has agreed that during the period from the date of
the Amalgamation Agreement to the Effective Time, except as otherwise agreed to
by the parties or permitted by the Amalgamation Agreement, it will, and will
cause its subsidiaries to, carry on their respective businesses in the ordinary
course consistent with past practice and, to the extent consistent therewith,
use all reasonable efforts to preserve intact their current business
organizations, use reasonable efforts to keep available the services of their
current officers and other key employees and preserve their relationships with
those persons having business dealings with them.
Without limiting the generality of the foregoing, and except as otherwise
agreed to by NTL or permitted by the Amalgamation Agreement, Partners has agreed
that it will not, and will not permit any of its subsidiaries to:
(i) other than dividends and distributions by a direct or indirect
wholly-owned subsidiary of Partners to its parent, or by a subsidiary that
is partially owned by Partners or any of its subsidiaries, provided that
Partners or any such subsidiary receives or is to receive its proportionate
share thereof, (A) declare, set aside or pay any dividends on, make any
other distributions in respect of, or enter into any agreement with respect
to the voting of, any of its capital stock, (B) split, combine or
reclassify any of its capital stock or issue or authorize the issuance of
any other securities in respect of, in lieu of or in substitution for
shares of its capital stock, except for issuances of Partners Common Shares
upon the exercise of Partners employee stock options under the Partners
Stock Plan in each case, outstanding as of the date hereof in accordance
with their present terms or (C) purchase, redeem or otherwise acquire any
shares of capital stock of Partners or any of its subsidiaries or any other
securities thereof or any rights, warrants or options to acquire any such
shares or other securities;
(ii) issue, deliver, sell, pledge or otherwise encumber or subject to
any lien any shares of its capital stock, any other voting securities or
any securities convertible into, or any rights, warrants or options to
acquire, any such shares, voting securities or convertible securities
(other than the issuance of Partners Common Shares upon the exercise of
Partners employee stock options under the Partners Stock Plan) in each
case, outstanding as of the date of the Amalgamation Agreement in
accordance with their present terms;
(iii) amend the Partners Charter, the Partners Bye-laws or other
comparable organizational documents;
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(iv) acquire or agree to acquire by merging or consolidating with, or
by purchasing a substantial portion of the assets of, or by any other
manner, any business or any person;
(v) except as otherwise contemplated by the Amalgamation Agreement,
sell, lease, license, mortgage or otherwise encumber or subject to any lien
or otherwise dispose of any of its properties or assets (including
securitizations), other than (A) in the ordinary course of business
consistent with past practice, (B) the sale, lease, license or other
disposition of up to $1 million of such assets, in the aggregate or (C) the
mortgage, encumbrance or subjecting to liens of up to $5 million of such
assets, in the aggregate;
(vi) take any action that would cause the representations and
warranties set forth in the Amalgamation Agreement (with each reference
therein to "ordinary course of business" being deemed for purposes of this
subparagraph (vi) to be immediately followed by "consistent with past
practice") to no longer be true and correct;
(vii) incur any indebtedness for borrowed money, other than pursuant
to agreements or arrangements in effect as of the date of the Amalgamation
Agreement, or issue any debt securities or assume, guarantee or endorse, or
otherwise as an accommodation become responsible for the obligations of any
person for borrowed money;
(viii) make any additional equity investment in, or enter into any new
agreement, arrangement or understanding with, any Significant Affiliate; or
(ix) authorize, or commit or agree to take, any of the foregoing
actions;
provided, that the limitations set forth in subparagraphs (i) through (ix) above
(other than subparagraph (iii)) will not apply to any transaction between
Partners and any wholly-owned subsidiary or between any wholly-owned
subsidiaries of Partners.
In addition, Partners will not, and will not permit its subsidiaries to,
and will use its reasonable best efforts to cause the Significant Affiliates not
to, enter into any material agreement, arrangement or understanding with respect
to programming, software, provisioning of cable modem internet service, billing,
provisioning of digital CATV service, and the acquisition of set-top boxes or
switching equipment or other computer and telecommunications equipment with a
value in excess of L1 million, or technology or similar strategic business
issues without prior approval from NTL. NTL will treat as confidential any
information which Partners discloses to NTL in respect of any Significant
Affiliate and designates as confidential.
Except as otherwise expressly contemplated by the Amalgamation Agreement or
as consented to by Partners in writing, during the period from the date of the
Amalgamation Agreement to the Effective Time, NTL has agreed that it will not,
and will not permit any of its subsidiaries to:
(i) other than dividends and distributions by a direct or indirect
wholly-owned subsidiary of NTL to its parent, or by a subsidiary that is
partially owned by NTL or any of its subsidiaries, provided, that NTL or
any such subsidiary receives or is to receive its proportionate share
thereof, declare, set aside or pay any dividends on, make any other
distributions (whether by recapitalization, restructuring or otherwise) in
respect of, or enter into any agreement with respect to the voting of, any
of its capital stock, other than reasonable quarterly dividends on NTL
Common Stock if the NTL Board shall so determine;
(ii) adopt a plan of complete or partial liquidation;
(iii) enter into any agreement, arrangement or understanding for a
merger, acquisition or other business combination unless the NTL Board
determines that such transaction is in the best interest of the
stockholders of NTL and those persons who will become stockholders of NTL
as a result of the Amalgamation;
(iv) except as contemplated by the Amalgamation Agreement, amend its
certificate of incorporation; or
(v) authorize, or commit or agree to take, any of the foregoing
actions;
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provided, that the limitations set forth in subparagraphs (i) through (v) above
will not apply to any transaction between NTL and any wholly-owned subsidiary or
between any wholly-owned subsidiaries of NTL.
Each of Partners and NTL has also agreed that, except as required by law,
it will not, and will not permit any of its respective subsidiaries to,
voluntarily take any action that would, or that could reasonably be expected to,
result in (i) any of the representations and warranties of such party set forth
in the Amalgamation Agreement that are qualified as to materiality becoming
untrue at the Effective Time, (ii) any of such representations and warranties
that are not so qualified becoming untrue in any material respect at the
Effective Time or (iii) any of the conditions to the Amalgamation set forth in
the Amalgamation Agreement not being satisfied.
Each of Partners and NTL has also agreed to promptly advise the other party
orally and in writing to the extent that it has knowledge of (i) any
representation or warranty made by it contained in the Amalgamation Agreement
that is qualified as to materiality becoming untrue or inaccurate in any respect
or any such representation or warranty that is not so qualified becoming untrue
or inaccurate in any material respect, (ii) the failure by it to comply in any
material respect with or satisfy in any material respect any covenant, condition
or agreement to be complied with or satisfied by it under the Amalgamation
Agreement and (iii) any change or event having, or which, insofar as can
reasonably be foreseen, could reasonably be expected to have a material adverse
effect on such party or on the truth of their respective representations and
warranties or the ability of the conditions set forth in the Amalgamation
Agreement to be satisfied; provided, however, that no such notification will
affect the representations, warranties, covenants or agreements of the parties
(or remedies with respect thereto) or the conditions to the obligations of the
parties under the Amalgamation Agreement.
NO SOLICITATION
Partners has agreed that, prior to the Effective Time, it will not, nor
will it permit any of its subsidiaries to, nor will it authorize or permit any
of its directors, officers or employees or any investment banker, financial
advisor, attorney, accountant or other representative retained by it or any of
its subsidiaries to, directly or indirectly through another person, (i) solicit,
initiate or encourage or take any other action designed to facilitate, any
inquiries or the making of any proposal which constitutes any Partners Takeover
Proposal or (ii) participate in any discussions or negotiations regarding any
Partners Takeover Proposal or furnish any nonpublic information relating to
Partners and its subsidiaries to any person that may be considering making, or
has made, a Partners Takeover Proposal; provided that, Partners may, in response
to an unsolicited written proposal from a third party regarding a Partners
Takeover Proposal, engage in the activities specified in clause (ii) if (A) the
Partners Board determined in good faith, after obtaining and taking into account
the advice of outside counsel, that such action is required for the Partners
Board to comply with its fiduciary duties under applicable law and (B) Partners
has received from such third party an executed confidentiality agreement with
terms not materially less favorable to NTL than those contained in the
Confidentiality Agreement between NTL and Partners. As used in the Amalgamation
Agreement and this Joint Proxy Statement/Prospectus, "Partners Takeover
Proposal" means any inquiry, proposal or offer from any person relating to any
direct or indirect acquisition or purchase of a business that constitutes 10% or
more of the net revenues, net income or the assets of Partners and its
subsidiaries, taken as a whole, or 10% or more of any equity securities of
Partners, any tender offer or exchange offer that if consummated would result in
any person beneficially owning any equity securities of Partners, or any merger,
consolidation, business combination, recapitalization, liquidation, dissolution
or similar transaction involving Partners (or any Partners subsidiary whose
business constitutes 10% or more of the net revenues, net income or the assets
of Partners and its subsidiaries, taken as whole) or the Partners Common Shares,
other than the transactions contemplated by the Amalgamation Agreement, provided
that the term Partners Takeover Proposal does not include any matters relating
to the Purchase Rights and the equity interests of Partners subject thereto.
Except as provided in the next sentence, the Partners Board has agreed to
recommend approval and adoption of the Amalgamation Agreement and the
Amalgamation by the shareholders of Partners and not to withdraw or modify, or
propose publicly to withdraw or modify, in a manner adverse to NTL, the approval
or
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recommendation by such Board. The Partners Board may withdraw or modify in a
manner adverse to NTL (or, if not previously made, not to make) its
recommendation to the shareholders of Partners, but only if and to the extent
such Board determines, after obtaining and taking into account the advice of
outside counsel, that such action is required in response to an unsolicited bona
fide written Superior Partners Takeover Proposal in order for such Board to
comply with its fiduciary duties under applicable law. For purposes of the
Amalgamation Agreement and this Joint Proxy Statement/Prospectus, "Superior
Partners Takeover Proposal" means any bona fide Partners Takeover Proposal for
at least a majority of the outstanding Partners Common Shares on terms the
Partners Board determines in its good faith judgment (taking into account the
advice of its financial advisor, all of the terms and conditions of such
Partners Takeover Proposal and the conditions to consummation) are more
favorable and provide greater value to Partners and all of its shareholders than
the Amalgamation Agreement and the Amalgamation taken as a whole.
Partners has agreed to immediately advise NTL orally and in writing of any
request for information or of any Partners Takeover Proposal, the material terms
and conditions of such request or Partners Takeover Proposal and the identity of
the person making such request or Partners Takeover Proposal. Partners will, to
the extent consistent with the fiduciary duties of its Board under applicable
law, keep NTL reasonably informed of the status and details (including
amendments or proposed amendments) of any such request or Partners Takeover
Proposal.
In addition, the Amalgamation Agreement provides that Partners may take and
disclose to its shareholders a position contemplated by Rule 14e-2(a)
promulgated under the Exchange Act or may make any disclosure to the
shareholders of Partners if, in the good faith judgment of the Partners Board,
after consultation with outside counsel, failure so to disclose would be
inconsistent with its obligations under applicable law.
PARTNERS INCENTIVE PLANS
At present, Partners is a party to the Partners Stock Plan and the Partners
SAR Plan.
Partners Stock Plan. Currently, there are 20,250 Class A Common Shares
reserved for issuance under the Partners Stock Plan. The Partners Stock Plan
provides that Partners is required to give notice to holders of the employee
stock options at least 15 days prior to the closing of the Amalgamation. The
options expire three days after the date of notice if not exercised. At the
present time, 8,100 of the options have vested. Under the Partners Stock Plan,
Partners may, but is not required to, accelerate any unvested options.
Partners anticipates that all of the options will be exercised or will have
expired prior to the Effective Time. However, if any options are outstanding,
the Amalgamation Agreement provides that each option outstanding immediately
prior to the Effective Time shall be adjusted to thereafter represent an option
to acquire, on the same terms and conditions as were previously applicable under
such option, the number of shares of NTL Common Stock equal to the number of
Partners Common Shares subject to such option, multiplied by the Exchange Ratio
(such product rounded up to the nearest whole number), at an exercise price per
share of NTL Common Stock (rounded down to nearest whole cent) equal to (i) the
aggregate exercise price for Partners Common Shares otherwise purchasable
pursuant to such option divided by (ii) the aggregate number of whole shares of
NTL Common Stock deemed to be subject to such option in accordance with the
foregoing (each, as so adjusted, an "Adjusted Option").
Partners SAR Plan. There are 14,000 stock appreciation rights ("SARs")
outstanding under the Partners SAR Plan. Partners is required to give notice to
holders of SARs more than 30 days but not more than sixty days prior to the
closing of the Amalgamation. The SARs expire 15 days after the date of notice if
not exercised prior thereto. All of the SARs are fully vested; however, the
exercise price for more than two-thirds of the outstanding SARs currently
exceeds the market price of the Class A Common Shares.
Partners anticipates that all of the SARs will be exercised or will have
expired prior to the Effective Time. However, if SARs are outstanding, the
Amalgamation Agreement provides that each SAR outstanding immediately prior to
the Effective Time shall be adjusted to thereafter represent a right to receive
an amount of cash, on the same terms and conditions as were previously
applicable under such SAR, without regard to
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any provision reducing the period of exercise of such SAR pursuant to the
cessation of service as a director of Partners, equal to the amount by which the
Fair Market Value (as defined in the Partners SAR Plan) per share of NTL Common
Stock multiplied by the Exchange Ratio (rounded to the nearest cent) exceeds a
base price per share of NTL Common Stock equal to the base price for the
Partners Class A Common Share subject to such Partners SAR (each, as so
adjusted, an "Adjusted SAR").
Obligations of NTL. As soon as practicable after the Effective Time, NTL
will deliver to the holders of Adjusted Options and Adjusted SARs appropriate
notices setting forth such holders' rights pursuant to the respective Partners
Incentive Plan and the agreements evidencing the grants of awards thereunder and
that such awards and agreements will be assumed by NTL and will continue in
effect on the same terms and conditions, subject to the provisions of the
Amalgamation Agreement, including the adjustments described in the preceding
paragraph after giving effect to the Amalgamation.
A holder of an Adjusted Option or Adjusted SAR may exercise such Adjusted
Option or Adjusted SAR in whole or in part in accordance with its terms by
delivering a properly executed notice of exercise to NTL, together with the
consideration therefor and the federal withholding tax information, if any,
required in accordance with the related Partners Incentive Plan.
Except as otherwise contemplated by the preceding three paragraphs and
except to the extent required under the respective terms of the Partners
Incentive Plans and Partners SARs in effect as of the date of the Amalgamation
Agreement, all restrictions or limitations on transfer and vesting with respect
to Partners employee stock options and Partners SARs awarded under the Partners
Incentive Plans or any other plan, program or arrangement of Partners or any of
its subsidiaries, to the extent that such restrictions or limitations will not
have already lapsed, will remain in full force and effect with respect to such
options and SARs after giving effect to the Amalgamation and the assumption by
NTL as set forth above.
EMPLOYEE BENEFITS
At the Effective Time, the Partners Incentive Plans may be assumed by NTL,
with the result that all obligations of Partners under the Partners Incentive
Plans, including with respect to awards outstanding at the Effective Time under
each Partners Incentive Plan, would become obligations of NTL following the
Effective Time. Prior to the Effective Time, NTL will take all necessary actions
(including, if required to comply with Section 162(m) or 422 of the Code, (and
the regulations thereunder) or applicable law or rule of the NASDAQ, obtaining
the approval of its stockholders at the NTL Special Meeting) for the assumption
of the Partners Incentive Plans, including the reservation, issuance and
quotation of NTL Common Stock in a number at least equal to (i) the number of
shares of NTL Common Stock that will be subject to Adjusted Options and (ii) the
product of the Exchange Ratio and the number of Partners Common Shares available
for future awards under the Partners Stock Plan immediately prior to the
Effective Time. If required, NTL will prepare and file with the SEC no later
than the Effective Time, a registration statement on Form S-8 (or another
appropriate form) registering a number of shares of NTL Common Stock determined
in accordance with the preceding sentence. Such registration statement will be
kept effective (and the current status of the prospectus or prospectuses
required thereby will be maintained) at least for so long as Adjusted Options
remain outstanding and until such time as the shares of NTL Common Stock subject
to such Adjusted Options are no longer subject to resale restrictions under the
Securities Act.
Following the Effective Time, NTL will honor all obligations of Partners or
its subsidiaries under employment agreements of Partners or its subsidiaries as
amended and/or restated as contemplated in the Amalgamation Agreement.
INDEMNIFICATION AND INSURANCE
NTL has agreed that for six years after the Effective Time and thereafter
with respect to any claims during such six-year period, it will indemnify,
defend and hold harmless each Indemnified Party against all Costs incurred in
connection with any claim, action, suit, proceeding or investigation, whether
civil, criminal, administrative or investigative, arising out of acts or
omissions occurring at or prior to the Effective Time to the fullest extent that
Partners is permitted to indemnify such persons under the laws of Bermuda and
the
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Partners Bye-laws as in effect on the date the Amalgamation Agreement and it
will advance expenses (including expenses constituting Costs described below) as
incurred to the fullest extent permitted under applicable law. In addition, from
and after the Effective Time, directors and officers of Partners who become
directors or officers of NTL or the Amalgamated Company will be entitled to the
same indemnity rights and protections as are afforded to other directors and
officers of NTL.
NTL has also agreed that for six years after the Effective Time, it will
provide to Partners' current directors and officers liability insurance covering
acts or omissions occurring prior to the Effective Time with respect to those
persons who are currently covered by Comcast's directors' and officers'
liability insurance policy on terms with respect to such coverage and amount no
less favorable than those of such policy in effect on the date of the
Amalgamation Agreement, provided that in no event shall it be required to expend
more than $360,000 in the aggregate to maintain such coverage.
The indemnification and insurance provisions of the Amalgamation Agreement
(i) are intended to be for the benefit of, and will be enforceable by, each
Indemnified Party, his or her heirs or representatives and (ii) are in addition
to, and not in substitution for, any other rights to indemnification or
contribution that any such person may have by contract or otherwise. Each
Indemnified Party is expressly made a third party beneficiary of the provisions
in favor of the Indemnified Parties set forth in the Amalgamation Agreement. NTL
will pay all reasonable Costs, including attorneys' fees, that may be incurred
by any Indemnified Party in enforcing the indemnity and other obligations
provided for in the Amalgamation Agreement.
In the event that NTL or any of its successors or assigns (i) consolidates
with or merges into any other person and is not the continuing or surviving
corporation or entity of such consolidation or merger or (ii) transfers or
conveys all or substantially all of its properties and assets to any person,
then, and in each such case, proper provision will be made so that the
successors and assigns of NTL assume the obligations set forth in the preceding
three paragraphs.
CONDITIONS PRECEDENT TO THE AMALGAMATION
The respective obligation of NTL, Partners and Sub to effect the
Amalgamation is subject to the satisfaction or waiver on or prior to the Closing
Date of the following conditions: (i) the obtaining of the Partners Shareholder
Approval and the NTL Stockholder Approval; (ii) the obtaining of the consent of
the Minister to the Amalgamation; (iii) the obtaining of the Required British
Approvals; (iv) the obtaining of all other approvals required to be obtained by
Partners, NTL or any of their subsidiaries, except where the failure to obtain
such approvals is not reasonably expected to have a material adverse effect on
the Amalgamated Company and its prospective subsidiaries, taken as a whole, or
which will not result in a material violation of any laws; (v) the absence of
any judgment, order, decree, statute, law, ordinance, rule or regulation,
entered, enacted, promulgated, enforced or issued by any court or other
governmental entity of competent jurisdiction or other legal restraint or
prohibition (collectively, the "Restraints") which prevents the consummation of
the Amalgamation or which otherwise is reasonably likely to have a material
adverse effect on Partners or NTL; (vi) the effectiveness of the Registration
Statement and the absence of any stop order or proceeding seeking a stop order
suspending such effectiveness; (vii) the quotation on the NASDAQ, subject only
to official notice of issuance, of the shares of NTL Common Stock constituting
the Share Issuance and issuable upon exercise of Adjusted Options; and (viii)
the obtaining of the Required Consents.
The obligation of NTL to effect the Amalgamation is also subject to the
satisfaction or waiver of the following conditions: (i) the representations and
warranties of Partners set forth in the Amalgamation Agreement being true and
correct both when made and at and as of the Closing Date, as if made at and as
of such time (except to the extent expressly made as of an earlier date, in
which case as of such date), except where the failure of such representations
and warranties to be so true and correct (without giving effect to any
limitation as to "materiality" or "material adverse effect" set forth therein)
does not have, and is not likely to have, individually or in the aggregate, a
material adverse effect on NTL or Partners; (ii) Partners having performed in
all material respects all obligations required by the Amalgamation Agreement to
be performed by it at or prior to the Closing Date; (iii) there having not
occurred, as of the Closing Date, any material adverse change relating to
Partners from the date of the Amalgamation Agreement; (iv) each of Comcast and
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Warburg, Pincus having agreed to a "lock-up" agreement with NTL preventing them
from selling, transferring or disposing of any interest in the consideration
received by them in connection with the Amalgamation for a period of 150 days
after the Closing Date; (v) the number of Dissenting Shares having not been more
than 5% of the total issued and outstanding Class A Common Shares; and (vi) NTL
having received the audited balance sheet and other financial statements of
Partners as at December 31, 1997 and for the quarter and year then ended and
there being no material adverse difference in the amounts reflected therein for
revenue and operating income (earnings before interest, taxes, depreciation and
amortization) for the year and quarter ended December 31, 1997 and thereon for
cash and cash equivalents, net working capital (current assets less current
liabilities), third party debt, shareholder loans and equity as of December 31,
1997 from the amounts set forth on or in the Preliminary Financial Statements.
The obligation of Partners to effect the Amalgamation is also subject to
the satisfaction or waiver of the following conditions: (i) the representations
and warranties of NTL set forth in the Amalgamation Agreement being true and
correct both when made and at and as of the Closing Date, as if made at and as
of such time (except to the extent expressly made as of an earlier date, in
which case as of such date), except where the failure of such representations
and warranties to be so true and correct (without giving effect to any
limitation as to "materiality" or "material adverse effect" set forth therein)
does not have, and is not likely to have, individually or in the aggregate, a
material adverse effect on NTL; (ii) NTL having performed in all material
respects all obligations required by the Amalgamation Agreement to be performed
by it at or prior to the Closing Date; (iii) there having not occurred, as of
the Closing Date, any material adverse change relating to NTL from the date of
the Amalgamation Agreement; and (iv) NTL having entered into the Registration
Rights Agreement with Comcast and Warburg, Pincus.
Neither NTL nor Partners may rely on the failure of any applicable
condition to be satisfied if such failure was caused by such party's failure to
use best efforts to consummate the Amalgamation and the other transactions
contemplated by the Agreement.
ADDITIONAL AGREEMENTS
NASDAQ Quotation. NTL has agreed to use best efforts to cause the NTL
Common Stock issuable under the Amalgamation Agreement and upon exercise of
Adjusted Options to be approved for quotation on the NASDAQ, subject to official
notice of issuance, as promptly as practicable after the date of the
Amalgamation Agreement, and in any event prior to the Closing Date. NTL has also
agreed to use best efforts to cause the NTL Class C Stock and NTL Class D Stock
to be approved for quotation on the NASDAQ, subject to official notice of
issuance, prior to the 60th day following the Closing Date if either or both of
such preferred stocks are then outstanding.
Purchase Rights. From the date of the Amalgamation Agreement until the
Closing Date, the parties to the Amalgamation Agreement have agreed to consult
with each other as to any actions to be taken in connection with the Purchase
Rights. The parties have agree that NTL shall have the primary role in any
negotiations in respect of the Purchase Rights, provided, that (i) Partners
shall have received prior notice of and shall have the right to participate in
any such negotiations, (ii) if any offer is made to settle in cash either or
both of the Purchase Rights, Partners shall have the right, in its sole
discretion, to veto any such settlement, (iii) Partners shall not accept any
offer or proposed value for Partners' interests in either of the Significant
Affiliates without NTL's consent and (iv) except as otherwise provided in the
Amalgamation Agreement, Partners shall take such actions as are requested by NTL
in connection with such negotiations following such consultation. In connection
with any negotiated agreement, arrangement or understanding that would result in
the Purchase Rights being Resolved for purposes of the Amalgamation Agreement,
(A) NTL shall have the sole right to determine the terms and conditions of any
such agreement, arrangement or understanding so long as such terms and
conditions would not adversely affect the right of shareholders of Partners to
receive in the Amalgamation the consideration as provided for in the
Amalgamation Agreement and (B) in the event of the entering into of any such
agreement, arrangement or understanding, Partners shall take such actions as are
necessary to effect the transactions contemplated thereby.
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Notwithstanding the provisions of the preceding paragraph, (i) Partners
will not be obligated to take an action requested by NTL if Partners determines
in good faith, after obtaining and taking into account the advice of outside
counsel (which outside counsel will be made available to NTL and NTL's outside
counsel prior to Partners' final determination), that such action would
reasonably be likely to cause Partners to be in breach of its contractual
obligations or to violate its legal duties and (ii) Partners will not be
obligated to commence a proceeding or initiate litigation in respect of the
Purchase Rights unless (A) such proceeding or litigation is in the nature of a
declaratory judgment or (B) a recognized law firm practicing the law of the
applicable jurisdiction retained by NTL is of the view that such proceeding or
litigation has a reasonable likelihood of success on the merits.
Relationship with Significant Affiliates. Subject to the preceding
provisions relating to the Purchase Rights, Partners has agreed that (i) it will
not vote for or consent to any changes to the agreements or understandings
relating to its investment in Cable London or Birmingham Cable and (ii) it will
cause its representative(s) on the boards of directors of Cable London and
Birmingham Cable, subject to their legal obligations and contractual obligations
in effect as of the date of the Amalgamation Agreement, not to take any action
which is likely to have a material adverse effect on Partners or, after giving
effect to the Amalgamation, the Amalgamated Company, in each case, without the
prior approval of NTL, which approval shall not be unreasonably withheld or
delayed.
Standstill Agreements; Confidentiality Agreements. Partners has agreed
that, during the period from the date of the Amalgamation Agreement through the
Effective Time, Partners will not terminate, amend, modify or waive any
provision of any confidentiality or standstill agreement to which it or any of
its respective subsidiaries is a party. During such period, Partners will
enforce, to the fullest extent permitted under applicable law, the provisions of
any such agreement, including by obtaining injunctions to prevent any breaches
of such agreements and to enforce specifically the terms and provisions thereof
in any court having jurisdiction.
Debt Offers. Each of NTL and Partners have agreed to use its respective
reasonable best efforts to obtain, upon terms and conditions which are
reasonably satisfactory to NTL, the consents of the holders of its various debt
securities in order to permit the Amalgamation. For information regarding the
status of such consents, see "THE AMALGAMATION -- The Debt Consents." The costs,
fees and expenses payable by Partners in connection with its debt offer shall be
subject to the reasonable approval of NTL.
NTL Preferred Stock. If the NTL Class C Stock or NTL Class D Stock, or
both, are to be issued as part of the consideration to be received in the
Amalgamation, prior to the Effective Time, NTL will take all necessary steps to
file with the Secretary of State of the State of Delaware the Certificates of
Designation with respect to the NTL Class C Stock or NTL Class D Stock, or both,
as the case may be, with such further changes as the parties to the Amalgamation
Agreement may agree, all in accordance with applicable provisions of the DGCL,
and to amend the Rights Agreement, dated as of October 13, 1993 (the "Rights
Agreement"), between NTL and Continental Stock Transfer & Trust Company under
which the Series A Junior Participating Preferred Stock (the "Rights") are
reserved for issuance to cause such Rights to be issuable in respect of the NTL
Class C Stock or NTL Class D Stock, or both, as the case may be, as contemplated
by the Amalgamation Agreement. If, upon formal designation, each share of NTL
Class C Stock or NTL Class D Stock is not equivalent to a share of NTL Common
Stock, appropriate adjustments will be made.
TERMINATION
The Amalgamation Agreement may be terminated at any time prior to the
Effective Time, and, subject to certain exceptions, whether before or after the
Partners Shareholder Approval or the NTL Stockholder Approval:
(i) by mutual written consent of NTL and Partners;
(ii) by either NTL or Partners: (A) if the Amalgamation has not been
consummated by November 4, 1998 (the "End Date"); provided, however, that
(x) if there shall occur at any time subsequent to September 4, 1998 and
prior to November 4, 1998 any Restraint prohibiting, delaying or
restricting the Partners Special General Meeting, the voting of shares by
Comcast in favor of the
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Amalgamation or the consummation of the Amalgamation, the End Date will be
extended to December 31, 1998, (y) if, as of November 4, 1998, the Partners
Consent has not been obtained, the End Date will be extended to December
31, 1998, and (z) the right to terminate the Amalgamation Agreement
pursuant to this subparagraph (ii)(A) shall not be available to any party
whose failure to perform any of its obligations under the Amalgamation
Agreement results in the failure of the Amalgamation to be consummated by
such time; provided, further, that the Amalgamation Agreement may be
extended not more than 30 days (but in no event to a date later than
December 4, 1998) by either party by written notice to the other party if
the Amalgamation has not been consummated as a direct result of NTL or
Partners having failed to receive all regulatory approvals required to be
obtained with respect to the Amalgamation; (B) if the Partners Shareholder
Approval has not been obtained; (C) if the NTL Stockholder Approval has not
been obtained; or (D) if any Restraint which prevents the consummation of
the Amalgamation or which otherwise is reasonably likely to have a material
adverse effect on Partners or NTL is in effect and has become final and
nonappealable, provided, that the party seeking to terminate the
Amalgamation Agreement must have used its best efforts to prevent the entry
of and to remove such Restraint;
(iii) by either NTL or Partners if the other party has breached or
failed to perform in any material respect any of its representations,
warranties, covenants or other agreements contained in the Amalgamation
Agreement, which breach or failure to perform would give rise to the
failure of a condition set forth in the Amalgamation Agreement, and such
condition is incapable of being satisfied by the End Date; and
(iv) by Partners, prior to receipt of the Partners Shareholder
Approval, if (A) as of a date not more than ten business days before the
Partners Special General Meeting, the NTL Average Stock Price determined as
of such date is less than $26.70, (B) notice has been provided to NTL under
the Amalgamation Agreement of an intent to terminate and (C) within five
business days of receipt of such notice, NTL has not offered to increase
the Exchange Ratio such that the value of the consideration to be received
in the Amalgamation shall be $10.00 per Partners Common Share or more at
such time.
In the event of termination of the Amalgamation Agreement by either
Partners or NTL as described above, the Amalgamation Agreement will become void
and have no effect, without any liability or obligation on the part of NTL or
Partners, except for, among other things, certain specified obligations
including, without limitation, those relating to financial advisory and
brokerage fees and expenses of the Amalgamation, and except to the extent that
such termination results from the willful and material breach by a party of any
of its representations, warranties, covenants or agreements set forth in the
Amalgamation Agreement.
FEES AND EXPENSES
All fees and expenses incurred in connection with the Amalgamation, the
Amalgamation Agreement, and the transactions contemplated by the Amalgamation
Agreement will be paid by the party incurring such fees or expenses, whether or
not the Amalgamation is consummated.
AMENDMENT
The Amalgamation Agreement may be amended in writing by NTL and Partners at
any time before or after the Partners Shareholder Approval or the NTL
Stockholder Approval; provided, however, that after any such approval, there may
be no amendment that by law requires further approval by the shareholders of
Partners or the stockholders of NTL without the further approval of such
holders.
EXTENSION; WAIVER
At any time prior to the Effective Time, NTL or Partners may (i) extend the
time for the performance of any of the obligations or other acts of the other
party, (ii) waive any inaccuracies in the representations and warranties of the
other party contained in the Amalgamation Agreement or in any document delivered
pursuant to the Amalgamation Agreement or (iii) waive compliance by the other
party with any of the agreements or conditions contained in the Amalgamation
Agreement. Any agreement on the part of a party to any such extension or waiver
will be valid only if set forth in an instrument in writing signed on behalf of
such party. The failure of any party to the Amalgamation Agreement to assert any
of its rights under the Amalgamation Agreement or otherwise shall not constitute
a waiver of such rights.
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THE TELEWEST AGREEMENT
The TeleWest Agreement is included in its entirety as Annex L to this Joint
Proxy Statement/Prospectus and is incorporated herein by reference. We urge
shareholders of Partners and stockholders of NTL to read such document.
SALE OF THE BIRMINGHAM CABLE EQUITY INTEREST
General. Subject to the terms and conditions of the TeleWest Agreement,
Partners has agreed to sell or procure to be sold, and TeleWest has agreed to
purchase, the Birmingham Cable Equity Interest for L125 million in cash, as well
as Partners' right to, and interest in, certain subordinated loans and fees due
to Partners and Comcast UK Consulting Inc. ("Comcast UK Consulting"), from
Birmingham Cable and its subsidiaries (the "Birmingham Cable Loans and Fees")
for L5 million in cash (or L2.5 million if the Amalgamation does not occur on or
prior to the completion of the obligations required for such sale and purchase
(the "Birmingham Cable Completion") with a further L2.5 million to be paid upon
the Closing of the Amalgamation). The Birmingham Cable Completion will occur
immediately prior to the Closing of the Amalgamation or, if the Amalgamation
occurs before October 16, 1998, on October 16, 1998, provided, that if the
Closing of the Amalgamation has not taken place by December 31, 1998, the
Birmingham Cable Completion will occur on December 31, 1998.
Period Between the Date of the TeleWest Agreement and the Birmingham Cable
Completion. Pursuant to the TeleWest Agreement, Partners has agreed that during
the period from the date of the TeleWest Agreement to the Birmingham Cable
Completion, except with the prior written consent of TeleWest and as otherwise
contemplated by the TeleWest Agreement, it will not: (i) sell, transfer, assign,
grant options over, dispose of, or otherwise deal in any manner with the legal
title to, or the beneficial ownership of, or any other interest in, any shares
in Birmingham Cable beneficially owned by it or any loans due to it; (ii) demand
repayment of any of the loans or accrued consulting fees due to it or any of its
subsidiary or parent undertakings or the payment of interest thereon; or (iii)
enter into any agreement to do any of the foregoing in relation to such shares
in Birmingham Cable.
Deliveries at the Birmingham Cable Completion. The TeleWest Agreement
provides that at the Birmingham Cable Completion, Partners will deliver to
TeleWest, except as otherwise waived by TeleWest: (i) a stock transfer form duly
executed by Partners transferring the Birmingham Cable Equity Interest to
TeleWest; (ii) resignation letters executed as deeds from Ronald Lawley and Gary
Mizga resigning as directors of Birmingham Cable with effect from the Birmingham
Cable Completion without any compensation for loss of office and waiving any
other claims which they may have in their capacity as directors against
Birmingham Cable; (iii) an agreement executed by Comcast UK Consulting
terminating the Consultant Agreement for Operational Assistance, dated April 25,
1990, between Birmingham Cable, Birmingham Cable Limited and Comcast UK
Consulting, as amended, and the Management Agreement, dated April 25, 1990,
between Birmingham Cable, Birmingham Cable Limited, US West International
Holdings Inc. and Comcast Cablevision of Birmingham Inc., as of the Birmingham
Cable Completion; (iv) a letter executed by Partners consenting to TeleWest (or,
if so directed by TeleWest, to TeleWest Holdings) being registered as the sole
holder of the Birmingham Cable Equity Interest for purposes of Birmingham
Cable's articles of association; and (v) an assignment executed by Partners and
Comcast UK Consulting assigning their respective rights and interests in the
Birmingham Cable Loans and Fees to TeleWest conditional upon TeleWest entering
into a deed of subordination and providing to Chemical Investment Bank Limited
("Chemical") such evidence as is required by the L175 million Revolving Credit
Facility Agreement, dated February 15, 1995, in favor of Birmingham Cable.
The TeleWest Agreement also provides that as of the Birmingham Cable
Completion, except as otherwise waived by Partners, TeleWest will: (i) procure
the telegraphic transfer of L130 million (or, if the Amalgamation does not occur
on or prior to the Birmingham Cable Completion L127.5 million) in cleared funds
to an account specified by Partners, receipt of which will discharge TeleWest
from its obligation to pay the consideration for the Birmingham Cable Equity
Interest and the Birmingham Cable Loans and Fees; (ii) deliver to Partners the
executed counterpart of the agreement described in subsection (iii) of the
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preceding paragraph; and (iii) if required by Partners, deliver to Partners or,
if so directed, to Chemical, an executed deed of subordination and evidence
referred to in subsection (v) of the preceding paragraph.
Co-Ownership Agreement; Waiver of Claims. Each of Partners, TeleWest and
TeleWest Holdings agrees that the sale of the Birmingham Cable Equity Interest
to TeleWest (or TeleWest Holdings) pursuant to the TeleWest Agreement will
supercede the provisions of the Co-Ownership Agreement which would otherwise
apply as a result of the Amalgamation being implemented. In addition, each of
Partners and TeleWest Holdings agrees that with effect from the Birmingham Cable
Completion, the Co-Ownership Agreement will terminate without any liability for
any of the parties thereto. Each of Partners and TeleWest Holdings also waives
any claims and rights it may have against the other as of the date of the
TeleWest Agreement.
Notification to Appraiser. Each of Partners and TeleWest Holdings has
agreed to inform the appraiser appointed pursuant to the Co-Ownership Agreement
of the settlement reached under the TeleWest Agreement and to use its best
efforts to ensure that the appraisal process is terminated as soon as
practicable. See "THE AMALGAMATION -- Purchase Rights Relating to Partners'
Interest in Birmingham Cable and Cable London -- Birmingham Cable." Partners has
agreed to pay any fees and expenses incurred in such appraisal process.
Releases. Each of TeleWest and TeleWest Holdings has agreed that with
effect from the Birmingham Cable Completion, it will procure that Partners and
its parent and subsidiary undertakings are released from all past, present and
future obligations under certain subscription agreements as set forth in the
TeleWest Agreement. TeleWest has also agreed that following the Birmingham Cable
Completion, it will use all reasonable efforts to obtain the release of Partners
and its subsidiary and parent undertakings as of the date of the TeleWest
Agreement from all guarantees, indemnities, counter-indemnities and letters of
comfort (collectively, the "Guarantees") given to any third party by Partners as
of the date of the TeleWest Agreement in respect of any liability or obligation
of Birmingham Cable and, pending such release, to indemnify Partners against all
amounts paid by it to any third party pursuant to any such Guarantees arising
after the Birmingham Cable Completion. TeleWest has also agreed that it will pay
any amounts properly due and payable under the Guarantees as and when such
amounts are due.
Birmingham Link Agreement. NTL has agreed that if the Amalgamation is
completed, Birmingham Cable may terminate the Birmingham Link Agreement, dated
February 13, 1993, between National Transcommunications Limited and Birmingham
Cable upon six months' prior written notice at any time on or after January 1,
2000.
Other. Under the terms of the TeleWest Agreement, TeleWest may, at its
option by notice to Partners at any time prior to the Birmingham Cable
Completion, substitute TeleWest Holdings as the purchaser of the Birmingham
Cable Equity Interest and the Birmingham Cable Loans and Fees and to satisfy the
consideration payable in respect thereof. If such option is exercised, the
guarantee as described under "Guarantees -- TeleWest Guarantee" below will
become effective.
CABLE LONDON "SHOOT-OUT"
Procedure. The TeleWest Agreement provides that at any time during the
Shoot-out Period (as defined herein), Partners may give notice, and not later
than the end of the Shoot-out Period Partners shall give notice (the "Offer
Notice"), to TeleWest offering to sell to TeleWest the Cable London Equity
Interest and all of the rights and interests of Partners and its subsidiaries in
certain subordinated loans and fees due to Partners and Comcast UK Consulting
and any of their respective subsidiaries and parent undertakings from Cable
London and its subsidiaries (the "CUKCP Cable London Loans and Fees") for the
cash sum (the "Sum") specified in the Offer Notice on the terms and conditions
set forth in the TeleWest Agreement (the "Offer"). If Partners fails to give the
Offer Notice prior to the end of the Shoot-out Period, then Partners will be
deemed to have delivered an Offer Notice for a sum equal to L100 million. For
purposes of the TeleWest Agreement and this Joint Proxy Statement/Prospectus,
"Shoot-out Period" means the period commencing on the date which is the earlier
of (i) six months after (A) the Closing Date of the Amalgamation or (B) if
earlier, December 31, 1998, and (ii) the earlier of (A) the date on which a
public announcement is made of a firm
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intention to make a recommended offer for the ordinary shares of TeleWest (other
than those owned or contracted to be acquired by the offeror or persons acting
in concert with the offeror) or of a merger between NTL and a third party where
NTL is not the surviving entity whether or not, in either case, subject to the
satisfaction of any pre-conditions, and (B) the completion of any such offer or
merger whether or not recommended, and ending at midnight on the date which is
three months thereafter (both dates inclusive).
Pursuant to the TeleWest Agreement, TeleWest will have 30 days (the
"Acceptance Period") in which to accept or decline the Offer by notice to
Partners. If TeleWest accepts the Offer, Partners will sell, and will procure
that its subsidiaries will sell, subject to and conditional upon the receipt or
waiver of the Shoot-out Approvals (as defined herein), to TeleWest, and TeleWest
will purchase from Partners or any of its subsidiaries, the Cable London Equity
Interest, as of the date of completion of the obligations required for such sale
and purchase (the "Cable London Completion"), as well as their respective rights
and interests in the CUKCP Cable London Loans and Fees, at the Sum specified in
the Offer Notice. If TeleWest declines the Offer or gives no notice within the
Acceptance Period, TeleWest will sell, and will procure that its subsidiaries
and MediaOne Cable Communications Limited will sell, subject to and conditional
upon the receipt or waiver of the Shoot-out Approvals, to Partners, and Partners
will purchase from TeleWest or any of its subsidiaries, all of the shares in the
capital of Cable London owned and to be owned, or in which TeleWest has an
interest, at the Cable London Completion, as well as the respective rights and
interests of TeleWest and its subsidiaries in certain subordinated loans and
fees due to TeleWest and any of its subsidiaries from Cable London and its
subsidiaries (the "TeleWest Cable London Loans and Fees") at the Sum specified
in the Offer Notice. See "-- Shoot-out Approvals."
If, as referred to in the preceding paragraph, either TeleWest or Partners
(the "Purchaser") becomes obliged or agrees to purchase the shares in Cable
London which are owned by the other (the "Vendor"), the sale of such shares (the
"Cable London Sale Shares") will be completed on such date as the Purchaser may
specify upon at least 10 business days' prior notice to the Vendor. If the Cable
London Completion has not occurred within 90 days after the end of the
Acceptance Period (the "Long Stop Date"), the Purchaser will no longer be
entitled to purchase the Cable London Sale Shares and the relevant Cable London
Loans and Fees unless it elects, by prior written notice to the Vendor, to delay
the date of the Cable London Completion by a period of up to a further 90 days
from the Long Stop Date. If the Purchaser exercises such option, it shall pay to
the Vendor at the Cable London Completion an amount equal to 5% of the Sum for
every 30 days (or part thereof) by which the date for the Cable London
Completion is extended from the Long Stop Date up to a maximum of 90 days. If
the Cable London Sale Shares have not been purchased by the end of the
prescribed period, the Purchaser will no longer be entitled to purchase the
Cable London Sale Shares or the relevant Cable London Loan and Fees, and the
Vendor will then have the option (to be exercised and completed within 60 days)
to purchase the Cable London Sale Shares and the relevant Cable London Loan and
Fees from the Purchaser for an amount equal to 70% of the Sum. Such option will
be the only remedy of the Vendor for any failure by the Purchaser to acquire the
Cable London Sale Shares and the relevant Cable London Loans and Fees.
If the Purchaser is prohibited from acquiring the Cable London Sale Shares
solely because it is unable to obtain the requisite Shoot-out Approvals from the
DTI, the ITC and OFTEL by the expiration of the prescribed period and the
Purchaser elects not to waive such Shoot-out Approvals, the Vendor will have the
option (to be exercised and completed within 60 days) to purchase the shares in
Cable London owned by the Purchaser for the Sum. If the Purchaser is unable to
acquire the Cable London Sale Shares because it is unable to obtain the
requisite Shoot-out Approval from the Canadian Imperial Bank of Commerce
("CIBC"), as agent and security trustee under the terms of the L170 million
credit facility in favor of Cable London, by the expiration of the prescribed
period, then the provisions relating to the Shoot-out procedure in the TeleWest
Agreement will cease to apply (without prejudice to any breaches of such
provisions prior to such date).
Deliveries at the Cable London Completion. The TeleWest Agreement provides
that at the Cable London Completion, the Vendor will deliver to the Purchaser:
(i) a duly executed transfer of the shares in Cable London owned by the Vendor
as of the Cable London Completion, together with the share certificates relating
to such shares; (ii) resignation letters executed as deeds from those directors
of Cable London
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appointed by the Vendor resigning as directors of Cable London and its
subsidiaries with effect from the Cable London Completion without any
compensation for loss of office and waiving any other claims against Cable
London; (iii) if the Amalgamation has not been previously completed, an
agreement duly executed by Partners (if Partners is the Vendor) or MediaOne (if
TeleWest is the Vendor) terminating the Consultant Agreement for Operational
Assistance, dated August 17, 1989, between Cable London and Comcast (the
"Partners Consultant Agreement") (if Partners is the Vendor) or the Consultant
Agreement for Technical Assistance, between Cable London and MediaOne (the
"TeleWest Consultant Agreement") (if TeleWest is the Vendor) with effect from
the Cable London Completion without any liability or obligation upon either
party to such agreements (and, in the case of the termination of the Partners
Consultant Agreement, upon Comcast) other than for accrued fees; (iv) if
Partners is the Vendor, an agreement duly executed by Partners terminating the
Equalisation Deed, dated July 17, 1996, between TeleWest and Partners, with
effect from the Cable London Completion; (v) if TeleWest is the Vendor, an
agreement terminating all of the provisions of the Equalisation Deed other than
those as set forth in the TeleWest Agreement; and (vi) unless the relevant Cable
London Loans and Fees are to be capitalized pursuant to "-- Capitalization"
below, an assignment duly executed by the Vendor and MediaOne (if TeleWest is
the Vendor) assigning their respective rights and interests in the relevant
Cable London Loans and Fees to the Purchaser.
The TeleWest Agreement also provides that at the Cable London Completion,
the Purchaser will: (i) procure the telegraphic transfer of the Sum (or such
lesser amount in accordance with the TeleWest Agreement) in cleared funds to
such account as the Vendor shall specify and any further amount payable to the
Vendor pursuant to the TeleWest Agreement; (ii) if required by the Vendor,
deliver to the Vendor or, if so directed, to CIBC, a mortgage and deed of
subordination duly executed by the Purchaser, together with a legal opinion
confirming the capacity of the Purchaser to enter into such documents and that
the Purchaser's obligations thereunder are legal, valid and binding and
enforceable in accordance with their terms; and (iii) deliver to the Vendor the
counterparts of the agreements referred to in subsections (iii), (iv) or (v) of
the preceding paragraph, as appropriate, and subsection (vi) of the preceding
paragraph duly executed by Cable London and the Vendor, as appropriate.
Conduct of Business During the Shoot-out Period. Pursuant to the TeleWest
Agreement, each of TeleWest and Partners has agreed that between the date of the
TeleWest Agreement and the expiration of the Shoot-out Period it will not and
will procure that none of its subsidiary or parent undertakings will, except
with the prior written consent of the other: (i) sell, transfer, assign, grant
options over, dispose of, or otherwise deal in any manner with the legal title
to, or the beneficial ownership of, or any other interest in, any shares in
Cable London owned by it or any loans due to it, other than as contemplated by
the TeleWest Agreement or the Equalisation Deed; (ii) demand repayment of any of
the loans or accrued consultancy fees due to it or any of its subsidiary or
parent undertakings by Cable London or any of its subsidiaries or the payment of
interest thereon, other than as contemplated by the TeleWest Agreement; (iii)
enter into any agreement to do any of the foregoing in relation to such shares
in Cable London.
Releases. The Purchaser has agreed that with effect from the Cable London
Completion, it will procure that the Vendor and its parent and subsidiary
undertakings as at the date of the TeleWest Agreement are released from all
past, present and future obligations under the agreement, dated July 10, 1989,
between Cable London, US West International Holdings, Comcast, Jerold Samuel
Nathan, Malcolm Gee, Sally Margaret Davids and Stephen Michael Kirk. The
Purchaser has also agreed that, following the Cable London Completion, it will
use all reasonable endeavors to obtain the release of the Vendor and its
subsidiary and parent undertakings as of the date of the TeleWest Agreement from
all Guarantees given in relation to any liability or obligation of Cable London
or any of its subsidiaries and pending such release, to indemnify the Vendor
against all amounts paid by it to any third party pursuant to any such
Guarantees arising after the Cable London Completion. The Purchaser has also
agreed that it will pay any amounts properly due and payable under the
Guarantees as and when such amounts are due.
Shoot-out Approvals. The Cable London Completion is conditioned upon the
following (the "Shoot-out Approvals"): (i) the Purchaser receiving written
confirmation from the DTI and from the ITC to the effect that the acquisition of
shares in Cable London pursuant to the TeleWest Agreement (the "Acquisition")
will not lead to the revocation of any licenses issued pursuant to the Cable and
Broadcasting Act 1984
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or the Broadcasting Act 1990 (as amended) or the revocation of any of the
telecommunications or wireless telegraphy licenses issued by the DTI pursuant to
the Telecommunications Act 1984 or the Wireless Telegraphy Act 1949 or 1998
which are held by Cable London or any of its subsidiaries; (ii) OFTEL having
indicated to the Purchaser either that the Acquisition does not qualify for
investigation by the Monopolies and Mergers Commission pursuant to the Fair
Trading Act 1973 or that The Secretary of State for Trade and Industry has
decided not to refer the Acquisition to the Monopolies and Mergers Commission;
and (iii) CIBC consenting to (A) the Acquisition, (B) the capitalization
referred to in "-- Capitalization" below, unless the Cable London Loans and Fees
are to be assigned, (C) the release of the shares in Cable London to be sold by
the Vendor pursuant to the Acquisition from the security granted to CIBC over
such shares and the termination of any deed of subordination between the Vendor
and CIBC and (D) the assignment of the relevant Cable London Loans and Fees to
the Purchaser, unless the relevant Cable London Loans and Fees are to be
capitalized pursuant to "-- Capitalization" below, in each case with effect from
the Cable London Completion.
The Purchaser may waive any of the Shoot-out Approvals (other than the
Shoot-out Approval from CIBC). Each of the parties has agreed to use its best
efforts to obtain the Shoot-out Approvals following service of an Offer Notice
and will cooperate, and procure that Cable London and its subsidiaries will
cooperate, to obtain the Shoot-out Approvals. In particular, each of the parties
has agreed to take such action as CIBC may reasonably require in order to obtain
the Shoot-out Approval from CIBC.
Capitalization. Each of Partners and TeleWest has agreed that if a
capitalization will result in the requisite Shoot-out Approval from CIBC being
obtained, or if requested by the proposed buyer of the Cable London Sale Shares,
it will, with consent of CIBC, exercise all voting rights and other powers of
control available to it, and procure that each director of Cable London
appointed by it will vote and act in a manner, so as to procure that all loans
and fees outstanding from the Vendor, or any subsidiary or parent undertaking of
the Vendor, including any interest on such loans immediately prior to the Cable
London Completion, are capitalized into ordinary shares of L1 each in Cable
London immediately prior to or at the Cable London Completion.
OTHER ACTIONS WITH RESPECT TO CABLE LONDON
The TeleWest Agreement provides that as soon as reasonably practicable
after the date thereof, and in any event prior to August 31, 1998, each of
TeleWest and Partners will exercise all voting rights and other powers of
control available to it, and will procure that each director of Cable London
appointed by it will act and vote in a manner so as to procure that: (i)
immediately following the Closing of the Amalgamation, the Partners Consultant
Agreement and the TeleWest Consultant Agreement are terminated without any
liability for any of the parties thereto and that each of TeleWest and Partners
waives any claims and rights it may have against the other or any of subsidiary
or parent undertakings with respect to such agreement as of the date of the
TeleWest Agreement; (ii) immediately following the Closing of the Amalgamation,
George Blumenthal, J. Barclay Knapp, Leigh Wood and Mark Wynn are appointed as
directors of Cable London and Gary Mizga and Ronald Lawley resign as directors
of Cable London without any compensation for loss of office; and (iii) the
Special Resolution, as set forth in Schedule 2 to the TeleWest Agreement, is
duly passed, amending Cable London's articles of association.
Each of TeleWest and Partners has also agreed that immediately following
the Closing of the Amalgamation, the following persons will be treated as having
been appointed by it as its Nominated Directors (as defined in Cable London's
articles of association): (i) with respect to TeleWest, Charles Burdick, David
Van Valkenburg and Mark Wynn and (ii) with respect to Partners, J. Barclay
Knapp, Leigh Wood and George Blumenthal.
GUARANTEES
TeleWest Guarantee. In consideration of Partners entering into the
TeleWest Agreement, TeleWest has agreed to irrevocably and unconditionally
guarantee, as primary obligor, the full, prompt and complete performance by
TeleWest Holdings of all of its obligations under the TeleWest Agreement and the
due and
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punctual payment of all sums now or subsequently payable by TeleWest Holdings to
Partners under the TeleWest Agreement, and agrees that if TeleWest Holdings
defaults in the payment of any sum under the TeleWest Agreement, TeleWest will,
upon Partners' demand, pay such sum to Partners. Such obligations of TeleWest
will not be affected by any act, omission, matter or thing which might otherwise
operate to release or exonerate TeleWest from such obligations or affect such
obligations, including without limitation and whether or not known to TeleWest:
(i) any time, indulgence, waiver or consent at any time given to TeleWest
Holdings or any other person; (ii) any compromise or release of or abstention
from perfecting or enforcing any right or remedy against TeleWest Holdings or
any other person; (iii) any legal limitation, disability, incapacity or other
circumstance relating to TeleWest Holdings or any other person or any amendment
to or variation of the terms of the TeleWest Agreement or any other document
referred to in the TeleWest Agreement; and (iv) any irregularity,
unenforceability or invalidity of any obligations of TeleWest Holdings under the
TeleWest Agreement or the dissolution, amalgamation, reconstruction or
insolvency of TeleWest Holdings. Partners may enforce such guarantee without
first taking any steps or proceedings against TeleWest Holdings. Such
obligations of TeleWest will not take effect until, and are conditional upon,
TeleWest exercising its right to substitute TeleWest Holdings as the purchaser
of the Birmingham Cable Equity Interest and the Birmingham Cable Loans and Fees
as described under "-- Sale of Birmingham Cable Equity Interest -- Other" above.
NTL Guarantee. In consideration of TeleWest Holdings and TeleWest entering
into the TeleWest Agreement, NTL has agreed to irrevocably and unconditionally
guarantee, as primary obligor, the full, prompt and complete performance by
Partners of all of its obligations under the TeleWest Agreement and the due and
punctual payment of all sums now or subsequently payable by Partners to TeleWest
Holdings under the TeleWest Agreement, and agrees that if Partners defaults in
the payment of any sum under the TeleWest Agreement, NTL will, upon demand by
TeleWest Holdings, pay such sum to TeleWest Holdings. Such obligations of NTL
will not be affected by any act, omission, matter or thing which might otherwise
operate to release or exonerate NTL from its obligations or affect such
obligations, including without limitation and whether or not known to NTL: (i)
any time, indulgence, waiver or consent at any time given to Partners or any
other person; (ii) any compromise or release of or abstention from perfecting or
enforcing any right or remedy against Partners or any other person; (iii) any
legal limitation, disability, incapacity or other circumstance relating to
Partners or any other person or any amendment to or variation of the terms of
the TeleWest Agreement or any other document referred to in the TeleWest
Agreement; and (iv) any irregularity, unenforceability or invalidity of any
obligations of Partners under the TeleWest Agreement or the dissolution,
amalgamation, reconstruction or insolvency of Partners. TeleWest Holdings or
TeleWest may enforce such guarantee without first taking any steps or
proceedings against Partners. Such obligations of NTL will not take effect
until, and are conditional upon, the completion of the Amalgamation.
CERTAIN AGREEMENTS RELATED TO THE AMALGAMATION
Stockholders of NTL and shareholders of Partners should note that although
the following summary includes references to NTL Class C Stock, as a result of
the TeleWest Agreement, such stock will not be issued as a form of consideration
in the Amalgamation.
VOTING AGREEMENTS
Concurrent with the execution of the Amalgamation Agreement, each of
Comcast and Warburg, Pincus executed a Voting Agreement with NTL. Pursuant to
the Voting Agreement executed by Comcast (the "Comcast Voting Agreement"),
Comcast agreed that until the earlier to occur of the Effective Time or the
termination of the Comcast Voting Agreement, it will, and will cause its
subsidiaries to, vote in favor of the Amalgamation Agreement at the Partners
Special General Meeting. Comcast also agreed that it will, and will cause its
subsidiaries to, (i) comply with the relevant non-solicitation provisions of the
Amalgamation Agreement, (ii) not sell, transfer, dispose or assign, directly or
indirectly, all or any part of its interest in Partners other than pursuant to
the Amalgamation Agreement, (iii) not enter into any new agreement or other
arrangement between Comcast and its subsidiaries (other than Partners and its
subsidiaries), on the one hand, and Partners, or any subsidiary of Partners, or
any Significant Affiliate (as defined in the Amalgamation
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Agreement), on the other hand, or amend any such existing agreement or other
arrangement or (iv) if any interest in any Significant Affiliate is transferred
by Partners or any subsidiary of Partners to Comcast or any subsidiary of
Comcast, make arrangements to effectively transfer such interest to NTL at the
Effective Time without any additional consideration (other than the
consideration to be received in the Amalgamation) being payable by NTL.
Additionally, Comcast agreed, on behalf of Comcast and its subsidiaries (other
than Partners and its subsidiaries), that from and after the Effective Time, it
will (i) for so long as Comcast is subject to the filing requirements of Section
13 of the Exchange Act with respect to NTL Capital Stock, vote any shares of NTL
Capital Stock in the same proportion as voted by stockholders of NTL generally
(other than any affiliate thereof), provided that this covenant does not apply
to any class vote of the NTL Class C Stock or NTL Class D Stock, (ii) use its
reasonable efforts to provide that any person now serving as a director of a
Significant Affiliate at the request of Comcast or any of its subsidiaries
continue to so serve until NTL shall otherwise direct and use its reasonable
efforts to cause such person to consult with NTL with respect to their duties
and (iii) assign to NTL any rights which Comcast or any of its subsidiaries
(other than Partners and its subsidiaries) may have with respect to any
management, consulting or similar agreement with Partners, any subsidiary of
Partners or any Significant Affiliate and transfer and pay, promptly upon
receipt, to NTL or its designee, any proceeds therefrom received by Comcast or
any subsidiary of Comcast in respect thereof, provided that NTL shall have
agreed to assume or otherwise be responsible for any obligations thereunder. The
Comcast Voting Agreement will terminate upon termination of the Amalgamation
Agreement.
Pursuant to the voting agreement executed by Warburg, Pincus (the "Warburg,
Pincus Voting Agreement"), Warburg, Pincus agreed, on behalf of itself and its
affiliates, to vote in favor of the Amalgamation Agreement at the Partners
Special General Meeting, as well as to comply with the relevant nonsolicitation
provisions of the Amalgamation Agreement and not to sell, transfer, dispose or
assign, directly or indirectly, all or any part of its interest in Partners
other than pursuant to the Amalgamation Agreement. Additionally, Warburg, Pincus
consented to the Amalgamation Agreement for purposes of the Shareholders
Agreement, dated September 20, 1994, between Comcast, Warburg, Pincus, Holdings
and Partners and acknowledged that such agreement will terminate at the
Effective Time. The Warburg, Pincus Voting Agreement will terminate upon
termination of the Amalgamation Agreement.
The foregoing summary of the Voting Agreements is qualified in its entirety
by the text of the Voting Agreements which are attached as Annex F hereto and
which are incorporated herein by reference.
THE REGISTRATION RIGHTS AGREEMENT
The Amalgamation Agreement requires NTL to enter into the Registration
Rights Agreement with Comcast and Warburg, Pincus on or prior to the Closing
Date. Pursuant to the Registration Rights Agreement, NTL will be obligated to
file a registration statement with the SEC upon written notice by either Comcast
or Warburg, Pincus to register their shares of NTL Capital Stock received in
connection with the Amalgamation. The Registration Rights Agreement will entitle
each of Comcast and Warburg, Pincus to request the filing of two such
registration statements, provided that (i) neither Comcast nor Warburg, Pincus
may demand more than one such registration statement in any 12-month period and
(ii) NTL will not be required to effect more than one demand registration in any
3-month period. Each of Comcast and Warburg, Pincus will have the right to
participate in the demand of the other, but no other stockholder will have the
right, or would be given the right, to "piggyback" on any such demand.
Pursuant to the Registration Rights Agreement, each of Comcast and Warburg,
Pincus will have the right to "piggyback" on up to two registrations filed by
NTL subject to customary terms, including priority of NTL primary shares.
NTL is required to bear the expenses of the registration of the shares of
NTL Capital Stock received by Comcast and Warburg, Pincus pursuant to the
Amalgamation. NTL will also pay the fees and disbursements, subject to certain
limitations, of counsel selected by each of Comcast and Warburg, Pincus to
represent them. Comcast and Warburg, Pincus are responsible for paying any other
selling expenses, including underwriting
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discounts and broker's commissions, and expenses of their respective counsel
except as described in the previous sentence.
From and after one year from the signing of the Amalgamation Agreement, if
Warburg, Pincus delivers a satisfactory written legal opinion to NTL and its
transfer agent, NTL will cause the transfer agent to issue to Warburg, Pincus
unlegended certificates in respect of the shares of NTL Capital Stock held by
Warburg, Pincus.
The foregoing summary of the Registration Rights Agreement is qualified in
its entirety by the text of the form of Registration Rights Agreement which is
attached as Annex G hereto and which is incorporated herein by reference.
LOCK-UP AGREEMENTS
The Amalgamation Agreement requires that, on or prior to the Closing Date,
each of Comcast and Warburg, Pincus enter into a "lock-up" agreement with NTL
preventing them from selling, transferring or disposing of any interest in the
consideration received by them in connection with the Amalgamation for a period
of 150 days after the Closing Date.
The foregoing summary of such "lock-up" agreements is qualified in its
entirety by the texts of the forms of "lock-up" agreements which are attached as
Annex H hereto and which are incorporated herein by reference.
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<PAGE> 115
MARKET PRICE DATA AND DIVIDENDS
The NTL Common Stock is quoted and traded on the NASDAQ under the symbol
"NTLI." From October 14, 1993 through March 26, 1997, the NTL Common Stock was
quoted and traded on the NASDAQ under the symbol "ICTL." The Class A Common
Shares are traded in the over-the-counter market and are quoted on the NASDAQ
under the symbol "CMCAF." There is no established public trading market for the
Class B Common Shares. The following table sets forth, for the periods
indicated, the high and low reported sales prices per share of NTL Common Stock
and Class A Common Shares, as reported on the NASDAQ.
<TABLE>
<CAPTION>
NTL CLASS A
-------------- --------------
COMMON STOCK COMMON SHARES
-------------- --------------
HIGH LOW HIGH LOW
---- ---- ---- ----
<S> <C> <C> <C> <C>
1995
First Quarter.................................... $26 5/8 $20 1/4 $19 1/4 $13 7/8
Second Quarter................................... 26 1/4 20 1/4 16 5/8 13 1/4
Third Quarter.................................... 28 7/8 24 3/8 17 3/8 14 1/8
Fourth Quarter................................... 28 1/4 23 5/8 16 1/4 11 3/4
1996
First Quarter.................................... $30 1/8 $21 5/8 $14 1/4 $11 1/2
Second Quarter................................... 34 1/8 27 3/4 14 1/4 11 7/8
Third Quarter.................................... 30 22 5/8 13 7/8 9 5/8
Fourth Quarter................................... 28 1/4 22 5/8 14 10
1997
First Quarter.................................... $26 3/4 $18 1/8 $14 1/8 $ 9 3/4
Second Quarter................................... 27 1/4 19 13 10 1/2
Third Quarter.................................... 27 7/8 20 1/8 12 1/4 9 1/8
Fourth Quarter................................... 29 3/8 25 1/4 12 1/8 8 3/4
1998
First Quarter.................................... 45 3/4 26 3/4 14 5/8 8 5/8
Second Quarter................................... 54 35 3/4 16 1/4 12 1/4
Third Quarter (through September 29, 1998)....... 65 35 1/2 18 11/16 12 5/8
</TABLE>
On February 4, 1998, the last trading day prior to the public announcement
of the execution of the Amalgamation Agreement, the composite closing prices of
the NTL Common Stock and the Class A Common Shares, as reported on the NASDAQ,
were $32.000 per share and $9.250 per share, respectively. On September 29,
1998, the last trading day prior to the date of this Joint Proxy
Statement/Prospectus, the composite closing prices of the NTL Common Stock and
the Class A Common Shares, as reported on the NASDAQ, were $44.875 per share and
$15.875 per share, respectively.
The market prices of shares of NTL Common Stock and the Class A Common
Shares are subject to fluctuation. As a result, stockholders of NTL and
shareholders of Partners are urged to obtain current market quotations.
Since their inceptions, neither NTL nor Partners has declared or paid any
cash dividends on the NTL Common Stock or the Class A Common Shares,
respectively. NTL currently intends to retain its earnings for future growth
and, therefore, does not anticipate paying cash dividends in the foreseeable
future. Partners is prohibited from paying dividends on the Class B Common
Shares without also paying pro rata dividends on the Class A Common Shares.
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DESCRIPTION OF NTL CAPITAL STOCK
GENERAL
The authorized capital stock of NTL consists of 100,000,000 shares of NTL
Common Stock, par value $.01 per share, and 2,500,000 shares of preferred stock,
par value $.01 per share (the "NTL Preferred Stock"). At the close of business
on September 4, 1998: (i) approximately 41,383,000 shares of NTL Common Stock
were issued and outstanding; (ii) no shares of NTL Common Stock were held by NTL
in its treasury; (iii) approximately 121,000 shares of the NTL 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; (v) approximately 7,261,000 shares of
NTL Common Stock were reserved for issuance pursuant to the conversion of the 7%
Convertible Notes; (vi) approximately 939,000 shares of NTL Common Stock were
reserved for issuance upon the exercise of certain warrants; and (vii)
approximately 15,545,000 shares of NTL Common Stock were reserved for issuance
pursuant to various NTL employee and director stock options.
NTL COMMON STOCK
The holders of NTL Common Stock are entitled to one vote for each share
held of record on all matters submitted to a vote of the stockholders of NTL and
do not have cumulative voting rights in the election of directors. Holders of
NTL Common Stock are entitled to receive ratably such dividends as may from time
to time be declared by the NTL Board out of funds legally available therefor. In
the event of a liquidation, dissolution or winding up of NTL, holders of NTL
Common Stock would be entitled to share ratably in all assets of NTL available
for distribution to holders of NTL Common Stock remaining after payment of
liabilities and liquidation preference of any outstanding NTL Preferred Stock.
Holders of NTL Common Stock have no preemptive rights and have no rights to
convert their NTL Common Stock into any other securities, and there are no
redemption provisions with respect to such shares. All of the outstanding shares
of NTL Common Stock are fully paid and nonassessable.
NTL PREFERRED STOCK
The NTL Board has the authority to issue NTL 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 NTL.
NTL 13% Preferred. The NTL 13% Preferred ranks prior to the NTL Common
Stock, Rights Preferred Stock and NTL Series A Preferred with respect to
dividend rights and rights on liquidation, winding up and dissolution, and each
share of NTL 13% Preferred has a liquidation preference of $1,000. Holders of
shares of NTL 13% Preferred are entitled to receive, when, as and if declared by
the NTL Board, 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 NTL's
option, be paid in cash, by issuing additional shares of NTL 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. NTL may redeem any or all of the NTL 13%
Preferred on or after February 15, 2002 at declining redemption prices as set
forth in the certificate of designation with respect to the NTL 13% Preferred,
plus accrued and unpaid dividends to the date of redemption. NTL must redeem all
outstanding shares of NTL 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.
Holders of NTL 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 NTL 13% Preferred
including (i) amending certain rights of the holders of the NTL 13% Preferred
and (ii) the issuance of any class of equity securities that ranks on a parity
with or senior to the NTL 13% Preferred, other than additional shares of the NTL
13% Preferred issued in lieu of cash dividends or parity
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<PAGE> 117
securities issued to finance the redemption by NTL of the NTL 13% Preferred. In
addition, if (i) dividends are in arrears for six quarterly periods (whether or
not consecutive) or (ii) NTL fails to make a mandatory redemption or an offer to
purchase all of the outstanding shares of NTL 13% Preferred following a Change
of Control Triggering Event (as defined in the certificate of designation with
respect to the NTL 13% Preferred) as required or fails to pay pursuant to such
redemption or offer, holders of a majority of the outstanding shares of NTL 13%
Preferred, voting as a class, will be entitled to elect two directors to the NTL
Board. In the event of a Change of Control Triggering Event, NTL will, subject
to certain conditions, offer to purchase all outstanding shares of NTL 13%
Preferred 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 NTL 13% Preferred), NTL will have the option to
redeem all of the outstanding shares of NTL 13% Preferred 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, NTL may, at its option, exchange
all, but not less than all, of the shares of NTL 13% Preferred then outstanding
into NTL's 13% Series B Subordinated Exchange Debentures Due 2009.
NTL Class D Stock. Each share of NTL Class D Stock shall be entitled to
receive, when, as and if declared by the NTL Board, out of funds legally
available for the payment of dividends, contemporaneously with any dividends
with respect to shares of NTL Common Stock, dividends in an amount per share
(rounded to the nearest cent) equal to, subject to the provision for adjustment
hereinafter set forth, 1.00 times the aggregate per share amount of cash
dividends declared by the NTL Board with respect to the NTL Common Stock, and
1.00 times the aggregate per share amount (payable in kind) of all non-cash
dividends or other distributions (other than a dividend payable in shares of NTL
Common Stock or a subdivision of the outstanding shares of NTL Common Stock, by
reclassification or otherwise) declared by the NTL Board with respect to the NTL
Common Stock, to the same extent as, on the same basis as, and in the same form
as (whether payable in cash or in kind), any dividends with respect to shares of
NTL Common Stock. In the event NTL shall at any time after the date of initial
issuance of the NTL Class D Stock, (i) declare any dividend on NTL Common Stock
payable in shares of NTL Common Stock, (ii) subdivide the outstanding NTL Common
Stock, or (iii) combine the outstanding NTL Common Stock into a smaller number
of shares, then in each such case the amount to which each share of NTL Class D
Stock was entitled to receive immediately prior to such event shall be adjusted
by multiplying such amount by a fraction the numerator of which is the number of
shares of NTL Common Stock outstanding immediately after such event and the
denominator of which is the number of shares of NTL Common Stock that were
outstanding immediately prior to such event.
So long as any shares of NTL Class D Stock are outstanding, no dividends
shall be declared or paid or set apart for payment or other distribution
declared or made upon Parity Securities (as defined herein) or Junior Securities
(as defined herein) by NTL, unless a dividend in the amount and form provided
for herein is paid or set apart for payment on or in respect of the NTL Class D
Stock.
Except as otherwise provided in the NTL Restated Certificate or under
applicable law, (i) each share of NTL Class D Stock shall be entitled to vote
together with the NTL Common Stock on all matters submitted for a vote of
holders of NTL Common Stock as a single class, (ii) subject to the provision for
adjustment hereinafter set forth, shall be entitled to 1.00 votes per share of
NTL Class D Stock and (iii) shall be entitled to notice of any stockholders'
meeting in accordance with the NTL Restated Certificate and the NTL By-laws. In
the event NTL shall at any time after the date of initial issuance of the NTL
Class D Stock (i) declare any dividend on NTL Common Stock payable in shares of
NTL Common Stock, (ii) subdivide the outstanding NTL Common Stock or (iii)
combine the outstanding NTL Common Stock into a smaller number of shares, then
in each such case the number of votes per share to which holders of shares of
NTL Class D Stock were entitled immediately prior to such event shall be
adjusted by multiplying such number by a fraction, the numerator of which is the
number of shares of NTL Common Stock outstanding immediately after such event
and the denominator of which is the number of shares of NTL Common Stock that
were outstanding immediately prior to such event.
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<PAGE> 118
So long as any shares of NTL Class D Stock are outstanding, NTL shall not,
without the written consent or affirmative vote at a meeting called for that
purpose of the holders of two-thirds or more of the shares of NTL Class D Stock
then outstanding, amend, alter or repeal, whether by merger, consolidation,
combination, reclassification or otherwise, the NTL Restated Certificate or the
NTL By-laws or of any provision thereof (including the adoption of a new
provision thereof) which would result in an alteration or circumvention of the
voting powers, designation and preferences and relative participating, optional
and other special rights, and qualifications, limitations and restrictions of
the NTL Class D Stock. This required consent or vote shall be in addition to any
approval of stockholders of NTL which may be required by law or pursuant to any
other provision of the NTL Restated Certificate or the NTL By-laws.
Any shares of NTL Class D Stock purchased or otherwise acquired by NTL in
any manner whatsoever shall be retired and cancelled promptly after the
acquisition thereof. All such shares shall upon their cancellation become
authorized but unissued shares of preferred stock and may be reissued as part of
a new series of preferred stock to be created by resolution or resolutions of
the NTL Board, subject to the conditions and restrictions on issuance set forth
herein.
Upon any voluntary or involuntary liquidation, dissolution or winding up of
NTL, no distribution shall be made to the holders of Junior Securities unless,
prior thereto, the holders of shares of NTL Class D Stock shall have received
$0.01 per share (the "Class D Liquidation Preference"), and the holders of
Parity Securities shall have received any liquidation preference due them (the
"Parity Preference"). Following the payment of the full amount of the Class D
Liquidation Preference, no additional distributions shall be made to the holders
of shares of NTL Class D Stock unless, prior thereto, the holders of shares of
NTL Common Stock shall have received an amount per share (the "Common
Adjustment") equal to the quotient obtained by dividing (i) the Class D
Liquidation Preference by (ii) 1.00 (as appropriately adjusted to reflect such
events as stock splits, stock dividends and recapitalizations with respect to
the NTL Common Stock) (such number in clause (ii) being hereinafter referred to
as the "Adjustment Number"). Following the payment of the full amount of the
Class D Liquidation Preference, the Parity Preference and the Common Adjustment
in respect of all outstanding shares of NTL Class D Stock and NTL Common Stock,
respectively, holders of shares of NTL Class D Stock and NTL Common Stock shall
receive their ratable and proportionate share of the remaining assets to be
distributed in the ratio of the Adjustment Number to 1 with respect to such NTL
Class D Stock and NTL Common Stock, on a per share basis, respectively.
In the event, however, that there are not sufficient assets available to
permit payment in full of the Class D Liquidation Preference and the Parity
Preference, then such remaining assets shall be distributed ratably to the
holders of all such shares in proportion to their respective liquidation
preferences. In the event, however, that there are not sufficient assets
available to permit payment in full of the Common Adjustment, then such
remaining assets shall be distributed ratably to the holders of NTL Common
Stock.
In the event NTL shall at any time after the date of first issuance of the
NTL Class D Stock (i) declare any dividend on NTL Common Stock payable in shares
of NTL Common Stock, (ii) subdivide the outstanding NTL Common Stock or (iii)
combine the outstanding NTL Common Stock into a smaller number of shares, then
in each such case the Adjustment Number in effect immediately prior to such
event shall be adjusted by multiplying such Adjustment Number by a fraction, the
numerator of which is the number of shares of NTL Common Stock outstanding
immediately after such event and the denominator of which is the number of
shares of NTL Common Stock that were outstanding immediately prior to such
event.
If NTL shall enter into any consolidation, merger, share exchange,
combination or other transaction in which the shares of NTL Common Stock are
exchanged for or changed into other stock or securities, cash and/or any other
property, then in any such case the shares of NTL Class D Stock shall at the
same time be similarly exchanged or changed in an amount per share (subject to
the provision for adjustment hereinafter set forth) equal to 1.00 times the
aggregate amount of stock, securities, cash and/or any other property (payable
in kind), as the case may be, into which or for which each share of NTL Common
Stock is changed or exchanged. In the event NTL shall at any time after the date
of first issuance of the NTL Class D Stock (i) declare any dividend on NTL
Common Stock payable in shares of NTL Common Stock, (ii) subdivide the
outstanding NTL Common Stock or (iii) combine the outstanding NTL Common Stock
into a smaller
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number of shares, then in each such case the amount set forth in the preceding
sentence with respect to the exchange or change of shares of NTL Class D Stock
shall be adjusted by multiplying such amount by a fraction, the numerator of
which is the number of shares of NTL Common Stock outstanding immediately after
such event and the denominator of which is the number of shares of NTL Common
Stock that were outstanding immediately prior to such event.
Except as set forth below, the shares of NTL Class D Stock shall not be
redeemable. If the Purchase Right is Exercised, each share of NTL Class D Stock
shall, within 45 days of the receipt by NTL of the Net Proceeds, be redeemed by
NTL for a pro rata (by number of shares of NTL Class D Stock originally issued)
share of the Net Proceeds. Such redemption shall be, at the election of NTL,
payable either (i) in cash, subject to any requirements of law or NTL's debt
instruments or (ii) in shares of NTL Common Stock valued at the greater of
$30.00 per share (subject to adjustment if change in NTL Common Stock prior to
the date of first issuance of the NTL Class D Stock or the NTL Average Market
Price as of the date of receipt of the proceeds by NTL.
Nothing contained in the terms of the NTL Class D Stock shall be deemed to
restrict or prohibit NTL from acquiring shares of NTL Class D Stock.
If (i) NTL shall so elect in its sole discretion or (ii) the Purchase Right
is Resolved, NTL shall, within 45 days of the date of election with respect to
clause (i) or the date the Purchase Rights is Resolved with respect to clause
(ii), exchange each share of NTL Class D Stock into 1.00 shares (or, if there
has been one or more adjustments, the adjusted number of shares) of NTL Common
Stock.
In the event of redemption of the NTL Class D Stock or an exchange of the
shares of NTL Class D Stock, notice of such redemption or exchange shall be
given to each holder of record of the shares to be redeemed or exchanged at such
holder's address as the same appears on the stock transfer books of NTL at least
30 but not more than 45 days before the date fixed for redemption or exchange,
as the case may be; provided, however, that no failure to give such notice nor
any defect therein shall affect the validity of the redemption or exchange of
any share of NTL Class D Stock to be redeemed or exchanged except as to the
holder to whom NTL has failed to give said notice or except as to the holder
whose notice was defective. Each such notice shall state: (i) the redemption
date or exchange date; (ii) the amount and nature of the consideration to be
paid in respect of each share; (iii) the place or places where certificates for
such shares are to be surrendered for redemption or exchange; (iv) the specific
provision hereof pursuant to which such redemption or exchange is to be made;
and (v) that dividends on the shares to be redeemed or exchanged will cease to
accrue on such redemption date or exchange date. Upon giving any notice of a
redemption or notice of exchange, NTL shall become obligated to redeem or
exchange the shares of NTL Class D Stock specified in such notice on the
redemption date or exchange date, as the case may be, specified in such notice.
Notice having been given as aforesaid, from and after the redemption date
or the exchange date (unless, in the case of a redemption, default shall be made
by NTL in providing money for the payment of the redemption price of the shares
called for redemption or, in the case of an exchange, NTL defaults in issuing
NTL Common Stock or fails to pay or set aside for payment accrued and unpaid
dividends on the NTL Class D Stock to the exchange date), dividends on the
shares of NTL Class D Stock called for redemption or exchange shall cease to
accrue, and all rights of the holders thereof as stockholders of NTL (except the
right to receive from NTL the redemption price without interest or the NTL
Common Stock and accrued and unpaid dividends on the NTL Class D Stock to the
exchange date) shall cease. Upon surrender in accordance with said notice of the
certificates for any shares so redeemed or exchanged (properly endorsed or
assigned for transfer, if the NTL Board shall so require and the notice shall so
state), such share shall be redeemed or exchanged by NTL at the redemption price
or rate of exchange aforesaid.
NTL will pay any and all issuance and delivery taxes that may be payable in
respect of the issuance or delivery of NTL Common Stock in exchange for shares
of NTL Class D Stock. NTL shall not, however, be required to pay any tax which
may be payable in respect of any transfer involved in the issuance and delivery
of NTL Common Stock in a name other than that in which the shares of NTL Class D
Stock so exchange were registered, and no such issuance or delivery shall be
made unless and until the person requesting such
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issuance has paid to NTL the amount of any such tax or has established to the
satisfaction of NTL that such tax has been paid.
If a notice of redemption shall have been given, such redemption is for
consideration consisting solely of cash and if, prior to the redemption date,
NTL shall have irrevocably deposited the aggregate redemption price of the
shares of NTL Class D Stock to be redeemed in trust for the pro rata benefit of
the holders of the shares of NTL Class D Stock to be redeemed, so as to be and
to continue to be available therefor, with a bank or trust company that (i) is
organized under the laws of the United States of America or any state thereof,
(ii) has capital and surplus of not less than $250,000,000 and (iii) has, or, if
it has no publicly traded debt securities rated by a nationally recognized
rating agency, is the subsidiary of a bank holding company that has, publicly
traded debt securities rated at least "A" or the equivalent thereof by Standard
& Poor's NTL or "A-2" or the equivalent by Moody's Investor Service Inc., then
upon making such deposit, all rights of holders of the shares so called for
redemption shall cease, except the right of holders of such shares to receive
the redemption price against delivery of such shares, but without interest, and
such shares shall cease to be outstanding. Any funds so deposited that are
unclaimed by holders of shares at the end of three years from such redemption
date shall be repaid to NTL upon its request, after which repayment the holders
of shares of NTL Class D Stock so called for redemption shall thereafter be
entitled to look only to NTL for payment of the redemption price.
In the event of redemption of shares of NTL Class D Stock for shares of NTL
Common Stock or an exchange of NTL Class D Stock for shares of NTL Common Stock:
(i) such redemption or exchange shall be deemed to have been effected
on the redemption date or the exchange date, as the case may be, and the
person in whose name or names any certificate or certificates for shares of
NTL Common Stock shall be issuable upon such redemption or exchange shall
be deemed to have become the holder of record of the shares of NTL Common
Stock represented thereby as of the close of business on the redemption
date or the exchange date, as the case may be;
(ii) all such shares of NTL Common Stock issued upon redemption or
exchange of the NTL Class D Stock will upon issuance be duly and validly
issued and fully paid and non-assessable, free of all liens and charges and
not subject to any preemptive rights;
(iii) effective as of the close of business on the redemption date or
exchange date, as the case may be, the holder thereof shall be deemed to be
the holder of the shares of NTL Common Stock for which such shares of NTL
Class D Stock were redeemed or exchanged, as the case may be, and, as from
the redemption date or the exchange date, as the case may be, such holder
shall be entitled to all rights of a holder of NTL Common Stock;
(iv) prior to the issuance of any such shares of NTL Common Stock, NTL
shall comply with all applicable federal and state laws and regulations
which require action to be taken by NTL; and
(v) no fractional shares of NTL Common Stock shall be issued, but in
lieu thereof NTL shall pay a cash adjustment in respect of such fractional
interest in an amount equal to such fractional interest multiplied by the
closing price reported by the principal securities exchange on which the
shares of NTL Common Stock are listed and traded on the redemption date or
exchange date, as the case may be.
NTL covenants that it will at all times reserve and keep available, free
from preemptive rights, such number of its authorized but unissued shares of NTL
Common Stock and/or its shares of NTL Common Stock held as treasury stock as
shall be required for the purpose of effecting the redemption or exchange of the
NTL Class D Stock.
The NTL Board shall, with respect to all matters except those set forth in
the terms of the NTL Class D Stock relating to liquidation, dissolution and
winding up, redemption and exchange and the related definitions, have the
obligations and duties (including fiduciary duties) to the holders of the NTL
Class D Stock to the same extent and as if they were holders of the NTL Common
Stock. With respect to the Contractual Matters, the NTL Board shall act in good
faith and, in the event that NTL is not reasonably likely to enter into any
agreement, arrangement or understanding directly or indirectly relating to the
Purchase Right or the
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ownership interest in Birmingham Cable which would result in an exchange, and
the Purchase Right is reasonably likely to be exercised, NTL shall use its
reasonable efforts to maximize the proceeds to be received from the exercise
thereof.
The NTL Class D Stock shall, with respect to dividend rights, rank on a
parity with, the NTL Common Stock. With respect to rights on liquidation,
dissolution and winding up, the NTL Class D Stock shall rank prior to all
classes of the NTL Common Stock and junior to all other series of NTL Preferred
Stock. All equity securities of NTL to which the NTL Class D Stock ranks prior
(whether with respect to dividends or upon liquidation, dissolution, winding up
or otherwise), are collectively referred to herein as the "Junior Securities."
All equity securities of NTL with which the NTL Class D Stock ranks on a parity
(whether with respect to dividends or upon liquidation, dissolution or winding
up) are collectively referred to herein as the "Parity Securities." All equity
securities of NTL to which the NTL Class D Stock ranks junior (whether with
respect to dividends or upon liquidation, dissolution or winding up) are
collectively referred to herein as "Senior Securities." The respective
definitions of Junior Securities, Parity Securities and Senior Securities shall
also include any options exercisable for or convertible into any of the Junior
Securities, Parity Securities and Senior Securities, as the case may be.
So long as any of the NTL Class D Stock is outstanding, NTL will furnish
the holders thereof with the quarterly and annual financial reports that NTL is
required to file with the SEC pursuant to Section 13 or Section 15(d) of the
Exchange Act or, in the event NTL is not required to file such reports, reports
containing the same information as would be required in such reports.
The following definitions are used in this description:
"Exercised" shall mean that the Purchase Right has been validly exercised
by TeleWest and/or General Cable (other than pursuant to clause (B) of the
definition of "Resolved" below) and NTL (or the relevant subsidiary of NTL) has
received the proceeds therefrom in consideration for the delivery of the equity
interests thereunder.
"Net Proceeds" shall mean the net proceeds received for the equity interest
(as of the date of first issuance of the NTL Class D Stock) in Birmingham Cable
(without regard to debt, loans from NTL to Birmingham Cable or the debt
component (i.e., face amount and accrued and unpaid interest) of any convertible
security) from the consummation of the sale of the interest under the Purchase
Rights less taxes which would be payable on such sale at the Tax Rate without
giving effect to any credits or other adjustments available to NTL or its
subsidiaries as a result of factors not related to NTL's interest in Birmingham
Cable.
"NTL Average Market Price" means the average of the average of the high and
low sales prices of the NTL Common Stock on the principal market on which it is
traded for each of the five trading days ending on the last trading day prior to
the date of determination.
"Purchase Right" shall mean the purchase right set forth in Section 5.2 of
the Co-Ownership Agreement, dated March 12, 1990, between US West International
Holdings, Inc. and Comcast Cablevision of Birmingham, Inc., as subsequently
amended, supplemented and novated.
"Resolved" shall mean that (A) the Purchase Right is no longer of any legal
force and effect or (B) that NTL shall have entered into an agreement,
arrangement or understanding with TeleWest and/or General Cable directly or
indirectly relating to a business combination between NTL and TeleWest or the
Purchase Right or the ownership interest in Birmingham Cable.
The foregoing summary of the NTL Class D Stock does not purport to be
complete and is qualified in its entirety by reference to the Form of
Certificate of Designation, Preferences and Rights of Class D Junior
Participating Preferred Stock of NTL, a copy of which is attached hereto as
Annex I.
SECTION 203 OF THE DGCL
Generally, Section 203 of the DGCL prohibits a publicly held Delaware
corporation from engaging in any Business Combination (as defined herein) with
an Interested Stockholder (as defined herein) for a period of three years
following the time that such stockholder becomes an Interested Stockholder,
unless (i) prior to
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such time either the Business Combination or the transaction which resulted in
the stockholder becoming an Interested Stockholder is approved by the board of
directors of the corporation, (ii) upon consummation of the transaction which
resulted in the stockholder becoming an Interested Stockholder, the Interested
Stockholder owned at least 85% of the voting stock of the corporation
outstanding at the time the transaction commenced, excluding, for purposes of
determining the number of shares outstanding, those shares held by persons who
are both directors and officers and certain employee stock plans or (iii) at or
after such time the Business Combination is approved by the board and authorized
at an annual or special meeting of stockholders, and not by written consent, by
the affirmative vote of at least two-thirds of the outstanding voting stock
which is not owned by the Interested Stockholder. A Business Combination
includes certain mergers, consolidations, asset sales, transfers and other
transactions resulting in a financial benefit to the Interested Stockholder. An
Interested Stockholder is a person who, together with affiliates and associates,
owns (or within the preceding three years, did own) 15% or more of the
corporation's voting stock.
TRANSFER AGENT AND REGISTRAR
The Transfer Agent and Registrar for the NTL Common Stock is Continental
Stock Transfer & Trust Company.
NTL RIGHTS AGREEMENT
On August 27, 1993, the NTL Board adopted the Rights Agreement. The Rights
Agreement provides that one Right will be issued with each share of NTL Common
Stock issued (whether originally issued or from NTL's treasury) on or after
October 13, 1993 and prior to the Rights Distribution Date (as defined herein).
The Rights are not exercisable until the Rights Distribution Date and will
expire at the close of business on October 13, 2003 unless previously redeemed
by NTL as described below. When exercisable, each Right entitles the owner to
purchase from NTL one one-hundredth of a share of Rights Preferred Stock at a
purchase price of $100.00.
Except as described below, the Rights will be evidenced by the NTL Common
Stock certificates. The Rights will separate from the NTL 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 NTL 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 NTL 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 NTL Common Stock other than one payable in NTL 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 plus accrued and unpaid dividends and will be entitled to an aggregate
payment of 100 times the payment made per share of the NTL Common Stock. Each
share of Rights Preferred Stock will have 100 votes and will vote together with
the NTL Common Stock. In the event of any merger, consolidation or other
transaction in which shares of the NTL 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 NTL 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 NTL 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 NTL Common
Stock at a price and on terms determined by at
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least a majority of the members of the NTL Board who are not officers of NTL and
who are not representatives, nominees, affiliates or associates of an Acquiring
Person, to be fair to the stockholders of NTL and otherwise in the best
interests of NTL 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 NTL Common Stock (or, in certain
circumstances, cash, property or other securities of NTL) 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 NTL as set forth below.
In the event that, at any time following the Stock Acquisition Date, (i)
NTL is acquired in a merger or other business combination transaction in which
NTL is not the surviving corporation or the NTL 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 NTL's assets, cash flow or
earning power is sold or transferred, each holder of a Right (except Rights
which previously have been voided as set forth above) shall thereafter have the
right to receive, upon the exercise thereof at the then current exercise price,
common stock of the acquiring company having a value equal to two times the
exercise price of the Right.
At any time until 10 days following the Stock Acquisition Date, NTL may
redeem the Right in whole, but not in part, at a price of $.01 per Right.
Immediately upon the action of the NTL Board ordering redemption of the Rights,
the Rights will terminate and the only right of the holders of the Rights will
be to receive the $.01 redemption price.
Until a Right is exercised, the holder thereof, as such, shall have no
rights as a stockholder of NTL, 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 NTL, stockholders may, depending upon the
circumstances, recognize taxable income in the event that the Rights become
exercisable for the NTL 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 NTL Board
prior to the Rights Distribution Date. After the Rights Distribution Date, the
provisions of the Rights Agreement may be amended by the NTL Board 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 NTL without the prior approval of the NTL Board. The effect of the Rights may
be to inhibit a change in control of NTL (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 NTL stockholders.
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COMPARISON OF THE RIGHTS OF STOCKHOLDERS OF NTL
AND SHAREHOLDERS OF PARTNERS
GENERAL
As a result of the Amalgamation, the shareholders of Partners will become
stockholders of NTL, and the rights of all such former shareholders of Partners
will thereafter be governed by the NTL Restated Certificate, the NTL By-laws and
the DGCL. The rights of the holders of Class A Common Shares and Class B Common
Shares are presently governed by the Partners Charter, the Partners Bye-laws and
the Companies Act. The following summary sets forth the material differences
among the rights of the stockholders of NTL and the shareholders of Partners and
sets forth the material differences between the NTL Restated Certificate and the
Partners Charter and the NTL By-laws and the Partners Bye-laws (collectively,
the "Corporate Documents"), and the DGCL and the Companies Act. This summary is
not intended to be complete, does not purport to deal with all aspects of
Bermuda or Delaware law or the Corporate Documents that may be relevant to
Partners and its shareholders, and is qualified by reference to the full text of
the Corporate Documents, the DGCL and the Companies Act. For information as to
how such documents may be obtained, see "AVAILABLE INFORMATION."
AUTHORIZED CAPITAL
Partners. The authorized capital of Partners consists of 50,000,000 Class
A Common Shares, 50,000,000 Class B Common Shares and 10,000,000 preferred
shares, par value L.01 per share.
NTL. The authorized capital of NTL consists of 100,000,000 shares of NTL
Common Stock and 2,500,000 shares of NTL Preferred Stock.
SPECIAL MEETINGS OF STOCKHOLDERS
Partners. Under the Companies Act, an annual general meeting must be held
once in every calendar year, and a special general meeting of shareholders may
be convened by the directors at any time on thirty days' notice and must be
convened upon the requisition of shareholders holding not less than one-tenth of
the paid up capital of the company carrying the right to vote at general
meetings.
NTL. The DGCL provides that a special meeting of stockholders may be
called by the board of directors or by such person or persons as may be
authorized by a corporation's certificate of incorporation or by-laws. The NTL
By-laws provide that special meetings of stockholders may be called only by the
NTL Board, the Chairman of the Board or the President.
STOCKHOLDER ACTION BY CONSENT
Partners. Under the Companies Act, action by written consent of
shareholders is permitted where the written resolution is signed by all of the
shareholders who would be entitled to attend and vote at a meeting, with the
exception of a resolution to remove an auditor or a director before the
expiration of his term of office.
NTL. Under the DGCL, unless otherwise specified in the corporation's
certificate of incorporation, any action required or permitted to be taken at a
meeting of stockholders may be taken by stockholders without a meeting, without
prior notice and without a vote, if a written consent or consents setting forth
the action taken is signed by the holders of outstanding stock having not less
than the minimum number of votes that would be necessary to authorize or take
such action at a meeting at which all shares entitled to vote upon such action
were present and voted and such votes are delivered to the corporation. However,
the NTL Restated Certificate provides that any action required or permitted to
be taken at any meeting of stockholders may be taken only upon the vote of the
stockholders at such meeting duly noticed and called, and may not be taken by a
written consent of the stockholders pursuant to the DGCL.
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AMENDMENTS TO CHARTER
Partners. Under the Companies Act, amendments to the memorandum of
association of a Bermuda company must be submitted to a general meeting of the
shareholders and will be effective only to the extent approved by the
shareholders at such meeting and, except for the alteration of share capital, by
the Minister. Amendments to the bye-laws of a Bermuda company must be submitted
to a general meeting of the shareholders and will be effective only to the
extent approved by the shareholders representing more than 50% of the total
votes able to be cast at such meeting.
NTL. Under the DGCL, a proposed amendment to the certificate of
incorporation requires a resolution adopted by the board of directors and,
unless otherwise provided in the certificate of incorporation, the affirmative
vote of the holders of a majority of the outstanding stock entitled to vote
thereon and (if applicable) the affirmative vote of the holders of a majority of
the outstanding stock of each class entitled to vote thereon as a class. If any
such amendment would adversely affect the rights of any holders of shares of a
class or series of stock, the vote of the holders of a majority of all
outstanding shares of the class or series, voting as a class, is also necessary
to authorize such amendment. However, the NTL Restated Certificate provides that
the amendment of any of the following provisions requires the affirmative vote
of the holders of two-thirds of the voting stock, voting together as a single
class: (i) Article FIFTH (relating to the number and classes of directors); (ii)
Article SEVENTH (relating to stockholder action at annual and special meetings);
(iii) Article EIGHTH (relating to special meetings of stockholders); (iv)
Article NINTH (relating to business combinations); (v) Article TENTH (relating
to liability of directors); and (vi) Article ELEVENTH (relating to the NTL
Board's power to make or alter the NTL By-laws).
INSPECTION OF BOOKS AND RECORDS; SHAREHOLDER AND STOCKHOLDER LISTS
Partners. The Companies Act provides the general public with a right to
inspect a Bermuda company's public documents at the office of the Registrar of
Companies in Bermuda or at a company's registered office and provides a Bermuda
company's shareholders with a right of inspection of such company's bye-laws,
minutes of general meetings of shareholders and audited financial statements.
The register of shareholders is also open to inspection by shareholders free of
charge and, upon payment of a small fee, by any other person. A Bermuda company
is required to maintain its share register in Bermuda but may establish a branch
register outside of Bermuda. A Bermuda company is required to keep at its
registered office a register of its directors and officers which is open for
inspection by members of the public without charge. Bermuda law does not,
however, provide a general right for shareholders to inspect or obtain copies of
any other corporate records.
NTL. Under the DGCL, any stockholder of a Delaware corporation may examine
the lists of stockholders, and any stockholder making a written demand may
inspect any other corporate books and records for any purpose reasonably related
to the stockholder's interest as a stockholder.
VOTING RIGHTS WITH RESPECT TO EXTRAORDINARY CORPORATE TRANSACTIONS
Partners. The Companies Act permits an amalgamation between two or more
Bermuda companies (or between one or more Bermuda exempted companies and one or
more foreign corporations) subject, unless the bye-laws otherwise provide, to
obtaining a vote of three-fourths of the shareholders of each such company
present and voting in person or by proxy at a meeting called for the purpose.
The Partners Bye-laws provide for a lesser vote and require the affirmative vote
of the holders of a majority of the total votes able to be cast at general
meetings of Partners. For purposes of approval of an amalgamation, all shares,
whether or not otherwise entitled to vote, carry the right to vote. A separate
vote of a class of shares is required if the rights of such class would be
altered by virtue of the amalgamation. See "THE PARTNERS SPECIAL GENERAL
MEETING." "Short form" amalgamations are permitted between a holding company and
one or more of its wholly-owned subsidiary companies or between two or more
wholly-owned subsidiary companies of the same holding company subject to
approval of the amalgamation by a resolution of the directors of each
amalgamating company.
Under Bermuda law, there is no general requirement for a company's
shareholders to approve a sale, lease or exchange of any or substantially all of
its property and assets. Under Bermuda law, a company may enter into a
compromise or arrangement in connection with a scheme for the reconstruction of
the company on terms which include, among other things, the transfer of all or
part of the undertaking or assets of the company
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to another company. Any such compromise or arrangement requires the approval of
a majority in number representing three-fourths in value of each class of
shareholders and creditors of the company and the sanction of the Court.
NTL. Under the DGCL, the approval by the affirmative vote of the holders
of a majority of the outstanding stock of a corporation entitled to vote on the
matters generally is required for a merger, consolidation or sale, lease or
exchange of all or substantially all of the corporation's assets to be
consummated. The NTL Restated Certificate provides certain restrictions on
business combinations with interested stockholders or their affiliates.
Accordingly, the NTL Restated Certificate requires the affirmative vote of at
least two-thirds of the voting stock for the adoption or authorization of a
Business Combination (as defined in the NTL Restated Certificate) unless (i)
such Business Combination is approved the by affirmative vote of a majority of
the Continuing Directors (as defined in the NTL Restated Certificate) or (ii)
certain price and procedural requirements have been met.
DISSENTERS' RIGHTS
Partners. Under the Companies Act, a dissenting shareholder of a company
participating in an amalgamation (other than an amalgamation between a company
and its wholly-owned subsidiary or between two or more subsidiaries of the same
holding company) may, in certain circumstances, receive the appraised value of
his shares (as determined by the Court), in lieu of the consideration such
shareholder would otherwise receive in an amalgamation. See "THE
AMALGAMATION -- Rights of Dissenting Shareholders."
NTL. Under the DGCL, except as otherwise provided by the DGCL,
stockholders have the right to demand and receive payment in cash of the fair
value of their stock (as appraisal pursuant to judicial proceedings) in the
event of a merger or consolidation in lieu of the consideration such stockholder
would otherwise receive in such transaction. However, except as otherwise
provided by the DGCL, stockholders do not have such appraisal rights if, among
other things, the consideration they receive for their shares consists of (i)
shares of stock of the corporation surviving or resulting from such merger or
consolidation, (ii) shares of stock of any other corporation which at the
effective date of the merger or consolidation will be either listed on a
national securities exchange or designated as a national market system security
on an interdealer quotation system by the National Association of Securities
Dealers, Inc. or held of record by more than 2,000 stockholders, (iii) cash in
lieu of fractional shares of the corporations described in clause (i) or (ii) of
this sentence, or (iv) any combination of the foregoing.
DERIVATIVE SUITS
Partners. Under Bermuda law, a shareholder may commence a derivative
action in the name of the company to remedy a wrong done to the company only (i)
where the act complained of is alleged to be beyond the corporate capacity of
the company or illegal, (ii) where the act complained of constitutes a fraud
against the minority shareholders by those controlling the company, (iii) where
an act requires approval by a greater percentage of the company's shareholders
than actually approved it or (iv) where the act infringes the personal rights of
an individual shareholder. The actions summarized above are generally recognized
as exceptions to the rule in Foss v. Harbottle, under which only the company
could initiate an action.
There is also a statutory remedy under Section 111 of the Companies Act,
which provides that a shareholder may seek redress of the court as long as such
shareholder can establish that the company's affairs are being conducted, or
have been conducted, in a manner oppressive or prejudicial to the interests of
some part of the shareholders, including the interests of such shareholder. The
court would also have to be satisfied that to wind up the company would unfairly
prejudice that part of the shareholders, but otherwise the facts would justify
the making of a winding-up order on the ground that it was just and equitable to
do so. If the court is satisfied on these two grounds it can make such order as
it thinks fit, whether for regulating the conduct of the company's affairs in
the future, or for the purchase of the shares of any shareholders by other
shareholders of the company or by the company. A shareholder may also petition
the Court under Section 161(g) of the Companies Act which provides that the
court may wind up a company if it is of the opinion that it is just and
equitable to do so.
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NTL. Under the DGCL, class actions and derivative actions generally are
available to stockholders for, among other things, breach of fiduciary duty,
corporate waste and actions not taken in accordance with applicable law. In such
actions, the court has discretion to permit the winning party to recover
attorneys' fees incurred in connection with such action. The DGCL requires that
in any derivative suit instituted by a stockholder of a corporation, the
plaintiff must have been a stockholder of the corporation at the time of the
transaction of which he complains or his stock must have thereafter devolved
upon him by operation of law.
TENDER OFFER STATUTES
Partners. Bermuda law provides that where an offer is made for shares in a
company by another company and, within four months of the offer, the holders of
not less than 90% in value of the shares which are the subject of the offer
accept, save for shares already held at the date of the offer by or by a nominee
for the offeror, the offeror may by notice, given within two months after the
expiration of such four months, require the dissenting shareholders to transfer
their shares on the terms of the offer. Dissenting shareholders may apply to a
Court within one month of such notice objecting to the transfer and the Court
may make such order as it thinks fit.
In addition, Bermuda law provides that the holders of not less than 95% of
the shares or any class of shares in a company may acquire the shares held by
the remaining shareholders by serving notice on such shareholders. Dissenting
Shareholders may apply to the Court to have the fair value of their shares
appraised by the Court.
NTL. Section 203 of the DGCL generally prohibits a Delaware corporation
from engaging in a Business Combination with an Interested Stockholder for a
period of three years following the date that such person became an Interested
Stockholder. With certain exceptions, an Interested Stockholder is a person or
group who or which owns 15% or more of the corporation's outstanding voting
stock (including any rights to acquire stock pursuant to an option, warrant,
agreement, arrangement or understanding or upon the exercise of conversion or
exchange rights, and stock with respect to which the person has voting rights
only), or is an affiliate or associate of the corporation and was the owner of
more than 15% or more of such voting stock at any time within the previous three
years.
For purposes of Section 203, Business Combination is broadly defined to
include mergers with or caused by the Interested Stockholder; sales or other
dispositions to the Interested Stockholder (except proportionately with the
corporation's other stockholders) of assets of the corporation or a subsidiary
equal to 10% or more of the aggregate market value of the corporation's
consolidated assets or its outstanding stock; the issuance or transfer by the
corporation or a subsidiary of stock of the corporation or such subsidiary to
the Interested Stockholder (except for transfers in a conversion or exchange or
a pro rata distribution or certain other transactions, none of which increase
the Interested Stockholder's proportionate ownership or any class or series of
the corporation's or such subsidiary's stock); and receipt by the Interested
Stockholder (except proportionately as a stockholder), directly or indirectly,
of any loans, advances, guarantees, pledges or other financial benefits provided
by or through the corporation or a subsidiary.
The three-year moratorium imposed on Business Combinations by Section 203
does not apply if (i) prior to the time on which such stockholder becomes an
Interested Stockholder the board of directors approves either the Business
Combination or the transaction which resulted in the person becoming an
Interested Stockholder; (ii) the Interested Stockholder owns at least 85% of the
corporation's voting stock upon consummation of the transaction which made him
an Interested Stockholder (excluding shares held by certain affiliates of the
corporation and certain employee stock plans); or (iii) at or subsequent to the
time such person becomes an Interested Stockholder, the Business Combination is
approved by both the board of directors and at least two-thirds of the
outstanding voting stock of the corporation (excluding shares held by the
Interested Stockholder).
NTL RIGHTS AGREEMENT
For a description of the Rights Agreement, see "DESCRIPTION OF NTL CAPITAL
STOCK -- NTL Rights Agreement."
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NUMBER OF DIRECTORS; ELECTION OF DIRECTORS; REMOVAL; VACANCIES
Partners. The Companies Act provides that the affairs of a company shall
be managed by not less than two directors. The Partners Bye-laws provide that
the Partners Board shall consist of at least two directors with the maximum
number being fixed by the shareholders in a general meeting. There are currently
nine directors serving on the Partners Board. Although the Companies Act permits
the classification of a board of directors in a manner specified in a company's
bye-laws, the Partners Bye-laws do not provide for a classified board.
Under the Companies Act, subject to a company's bye-laws, a company may
remove a director at a special general meeting called for such purpose, provided
that notice of any such meeting shall be served on the director concerned not
less than 14 days before the meeting and the director concerned shall be
entitled to be heard at such meeting.
Under the Partners Bye-laws, the Partners Board may fill casual vacancies
or increase the size of the Partners Board up to the maximum number set by
shareholders of Partners in a general meeting. Any director so appointed will
retire from office at the succeeding annual general meeting of the company, but
will be eligible for re-election.
NTL. The DGCL permits the certificate of incorporation or the by-laws of a
corporation to contain provisions governing the number and terms of directors.
The NTL By-laws state that the NTL Board shall consist of not less than three
nor more than fifteen members, the exact number of which shall be fixed from
time to time by the NTL Board. There are currently eight directors serving the
NTL Board. The DGCL permits the certificate of incorporation or by-laws of a
corporation to provide that directors be divided into up to three classes, with
the term of office of each class of directors expiring in successive years. The
NTL Restated Certificate provides for the NTL Board to be divided into three
classes, each of which is to be composed as nearly as possible of one-third of
the directors. The NTL By-laws provide directors shall be elected by a plurality
of the votes cast at the annual meetings of stockholders.
Under the DGCL, in the case of a classified board and unless a
corporation's certificate of incorporation provides otherwise, any director may
only be removed for cause by the holders of a majority of the shares entitled to
vote at an election of directors. Under the NTL Restated Certificate, any or all
directors may be removed only for cause and only by the affirmative vote of the
holders of two-thirds of the outstanding shares entitled to vote at an election
of directors.
Under the DGCL, vacancies and newly created directorships may be filled by
a majority of the directors then in office or by a sole remaining director (even
though less than a quorum) unless otherwise provided in the certificate of
incorporation or by-laws. However, the DGCL also provides that if the directors
then in office constitute less than a majority of the whole board, the Court of
Chancery may, upon application of any stockholder or stockholders holding at
least 10% of the total number of shares at the time outstanding entitled to vote
for directors, order an election of directors to be held. The NTL Restated
Certificate and the NTL By-laws also provide that any vacancy, howsoever
resulting, may be filled by a majority of the directors then in office, though
less than a quorum, or by a sole remaining director.
ADVANCE NOTICE OF DIRECTOR NOMINATIONS
Partners. The Partners Bye-laws require nominations of persons for
election to the Partners Board to be made by recommendation of the Partners
Board or by a shareholder of Partners (other than a person to be nominated)
entitled to vote at the meeting who complies with advance notice procedures set
forth in the Partners Bye-laws.
NTL. The NTL By-laws require nominations of persons for election to the
NTL Board to be considered at a meeting of stockholders to be made by or at the
direction of the NTL Board, by any committee or persons appointed by the NTL
Board or by any stockholder of NTL entitled to vote for the election of
directors at such meeting who complies with advance notice procedures set forth
in the NTL By-laws.
LIMITATIONS ON DIRECTOR LIABILITY
Partners. Under the Companies Act, a director must observe the statutory
duty of care which requires directors to act honestly and in good faith with a
view to the best interests of the company and to exercise the care, diligence
and skill that a reasonably prudent person would exercise in comparable
circumstances.
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Directors are also subject to common law fiduciary duties which require
directors to act in what they reasonably believe to be the best interests of the
company and for a proper purpose. Bermuda law renders void any provision in the
bye-laws or any contract between a company and any such director exempting him
from or indemnifying him against any liability in respect of any fraud or
dishonesty of which he may be guilty in relation to the company.
NTL. The DGCL provides that a corporation's certificate of incorporation
may include a provision limiting the liability of a director to the corporation
or its stockholders for monetary damages for breach of fiduciary duty as a
director. However, no such provision can limit the liability of a director for
(i) any breach of the director's duty of loyalty to the corporation or its
stockholders, (ii) acts or omissions not in good faith or which involve
intentional misconduct or a knowing violation of law, (iii) certain acts
concerning unlawful payments of dividends or stock purchases or redemptions
under Section 174 of the DGCL or (iv) any transaction from which a director
derived an improper personal benefit. The NTL Restated Certificate contains a
provision limiting the liability of its directors as permitted under Delaware
law.
INDEMNIFICATION OF DIRECTORS AND OFFICERS
Partners. Under the Companies Act, a company is permitted to indemnify any
officer or director, out of the funds of the company, against (i) any liability
incurred by him in defending any proceedings, whether civil or criminal, in
which judgment is given in his favor, or in which he is acquitted, or in
connection with any application under relevant Bermuda legislation in which
relief from liability is granted to him by the Court and (ii) any loss or
liability resulting from negligence, default, breach of duty or breach of trust,
save for fraud and dishonesty. The Partners Byelaws generally provide that every
officer and director of Partners shall be indemnified out of the funds of
Partners against all civil liabilities, loss, damage or expense incurred or
suffered as such officer or director, provided that such indemnity shall not
extend to any matter which would render it void pursuant to the Companies Act.
NTL. Under the DGCL, a corporation may 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 such person 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 attorneys'
fees), judgments, fines and amounts paid in settlement actually and reasonably
incurred by such person in connection with such action, suit or proceeding if
such person 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.
The DGCL permits similar indemnification in the case of derivative actions,
except that no indemnification may be made in respect of any claim, issue or
matter as to which such person shall have been adjudged to be liable to the
corporation unless and only to the extent that the Court of Chancery or the
court in which such action or suit was brought shall determine upon application
that, despite the adjudication of liability and in view of all the circumstances
of the case, such person is fairly and reasonably entitled to indemnity for such
expenses which the Court of Chancery or such other court shall deem proper.
Indemnification for settlement of a suit by or in the right of the corporation
is not permitted under the DGCL. A director, officer, employee or agent who is
successful, on the merits or otherwise in defense of any proceeding subject to
the DGCL's indemnification provisions must be indemnified by the corporation for
reasonable expenses incurred in connection therewith, including attorneys' fees.
The NTL By-laws provide, in substance, that each person made, or threatened
to be made, a defendant or witness to any action, suit or proceedings (whether
civil, criminal or otherwise) by reason of the fact that he or she is or was a
director or officer of NTL, or he or she is or was serving, at the request of
NTL, in any capacity any other corporation, partnership, joint venture, trust,
employee benefit plan or other enterprise, will be indemnified by NTL to the
full extent permitted by the DGCL.
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<PAGE> 130
PROPOSAL FOR SHARES AMENDMENT
On July 21, 1998, the NTL Board unanimously approved a resolution to amend
the NTL Restated Certificate to increase the maximum number of authorized shares
of NTL Common Stock from 100,000,000 to 400,000,000 shares and to increase the
maximum number of authorized shares of NTL Preferred Stock from 2,500,000 to
10,000,000 shares. If the Shares Amendment is approved, NTL will be authorized
to issue 400,000,000 shares of NTL Common Stock and 10,000,000 shares of NTL
Preferred Stock.
At the close of business on September 4, 1998, (i) approximately 41,383,000
shares of NTL Common Stock were issued and outstanding; (ii) approximately
121,000 shares of NTL 13% Preferred were issued and outstanding; (iii) 1,000,000
shares of Rights Preferred Stock were reserved for issuance pursuant to the
Rights Agreement; (iv) approximately 7,261,000 shares of NTL Common Stock were
reserved for issuance pursuant to the conversion of the 7% Convertible Notes;
(v) approximately 939,000 shares of NTL Common Stock were reserved for issuance
upon the exercise of certain warrants; and (vi) approximately 15,545,000 shares
of NTL Common Stock were reserved for issuance pursuant to various NTL employee
and director stock options. It is anticipated that a maximum of approximately
18.8 million shares of NTL Common Stock will be issued in connection with the
Share Issuance assuming that shareholders of Partners receive .3745 shares of
NTL Common Stock in the Amalgamation. If NTL Class D Stock is to be issued as
part of the consideration in the Amalgamation at the exchange ratio set forth
herein, it is anticipated that approximately 3.2 million shares of NTL Class D
Stock will be issued in connection with the Share Issuance.
The Shares Amendment would revise Article FOURTH of the NTL Restated
Certificate to read, in its entirety, as follows:
"FOURTH: A. Authorized Capital The total number of shares of stock which
the Corporation shall have the authority to issue is 410,000,000 consisting of
400,000,000 shares of common stock, par value $0.01 per share (the "Common
Stock"), and 10,000,000 shares of preferred stock, par value $0.01 per share
(the "Preferred Stock")."
NTL does not presently have sufficient shares of NTL Preferred Stock
authorized in the event the NTL Class D Stock is issued using the exchange ratio
set forth in this document. NTL is seeking the approval of the Shares Amendment
to increase the authorized shares of NTL Preferred Stock in order to permit the
issuance of the NTL Class D Stock using such ratio. However, obtaining the
necessary stockholder approval for such increase in authorized shares of NTL
Preferred Stock is not a condition to the Amalgamation. If stockholder approval
of the Shares Amendment is not obtained, NTL and Partners will agree to any
necessary adjustments, which may include the issuance of depositary shares that
replicate the terms of the NTL Class D Stock or adjusting the number of shares
of NTL Class D Stock (with corresponding changes to the terms of such shares) to
ensure that shareholders of Partners receive the intended benefits and rights of
such NTL Class D Stock.
Approximately 125,000 shares of NTL Preferred Stock were issued in
connection with the acquisition of ComTel, and NTL had sufficient shares of NTL
Preferred Stock authorized to issue such NTL Preferred Stock. Such NTL Preferred
Stock has a pay-in-kind coupon of 9.9%, will mature in 2008 and is redeemable
within 15 months for NTL Common Stock valued at market, new NTL convertible
preferred securities or cash. Although it will not be convertible into NTL
Common Stock, such NTL Preferred Stock may be redeemed by NTL for shares of NTL
Preferred Stock which will be convertible, at the holder's option, into shares
of NTL Common Stock.
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<PAGE> 131
Other than for the purpose set forth in the preceding paragraph, the
increase in the number of authorized shares of NTL Common Stock and NTL
Preferred Stock will provide additional shares for issuance pursuant to the
Amalgamation Agreement and will provide additional shares for issuance, without
the delay and expense of further stockholder approval, at such time and for such
proper corporate purposes as the NTL Board may in the future deem advisable.
Such shares may be issued if and when the NTL Board decides it is in the best
interest of NTL to do so which may include, without limitation, issuances (i) as
part of an acquisition transaction, (ii) to obtain funds through the sale of NTL
Common Stock or NTL Preferred Stock, (iii) to declare a stock split or stock
dividend; (iv) in respect of an employee benefit or stock plan; or (v) for other
corporate purposes. Unless required by applicable law, the rules of the NASDAQ,
the NTL Restated Certificate or the NTL By-laws, it is not anticipated that NTL
will solicit the votes of stockholders prior to the issuance of the NTL Common
Stock or NTL Preferred Stock for any of the purposes described above.
THE NTL BOARD UNANIMOUSLY RECOMMENDS THAT
STOCKHOLDERS OF NTL VOTE FOR THE SHARES AMENDMENT
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<PAGE> 132
BUSINESS OF NTL
NTL is a leading communications company in the UK, providing residential,
business and wholesale customers with the following services: (i) Residential
Telecoms and Televisions Services, including residential telephony, cable
television and Internet access services; (ii) National Telecoms Services,
including national business telecoms, national and international carrier
telecommunications, and satellite and radio communications services; and (iii)
Broadcast Services, including digital and analog television and radio broadcast
transmission services.
NTL provides its broad range of services over local, national and
international network infrastructure. NTL operates (i) advanced local broadband
networks serving entire communities throughout NTL's regional franchise areas,
(ii) the UK's first SDH backbone telecommunications network, as well as
satellite earth stations and radio communications facilities from NTL's tower
sites across the UK and (iii) a broadcast transmission network which provides
national, regional and local analog and digital transmission services to
customers throughout the UK.
In March 1997, NTL changed its name from International CableTel
Incorporated to NTL Incorporated to reflect the integration of the services
provided by NTL following its acquisition of NTL Group Limited in 1996, and to
capitalize on NTL Group Limited's 30-year history in the UK as a provider of
reliable communications services.
RESIDENTIAL TELECOMS AND TELEVISION SERVICES
NTL is the third largest operator of local broadband communications systems
in the UK as measured by the number of homes in its franchise areas, and has
achieved the highest customer penetration and lowest churn rates of any
multisystem operator in the UK. NTL is presently the sole provider of broadband
services in its franchise areas, offering residential telephony, cable
television and Internet access services to customers connected to its networks.
As of December 31, 1997, NTL had 321,300 residential customers,
approximately 90% of which subscribed to both telephone and television services.
At the end of 1997, NTL had a total of 608,500 Revenue Generating Units ("RGUs")
resulting in 37.3% telephone penetration, 37.8% cable penetration and 75.1% RGU
penetration of homes marketed. By comparison, based on published statistics of
the ITC dated October 1, 1997, UK cable customer penetration averaged
approximately 27.0% for telephone and approximately 21.8% for cable television.
As of October 1, 1997, the UK telephony cable industry had connected
approximately 3.1 million telephone lines and approximately 2.2 million
broadband cable customers.
The following table illustrates operating statistics for NTL's newly
constructed network:
<TABLE>
<CAPTION>
DECEMBER 31,
---------------------------------------
1997 1996 1995 1994
--------- ------- ------- -------
<S> <C> <C> <C> <C>
Homes passed(1)............................ 1,007,000 779,100 463,000 144,000
Homes marketed............................. 810,000 467,300 176,200 7,200
Homes marketed (as % of homes passed)...... 80% 60% 38% 5%
Total customers(2)......................... 321,300 168,200 57,700 2,280
Total RGUs(3).............................. 608,500 302,000 102,330 3,960
Customer penetration....................... 40% 36% 33% 32%
RGU penetration(4)......................... 75% 65% 58% 55%
Annualized churn........................... 11% 10% NM NM
</TABLE>
- ---------------
(1) "Homes passed" is the expression in common usage in the cable industry as
the measurement of the size of a cabled area, meaning the total number of
residential premises which have the potential to be connected to NTL's
network.
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<PAGE> 133
(2) As of December 31, 1997, NTL also provided service to approximately 14,000
customers connected to acquired cable systems over which it does not offer a
full range of services.
(3) An RGU (revenue generating unit) is one telephone account or one CATV
account; a dual customer represents two RGUs.
(4) RGU penetration is the number of RGUs per 100 homes marketed. As defined,
maximum RGU penetration is 200%.
NM Not meaningful due to the limited customer base and recent commencement of
services.
NTL's customer base and RGUs both increased by nearly 100% in 1997 compared
to year-end 1996. NTL believes that much of its success during this period has
been due to its marketing strategies and the introduction of innovative
residential services packages which bundle telephone and a small selection of
CATV channels within a single product offering. NTL also gives customers the
opportunity to purchase additional channel packages and premium channels.
Consistent with NTL's objectives, the high penetration rates generated by this
strategy have led to increased levels of gross profit contribution per home
passed.
NTL believes it has also maintained high levels of customer satisfaction as
indicated by NTL's low rates of churn. During 1997, NTL maintained an annualized
churn rate of less than 11%, a rate which is significantly lower than the
published churn rates of all other UK telephony cable operators. In a recent
survey of a sample of its customers, NTL found that 89% of its customers would
recommend the service to a friend or relative, and that only 15% had ever
considered changing their telephone service back to BT.
NTL's local franchise areas cover approximately 2.1 million homes, spanning
a wide geography across England, Scotland, Wales and Northern Ireland. As of
December 31, 1997, NTL's integrated full-service network had been constructed
past over one million (or approximately 48%) of its homes under franchise. NTL's
local broadband networks use advanced high capacity SDH fiber rings which serve
entire communities, bringing fiber connections directly to businesses and
"Siamese" coaxial/copper connections to residences. NTL's local networks cover
approximately 2,500 route miles of fiber backbone network, with approximately
175,000 fiber miles, and an estimated 5,000 route miles of "Siamese"
coaxial/copper connections.
NATIONAL TELECOMS SERVICES
NTL's objective in National Telecoms Services is to successfully integrate
its strategies for developing, operating and marketing local telephony/cable
systems with its national network to provide high quality voice, data and video
communications services throughout the UK. Based on the quarter ended September
30, 1997, NTL generated approximately $180 million in annualized National
Telecoms Services revenue. NTL has constructed a national SDH fiber telecoms
network, which is one of only five national telecoms networks in the UK. The NTL
national network currently covers approximately 1,500 route miles and 40,000
fiber miles throughout England, Scotland and Wales. During 1998, NTL plans to
extend the network to include the first resilient fiber connection between
Northern Ireland, the Republic of Ireland and England.
The integration of its local networks with the national telecoms network
creates strategic advantages for NTL's telephony business. The national network
allows NTL to carry telecommunications traffic between each of its franchise
areas and throughout the UK and, therefore, achieve significant savings on the
interconnection fees it pays to other carriers. In addition, using the national
telecoms network gives NTL greater pricing flexibility and will enable NTL to
design and offer new telephony services packages to its customers, which
management believes should have a positive effect on NTL's penetration rates.
Capitalizing on the extended reach of its national network, NTL is
competing for a share of the approximately L21 billion UK telecoms market on a
national basis. In the business telecoms market, NTL has been increasingly
successful in obtaining telecoms contracts from businesses located within its
franchise areas. As of December 31, 1997, NTL had a total of approximately 6,600
business customers, which represented more than a 95% increase over year-end
1996. NTL's current business customers include major international corporations,
universities, local governmental authorities, and small and medium sized
businesses. NTL believes that it can build on the strengths gained in its local
franchise areas to approach targeted business users
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<PAGE> 134
located in other areas of the UK. To connect the "last mile" to the customers'
premises from the national network, NTL has a variety of options, including
building fiber where justified, using microwave links from the NTL tower
infrastructure, or leasing circuits from other local operators. NTL launched its
national business telecoms service in November 1997 and its strategy is to
target medium to large businesses, beginning with those located near the major
urban areas currently served by the NTL national network.
NTL also offers a variety of other telecommunications services from its
national fiber network and microwave transmission facilities. NTL competes in
the growing market for bandwidth and leased line services as a national and
international wholesale telecommunications carrier. NTL's international
facilities license allows it to carry international traffic, and NTL has
recently entered into an agreement of a 25-year lease of international
telecommunications capacity on a new transatlantic fiber optic cable connecting
The Netherlands, Germany, the UK and the United States. NTL is also expanding
its product portfolio to include virtual private networks, managed data
networks, ATM and frame relay services and multi-media services.
In addition to business and carrier telecoms, NTL provides the following
telecom services: (i) a full range of services in the design, building and
operation of radio based networks, and the provision of infrastructure and
support services to customers in the emergency services sector, (ii) global
satellite connectivity for clients requiring video, digital audio and data
services, and (iii) residential, wholesale and business Internet access and
support services, consulting and systems integration services, and Intranet
design and implementation.
BROADCAST SERVICES
NTL's Broadcast Services group includes the original core business of NTL
Group Limited which has been providing television and radio broadcasters with
broadcast transmission services for more than 30 years.
NTL transmits television and radio broadcast signals for the UK's main
commercial television channels and independent radio stations from a national
infrastructure of over 1,200 owned and shared transmission sites across the UK.
Current customers include the ITV companies, Channel 4/S4C, and Channel 5. The
Broadcast Services group provides NTL with a stable contracted revenue stream
from a variety of customers, through long-term contracts generally with eight to
ten year terms. In addition to transmission services, the Broadcast Services
group markets value added services to its existing television customers. This
group also designs, installs, operates and maintains new transmitter networks
and has a spectrum planning service to plan the coverage of television and radio
networks.
Two of the four recipients of the DTT multiplexes awarded to date have
selected NTL as the preferred supplier of transmission services. If NTL
successfully concludes contractual arrangements with the multiplex operators,
the introduction of DTT broadcasting in the UK will significantly expand NTL's
broadcasting transmission services business.
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<PAGE> 135
BUSINESS OF PARTNERS
Partners was formed to develop, construct, manage and operate the interests
of Comcast in the UK cable and telecommunications industry. As of June 30, 1998,
Partners had interests in the Partners Operating Companies as follows:
Birmingham Cable, a 27.5% interest, Cable London, a 50% interest, Cambridge
Cable, a 100% interest, and two companies holding the franchises for Darlington
and Teesside, England, a 100% interest. When build-out of the Partners Operating
Companies' systems is complete, these systems will have the potential to serve
approximately 1.6 million homes and the businesses within their franchise areas.
The Partners Operating Companies not subject to the Purchase Rights will have
the potential to serve approximately 750,000 homes and the businesses within
their franchise areas.
PARTNERS OPERATING COMPANIES' SYSTEMS
The following table sets forth, for each Operating Company, homes passed,
homes marketed, cable subscriber, residential telephony subscriber and business
telephony subscriber information for the five years ended December 31, 1997. The
information presented below does not give effect to the Partner's proportionate
ownership interests in Birmingham Cable, Cable London and Cambridge Cable (prior
to March 31, 1996).
<TABLE>
<CAPTION>
1997 1996 1995 1994 1993
------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
HOMES PASSED (1)
Cambridge Cable(5)..................... 238,942 188,513 151,577 115,518 75,072
Teesside............................... 155,505 100,542 40,608
Birmingham Cable....................... 444,069 374,451 292,503 227,110 156,720
Cable London........................... 358,707 312,050 246,198 171,864 121,755
HOMES MARKETED (2)
Cambridge Cable(5)..................... 224,833 174,868 142,237 107,987 64,846
Teesside............................... 145,665 92,839 34,585
Birmingham Cable....................... 429,638 369,512 291,875 220,632 150,248
Cable London........................... 345,163 296,416 230,325 163,564 121,755
CABLE SUBSCRIBERS (3)
Cambridge Cable(5)..................... 52,766 45,378 36,799 30,763 16,007
Teesside............................... 45,387 30,280 14,391
Birmingham Cable....................... 116,995 111,432 88,719 73,540 55,356
Cable London........................... 83,142 67,877 52,871 42,977 30,111
RESIDENTIAL TELEPHONY SUBSCRIBERS (4)
Cambridge Cable(5)..................... 76,350 56,448 43,002 33,302 12,012
Teesside............................... 79,840 49,612 20,094
Birmingham Cable....................... 123,354 105,128 81,268 57,944 35,430
Cable London........................... 80,193 57,495 39,608 31,121 17,577
BUSINESS TELEPHONY SUBSCRIBERS (4)
Cambridge Cable(5)..................... 2,936 2,227 1,779 1,253 474
Teesside............................... 1,796 554 75
Birmingham Cable....................... 3,748 2,994 2,154 1,504 1,158
Cable London........................... 2,963 2,560 1,864 1,429 889
</TABLE>
- ---------------
(1) A home is deemed "passed" if it can be connected to the distribution system
without further extension of the transmission lines.
(2) A home is deemed "marketed" if it has been released to the Partners
Operating Companies' marketing departments for sales.
(3) A dwelling with one or more television sets connected to a system is counted
as one Cable Subscriber.
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<PAGE> 136
(4) A dwelling with one or more telephone lines connected to a system is counted
as one Telephony Subscriber.
(5) Prior to March 31, 1996, Partners owned 50% of Cambridge Cable.
Cambridge Cable Franchise Area. Cambridge Cable holds, through wholly
owned subsidiaries, the Cambridge, Harlow and Ipswich/Colchester franchises,
which were awarded in 1990, and the local delivery operator license for the
South East Anglia area (the "SEA Franchise"), which was awarded in 1995. The
franchise areas contain approximately 490,000 homes, although the build
milestones in the SEA Franchise only require Cambridge Cable to pass 104,000 of
the 205,000 homes in the SEA Franchise.
Teesside Franchise Area. Wholly owned subsidiaries of the Company hold the
Darlington and Teesside franchises which were awarded in 1991 and contain
approximately 254,000 homes.
Birmingham Cable Franchise Area. Birmingham Cable holds a franchise,
awarded in 1988, for the cities of Birmingham and Solihull with approximately
443,000 homes and the local delivery operator license for the Wythall franchise,
a 4,000 home franchise awarded in 1995.
Cable London Franchise Area. Cable London holds, through wholly owned
subsidiaries, the Camden, Haringey, Enfield and Hackney/Islington franchises,
which were awarded in 1989 and 1990. Cable London's franchise area covers a
contiguous area of approximately 65 square miles or roughly 20% of Greater
London and contains approximately 437,000 homes.
REVENUE SOURCES
Cable Communications. The Partners Operating Companies offer varying
levels of cable communications service, depending primarily on their respective
channel capacities. Monthly service rates and related charges vary in accordance
with the type of service selected by the subscriber. The Company may receive an
additional monthly fee for premium services, the charge for which varies with
the type and level of service selected by the subscriber. Additional charges are
often imposed for installation services, commercial subscribers, program guides
and other services. The Company also generates revenue from pay-per-view
services and advertising sales. Subscribers typically pay on a monthly basis and
generally may discontinue services at any time.
Residential Telephony. The Partners Operating Companies charge residential
telephony subscribers an initial connection fee, a monthly exchange line rental
fee, usage fees, which are charges for each local, long distance or
international call, and fees for additional services.
Business Telecommunications. The Partners Operating Companies charge
business telecommunications subscribers a connection fee based upon the number
of lines being installed and for the initial connection or reconnection to the
Partners Operating Companies' networks, a monthly exchange line rental fee,
usage fees, which are charges for each local, long distance or international
call, and fees for additional services.
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<PAGE> 137
RECENT DEVELOPMENTS
DIAMOND
On June 16, 1998, NTL entered into the Diamond Agreement with the
shareholders of Diamond (each, a "Transferor"), for the acquisition of all of
the outstanding shares of Diamond. Pursuant to the Diamond Agreement, on the
closing date of the Diamond transaction (the "Diamond Closing Date"), NTL will
transfer to each Transferor one share of NTL Common Stock for each four issued
and outstanding ordinary shares, par value 2.5p per share (the "Ordinary
Shares"), and each deferred share, par value 25p per share, of Diamond (the
"Share Exchange"). However, the Diamond Agreement provides for adjustment of
such consideration as follows: (i) if the Diamond Closing Date occurs within
four months of the date of the Diamond Agreement, and the average sales price of
the NTL Common Stock, as calculated pursuant to the Diamond Agreement, is equal
to or greater than the Maximum Aggregate Stock Price ($52.00), the number of
shares of NTL Common Stock to be transferred for each four Ordinary Shares will
be decreased such that the value of such consideration will not exceed the
Maximum Average Stock Price, and (ii) if the Diamond Closing Date does not occur
within such four-month period, the Maximum Average Stock price will increase by
$.50 on October 16, 1998, and on each monthly anniversary date thereafter until
the Diamond Closing Date.
Diamond has approximately 60.7 million fully diluted shares outstanding,
and the total consideration for the Share Exchange will be approximately 15.2
million shares of NTL Common Stock. Based on the composite closing price of NTL
Common Stock on the date of the Diamond Agreement, the purchase price implies a
total Diamond equity value of approximately $630 million. The consummation of
the Diamond transaction is subject to, among other things, the approval by the
stockholders of NTL of the issuance of shares of NTL Common Stock in accordance
with the terms of the Diamond Agreement.
COMTEL
Pursuant to the ComTel Agreement with Vision Networks III B.V., a
wholly-owned subsidiary of Royal PTT Nederland NV (KPN), NTL acquired the
operations of ComTel. ComTel operates telephony/cable networks in the UK, and
its franchises cover approximately 1.1 million homes and are located in the
Midlands and South East England regions, covering areas including Oxford,
Swindon, Coventry and Stratford.
Pursuant to the ComTel Agreement, NTL acquired ComTel for a total of
approximately L550 million in two stages. In the first stage, NTL acquired
certain of the ComTel properties for L275 million in cash. In the second stage,
which was completed on September 22, 1998, NTL acquired the remaining ComTel
properties for L200 million in cash and L75 million in NTL Preferred Stock. Such
NTL Preferred Stock has a pay-in-kind coupon of 9.9%, will mature in 2008 and is
redeemable within 15 months for NTL Common Stock valued at market, new NTL
convertible preferred securities or cash. NTL financed the acquisition of ComTel
through a bank loan, completed through an amendment to the New Credit Facility.
The acquisition of ComTel will be treated as a purchase by NTL for accounting
and financial reporting purposes. The consummation of the ComTel acquisition did
not require a vote of the stockholders of NTL.
REDEMPTION OF 10 7/8% NOTES
On June 10, 1998, NTL provided to the trustee of the 10 7/8% Notes a notice
that NTL will redeem such Notes on October 15, 1998. Pending such redemption,
NTL has used cash on hand to deposit in trust with such trustee an amount equal
to approximately $218.6 million (103.107% of accreted value) to pay the
redemption price (including principal) on such 10 7/8% Notes, thereby defeasing
certain of its obligations under the indenture governing such 10 7/8% Notes. In
July 1998, using funds so deposited with the trustee, NTL purchased from one
holder for $65 million a portion of the 10 7/8% Notes with an accreted value of
$62.2 million.
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<PAGE> 138
STOCK OWNERSHIP
The following table shows the beneficial ownership of the Class A Common
Shares as of August 31, 1998, unless otherwise indicated in the footnotes below,
by each director and designated executive officer, all directors and designated
executive officers of Partners as a group, and each person Partners believes
holds more than 5% of the outstanding Class A Common Shares. An asterisk in the
column listing the percentage of shares beneficially owned indicates that the
person owns less than 1% of the Class A Common Shares as of August 31, 1998.
<TABLE>
<CAPTION>
CLASS A COMMON SHARES
BENEFICIALLY OWNED
---------------------------
NUMBER OF PERCENTAGE OF
NAME SHARES(1) CLASS
---- ---------- -------------
<S> <C> <C>
John R. Alchin............................................. 2,000 *
Julian A. Brodsky.......................................... 1,000 *
Brian L. Roberts........................................... 1,000 *
Ralph J. Roberts........................................... 5,000 *
H. Brian Thompson.......................................... 1,000 *
All directors and designated executive officers as a group
(10 persons)............................................. 10,000 *
Snyder Capital Management, Inc.(2)......................... 3,152,000 8.5%
350 California Street
San Francisco, CA 94104
Warburg, Pincus Investors, L.P.(3)......................... 10,235,744 27.5%
E.M. Warburg, Pincus & Co., LLC
Warburg, Pincus & Co.
466 Lexington Avenue
New York, NY 10017
</TABLE>
- ---------------
(1) All shares listed are directly held with sole voting and investment power
unless otherwise indicated.
(2) Based on Schedule 13G filing dated May 6, 1998.
(3) Warburg, Pincus and Co., a New York general partnership ("WP"), is the sole
general partner of Warburg, Pincus. E.M. Warburg, Pincus & Co., LLC, New
York limited liability company ("EMW LLC"), manages Warburg, Pincus. The
members of EMW LLC are substantially the same as the partners of WP. Lionel
I. Pincus is the managing partner of WP and the managing member of EMW LLC
and may be deemed to control both WP and EMW LLC. WP, as the sole general
partner of Warburg, Pincus, has a 20% interest in the profits of Warburg,
Pincus. Messrs. Howard H. Newman and Jeffrey A. Harris, directors of
Partners, are managing directors and members of EMW LLC and a general
partner WP. As such, Messrs. Newman and Harris may be deemed to have an
indirect pecuniary interest (within the meaning of Rule 16a-1 under the
Exchange Act) in an indeterminate portion of the Class A Common Shares
beneficially owned by Warburg, Pincus and WP. Each of Messrs. Newman and
Harris disclaims beneficial ownership of such shares within the meaning of
Rule 13d-3 under the Exchange Act.
The following table shows the beneficial ownership of the Class B Common
Shares as of August 31, 1998:
<TABLE>
<CAPTION>
CLASS B COMMON SHARES
BENEFICIALLY OWNED
--------------------------
NUMBER OF PERCENTAGE OF
NAME SHARES CLASS
---- ---------- -------------
<S> <C> <C>
Comcast U.K. Holdings, Inc.(1).............................. 12,872,605 100.0%
1105 Market Street
Wilmington, DE 19801
</TABLE>
- ---------------
(1) Each record holder of Class B Common Shares is entitled to 10 votes per
share which constitutes approximately 77.6% of the total voting power of
all outstanding Partners Common Shares. The 12,872,605 Class B Common
Shares are convertible into Class A Common Shares on a one-for-one basis.
All of the Class B Common Shares, if converted into Class A Common Shares,
would represent approximately 25.7% of the voting power of the Class A
Common Shares.
130
<PAGE> 139
LEGAL MATTERS
Certain legal matters relating to the validity of the shares of NTL Common
Stock to be issued in the Amalgamation will be passed upon for NTL by Skadden,
Arps, Slate, Meagher & Flom LLP, New York, New York, special counsel for NTL.
Each of Davis Polk and Wardwell, New York, New York, U.S. counsel for Partners,
and Conyers Dill & Pearman, Hamilton, Bermuda, Bermuda counsel for Partners,
will render opinions with respect to material tax consequences of the
Amalgamation. See "THE AMALGAMATION -- Material Tax Consequences of the
Amalgamation."
EXPERTS
The consolidated financial statements of NTL included herein have been
audited by Ernst & Young LLP, independent auditors, as set forth in their report
thereon included herein. Such consolidated financial statements are included
herein in reliance upon such report given upon the authority of such firm as
experts in accounting and auditing.
The consolidated financial statements as of December 31, 1997 and 1996 and
for each of the three years in the period ended December 31, 1997 of Comcast UK
Cable Partners Limited and subsidiaries included herein and incorporated in this
Joint Proxy Statement/Prospectus by reference to the Comcast UK Cable Partners
Limited Annual Report on Form 10-K for the year ended December 31, 1997 have
been audited by Deloitte & Touche LLP, independent auditors, as stated in their
reports, which are also included herein and incorporated by reference herein and
have been so included and incorporated in reliance upon the reports of such firm
given upon their authority as experts in accounting and auditing.
The consolidated financial statements as of December 31, 1997 and 1996 and
for each of the three years in the period ended December 31, 1997 of Birmingham
Cable Corporation Limited and Cable London PLC included herein and incorporated
in this Joint Proxy Statement/Prospectus by reference to the Comcast UK Cable
Partners Limited Annual Report on Form 10-K for the year ended December 31, 1997
have been audited by Deloitte & Touche, independent auditors, as stated in their
reports, which are also included herein and incorporated by reference herein and
have been so included and incorporated in reliance upon the reports of such firm
given upon their authority as experts in accounting and auditing.
The combined financial statements of ComTel UK Finance, B.V. and its
subsidiaries as of and for the year ended December 31, 1997, and the combined
financial statements of Telecential as of and for the 16 months ended December
31, 1996, each appearing in this Joint Proxy Statement/Prospectus, have been
audited by Deloitte & Touche, as indicated in their report with respect thereto
included herein.
The combined financial statements as of and for the year ended December 31,
1996 of ComTel UK Finance B.V. included in this Joint Proxy Statement/Prospectus
have been included in reliance on the report of Coopers & Lybrand, independent
Chartered Accountants, given on the authority of such firm as experts in
accounting and auditing.
131
<PAGE> 140
STOCKHOLDER PROPOSALS
NTL
Any proposal of stockholders of NTL intended to be presented at NTL's 1999
Annual Meeting must have been received by NTL for inclusion in the proxy
statement and form of proxy relating to that meeting on or before December 29,
1998.
Pursuant to the NTL By-laws, in order for any matter to be properly before
the 1999 Annual Meeting, notice must be given to the Secretary of NTL at 10 East
59th Street, New York, New York 10022, not less than 75 days nor more than 90
days prior to the meeting; provided, however, that in the event that less than
90 days' notice or prior public disclosure of the date of the meeting is given
or made to stockholders, notice by the stockholder to be timely must be so
received not later than the close of business on the fifteenth day following the
day on which such notice of the date of the meeting was mailed or such public
disclosure was made, whichever first occurs. Such stockholder's notice to the
Secretary shall set forth as to each matter the stockholder proposes to bring
before the meeting (i) a brief description of the business desired to be brought
before the meeting and the reasons for conducting such business at the meeting,
(ii) the name and record address of the stockholder proposing such business,
(iii) the class, series and number of shares of capital stock of NTL which are
beneficially owned by the stockholder and (iv) any material interest of the
stockholder in such business. Insofar as the NTL Special Meeting is concerned,
such notice must be received by the Secretary of NTL at the above address no
later than Monday, October 5, 1998.
PARTNERS
Any proposal of shareholders of Partners intended to be presented at the
Partners Annual General Meeting of Stockholders in 1999 must have been received
by Comcast by December 29, 1998 in order to be considered for inclusion in the
proxy statement and form of proxy relating to that meeting.
132
<PAGE> 141
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
NTL INCORPORATED AND SUBSIDIARIES
Report of Independent Auditors.............................. F-4
Consolidated Balance Sheets as of December 31, 1997 and
December 31, 1996......................................... F-5
Consolidated Statements of Operations for the Years Ended
December 31, 1997, December 31, 1996 and December 31,
1995...................................................... F-6
Consolidated Statement of Shareholders' Equity (Deficiency)
for the Years Ended December 31, 1997, December 31, 1996
and December 31, 1995..................................... F-7
Consolidated Statements of Cash Flows for the Years Ended
December 31, 1997, December 31, 1996 and December 31,
1995...................................................... F-8
Notes to Consolidated Financial Statements.................. F-9
Condensed Consolidated Balance Sheet as of June 30, 1998
(Unaudited)............................................... F-29
Condensed Consolidated Statements of Operations for the Six
Months Ended June 30, 1998 and 1997 (Unaudited)........... F-30
Condensed Consolidated Statement of Shareholders
(Deficiency) for the Six Months Ended June 30, 1998
(Unaudited)............................................... F-31
Condensed Consolidated Statements of Cash Flows for the Six
Months Ended June 30, 1998 and 1997 (Unaudited)........... F-32
Notes to Condensed Consolidated Financial Statements
(Unaudited)............................................... F-33
COMCAST UK CABLE PARTNERS LIMITED AND SUBSIDIARIES
Independent Auditors' Report................................ F-39
Consolidated Balance Sheet as of December 31, 1997 and
December 31, 1996......................................... F-40
Consolidated Statement of Operations for the Years Ended
December 31, 1997, December 31, 1996 and December 31,
1995...................................................... F-41
Consolidated Statement of Cash Flows for the Years Ended
December 31, 1997, December 31, 1996 and December 31,
1995...................................................... F-42
Consolidated Statement of Shareholders' Equity for the Years
Ended December 31, 1997, December 31, 1996 and December
31, 1995.................................................. F-43
Notes to Consolidated Financial Statements.................. F-44
Condensed Consolidated Balance Sheet as of June 30, 1998 and
December 31, 1997 (Unaudited)............................. F-58
Condensed Consolidated Statement of Operations and
Accumulated Deficit for the Three and Six Months Ended
June 30, 1998 and 1997 (Unaudited)........................ F-59
Condensed Consolidated Statement of Cash Flows for the Six
Months Ended June 30, 1998 and 1997 (Unaudited)........... F-60
Notes to Condensed Consolidated Financial Statements
(Unaudited)............................................... F-61
BIRMINGHAM CABLE CORPORATION LIMITED AND SUBSIDIARIES
Independent Auditors' Report................................ F-66
Consolidated Balance Sheet as of December 31, 1997 and
December 31, 1996......................................... F-67
Consolidated Statement of Operations for the Years Ended
December 31, 1997, December 31, 1996 and December 31,
1995...................................................... F-68
</TABLE>
F-1
<PAGE> 142
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Consolidated Statement of Cash Flows for the Years Ended
December 31, 1997, December 31, 1996 and December 31,
1995...................................................... F-69
Consolidated Statement of Shareholders' Equity for the Years
Ended December 31, 1997, December 31, 1996 and December
31, 1995.................................................. F-70
Notes to Consolidated Financial Statements.................. F-71
CABLE LONDON PLC AND SUBSIDIARIES
Independent Auditors' Report................................ F-78
Consolidated Balance Sheet as of December 31, 1997 and
December 31, 1996......................................... F-79
Consolidated Statement of Operations for the Years Ended
December 31, 1997, December 31, 1996 and December 31,
1995...................................................... F-80
Consolidated Statement of Cash Flows for the Years Ended
December 31, 1997, December 31, 1996 and December 31,
1995...................................................... F-81
Consolidated Statement of Shareholders' (Deficiency) Equity
for the Years Ended December 31, 1997, December 31, 1996
and December 31, 1995..................................... F-82
Notes to Consolidated Financial Statements.................. F-83
COMTEL UK FINANCE B.V.
AUDITED COMBINED FINANCIAL STATEMENTS
Independent Auditors' Report................................ F-90
Report of Independent Accountants........................... F-91
Combined Statements of Operations for each of the years in
the two year period ended December 31, 1997............... F-92
Combined Balance Sheets as of December 31, 1996 and 1997.... F-93
Combined Statements of Shareholders' Equity for each of the
years in the two year period ended December 31, 1997...... F-94
Combined Statements of Cash Flows for each of the years in
the two year period ended December 31, 1997............... F-95
Notes to the Combined Financial Statements.................. F-96
COMBINED FINANCIAL STATEMENTS
Combined Statements of Operations for each of the six month
periods ended June 30, 1997 and June 30, 1998............. F-103
Combined Balance Sheet as of June 30, 1998.................. F-104
Combined Statement of Shareholders' Equity for the six month
period ended June 30, 1998................................ F-105
Combined Statements of Cash Flows for each of the six month
periods ended June 30, 1997 and June 30, 1998............. F-106
Notes to the Unaudited Combined Financial Statements........ F-107
</TABLE>
F-2
<PAGE> 143
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
TELECENTIAL COMMUNICATIONS (CANADA) LIMITED
TELECENTIAL COMMUNICATIONS (UK) LIMITED
AUDITED COMBINED FINANCIAL STATEMENTS
Independent Auditors' Report................................ F-109
Combined Statement of Operations for the sixteen month
period ended December 31, 1996............................ F-110
Combined Balance Sheet as of December 31, 1996.............. F-111
Combined Statement of Shareholders' Equity for the sixteen
month period ended December 31, 1996...................... F-112
Combined Statement of Cash Flows for the sixteen month
period ended December 31, 1996............................ F-113
Notes to the Combined Financial Statements.................. F-114
</TABLE>
F-3
<PAGE> 144
REPORT OF INDEPENDENT AUDITORS
The Board of Directors and Shareholders
NTL Incorporated
We have audited the consolidated balance sheets of NTL Incorporated and
Subsidiaries as of December 31, 1997 and 1996, and the related consolidated
statements of operations, shareholders' equity (deficiency) and cash flows for
each of the three years in the period ended December 31, 1997. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position of
NTL Incorporated and Subsidiaries at December 31, 1997 and 1996, and the
consolidated results of their operations and their cash flows for each of the
three years in the period ended December 31, 1997, in conformity with generally
accepted accounting principles.
ERNST & YOUNG LLP
New York, New York
March 20, 1998
F-4
<PAGE> 145
NTL INCORPORATED AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31
--------------------------------
1997 1996
-------------- --------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents................................. $ 98,902,000 $ 445,884,000
Marketable securities..................................... 4,998,000 --
Accounts receivable -- trade, less allowance for doubtful
accounts of $8,056,000 (1997) and $3,870,000 (1996).... 66,022,000 28,340,000
Other..................................................... 67,232,000 66,817,000
-------------- --------------
Total current assets................................... 237,154,000 541,041,000
Fixed assets, net........................................... 1,756,985,000 1,459,528,000
Intangible assets, net...................................... 364,479,000 392,933,000
Other assets, net of accumulated amortization of $25,889,000
(1997) and $21,789,000 (1996)............................. 63,021,000 61,109,000
-------------- --------------
Total assets........................................... $2,421,639,000 $2,454,611,000
============== ==============
LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIENCY)
Current liabilities:
Accounts payable.......................................... $ 45,475,000 $ 57,960,000
Accrued expenses and other................................ 181,605,000 101,228,000
Accrued construction costs................................ 26,930,000 62,723,000
Deferred revenue.......................................... 35,060,000 16,491,000
Deferred purchase price................................... -- 60,537,000
-------------- --------------
Total current liabilities.............................. 289,070,000 298,939,000
Long-term debt.............................................. 2,015,057,000 1,732,168,000
Other....................................................... 428,000 459,000
Commitments and contingent liabilities
Deferred income taxes....................................... 70,218,000 94,931,000
Senior redeemable exchangeable preferred stock, $.01 par
value, plus accreted dividends; liquidation preference
$107,000,000; less unamortized discount of $3,444,000
(1997); issued and outstanding 110,000 shares (1997) and
none (1996)............................................... 108,534,000 --
Shareholders' equity (deficiency):
Series preferred stock -- $.01 par value; authorized
2,500,000 shares; liquidation preference $78,000,000;
issued and outstanding 780 shares (1997 and 1996)...... -- --
Common stock -- $.01 par value; authorized 100,000,000
shares; issued and outstanding 32,210,000 (1997) and
32,066,000 (1996) shares............................... 322,000 321,000
Additional paid-in capital................................ 538,054,000 548,647,000
Cumulative translation adjustment......................... 117,008,000 163,141,000
(Deficit)................................................. (717,052,000) (383,995,000)
-------------- --------------
(61,668,000) 328,114,000
-------------- --------------
Total liabilities and shareholders' equity
(deficiency)......................................... $2,421,639,000 $2,454,611,000
============== ==============
</TABLE>
See accompanying notes.
F-5
<PAGE> 146
NTL INCORPORATED AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
-----------------------------------------------
1997 1996 1995
------------- ------------- -------------
<S> <C> <C> <C>
Revenues
Local telecommunications and television..... $ 189,407,000 $ 89,209,000 $ 24,804,000
National and international
telecommunications....................... 162,738,000 45,430,000 --
Broadcast transmission and other............ 130,799,000 83,618,000 --
Other telecommunications.................... 8,831,000 10,086,000 8,937,000
------------- ------------- -------------
491,775,000 228,343,000 33,741,000
Costs and expenses
Operating expenses.......................... 301,644,000 144,315,000 24,415,000
Selling, general and administrative
expenses................................. 169,133,000 114,992,000 57,932,000
Franchise fees.............................. 23,587,000 13,117,000 --
Corporate expenses.......................... 18,324,000 14,899,000 14,697,000
Nonrecurring charges........................ 20,642,000 -- --
Depreciation and amortization............... 150,509,000 98,653,000 29,823,000
------------- ------------- -------------
683,839,000 385,976,000 126,867,000
------------- ------------- -------------
Operating (loss)......................... (192,064,000) (157,633,000) (93,126,000)
Other income (expense)
Interest and other income................... 28,415,000 33,634,000 21,185,000
Interest expense............................ (202,570,000) (137,032,000) (28,379,000)
Other gains................................. 21,497,000 -- --
Foreign currency transaction gains.......... 574,000 2,408,000 84,000
------------- ------------- -------------
(Loss) before income taxes, minority
interests and extraordinary item......... (344,148,000) (258,623,000) (100,236,000)
Income tax benefit (provision).............. 15,591,000 (7,653,000) 2,477,000
------------- ------------- -------------
(Loss) before minority interests and
extraordinary item....................... (328,557,000) (266,276,000) (97,759,000)
Minority interests.......................... -- 11,822,000 6,974,000
------------- ------------- -------------
(Loss) before extraordinary item............ (328,557,000) (254,454,000) (90,785,000)
Loss from early extinguishment of debt...... (4,500,000) -- --
------------- ------------- -------------
Net (loss)............................... $(333,057,000) $(254,454,000) $ (90,785,000)
============= ============= =============
Basic and diluted net (loss) per common share:
(Loss) before extraordinary item............ $ (10.60) $ (8.20) $ (3.01)
Extraordinary item.......................... (.14) -- --
------------- ------------- -------------
Net (loss) per common share.............. $ (10.74) $ (8.20) $ (3.01)
============= ============= =============
</TABLE>
See accompanying notes.
F-6
<PAGE> 147
NTL INCORPORATED AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY (DEFICIENCY)
<TABLE>
<CAPTION>
SERIES COMMON STOCK --
PREFERRED STOCK $.01 PAR VALUE ADDITIONAL CUMULATIVE
--------------- --------------------- PAID-IN TRANSLATION
SHARES PAR SHARES PAR CAPITAL ADJUSTMENT (DEFICIT)
------- ----- ---------- -------- ------------ ------------ -------------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance, December 31, 1994............ 22,635,000 $226,000 $462,197,000 $ 12,867,000 $ (38,756,000)
Exercise of stock options............. 20,000 1,000 101,000
Stock split........................... 7,547,000 75,000 (75,000)
Net loss for the year ended December
31, 1995............................ (90,785,000)
Currency translation adjustment....... (6,594,000)
---------- -------- ------------ ------------ -------------
Balance, December 31, 1995............ 30,202,000 302,000 462,223,000 6,273,000 (129,541,000)
Exercise of stock options............. 396,000 4,000 1,362,000
Exercise of warrants.................. 53,000 1,000 298,000
Issuance of warrants in connection
with consent solicitations.......... 1,641,000
Shares issued for acquisitions........ 780 $ -- 1,415,000 14,000 83,123,000
Net loss for the year ended December
31, 1996............................ (254,454,000)
Currency translation adjustment....... 156,868,000
--- ---- ---------- -------- ------------ ------------ -------------
Balance, December 31, 1996............ 780 -- 32,066,000 321,000 548,647,000 163,141,000 (383,995,000)
Exercise of stock options............. 119,000 1,000 1,532,000
Exercise of warrants.................. 25,000 138,000
Accreted dividends on senior
redeemable exchangeable preferred
stock............................... (11,978,000)
Accretion of discount on senior
redeemable exchangeable preferred
stock............................... (285,000)
Net loss for the year ended December
31, 1997............................ (333,057,000)
Currency translation adjustment....... (46,133,000)
--- ---- ---------- -------- ------------ ------------ -------------
Balance, December 31, 1997............ 780 $ -- 32,210,000 $322,000 $538,054,000 $117,008,000 $(717,052,000)
=== ==== ========== ======== ============ ============ =============
</TABLE>
See accompanying notes.
F-7
<PAGE> 148
NTL INCORPORATED AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
------------------------------------------------
1997 1996 1995
------------- -------------- -------------
<S> <C> <C> <C>
Operating activities
Net loss.................................................. $(333,057,000) $ (254,454,000) $ (90,785,000)
Adjustment to reconcile net loss to net cash (used in)
operating activities:
Depreciation and amortization........................... 150,509,000 98,653,000 29,823,000
Loss from early extinguishment of debt.................. 4,500,000 -- --
Amortization of noncompetition agreements............... 1,852,000 2,906,000 3,256,000
Provision for losses on accounts receivable............. 6,891,000 2,597,000 709,000
Minority interests...................................... -- (11,822,000) (6,974,000)
Deferred income taxes................................... (16,852,000) 5,063,000 --
Amortization of original issue discount................. 122,639,000 104,264,000 29,379,000
Other................................................... (8,148,000) 8,578,000 6,229,000
Changes in operating assets and liabilities, net of
effect from business acquisitions:
Accounts receivable................................... (30,430,000) 10,050,000 (6,496,000)
Other current assets.................................. (6,563,000) (20,316,000) (6,749,000)
Other assets.......................................... 2,303,000 (24,000) (123,000)
Accounts payable...................................... (4,615,000) (2,869,000) 20,583,000
Accrued expenses and other............................ 74,706,000 35,691,000 9,926,000
Deferred revenue...................................... 18,994,000 278,000 1,075,000
------------- -------------- -------------
Net cash (used in) operating activities............ (17,271,000) (21,405,000) (10,147,000)
Investing activities
Purchase of fixed assets.................................. (503,656,000) (505,664,000) (445,550,000)
Payment of deferred purchase price........................ (57,330,000) -- --
Increase in other assets.................................. (4,322,000) (6,013,000) (3,361,000)
Acquisitions of subsidiaries and minority interests, net
of cash acquired........................................ -- (332,693,000) (12,412,000)
Purchase of marketable securities......................... (145,939,000) -- --
Proceeds from sales of marketable securities.............. 142,596,000 -- --
------------- -------------- -------------
Net cash (used in) investing activities............ (568,651,000) (844,370,000) (461,323,000)
Financing activities
Proceeds from borrowings and sale of preferred stock, net
of financing costs...................................... 490,302,000 1,146,190,000 326,166,000
Principal payments........................................ (242,424,000) (95,283,000) (9,963,000)
Cash released from escrow................................. -- 1,600,000 2,810,000
Capital contribution from minority partner................ -- -- 12,626,000
Proceeds from borrowings from minority partner............ -- 31,232,000 19,065,000
Proceeds from exercise of stock options and warrants...... 1,671,000 1,665,000 102,000
------------- -------------- -------------
Net cash provided by financing activities.......... 249,549,000 1,085,404,000 350,806,000
Effect of exchange rate changes on cash..................... (10,609,000) 50,972,000 1,345,000
------------- -------------- -------------
Increase (decrease) in cash and cash equivalents............ (346,982,000) 270,601,000 (119,319,000)
Cash and cash equivalents at beginning of year.............. 445,884,000 175,283,000 294,602,000
------------- -------------- -------------
Cash and cash equivalents at end of year.................... $ 98,902,000 $ 445,884,000 $ 175,283,000
============= ============== =============
Supplemental disclosure of cash flow information
Cash paid during the period for interest exclusive of
amounts capitalized..................................... $ 72,047,000 $ 27,595,000 $ 1,735,000
Income taxes paid......................................... 1,107,000 367,000 1,695,000
Supplemental schedule of noncash financing activities
Accretion of dividends and discount on senior redeemable
exchangeable preferred stock............................ $ 12,263,000 $ -- $ --
Warrants issued in connection with consent
solicitations........................................... -- 1,641,000 --
Common stock issued for acquisition....................... -- 34,137,000 --
Preferred stock issued for acquisition of minority
interest, including notes payable to minority partner... -- 49,000,000 --
Liabilities incurred in connection with acquisitions...... -- 81,906,000 --
</TABLE>
See accompanying notes.
F-8
<PAGE> 149
NTL INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. ORGANIZATION
NTL Incorporated (the "Company"), through its subsidiaries and joint
ventures, owns and operates television and radio broadcasting, cable television,
telephone and telecommunications systems in the United Kingdom and provides
long-distance telephone service in the United States. Based on revenues and
identifiable assets, the Company's predominant lines of business are television
and radio broadcasting, cable television, telephone and telecommunications
services in the United Kingdom.
2. SIGNIFICANT ACCOUNTING POLICIES
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ from those estimates.
Principles of Consolidation
The consolidated financial statements include the accounts of the Company,
its wholly-owned subsidiaries and entities where the Company's interest is
greater than 50%. Significant intercompany accounts and transactions have been
eliminated in consolidation.
Foreign Currency Translation
The financial statements of the Company's foreign subsidiaries have been
translated into U.S. dollars in accordance with Statement of Financial
Accounting Standards ("SFAS") No. 52, "Foreign Currency Translation." All
balance sheet accounts have been translated using the current exchange rates at
the respective balance sheet dates. Statement of operations amounts have been
translated using the average exchange rates for the respective years. The gains
or losses resulting from the change in exchange rates have been reported
separately as a component of shareholders' equity (deficiency).
Cash Equivalents
Cash equivalents are short-term highly liquid investments purchased with a
maturity of three months or less. Cash equivalents were $55,894,000 and
$339,249,000 at December 31, 1997 and 1996, respectively, which consisted
primarily of repurchase agreements and corporate commercial paper. At December
31, 1997 and 1996, none and $238,862,000, respectively, of such cash equivalents
were denominated in British pounds sterling.
Marketable Securities
Marketable securities are classified as available-for-sale, which are
carried at fair value. Unrealized holding gains and losses on securities, net of
tax, are carried as a separate component of shareholders' equity (deficiency).
The amortized cost of debt securities is adjusted for amortization of premiums
and accretion of discounts to maturity. Such amortization is included in
interest income. Realized gains and losses and declines in value judged to be
other than temporary will be included in interest income. The cost of securities
sold or matured is based on the specific identification method. Interest on
securities is included in interest income.
Marketable securities at December 31, 1997 consist of federal agency notes.
During the year ended December 31, 1997, there were no realized gains or losses
on sales of securities. All of the marketable securities as of December 31, 1997
had a contractual maturity of less than one year.
F-9
<PAGE> 150
NTL INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Fixed Assets
Fixed assets are stated at cost, which includes amounts capitalized for
labor and overhead expended in connection with the design and installation of
operating equipment. Depreciation is computed by the straight-line method over
the estimated useful lives of the assets. Estimated useful lives are as follows:
operating equipment -- 5 to 40 years and other equipment -- 3 to 22.5 years.
Long-lived assets are reviewed for impairment whenever events or changes in
circumstances indicate that the carrying amount may not be recoverable. If the
sum of the expected future undiscounted cash flows is less than the carrying
amount of the asset, a loss is recognized for the difference between the fair
value and the carrying value of the asset.
Intangible Assets
Intangible assets include goodwill and license acquisition costs. Goodwill
is the excess of the purchase price over the fair value of net assets acquired
in business combinations accounted for as purchases. Goodwill is amortized on a
straight-line basis over the periods benefited, principally 30 years. License
acquisition costs represent the portion of purchase price allocated to the cable
television and telecommunications licenses acquired in business combinations.
License acquisition costs are amortized on a straight-line basis over the
remaining life of the license as follows: cable television license -- 7 to 12
years and telecommunications license -- 23 years. The Company continually
reviews the recoverability of the carrying value of these assets using the same
methodology that it uses for the evaluation of its other long-lived assets.
Other Assets
Other assets consist primarily of noncompetition agreements obtained in
exchange for the issuance of warrants to purchase an aggregate of 899,000 shares
of common stock and deferred financing costs. The noncompetition agreements were
valued at the difference between the fair market value of the common stock on
the date of grant and the exercise price of the warrants. The noncompetition
agreements are being expensed on a straight-line basis over the noncompetition
period of primarily five years. Deferred financing costs were incurred in
connection with the issuance of debt and are amortized over the term of the
related debt.
Capitalized Interest
Interest is capitalized as a component of the cost of fixed assets
constructed. In 1997, 1996 and 1995, interest of $6,770,000, $10,294,000 and
$12,183,000, respectively, was capitalized.
Revenue Recognition
Revenues are recognized at the time the service is provided to the
customer.
Cable Television System Costs, Expenses and Revenues
The Company accounts for costs, expenses and revenues applicable to the
construction and operation of its cable television, telephone and
telecommunications systems in accordance with SFAS No. 51, "Financial Reporting
by Cable Television Companies."
Advertising Expense
The Company expenses the cost of advertising as incurred. Advertising costs
were $31,003,000, $22,727,000 and $10,370,000 in 1997, 1996 and 1995,
respectively.
F-10
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NTL INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Net (Loss) Per Share
In February 1997, the Financial Accounting Standards Board ("FASB") issued
SFAS No. 128, "Earnings Per Share". SFAS 128 replaced the calculation of primary
and fully diluted earnings per share with basic and diluted earnings per share.
Unlike primary earnings per share, basic earnings per share excludes any
dilutive effects of options, warrants and convertible securities. Diluted
earnings per share is very similar to the previously reported fully diluted
earnings per share. The Company adopted SFAS No. 128 for each of the three years
in the period ended December 31, 1997.
Stock-Based Compensation
The Company has adopted the disclosure-only provisions of SFAS No. 123,
"Accounting for Stock-Based Compensation." The Company applies APB Opinion No.
25, "Accounting for Stock Issued to Employees" and related interpretations in
accounting for its stock option plans.
Reclassifications
Certain prior year amounts have been reclassified to conform to the 1997
presentation.
3. RECENT ACCOUNTING PRONOUNCEMENTS
Comprehensive Income
In June 1997, the FASB issued SFAS No. 130, "Reporting Comprehensive
Income". SFAS No. 130 requires that all items that are required to be recognized
under accounting standards as components of comprehensive income be reported in
a financial statement that is displayed with the same prominence as other
financial statements. SFAS No. 130 is effective for fiscal years beginning after
December 15, 1997. The Company will adopt SFAS No. 130 in the first interim
period for its fiscal year ending December 31, 1998.
Segment Reporting
In June 1997, the FASB issued SFAS No. 131, "Disclosures about Segments of
an Enterprise and Related Information". SFAS No. 131 establishes standards for
the way that public business enterprises report information about operating
segments in annual financial statements and requires that those enterprises
report selected information about operating segments in interim financial
reports issued to shareholders. It also establishes standards for related
disclosures about products and services, geographic areas, and major customers.
SFAS No. 131 is effective for financial statements for periods beginning after
December 15, 1997. The Company will adopt SFAS No. 131 for its fiscal year
ending December 31, 1998. The Company is currently evaluating the effect that
the adoption will have on its financial statements.
4. CERTAIN SIGNIFICANT RISKS AND UNCERTAINTIES
Need for Additional Financing
The Company will require additional financing in the future. There can be
no assurance that the required financing will be obtainable on acceptable terms.
Requirements to Meet Build Milestones
The telecommunications license for each United Kingdom franchise contains
specific construction milestones. Based on current network construction
scheduling, the Company believes it will be able to satisfy its milestones in
the future, but there can be no assurance that such milestones will be met. 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
licenses could be revoked.
F-11
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NTL INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Concentrations
The Company's television and radio broadcasting business is substantially
dependent upon contracts with a small group of companies for the right to
broadcast their programming, and upon a site sharing agreement for a large
number of its transmission sites. The loss of any one of these contracts or the
site sharing agreement could have a material adverse effect on the business of
the Company.
Limited Access to Programming
The Company's ability to make a competitive offering of cable television
services is dependent on the Company's ability to obtain access to programming
at a reasonable cost. There can be no assurance that the Company's current
programming will continue to be available on acceptable commercial terms or at
all.
Currency Risk
To the extent that the Company obtains financing in United States dollars
and incurs construction and operating costs 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. The Company has entered into an option
agreement to hedge some of the risk of exchange rate fluctuations related to
interest payments on United States dollar denominated debt.
5. FIXED ASSETS
Fixed assets consists of:
<TABLE>
<CAPTION>
DECEMBER 31
--------------------------------
1997 1996
-------------- --------------
<S> <C> <C>
Operating equipment.................................. $1,612,440,000 $1,080,135,000
Other equipment...................................... 225,514,000 197,368,000
Construction-in-progress............................. 134,795,000 305,372,000
-------------- --------------
1,972,749,000 1,582,875,000
Accumulated depreciation............................. (215,764,000) (123,347,000)
-------------- --------------
$1,756,985,000 $1,459,528,000
============== ==============
</TABLE>
6. INTANGIBLE ASSETS
Intangible assets consists of:
<TABLE>
<CAPTION>
DECEMBER 31
----------------------------
1997 1996
------------ ------------
<S> <C> <C>
License acquisition costs, net of accumulated
amortization of $46,620,000 (1997) and $34,894,000
(1996)................................................ $123,116,000 $134,909,000
Goodwill, net of accumulated amortization of $13,449,000
(1997) and $5,986,000 (1996).......................... 241,363,000 258,024,000
------------ ------------
$364,479,000 $392,933,000
============ ============
</TABLE>
In October 1996, the Company acquired the remaining 40% interest it did not
already own in CableTel Newport in exchange for 780 shares of the Company's
Series A Preferred Stock. CableTel Newport owns and operates cable television,
telephone and telecommunications franchises in South Wales. The Series A
Preferred Stock was valued at $49,000,000, based on an appraisal as of the date
of issuance. The fair value of
F-12
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NTL INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
the net tangible assets acquired of $67,710,000 exceeded the aggregate purchase
price of $49,062,000 (including costs incurred of $62,000) by $18,648,000, which
is classified as a reduction to license acquisition costs.
In September 1996, the Company acquired the remaining 30% minority interest
of English Cable Enterprises, Inc. ("ECE") that the Company did not own, in
exchange for 1,415,000 shares of its common stock. ECE, through its
subsidiaries, owns four cable television, telephone and telecommunications
licenses in the northern suburbs of London. The value of the shares, based on
the market price on the date of issuance, of $34,137,000 plus costs incurred of
$204,000 exceeded the fair value of the net tangible assets acquired by
$28,649,000, which is classified as license acquisition costs.
In May 1996, an indirect wholly-owned subsidiary of the Company, NTL
Investment Holdings Limited ("NTLIH"), acquired NTL Group Limited for payments
of approximately L204,000,000 at closing, L17,100,000 in October 1996 and
L35,000,000 in May 1997. NTL Group Limited provides television and radio
transmission services and a range of other services in the broadcasting and
telecommunications industries. This acquisition has been accounted for as a
purchase, and, accordingly, the net assets and results of operations of NTL
Group Limited have been included in the consolidated financial statements from
the date of acquisition. The aggregate purchase price of L256,100,000
($439,000,000) plus costs incurred of $3,700,000 exceeded the fair value of the
net tangible assets acquired by $263,000,000, which is classified as goodwill.
The pro forma unaudited consolidated results of operations for the year
ended December 31, 1996 assuming consummation of the above mentioned
transactions as of January 1, 1996 is as follows:
<TABLE>
<S> <C>
Total revenue................................. $ 289,638,000
Net loss...................................... (265,180,000)
Basic and diluted net loss per share.......... (8.31)
</TABLE>
In October 1995, CableTel South Wales Limited, a wholly-owned subsidiary of
CableTel Newport, acquired the cable television business of Metro Cable TV
Limited in South Wales ("Metro Wales"), and CableTel Central Hertfordshire
Limited, a wholly-owned subsidiary of ECE, acquired the cable television
business of Metro Cable TV Limited in Hertfordshire ("Metro Herts"), for an
aggregate consideration of $12,125,000. These acquisitions have been accounted
for as purchases, and, accordingly, the net assets and results of operations of
Metro Wales and Metro Herts have been included in the consolidated financial
statements from the date of acquisition. The aggregate purchase price exceeded
the fair value of the net tangible assets acquired by $10,167,000, which is
classified as license acquisition costs. In 1996, the Metro Wales license
acquisition costs were reduced by $565,000.
F-13
<PAGE> 154
NTL INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
7. LONG-TERM DEBT
Long-term debt consists of:
<TABLE>
<CAPTION>
DECEMBER 31
--------------------------------
1997 1996
-------------- --------------
<S> <C> <C>
10 7/8% Senior Deferred Coupon Notes ("10 7/8%
Notes")(a)......................................... $ 194,959,000 $ 175,368,000
12 3/4% Series A Senior Deferred Coupon Notes
("12 3/4% Notes")(b)............................... 209,387,000 185,043,000
11 1/2% Series B Senior Deferred Coupon Notes
("11 1/2% Notes")(c)............................... 743,961,000 665,257,000
10% Series B Senior Notes ("10% Notes")(d)........... 400,000,000 --
7 1/4% Convertible Subordinated Notes ("7 1/4%
Convertible Notes")(e)............................. 191,750,000 191,750,000
7% Convertible Subordinated Notes ("7% Convertible
Notes")(f)......................................... 275,000,000 275,000,000
Term Loan and Revolving Facility(g).................. -- 239,750,000
-------------- --------------
$2,015,057,000 $1,732,168,000
============== ==============
</TABLE>
- ---------------
(a) In October 1993, the Company issued $212,000,000 aggregate principal amount
of 10 7/8% Senior Deferred Coupon Notes due 2003. The 10 7/8% Notes were
issued at a price to the public of 58.873% or $124,811,000. The Company
incurred $5,019,000 in fees and expenses which is included in deferred
financing costs. The original issue discount on the 10 7/8% Notes accretes
at a rate of 10 7/8%, compounded semiannually, to an aggregate principal
amount of $212,000,000 by October 15, 1998. Interest will thereafter accrue
at 10 7/8% per annum, payable semiannually beginning on April 15, 1999.
During 1997, 1996 and 1995, the Company recognized $19,591,000, $17,620,000
and $15,851,000, respectively, of the original issue discount as interest
expense.
The 10 7/8% Notes are effectively subordinated to all existing and future
indebtedness and other liabilities and commitments of the Company's
subsidiaries. The 10 7/8% Notes may be redeemed at the Company's option, in
whole or in part, at any time on or after October 15, 1998 at 103.107% the
first year, 101.554% the second year and 100% thereafter, plus accrued and
unpaid interest to the date of redemption. The indenture governing the
10 7/8% Notes contains restrictions relating to, among other things: (i)
incurrence of additional indebtedness and issuance of preferred stock; (ii)
dividend and other payment restrictions; and (iii) mergers, consolidations
and sales of assets.
(b) In April 1995, the Company issued $277,803,500 aggregate principal amount of
12 3/4% Senior Deferred Coupon Notes due 2005. The 12 3/4% Notes were issued
at a price to the public of 53.995% or $150,000,000. The Company incurred
$6,192,000 in fees and expenses in connection with the issuance of 12 3/4%
Notes which is included in deferred financing costs. The original issue
discount accretes at a rate of 12 3/4%, compounded semiannually, to an
aggregate principal amount of $277,803,500 by April 15, 2000. Interest will
thereafter accrue at 12 3/4% per annum, payable semiannually beginning on
October 15, 2000. During 1997, 1996 and 1995, the Company recognized
$24,344,000, $21,515,000 and $13,528,000, respectively, of original issue
discount as interest expense.
The 12 3/4% Notes are effectively subordinated to all existing and future
indebtedness and other liabilities and commitments of the Company's
subsidiaries, rank pari passu in right of payment with all senior unsecured
indebtedness and rank senior in right of payment to all subordinated
indebtedness of the Company. The 12 3/4% Notes may be redeemed at the
Company's option, in whole or in part, at any time on or after April 15,
2000 at 103.64% the first year, 101.82% the second year and 100% thereafter,
plus accrued and unpaid interest to the date of redemption. The indenture
governing the 12 3/4% Notes contains
F-14
<PAGE> 155
NTL INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
restrictions relating to, among other things: (i) incurrence of additional
indebtedness and issuance of preferred stock, (ii) dividend and other
payment restrictions and (iii) mergers, consolidations and sales of assets.
(c) In January 1996, the Company issued $1,050,000,000 aggregate principal
amount of 11 1/2% Series B Senior Deferred Coupon Notes due 2006. The
11 1/2% Notes were issued at a price to investors of 57.155% of the
aggregate principal amount at maturity or $600,127,500. The Company incurred
$19,273,000 in fees and expenses in connection with the issuance of the
11 1/2% Notes which is included in deferred financing costs. The original
issue discount accretes at a rate of 11 1/2%, compounded semiannually, to an
aggregate principal amount of $1,050,000,000 by February 1, 2001. Interest
will thereafter accrue at 11 1/2% per annum, payable semiannually beginning
on August 1, 2001. During 1997 and 1996, the Company recognized $78,704,000
and $65,129,000 of original issue discount as interest expense.
The 11 1/2% Notes are effectively subordinated to all existing and future
indebtedness and other liabilities and commitments of the Company's
subsidiaries, rank pari passu in right of payment with all senior unsecured
indebtedness and rank senior in right of payment to all subordinated
indebtedness of the Company. The 11 1/2% Notes may be redeemed at the
Company's option, in whole or in part, at any time on or after February 1,
2001 at 105.75% the first year, 102.875% the second year and 100%
thereafter, plus accrued and unpaid interest to the date of redemption. The
indenture governing the 11 1/2% Notes contains restrictions relating to,
among other things: (i) incurrence of additional indebtedness and issuance
of preferred stock; (ii) dividend and other payment restrictions and (iii)
mergers, consolidations and sales of assets.
(d) In February 1997, the Company issued $400,000,000 aggregate principal amount
of 10% Senior Notes due 2007. The Company received net proceeds of
$389,000,000 after discounts and commissions from the issuance of the 10%
Notes. Discounts, commissions and other fees incurred of $11,885,000 are
included in deferred financing costs. The 10% Notes accrue interest at 10%
per annum, payable semiannually as of August 15, 1997.
The 10% Notes are effectively subordinated to all existing and future
indebtedness and other liabilities and commitments of the Company's
subsidiaries. The 10% Notes may be redeemed at the Company's option, in
whole or in part, at any time on or after February 15, 2002 at a redemption
price of 105% that declines annually to 100% in 2005, in each case together
with accrued and unpaid interest to the date of redemption. The indenture
governing the 10% Notes contains restrictions relating to, among other
things: (i) incurrence of additional indebtedness and the issuance of
preferred stock, (ii) dividend and other payment restrictions and (iii)
mergers, consolidations and sales of assets.
(e) In April and May 1995, the Company issued $191,750,000 principal amount of
7 1/4% Convertible Subordinated Notes due 2005. Interest payments began on
October 15, 1995 and interest is payable every six months thereafter. The
7 1/4% Convertible Notes will mature on April 15, 2005. The 7 1/4%
Convertible Notes are unsecured obligations convertible into shares of
common stock prior to maturity at a conversion price of $27.56 per share,
subject to adjustment. There are approximately 6,958,000 shares of common
stock reserved for issuance upon the conversion of the 7 1/4% Convertible
Notes. The 7 1/4% Convertible Notes are redeemable, in whole or in part, at
the option of the Company at any time on or after April 15, 1998, at a
redemption price of 105.08% that declines annually to 100.73% in 2004, in
each case together with accrued interest to the redemption date. The Company
incurred $6,822,000 in fees and expenses in connection with the issuance of
the 7 1/4% Convertible Notes, which is included in deferred financing costs.
In March 1998, the Company announced that it was calling for redemption all
of the 7 1/4% Convertible Notes. The redemption date is April 20, 1998 and
the redemption price is 105.08% of the principal amount, plus accrued and
unpaid interest through the date of redemption.
(f) In June 1996, the Company issued $275,000,000 aggregate principal amount of
7% Convertible Subordinated Notes due 2008. Interest payments began on
December 15, 1996 and interest is payable
F-15
<PAGE> 156
NTL INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
every six months thereafter. The 7% Convertible Notes mature on June 15,
2008. The 7% Convertible Notes are unsecured obligations convertible into
shares of common stock prior to maturity at a conversion price of $37.875
per share, subject to adjustment. There are approximately 7,261,000 shares
of common stock reserved for issuance upon conversion of the 7% Convertible
Notes. The 7% Convertible Notes are redeemable, in whole or in part, at the
option of the Company at any time on or after June 15, 1999, at a redemption
price of 104.9% that declines annually to 100% in 2006, in each case
together with accrued and unpaid interest to the redemption date. The
Company incurred $8,616,000 in fees and expenses in connection with the
issuance of the 7% Convertible Notes, which is included in deferred
financing costs.
(g) To finance a substantial portion of the purchase price for NTL Group
Limited, NTLIH obtained from a syndicate of lenders senior secured loan
facilities (the "NTLIH Facility") of a maximum principal amount of
L165,000,000 comprised of: (i) a long-term loan facility of L140,000,000 and
(ii) a revolving credit facility of L25,000,000. One of the Lenders also
made available to NTLIH a secured loan facility of L60,000,000 (the "Bridge
Facility") to finance the remainder of the payment due at closing and
acquisition costs and expenses due at closing. Loans under the NTLIH
Facility incurred interest at an annual rate equal to LIBOR plus a margin
that varied from 0.75% per annum to 1.75% per annum, based on certain
financial ratios of NTLIH and certain of its subsidiaries. Interest was
payable either monthly, quarterly or semiannually, at the option of NTLIH.
The effective interest rate on the NTLIH Facility at December 31, 1996 was
7.972%. The Bridge Facility was repaid in full in August 1996. In October
1997, the principal and accrued interest outstanding under the NTLIH
Facility of L140,138,000 ($231,466,000) was repaid using cash on hand.
In 1997, NTL (UK) Group, Inc., a wholly-owned subsidiary of the Company,
which is the holding company for the United Kingdom operations and the
parent company of NTLIH, and NTLIH entered into an agreement with The Chase
Manhattan Bank pursuant to which Chase has agreed to fully underwrite a
L555,000,000, eight-year term loan facility with an initial four-year
revolving period. By April 14, 1999, Chase's commitment will be reduced to
no less than L480,000,000 or such greater amount as is necessary to ensure
that the Company's United Kingdom operations remain fully funded by
reference to an agreed business plan. The facility will be used to finance
capital expenditures and working capital for the Company's United Kingdom
operations, including its local broadband, national telecommunications and
national digital television networks. A portion of the facility
(L75,000,000) is conditional upon the execution of contracts to provide
digital television transmission services to certain third parties. Chase has
provided a portion of the L555,000,000 facility in the form of a
L350,000,000 facility to the Company on the same terms as to restrictions,
covenants, guarantees and security as the L555,000,000 facility. As of March
20, 1998, L10,000,000 ($16,517,000) is outstanding under the L350,000,000
facility. The principal amount outstanding under the L350,000,000 facility
is required to be repaid on December 31, 2005. Interest is payable either
monthly, quarterly or semi-annually, at the option of NTLIH, at LIBOR plus,
at a maximum, 2.25% per annum. The commitment fee is .375% per annum on the
unutilized portion of the L350,000,000 facility and is payable quarterly in
arrears. The facility is secured by first fixed and floating charges over
all present and future assets and undertakings of the United Kingdom group.
The facility contains customary financial covenants, and certain
restrictions relating to, among other things: (i) incurrence of additional
indebtedness or guarantees, (ii) investments, acquisitions and mergers and
(iii) dividend and other payment restrictions. In the absence of a default,
the facility generally permits payments to the Company to pay interest and
principal of existing indebtedness of the Company. At December 31, 1997,
restricted net assets were approximately $1,861,000,000.
In March 1998, the Company issued 125,000,000 pounds sterling aggregate
principal amount of 9 1/2% Senior Notes due 2008 (the "Sterling Senior
Notes"), 300,000,000 pounds sterling aggregate principal amount of 10 3/4%
Senior Deferred Coupon Notes due 2008 (the "Sterling Deferred Coupon Notes")
and $1,300,000,000 aggregate principal amount of 9 3/4% Senior Deferred
Coupon Notes due 2008 (the "Dollar Deferred Coupon Notes") (together the
"New Notes"). The Sterling Senior Notes, Sterling
F-16
<PAGE> 157
NTL INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Deferred Coupon Notes and the Dollar Deferred Coupon Notes were issued at a
price to the public of 99.67% or 124,588,000 pounds sterling, 58.62% or
175,860,000 pounds sterling and 61.724% or $802,412,000, respectively. The
Company received net proceeds of 121,161,000 pounds sterling, 170,584,000
pounds sterling and $778,340,000, after discounts and commissions, from the
issuance of the Sterling Senior Notes, the Sterling Deferred Coupon Notes
and the Dollar Deferred Coupon Notes, respectively.
The original issue discount of the Sterling Deferred Coupon Notes accretes
at a rate of 10 3/4%, compounded semiannually, to an aggregate principal
amount of L300,000,000 by April 1, 2003. The original issue discount of the
Dollar Deferred Coupon Notes accretes at a rate of 9 3/4%, compounded
semiannually, to an aggregate principal amount of $1,300,000,000 by April 1,
2003. Interest on each of the Sterling Deferred Coupon Notes and the Dollar
Deferred Coupon Notes will thereafter accrue at 10 3/4% per annum and 9 3/4%
per annum, respectively, payable semiannually, beginning on October 1, 2003.
The Sterling Senior Notes accrue interest at 9 1/2% per annum, payable
semiannually, beginning on October 1, 1998.
The New Notes are effectively subordinated to all existing and future
indebtedness and other liabilities and commitments of the Company's
subsidiaries, rank pari passu in right of payment with each other and with
all senior unsecured indebtedness of the Company and rank senior in right of
payment to all subordinated indebtedness of the Company.
The New Notes may be redeemed at the Company's option, in whole or in part,
at any time on or after April 1, 2003, at a redemption price of 104 3/4% to
105 3/8% that declines annually to 100% in 2006, in each case together with
accrued and unpaid interest to the date of redemption.
The indentures governing the New Notes contain restrictions relating to,
among other things: (i) incurrence of additional indebtedness and the
issuance of preferred stock, (ii) dividend and other payment restrictions
and (iii) mergers, consolidations and sales of assets.
8. REDEEMABLE PREFERRED STOCK
In February 1997, the Company issued $100,000,000 of its 13% Senior
Redeemable Exchangeable Preferred Stock (the "Redeemable Preferred Stock"). The
Company received net proceeds of $96,625,000 after discounts and commissions
from the issuance of the Redeemable Preferred Stock. Discounts, commissions and
other fees incurred of $3,729,000 were recorded as unamortized discount at
issuance.
Of the 2,500,000 authorized shares of Series Preferred Stock, 100,000
shares of Redeemable Preferred Stock were issued. Dividends accrue at 13% per
annum ($130 per share) and are payable quarterly in arrears as of May 15, 1997.
Dividends, whether or not earned or declared, will accrue without interest until
declared and paid, which declaration may be for all or part of the accrued
dividends. Dividends accruing on or prior to February 15, 2004 may, at the
option of the Company, be paid in cash, by the issuance of additional Redeemable
Preferred Stock or in any combination of the foregoing. As of December 31, 1997,
the Company has accrued $11,978,000 for dividends and has issued approximately
10,000 shares for $10,187,000 of such accrued dividends. The Redeemable
Preferred Stock may be redeemed, at the Company's option, in whole or in part,
at any time on or after February 15, 2002 at a redemption price of 106.5% of the
liquidation preference of $1,000 per share that declines annually to 100% in
2005, in each case together with accrued and unpaid dividends to the redemption
date. The Redeemable Preferred Stock is subject to mandatory redemption on
February 15, 2009. On any scheduled dividend payment date, the Company may, at
its option, exchange all of the shares of Redeemable Preferred Stock then
outstanding for the Company's 13% Subordinated Exchange Debentures due 2009 (the
"Subordinated Debentures").
The Subordinated Debentures, if issued, will bear interest at a rate of 13%
per annum, payable semiannually in arrears on February 15 and August 15 of each
year commencing with the first such date to
F-17
<PAGE> 158
NTL INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
occur after the date of exchange. Interest accruing on or prior to February 15,
2004 may, at the option of the Company, be paid in cash, by the issuance of
additional Subordinated Debentures or in any combination of the foregoing. The
Subordinated Debentures will be redeemable, at the Company's option, in whole or
in part, on or after February 15, 2002 at a redemption price of 106.5% that
declines annually to 100% in 2005, in each case together with accrued and unpaid
interest to the redemption date.
9. NONRECURRING CHARGES INCLUDING RESTRUCTURING CHARGES
Nonrecurring charges of $20,642,000 in 1997 include deferred costs
written-off of $5,013,000 and restructuring costs of $15,629,000. The deferred
costs written-off relate to the Company's unsuccessful bid for United Kingdom
digital terrestrial television multiplex licenses. Restructuring costs relate to
the Company's announcement in September 1997 of a reorganization of certain of
its operations. The Company is consolidating the Customer Operations departments
that serve its three franchise areas in England into one department, and is
consolidating certain operations and management groups within the Broadcast
Services division, as well as certain other consolidations or cessations of
activities. This charge consisted of employee severance and related costs of
$6,726,000 for approximately 280 employees to be terminated, lease exit costs of
$6,539,000 and penalties of $2,364,000 associated with the cancellation of
contractual obligations. As of December 31, 1997, $5,441,000 of the provision
has been used, including $2,916,000 for severance and related costs, $324,000
for lease exit costs and $2,201,000 for penalties associated with the
cancellation of contractual obligations, and 118 employees had been terminated.
There was no other adjustment to the liability.
10. OTHER GAINS
Other gains of $21,497,000 in 1997 include a legal settlement of
$10,000,000 and a gain on the sale of fixed assets of $11,497,000. In October
1997, following the U.S. District Court's decision to dismiss the Company's
complaint against LeGroupe Videotron Ltee and its subsidiary, the Company
entered into a Settlement Agreement dismissing the Company's complaint in
exchange for a payment of $10,000,000. In December 1997, a U.S. subsidiary of
the Company sold its fixed and other assets utilized in its microwave
transmission service business and recognized a gain of $11,497,000.
11. INCOME TAXES
The provision (benefit) for income taxes consists of the following:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
-----------------------------------------
1997 1996 1995
------------ ---------- -----------
<S> <C> <C> <C>
Current:
Federal................................... $ -- $ -- $ (181,000)
State and local........................... 1,261,000 344,000 167,000
Foreign................................... -- 2,246,000 (2,463,000)
------------ ---------- -----------
Total current..................... 1,261,000 2,590,000 (2,477,000)
------------ ---------- -----------
Deferred:
Federal................................... -- -- --
State and local........................... -- -- --
Foreign................................... (16,852,000) 5,063,000 --
------------ ---------- -----------
Total deferred.................... (16,852,000) 5,063,000 --
------------ ---------- -----------
$(15,591,000) $7,653,000 $(2,477,000)
============ ========== ===========
</TABLE>
F-18
<PAGE> 159
NTL INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for income tax purposes. Significant components of
the deferred tax liabilities and assets are as follows:
<TABLE>
<CAPTION>
DECEMBER 31
------------------------------
1997 1996
------------- -------------
<S> <C> <C>
Deferred tax liabilities:
Fixed assets........................................ $ 68,380,000 $ 78,433,000
Depreciation and amortization....................... -- 30,623,000
Other............................................... 4,894,000 6,018,000
------------- -------------
Total deferred tax liabilities.............. 73,274,000 115,074,000
Deferred tax assets:
Net operating losses................................ 107,208,000 99,227,000
Net deferred interest expense....................... 94,689,000 51,770,000
Depreciation and amortization....................... 16,935,000 --
Other............................................... 18,164,000 10,396,000
------------- -------------
Total deferred tax assets................... 236,996,000 161,393,000
Valuation allowance for deferred tax assets........... (233,940,000) (141,250,000)
------------- -------------
Net deferred tax assets............................... 3,056,000 20,143,000
------------- -------------
Net deferred tax liabilities.......................... $ 70,218,000 $ 94,931,000
============= =============
</TABLE>
At December 31, 1997, the Company had net operating loss carryforwards of
approximately $56,000,000 for U.S. federal income tax purposes that expire as
follows: $500,000 in 2008, $1,100,000 in 2009, $21,000,000 in 2010, $27,700,000
in 2011 and $5,700,000 in 2012. The Company also has United Kingdom net
operating loss carryforwards of approximately $290,000,000 which have no
expiration date. Pursuant to United Kingdom law, these losses are only available
to offset income of the separate entity that generated the loss.
The reconciliation of income taxes computed at U.S. federal statutory rates
to income tax expense is as follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
---------------------------------------------
1997 1996 1995
------------- ------------ ------------
<S> <C> <C> <C>
Provision (benefit) at federal statutory
rate (35%)............................ $(120,452,000) $(90,518,000) $(35,083,000)
Add (deduct):
State and local income tax, net of
federal benefit.................... 820,000 224,000 109,000
Foreign losses with no benefit........ 59,804,000 44,610,000 6,699,000
Amortization of goodwill and license
acquisition costs.................. 3,925,000 4,031,000 3,696,000
U.S. losses with no benefit........... 40,312,000 49,184,000 22,507,000
Other................................. -- 122,000 (405,000)
------------- ------------ ------------
$ (15,591,000) $ 7,653,000 $ (2,477,000)
============= ============ ============
</TABLE>
F-19
<PAGE> 160
NTL INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
12. FAIR VALUES OF FINANCIAL INSTRUMENTS
The following methods and assumptions were used by the Company in
estimating its fair value disclosures for financial instruments:
Cash and cash equivalents: The carrying amounts reported in the
consolidated balance sheets approximate fair value.
Long-term debt: The fair values of the 10 7/8% Notes, the 12 3/4% Notes,
the 11 1/2% Notes, the 10% Notes, the 7 1/4% Convertible Notes and the 7%
Convertible Notes are based on the quoted market price. The fair value of the
Term Loan and Revolving Facility is estimated using discounted cash flow
analysis, based on the Company's incremental borrowing rate for similar types of
borrowing arrangements.
Redeemable Preferred Stock: The fair value is based on the quoted market
price.
The carrying amounts and fair values of the Company's financial instruments
are as follows:
<TABLE>
<CAPTION>
DECEMBER 31, 1997 DECEMBER 31, 1996
--------------------------- ---------------------------
CARRYING CARRYING
AMOUNT FAIR VALUE AMOUNT FAIR VALUE
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Cash and cash equivalents............. $ 98,902,000 $ 98,902,000 $445,884,000 $445,884,000
Long-term debt:
10 7/8% Notes....................... 194,959,000 199,810,000 175,368,000 179,140,000
12 3/4% Notes....................... 209,387,000 230,577,000 185,043,000 202,797,000
11 1/2% Notes....................... 743,961,000 819,000,000 665,257,000 714,000,000
10% Notes........................... 400,000,000 422,000,000 -- --
7 1/4% Convertible Notes............ 191,750,000 212,843,000 191,750,000 206,611,000
7% Convertible Notes................ 275,000,000 264,688,000 275,000,000 251,625,000
Term Loan and Revolving Facility.... -- -- 239,750,000 239,750,000
Redeemable Preferred Stock.......... 108,534,000 121,846,000 -- --
</TABLE>
13. RELATED PARTY TRANSACTIONS
On July 25, 1990, Cellular Communications, Inc. ("CCI") and AirTouch
Communications, Inc. ("AirTouch") entered into a Merger and Joint Venture
Agreement, as amended as of December 14, 1990. In connection with this
agreement, on July 31, 1991, CCI distributed to its shareholders the stock of
the Company.
Through August 1996, CCI provided management, financial and legal services
to the Company. Amounts charged to the Company included direct costs where
identifiable, and indirect costs allocated utilizing direct labor hours as
reported by the common officers and employees of CCI and the Company. For the
years ended December 31, 1996 and 1995, CCI charged $1,194,000, and $1,644,000,
respectively, which is included in corporate expenses. In August 1996, upon the
merger of CCI with AirTouch, the Company commenced providing management,
financial, legal and technical services to Cellular Communications
International, Inc. ("CCII") and CoreComm Incorporated ("CoreComm"). In 1996,
the Company charged CCII and CoreComm $351,000 and $200,000, respectively, which
included direct costs where identifiable and allocated corporate overhead based
upon the amount of time incurred on CCII and CoreComm business by the common
officers and employees of the Company, CCII and CoreComm. These charges reduced
corporate expenses in 1996.
In January 1997, the Company, CoreComm and CCII agreed to a change in the
Company's fee for the provision of services. In 1997, the Company charged
CoreComm and CCII $1,492,000 and $871,000, respectively, for direct costs where
identifiable and a fixed percentage of its corporate overhead. These charges
F-20
<PAGE> 161
NTL INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
reduced corporate expenses. In the opinion of management of the Company, the
allocation methods are reasonable.
As of December 31, 1997 and 1996, the Company had receivables of $69,000
and $586,000 from CCII and $71,000 and $102,000 from CoreComm, respectively.
In 1993, the Company entered into a consulting agreement with Insight
Communications Company, L.P. ("Insight U.S."), under which Insight U.S. provided
advice and assistance to the Company with respect to its cable television,
telephone and telecommunications operations in the United Kingdom. Two members
of the Company's Board of Directors are partners in Insight U.S. Pursuant to the
consulting agreement, which had a term of three years, the Company paid Insight
U.S. a fee of $50,000 per month for the first year, $40,000 per month for the
second year and $30,000 per month for the third year. The fees for the years
ended December 31, 1996 and 1995 of $270,000 and $450,000, respectively, are
included in corporate expenses.
14. NET LOSS PER COMMON SHARE
The following table sets forth the computation of basic and diluted net
loss per share:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
----------------------------------------------
1997 1996 1995
------------- ------------- ------------
<S> <C> <C> <C>
Numerator:
Loss before extraordinary item....... $(328,557,000) $(254,454,000) $(90,785,000)
Preferred stock dividend............. (11,978,000) -- --
------------- ------------- ------------
(340,535,000) (254,454,000) (90,785,000)
Extraordinary item..................... (4,500,000) -- --
------------- ------------- ------------
Loss available to common
shareholders......................... $(345,035,000) $(254,454,000) $(90,785,000)
Denominator for basic net loss per
common share......................... 32,117,000 31,041,000 30,190,000
Effect of dilutive securities..... -- -- --
------------- ------------- ------------
Denominator for diluted net loss per
common share......................... 32,117,000 31,041,000 30,190,000
------------- ------------- ------------
Basic and diluted net loss per common
share:
Loss before extraordinary item....... $ (10.60) $ (8.20) $ (3.01)
Extraordinary item................... (.14) -- --
------------- ------------- ------------
Net (loss)........................ $ (10.74) $ (8.20) $ (3.01)
============= ============= ============
</TABLE>
Stock options, warrants and convertible securities are excluded from the
calculation of net loss per common share as their effect would be antidilutive.
15. SHAREHOLDERS' EQUITY (DEFICIENCY)
Stock Split
On July 25, 1995, the Company declared a 4-for-3 stock split by way of
stock dividend, which was paid on August 11, 1995. All common stock data in the
Consolidated Financial Statements give effect to the stock split.
Series Preferred Stock
In October 1996, the Board of Directors created and authorized for issuance
2,000 shares of 5% Non-Voting Convertible Preferred Stock, Series A ("Series A
Preferred Stock"), of which 780 shares were issued
F-21
<PAGE> 162
NTL INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
in connection with the CableTel Newport acquisition. Each share of Series A
Preferred Stock has a stated value of $100,000, subject to certain exceptions.
The holders of Series A Preferred Stock are entitled to receive cumulative
dividends beginning in October 2001 at the rate of 5% of the stated value,
payable semi-annually in arrears, subject to certain exceptions. Dividends may
be paid, in the sole discretion of the Board of Directors, in cash, in common
stock or in additional shares of Series A Preferred Stock. The Company has the
right, exercisable at any time, to redeem all or some of the Series A Preferred
Stock at a price equal to the aggregate stated value of the shares to be
redeemed, together with all accrued and unpaid dividends, in cash or in shares
of common stock (based on the average market price of the common stock, as
defined). The holder of Series A Preferred Stock has the right to convert shares
of Series A Preferred Stock into common stock equal to the aggregate stated
value of Series A Preferred Stock divided by the greater of (a) $40.00 or (b)
the average market price of the common stock, as defined. The Series A Preferred
Stock has a liquidation preference equal to the stated value per share plus
accrued and unpaid dividends.
Warrants
In 1993, the Company issued warrants to purchase an aggregate of
approximately 899,000 shares of common stock at an initial exercise price of
$8.35 per share in connection with certain noncompetition agreements. The
exercise price decreased to $6.96 per share in the second year after the grant
and to $5.57 per share thereafter. The warrants were valued at $13,193,000, the
difference between the fair market value of the common stock on the date of
grant and $5.57 per share. The warrants expire in 2000.
In 1996, pursuant to the terms of the consent solicitations to the holders
of the 10 7/8% Notes and to the holders of the 12 3/4% Notes to gain consent to
modify certain indenture provisions, the Company paid an aggregate of $3,592,000
in consent payments and issued warrants to purchase 164,000 shares of common
stock at an exercise price of $23.78 per share in lieu of additional consent
payments of $1,641,000. The warrants expire in 2006.
Shareholder Rights Plan
The Rights Agreement provides that one Right will be issued with each share
of common stock issued on or after October 13, 1993. The Rights are exercisable
upon the occurrence of certain potential takeover events and will expire in
October 2003 unless previously redeemed by the Company. When exercisable, each
Right entitles the owner to purchase from the Company one one-hundredth of a
share of Series A Junior Participating Preferred Stock ("Rights Preferred
Stock") at a purchase price of $100.
The Rights Preferred Stock 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 Rights Preferred Stock
will be entitled to a minimum preferential liquidation payment of $1 per share
and will be entitled to an aggregate payment of 100 times the payment made per
share of 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 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 common stock. These rights are
protected by customary antidilution provisions.
There are 2,500,000 authorized shares of Series Preferred Stock of which
1,000,000 shares are designated Rights Preferred Stock.
Stock Options
There are 2,164,000 shares of common stock reserved for issuance under the
OCOM Corporation (a wholly-owned subsidiary of the Company) 1991 Stock Option
Plan. The plan provides that incentive stock
F-22
<PAGE> 163
NTL INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
options ("ISOs") be granted at the fair market value of OCOM's common stock on
the date of grant, and nonqualified stock options ("NQSOs") be granted at not
less than 85% of the fair market value of OCOM's common stock on the date of
grant. Options are exercisable as to 20% of the shares subject thereto on the
date of grant and become exercisable as to an additional 20% of the shares
subject thereto on each January 1 thereafter, while the optionee remains an
employee of the Company. Options will expire ten years after the date of the
grant.
There are 6,653,000 shares of common stock reserved for issuance under the
NTL Incorporated 1993 Stock Option Plan. The exercise price of an ISO may not be
less than 100% of the fair market value of the Company's common stock on the
date of grant, and the exercise price of a NQSO may not be less than 85% of the
fair market value of the Company's common stock on the date of grant. Options
are exercisable as to 20% of the shares subject thereto on the date of grant and
become exercisable as to an additional 20% of the shares subject thereto on each
January 1 thereafter, while the optionee remains an employee of the Company.
Options will expire ten years after the date of the grant.
There are 100,000 shares of common stock reserved for issuance under the
OCOM Corporation Non-Employee Director Stock Option Plan. The plan provides that
all options be granted at the fair market value of OCOM's common stock on the
date of grant, and options will expire ten years after the date of the grant.
Options are exercisable as to 20% of the shares subject thereto on the date of
grant and become exercisable as to an additional 20% of the shares subject
thereto on each subsequent anniversary of the grant date, while the optionee
remains a director of the Company. Options will expire ten years after the date
of the grant.
There are 320,000 shares of common stock reserved for issuance under the
NTL Incorporated 1993 Non-Employee Director Stock Option Plan. Under the terms
of this plan, options will be granted to members of the Board of Directors who
are not employees of the Company or any of its affiliates. The plan provides
that all options be granted at the fair market value of the Company's common
stock on the date of grant, and options will expire ten years after the date of
the grant. Options are exercisable as to 20% of the shares subject thereto on
the date of grant and become exercisable as to an additional 20% of the shares
subject thereto on each subsequent anniversary of the grant date while the
optionee remains a director of the Company. Options will expire ten years after
the date of the grant.
Pro forma information regarding net loss and net loss per share is required
by SFAS No. 123, and has been determined as if the Company had accounted for its
employee stock options under the fair value method of that Statement. The fair
value for these options was estimated at the date of grant using the
Black-Scholes option pricing model with the following weighted-average
assumptions for 1997, 1996 and 1995: risk-free interest rates of 5.89%, 6.56%
and 6.61%, respectively, dividend yield of 0%, volatility factor of the expected
market price of the Company's common stock of .276, .255 and .255, respectively,
and a weighted-average expected life of the option of 10 years.
The Black-Scholes option valuation model was developed for use in
estimating the fair value of traded options which have no vesting restrictions
and are fully transferable. In addition, option valuation models require the
input of highly subjective assumptions including the expected stock price
volatility. Because the Company's stock options have characteristics
significantly different from those of traded options and because changes in the
subjective input assumptions can materially affect the fair value estimate, in
management's opinion, the existing models do not necessarily provide a reliable
single measure of the fair value of its stock options.
F-23
<PAGE> 164
NTL INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
For purposes of pro forma disclosures, the estimated fair value of the
options is amortized to expense over the options' vesting period. Following is
the Company's pro forma information:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
----------------------------------------------
1997 1996 1995
------------- ------------- ------------
<S> <C> <C> <C>
Pro forma net (loss)................... $(343,850,000) $(261,245,000) $(93,688,000)
Basic and diluted pro forma net (loss)
per share............................ $ (11.08) $ (8.42) $ (3.10)
</TABLE>
A summary of the Company's stock option activity and related information
for the years ended December 31, follows:
<TABLE>
<CAPTION>
1997 1996 1995
--------------------- --------------------- ---------------------
WEIGHTED- WEIGHTED- WEIGHTED-
AVERAGE AVERAGE AVERAGE
NUMBER OF EXERCISE NUMBER OF EXERCISE NUMBER OF EXERCISE
OPTIONS PRICE OPTIONS PRICE OPTIONS PRICE
--------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Outstanding-beginning of
year........................ 6,738,000 $14.10 5,934,000 $11.04 4,795,000 $ 8.09
Granted....................... 1,571,000 23.97 1,390,000 25.94 1,164,000 23.07
Exercised..................... (119,000) 12.85 (396,000) 3.44 (21,000) 4.78
Forfeited..................... (33,000) 23.78 (190,000) 27.39 (4,000) 17.50
--------- --------- ---------
Outstanding-end of year....... 8,157,000 $15.98 6,738,000 $14.10 5,934,000 $11.04
========= ========= =========
Exercisable at end of year.... 5,663,000 $12.39 4,258,000 $10.71 3,410,000 $ 8.22
========= ========= =========
</TABLE>
Weighted-average fair value of options, calculated using the Black-Scholes
option pricing model, granted during 1997, 1996 and 1995 is $12.74, $13.98 and
$12.47, respectively.
The following table summarizes the status of the stock options outstanding
and exercisable at December 31, 1997:
<TABLE>
<CAPTION>
STOCK OPTIONS OUTSTANDING STOCK OPTIONS EXERCISABLE
-------------------------------------- -------------------------
WEIGHTED- WEIGHTED- WEIGHTED-
REMAINING AVERAGE AVERAGE
NUMBER CONTRACTUAL EXERCISE NUMBER EXERCISE
RANGE OF EXERCISE PRICES OF OPTIONS LIFE PRICE OF OPTIONS PRICE
- ------------------------ ---------- ----------- --------- ----------- ----------
<S> <C> <C> <C> <C> <C>
$0.19 to $0.56........... 77,000 3.6 Years $ 0.245 77,000 $ 0.245
$0.73 to $1.12........... 150,000 3.6 Years $ 0.745 150,000 $ 0.745
$1.53 to $2.69........... 356,000 3.6 Years $ 2.157 356,000 $ 2.157
$3.09 to $4.50........... 75,000 4.4 Years $ 3.230 75,000 $ 3.230
$8.81 to $14.63.......... 3,312,000 5.4 Years $ 8.873 3,305,000 $ 8.861
$15.19 to $22.88......... 1,498,000 7.4 Years $21.685 882,000 $21.659
$23.06 to $32.38......... 2,689,000 8.9 Years $25.038 818,000 $25.213
--------- ---------
Total............... 8,157,000 5,663,000
========= =========
</TABLE>
The Company has 25,309,000 shares of its common stock reserved for issuance
upon the exercise of warrants and stock options and the conversion of debt and
preferred stock.
16. EMPLOYEE BENEFIT PLANS
Certain subsidiaries of NTL Group Limited operate a defined benefit pension
plan in the United Kingdom. The assets of the Plan are held separately from
those of NTL Group Limited and are invested in specialized portfolios under the
management of an investment group. The pension cost is calculated using the
attained age method. The Company's policy is to fund amounts to the defined
benefit plan necessary to
F-24
<PAGE> 165
NTL INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
comply with the funding requirements as prescribed by the laws and regulations
in the United Kingdom. The change in the projected benefit obligation in 1997 is
due to the change in actuarial assumptions used.
The components of net pension costs are as follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
----------------------------
1997 1996
------------ ------------
<S> <C> <C>
Service cost............................................ $ 10,693,000 $ 7,997,000
Interest cost........................................... 12,765,000 11,679,000
Actual return on plan assets............................ (30,852,000) (16,103,000)
Net amortization and deferral........................... 17,327,000 4,241,000
------------ ------------
$ 9,933,000 $ 7,814,000
============ ============
</TABLE>
The funded status (assets exceed accumulated benefits) of the plan is as
follows:
<TABLE>
<CAPTION>
DECEMBER 31
----------------------------
1997 1996
------------ ------------
<S> <C> <C>
Accumulated benefit obligation:
Vested................................................ $178,828,000 $148,809,000
Nonvested............................................. --
--
------------ ------------
$178,828,000 $148,809,000
============ ============
Fair value of plan assets, principally U.K. equity $195,226,000 $166,195,000
securities............................................
Projected benefit obligation............................ 204,340,000 170,795,000
------------ ------------
Excess of projected benefit obligation over (9,114,000) (4,600,000)
assets...........................................
Unrecognized net transition obligation.................. 10,203,000 11,541,000
Unrecognized net gain................................... (1,065,000) (5,098,000)
------------ ------------
Prepaid pension cost............................... $ 24,000 $ 1,843,000
============ ============
Actuarial assumptions:
Weighted average discount rate........................ 7.25% 8.25%
Weighted average rate of compensation increase........ 8.00% 8.00%
Expected long-term rate of return on plan assets...... 9.00% 9.50%
</TABLE>
17. LEASES
Leases for buildings, office space and equipment extend through 2031. Total
rental expense for the years ended December 31, 1997, 1996 and 1995 under
operating leases was $20,674,000, $14,886,000 and $2,607,000, respectively.
F-25
<PAGE> 166
NTL INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Future minimum lease payments under noncancellable operating leases as of
December 31, 1997 are as follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31:
-----------------------
<S> <C>
1998...................................... $ 21,169,000
1999...................................... 20,933,000
2000...................................... 20,572,000
2001...................................... 20,235,000
2002...................................... 16,352,000
Thereafter................................ 82,420,000
------------
$181,681,000
============
</TABLE>
18. COMMITMENTS AND CONTINGENT LIABILITIES
As of December 31, 1997, the Company was committed to pay approximately
$78,000,000 for equipment and services.
The Company has licenses issued by the United Kingdom Department of Trade
and Industry ("DTI") and the United Kingdom Independent Television Commission
("ITC") for its cable television, telephone and telecommunications business. The
initial terms of the Company's licenses was 23 years for the DTI licenses and 15
years for the ITC licenses. The Company's licenses expire in 2008 to 2016 for
the DTI licenses and 1999 to 2005 for the ITC licenses. The DTI requires a fixed
annual renewal fee of L2,500 ($4,200) per license. The ITC requires an annual
license fee ranging from L1,300 ($2,200) to L7,900 ($13,100) per license based
on the number of homes in the licensed area, which is subject to adjustment
annually. The Company's license fees in 1997 were $316,000.
In addition, the Company was awarded certain newly issued licenses by the
ITC in 1995. Pursuant to the terms of the local delivery license ("LDL") for
Northern Ireland granted to a wholly-owned subsidiary of the Company, the
Company is required to make annual cash payments to the ITC for fifteen years
commencing in January 1997 in the amount of approximately L14,400,000
($23,800,000) (subject to adjustments for inflation). Such payments are in
addition to the percentages of qualifying revenue already set by the ITC of 0%
for the first ten years and 2% for the last five years of the fifteen year
license. The Company paid $23,587,000 in 1997.
Pursuant to the terms of the LDL for Glamorgan and Gwent, Wales granted to
a wholly-owned subsidiary of the Company, the Company is required to make annual
cash payments to the ITC for fifteen years, commencing in the first full
calendar year after the start of operations, in the amount of L104,188
($172,000). Such payments are in addition to the percentages of qualifying
revenue already set by the ITC of 0% for the first five years, 2% for the second
five years and 4% for the last five years of the fifteen-year license.
A significant portion of NTL Group Limited's revenues is attributable to
the provision of television and radio transmission and distribution services and
the provision of telecommunications services. In the United Kingdom, the
provision of such services is governed by the Telecommunications Act and The
Wireless Telegraphy Act 1949. NTL Group Limited holds five licenses under the
Telecommunications Act. The initial terms of these licenses were 10 or 25 years.
These licenses expire in 2002 to 2021. NTL Group Limited holds a number of
Wireless Telegraphy Act licenses which continue in force primarily from year to
year unless revoked or unless any of the license fees are not paid. The Company
paid $3,447,000 in 1997 in connection with these licenses.
F-26
<PAGE> 167
NTL INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The Company is involved in, or has been involved in, certain disputes and
litigation arising in the ordinary course of its business, including claims
involving contractual disputes and claims for damages to property and personal
injury resulting from the construction of the Company's networks and the
maintenance and servicing of the Company's transmission masts. None of these
matters are expected to have a material adverse effect on the Company's
financial position, results of operations or cash flows.
19. INDUSTRY SEGMENTS AND GEOGRAPHIC AREAS
The Company operates its long distance telephone and microwave transmission
business in the United States and its television and radio broadcasting, cable
television, telephone and telecommunications businesses in the United Kingdom.
The Company acquired its national and international telecom segment and its
broadcast transmission and other segment in 1996. Identifiable corporate assets
consist primarily of cash and cash equivalents. The industry segments and
geographic area information as of and for the years ended December 31, 1997,
1996 and 1995 are as follows:
<TABLE>
<CAPTION>
LONG
DISTANCE
TELEPHONE LOCAL NATIONAL BROADCAST
AND TELECOM AND TRANSMISSION
MICROWAVE AND INTERNATIONAL AND
TRANSMISSION TELEVISION TELECOM OTHER CORPORATE CONSOLIDATED
------------ ---------- ------------- ------------ --------- ------------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Year ended December 31, 1997
Total revenues............ $ 8,831 $ 189,407 $162,738 $130,799 $ -- $ 491,775
Operating income (loss)... (1,207) (208,815) (5,327) 42,652 (19,367) (192,064)
Depreciation and
amortization........... 2,368 103,704 17,454 20,328 6,655 150,509
Identifiable assets....... 27,623 1,579,044 350,704 358,302 105,966 2,421,639
Fixed asset additions..... 1,541 333,037 101,088 38,984 156 474,806
Year ended December 31, 1996
Total revenues............ $10,086 $ 89,209 $ 45,430 $ 83,618 $ -- $ 228,343
Operating income (loss)... 773 (164,108) (7,774) 26,376 (12,900) (157,633)
Depreciation and
amortization........... 2,744 69,200 8,601 13,152 4,956 98,653
Identifiable assets....... 15,660 1,655,759 220,764 412,989 149,439 2,454,611
Fixed asset additions..... 552 478,761 38,812 26,056 1,894 546,075
Year ended December 31, 1995
Total revenues............ $ 8,937 $ 24,804 $ -- $ -- $ -- $ 33,741
Operating (loss).......... (4,531) (76,161) -- -- (12,434) (93,126)
Depreciation and
amortization........... 2,729 25,650 -- -- 1,444 29,823
Identifiable assets....... 15,774 892,935 -- -- 101,960 1,010,669
Fixed asset additions..... 1,557 473,795 -- -- -- 475,352
</TABLE>
F-27
<PAGE> 168
NTL INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
20. SUBSEQUENT EVENT
In February 1998, the Company entered into an agreement and plan of
amalgamation (the "Agreement") with Comcast UK Cable Partners Limited
("Partners"). Under the Agreement, Partners' shareholders will receive 0.3745
shares of the Company's Common Stock for each share of Partners Common Stock.
Based on the closing price of the Company's Common Stock on the date of the
Agreement, the transaction is valued at approximately $600,000,000. The
Agreement contains provisions such that if the purchase price per Partners share
falls below $10.00, Partners has the right to terminate the transaction, subject
to the Company's right to adjust the exchange ratio such that Partners'
shareholders would receive $10.00 for each Partners share. Under certain
circumstances, the consideration payable to Partners' shareholders may be
adjusted based on the proceeds of the potential exercise of certain rights of
first refusal with respect to Partners' interests in the London and Birmingham
franchises. Completion of the transaction is subject to a number of closing
conditions including regulatory approvals, shareholder approvals and consents
from the holders of the Company's and Partners' debt.
F-28
<PAGE> 169
NTL INCORPORATED AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEET
(UNAUDITED)
<TABLE>
<CAPTION>
JUNE 30,
1998
--------------
<S> <C>
ASSETS
Current assets:
Cash and cash equivalents................................. $ 804,285,000
Marketable securities..................................... 116,475,000
Accounts receivable -- trade, less allowance for doubtful
accounts of $13,161,000................................ 101,117,000
Cash held in escrow....................................... 218,587,000
Other..................................................... 30,901,000
--------------
Total current assets........................................ 1,271,365,000
Fixed assets, net........................................... 2,279,636,000
Intangible assets, net...................................... 518,117,000
Other assets, net of accumulated amortization of
$30,315,000............................................... 94,710,000
--------------
Total assets................................................ $4,163,828,000
==============
LIABILITIES AND SHAREHOLDERS' (DEFICIENCY)
Current liabilities:
Accounts payable.......................................... $ 107,833,000
Accrued expenses and other................................ 142,997,000
Interest payable.......................................... 21,520,000
Accrued construction costs................................ 31,634,000
Deferred revenue.......................................... 54,742,000
Bank loan payable......................................... 458,343,000
Current portion of long-term debt......................... 205,583,000
--------------
Total current liabilities................................... 1,022,652,000
Long-term debt.............................................. 3,020,012,000
Other....................................................... 902,000
Commitments and contingent liabilities
Deferred income taxes....................................... 70,695,000
Senior redeemable exchangeable preferred stock -- $.01 par
value, plus accreted dividends; liquidation preference
$117,000,000; less unamortized discount of $3,289,000;
issued and outstanding 117,000 shares..................... 116,086,000
Shareholders' (deficiency):
Series preferred stock -- $.01 par value; authorized
2,500,000 shares; issued and outstanding none.......... --
Common stock -- $.01 par value; authorized 100,000,000
shares; issued and outstanding 41,291,000 shares....... 413,000
Additional paid-in capital................................ 720,975,000
Accumulated other comprehensive income.................... 127,119,000
(Deficit)................................................. (915,026,000)
--------------
(66,519,000)
--------------
Total liabilities and shareholders' (deficiency)............ $4,163,828,000
==============
</TABLE>
See accompanying notes.
F-29
<PAGE> 170
NTL INCORPORATED AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
SIX MONTHS ENDED JUNE 30,
------------------------------
1998 1997
------------- -------------
<S> <C> <C>
REVENUES
Local telecommunications and television..................... $ 130,179,000 $ 68,987,000
National and international telecommunications............... 102,660,000 83,782,000
Broadcast transmission and other............................ 66,892,000 64,287,000
Other telecommunications.................................... 2,375,000 4,583,000
------------- -------------
302,106,000 221,639,000
COSTS AND EXPENSES
Operating expenses.......................................... 155,354,000 141,251,000
Selling, general and administrative expenses................ 113,527,000 82,210,000
Franchise fees.............................................. 12,506,000 11,760,000
Corporate expenses.......................................... 7,779,000 9,042,000
Write-off of deferred costs................................. -- 4,555,000
Depreciation and amortization............................... 95,567,000 69,824,000
------------- -------------
384,733,000 318,642,000
------------- -------------
Operating (loss)............................................ (82,627,000) (97,003,000)
OTHER INCOME (EXPENSE)
Interest and other income................................... 23,478,000 18,213,000
Interest expense............................................ (141,622,000) (99,117,000)
Foreign currency transaction gains (losses)................. 2,797,000 (197,000)
------------- -------------
(Loss) before income taxes.................................. (197,974,000) (178,104,000)
Income tax benefit.......................................... -- 4,669,000
------------- -------------
Net (loss).................................................. $(197,974,000) $(173,435,000)
============= =============
Basic and diluted net (loss) per common share............... $ (5.79) $ (5.56)
============= =============
</TABLE>
See accompanying notes.
F-30
<PAGE> 171
NTL INCORPORATED AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF SHAREHOLDERS' (DEFICIENCY)
(UNAUDITED)
<TABLE>
<CAPTION>
SERIES COMMON STOCK -- ACCUMULATED
PREFERRED STOCK $.01 PAR VALUE ADDITIONAL OTHER
----------------- ---------------------- PAID-IN COMPREHENSIVE COMPREHENSIVE
SHARES PAR SHARES PAR CAPITAL INCOME INCOME
------ -------- ----------- -------- ------------ ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance, December 31, 1997...... 780 $ -- 32,210,000 $322,000 $538,054,000 $117,008,000
Exercise of stock options....... 162,000 1,000 3,370,000
Exercise of warrants............ 11,000 181,000
Accreted dividends on senior
redeemable exchangeable
preferred stock............... (7,397,000)
Accretion of discount on senior
redeemable exchangeable
preferred stock............... (155,000)
Conversion of 7 1/4%
Convertible Subordinated
Notes....................... 6,958,000 70,000 186,942,000
Conversion of Series Preferred
Stock......................... (780) 1,950,000 20,000 (20,000)
Comprehensive income
Net loss for the six months
ended
June 30, 1998................. $(197,974,000)
Currency translation
adjustment.................... 10,111,000 10,111,000
-------------
Total................... $(187,863,000)
=============
Balance, June 30, 1998.......... -- $ -- 41,291,000 $413,000 $720,975,000 $127,119,000
==== ======== =========== ======== ============ ============
<CAPTION>
(DEFICIT)
-------------
<S> <C>
Balance, December 31, 1997...... $(717,052,000)
Exercise of stock options.......
Exercise of warrants............
Accreted dividends on senior
redeemable exchangeable
preferred stock...............
Accretion of discount on senior
redeemable exchangeable
preferred stock...............
Conversion of 7 1/4%
Convertible Subordinated
Notes.......................
Conversion of Series Preferred
Stock.........................
Comprehensive income
Net loss for the six months
ended
June 30, 1998................. (197,974,000)
Currency translation
adjustment....................
Total...................
Balance, June 30, 1998.......... $(915,026,000)
=============
</TABLE>
See accompanying notes.
F-31
<PAGE> 172
NTL INCORPORATED AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30,
-------------------------------
1998 1997
-------------- -------------
<S> <C> <C>
Net cash provided by (used in) operating activities......... $ 7,716,000 $ (34,968,000)
INVESTING ACTIVITIES
Acquisition of subsidiary, net of cash acquired............. (443,844,000) --
Purchase of fixed assets.................................... (257,157,000) (239,760,000)
Payment of deferred purchase price.......................... -- (57,166,000)
Increase in other assets.................................... (3,620,000) (3,261,000)
Proceeds from sale of assets................................ 1,312,000 --
Purchase of marketable securities........................... (253,345,000) (130,313,000)
Proceeds from sales of marketable securities................ 143,840,000 43,512,000
-------------- -------------
Net cash (used in) investing activities..................... (812,814,000) (386,988,000)
FINANCING ACTIVITIES
Proceeds from borrowings and sale of preferred stock, net of
financing costs........................................... 1,784,890,000 497,542,000
Principal payments.......................................... (65,992,000) --
Cash placed in escrow....................................... (218,587,000) --
Proceeds from exercise of stock options and warrants........ 3,552,000 556,000
-------------- -------------
Net cash provided by financing activities................... 1,503,863,000 498,098,000
Effect of exchange rate changes on cash..................... 6,618,000 (8,961,000)
-------------- -------------
Increase in cash and cash equivalents....................... 705,383,000 67,181,000
Cash and cash equivalents at beginning of period............ 98,902,000 445,884,000
-------------- -------------
Cash and cash equivalents at end of period.................. $ 804,285,000 $ 513,065,000
============== =============
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash paid during the period for interest exclusive of
amounts capitalized....................................... $ 36,765,000 $ 24,162,000
Income taxes paid........................................... 136,000 --
SUPPLEMENTAL SCHEDULE OF NONCASH FINANCING ACTIVITIES
Accretion of dividends and discount on senior redeemable
exchangeable preferred stock.............................. $ 7,552,000 $ 5,039,000
Conversion of Convertible Notes, net of unamortized deferred
financing costs of $4,738,000............................. 187,012,000 --
</TABLE>
See accompanying notes.
F-32
<PAGE> 173
NTL INCORPORATED AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE A -- BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated financial statements have
been prepared in accordance with generally accepted accounting principles for
interim financial information and with the instructions to Form 10-Q and Rule
10-01 of Regulation S-X. Accordingly, they do not include all of the information
and footnotes required by generally accepted accounting principles for complete
financial statements. In the opinion of management, all adjustments (consisting
of normal recurring accruals) considered necessary for a fair presentation have
been included. Operating results for the six months ended June 30, 1998 are not
necessarily indicative of the results that may be expected for the year ending
December 31, 1998. For further information, refer to the consolidated financial
statements and footnotes thereto included in the Company's Annual Report on Form
10-K for the year ended December 31, 1997.
In March 1998, the Company issued debt denominated in British pounds
sterling. Interest expense has been translated using the average exchange rate
for the period and the debt balance has been translated using the current
exchange rate at the balance sheet date. Foreign currency gains and losses
arising from exchange rate fluctuations are included in the results of
operations.
The Company has adopted Statement of Financial Accounting Standards No.
130, "Reporting Comprehensive Income." Comprehensive loss for the six months
ended June 30, 1998 and 1997 was $(187,863,000) and $(210,193,000),
respectively.
In June 1998, the Financial Accounting Standards Board issued Statement No.
133, "Accounting for Derivative Instruments and Hedging Activities," which is
required to be adopted in years beginning after June 15, 1999. Management does
not anticipate that the adoption of the new Statement will have a significant
effect on earnings or the financial position of the Company.
Certain prior year amounts have been reclassified to conform to the 1998
presentation.
NOTE B -- COMTEL ACQUISITION AND BANK LOAN PAYABLE
In June 1998, the Company entered into an acquisition agreement (the
"ComTel Agreement") with Vision Networks III B.V., a wholly owned subsidiary of
Royal PTT Nederland NV (KPN), for the acquisition of the operations of ComTel
Limited and Telecential Communications (collectively, "ComTel"). Under the
ComTel Agreement, the Company will acquire ComTel for a total of 550 million
pounds sterling in two stages. In the first stage, the Company acquired certain
of the ComTel properties for 275 million pounds sterling in cash. In the second
stage, upon the completion of certain corporate reorganizations within ComTel,
the Company will acquire the remaining ComTel properties for 200 million pounds
sterling in cash and 75 million pounds sterling in a new NTL PIK Preferred Stock
(the "PIK Preferred Stock"). The PIK Preferred Stock will have a pay-in-kind
coupon of 9.9%, will mature in 2008, and is redeemable within 15 months for
common stock valued at market, new NTL convertible preferred securities, or
cash. The Company financed the cash portion of the first stage of the
transaction through a bank loan, completed through an amendment to the Company's
existing bank facility with the Chase Manhattan Bank.
The bank loan payable of 275 million pounds sterling ($458.3 million)
incurs interest payable either monthly, quarterly or semiannually at LIBOR plus
3% per annum increasing by .25% per annum each month beginning in September 1998
to a maximum of 4% per annum. The Company may borrow an additional 200 million
pounds sterling on or before January 31, 1999, subject to extension to March 31,
1999, for the cash portion of the second stage of the ComTel acquisition. The
fee to the bank for this commitment is 3% per annum payable quarterly in
arrears. The bank loan is required to be repaid on January 31, 1999, subject to
extension to June 30, 1999.
The completed portion of the ComTel acquisition has been accounted for as a
purchase, and, accordingly, the net assets and results of operations of the
acquired businesses have been included in the consolidated
F-33
<PAGE> 174
NTL INCORPORATED AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
financial statements from the date of acquisition. The assets acquired and
liabilities assumed have been recorded at their estimated fair values, which are
subject to further adjustment based upon appraisals and other analyses. The
purchase price of 275 million pounds sterling plus costs incurred of 1.4 million
pounds sterling (an aggregate of 276.4 million pounds sterling ($460.6 million))
exceeded the estimated fair value of the net tangible assets acquired by 100.5
million pounds sterling ($167.5 million), which is classified as license
acquisition costs.
The pro forma unaudited consolidated results of operations for the six
months ended June 30, 1998 and 1997 assuming consummation of the completed
portion of the ComTel acquisition as of the beginning of the periods are as
follows:
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30,
------------------------------
1998 1997
------------- -------------
<S> <C> <C>
Total revenue................................. $ 321,202,000 $ 235,859,000
Net (loss).................................... (223,395,000) (194,371,000)
Basic and diluted net (loss) per common
share....................................... (6.51) (6.21)
</TABLE>
NOTE C -- PENDING ACQUISITIONS
In February 1998, the Company entered into an agreement and plan of
amalgamation (the "Partners Agreement") with Comcast UK Cable Partners Limited
("Partners"). Under the Partners Agreement, Partners' shareholders will receive
0.3745 shares of the Company's Common Stock for each share of Partners Common
Stock. Based on the closing price of the Company's Common Stock on the date of
the Partners Agreement, the transaction is valued at approximately $600 million.
The Partners Agreement contains provisions such that if the purchase price per
Partners share falls below $10.00, Partners has the right to terminate the
transaction, subject to the Company's right to adjust the exchange ratio such
that Partners' shareholders would receive $10.00 for each Partners share. Under
certain circumstances, the consideration payable to Partners' shareholders may
be adjusted based on the proceeds of the potential exercise by a third party of
certain purchase rights with respect to Partners' interests in the London and
Birmingham franchises. Completion of the transaction is subject to a number of
closing conditions including regulatory approvals, shareholder approvals and
consents from the holders of the Company's and Partners' debt.
In June 1998, the Company entered into an acquisition agreement (the
"Diamond Agreement") with Diamond Cable Communications, plc ("Diamond"). Under
the Diamond Agreement, Diamond shareholders will receive 0.25 shares of NTL
Common Stock for each Diamond Ordinary Share. Diamond has approximately 60.7
million fully diluted shares outstanding, and the total consideration for the
transaction will be approximately 15.2 million NTL shares. Based on the closing
price of the Company's Common Stock on the date of the Diamond Agreement, the
purchase price implies a total Diamond equity value of approximately $630
million. The Diamond Agreement contains provisions such that if the Company's
stock price exceeds $52 per share for a measuring period prior to closing (the
"Cap"), the number of the Company's shares issued to Diamond will be decreased
such that the consideration for four Diamond shares will not exceed $52. In the
event that the transaction is not closed within four months, the Cap will be
increased by $0.50, and an additional $0.50 per month thereafter until closing.
The Diamond Agreement also contains provisions such that if the Company's stock
price falls below $36 per share for a measuring period prior to closing, Diamond
has the right to terminate the transaction, subject to the Company's right to
adjust the exchange ratio such that the consideration will be $36 for four
Diamond shares. As of March 31, 1998, Diamond had total debt of approximately
$1.3 billion, which is expected to remain outstanding, and cash of approximately
$414 million. The closing of the Diamond Agreement is subject to shareholder
approval, bond consents and customary closing conditions.
F-34
<PAGE> 175
NTL INCORPORATED AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE D -- FIXED ASSETS
Fixed assets consist of:
<TABLE>
<CAPTION>
JUNE 30,
1998
--------------
(UNAUDITED)
<S> <C>
Operating equipment......................................... $2,001,302,000
Other equipment............................................. 276,570,000
Construction-in-progress.................................... 294,217,000
--------------
2,572,089,000
Accumulated depreciation.................................... (292,453,000)
--------------
$2,279,636,000
==============
</TABLE>
NOTE E -- INTANGIBLE ASSETS
Intangible assets consists of:
<TABLE>
<CAPTION>
JUNE 30,
1998
------------
(UNAUDITED)
<S> <C>
License acquisition costs, net of accumulated amortization
of $53,949,000............................................ $283,376,000
Goodwill, net of accumulated amortization of $22,368,000.... 234,741,000
------------
$518,117,000
============
</TABLE>
NOTE F -- LONG-TERM DEBT
Long-term debt consists of:
<TABLE>
<CAPTION>
JUNE 30,
1998
--------------
(UNAUDITED)
<S> <C>
10 7/8% Senior Deferred Coupon Notes........................ $ 205,583,000
12 3/4% Series A Senior Deferred Coupon Notes............... 222,736,000
11 1/2% Series B Senior Deferred Coupon Notes............... 786,739,000
10% Series B Senior Notes................................... 400,000,000
9 1/2% Senior Sterling Notes, less unamortized discount of
$671,000.................................................. 207,666,000
10 3/4% Senior Deferred Coupon Sterling Notes............... 302,441,000
9 3/4% Senior Deferred Coupon Notes......................... 825,430,000
7 1/4% Convertible Subordinated Notes....................... --
7% Convertible Subordinated Notes........................... 275,000,000
--------------
3,225,595,000
Less current portion........................................ 205,583,000
--------------
$3,020,012,000
==============
</TABLE>
In June 1998, the Company announced that it had provided to the Trustee of
its 10 7/8% Senior Deferred Coupon Notes due 2003 a notice that it will redeem
the 10 7/8% Notes on October 15, 1998. Pending such redemption, the Company has
deposited in trust with the Trustee an amount equal to approximately $218.6
million to pay the redemption price (including principal) on the 10 7/8% Notes.
In July 1998, the Company redeemed a portion of the 10 7/8% Notes with an
accreted value of $62.2 million for cash of $65 million. The
F-35
<PAGE> 176
NTL INCORPORATED AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Company recorded an extraordinary loss from the early extinguishment of this
portion of the 10 7/8% Notes of approximately $4.3 million in the third quarter
of 1998.
In March 1998, the Company called for redemption all of its $191,750,000
principal amount 7 1/4% Convertible Subordinated Notes due 2005. The redemption
date was April 20, 1998, at a redemption price of 105.08% of the principal
amount plus accrued and unpaid interest through the date of redemption. The
7 1/4% Notes were convertible into Common Stock at a conversion price of $27.56
per share. In April 1998, all of the 7 1/4% Notes were converted into
approximately 6,958,000 shares of the Company's Common Stock.
In March 1998, the Company issued 125 million pounds sterling aggregate
principal amount of 9 1/2% Senior Notes due 2008 (the "Sterling Senior Notes"),
300 million pounds sterling aggregate principal amount of 10 3/4% Senior
Deferred Coupon Notes due 2008 (the "Sterling Deferred Coupon Notes") and $1.3
billion aggregate principal amount of 9 3/4% Senior Deferred Coupon Notes due
2008 (the "Dollar Deferred Coupon Notes") (together the "New Notes"). The
Sterling Senior Notes, Sterling Deferred Coupon Notes and the Dollar Deferred
Coupon Notes were issued at a price to the public of 99.67% or 124.6 million
pounds sterling, 58.62% or 175.9 million pounds sterling and 61.724% or $802.4
million, respectively. The Company received net proceeds of 121.2 million pounds
sterling, 170.6 million pounds sterling and $778.3 million, after discounts and
commissions, from the issuance of the Sterling Senior Notes, the Sterling
Deferred Coupon Notes and the Dollar Deferred Coupon Notes, respectively. The
aggregate of the discounts, commissions and other fees incurred of $39.5 million
is included in deferred financing costs.
The original issue discount of the Sterling Deferred Coupon Notes accretes
at a rate of 10 3/4%, compounded semiannually, to an aggregate principal amount
of 300 million pounds sterling by April 1, 2003. The original issue discount of
the Dollar Deferred Coupon Notes accretes at a rate of 9 3/4%, compounded
semiannually, to an aggregate principal amount of $1.3 billion by April 1, 2003.
Interest on each of the Sterling Deferred Coupon Notes and the Dollar Deferred
Coupon Notes will thereafter accrue at 10 3/4% per annum and 9 3/4% per annum,
respectively, payable semiannually, beginning on October 1, 2003. The Sterling
Senior Notes accrue interest at 9 1/2% per annum, payable semiannually,
beginning on October 1, 1998.
The New Notes are effectively subordinated to all existing and future
indebtedness and other liabilities and commitments of the Company's
subsidiaries, rank pari passu in right of payment with each other and with all
senior unsecured indebtedness of the Company and rank senior in right of payment
to all subordinated indebtedness of the Company.
The New Notes may be redeemed at the Company's option, in whole or in part,
at any time on or after April 1, 2003, at a redemption price of 104 3/4% to
105 3/8% that declines annually to 100% in 2006, in each case together with
accrued and unpaid interest to the date of redemption.
The indentures governing the New Notes contain restrictions relating to,
among other things: (i) incurrence of additional indebtedness and the issuance
of preferred stock, (ii) dividend and other payment restrictions and (iii)
mergers, consolidations and sales of assets.
NOTE G -- CONVERSION OF SERIES PREFERRED STOCK
In May 1998, the 780 outstanding shares of 5% Non-Voting Convertible
Preferred Stock, Series A were converted into 1,950,000 shares of Common Stock.
NOTE H -- GRANT OF STOCK OPTIONS
In March 1998, options to purchase approximately 7,800,000 shares of Common
Stock were granted to officers, non-employee directors and employees at an
exercise price of $36.50 per share. Officers and senior management employees
were granted options to purchase 3,260,000 shares and 2,765,000 shares,
respectively. These employees will not be granted any further options in 1998 to
2001 inclusive. These options will vest
F-36
<PAGE> 177
NTL INCORPORATED AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
beginning January 1, 1999 through January 1, 2004. The non-employee directors
were granted options to purchase an aggregate of 450,000 shares which vest on
the same schedule. Supervisory employees were granted options to purchase an
aggregate of approximately 1,000,000 shares which are exercisable as to 20% of
the shares subject thereto on the date of grant and an additional 20% each
January 1 thereafter, while the optionee remains an employee of the Company.
Finally, each employee who is not included in the groups described above and who
has at least one year of service as of March 1, 1998 was granted an option to
purchase 100 shares which are exercisable on a 20% per year schedule.
Beginning in March 1998 and in each year thereafter, each employee who is
not otherwise granted options and has completed at least one year of employment
will be granted an option to purchase 100 shares of the Company's Common Stock
each year. The exercise price for these options will be equal to the closing
price of the Company's Common Stock on the date of issuance, and these options
will vest on a 20% per year schedule. It is anticipated that approximately
1,850,000 options will be granted each year in 1999, 2000 and 2001 to
supervisory and other employees.
NOTE I -- RESTRUCTURING CHARGES
In September 1997, the Company announced a reorganization of certain of its
operations. Restructuring costs of $15,629,000 were recorded in September 1997
consisting of employee severance and related costs of $6,726,000 for
approximately 280 employees to be terminated, lease exit costs of $6,539,000 and
penalties of $2,364,000 associated with the cancellation of contractual
obligations. As of June 30, 1998, $7,620,000 of the provision has been used,
including $3,991,000 for severance and related costs, $1,418,000 for lease exit
costs and $2,211,000 for penalties associated with the cancellation of
contractual obligations. As of June 30, 1998, 134 employees had been terminated.
There was no other adjustment to the liability.
NOTE J -- NET LOSS PER COMMON SHARE
The following table sets forth the computation of basic and diluted net
loss per common share:
<TABLE>
<CAPTION>
SIX MONTHS ENDED JUNE 30,
------------------------------
1998 1997
------------- -------------
<S> <C> <C>
Numerator:
Net loss............................................ $(197,974,000) $(173,435,000)
Preferred stock dividend............................ (7,397,000) (5,039,000)
------------- -------------
Loss available to common shareholders............... (205,371,000) $(178,474,000)
------------- -------------
Denominator for basic net loss per common share..... 35,448,000 32,091,000
Effect of dilutive securities....................... -- --
------------- -------------
Denominator for diluted net loss per common share... 35,448,000 32,091,000
------------- -------------
Basic and diluted net loss per common share......... $ (5.79) $ (5.56)
============= =============
</TABLE>
The shares issuable upon the exercise of stock options and warrants and
upon the conversion of convertible securities are excluded from the calculation
of net loss per common share as their effect would be antidilutive.
NOTE K -- COMMITMENTS AND CONTINGENT LIABILITIES
As of June 30, 1998, the Company was committed to pay approximately
$110,800,000 for equipment and services.
F-37
<PAGE> 178
NTL INCORPORATED AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The Company has licenses issued by the United Kingdom Department of Trade
and Industry ("DTI") and the United Kingdom Independent Television Commission
("ITC") for its cable television ("CATV"), telephone and telecommunications
business. The initial terms of the Company's licenses was 15 or 23 years for the
DTI licenses and 15 years for the ITC licenses. The Company's licenses expire in
2005 to 2016 for the DTI licenses and 1999 to 2005 for the ITC licenses. The DTI
requires a fixed annual renewal fee of 2,500 pounds sterling ($4,200) per
license. The ITC requires an annual license fee ranging from 1,300 pounds
sterling ($2,200) to 7,900 pounds sterling ($13,000) per license based on the
number of homes in the licensed area, which is subject to adjustment annually.
The provision of the Company's transmission and distribution services is
governed by the Telecommunications Act and the Wireless Telegraphy Act 1949. The
Company holds five licenses under the Telecommunications Act. The initial terms
of these licenses were 10 or 25 years. These licenses expire in 2002 to 2021.
The Company holds a number of Wireless Telegraphy Act licenses which continue in
force primarily from year to year unless revoked or unless any of the license
fees are not paid. The Company's license fees paid in the six months ended June
30, 1998 were $742,000.
In addition, the Company was awarded certain newly issued licenses by the
ITC in 1995. Pursuant to the terms of the local delivery license ("LDL") for
Northern Ireland granted to a wholly-owned subsidiary of the Company, the
Company is required to make annual cash payments to the ITC for fifteen years
commencing in January 1997 in the amount of approximately 14,400,000 pounds
sterling ($24,000,000) (subject to adjustments for inflation). The fee for 1998
is 14,951,661 pounds sterling. Such payments are in addition to the percentages
of qualifying revenue already set by the ITC of 0% for the first ten years and
2% for the last five years of the fifteen year license. The Company paid
$12,420,000 in the six months ended June 30, 1998.
Pursuant to the terms of the LDL for Glamorgan and Gwent, Wales granted to
a wholly-owned subsidiary of the Company, the Company is required to make annual
cash payments to the ITC for fifteen years, commencing in January 1998, in the
amount of 104,188 pounds sterling ($174,000). Such payments are in addition to
the percentages of qualifying revenue already set by the ITC of 0% for the first
five years, 2% for the second five years and 4% for the last five years of the
fifteen year license. The Company paid $86,000 in the six months ended June 30,
1998.
The Company is involved in, or has been involved in, certain disputes and
litigation arising in the ordinary course of its business, including claims
involving contractual disputes and claims for damages to property and personal
injury resulting from construction of the Company's networks and the maintenance
and servicing of the Company's transmission masts. None of these matters are
expected to have a material adverse effect on the Company's financial position,
results of operations or cash flows.
F-38
<PAGE> 179
INDEPENDENT AUDITORS' REPORT
Board of Directors and Shareholders
Comcast UK Cable Partners Limited
We have audited the accompanying consolidated balance sheet of Comcast UK
Cable Partners Limited (a company incorporated in Bermuda) and subsidiaries as
of December 31, 1997 and 1996, and the related consolidated statements of
operations, shareholders' equity and of cash flows for each of the three years
in the period ended December 31, 1997. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally
accepted in the United States of America. Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, such consolidated financial statements present fairly, in
all material respects, the financial position of Comcast UK Cable Partners
Limited and subsidiaries as of December 31, 1997 and 1996, and the results of
their operations and their cash flows for each of the three years in the period
ended December 31, 1997 in conformity with accounting principles generally
accepted in the United States of America.
DELOITTE & TOUCHE LLP
Philadelphia, Pennsylvania
February 27, 1998
F-39
<PAGE> 180
COMCAST UK CABLE PARTNERS LIMITED AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
(IN L000'S, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
DECEMBER 31,
---------------------
1997 1996
--------- ---------
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents................................. L 37,372 L 63,314
Short-term investments.................................... 61,466
Accounts receivable, less allowance for doubtful accounts
of L2,598 and L1,338................................... 4,255 2,922
Other current assets...................................... 5,419 5,359
--------- ---------
Total current assets................................... 47,046 133,061
--------- ---------
INVESTMENTS IN AFFILIATES................................... 61,363 69,472
--------- ---------
PROPERTY AND EQUIPMENT...................................... 315,702 232,112
Accumulated depreciation.................................. (33,000) (13,765)
--------- ---------
Property and equipment, net............................... 282,702 218,347
--------- ---------
DEFERRED CHARGES............................................ 60,770 60,867
Accumulated amortization.................................. (13,985) (8,379)
--------- ---------
Deferred charges, net..................................... 46,785 52,488
--------- ---------
FOREIGN EXCHANGE PUT OPTIONS AND OTHER, net................. 7,958 11,002
--------- ---------
L 445,854 L 484,370
========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable and accrued expenses..................... L 23,605 L 23,086
Current portion of long-term debt......................... 1,683 1,463
Foreign exchange call options............................. 4,086
Due to affiliates......................................... 920 676
--------- ---------
Total current liabilities.............................. 26,208 29,311
--------- ---------
LONG-TERM DEBT, less current portion........................ 234,010 202,626
--------- ---------
FOREIGN EXCHANGE CALL OPTIONS............................... 2,688 3,079
--------- ---------
LONG-TERM DEBT, due to shareholder.......................... 11,272 10,322
--------- ---------
COMMITMENTS AND CONTINGENCIES
SHAREHOLDERS' EQUITY
Preferred shares, L.01 par value -- authorized, 10,000,000
shares; issued none....................................
Class A common shares, L.01 par value -- authorized,
50,000,000 shares; issued, 37,231,997.................. 372 372
Class B common shares, L.01 par value -- authorized,
50,000,000 shares; issued, 12,872,605.................. 129 129
Additional capital........................................ 358,548 358,548
Accumulated deficit....................................... (187,373) (120,017)
--------- ---------
Total shareholders' equity............................. 171,676 239,032
--------- ---------
L 445,854 L 484,370
========= =========
</TABLE>
See notes to consolidated financial statements.
F-40
<PAGE> 181
COMCAST UK CABLE PARTNERS LIMITED AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF OPERATIONS
(AMOUNTS IN L000'S, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
--------------------------------
1997 1996 1995
-------- -------- --------
<S> <C> <C> <C>
REVENUES
Service income........................................... L 55,603 L 31,358 L 1,530
Consulting fee income.................................... 1,059 1,070 1,313
-------- -------- --------
56,662 32,428 2,843
-------- -------- --------
COSTS AND EXPENSES
Operating................................................ 19,624 12,211 683
Selling, general and administrative...................... 30,850 25,073 7,815
Management fees.......................................... 3,204 2,997 3,105
Depreciation and amortization............................ 25,588 16,700 3,049
-------- -------- --------
79,266 56,981 14,652
-------- -------- --------
OPERATING LOSS............................................. (22,604) (24,553) (11,809)
OTHER (INCOME) EXPENSE
Interest expense......................................... 25,243 23,627 3,539
Investment income........................................ (7,259) (12,555) (11,758)
Equity in net losses of affiliates....................... 21,359 18,432 23,677
Exchange losses (gains) and other........................ 5,409 (13,482) 1,695
-------- -------- --------
44,752 16,022 17,153
-------- -------- --------
NET LOSS................................................... (L67,356) (L40,575) (L28,962)
======== ======== ========
NET LOSS PER SHARE......................................... (L 1.34) (L .84) (L .70)
======== ======== ========
WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING....... 50,105 48,216 41,245
======== ======== ========
</TABLE>
See notes to consolidated financial statements.
F-41
<PAGE> 182
COMCAST UK CABLE PARTNERS LIMITED AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
(IN L000'S)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
-------------------------------
1997 1996 1995
-------- -------- ---------
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net loss.................................................. (L67,356) (L40,575) (L28,962)
Adjustments to reconcile net loss to net cash provided by
(used in) operating activities:
Depreciation and amortization.......................... 25,588 16,700 3,049
Amortization on foreign exchange contracts............. 2,770 2,752 (75)
Non-cash interest expense.............................. 24,684 23,209 3,539
Non-cash investment income............................. (2,521) (2,854) (5,016)
Exchange losses (gains)................................ 2,852 (18,857) 944
Equity in net losses of affiliates..................... 21,359 18,432 23,677
Other.................................................. 991 (199) 619
Increase in accounts receivable, other current assets
and other............................................ (3,447) (1,154) (2,658)
Increase in accounts payable and accrued expenses...... 519 1,045 10,002
Increase (decrease) in due to affiliates............... 244 (1,548) (4,628)
-------- -------- ---------
Net cash provided by (used in) operating
activities........................................ 5,683 (3,049) 491
-------- -------- ---------
FINANCING ACTIVITIES
Proceeds from borrowings............................... 192,542
Repayments of debt..................................... (1,633) (1,711)
Debt acquisition costs................................. (6,089)
Purchase of foreign exchange put options............... (13,855)
Proceeds from sales of foreign exchange call options... 2,125 3,415
Other.................................................. (53)
-------- -------- ---------
Net cash (used in) provided by financing
activities........................................ (1,633) 414 175,960
-------- -------- ---------
INVESTING ACTIVITIES
Acquisition, net of cash acquired...................... (10,373)
Proceeds from sales (purchases) of short-term
investments, net..................................... 61,466 (4,226) (43,141)
Capital contributions and loans to affiliates.......... (8,713) (10,667) (25,829)
Capital expenditures................................... (82,125) (70,624) (45,308)
Additions to deferred charges.......................... (620) (392) (59)
-------- -------- ---------
Net cash used in investing activities............. (29,992) (96,282) (114,337)
-------- -------- ---------
(DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS............ (25,942) (98,917) 62,114
CASH AND CASH EQUIVALENTS, beginning of year................ 63,314 162,231 100,117
======== ======== =========
CASH AND CASH EQUIVALENTS, end of year...................... L 37,372 L 63,314 L 162,231
======== ======== =========
</TABLE>
See notes to consolidated financial statements.
F-42
<PAGE> 183
COMCAST UK CABLE PARTNERS LIMITED AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
(IN THOUSANDS)
<TABLE>
<CAPTION>
A COMMON B COMMON
--------------- --------------- ADDITIONAL ACCUMULATED
SHARES AMOUNT SHARES AMOUNT CAPITAL DEFICIT TOTAL
------ ------ ------ ------ ---------- ----------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE, JANUARY 1, 1995........... 28,372 L284 12,873 L129 L287,450 (L 50,480) L237,383
Net loss...................... (28,962) (28,962)
Other......................... (53) (53)
------ ---- ------ ---- -------- --------- --------
BALANCE, DECEMBER 31, 1995......... 28,372 284 12,873 129 287,397 (79,442) 208,368
Net loss...................... (40,575) (40,575)
Shares issued in connection
with SingTel Transaction.... 8,860 88 71,151 71,239
------ ---- ------ ---- -------- --------- --------
BALANCE, DECEMBER 31, 1996......... 37,232 372 12,873 129 358,548 (120,017) 239,032
Net loss...................... (67,356) (67,356)
------ ---- ------ ---- -------- --------- --------
BALANCE, DECEMBER 31, 1997......... 37,232 L372 12,873 L129 L358,548 (L187,373) L171,676
====== ==== ====== ==== ======== ========= ========
</TABLE>
See notes to consolidated financial statements.
F-43
<PAGE> 184
COMCAST UK CABLE PARTNERS LIMITED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
1. BUSINESS
Comcast UK Cable Partners Limited and subsidiaries (the "Company"), a
Bermuda company incorporated in 1992, was formed to develop, construct, manage
and operate the interests of Comcast Corporation ("Comcast") in the United
Kingdom ("UK") cable and telecommunications industry. The Company is a
controlled subsidiary of Comcast U.K. Holdings, Inc. ("Holdings"), a Delaware
corporation indirectly wholly owned by Comcast. As of December 31, 1997, the
Company has interests in four operations (the "Partners Operating Companies"):
Birmingham Cable Corporation Limited ("Birmingham Cable"), in which the Company
owns a 27.5% interest, Cable London PLC ("Cable London"), in which the Company
owns a 50.0% interest, Cambridge Holding Company Limited ("Cambridge Cable"), in
which the Company owns a 100% interest and two companies holding the franchises
for Darlington and Teesside, England ("Teesside"), in which the Company owns a
100% interest. The Company also owns a 100% interest in Comcast UK Holdings
Limited ("UK Holdings"), a company incorporated in Bermuda in December 1997.
On February 4, 1998, the Company entered into a definitive agreement to
amalgamate (the "NTL Transaction") with a wholly owned Bermuda subsidiary of NTL
Incorporated ("NTL"). NTL is an alternative telecommunications company in the UK
and is listed on Nasdaq. The NTL Transaction is expected to close in 1998,
subject to, among other things, the receipt of required Bermuda and UK
regulatory approvals, the approval of the Company's and NTL's shareholders, the
consent of the Company's and NTL's bondholders, the consent of certain NTL bank
lenders and other customary closing matters. Comcast, through Holdings, is the
sole holder of the multiple-voting Class B Common Shares of the Company and has
agreed to vote for the transaction, assuring its approval by the Company's
shareholders. Upon consummation of the NTL Transaction, the Company would become
a wholly owned subsidiary of NTL.
Except in the circumstances described below, the Company's shareholders
will receive 0.3745 shares of NTL common stock for each of the Company's Class A
Common Shares or Class B Common Shares. If the average closing price of the NTL
common stock for a specified period of time prior to the Company's shareholders
meeting to approve the NTL Transaction (the "Average Price") is less than
$26.70, the Company will have the option to terminate the NTL Transaction,
subject to the right of NTL to adjust the exchange ratio such that one share of
the Company's Class A Common Shares or Class B Common Shares will be exchanged
for a number of shares of NTL common stock equal to $10.00 (based on the Average
Price).
Pursuant to existing arrangements between the Company and Telewest
Communications plc ("Telewest"), a co-owner of interests in Cable London and
Birmingham Cable, Telewest has certain rights (the "Telewest Rights") to acquire
either or both of the Company's interests in these systems as a result of the
NTL Transaction. However, as described in the following paragraphs, the
consummation of the NTL Transaction is not dependent on the resolution of the
Telewest Rights.
If the Telewest Rights have been exercised prior to the closing of the NTL
Transaction, the Company's shareholders may receive (at the option of NTL), in
lieu of a portion of the consideration allocable to the interest subject to the
exercised Telewest Rights, the per share proceeds from the sale of the interest
to Telewest (net of taxes on gain on sale), payable in cash or shares of NTL
common stock valued at the greater of $30.00 per share or the Average Price at
closing (the "Exercise Consideration").
Similarly, if at closing either of the Telewest Rights have not been
exercised and have not been waived or otherwise expired, the Company's
shareholders may receive (at the option of NTL), shares of a new class of NTL
preferred stock equal to a portion of the consideration allocable to the
interest subject to the unexercised Telewest Rights. Any shares of NTL preferred
stock would have the same voting and dividend rights as shares of NTL common
stock, would be subject to redemption as described below, and would be expected
to be listed for trading on Nasdaq. If following closing the Telewest Rights are
exercised, the NTL preferred stock will be
F-44
<PAGE> 185
COMCAST UK CABLE PARTNERS LIMITED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
redeemed for the Exercise Consideration (based on the Average Price at the time
of exercise). If the Telewest Rights are resolved without being exercised, the
NTL preferred stock will be redeemed for NTL common stock on a one-for-one
basis.
Of the consideration to be received by the Company's shareholders in the
NTL Transaction, the parties have allocated 31% to the Company's interest in
Cable London and 17% to the Company's interest in Birmingham Cable. However, if
either or both of the Telewest Rights are exercised, the actual consideration to
be received by the Company's shareholders may be materially different from the
portion of the consideration (the "allocable portion") which has been allocated
by the parties to the Company's respective interests in Cable London and
Birmingham Cable, depending on, among other things, the value of these
interests, as finally determined, whether NTL exercises its option to deliver
the Exercise Consideration in lieu of the allocable portion and, the amount of
any taxes payable by the Company on the sale of these interests.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Accounting
Subsidiaries of the Company maintain their books and records in accordance
with accounting principles generally accepted in the UK. The consolidated
financial statements have been prepared in accordance with generally accepted
accounting principles as practiced in the United States ("US") and are stated in
UK pounds sterling ("UK Pound"). There were no significant differences between
accounting principles followed for UK purposes and generally accepted accounting
principles practiced in the US. The UK Pound exchange rate as of December 31,
1997 and 1996 was US $1.65 and US $1.71, respectively.
Basis of Consolidation
The consolidated financial statements include the accounts of the Company
and all wholly owned subsidiaries. All significant intercompany accounts and
transactions among the consolidated entities have been eliminated.
Management's Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
Fair Values
The estimated fair value amounts presented in these notes to consolidated
financial statements have been determined by the Company using available market
information and appropriate methodologies. However, considerable judgment is
required in interpreting market data to develop the estimates of fair value. The
estimates presented herein are not necessarily indicative of the amounts that
the Company could realize in a current market exchange. The use of different
market assumptions and/or estimation methodologies may have a material effect on
the estimated fair value amounts. Such fair value estimates are based on
pertinent information available to management as of December 31, 1997 and 1996,
and have not been comprehensively revalued for purposes of these consolidated
financial statements since such dates. The carrying value of the amounts due to
affiliates and long-term debt due to shareholder approximates fair value as of
December 31, 1997 and 1996.
F-45
<PAGE> 186
COMCAST UK CABLE PARTNERS LIMITED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
Cash Equivalents and Short-term Investments
Cash equivalents consist principally of commercial paper, time deposits and
money market funds with maturities of three months or less when purchased.
Short-term investments as of December 31, 1996 consist principally of commercial
paper and corporate floating rate notes with maturities greater than three
months when purchased. The carrying amounts of the Company's cash equivalents
and short-term investments, classified as available for sale securities,
approximate their fair values.
Investments in Affiliates
Investments in entities in which the Company has the ability to exercise
significant influence over the operating and financial policies of the investee
are accounted for under the equity method. Equity method investments are
recorded at original cost and adjusted periodically to recognize the Company's
proportionate share of the investees' net income or losses after the date of
investment, additional contributions made and dividends received. The
differences between the Company's recorded investments and its proportionate
interests in the book value of the investees' net assets are being amortized to
equity in net losses of affiliates over the remaining original lives of the
related franchises of eight years.
Prematurity Period
The Company accounts for costs, expenses and revenues applicable to the
construction and operation of its cable telecommunications systems in Teesside
and Cambridge Cable under the provisions of Statement of Financial Accounting
Standards ("SFAS") No. 51, "Financial Reporting by Cable Television Companies."
Under SFAS No. 51, during the period while the systems are partially under
construction and partially in service (the "Prematurity Period"), costs of cable
telecommunications plant, including materials, direct labor and construction
overhead are capitalized. Subscriber-related costs and general and
administrative costs are expensed as incurred. Costs incurred in anticipation of
servicing a fully operating system that will not vary regardless of the number
of subscribers are partially expensed and partially capitalized, based upon the
percentage of average actual or estimated subscribers, whichever is greater, to
the total number of subscribers expected at the end of the Prematurity Period
(the "Fraction").
During the Prematurity Period, depreciation and amortization of system
assets is determined by multiplying the depreciation and amortization of the
total capitalized system assets expected at the end of the Prematurity Period by
the Fraction. At the end of the Prematurity Period, depreciation and
amortization of system assets is based on the remaining undepreciated cost at
that date.
As of December 31, 1997, two of the Company's five franchise areas which
are under construction have completed their Prematurity Period. The remaining
Prematurity Periods are expected to terminate at various dates in 1998 and 1999.
Property and Equipment
Property and equipment, which consists principally of system assets, is
shown at historical cost less accumulated depreciation. Improvements that extend
asset lives are capitalized; other repairs and maintenance charges are expensed
as incurred. The cost and related accumulated depreciation applicable to assets
sold or retired are removed from the accounts and the gain or loss on
disposition is recognized as a component of depreciation expense.
F-46
<PAGE> 187
COMCAST UK CABLE PARTNERS LIMITED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
System assets
Prior to the Prematurity Period, no depreciation is provided on system
assets. During the Prematurity Period, depreciation is provided in accordance
with SFAS No. 51.
Depreciation of system assets is provided by the straight-line method over
estimated useful lives as follows:
<TABLE>
<S> <C>
Plant....................................................... 15-40 years
Network..................................................... 15 years
Subscriber equipment........................................ 6-10 years
Switch...................................................... 10 years
Computers................................................... 4 years
</TABLE>
Non-system assets
Depreciation of non-system assets is provided by the straight-line method
over estimated useful lives as follows:
<TABLE>
<S> <C>
Buildings................................................... 40 years
Fixtures, fittings and equipment............................ 5 years
Vehicles.................................................... 4 years
Computers................................................... 4 years
</TABLE>
Leased Assets
Assets held under capital leases are treated as if they had been purchased
outright and the corresponding liability is included in long-term debt. Capital
lease payments include principal and interest, with the interest portion being
expensed. Payments on operating leases are expensed on a straight-line basis
over the lease term.
Deferred Charges
Deferred charges consist primarily of franchise acquisition costs
attributable to obtaining, developing and maintaining the franchise licenses of
Teesside and Cambridge Cable, debt acquisition costs relating to the sale of
approximately $517.3 million principal amount at maturity of the Company's
11.20% Senior Discount Debentures Due 2007 (the "2007 Discount
Debentures" -- see Note 7) and goodwill arising from the SingTel Transaction
(see Note 4). Franchise acquisition costs are being amortized on a straight-line
basis over the remaining original lives of the related franchises of 12 to 15
years. Debt acquisition costs are being amortized on a straight-line basis over
the term of the 2007 Discount Debentures of 12 years. Goodwill is being
amortized on a straight-line basis over the remaining original lives of the
related franchises of 11 years.
Valuation of Long-Lived Assets
The Company periodically evaluates the recoverability of its long-lived
assets, including property and equipment and deferred charges, using objective
methodologies. Such methodologies include evaluations based on the cash flows
generated by the underlying assets or other determinants of fair value.
Revenue Recognition
Service income is recognized as service is provided. Credit risk is managed
by disconnecting services to subscribers who are delinquent.
F-47
<PAGE> 188
COMCAST UK CABLE PARTNERS LIMITED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
Stock-Based Compensation
Effective January 1, 1996, the Company adopted the provisions of SFAS No.
123, "Accounting for Stock-Based Compensation," which encourages, but does not
require, companies to record compensation cost for stock-based compensation
plans at fair value. The Company has elected to continue to account for stock-
based compensation in accordance with Accounting Principles Board Opinion No.
25, "Accounting for Stock Issued to Employees," and related interpretations, as
permitted by SFAS No. 123. Compensation expense for stock options is measured as
the excess, if any, of the quoted market price of the Company's stock at the
date of grant over the amount an employee must pay to acquire the stock.
Compensation expense for stock appreciation rights is recorded annually based on
changes in quoted market prices of the Company's stock or other determinants of
fair value at the end of the year (see Note 8).
Income Taxes
The Company is exempt from US federal, state and local income taxes. At the
present time, no income, profit, capital or capital gains taxes are levied in
Bermuda and, accordingly, no provision for such taxes has been recorded by the
Company. In the event that such taxes are levied, the Company has received an
undertaking from the Bermuda Government exempting it from all such taxes until
March 2016.
The Company's wholly owned subsidiaries recognize deferred tax assets and
liabilities for temporary differences between the financial reporting basis and
the tax basis of their assets and liabilities and expected benefits of utilizing
net operating loss carryforwards. The impact on deferred taxes of changes in tax
rates and laws, if any, applied to the years during which temporary differences
are expected to be settled, are reflected in the financial statements in the
period of enactment.
Derivative Financial Instruments
The Company uses derivative financial instruments, principally foreign
exchange option contracts ("FX Options"), to manage its exposure to fluctuations
in foreign currency exchange rates. Written FX Options are marked-to-market on a
current basis in the Company's consolidated statement of operations (see Note
6).
Those instruments that have been entered into by the Company to hedge
exposure to foreign currency exchange rate risks are periodically examined by
the Company to ensure that the instruments are matched with underlying
liabilities, reduce the Company's risks relating to foreign currency exchange
rates, and, through market value and sensitivity analysis, maintain a high
correlation to the underlying value of the hedged item. For those instruments
that do not meet the above criteria, variations in their fair value are
marked-to-market on a current basis in the Company's consolidated statement of
operations.
The Company does not hold or issue any derivative financial instruments for
trading purposes and is not a party to leveraged instruments (see Notes 6 and
7). The credit risks associated with the Company's derivative financial
instruments are controlled through the evaluation and monitoring of the
creditworthiness of the counterparties. Although the Company may be exposed to
losses in the event of nonperformance by the counterparties, the Company does
not expect such losses, if any, to be significant.
Net Loss Per Share
In February 1997, the Financial Accounting Standards Board ("FASB") issued
SFAS No. 128, "Earnings per Share," which was adopted by the Company effective
for the year ended December 31, 1997, as required by the statement. For the
years ended December 31, 1997, 1996 and 1995, the Company's potential common
shares have an antidilutive effect on the loss per share and, therefore, have
not been used in determining the total weighted average number of common shares
outstanding. Diluted loss per share for 1997, 1996 and 1995 is antidilutive and,
therefore, has not been presented.
F-48
<PAGE> 189
COMCAST UK CABLE PARTNERS LIMITED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
Reclassifications
Certain reclassifications have been made to the prior years' consolidated
financial statements to conform to those classifications used in 1997.
3. TEESSIDE ACQUISITION
In June 1994, the Company acquired all of the outstanding shares of two
companies that owned Teesside, which comprise an area containing approximately
254,000 homes. The construction of Teesside's cable telecommunications network
commenced in the third quarter of 1994. Teesside added its initial cable and
telephony subscribers in June 1995.
4. SINGTEL TRANSACTION
In March 1996, the Company completed the acquisition (the "SingTel
Transaction") of Singapore Telecom International Pte. Limited's ("Singapore
Telecom") 50% interest in Cambridge Cable, pursuant to the terms of a Share
Exchange Agreement executed by the parties in December 1995. In exchange for
Singapore Telecom's 50% interest in Cambridge Cable and certain loans made to
Cambridge Cable, with accrued interest thereon, the Company issued approximately
8.9 million of its Class A Common Shares and paid approximately L11.8 million to
Singapore Telecom. The Company accounted for the SingTel Transaction under the
purchase method. As a result of the SingTel Transaction, the Company owns 100%
of Cambridge Cable and Cambridge Cable was consolidated with the Company
effective March 31, 1996.
The following unaudited pro forma information for the years ended December
31, 1996 and 1995 has been presented as if the SingTel Transaction had occurred
on January 1, 1995. This unaudited pro forma information is based on historical
results of operations adjusted for acquisition costs and, in the opinion of
management, is not necessarily indicative of what results would have been had
the Company owned 100% of Cambridge Cable since January 1, 1995 (in thousands,
except per share data).
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31
--------------------
1996 1995
-------- --------
<S> <C> <C>
Revenues.................................................... L 38,651 L 22,859
Net loss.................................................... (42,300) (37,616)
Net loss per share.......................................... (.84) (.75)
</TABLE>
5. INVESTMENTS IN AFFILIATES
The Company has historically invested in three affiliates (the "Equity
Investees," which term excludes Cambridge Cable as of, and subsequent to March
31, 1996 -- see Note 4): Birmingham Cable, Cable London and Cambridge Cable. The
Equity Investees operate integrated cable communications, residential telephony
and business telecommunications systems in their respective major metropolitan
areas under exclusive cable television licenses and non-exclusive
telecommunications licenses. As of December 31, 1997, the Company's ownership
interest in the Equity Investees is as follows:
<TABLE>
<S> <C>
Birmingham Cable............................................ 27.5%
Cable London................................................ 50.0%
</TABLE>
The Company also has a 16.4% interest in Cable Programme Partners-1 Limited
Partnership ("CPP-1") which previously developed and distributed cable
programming in the UK. During 1995, CPP-1 sold its only channel and has wound
down its operations to a minimal level of activity. The carrying value of the
Company's investment in CPP-1 has been reduced to zero and the Company has no
future funding commitments to CPP-1.
F-49
<PAGE> 190
COMCAST UK CABLE PARTNERS LIMITED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
Included in investments in affiliates as of December 31, 1997 and 1996, are
loans to Cable London of L28.5 million and L22.5 million and accrued interest of
L6.0 million and L3.6 million, respectively. The loans accrue interest at a rate
of 2% above the published base lending rate of Barclays Bank PLC (9.25%
effective rate as of December 31, 1997) and are subordinate to Cable London's
revolving bank credit facility. Of these loans, L21.0 million as of December 31,
1997 and 1996 are convertible into ordinary shares of Cable London at a per
share conversion price of L2.00. Also included in investments in affiliates as
of December 31, 1997 are loans to Birmingham Cable of L1.9 million and accrued
interest of L133,000. The Birmingham Cable loans accrue interest at a fixed rate
of 7.80% and are subordinate to Birmingham Cable's credit facility. Loans to
Cambridge Cable and related accrued interest have been eliminated in
consolidation subsequent to the SingTel Transaction (see Note 4).
In February 1995, a subsidiary of Birmingham Cable issued 175,000
cumulative L1.00 redeemable five year term preference shares for a paid up value
of L175.0 million. Also in February 1995, Birmingham Cable entered into a L175.0
million five year revolving credit facility (the "Birmingham Facility") which
provided for conversion into a five year term loan on March 31, 2000. In March
1997, the terms of the Birmingham Facility were amended to extend the maturity
of the term loan to December 31, 2005 and to amend the required cash flow levels
(as defined) and certain other terms. Interest rates on the Birmingham Facility
are at the London Interbank Offered Rate ("LIBOR") plus 5/8% to 2 1/4%.
In July 1997, the preference shareholder exercised its option to require
Birmingham Cable to purchase its shareholding. Birmingham Cable funded the
redemption of the preference shares with the proceeds from the Birmingham
Facility and restricted cash and settled its five year L175.0 million interest
rate exchange agreement with Barclays Bank PLC. The balance of the Birmingham
Facility will be used, subject to certain restrictions, for capital expenditures
and working capital requirements relating to the build-out of its systems. The
preference shares had an effective dividend rate, including Advanced Corporation
Tax ("ACT"), of 8.00%.
The Birmingham Facility contains restrictive covenants which limit
Birmingham Cable's ability to enter into arrangements for the acquisition and
sale of property and equipment, investments, mergers and the incurrence of
additional debt. Certain of these covenants require that certain minimum build
requirements, financial ratios and cash flow levels be maintained and contain
restrictions on dividend payments. Birmingham Cable's three principal
shareholders' (including the Company) right to receive consulting fee payments
from Birmingham Cable has been subordinated to the banks under the Birmingham
Facility. The payment of consulting fees is restricted until Birmingham Cable
meets certain financial ratio tests under the Birmingham Facility. Birmingham
Cable has pledged the shares of its material subsidiaries to secure the
Birmingham Facility. Upon a change of control, all amounts due under the
Birmingham Facility become immediately due and payable. The consummation of the
NTL Transaction will not result in a change of control as defined in the
Birmingham Facility.
In May 1997, Cable London entered into a L170.0 million revolving credit
facility (the "London Revolver") with various banks, which converts into a five
year term loan on June 30, 2001. Interest rates on the London Revolver are at
LIBOR plus 1/2% to 2 3/8%. In May 1997, Cable London repaid all amounts
outstanding under its existing credit facility with proceeds from borrowings
under the London Revolver. The balance of the London Revolver will be used,
subject to certain restrictions, for capital expenditures and working capital
requirements relating to the build-out of its systems.
The London Revolver contains restrictive covenants which limit Cable
London's ability to enter into arrangements for the acquisition and sale of
property and equipment, investments, mergers and the incurrence of additional
debt. Certain of these covenants require that certain financial ratios and cash
flow levels be maintained and contain certain restrictions on dividend payments.
The Company's right to receive consulting fee payments from Cable London has
been subordinated to the banks under the London Revolver. The
F-50
<PAGE> 191
COMCAST UK CABLE PARTNERS LIMITED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
payment of consulting fees is restricted until Cable London meets certain
financial ratio tests under the London Revolver. In addition, the Company's
shares in Cable London have been pledged to secure the London Revolver. Upon a
change of control, all amounts due under the London Revolver become immediately
due and payable. The consummation of the NTL Transaction will not result in a
change of control as defined in the London Revolver.
Although the Company is not contractually committed to make any additional
capital contributions or advances to any of the Equity Investees, it currently
intends to fund its share of the amounts necessary for capital expenditures and
to finance operating deficits. Failure to do so could dilute the Company's
ownership interests in the Equity Investees.
F-51
<PAGE> 192
COMCAST UK CABLE PARTNERS LIMITED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
Summarized financial information for affiliates accounted for under the
equity method for 1997, 1996 and 1995, is as follows:
<TABLE>
<CAPTION>
BIRMINGHAM CABLE CAMBRIDGE
CABLE LONDON CABLE(1) CPP-1(2) COMBINED
---------- -------- --------- -------- ---------
L000 L000 L000 L000 L000
<S> <C> <C> <C> <C> <C>
YEAR ENDED DECEMBER 31, 1997
Results of operations
Service income........................... L 67,166 L 52,816 L L L 119,982
Operating, selling, general and
administrative expenses............... (56,564) (45,787) (102,351)
Depreciation and amortization............ (26,427) (19,740) (46,167)
Operating loss........................... (15,825) (12,711) (28,536)
Net loss................................. (30,826) (25,168) (55,994)
Company's equity in net loss............. (8,616) (12,743) (21,359)
AT DECEMBER 31, 1997
Financial position
Current assets........................... 11,424 10,340 21,764
Noncurrent assets........................ 248,611 185,353 433,964
Current liabilities...................... 22,293 22,902 45,195
Noncurrent liabilities................... 165,413 173,038 338,451
YEAR ENDED DECEMBER 31, 1996
Results of operations
Service income........................... 52,472 40,091 6,401 98,964
Operating, selling, general and
administrative expenses............... (44,476) (39,135) (6,366) (89,977)
Depreciation and amortization............ (19,690) (14,862) (2,168) (36,720)
Operating loss........................... (11,694) (13,906) (2,133) (27,733)
Net loss................................. (20,378) (21,241) (4,419) (46,038)
Company's equity in net loss............. (5,671) (10,551) (2,210) (18,432)
AT DECEMBER 31, 1996
Financial position
Current assets........................... 70,531 10,217 80,748
Noncurrent assets........................ 255,115 159,906 415,021
Current liabilities...................... 33,628 85,183 118,811
Noncurrent liabilities................... 188,863 60,831 249,694
YEAR ENDED DECEMBER 31, 1995
Results of operations
Service income........................... 39,004 30,277 20,585 1,088 90,954
Operating, selling, general and
administrative expenses............... (35,894) (33,238) (26,273) (5,673) (101,078)
Depreciation and amortization............ (14,455) (10,847) (7,150) (34) (32,486)
Operating loss........................... (11,345) (13,808) (12,838) (4,619) (42,610)
Net loss................................. (14,279) (17,675) (20,398) (5,388) (57,740)
Company's equity in net loss............. (3,922) (8,657) (10,200) (898) (23,677)
</TABLE>
- ---------------
(1) 1996 results of operations information for Cambridge Cable is for the three
months ended March 31, 1996 (see Note 4).
(2) 1995 results of operations information for CPP-1 is for the six months ended
June 30, 1995.
F-52
<PAGE> 193
COMCAST UK CABLE PARTNERS LIMITED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
6. FOREIGN CURRENCY RISK MANAGEMENT
The Company is exposed to market risk including changes in foreign currency
exchange rates. To manage the volatility relating to this exposure, the Company
enters into various derivative transactions pursuant to the Company's policies
in areas such as counterparty exposure and hedging practices. Positions are
monitored using techniques including market value and sensitivity analyses.
The Company has entered into certain FX Options as a normal part of its
foreign currency risk management efforts. During 1995, the Company entered into
certain foreign exchange put option contracts ("FX Puts") which may be settled
only on November 16, 2000. These FX Puts are used to limit the Company's
exposure to the risk that the eventual cash outflows related to net monetary
liabilities denominated in currencies other than its functional currency (the UK
Pound) (principally the 2007 Discount Debentures -- see Note 7) are adversely
affected by changes in exchange rates. As of December 31, 1997 and 1996, the
Company had L250.0 million notional amount of FX Puts to purchase US dollars at
an exchange rate of $1.35 per L1.00 (the "Ratio"). The FX Puts provide a hedge,
to the extent the exchange rate falls below the Ratio, against the Company's net
monetary liabilities denominated in US dollars since gains and losses realized
on the FX Puts are offset against foreign exchange gains or losses realized on
the underlying net liabilities. Premiums paid for the FX Puts of L13.9 million
are included in foreign exchange put options and other in the Company's
consolidated balance sheet, net of related amortization. These premiums are
being amortized over the terms of the related contracts of five years. As of
December 31, 1997 and 1996, the FX Puts had carrying values of L8.0 million and
L10.7 million, respectively. The estimated fair value of the FX Puts was L3.2
million as of both December 31, 1997 and 1996. The difference between the
carrying amount and the estimated fair value of the FX Puts was not significant
as of December 31, 1995.
In 1995, in order to reduce hedging costs, the Company sold foreign
exchange call option contracts ("FX Calls") to exchange L250.0 million notional
amount and received L3.4 million. These contracts may only be settled on their
expiration dates. Of these contracts, L200.0 million notional amount, with an
exchange ratio of $1.70 per L1.00, expired unexercised in November 1996 while
the remaining contract, with a L50.0 million notional amount and an exchange
ratio of $1.62 per L1.00, has a settlement date in November 2000. In the fourth
quarter of 1996, in order to continue to reduce hedging costs, the Company sold
additional FX Calls for L2.1 million, to exchange L200.0 million notional amount
at an average exchange ratio of $1.75 per L1.00. These contracts expired
unexercised in the fourth quarter of 1997. The FX Calls are marked-to-market on
a current basis in the Company's consolidated statement of operations.
As of December 31, 1997 and 1996, the estimated fair value of the
liabilities related to the FX Calls, as recorded in the Company's consolidated
balance sheet, was L2.7 million and L7.2 million, respectively. Changes in fair
value between measurement dates relating to the FX Calls resulted in exchange
gains of L4.5 million during the year ended December 31, 1997 and exchange
losses of L1.3 million during the year ended December 31, 1996 in the Company's
consolidated statement of operations. There were not significant exchange gains
or losses relating to these contracts for the year ended December 31, 1995.
7. LONG-TERM DEBT
2007 Discount Debentures
In November 1995, the Company received net proceeds of approximately $291.1
million (L186.9 million) from the sale of its 2007 Discount Debentures in a
public offering ($517.3 million principal at maturity). Interest accretes on the
2007 Discount Debentures at 11.20% per annum compounded semi-annually from
November 15, 1995 to November 15, 2000, after which date interest will be paid
in cash on each May 15 and November 15 through November 15, 2007. The accreted
value of the 2007 Discount Debentures was L229.2 million and L198.1 million as
of December 31, 1997 and 1996, respectively.
F-53
<PAGE> 194
COMCAST UK CABLE PARTNERS LIMITED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
The 2007 Discount Debentures contain restrictive covenants which limit the
Company's ability to enter into arrangements for the sale of assets, mergers,
the incurrence of additional debt and the payment of dividends. The Company was
in compliance with such restrictive covenants as of December 31, 1997.
Consummation of the NTL Transaction (see Note 1) is subject to consent of the
Company's bondholders.
UK Holdings Credit Facility
On December 23, 1997, UK Holdings entered into a loan agreement (the "UK
Holdings Agreement") with a consortium of banks to provide financing under a
credit facility (the "UK Holdings Credit Facility") up to a maximum of L200.0
million. Under the terms of the UK Holdings Agreement, borrowings under the UK
Holdings Credit Facility are guaranteed by Teesside and Cambridge Cable.
On January 14, 1998, UK Holdings borrowed L75.0 million under Tranche A of
the UK Holdings Credit Facility. Of this initial borrowing, L50.4 million was
paid to the Company as a dividend and L17.8 million was used to fund capital
expenditures and working capital requirements at Cambridge Cable and Teesside.
Amounts available under the UK Holdings Credit Facility will be reduced each
quarter in varying amounts beginning March 31, 2000 and continuing through
December 31, 2000. The UK Holdings Credit Facility bears interest at a rate per
annum equal to LIBOR plus 1/2% to 2 1/4%.
The UK Holdings Credit Facility contains restrictive covenants which limit
UK Holdings' ability to enter into arrangements for the acquisition and sale of
property and equipment, investments, mergers and the incurrence of additional
debt. Certain of these covenants require that certain financial ratios and cash
flow levels be maintained and contain certain restrictions on dividend payments.
The Company's right to receive consulting fee payments from Cambridge Cable and
Teesside has been subordinated to the banks under the UK Holdings Credit
Facility. In addition, the Company's shares in UK Holdings have been pledged to
secure the UK Holdings Credit Facility.
The consummation of the NTL Transaction will result in a change in control,
as defined in the UK Holdings Credit Facility. Upon a change in control, all
amounts outstanding under the UK Holdings Credit Facility will become
immediately due and payable.
Other
As of December 31, 1997 and 1996, Cambridge Cable has two outstanding bank
loans totaling L505,000 and L533,000, respectively, which are included in
long-term debt. These bank loans are secured by Cambridge Cable's land and
buildings in Cambridge and Bishop Stortford and are payable in quarterly
installments through April 2000 and bear interest at a weighted average fixed
rate of 9.35%. Also included in long-term debt are capital lease obligations of
Cambridge Cable and Teesside (see Note 12).
Maturities of long-term debt outstanding, including long-term debt, due to
shareholder (see Note 9), as of December 31, 1997 for the four years after 1998
are as follows (in L000's):
<TABLE>
<S> <C>
1999........................................................ L12,658
2000........................................................ 665
2001........................................................ 528
2002........................................................ 498
</TABLE>
The Company's long-term debt, excluding long-term debt due to shareholder,
had estimated fair values of L259.6 million and L219.7 million as of December
31, 1997 and 1996, respectively. The estimated fair value of the Company's
publicly traded debt is based on quoted market prices for that debt. Interest
rates that are currently available to the Company for issuance of debt with
similar terms and remaining maturities are used to estimate fair value for debt
issues for which quoted market prices are not available.
F-54
<PAGE> 195
COMCAST UK CABLE PARTNERS LIMITED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
8. STOCK OPTION/SAR PLANS
The Company implemented a Stock Appreciation Rights ("SARs") plan during
1995 for certain outside directors under which the terms of the SARs granted are
determined by the Compensation Committee of the Board of Directors (the "SAR
Plan"). Under the SAR Plan, eligible participants are entitled to receive a cash
payment from the Company equal to 100% of the excess, if any, of the fair market
value of a share of the Company's Class A Common Shares at the time of exercise
over the fair market value of such a share at the grant date. Under the SAR
Plan, a total of 50,000 SARs may be granted. The SARs have a term of ten years
from the date of grant and are immediately exercisable. No SARs were granted in
1997. A total of 6,000 and 15,000 SARs were granted in 1996 and 1995,
respectively and 14,000 SARs were outstanding at December 31, 1997, all
exercisable. The fair value of the Company's Class A Common Stock at the grant
date of the SARs was $12.63 and $16.25 for 1996 and 1995 grants, respectively.
Compensation expense recorded during the year ended December 31, 1996 was not
significant. No compensation expense was recognized during the years ended
December 31, 1997 and December 31, 1995 as the exercise price of the SARs was
not less then the fair value of a share of the Company's Class A Common Shares.
The Company implemented a qualified stock option plan during 1995 for
certain employees, officers and directors, under which the option prices and
other terms are determined by the Compensation Committee of the Board of
Directors (the "Option Plan"). Under the Option Plan, not more than 250,000 of
the Company's Class A Common Shares may be issued pursuant to the plan upon
exercise of qualified stock options. All options must be granted within ten
years from the date of adoption of the Option Plan, with options becoming
exercisable over four years from the date of grant. A total of 20,250 options,
with an exercise price of $12.63, were granted in 1996 and are outstanding (none
exercisable) at December 31, 1997. No options were granted in 1997 or 1995. No
compensation expense has been recognized under the Option Plan as the exercise
price of the grants was not less than the fair market value of the shares at the
grant date. The fair value of the options granted in 1996 was not significant.
9. RELATED PARTY TRANSACTIONS
Comcast U.K. Consulting, Inc. ("UK Consulting"), a wholly owned subsidiary
of the Company, earns consulting fee income under consulting agreements with the
Equity Investees. The consulting fee income is generally based on a percentage
of gross revenues or a fixed amount per dwelling unit in the Equity Investees'
franchise areas.
The Company's right to receive consulting fee payments from Birmingham
Cable and Cable London has been subordinated to the banks under their credit
facilities. Accordingly, a portion of these fees have been classified as
long-term receivables and are included in investments in affiliates in the
Company's consolidated balance sheet. In addition, the Company's shares in Cable
London have been pledged to secure amounts outstanding under the London
Revolver.
Management fee expense is incurred under agreements between the Company on
the one hand, and Comcast, the Company's controlling shareholder, and Comcast UK
Cable Partners Consulting, Inc. ("Comcast Consulting"), an indirect wholly owned
subsidiary of Comcast, on the other, whereby Comcast and Comcast Consulting
provide consulting services to the Equity Investees on behalf of the Company and
management services to the Company. Such management fees are based on Comcast's
and Comcast Consulting's cost of providing such services. As of December 31,
1997 and 1996, due to affiliates consists primarily of this management fee and
operating expenses paid by Comcast and its affiliates on behalf of the Company.
Investment income includes L2.5 million, L2.9 million and L5.0 million of
interest income in 1997, 1996 and 1995, respectively, relating to the loans to
Birmingham Cable, Cable London and Cambridge Cable described in Note 5.
F-55
<PAGE> 196
COMCAST UK CABLE PARTNERS LIMITED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
Long-term debt, due to shareholder consists of 9% Subordinated Notes
payable to Holdings (the "Notes") which are due in 1999. During the years ended
December 31, 1997, 1996 and 1995, interest expense on the Notes was L950,000,
L870,000 and L800,000, respectively.
In management's opinion, the foregoing transactions were entered into on
terms no more or less favorable than those with non-affiliated parties.
10. INCOME TAXES
The Company's wholly owned subsidiaries have a deferred tax asset arising
from the carryforward of net operating losses and the differences between the
book and tax basis of property. However, a valuation allowance has been recorded
to fully reserve the deferred tax asset as its realization is uncertain.
Significant components of deferred income taxes are as follows (in L000's):
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------
1997 1996
-------- --------
<S> <C> <C>
Net operating loss carryforwards (carried forward
indefinitely)............................................. L 14,382 L 13,485
Differences between book and tax basis of property.......... 7,959 1,024
Other....................................................... 321 170
Less: Valuation allowance................................... (22,662) (14,679)
-------- --------
L L
======== ========
</TABLE>
11. STATEMENT OF CASH FLOWS -- SUPPLEMENTAL INFORMATION
The Company made cash payments for interest of approximately L559,000 and
L418,000 during the years ended December 31, 1997 and 1996, respectively. There
were no cash interest payments made during the year ended December 31, 1995.
The Company's wholly owned subsidiaries incurred capital lease obligations
of L2.1 million, L1.2 million and L490,000 during the years ended December 31,
1997, 1996 and 1995, respectively.
12. COMMITMENTS AND CONTINGENCIES
Certain of the Company's facilities and equipment are held under operating
or capital leases which expire through 2008.
A summary of assets held under capital lease are as follows (in L000's):
<TABLE>
<CAPTION>
DECEMBER 31,
-----------------
1997 1996
------- ------
<S> <C> <C>
Land, buildings and equipment............................... L10,735 L8,605
Less: Accumulated depreciation.............................. (3,165) (834)
------- ------
L 7,570 L7,771
======= ======
</TABLE>
F-56
<PAGE> 197
COMCAST UK CABLE PARTNERS LIMITED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONCLUDED)
YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
Future minimum rental payments under lease commitments with an initial or
remaining term of more than one year of December 31, 1997 are as follows (in
L000's):
<TABLE>
<CAPTION>
OPERATING CAPITAL
LEASES LEASES
--------- ---------
<S> <C> <C>
1998........................................................ L 2,191 L 1,580
1999........................................................ 1,753 969
2000........................................................ 902 283
2001........................................................ 706 63
2002........................................................ 629 63
Thereafter.................................................. 1,731 36
------- -------
Total minimum rental commitments............................ L 7,912 L 2,994
=======
Less: Amount representing interest.......................... (1,874)
-------
Present value of minimum rental commitments................. 6,038
Less: Current portion of capital lease obligations.......... (1,660)
-------
Long-term portion of capital lease obligations.............. L 4,378
=======
</TABLE>
Operating lease expense for the years ended December 31, 1997, 1996 and
1995 was L1.7 million, L1.5 million and L328,000, respectively.
The Company is subject to legal proceedings and claims which arise in the
ordinary course of its business. In the opinion of management, the amount of
ultimate liability with respect to these actions will not materially affect the
financial position, results of operations or liquidity of the Company.
13. QUARTERLY FINANCIAL INFORMATION (UNAUDITED)
<TABLE>
<CAPTION>
FIRST SECOND THIRD FOURTH TOTAL
QUARTER QUARTER(1) QUARTER QUARTER(2) YEAR
-------- ---------- -------- ---------- --------
(L000, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
1997
Revenues............................ L 12,351 L 13,350 L 14,241 L 16,720 L 56,662
Operating loss...................... (6,543) (6,364) (5,679) (4,018) (22,604)
Equity in net losses of
affiliates........................ (5,152) (5,162) (5,195) (5,850) (21,359)
Net loss............................ (20,540) (13,108) (20,682) (13,026) (67,356)
Net loss per share.................. (.41) (.26) (.41) (.26) (1.34)
1996
Revenues............................ L 2,334 L 9,452 L 10,090 L 10,552 L 32,428
Operating loss...................... (3,765) (6,128) (7,398) (7,262) (24,553)
Equity in net losses of
affiliates........................ (5,698) (3,942) (4,166) (4,626) (18,432)
Net loss............................ (11,987) (11,292) (14,571) (2,725) (40,575)
Net loss per share.................. (.28) (.22) (.30) (.04) (.84)
</TABLE>
- ---------------
(1) The Company began consolidating Cambridge Cable effective March 31, 1996.
(2) The fourth quarter of 1996 net loss includes L12.9 million of foreign
currency exchange rate gains resulting from fluctuations in the foreign
currency exchange rate.
F-57
<PAGE> 198
COMCAST UK CABLE PARTNERS LIMITED AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEET
QUARTER ENDED JUNE 30, 1998
(UNAUDITED)
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
1998 1997
--------- ------------
(IN L000'S, EXCEPT SHARE
DATA)
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents................................. L 92,315 L 37,372
Accounts receivable, less allowance for doubtful accounts
of L3,065 and L2,598................................... 3,805 4,255
Other current assets...................................... 6,798 5,419
--------- ---------
Total current assets.............................. 102,918 47,046
--------- ---------
INVESTMENTS IN AFFILIATES................................... 53,981 61,363
--------- ---------
PROPERTY AND EQUIPMENT...................................... 348,960 315,702
Accumulated depreciation.................................. (44,506) (33,000)
--------- ---------
Property and equipment, net............................... 304,454 282,702
--------- ---------
DEFERRED CHARGES............................................ 58,666 60,770
Accumulated amortization.................................. (13,082) (13,985)
--------- ---------
Deferred charges, net..................................... 45,584 46,785
--------- ---------
FOREIGN EXCHANGE PUT OPTIONS, net........................... 6,584 7,958
--------- ---------
L 513,521 L 445,854
========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable and accrued expenses..................... L 25,210 L 23,605
Accrued interest.......................................... 323
Current portion of long-term debt......................... 1,943 1,683
Due to affiliates......................................... 1,161 920
--------- ---------
Total current liabilities......................... 28,637 26,208
--------- ---------
LONG-TERM DEBT, less current portion........................ 330,695 234,010
--------- ---------
FOREIGN EXCHANGE CALL OPTION................................ 2,515 2,688
--------- ---------
LONG-TERM DEBT, due to shareholder.......................... 11,775 11,272
--------- ---------
COMMITMENTS AND CONTINGENCIES
SHAREHOLDERS' EQUITY
Preferred shares, L0.1 par value -- authorized 10,000,000
shares; issued, none...................................
Class A common shares, L.01 par value -- authorized
50,000,000 shares; issued, 37,231,997.................. 372 372
Class B common shares, L.01 par value -- authorized
50,000,000 shares; issued, 12,872,605.................. 129 129
Additional capital........................................ 358,548 358,548
Accumulated deficit....................................... (219,150) (187,373)
--------- ---------
Total shareholders' equity........................ 139,899 171,676
--------- ---------
L 513,521 L 445,854
========= =========
</TABLE>
See notes to condensed consolidated financial statements.
F-58
<PAGE> 199
COMCAST UK CABLE PARTNERS LIMITED AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT
OF OPERATIONS AND ACCUMULATED DEFICIT
QUARTER ENDED JUNE 30, 1998
(UNAUDITED)
<TABLE>
<CAPTION>
SIX MONTHS ENDED THREE MONTHS ENDED
JUNE 30, JUNE 30,
---------------------- ----------------------
1998 1997 1998 1997
--------- --------- --------- ---------
(IN L000'S, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C>
REVENUES
Service income............................ L 36,027 L 25,205 L 18,725 L 13,087
Consulting fee income..................... 561 496 287 263
--------- --------- --------- ---------
36,588 25,701 19,012 13,350
--------- --------- --------- ---------
COSTS AND EXPENSES
Operating................................. 11,762 9,894 6,101 5,165
Selling, general and administrative....... 17,196 14,818 8,707 7,419
Management fees........................... 1,470 1,707 715 864
Depreciation and amortization............. 14,684 12,189 7,430 6,266
--------- --------- --------- ---------
45,112 38,608 22,953 19,714
--------- --------- --------- ---------
OPERATING LOSS.............................. (8,524) (12,907) (3,941) (6,364)
OTHER (INCOME) EXPENSE
Interest expense.......................... 17,407 12,285 8,937 6,234
Investment income......................... (4,489) (4,026) (2,260) (1,925)
Equity in net losses of affiliates........ 11,185 10,314 4,770 5,162
Exchange (gains) losses and other......... (850) 2,168 898 (2,727)
--------- --------- --------- ---------
23,253 20,741 12,345 6,744
--------- --------- --------- ---------
NET LOSS.................................... (31,777) (33,648) (16,286) (13,108)
ACCUMULATED DEFICIT
Beginning of period.................... (187,373) (120,017) (202,864) (140,557)
--------- --------- --------- ---------
End of period.......................... L(219,150) L(153,665) L(219,150) L(153,665)
========= ========= ========= =========
NET LOSS PER SHARE.......................... L (.63) L (.67) L (.32) L (.26)
========= ========= ========= =========
WEIGHTED AVERAGE NUMBER OF COMMON SHARES
OUTSTANDING DURING THE PERIOD............. 50,105 50,105 50,105 50,105
========= ========= ========= =========
</TABLE>
See notes to condensed consolidated financial statements.
F-59
<PAGE> 200
COMCAST UK CABLE PARTNERS LIMITED AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30,
--------------------
1998 1997
-------- --------
L000 L000
<S> <C> <C>
OPERATING ACTIVITIES
Net loss.................................................. (L31,777) (L33,648)
Adjustments to reconcile net loss to net cash provided by
operating activities:
Depreciation and amortization.......................... 14,684 12,189
Amortization on foreign exchange contracts............. 1,374 1,374
Non-cash interest expense.............................. 13,301 12,015
Non-cash investment income............................. (1,427) (1,149)
Exchange (gains) losses................................ (2,590) 1,780
Equity in net losses of affiliates..................... 11,185 10,314
Increase in accounts receivable and other current
assets................................................ (929) (813)
Increase in accounts payable and accrued expenses and
accrued interest...................................... 1,928 1,178
-------- --------
Net cash provided by operating activities......... 5,749 3,240
-------- --------
FINANCING ACTIVITIES
Repayments of debt........................................ (1,124) (800)
Proceeds from borrowings.................................. 86,000
Deferred financing costs.................................. (1,634)
Net transactions with affiliates.......................... (365) (272)
-------- --------
Net cash provided by (used in) financing
activities...................................... 82,877 (1,072)
-------- --------
INVESTING ACTIVITIES
Proceeds from sales of short-term investments, net........ 38,161
Capital contributions and loans to affiliates............. (1,768) (8,661)
Capital expenditures...................................... (31,701) (38,194)
Deferred charges.......................................... (214) (461)
-------- --------
Net cash used in investing activities............. (33,683) (9,155)
-------- --------
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS............ 54,943 (6,987)
CASH AND CASH EQUIVALENTS, beginning of period.............. 37,372 63,314
-------- --------
CASH AND CASH EQUIVALENTS, end of period.................... L 92,315 L 56,327
======== ========
</TABLE>
See notes to condensed consolidated financial statements.
F-60
<PAGE> 201
COMCAST UK CABLE PARTNERS LIMITED AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
QUARTER ENDED JUNE 30, 1998
(UNAUDITED)
1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Basis of Presentation
The condensed consolidated balance sheet as of December 31, 1997 has been
condensed from the audited consolidated balance sheet as of that date. The
condensed consolidated balance sheet as of June 30, 1998, the condensed
consolidated statement of operations and accumulated deficit for the six and
three months ended June 30, 1998 and 1997 and the condensed consolidated
statement of cash flows for the six months ended June 30, 1998 and 1997 have
been prepared by Comcast UK Cable Partners Limited (the "Company") and have not
been audited by the Company's independent auditors. In the opinion of
management, all adjustments (which include only normal recurring adjustments)
necessary to present fairly the financial position, results of operations and
cash flows as of June 30, 1998 and for all periods presented have been made.
Certain information and note disclosures normally included in the Company's
annual financial statements prepared in accordance with generally accepted
accounting principles have been condensed or omitted. These condensed
consolidated financial statements should be read in conjunction with the
financial statements and notes thereto included in the Company's December 31,
1997 Annual Report on Form 10-K filed with the Securities and Exchange
Commission. The results of operations for the periods ended June 30, 1998 are
not necessarily indicative of operating results for the full year.
Reclassifications
Certain reclassifications have been made to the prior year condensed
consolidated financial statements to conform to those classifications used in
1998.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
New Accounting Pronouncement
In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards ("SFAS") No. 133, "Accounting for Derivative
Instruments and Hedging Activities." This statement, which establishes
accounting and reporting standards for derivatives and hedging activities, is
effective for fiscal years beginning after June 15, 1999. Upon the adoption of
SFAS No. 133, all derivatives are required to be recognized in the statement of
financial position as either assets or liabilities and measured at fair value.
The Company is currently evaluating the impact the adoption of SFAS No. 133 will
have on its financial position and results of operations.
3. AMALGAMATION WITH NTL
On February 4, 1998, the Company entered into a definitive agreement to
amalgamate (the "NTL Transaction") with a wholly owned Bermuda subsidiary of NTL
Incorporated ("NTL"). NTL is an alternative telecommunications company in the
United Kingdom ("UK") and is listed on Nasdaq. The NTL Transaction is expected
to close in 1998, subject to, among other things, the receipt of required
Bermuda and UK regulatory approvals, the approval of the Company's and NTL's
shareholders, the consent of the Company's and NTL's bondholders, the consent of
certain NTL bank lenders and other customary closing matters. Comcast
Corporation ("Comcast"), through its indirect wholly owned subsidiary, Comcast
U.K. Holdings, Inc. ("Holdings"), is the sole holder of the multiple-voting
Class B Common Shares of the Company and has agreed to vote for the transaction,
assuring its approval by the Company's shareholders. Upon consummation of the
NTL Transaction, the Company would become a wholly owned subsidiary of NTL.
F-61
<PAGE> 202
COMCAST UK CABLE PARTNERS LIMITED AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
QUARTER ENDED JUNE 30, 1998
(UNAUDITED)
Except in the circumstances described below, the Company's shareholders
will receive 0.3745 shares of NTL common stock for each of the Company's Class A
Common Shares or Class B Common Shares. If the average closing price of the NTL
common stock for a specified period of time prior to the Company's shareholders
meeting to approve the NTL Transaction (the "Average Price") is less than
$26.70, the Company will have the option to terminate the NTL Transaction,
subject to the right of NTL to adjust the exchange ratio such that one share of
the Company's Class A Common Shares or Class B Common Shares will be exchanged
for a number of shares of NTL common stock equal to $10.00 (based on the Average
Price).
Pursuant to existing arrangements between the Company and Telewest
Communications plc ("Telewest"), a co-owner of interests in Cable London PLC
("Cable London") and Birmingham Cable Corporation Limited ("Birmingham Cable"),
Telewest has certain rights (the "Telewest Rights") to acquire either or both of
the Company's interests in these systems (see Note 4) as a result of the NTL
Transaction. However, as described in the following paragraphs, the consummation
of the NTL Transaction is not dependent on the resolution of the Telewest
Rights.
If the Telewest Rights have been exercised prior to the closing of the NTL
Transaction, the Company's shareholders may receive (at the option of NTL), in
lieu of a portion of the consideration allocable to the interest subject to the
exercised Telewest Rights, the per share proceeds from the sale of the interest
to Telewest (as adjusted including for taxes), payable in cash or shares of NTL
common stock valued at the greater of $30.00 per share or the Average Price at
closing (the "Exercise Consideration").
Similarly, if at closing either of the Telewest Rights have not been
exercised and have not been waived or otherwise expired, the Company's
shareholders may receive (at the option of NTL), shares of a new class of NTL
preferred stock equal to a portion of the consideration allocable to the
interest subject to the unexercised Telewest Rights. Any shares of NTL preferred
stock would have the same voting and dividend rights as shares of NTL common
stock, would be subject to redemption as described below, and would be expected
to be listed for trading on Nasdaq. If following closing the Telewest Rights are
exercised, the NTL preferred stock will be redeemed for the Exercise
Consideration (based on the Average Price at the time of exercise). If the
Telewest Rights are resolved without being exercised, the NTL preferred stock
will be redeemed for NTL common stock on a one-for-one basis.
Of the consideration to be received by the Company's shareholders in the
NTL Transaction, the parties have allocated 31% to the Company's interest in
Cable London and 17% to the Company's interest in Birmingham Cable. However, if
either or both of the Telewest Rights are exercised, the actual consideration to
be received by the Company's shareholders may be materially different from the
portion of the consideration (the "allocable portion") which has been allocated
by the parties to the Company's respective interests in Cable London and
Birmingham Cable, depending on, among other things, the value of these
interests, as finally determined, whether NTL exercises its option to deliver
the Exercise Consideration in lieu of the allocable portion, and the amount of
any taxes payable by the Company on the sale of these interests.
4. INVESTMENTS IN AFFILIATES
The Company has invested in two affiliates: Birmingham Cable and Cable
London (together, the "Equity Investees"). The Equity Investees operate
integrated cable communications, residential telephony and business
telecommunications systems in their respective major metropolitan areas under
exclusive cable television licenses and non-exclusive telecommunications
licenses. As of June 30, 1998, the Company's ownership interest in the Equity
Investees is as follows:
<TABLE>
<S> <C>
Birmingham Cable............................................ 27.5%
Cable London................................................ 50.0%
</TABLE>
F-62
<PAGE> 203
COMCAST UK CABLE PARTNERS LIMITED AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
QUARTER ENDED JUNE 30, 1998
(UNAUDITED)
Included in investments in affiliates as of June 30, 1998 and December 31,
1997, are loans to Cable London of L28.5 million and accrued interest of L7.3
million and L6.0 million, respectively. The loans accrue interest at a rate of
2% above the published base lending rate of Barclays Bank plc (9.5% effective
rate as of June 30, 1998) and are subordinate to Cable London's credit facility.
Of these loans, L21.0 million as of June 30, 1998 and December 31, 1997, are
convertible into ordinary shares of Cable London at a per share conversion price
of L2.00. Also included in investments in affiliates as of June 30, 1998 and
December 31, 1997, are loans to Birmingham Cable of L3.7 million and L1.9
million and accrued interest of L248,000 and L133,000, respectively. The
Birmingham Cable loans accrue interest at a fixed rate of 7.8% and are
subordinate to Birmingham Cable's credit facility.
Although the Company is not contractually committed to make any additional
capital contributions or advances to the Equity Investees, it currently intends
to fund its share of the amounts necessary for capital expenditures and to
finance operating deficits. Failure to do so could dilute the Company's
ownership interests in the Equity Investees.
Summarized financial information for affiliates accounted for under the
equity method is as follows:
<TABLE>
<CAPTION>
BIRMINGHAM CABLE
CABLE LONDON COMBINED
---------- -------- --------
L000 L000 L000
<S> <C> <C> <C>
SIX MONTHS ENDED JUNE 30, 1998
Results of operations
Service income.................................. L 37,975 L 32,178 L 70,153
Operating, selling, general and administrative
expenses..................................... (29,276) (25,207) (54,483)
Depreciation and amortization................... (13,742) (10,976) (24,718)
Operating loss.................................. (5,043) (4,005) (9,048)
Net loss........................................ (19,078) (11,530) (30,608)
Company's equity in net loss.................... (5,324) (5,861) (11,185)
THREE MONTHS ENDED JUNE 30, 1998
Results of operations
Service income.................................. 19,196 16,243 35,439
Operating, selling, general and administrative
expenses..................................... (14,694) (12,544) (27,238)
Depreciation and amortization................... (7,256) (5,520) (12,776)
Operating loss.................................. (2,754) (1,821) (4,575)
Net loss........................................ (6,733) (5,660) (12,393)
Company's equity in net loss.................... (1,892) (2,878) (4,770)
AT JUNE 30, 1998
Financial position
Current assets.................................. 11,295 11,298 22,593
Noncurrent assets............................... 246,011 188,914 434,925
Current liabilities............................. 21,749 22,032 43,781
Noncurrent liabilities.......................... 182,306 189,958 372,264
</TABLE>
F-63
<PAGE> 204
COMCAST UK CABLE PARTNERS LIMITED AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
QUARTER ENDED JUNE 30, 1998
(UNAUDITED)
<TABLE>
<CAPTION>
BIRMINGHAM CABLE
CABLE LONDON COMBINED
---------- -------- --------
L000 L000 L000
<S> <C> <C> <C>
SIX MONTHS ENDED JUNE 30, 1997
Results of operations
Service income.................................. L 31,800 L 24,693 L 56,493
Operating, selling, general and administrative
expenses..................................... (27,645) (22,294) (49,939)
Depreciation and amortization................... (13,035) (8,890) (21,925)
Operating loss.................................. (8,880) (6,491) (15,371)
Net loss........................................ (15,364) (11,879) (27,243)
Company's equity in net loss.................... (4,295) (6,019) (10,314)
THREE MONTHS ENDED JUNE 30, 1997
Results of operations
Service income.................................. 16,406 13,022 29,428
Operating, selling, general and administrative
expenses..................................... (14,191) (11,258) (25,449)
Depreciation and amortization................... (6,742) (4,632) (11,374)
Operating loss.................................. (4,527) (2,868) (7,395)
Net loss........................................ (8,009) (5,770) (13,779)
Company's equity in net loss.................... (2,237) (2,925) (5,162)
</TABLE>
5. LONG-TERM DEBT
UK Holdings Credit Facility
In December 1997, Comcast UK Holdings Limited ("UK Holdings"), a wholly
owned subsidiary of the Company, entered into a loan agreement (the "UK Holdings
Agreement") with a consortium of banks to provide financing under a credit
facility (the "UK Holdings Credit Facility") up to a maximum of L200.0 million.
Under the terms of the UK Holdings Agreement, borrowings under the UK Holdings
Credit Facility are guaranteed by Cambridge Holding Company Limited ("Cambridge
Cable") and two companies holding the franchises for Darlington and Teesside,
England ("Teesside"). Cambridge Cable and Teesside are wholly owned subsidiaries
of the Company.
In January 1998, UK Holdings borrowed L75.0 million under the UK Holdings
Credit Facility. Of this initial borrowing, L50.4 million was paid to the
Company as a dividend and L17.8 million was used to fund capital expenditures
and working capital requirements at Cambridge Cable and Teesside. Final maturity
of the UK Holdings Credit Facility is January 31, 2001. The UK Holdings Credit
Facility bears interest at a rate per annum equal to the London Interbank
Offered Rate ("LIBOR") plus 1/2% to 2 1/4%. As of June 30, 1998 the Company's
effective weighted average interest rate on the UK Holdings Credit Facility was
9.48%.
The consummation of the NTL Transaction will result in a change in control,
as defined in the UK Holdings Credit Facility. Upon a change in control, all
amounts outstanding under the UK Holdings Credit Facility will become
immediately due and payable.
6. RELATED PARTY TRANSACTIONS
Comcast U.K. Consulting, Inc., a wholly owned subsidiary of the Company,
earns consulting fee income under consulting agreements with the Equity
Investees. The consulting fee income is generally based on a percentage of gross
revenues or a fixed amount per dwelling unit in the Equity Investees' franchise
areas.
F-64
<PAGE> 205
COMCAST UK CABLE PARTNERS LIMITED AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (CONCLUDED)
QUARTER ENDED JUNE 30, 1998
(UNAUDITED)
The Company's right to receive consulting fee payments from the Equity
Investees has been subordinated to the banks under their credit facilities.
Accordingly, these fees have been classified as long-term receivables and are
included in investments in affiliates in the Company's condensed consolidated
balance sheet. In addition, the Company's shares in Cable London have been
pledged to secure amounts outstanding under Cable London's revolving credit
facility.
Management fee expense is incurred under agreements between the Company on
the one hand, and Comcast, the Company's controlling shareholder, and Comcast UK
Cable Partners Consulting, Inc. ("Comcast Consulting"), an indirect wholly owned
subsidiary of Comcast, on the other, whereby Comcast and Comcast Consulting
provide consulting services to the Equity Investees on behalf of the Company and
management services to the Company. Such management fees are based on Comcast's
and Comcast Consulting's cost of providing such services. As of June 30, 1998
and December 31, 1997, due to affiliates consists primarily of this management
fee and operating expenses paid by Comcast and its affiliates on behalf of the
Company.
For the six and three months ended June 30, 1998 and 1997, investment
income includes L1.4 million, L1.1 million, L733,000 and L620,000 of interest
income, respectively, relating to the loans to the Equity Investees.
Long-term debt due to shareholder consists of 9% Subordinated Notes payable
to Holdings which are due in September 1999. For the six and three months ended
June 30, 1998 and 1997, the Company recorded L503,000, L461,000, L258,000 and
L237,000, respectively, of interest expense relating to such notes.
In management's opinion, the foregoing transactions were entered into on
terms no more or less favorable than those with non-affiliated parties.
7. CONTINGENCIES
The Company is subject to legal proceedings and claims which arise in the
ordinary course of its business. In the opinion of management, the amount of
ultimate liability with respect to these actions will not materially affect the
financial position, results of operations or liquidity of the Company.
8. STATEMENT OF CASH FLOWS -- SUPPLEMENTAL INFORMATION
The Company made cash payments for interest of L3.8 million, L270,000, L2.2
million and L135,000 during the six and three months ended June 30, 1998 and
1997, respectively.
The Company's wholly owned subsidiaries incurred capital lease obligations
of L1.7 million, L607,000, L426,000 and L607,000 during the six and three months
ended June 30, 1998 and 1997, respectively.
F-65
<PAGE> 206
INDEPENDENT AUDITORS' REPORT
Board of Directors and Shareholders
Birmingham Cable Corporation Limited
We have audited the accompanying consolidated balance sheet of Birmingham
Cable Corporation Limited (a company incorporated in the United Kingdom) and
subsidiaries as of December 31, 1997 and 1996, and the related consolidated
statements of operations, shareholders' equity and of cash flows for each of the
three years in the period ended December 31, 1997. These financial statements
are the responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally
accepted in the United States of America. Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, such consolidated financial statements present fairly, in
all material respects, the financial position of Birmingham Cable Corporation
Limited and subsidiaries as of December 31, 1997 and 1996, and the results of
their operations and their cash flows for each of the three years in the period
ended December 31, 1997 in conformity with accounting principles generally
accepted in the United States of America.
DELOITTE & TOUCHE
Birmingham, England
February 27, 1998 (March 16, 1998 as to Note 3)
F-66
<PAGE> 207
BIRMINGHAM CABLE CORPORATION LIMITED AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
(IN L000'S, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------
1997 1996
-------- --------
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents................................. L 2,254 L 7,689
Restricted cash........................................... 53,000
Accounts receivable, less allowance for doubtful accounts
of L4,834 and L2,360................................... 6,326 4,809
Interest receivable....................................... 2,016
Other current assets...................................... 2,844 3,017
-------- --------
Total current assets................................... 11,424 70,531
-------- --------
RESTRICTED CASH............................................. 22,000
-------- --------
PROPERTY AND EQUIPMENT...................................... 310,111 269,665
Accumulated depreciation.................................. (74,214) (49,961)
-------- --------
Property and equipment, net............................... 235,897 219,704
-------- --------
DEFERRED CHARGES............................................ 18,112 16,890
Accumulated amortization.................................. (5,398) (3,479)
-------- --------
Deferred charges, net..................................... 12,714 13,411
-------- --------
L260,035 L325,646
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable and accrued expenses..................... L 18,997 L 24,381
Accrued interest.......................................... 1,611 7,398
Current portion of capital lease obligations.............. 1,685 1,849
-------- --------
Total current liabilities.............................. 22,293 33,628
-------- --------
LONG-TERM DEBT.............................................. 140,000
-------- --------
CAPITAL LEASE OBLIGATIONS, less current portion............. 13,539 11,625
-------- --------
LONG-TERM DEBT, due to shareholders......................... 7,492
-------- --------
OTHER LIABILITIES........................................... 4,382 2,238
-------- --------
COMMITMENTS AND CONTINGENCIES
PREFERENCE SHARES........................................... 175,000
-------- --------
SHAREHOLDERS' EQUITY
Ordinary shares, L1.00 par value -- authorized, 60,000,000
shares; issued, 51,073,486............................. 51,073 51,073
Additional capital........................................ 112,399 112,399
Accumulated deficit....................................... (91,143) (60,317)
-------- --------
Total shareholders' equity............................. 72,329 103,155
-------- --------
L260,035 L325,646
======== ========
</TABLE>
See notes to consolidated financial statements.
F-67
<PAGE> 208
BIRMINGHAM CABLE CORPORATION LIMITED AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF OPERATIONS
(IN L000'S)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------
1997 1996 1995
-------- -------- --------
<S> <C> <C> <C>
SERVICE INCOME.............................................. L 67,166 L 52,472 L 39,004
-------- -------- --------
COSTS AND EXPENSES
Operating................................................. 28,942 20,912 16,358
Selling, general and administrative....................... 27,622 23,564 19,536
Depreciation and amortization............................. 26,427 19,690 14,455
-------- -------- --------
82,991 64,166 50,349
-------- -------- --------
OPERATING LOSS.............................................. (15,825) (11,694) (11,345)
INTEREST EXPENSE............................................ 17,500 17,202 13,993
INVESTMENT INCOME........................................... (2,499) (8,518) (11,059)
-------- -------- --------
NET LOSS.................................................... L(30,826) L(20,378) L(14,279)
======== ======== ========
</TABLE>
See notes to consolidated financial statements.
F-68
<PAGE> 209
BIRMINGHAM CABLE CORPORATION LIMITED AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
(IN L000'S)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------------
1997 1996 1995
--------- -------- ---------
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net loss............................................... L (30,826) L(20,378) L (14,279)
Adjustments to reconcile net loss to net cash (used in)
provided by operating activities:
Depreciation and amortization....................... 26,427 19,690 14,455
Non-cash interest expense........................... 492
Decrease (increase) in accounts receivable, interest
receivable and other current assets............... 672 4,939 (7,438)
(Decrease) increase in accounts payable and accrued
expenses, accrued interest and other
liabilities....................................... (9,027) 10,559 6,469
--------- -------- ---------
Net cash (used in) provided by operating
activities..................................... (12,262) 14,810 (793)
--------- -------- ---------
FINANCING ACTIVITIES
Proceeds from borrowings............................... 140,000 175,000
Loans from shareholders................................ 7,000
Debt acquisition costs................................. (2,977)
Redemption of preference shares........................ (175,000)
Repayment of capital leases............................ (2,316) (1,161) (220)
--------- -------- ---------
Net cash (used in) provided by financing
activities........................................ (30,316) (1,161) 171,803
--------- -------- ---------
INVESTING ACTIVITIES
Restricted cash........................................ 75,000 39,000 (114,000)
Capital expenditures................................... (36,635) (56,492) (47,999)
Deferred charges....................................... (1,222) (991) (601)
--------- -------- ---------
Net cash provided by (used in) investing
activities..................................... 37,143 (18,483) (162,600)
--------- -------- ---------
(DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS......... (5,435) (4,834) 8,410
CASH AND CASH EQUIVALENTS, beginning of year............. 7,689 12,523 4,113
--------- -------- ---------
CASH AND CASH EQUIVALENTS, end of year................... L 2,254 L 7,689 L 12,523
========= ======== =========
</TABLE>
See notes to consolidated financial statements.
F-69
<PAGE> 210
BIRMINGHAM CABLE CORPORATION LIMITED AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
(IN L000'S)
<TABLE>
<CAPTION>
ORDINARY ADDITIONAL ACCUMULATED
SHARES CAPITAL DEFICIT TOTAL
-------- ---------- ----------- --------
<S> <C> <C> <C> <C>
BALANCE, JANUARY 1, 1995....................... L51,073 L112,399 L(25,660) L137,812
Net loss..................................... (14,279) (14,279)
------- -------- -------- --------
BALANCE, DECEMBER 31, 1995..................... 51,073 112,399 (39,939) 123,533
Net loss..................................... (20,378) (20,378)
------- -------- -------- --------
BALANCE, DECEMBER 31, 1996..................... 51,073 112,399 (60,317) 103,155
Net loss..................................... (30,826) (30,826)
------- -------- -------- --------
BALANCE, DECEMBER 31, 1997..................... L51,073 L112,399 L(91,143) L 72,329
======= ======== ======== ========
</TABLE>
See notes to consolidated financial statements.
F-70
<PAGE> 211
BIRMINGHAM CABLE CORPORATION LIMITED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
1. BUSINESS
Birmingham Cable Corporation Limited, a company incorporated in the United
Kingdom ("UK"), and subsidiaries (the "Company") is principally engaged in the
development, construction, management and operation of cable telecommunications
systems. The Company holds two franchises in Birmingham/Solihull and Wythall,
England.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Accounting
The Company maintains its books and records in accordance with accounting
principles generally accepted in the UK. The consolidated financial statements
have been prepared in accordance with generally accepted accounting principles
as practiced in the United States ("US") and are stated in UK pounds sterling
("UK Pound"). There were no significant differences between accounting
principles followed for UK purposes and generally accepted accounting principles
practiced in the US. The UK Pound exchange rate as of December 31, 1997 and 1996
was US $1.65 and US $1.71, respectively.
Basis of Consolidation
The consolidated financial statements include the accounts of the Company
and all wholly owned subsidiaries. All significant intercompany accounts and
transactions among the consolidated entities have been eliminated.
Management's Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
Fair Values
The estimated fair value amounts presented in these notes to consolidated
financial statements have been determined by the Company using available market
information and appropriate methodologies. However, considerable judgment is
required in interpreting market data to develop the estimates of fair value. The
estimates presented herein are not necessarily indicative of the amounts that
the Company could realize in a current market exchange. The use of different
market assumptions and/or estimation methodologies may have a material effect on
the estimated fair value amounts. Such fair value estimates are based on
pertinent information available to management as of December 31, 1997 and 1996,
and have not been comprehensively revalued for purposes of these consolidated
financial statements since such dates.
Cash, Cash Equivalents and Restricted Cash
Cash, cash equivalents and restricted cash as of December 31, 1996 included
cash held on deposit as part of a L175.0 million financing arrangement entered
into by the Company in 1995. In July 1997 this arrangement was restructured and
the restricted cash was used, together with proceeds from the Birmingham
Facility, to redeem the preference shares (see Note 3).
F-71
<PAGE> 212
BIRMINGHAM CABLE CORPORATION LIMITED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
Prematurity Period
The Company accounts for costs, expenses and revenues applicable to the
construction and operation of its cable telecommunications systems under the
provisions of Statement of Financial Accounting Standards ("SFAS") No. 51,
"Financial Reporting by Cable Television Companies."
Under SFAS No. 51, during the period while the systems are partially under
construction and partially in service (the "Prematurity Period"), costs of cable
telecommunications plant, including materials, direct labor and construction
overhead are capitalized. Subscriber-related costs and general and
administrative costs are expensed as incurred. Costs incurred in anticipation of
servicing a fully operating system that will not vary regardless of the number
of subscribers are partially expensed and partially capitalized, based upon the
percentage of average actual or estimated subscribers, whichever is greater, to
the total number of subscribers expected at the end of the Prematurity Period
(the "Fraction").
During the Prematurity Period, depreciation and amortization of system
assets is determined by multiplying the depreciation and amortization of the
total capitalized system assets expected at the end of the Prematurity Period by
the Fraction. At the end of the Prematurity Period, depreciation and
amortization of system assets is based on the remaining undepreciated cost at
that date.
As of December 31, 1997, all of the Company's seven discrete build areas
have completed their Prematurity Period.
Property and Equipment
Property and equipment, which consists principally of system assets, is
shown at historical cost less accumulated depreciation. Improvements that extend
asset lives are capitalized; other repairs and maintenance charges are expensed
as incurred. The cost and related accumulated depreciation applicable to assets
sold or retired are removed from the accounts and the gain or loss on
disposition is recognized as a component of depreciation expense.
System assets
Prior to the Prematurity Period, no depreciation is provided on system
assets. During the Prematurity Period, depreciation is provided in accordance
with SFAS No. 51.
Depreciation of system assets is provided by the straight-line method over
estimated useful lives as follows:
<TABLE>
<S> <C>
Plant....................................................... 15-40 years
Network..................................................... 15 years
Subscriber equipment........................................ 6-10 years
Switch...................................................... 10 years
Computers................................................... 4 years
</TABLE>
F-72
<PAGE> 213
BIRMINGHAM CABLE CORPORATION LIMITED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
Non-system assets
Depreciation of non-system assets is provided by the straight-line method
over estimated useful lives as follows:
<TABLE>
<S> <C>
Buildings................................................... 40 years
Leasehold buildings......................................... term of lease
Fixtures, fittings and equipment............................ 5 years
Computers................................................... 4 years
Vehicles.................................................... 4 years
</TABLE>
Leased Assets
Assets held under capital leases are treated as if they had been purchased
outright and the corresponding liability is included in capital lease
obligations. Capital lease payments include principal and interest, with the
interest portion being expensed. Payments on operating leases are expensed on a
straight-line basis over the lease term.
Deferred Charges
Deferred charges consist primarily of franchise acquisition and development
costs directly attributable to obtaining, developing and maintaining the
franchise licenses. Franchise acquisition and development costs have been
allocated evenly between each build area and are amortized, by build area, on a
straight-line basis, over the lives of the franchises of 15 to 23 years.
Valuation of Long-Lived Assets
The Company periodically evaluates the recoverability of its long-lived
assets, including property and equipment and deferred charges, using objective
methodologies. Such methodologies include evaluations based on the cash flows
generated by the underlying assets or other determinants of fair value.
Revenue Recognition
Service income is recognized as service is provided. Credit risk is managed
by disconnecting services to subscribers who are delinquent.
Income Taxes
The Company recognizes deferred tax assets and liabilities for temporary
differences between the financial reporting basis and the tax basis of the
Company's assets and liabilities and expected benefits of utilizing net
operating loss carryforwards. The impact on deferred taxes of changes in tax
rates and laws, if any, applied to the years during which temporary differences
are expected to be settled, are reflected in the financial statements in the
period of enactment.
Derivative Financial Instruments
The Company uses interest rate exchange agreements ("Swaps"), to manage its
exposure to fluctuations in interest rates. Swaps are matched with either fixed
or variable rate debt and periodic cash payments are accrued on a settlement
basis as an adjustment to interest expense.
Those instruments that have been entered into by the Company to hedge
exposure to interest rate risks are periodically examined by the Company to
ensure that the instruments are matched with underlying
F-73
<PAGE> 214
BIRMINGHAM CABLE CORPORATION LIMITED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
liabilities, reduce the Company's risks relating to interest rates and, through
market value and sensitivity analysis, maintain a high correlation to the
interest expense or underlying value of the hedged item.
The Company does not hold or issue any derivative financial instruments for
trading purposes and is not a party to any leveraged instruments (see Note 3).
The credit risks associated with the Company's derivative financial instruments
are controlled through the evaluation and monitoring of the creditworthiness of
the counterparties. Although the Company may be exposed to losses in the event
of nonperformance by the counterparties, the Company does not expect such
losses, if any, to be significant.
Reclassifications
Certain reclassifications have been made to the prior years' consolidated
financial statements to conform to those classifications used in 1997.
3. LONG-TERM DEBT AND PREFERENCE SHARES
In February 1995, a subsidiary of the Company issued 175,000 cumulative
L1.00 redeemable five year term preference shares for a paid up value of L175.0
million. Also in February 1995, the Company entered into a L175.0 million five
year revolving credit facility (the "Birmingham Facility") which provided for
conversion into a five year term loan on March 31, 2000. In March 1997, the
terms of the Birmingham Facility were amended to extend the maturity of the term
loan to December 31, 2005 and to amend the required cash flow levels (as
defined) and certain other terms. Interest rates on the Birmingham Facility are
at the London Interbank Offered Rate ("LIBOR") plus 5/8% to 2 1/4%.
In July 1997, the preference shareholder exercised its option to require
the Company to purchase its shareholding. The Company funded the redemption of
the preference shares with the proceeds from the Birmingham Facility and
restricted cash and settled its five year L175.0 million interest rate exchange
agreement with Barclays Bank PLC. The balance of the Birmingham Facility will be
used, subject to certain restrictions, for capital expenditures and working
capital requirements relating to the build-out of its systems. The preference
shares had an effective dividend rate, including Advanced Corporation Tax
("ACT"), of 8.00%.
The Birmingham Facility contains restrictive covenants which limit the
Company's ability to enter into arrangements for the acquisition and sale of
property and equipment, investments, mergers and the incurrence of additional
debt. Certain of these covenants require that certain minimum build
requirements, financial ratios and cash flow levels be maintained and contain
restrictions on dividend payments. The Company's three principal shareholders'
right to receive consulting fee payments from the Company has been subordinated
to the banks under the Birmingham Facility. The payment of consulting fees is
restricted until the Company meets certain financial ratio tests under the
Birmingham Facility. The Company has pledged the shares of its material
subsidiaries to secure the Birmingham Facility. Upon a change of control, all
amounts due under the Birmingham Facility become immediately due and payable. On
February 4, 1998, Comcast UK Cable Partners Limited ("Comcast UK"), one the
Company's principal shareholders, entered into a definitive agreement to
amalgamate (the "NTL Transaction") with a wholly owned subsidiary of NTL
Incorporated. The consummation of the NTL Transaction will not result in a
change of control as defined in the Birmingham Facility.
The Company enters into Swaps as a normal part of its risk management
efforts to limit its exposure to adverse fluctuations in interest rates. Using
Swaps, the Company agrees to exchange, at specified intervals, the difference
between fixed and variable interest amounts calculated by reference to an agreed
upon notional amount. In conjunction with the Birmingham Facility, a subsidiary
of the Company and Barclays Bank PLC entered into a five year L175.0 million
Swap, whereby the subsidiary receives fixed interest at a rate of 8.83%
F-74
<PAGE> 215
BIRMINGHAM CABLE CORPORATION LIMITED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
and pays floating rate interest at the six month LIBOR. The L175.0 million Swap
was settled in July 1997 along with the redemption of the preference shares (see
above). In addition, a subsidiary of the Company entered into a second series of
five year Swaps with three banks. Under the agreements, the subsidiary pays
fixed rate interest at 9.20% and receives floating rate interest at six month
LIBOR, based upon the outstanding notional amount of the Swaps. As of December
31, 1997 and 1996, the notional amount outstanding on the second series of Swaps
was L149.0 million and L106.0 million, respectively, and increased to L160.0
million on January 2, 1998. The notional amounts of interest rate agreements are
used to measure interest to be paid or received and do not represent the amount
of exposure to credit loss. While Swaps represent an integral part of the
Company's interest rate risk management program, their incremental effect on
interest expense for the years ended December 31, 1997, 1996 and 1995 was not
significant. The estimated amount to settle the Company's Swaps was a liability
of L7.5 million and a receivable of L168,000 as of December 31, 1997 and 1996,
respectively.
On March 16, 1998, the Company's shareholders loaned L7.0 million to the
Company in the form of Junior Subordinated Debt, as defined in the Birmingham
Facility. The proceeds from this borrowing were used to settle the Swaps
described above. Additionally, on March 16, 1998 a subsidiary of the Company
entered into a L160.0 million notional amount two year Swap with three banks.
Under the terms of this Swap, the subsidiary pays fixed rate interest at 7.23%
and receives floating rate interest at six month LIBOR, based upon the notional
amount.
Maturities of long-term debt outstanding as of December 31, 1997 for the
four years after 1998 are as follows (L000's):
<TABLE>
<S> <C>
1999............................................... L
2000............................................... 7,000
2001............................................... 14,000
2002............................................... 21,000
</TABLE>
The differences between the carrying amounts and estimated fair value of
the Company's long-term debt was not significant as of December 31, 1997 and
1996. Interest rates that are currently available to the Company for debt with
similar terms and remaining maturities are used to estimate fair value for debt
issues for which quoted market prices are not available.
4. LONG-TERM DEBT, DUE TO SHAREHOLDERS
As of December 31, 1997, the Company had outstanding loans from
shareholders of L7.0 million and accrued interest thereon of L492,000. The loans
from shareholders bear interest at a fixed rate of 7.8% and are payable on
demand. Under the terms of the Birmingham Facility, however, principal and
interest on the loans from shareholders cannot be paid until the Birmingham
Facility is repaid. Thus, the loans from shareholders and accrued interest
thereon have been classified as long-term in the Company's consolidated balance
sheet. The carrying value of the loans from shareholders approximates fair value
as of December 31, 1997 and 1996.
5. RELATED PARTY TRANSACTIONS
The Company has consulting agreements with Comcast U.K. Consulting, Inc.
("Comcast Consulting") and Telewest Communications Group Ltd., subsidiaries of
two of the Company's principal shareholders, Comcast UK and Telewest
Communications plc ("Telewest"), respectively. The Company also has a consulting
agreement with General Cable, the Company's other principal shareholder. The
Company pays a fee to Telewest each year as a contribution to the operating
expenses and capital expenditures of Telewest's Network Service Center, which
provides telephony support to the Company. The Company has a telephony
F-75
<PAGE> 216
BIRMINGHAM CABLE CORPORATION LIMITED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
interconnect agreement with Telewest, whereby certain telephony traffic is
routed via Telewest. These interconnect costs are included in "other" below.
A summary of related party charges included in the Company's consolidated
financial statements is as follows (in L000's):
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
--------------------------
1996 1995 1997
------ ------ ------
<S> <C> <C> <C>
Consulting fees.......................................... L1,511 L1,326 L1,070
Network Service Center fees.............................. 711 814 680
Other.................................................... 1,151 109 6
------ ------ ------
L3,373 L2,249 L1,756
====== ====== ======
</TABLE>
As of December 31, 1997 and 1996, accounts payable and accrued expenses
include L1.4 million and L2.3 million, respectively, payable to the Company's
three principal shareholders, principally for consulting fees and normal
operating expenses paid by the shareholders and their affiliates on behalf of
the Company. As of December 31, 1997 and 1996, other long-term liabilities
includes L3.9 million and L1.3 million, respectively, of consulting fees payable
to the Company's three principal shareholders as payment is restricted under the
Birmingham Facility.
In management's opinion, the foregoing transactions were entered into on
terms no more or less favorable than those with non-affiliated third parties.
6. INCOME TAXES
The Company has a deferred tax asset arising from the carryforward of net
operating losses and the differences between the book and tax basis of property.
However, a valuation allowance has been recorded to fully reserve the deferred
tax asset as its realization is uncertain.
Significant components of the Company's deferred income taxes are as
follows (in L000's):
<TABLE>
<CAPTION>
DECEMBER 31
--------------------
1997 1996
-------- --------
<S> <C> <C>
Net operating loss carryforwards (carried forward
indefinitely)............................................. L 3,253 L 3,218
Differences between book and tax basis of property.......... 7,880 6,916
Less: Valuation allowance................................... (11,133) (10,134)
-------- --------
L L
======== ========
</TABLE>
In connection with the Birmingham Facility and the related preference share
arrangement (see Note 3), the Company is obligated to pay ACT on all preference
share dividends. Related ACT for 1997, 1996 and 1995 was L1.4 million, L2.8
million and L2.5 million, respectively, and has been classified as a component
of interest expense in the Company's consolidated statement of operations. ACT
may be carried forward indefinitely to offset potential future tax liabilities
of the Company.
7. STATEMENT OF CASH FLOWS -- SUPPLEMENTAL INFORMATION
The Company made cash payments for interest and preferred stock dividends
of approximately L43.0 million, L31.2 million and L11.3 million during the years
ended December 31, 1997, 1996 and 1995, respectively.
F-76
<PAGE> 217
BIRMINGHAM CABLE CORPORATION LIMITED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONCLUDED
YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
The Company incurred capital lease obligations of L4.1 million, L5.0
million and L4.6 million during the years ended December 31, 1997, 1996 and
1995, respectively.
8. COMMITMENTS AND CONTINGENCIES
Certain of the Company's facilities and equipment are held under operating
or capital leases which expire through 2007.
A summary of assets held under capital leases are as follows (in L000's):
<TABLE>
<CAPTION>
DECEMBER 31,
------------------
1997 1996
------- -------
<S> <C> <C>
System, fixtures, fittings, equipment and vehicles.......... L18,991 L14,925
Less: Accumulated depreciation.............................. (5,779) (3,556)
------- -------
L13,212 L11,369
======= =======
</TABLE>
Future minimum rental payments under lease commitments with an initial or
remaining term of more than one year as of December 31, 1997 are as follows (in
L000's):
<TABLE>
<CAPTION>
CAPITAL OPERATING
LEASES LEASES
-------- ---------
<S> <C> <C>
1998........................................................ L 2,699 L 156
1999........................................................ 2,801 156
2000........................................................ 2,778 156
2001........................................................ 2,300 157
2002........................................................ 1,719 154
Thereafter.................................................. 7,710 1,805
-------- -------
Total minimum rental commitments............................ 20,007 L 2,584
=======
Less: Amount representing interest.......................... (4,783)
--------
Present value of minimum rental commitments................. 15,224
Less: Current portion of capital lease obligations.......... (1,685)
--------
Long-term portion of capital lease obligations.............. L 13,539
========
</TABLE>
Operating lease expense for the years ended December 31, 1997, 1996 and
1995 was L169,000, L428,000 and L947,000, respectively.
Included within accounts payable and accrued expenses and other long-term
liabilities as of December 31, 1997 and 1996 is L570,000 and L665,000,
respectively, which represents the obligation incurred by the Company in
connection with the termination of a contractual obligation under an agreement
with the local authority to service and maintain the Company's satellite master
antenna television installations in the franchise area. This liability is
noninterest bearing and will be discharged by the payment of L95,000 annually
through 2003. The effect of discounting the liability is not significant to the
Company's financial position or results of operations.
F-77
<PAGE> 218
INDEPENDENT AUDITORS' REPORT
Board of Directors and Shareholders
Cable London PLC
We have audited the accompanying consolidated balance sheet of Cable London
PLC (a company incorporated in the United Kingdom) and subsidiaries as of
December 31, 1997 and 1996, and the related consolidated statements of
operations, shareholders' (deficiency) equity and of cash flows for each of the
three years in the period ended December 31, 1997. These financial statements
are the responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally
accepted in the United States of America. Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, such consolidated financial statements present fairly, in
all material respects, the financial position of Cable London PLC and
subsidiaries as of December 31, 1997 and 1996, and the results of their
operations and their cash flows for each of the three years in the period ended
December 31, 1997, in conformity with accounting principles generally accepted
in the United States of America.
DELOITTE & TOUCHE
London, England
February 27, 1998
F-78
<PAGE> 219
CABLE LONDON PLC AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
(IN L000'S, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
DECEMBER 31,
---------------------
1997 1996
--------- --------
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash...................................................... L 2,718 L 3,213
Accounts receivable, less allowance for doubtful accounts
of L1,762 and L1,465................................... 4,792 3,670
Other current assets...................................... 2,830 3,334
--------- --------
Total current assets.............................. 10,340 10,217
--------- --------
PROPERTY AND EQUIPMENT...................................... 235,786 192,630
Accumulated depreciation.................................. (55,292) (36,480)
--------- --------
Property and equipment, net............................... 180,494 156,150
--------- --------
DEFERRED CHARGES............................................ 8,073 6,986
Accumulated amortization.................................. (3,214) (3,230)
--------- --------
Deferred charges, net..................................... 4,859 3,756
--------- --------
L 195,693 L170,123
========= ========
LIABILITIES AND SHAREHOLDERS' (DEFICIENCY) EQUITY
CURRENT LIABILITIES
Accounts payable and accrued expenses..................... L 19,972 L 21,705
Other current liabilities................................. 2,172 3,117
Current portion of long-term debt and capital lease
obligations............................................ 758 60,361
--------- --------
Total current liabilities......................... 22,902 85,183
--------- --------
LONG-TERM DEBT, less current portion........................ 89,727 718
--------- --------
CAPITAL LEASE OBLIGATIONS, less current portion............. 11,751 7,869
--------- --------
CONVERTIBLE DEBT AND LOANS FROM SHAREHOLDERS................ 69,017 52,244
--------- --------
OTHER LIABILITIES........................................... 2,543
--------- --------
COMMITMENTS AND CONTINGENCIES
SHAREHOLDERS' (DEFICIENCY) EQUITY
Ordinary shares, L.10 par value--authorized, 100,000,000
shares; issued, 55,572,916 and 55,125,690.............. 5,557 5,513
Additional capital........................................ 97,254 96,486
Accumulated deficit....................................... (103,058) (77,890)
--------- --------
Total shareholders' (deficiency) equity................ (247) 24,109
--------- --------
L 195,693 L170,123
========= ========
</TABLE>
See notes to consolidated financial statements.
F-79
<PAGE> 220
CABLE LONDON PLC AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF OPERATIONS
(IN L000'S)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------------
1997 1996 1995
-------- -------- --------
<S> <C> <C> <C>
SERVICE INCOME............................................. L 52,816 L 40,091 L 30,277
-------- -------- --------
COSTS AND EXPENSES
Operating................................................ 22,084 17,978 14,622
Selling, general and administrative...................... 23,703 21,157 18,616
Depreciation and amortization............................ 19,740 14,862 10,847
-------- -------- --------
65,527 53,997 44,085
-------- -------- --------
OPERATING LOSS............................................. (12,711) (13,906) (13,808)
INTEREST EXPENSE........................................... 12,692 7,556 4,133
INVESTMENT INCOME.......................................... (235) (221) (266)
-------- -------- --------
NET LOSS................................................... L(25,168) L(21,241) L(17,675)
======== ======== ========
</TABLE>
See notes to consolidated financial statements.
F-80
<PAGE> 221
CABLE LONDON PLC AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
(IN L000'S)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------------
1997 1996 1995
-------- -------- --------
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net loss................................................. L(25,168) L(21,241) L(17,675)
Adjustments to reconcile net loss to net cash (used in)
provided by operating activities:
Depreciation and amortization......................... 19,740 14,862 10,847
Non-cash interest expense............................. 4,773 3,355 3,311
Increase in accounts receivable and other current
assets.............................................. (618) (2,428) (214)
(Decrease) increase in accounts payable and accrued
expenses, other current liabilities and other
liabilities......................................... (135) 7,508 3,992
-------- -------- --------
Net cash (used in) provided by operating
activities....................................... (1,408) 2,056 261
-------- -------- --------
FINANCING ACTIVITIES
Proceeds from borrowings................................. 94,029 40,000 38,000
Debt acquisition costs................................... (1,704) (493)
Loans from shareholders.................................. 12,000 3,000
Repayments of debt....................................... (65,031) (33) (30)
Repayment of capital leases.............................. (537) (21)
Issuances of shares...................................... 812
-------- -------- --------
Net cash provided by financing activities........... 39,569 42,946 37,477
-------- -------- --------
INVESTING ACTIVITIES
Capital expenditures..................................... (38,656) (46,082) (36,780)
Deferred charges and other............................... (834)
-------- -------- --------
Net cash used in investing activities............... (38,656) (46,082) (37,614)
-------- -------- --------
(DECREASE) INCREASE IN CASH................................ (495) (1,080) 124
CASH, beginning of year.................................... 3,213 4,293 4,169
-------- -------- --------
CASH, end of year.......................................... L 2,718 L 3,213 L 4,293
======== ======== ========
</TABLE>
See notes to consolidated financial statements.
F-81
<PAGE> 222
CABLE LONDON PLC AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF SHAREHOLDERS' (DEFICIENCY) EQUITY
(IN L000'S)
<TABLE>
<CAPTION>
ORDINARY ADDITIONAL ACCUMULATED
SHARES CAPITAL DEFICIT TOTAL
-------- ---------- ----------- --------
<S> <C> <C> <C> <C>
BALANCE, JANUARY 1, 1995........................ L5,513 L96,486 L (38,974) L 63,025
Net loss...................................... (17,675) (17,675)
------ ------- --------- --------
BALANCE, DECEMBER 31, 1995...................... 5,513 96,486 (56,649) 45,350
Net loss...................................... (21,241) (21,241)
------ ------- --------- --------
BALANCE, DECEMBER 31, 1996...................... 5,513 96,486 (77,890) 24,109
Shares issued................................. 44 768 812
Net loss...................................... (25,168) (25,168)
------ ------- --------- --------
BALANCE, DECEMBER 31, 1997...................... L5,557 L97,254 L(103,058) L (247)
====== ======= ========= ========
</TABLE>
See notes to consolidated financial statements.
F-82
<PAGE> 223
CABLE LONDON PLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
1. BUSINESS
Cable London PLC, a company incorporated in the United Kingdom ("UK"), and
subsidiaries (the "Company") is principally engaged in the development,
construction, management and operation of cable telecommunications systems. The
Company holds four franchises covering Camden, Haringey, Hackney/ Islington and
Enfield, England.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Accounting
The Company maintains its books and records in accordance with accounting
principles generally accepted in the UK. The consolidated financial statements
have been prepared in accordance with generally accepted accounting principles
as practiced in the United States ("US") and are stated in UK pounds sterling
("UK Pound"). There were no significant differences between accounting
principles followed for UK purposes and generally accepted accounting principles
practiced in the US. The UK Pound exchange rate as of December 31, 1997 and 1996
was US $1.65 and US $1.71, respectively.
Basis of Consolidation
The consolidated financial statements include the accounts of the Company
and all wholly owned subsidiaries. All significant intercompany accounts and
transactions among the consolidated entities have been eliminated.
Management's Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
Fair Values
The estimated fair value amounts presented in these notes to consolidated
financial statements have been determined by the Company using available market
information and appropriate methodologies. However, considerable judgment is
required in interpreting market data to develop the estimates of fair value. The
estimates presented herein are not necessarily indicative of the amounts that
the Company could realize in a current market exchange. The use of different
market assumptions and/or estimation methodologies may have a material effect on
the estimated fair value amounts. Such fair value estimates are based on
pertinent information available to management as of December 31, 1997 and 1996,
and have not been comprehensively revalued for purposes of these consolidated
financial statements since such dates.
Prematurity Period
The Company accounts for costs, expenses and revenues applicable to the
construction and operation of its cable telecommunications systems under the
provisions of Statement of Financial Accounting Standards ("SFAS") No. 51,
"Financial Reporting by Cable Television Companies."
Under SFAS No. 51, during the period while the systems are partially under
construction and partially in service (the "Prematurity Period"), costs of cable
telecommunications plant, including materials, direct labor and construction
overhead are capitalized. Subscriber-related costs and general and
administrative costs are
F-83
<PAGE> 224
CABLE LONDON PLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
expensed as incurred. Costs incurred in anticipation of servicing a fully
operating system that will not vary regardless of the number of subscribers are
partially expensed and partially capitalized, based on the percentage of average
actual or estimated subscribers, whichever is greater, to the total number of
subscribers expected at the end of the Prematurity Period (the "Fraction").
During the Prematurity Period, depreciation and amortization of system
assets is determined by multiplying the depreciation and amortization of the
total capitalized system assets expected at the end of the Prematurity Period by
the Fraction. At the end of the Prematurity Period, depreciation and
amortization of system assets is based on the remaining undepreciated cost at
that date.
As of December 31, 1997, three of the Company's four franchise areas have
completed their Prematurity Period. The remaining Prematurity Period is expected
to terminate in 1998.
Property and Equipment
Property and equipment, which consists principally of system assets, is
shown at historical cost less accumulated depreciation. Improvements that extend
asset lives are capitalized; other repairs and maintenance charges are expensed
as incurred. The cost and related accumulated depreciation applicable to assets
sold or retired are removed from the accounts and the gain or loss on
disposition is recognized as a component of depreciation expense.
System assets
- --------------
Prior to the Prematurity Period, no depreciation is provided on system
assets. During the Prematurity Period, depreciation is provided in accordance
with SFAS No. 51.
Depreciation of system assets is provided by the straight-line method over
estimated useful lives as follows:
<TABLE>
<S> <C>
Plant....................................................... 40 years
Network..................................................... 15 years
Subscriber equipment........................................ 6-8 years
Switch...................................................... 10 years
Computers................................................... 4 years
</TABLE>
Non-system assets
- -------------------
Depreciation of non-system assets is provided by the straight-line method
over estimated useful lives as follows:
<TABLE>
<S> <C>
Leased buildings............................................ 40 years
Fixtures, fittings and equipment............................ 5 years
Computers................................................... 4 years
Vehicles.................................................... 3 years
</TABLE>
Leased Assets
Assets held under capital leases are treated as if they had been purchased
outright and the corresponding liability is included in capital lease
obligations. Capital lease payments include principal and interest, with the
interest portion being expensed. Payments on operating leases are expensed on a
straight-line basis over the lease term.
F-84
<PAGE> 225
CABLE LONDON PLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
Deferred Charges
Deferred charges consist primarily of franchise acquisition and development
costs directly attributable to obtaining, developing and maintaining the
franchise licenses and debt acquisition costs incurred by the Company in
entering into the London Revolver (see Note 3). Franchise acquisition and
development costs are being amortized on a straight-line basis over periods from
two to fifteen years. Debt acquisition costs are being amortized on a
straight-line basis over the term of the London Revolver of nine years.
Valuation of Long-Lived Assets
The Company periodically evaluates the recoverability of its long-lived
assets, including property and equipment and deferred charges, using objective
methodologies. Such methodologies include evaluations based on the cash flows
generated by the underlying assets or other determinants of fair value.
Revenue Recognition
Service income is recognized as service is provided. Credit risk is managed
by disconnecting services to subscribers who are delinquent.
Income Taxes
The Company recognizes deferred tax assets and liabilities for temporary
differences between the financial reporting basis and the tax basis of the
Company's assets and liabilities and expected benefits of utilizing net
operating loss carryforwards. The impact on deferred taxes of changes in tax
rates and laws, if any, applied to the years during which temporary differences
are expected to be settled, are reflected in the financial statements in the
period of enactment.
Derivative Financial Instruments
The Company uses derivative financial instruments, including interest rate
exchange agreements ("Swaps") and interest rate collar agreements ("Collars"),
to manage its exposure to fluctuations in interest rates.
Swaps and Collars are matched with either fixed or variable rate debt and
periodic cash payments are accrued on a settlement basis as an adjustment to
interest expense.
Those instruments that have been entered into by the Company to hedge
exposure to interest rate risks are periodically examined by the Company to
ensure that the instruments are matched with underlying liabilities, reduce the
Company's risks relating to interest rates and, through market value and
sensitivity analysis, maintain a high correlation to the interest expense or
underlying value of the hedged item.
The Company does not hold or issue any derivative financial instruments for
trading purposes and is not a party to leveraged instruments (see Note 3). The
credit risks associated with the Company's derivative financial instruments are
controlled through the evaluation and monitoring of the creditworthiness of the
counterparties. Although the Company may be exposed to losses in the event of
nonperformance by the counterparties, the Company does not expect such losses,
if any, to be significant.
Reclassifications
Certain reclassifications have been made to the prior years' consolidated
financial statements to conform to those classifications used in 1997.
F-85
<PAGE> 226
CABLE LONDON PLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
3. LONG-TERM DEBT
In June 1995, the Company entered into a L60.0 million revolving credit
facility (the "London Facility") with various banks. The London Facility had a
two year term and an interest rate at the London Interbank Offered Rate
("LIBOR") plus 2 1/2%. In April 1997, the amount available under the London
Facility was increased to L65.0 million.
In May 1997, the Company entered into a L170.0 million revolving credit
facility (the "London Revolver") with various banks, which converts into a five
year term loan on June 30, 2001. Interest rates on the London Revolver are at
LIBOR plus 1/2% to 2 3/8%. In May 1997, the Company repaid all amounts
outstanding under the London Facility with proceeds from borrowings under the
London Revolver. The balance of the London Revolver will be used, subject to
certain restrictions, for capital expenditures and working capital requirements
relating to the build-out of its systems.
The London Revolver contains restrictive covenants which limit the
Company's ability to enter into arrangements for the acquisition and sale of
property and equipment, investments, mergers and the incurrence of additional
debt. Certain of these covenants require that certain financial ratios and cash
flow levels be maintained and contain certain restrictions on dividend payments.
The Company's two principal shareholders' rights to receive consulting fee
payments from the Company has been subordinated to the banks under the London
Revolver. The payment of consulting fees is restricted until the Company meets
certain financial ratio tests under the London Revolver. In addition, the
Company's two principal shareholders' shares in the Company have been pledged to
secure the London Revolver. Upon a change of control, all amounts due under the
London Revolver become immediately due and payable. On February 4, 1998, Comcast
UK Cable Partners Limited ("Comcast UK"), one the Company's principal
shareholders, entered into a definitive agreement to amalgamate (the "NTL
Transaction") with a wholly owned subsidiary of NTL Incorporated. The
consummation of the NTL Transaction will not result in a change of control as
defined in the London Revolver.
The Company enters into Swaps and Collars as a normal part of its risk
management efforts to limit its exposure to adverse fluctuations in interest
rates. Using Swaps, the Company agrees to exchange, at specified intervals, the
difference between fixed and variable interest amounts calculated by reference
to an agreed upon notional amount. Collars limit the Company's exposure to and
benefits from interest rate fluctuations on variable rate debt to within a
certain range of interest rates. In June 1997, the Company entered into a series
of four year interest Swaps with three banks. Under the agreements, the Company
pays fixed rate interest at 7.34% and receives floating rate interest at three
month LIBOR, based upon the outstanding notional amount of the Swaps. As of
December 31, 1997, the notional amount outstanding on the Swaps was L44.5
million and increased to L49.5 million on January 7, 1998. Also in June 1997,
the Company entered into a Collar which limits the interest rate on the notional
amount to between 6% and 9%. As of December 31, 1997, the notional amount
outstanding on the Collar was L22.3 million and increased to L24.8 million on
January 7, 1998. The notional amounts of interest rate agreements and interest
rate collar agreements are used to measure interest to be paid or received and
do not represent the amount of exposure to credit loss. While Swaps and Collars
represent an integral part of the Company's interest rate risk management
program, their incremental effect on interest expense for the year ended
December 31, 1997 was not significant. The estimated amount to settle the
Company's Swaps and Collar was L1.5 million as of December 31, 1997.
Also included in long-term debt is a mortgage note payable with an
outstanding balance of L753,000 and L755,000 as of December 31, 1997 and 1996,
respectively, payable in monthly installments through 2002 which is secured by
property of the Company. The mortgage note bears interest at a fixed rate of
9.79%.
F-86
<PAGE> 227
CABLE LONDON PLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
Maturities of long-term debt outstanding as of December 31, 1997 for the
four years after 1998 are as follows (L000's):
<TABLE>
<S> <C>
1999................................................ L
2000................................................
2001................................................ 2,225
2002................................................ 8,900
</TABLE>
The differences between the carrying amounts and estimated fair value of
the Company's long-term debt was not significant as of December 31, 1997 and
1996. Interest rates that are currently available to the Company for debt with
similar terms and remaining maturities are used to estimate fair value for debt
issues for which quoted market prices are not available.
4. CONVERTIBLE DEBT AND LOANS FROM SHAREHOLDERS
As of December 31, 1997 and 1996, the Company had outstanding convertible
debt due to shareholders of L42.0 million and outstanding loans from
shareholders of L15.0 million and L3.0 million, respectively. The convertible
debt and loans from shareholders bear interest at 2% above the base lending rate
of Barclays Bank PLC (9.25% effective rate as of December 31, 1997) and are
payable on demand. Accrued interest on the convertible debt and loans from
shareholders is L12.0 million and L7.2 million as of December 31, 1997 and 1996,
respectively. Under the terms of the London Revolver, principal and interest on
the convertible debt and loans from shareholders cannot be paid until the London
Revolver is repaid. Accordingly, the convertible debt, loans from shareholders
and accrued interest thereon has been classified as long-term convertible debt
and other in the Company's consolidated balance sheet. The convertible debt,
along with accrued interest thereon, is convertible into the Company's ordinary
shares at L2.00 per share. Interest expense on the convertible debt and loans
from shareholders was L4.8 million, L3.3 million and L3.2 million during the
years ended December 31, 1997, 1996 and 1995, respectively. The carrying value
of the convertible debt and loans from shareholders approximates fair value as
of December 31, 1997 and 1996.
5. RELATED PARTY TRANSACTIONS
The Company has consulting agreements with Comcast U.K. Consulting, Inc.
("Comcast Consulting") and Telewest Communications Group Ltd., subsidiaries of
the Company's two principal shareholders, Comcast UK and Telewest Communications
plc ("Telewest"), respectively. The Company pays a fee to Telewest each year as
a contribution to the operating expenses and capital expenditures of Telewest's
Network Service Center, which provides telephony support to the Company.
A summary of related party charges included in the Company's consolidated
financial statements is as follows (in L000's):
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
--------------------------
1997 1996 1995
------ ------ ------
<S> <C> <C> <C>
Consulting fees.......................................... L1,077 L 790 L 962
Network Service Center fees.............................. 521 639 503
Other.................................................... 355 125 33
------ ------ ------
L1,953 L1,554 L1,498
====== ====== ======
</TABLE>
As of December 31, 1997 and 1996, accounts payable and accrued expenses
include L176,000 million and L1.6 million, respectively, payable to the
Company's two principal shareholders, principally for consulting fees and normal
operating expenses paid by the shareholders and their affiliates on behalf of
the Company. As of
F-87
<PAGE> 228
CABLE LONDON PLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
December 31, 1997 other long-term liabilities includes L2.5 million of
consulting fees and interest payable to the Company's two principal shareholders
as payment is restricted under the London Revolver.
In management's opinion, the foregoing transactions were entered into on
terms no more or less favorable than those with non-affiliated third parties.
6. INCOME TAXES
The Company has a deferred tax asset arising from the carryforward of net
operating losses and the differences between the book and tax basis of property.
However, a valuation allowance has been recorded to fully reserve the deferred
tax asset as its realization is uncertain.
Significant components of the Company's deferred income taxes are as
follows (in L000's):
<TABLE>
<CAPTION>
DECEMBER 31
--------------------
1997 1996
-------- --------
<S> <C> <C>
Net operating loss carryforwards (carried forward
indefinitely)............................................. L 17,692 L 15,852
Differences between book and tax basis of property.......... 10,426 7,329
Other....................................................... (459) (756)
Less: Valuation allowance................................... (27,659) (22,425)
-------- --------
L L
======== ========
</TABLE>
7. STATEMENT OF CASH FLOWS -- SUPPLEMENTAL INFORMATION
The Company made cash payments for interest of approximately L7.4 million,
L3.7 million and L691,000 during the years ended December 31, 1997, 1996 and
1995, respectively.
The Company incurred capital lease obligations of L4.8 million, L1.5
million and L3.9 million during the years ended December 31, 1997, 1996 and
1995, respectively.
8. COMMITMENTS AND CONTINGENCIES
Certain of the Company's facilities and equipment are held under operating
or capital leases which expire through 2007.
A summary of assets held under capital leases are as follows (in L000's):
<TABLE>
<CAPTION>
DECEMBER 31
------------------
1997 1996
------- -------
<S> <C> <C>
System, fixtures, fittings, equipment and vehicles.......... L13,040 L 8,219
Less: Accumulated depreciation.............................. (2,836) (1,523)
------- -------
L10,204 L 6,696
======= =======
</TABLE>
F-88
<PAGE> 229
CABLE LONDON PLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONCLUDED)
YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
Future minimum rental payments under lease commitments with an initial or
remaining term of more than one year as of December 31, 1997 are as follows (in
L000's):
<TABLE>
<CAPTION>
CAPITAL OPERATING
LEASES LEASES
------- ---------
<S> <C> <C>
1998........................................................ L 1,550 L 902
1999........................................................ 2,036 496
2000........................................................ 2,078 181
2001........................................................ 2,313 148
2002........................................................ 1,457 146
Thereafter.................................................. 7,727 955
------- ------
Total minimum rental commitments............................ 17,161 L2,828
======
Less: Amount representing interest.......................... (4,678)
-------
Present value of minimum rental commitments................. 12,483
Less: Current portion of capital lease obligations.......... (732)
-------
Long-term portion of capital lease obligations.............. L11,751
=======
</TABLE>
Operating lease expense for the years ended December 31, 1997, 1996 and
1995 was L919,000, L1.2 million and L1.1 million, respectively.
F-89
<PAGE> 230
INDEPENDENT AUDITORS' REPORT
To the Shareholders of
ComTel UK Finance B.V.
We have audited the accompanying combined balance sheet of ComTel UK
Finance B.V. and its subsidiaries ("the Company") as of December 31, 1997 and
the related combined statement of operations, shareholders' equity and cash
flows for the year ended December 31, 1997. These combined financial statements
are the responsibility of the Company's management. Our responsibility is to
express an opinion on these combined financial statements based on our audit.
We conducted our audit in accordance with auditing standards generally
accepted in the United Kingdom which are similar to those in the United States
of America. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the combined financial position of the Company as of
December 31, 1997 and the combined results of its operations and its combined
cash flows for the year ended December 31, 1997 in conformity with generally
accepted accounting principles in the United States of America.
DELOITTE & TOUCHE
Chartered Accountants
Bracknell, England
June 5, 1998
(July 16, 1998 as to Note 10)
F-90
<PAGE> 231
REPORT OF INDEPENDENT ACCOUNTANTS
To the Shareholders of
ComTel UK Finance B.V.
We have audited the combined balance sheet of ComTel UK Finance B.V. and
its subsidiaries ("the Company") as of December 31, 1996 and the related
combined statement of operations, shareholders' equity and cash flows for the
year ended December 31, 1996. These combined financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these combined financial statements based on our audit. We did not
audit the combined financial statements of Telecential Communications (UK)
Limited and Telecential Communications (Canada) Limited, both 50% owned entities
(collectively "Telecential"). Those statements were audited by other auditors
whose report has been furnished to us, and our opinion, insofar as it relates to
the amounts included for Telecential, is based solely on the report of the other
auditors.
We conducted our audit in accordance with United Kingdom generally accepted
auditing standards which do not differ in any material respect from auditing
standards generally accepted in the United States of America. Those standards
require that we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. An audit also includes assessing the
accounting principles used and significant estimates made by management, as well
as evaluating the overall financial statement presentation. We believe that our
audit provides a reasonable basis for our opinion.
In our opinion, based on our audit and the report of the other auditors,
the financial statements referred to above present fairly, in all material
respects, the combined financial position of the Company as of December 31, 1996
and the combined results of its operations and its combined cash flows for the
year ended December 31, 1996 in conformity with generally accepted accounting
principles in the United States of America.
COOPERS & LYBRAND
Chartered Accountants
London, England
June 5, 1998, except as to Note 10, as to
which the date is July 16, 1998
F-91
<PAGE> 232
COMTEL UK FINANCE B.V.
COMBINED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31
------------------
1996 1997
L L
------- -------
(IN THOUSANDS)
<S> <C> <C>
REVENUE
Cable television............................................ 5,680 27,192
Residential telephone....................................... 3,247 23,203
Business telecommunications................................. 214 893
------- -------
9,141 51,288
------- -------
OPERATING COSTS AND EXPENSES
Telephone................................................... 1,247 4,461
Programming................................................. 3,659 17,730
Selling, general and administrative......................... 11,501 33,911
Depreciation and amortisation............................... 11,211 32,604
------- -------
27,618 88,706
------- -------
OPERATING LOSS.............................................. (18,477) (37,418)
Interest income............................................. 1,859 2,041
Interest expense............................................ (10,485) (27,044)
Loss from equity investment................................. (15,224) (6,125)
Foreign exchange gain (note 7).............................. 7,456 6,549
------- -------
LOSS BEFORE INCOME TAX EXPENSE.............................. (34,871) (61,997)
Income tax expense (note 3)................................. -- (100)
------- -------
NET LOSS.................................................... (34,871) (62,097)
======= =======
</TABLE>
The accompanying notes are an integral part of these combined financial
statements.
F-92
<PAGE> 233
COMTEL UK FINANCE B.V.
COMBINED BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31
------------------
1996 1997
L L
------- -------
(IN THOUSANDS)
<S> <C> <C>
ASSETS
Cash and cash equivalents................................... 9,977 10,119
Trade receivables (net of allowance for doubtful accounts of
L883 and L4,263 at December 31, 1996 and 1997
respectively)............................................. 1,754 5,895
Other assets................................................ 1,290 12,541
Advance to Telecential...................................... 46,563 --
Property, plant and equipment, net (note 4)................. 89,339 425,936
Equity investment in Telecential (note 5)................... 37,338 --
Intangible assets, net (note 6)............................. 120,962 210,573
------- -------
Total assets...................................... 307,223 665,064
======= =======
</TABLE>
LIABILITIES AND SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
L L
------- -------
(IN THOUSANDS)
<S> <C> <C>
Accounts payable............................................ 5,321 20,036
Other liabilities........................................... 13,445 49,532
Debt and capital lease obligations (note 7)................. 182,757 487,749
Loan from Parent (note 7)................................... 51,129 69,141
Shareholders' equity (note 8)............................... 54,571 38,606
------- -------
Total liabilities and shareholders' equity........ 307,223 665,064
======= =======
</TABLE>
The accompanying notes are an integral part of these combined financial
statements.
F-93
<PAGE> 234
COMTEL UK FINANCE B.V.
COMBINED STATEMENTS OF SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
FOR THE YEARS ENDED
DECEMBER 31, 1996
AND 1997
L
-------------------
(IN THOUSANDS)
<S> <C>
BALANCE AT DECEMBER 31, 1995................................ (3,570)
Net loss.................................................... (34,871)
Capital contributions from shareholders..................... 93,012
-------
BALANCE AT DECEMBER 31, 1996................................ 54,571
Net loss.................................................... (62,097)
Capital contributions from shareholders..................... 46,132
-------
BALANCE AT DECEMBER 31, 1997................................ 38,606
=======
</TABLE>
The accompanying notes are an integral part of these combined financial
statements.
F-94
<PAGE> 235
COMTEL UK FINANCE B.V.
COMBINED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
----------------------
1996 1997
L L
-------- --------
(IN THOUSANDS)
<S> <C> <C>
Cash flows from operating activities:
Net loss.................................................... (34,871) (62,097)
Adjustments to reconcile net loss to net cash used in
operating activities:
Depreciation and amortisation............................. 11,211 32,604
Loss from equity investment............................... 15,224 6,125
Foreign exchange gain..................................... (7,456) (6,549)
Provision for bad debt.................................... 817 841
Change in operating assets and liabilities:
Change in trade receivables............................... (2,011) (2,458)
Change in other assets.................................... 2,273 58
Change in accounts payable................................ (2,609) 3,196
Change in other liabilities............................... 3,252 23,166
Other....................................................... (1,274) 613
-------- --------
Net cash used in operating activities....................... (15,444) (4,501)
-------- --------
Cash flows from investing activities:
Cash invested in property, plant and equipment............ (51,456) (118,033)
Proceeds from disposition of assets....................... -- 869
Acquisition of Telecential, net of cash received.......... -- (117,024)
Acquisition of Coventry, net of cash received............. (3,949) --
Advances to Telecential................................... (40,411) (15,893)
-------- --------
Net cash used in investing activities....................... (95,816) (250,081)
-------- --------
Cash flows from financing activities:
Proceeds from issuance of debt............................ 49,180 301,048
Repayment of debt......................................... (22,086) (30,000)
Repayment of advances..................................... -- (62,456)
Capital contributions from shareholders................... 93,012 46,132
-------- --------
Net cash provided by financing activities................... 120,106 254,724
-------- --------
Net increase in cash and cash equivalents................... 8,846 142
Cash and cash equivalents at beginning of year.............. 1,131 9,977
-------- --------
Cash and cash equivalents at end of year.................... 9,977 10,119
======== ========
</TABLE>
The accompanying notes are an integral part of these combined financial
statements.
F-95
<PAGE> 236
COMTEL UK FINANCE B.V.
NOTES TO THE COMBINED FINANCIAL STATEMENTS
1. THE COMPANY
ComTel UK Finance B.V. ("the Company") is a holding company to be
incorporated in The Netherlands to hold the United Kingdom cable assets of
Vision Networks N.V. ("Vision Networks"). These assets comprise United Kingdom
subsidiaries which have exclusive licenses to operate a cable television and
telecommunications business through partnerships and subsidiaries focused on
certain franchise areas located north and east of Birmingham and north and west
of London, England.
References to Shareholders in these financial statements are to the
subscribers to the Company.
All amounts herein are presented in thousands in pounds sterling ("L")
unless otherwise noted.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The Company's combined financial statements have been prepared in
accordance with United States of America generally accepted accounting
principles.
The financial statements include the results of the companies acquired by
Vision Networks in 1995 and 1996. These companies include Vision Networks UK
Holding B.V., Vision Networks (UK) Holdings Limited, Vision Network (UK) I
Limited, Vision Network (UK) II Limited, Vision Networks Canada Limited, Andover
Cablevision Limited, Oxford Cable Limited, Stafford Communications Limited,
Wessex Cable Limited, ComTel Coventry Limited, ComTel Cable Services Limited,
Lichfield Cable Communications Limited, Tamworth Cable Communications Limited
and Vision Networks Services UK Limited. In addition, the financial statements
reflect the 50% ownership position in Telecential Communications (UK) Limited
and Telecential Communications (Canada) Limited (collectively "Telecential") on
the equity basis through May 27, 1997, being the date of acquisition of the
remaining 50% interest, and 100% on a combined basis for the remainder of 1997.
Principles of Combination -- The financial statements combine the accounts
of the Company and those of all majority owned subsidiaries for the two year
period ended December 31, 1997. The subsidiaries are under common ownership and
common management. Investments in more than 20% owned affiliates are accounted
for on the equity method. All significant intercompany accounts and transactions
have been eliminated.
Cable System Costs and Expenses -- The Company accounts for costs and
expenses applicable to the construction and operation of its cable system under
Statement of Financial Accounting Standards ("SFAS") No. 51, "Financial
Reporting by Cable Television Companies". Costs and expenses incurred in each
franchise during the set up period of the cable system have been capitalised in
full. Certain expenses incurred during the prematurity period are apportioned
between capital and revenue on the basis of the average number of subscribers as
a fraction of the number of subscribers estimated at the end of the prematurity
period. The prematurity period is deemed to run from when the first subscriber
is connected to the system to the earlier of three years or when the number of
cable television and telephony subscribers represents an appropriate percentage
penetration of the number of homes passed.
Revenue Recognition -- Revenue is recognised as services are delivered.
Initial connection fees are recognized in full upon installation to the
extent of direct selling costs incurred.
Initial installation costs for subscribers are capitalised and written off
over a period of 8 years. Subsequent connections are expensed as incurred.
Income Tax Expense -- Deferred tax assets and liabilities are recognised
for the future tax consequences attributable to differences between the
financial statement carrying amounts of existing assets and liabilities and
their respective tax bases. Deferred tax assets and liabilities are measured
using enacted tax rates expected to apply to taxable income in the years in
which those temporary differences are expected to reverse. A
F-96
<PAGE> 237
COMTEL UK FINANCE B.V.
NOTES TO THE COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
valuation allowance is raised against a deferred tax asset where it is more
likely than not some portion of the deferred tax asset will not be realised.
Franchise Costs -- Costs of successful franchise applications are
capitalised as intangible assets and amortised over a period of 20 years. Costs
of unsuccessful applications are expensed as incurred.
Goodwill -- Goodwill arising on the acquisition of subsidiaries is
amortised on a straight line basis over twenty years.
Property, Plant and Equipment -- Property, plant and equipment is stated at
cost. Depreciation on equipment other than cable infrastructure is computed on a
straight line basis using estimated useful lives of five to ten years. Cable
infrastructure is depreciated over twenty years. Leasehold improvements are
depreciated on a straight line basis over the lease periods.
Cash and Cash Equivalents -- Cash and cash equivalents include highly
liquid investments with original maturity of three months or less that are
readily convertible to cash.
Foreign Currencies -- The primary economic environment in which the Company
operates is the United Kingdom and hence its functional and reporting currency
is the United Kingdom pound sterling. Transactions in foreign currencies are
recorded using the rate of exchange in effect on the date of the transaction or
at the forward rate if the transaction has been hedged. Monetary assets and
liabilities denominated in foreign currencies are translated using the rate of
exchange in effect on the balance sheet date and gains or losses on translation
are included in the statement of operations.
Leasing Commitments -- Assets held under finance lease contracts are
capitalised in the balance sheet and are depreciated over their useful lives.
The interest element of the rental obligation is charged to expense over the
period of the lease and represents a constant proportion of the balance of
capital repayments outstanding. Rentals paid under operating leases are charged
to expense over the lease term.
Pension Costs -- The Company operates a defined contribution pension plan
for eligible employees and contributes up to specified limits to a third party
plan of the employee's choice. Pension costs totalled L85 and L332 in the years
ended December 31, 1996 and 1997, respectively.
Use of Estimates -- The preparation of financial statements in conformity
with United States of America generally accepted accounting principles requires
management to make estimates and assumptions that affect the reported amounts of
assets and liabilities and disclosure of contingent assets and liabilities at
the date of the financial statements and the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from those
estimates.
Concentration of Credit Risk and Market Risk -- The Company operates
predominantly in one industry segment, the provision of cable television and
telecommunications services in certain areas of England. Concentrations of
credit risk with respect to trade receivables are limited due to the large
number of customers comprising the Company's customer base. Ongoing credit
evaluations of customers' financial condition are performed and generally, no
collateral is required. The Company maintains reserves for potential credit
losses and such losses, in the aggregate, have not exceeded management's
estimates. No single customer accounts for 10% or more of combined revenues.
Fair Value of Financial Instruments -- Financial instruments are defined as
cash or contracts relating to the receipt, delivery or exchange of financial
instruments. Except as otherwise noted, fair value approximates the carrying
value of such instruments.
F-97
<PAGE> 238
COMTEL UK FINANCE B.V.
NOTES TO THE COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
3. INCOME TAX EXPENSE
No provision for deferred taxation has been made due to operating losses
incurred to date in the Company. The Company has net tax operating losses
carried forward in the United Kingdom and The Netherlands of approximately L175
million at December 31, 1997.
The operating losses have an unlimited carry forward period under United
Kingdom tax law (subject to restrictions on a loss carried forward where there
is a change in group ownership and a major change in the nature or conduct of
the business), but are limited in their use to the type of business which
generated the loss. The operating losses available in The Netherlands are also
subject to an unlimited carry forward under The Netherlands tax law (again
subject to restrictions where there is a change in group ownership).
Differences between the tax benefit recognised in the financial statements
and the expected tax benefit for the Company at the United Kingdom and The
Netherlands statutory rate of 31.5% (1996: 33%) and 35%, respectively, are
summarised as follows:
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31
------------------
1996 1997
L L
------- -------
(IN THOUSANDS)
<S> <C> <C>
Tax benefit of net losses at statutory rate.............. (11,716) (20,532)
Non-deductible expenses.................................. (103) 755
Tax benefit of operating losses not recognised
currently.............................................. 11,819 19,877
------- -------
Income tax expense....................................... -- 100
======= =======
Deferred tax assets relating to:
Net losses............................................... 17,976 56,331
Valuation allowance...................................... (9,516) (23,265)
------- -------
8,460 33,066
Deferred tax liabilities relating to:
Property, plant and equipment............................ (8,460) (33,066)
------- -------
Deferred tax per balance sheet........................... -- --
======= =======
</TABLE>
The ultimate realisation of deferred tax assets is dependent upon the
generation of future taxable income during the periods in which those temporary
differences become deductible. Management considers the scheduled reversal of
deferred tax liabilities, projected future taxable income, the level of
historical taxable losses, and tax planning strategies in making its assessment
as to the appropriateness of the reported valuation allowance.
The tax charge for the year represents current taxation on those United
Kingdom profits against which United Kingdom group relief cannot be offset.
F-98
<PAGE> 239
COMTEL UK FINANCE B.V.
NOTES TO THE COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
4. PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment is stated at cost and comprises:
<TABLE>
<CAPTION>
DECEMBER 31
-----------------
1996 1997
L L
------ -------
(IN THOUSANDS)
<S> <C> <C>
Land and buildings and improvements....................... 4,835 13,982
Plant and equipment....................................... 86,554 453,373
Set-up and prematurity costs.............................. 6,748 33,737
------ -------
98,137 501,092
Less accumulated depreciation............................. (8,798) (75,156)
------ -------
89,339 425,936
====== =======
</TABLE>
The Company leases certain plant and equipment under arrangements accounted
for as capital leases. The original cost of assets held under these arrangements
was L2,558 and L17,510 at December 31, 1996 and 1997, respectively. Accumulated
depreciation charged against these assets was L734 and L7,047 at December 31,
1996 and 1997, respectively.
Depreciation expense totaled L4,780 and L23,425 in the years ended December
31, 1996 and 1997, respectively, of which L537 and L2,770, respectively,
represented depreciation on assets held under capital lease arrangements.
5. ACQUISITIONS
In April 1996, the Company acquired 87.75% of ComTel Coventry Limited
("Coventry") for cash consideration of L3,973. The acquisition was accounted for
using the purchase method of accounting. The excess of consideration over fair
value of net assets acquired was L11,829, which is included in goodwill.
The 50% interest in Telecential which was not owned was acquired on May 27,
1997 for cash consideration of L123,191. The acquisition was accounted for using
the purchase method of accounting. The excess of fair value of net assets
acquired at the date of acquisition was L90,553 which is included in goodwill.
Accordingly, operating results of Telecential have been included in the combined
statement of operations from the date of acquisition of the remaining 50%
interest.
The unaudited pro forma combined historical results of the Company, as if
the acquisitions had occurred as of January 1, 1996 are as follows:
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31
------------------
1996 1997
L L
------- -------
(IN THOUSANDS)
<S> <C> <C>
Revenue.................................................. 47,555 72,271
Operating cost and expenses.............................. 89,368 119,036
------- -------
Operating loss........................................... (41,813) (46,765)
Loss before income taxes................................. (63,874) (74,248)
Net loss................................................. (63,971) (74,348)
</TABLE>
The unaudited pro forma results are not necessarily indicative of what
actually would have occurred if the acquisition had been completed as of the
beginning of each of the fiscal periods presented, nor are they necessarily
indicative of future combined results.
F-99
<PAGE> 240
COMTEL UK FINANCE B.V.
NOTES TO THE COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
5. ACQUISITIONS (CONTINUED)
Following the May 27, 1997 acquisition of the 50% interest in Telecential
the operations of both Telecential and the Company were combined. This involved
rationalising operations throughout the Company to (i) consolidate customer
operations and combine processes, practices and systems in order to provide
"World Class" customer services; (ii) rebrand the Company under the ComTel brand
name; and (iii) reduce staff and pay related severance costs. The initial
accrued liability in respect of these costs comprised:
<TABLE>
<CAPTION>
L
(IN THOUSANDS)
--------------
<S> <C>
Consolidation of customer operations........................ 1,838
Rebranding as ComTel........................................ 450
Severance costs............................................. 300
-----
2,588
=====
</TABLE>
All of the above was contracted for in 1997 and has therefore been expensed
within operating costs and expenses in the combined statement of operations.
L2,316 of these costs had been incurred by December 31, 1997 and the remaining
L272 was spent in the first quarter of 1998.
6. INTANGIBLE ASSETS
Intangible assets are stated at cost and comprise:
<TABLE>
<CAPTION>
DECEMBER 31
------------------
1996 1997
L L
------- -------
(IN THOUSANDS)
<S> <C> <C>
Goodwill................................................. 128,658 220,155
Franchise costs.......................................... -- 7,293
------- -------
128,658 227,448
Less accumulated amortisation............................ (7,696) (16,875)
------- -------
120,962 210,573
======= =======
</TABLE>
Amortisation expense totaled L6,431 and L9,179 in the years ended December
31, 1996 and 1997, respectively.
7. DEBT AND CAPITAL LEASE OBLIGATIONS
<TABLE>
<CAPTION>
DECEMBER 31
------------------
1996 1997
L L
------- -------
(IN THOUSANDS)
<S> <C> <C>
Note payable to bank..................................... 181,314 463,545
Other.................................................... -- 2,516
Capital lease obligations................................ 1,443 21,688
------- -------
182,757 487,749
Loan from Parent......................................... 51,129 69,141
------- -------
233,886 556,890
======= =======
</TABLE>
The note payable to the bank bears interest at a rate of LIBOR (7.438% at
December 31, 1997) plus 15 basis points. The loan is repayable in full in 1998.
The loan is collateralised by a guarantee from the ultimate parent company
Koninklijke PTT Nederland N.V. The loan from parent represents a Dutch guilder
denominated loan from Vision Networks and bears interest at a rate of LIBOR as
of December 31, 1997, and
F-100
<PAGE> 241
COMTEL UK FINANCE B.V.
NOTES TO THE COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
7. DEBT AND CAPITAL LEASE OBLIGATIONS -- (CONTINUED)
has no fixed repayment term. Debt obligations consisting of repayments on loans,
excluding capital lease obligations, are all due 1998.
Future minimum lease payments on capital lease obligations are due in
future years in the following amounts:
<TABLE>
<CAPTION>
DECEMBER 31
--------------
1997
L
--------------
(IN THOUSANDS)
<S> <C>
1998................................................... 4,073
1999................................................... 2,878
2000................................................... 2,288
2001................................................... 9,155
2002................................................... 1,454
Thereafter............................................. 1,840
------
21,688
Imputed interest....................................... 3,247
------
24,935
======
</TABLE>
Cash paid for interest during 1996 and 1997 was L10,874 and L27,726,
respectively.
8. SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
VISION
VISION NETWORKS VISION
NETWORKS (UK) NETWORKS
UK HOLDING HOLDINGS SERVICES UK
B.V. LIMITED LIMITED TOTAL
L L L L
---------- -------- ----------- -------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
BALANCE AT JANUARY 1, 1996...................... (1,363) (2,207) -- (3,570)
Net loss........................................ (7,547) (27,190) (134) (34,871)
Capital contributions........................... 93,012 -- -- 93,012
------- ------- ---- -------
BALANCE AT DECEMBER 31, 1996.................... 84,102 (29,397) (134) 54,571
Net loss........................................ (13,079) (48,888) (130) (62,097)
Capital contributions........................... 46,132 -- -- 46,132
------- ------- ---- -------
BALANCE AT DECEMBER 31, 1997.................... 117,155 (78,285) (264) 38,606
======= ======= ==== =======
</TABLE>
Vision Networks UK Holding B.V. consolidates all of the ComTel group of
companies, whilst Vision Networks (UK) Holdings Limited combines all of the
Telecential group of companies. Vision Networks Services UK Limited is a Dutch
holding company which provided management services to all of the companies in
each of the two groups.
9. COMMITMENTS AND CONTINGENCIES
Operating Leases
The Company leases business offices and uses certain equipment under lease
agreements accounted for as operating leases. Rental expense under such
arrangements amounted to L1,427 and L4,510 in the years ended December 31, 1996
and 1997 respectively.
F-101
<PAGE> 242
COMTEL UK FINANCE B.V.
NOTES TO THE COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
9. COMMITMENTS AND CONTINGENCIES (CONTINUED)
Future minimum lease payments under non cancellable operating leases as of
December 31, 1997 are summarised as follows:
<TABLE>
<CAPTION>
DECEMBER 31
--------------
1997
L
--------------
(IN THOUSANDS)
<S> <C>
1998................................................... 1,533
1999................................................... 2,686
2000................................................... --
2001................................................... --
2002................................................... --
Thereafter............................................. 1,608
-----
5,827
=====
</TABLE>
It is expected that, in the normal course of business, expiring leases will
be renewed or replaced by leases on other properties.
Milestones
The Company is obligated under the terms of its existing licences, and
under the milestone requirements of Local Delivery Licences ("LDL's") to
construct cable systems passing a predefined number of premises. Should the
Company fail to achieve these milestones, without licence modifications, the
Director General could commence proceedings to require compliance. Similarly the
Independent Television Commission ("ITC") may commence proceedings to require
compliance with the build milestones in the LDL's.
If the Company is unable to comply, its licence, in respect of which
milestones have not been met, could be revoked and awarded to other cable
operators, which could have a material adverse effect on the Company.
As of December 31, 1997 the Company was in compliance with its milestone
obligations.
10. SUBSEQUENT EVENTS
On June 11, 1998 the Company was incorporated in The Netherlands as
contemplated in note 1.
On June 16, 1998 NTL Group Limited ("NTL"), a subsidiary of NTL
Incorporated, acquired the entire issued share capital of the UK subsidiaries
which form part of the Company's combined group as presented in these financial
statements (the "ComTel Shares"). These UK subsidiaries comprised Andover
Cablevision Limited, Oxford Cable Limited, Stafford Communications Limited,
Wessex Cable Limited, ComTel Coventry Limited, ComTel Cable Services Limited,
Lichfield Cable Communications Limited, Tamworth Cable Communications Limited
and Vision Networks Services UK Limited.
On the same date an undertaking was entered into by NTL to acquire the
entire issued share capital of ComTel Limited, Heartland Cablevision (UK)
Limited and Heartland Cablevision II (UK) Limited, together with all interests
in the Telecommunications Partnership and LP5 and LP6 (the "Telecential
Assets"). The Telecential Assets form part of the Company's combined group as
presented in these financial statements. The completion of the acquisition of
the Telecential Assets is subject to compliance with certain obligations on all
parties to the sale before March 15, 1999 or, subject to specific exceptions,
December 31, 2002.
F-102
<PAGE> 243
COMTEL UK FINANCE B.V.
COMBINED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30
(UNAUDITED)
------------------
1997 1998
L L
------- -------
(IN THOUSANDS)
<S> <C> <C>
REVENUE
Cable television............................................ 4,921 21,534
Residential telephone....................................... 3,511 19,390
Business telecommunications................................. 274 2,570
------- -------
8,706 43,494
------- -------
OPERATING COSTS AND EXPENSES
Telephone................................................... 1,065 5,699
Programming................................................. 3,393 12,924
Selling, general and administrative......................... 7,640 24,140
Depreciation and amortisation............................... 8,897 25,969
------- -------
20,995 68,732
------- -------
OPERATING LOSS.............................................. (12,289) (25,238)
Interest income............................................. 412 665
Interest expense............................................ (8,726) (19,877)
Loss from equity investment................................. (9,312) --
Foreign exchange gain (loss)................................ 3,876 (7,639)
------- -------
LOSS BEFORE INCOME TAX EXPENSE.............................. (26,039) (52,089)
Income tax expense.......................................... -- --
------- -------
NET LOSS.................................................... (26,039) (52,089)
======= =======
</TABLE>
The accompanying notes are an integral part of these combined financial
statements.
F-103
<PAGE> 244
COMTEL UK FINANCE B.V.
COMBINED BALANCE SHEETS
<TABLE>
<CAPTION>
JUNE 30, 1998
(UNAUDITED)
L
--------------
(IN THOUSANDS)
<S> <C>
ASSETS
Cash and cash equivalents................................... 11,517
Trade receivables (net of allowance for doubtful accounts of
L3,854 at June 30, 1998).................................. 11,493
Other assets................................................ 114,074
Property, plant and equipment, net.......................... 295,132
Intangible assets, net...................................... 156,923
-------
Total assets...................................... 589,139
=======
</TABLE>
LIABILITIES AND SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
L
--------------
(IN THOUSANDS)
<S> <C>
Accounts payable............................................ 23,248
Other liabilities........................................... 60,798
Debt and capital lease obligations.......................... 309,706
Shareholders' equity........................................ 195,387
-------
Total liabilities and shareholders' equity........ 589,139
=======
</TABLE>
The accompanying notes are an integral part of these combined financial
statements.
F-104
<PAGE> 245
COMTEL UK FINANCE B.V.
COMBINED STATEMENT OF SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
FOR THE SIX MONTH
PERIOD ENDED
JUNE 30, 1998
-----------------
(UNAUDITED)
L
-----------------
(IN THOUSANDS)
<S> <C>
BALANCE AT DECEMBER 31, 1997................................ 38,606
Capital contributions....................................... 208,870
Net loss.................................................... (52,089)
-------
BALANCE AT JUNE 30, 1998.................................... 195,387
=======
</TABLE>
The accompanying notes are an integral part of these combined financial
statements.
F-105
<PAGE> 246
COMTEL UK FINANCE B.V.
COMBINED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
FOR THE SIX MONTH
PERIODS ENDED
JUNE 30
--------------------
(UNAUDITED)
1997 1998
L L
-------- --------
(IN THOUSANDS)
<S> <C> <C>
Cash flows from operating activities:
Net loss.................................................... (26,039) (52,089)
Adjustments to reconcile net loss to net cash used in
operating activities:
Depreciation and amortisation............................. 8,897 25,969
Loss from equity investment............................... 9,312 --
Foreign exchange (gain) loss.............................. (3,876) 7,639
Change in operating assets and liabilities:
Change in trade receivables............................... (2,317) (12,432)
Change in other assets.................................... 5,815 5,899
Change in accounts payable................................ 12,311 19,061
Change in other liabilities............................... (9,850) 10,312
Other....................................................... (2,461) 654
-------- --------
Net cash used in/provided by operating activities........... (8,208) 5,013
-------- --------
Cash flows from investing activities:
Cash invested in property, plant and equipment............ (45,798) (44,533)
Proceeds from sale of ComTel Shares, net of cash on
hand................................................... -- 267,652
Acquisition of Telecential, net of cash received.......... (117,024) --
Advances to Telecential................................... (15,893) --
-------- --------
Net cash used in/provided by investing activities........... (178,715) 223,119
-------- --------
Cash flows from financing activities:
Proceeds from the issuance of debt........................ 222,433 280,712
Repayment of debt......................................... (1,443) (535,535)
Repayment of advances..................................... (62,456) --
Capital contributions from shareholders................... 33,786 28,089
-------- --------
Net cash provided by/used in financing activities........... 192,320 (226,734)
-------- --------
Net increase in cash and cash equivalents................... 5,397 1,398
Cash and cash equivalents at beginning of period............ 9,977 10,119
-------- --------
Cash and cash equivalents at end of period.................. 15,374 11,517
======== ========
</TABLE>
The accompanying notes are an integral part of these combined financial
statements.
F-106
<PAGE> 247
COMTEL UK FINANCE B.V.
NOTES TO THE UNAUDITED COMBINED FINANCIAL STATEMENTS
1. THE COMPANY
ComTel UK Finance B.V. ("the Company") is a holding company incorporated in
The Netherlands to hold the United Kingdom cable assets of Vision Networks N.V.
("Vision Networks"). These assets comprise United Kingdom subsidiaries which
have exclusive licences to operate a cable television and telecommunications
business through partnerships and subsidiaries focused on certain franchise
areas located north and east of Birmingham and north and west of London,
England.
References to Shareholders in these financial statements are to the
subscribers to the Company.
The preparation of unaudited financial statements in conformity with United
States of America generally accepted accounting principles requires management
to make estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those estimates.
These unaudited financial statements are presented on a basis which is
consistent with the audited financial statements included elsewhere, herein.
The amounts pertaining to the unaudited combined financial statements are
presented in thousands in pounds sterling ("L").
2. SUPPLEMENTAL UNAUDITED PRO FORMA INFORMATION
The following supplemental unaudited pro forma information includes 100% of
the results of Vision Networks UK Holding B.V., Vision Networks (UK) Holdings
Limited, Vision Networks (UK) I Limited, Vision Networks (UK) II Limited, Vision
Networks Canada Limited, Andover Cablevision Limited, Oxford Cable Limited,
Stafford Communications Limited, Wessex Cable Limited, ComTel Coventry Limited,
ComTel Cable Services Limited, Lichfield Cable Communications Limited, Tamworth
Cable Communications Limited, Vision Networks Services UK Limited, and
Telecential Communications (UK) Limited and Telecential Communications (Canada)
Limited (collectively "Telecential") on a pro forma basis for the six months
ended June 30, 1997 as if Telecential had been acquired as of January 1, 1997.
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30, 1997
(UNAUDITED)
L
----------------
(IN THOUSANDS)
----------------
<S> <C>
Revenue..................................................... 34,063
Operating costs and expenses................................ (59,852)
-------
Operating loss.............................................. (25,789)
Interest income............................................. 544
Interest expense............................................ (11,278)
Foreign exchange gain....................................... 3,876
-------
Loss before income tax expense.............................. (32,647)
-------
Income tax expense.......................................... (75)
-------
Net loss.................................................... (32,722)
=======
</TABLE>
The supplemental unaudited pro forma information is provided for
illustrative purposes only and does not purport to represent what the actual
results of operations would have been had Telecential operated as part of the
Company for the six months ended June 30, 1997, nor is it necessarily indicative
of the Company's future operating results or combined financial position.
F-107
<PAGE> 248
COMTEL UK FINANCE B.V.
NOTES TO THE UNAUDITED COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
2. SUPPLEMENTAL UNAUDITED PRO FORMA INFORMATION (CONTINUED)
The Company has accounted for the acquisition of Telecential using the
purchase method of accounting under United States of America generally accepted
accounting principles. Accordingly, the purchase consideration in the
acquisition has been allocated to the assets acquired and liabilities assumed
with any excess being allocated to goodwill and amortised over 20 years.
The six months ended June 30, 1997 supplemental unaudited pro forma
information includes estimates made by the Company and assumptions that it
believes to be reasonable.
The supplemental unaudited pro forma information reflects the following:
1. The actual results of operations for the Company for the six month
period ended June 30, 1997.
2. The results of operations for Telecential for the six month period
ended June 30, 1997 as if Telecential had been acquired January 1, 1997.
3. Amortisation of goodwill based on purchase price allocation as if
Telecential had been acquired January 1, 1997.
4. Interest expense related to loans incurred to finance the
acquisition of Telecential as if the loans had been outstanding since
January 1, 1997.
5. The elimination of intercompany income and expenses as if
Telecential had been acquired January 1, 1997.
3. SUBSEQUENT EVENTS
On June 16, 1998 NTL Group Limited ("NTL"), a subsidiary of NTL
Incorporated, acquired the entire issued share capital of the UK subsidiaries
which form part of the Company's combined group as presented in these financial
statements (the "ComTel Shares"). These UK subsidiaries comprised Andover
Cablevision Limited, Oxford Cable Limited, Stafford Communications Limited,
Wessex Cable Limited, ComTel Coventry Limited, ComTel Cable Services Limited,
Lichfield Cable Communications Limited, Tamworth Cable Communications Limited
and Vision Networks Services UK Limited.
On the same date an undertaking was entered into by NTL to acquire the
entire issued share capital of ComTel Limited, Heartland Cablevision (UK)
Limited and Heartland Cablevision II (UK) Limited, together with all interests
in the Telecommunications Partnership and LP5 and LP6 (the "Telecential
Assets"). The Telecential Assets form part of the Company's combined group as
presented in these financial statements. The completion of the acquisition of
the Telecential Assets is subject to compliance with certain obligations on all
parties to the sale before March 15, 1999 or, subject to specific exceptions,
December 31, 2002.
F-108
<PAGE> 249
INDEPENDENT AUDITORS' REPORT
To the Shareholders of
Telecential Communications (Canada) Limited and
Telecential Communications (UK) Limited
We have audited the accompanying combined balance sheet of Telecential
Communications (Canada) Limited and Telecential Communications (UK) Limited
(collectively "Telecential") as of December 31, 1996 and the related combined
statement of operations, shareholders' equity and cash flows for the sixteen
month period ended December 31, 1996. The companies are under common ownership
and common management. These combined financial statements are the
responsibility of the Telecential management. Our responsibility is to express
an opinion on these combined financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally
accepted in the United Kingdom which are similar to those in the United States
of America. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the combined financial position of Telecential as of
December 31, 1996 and the combined results of their operations and their
combined cash flows for the sixteen month period ended December 31, 1996 in
conformity with generally accepted accounting principles in the United States of
America.
DELOITTE & TOUCHE
Chartered Accountants
Bracknell, England
June 5, 1998
(July 16, 1998 as to note 9)
F-109
<PAGE> 250
TELECENTIAL COMMUNICATIONS (CANADA) LIMITED
TELECENTIAL COMMUNICATIONS (UK) LIMITED
COMBINED STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
FOUR MONTHS
SIXTEEN MONTHS YEAR ENDED ENDED
ENDED DECEMBER 31, 1996 DECEMBER 31, 1995
DECEMBER 31, 1996 (UNAUDITED) (UNAUDITED)
L L L
-------------------- ----------------- -----------------
(IN THOUSANDS)
<S> <C> <C> <C>
REVENUE
Cable television....................... 26,829 21,196 5,633
Residential telephone.................. 20,273 16,363 3,910
Business telecommunications............ 982 855 127
------- ------- ------
48,084 38,414 9,670
------- ------- ------
OPERATING COSTS AND EXPENSES
Telephone.............................. 8,370 6,880 1,490
Programming............................ 15,346 12,557 2,789
Selling, general and administrative.... 28,709 23,125 5,584
Depreciation and amortisation.......... 18,199 14,660 3,539
------- ------- ------
70,624 57,222 13,402
------- ------- ------
OPERATING LOSS......................... (22,540) (18,808) (3,732)
Interest income........................ 288 207 81
Interest expense....................... (13,372) (11,834) (1,538)
Other income........................... 83 83 --
------- ------- ------
LOSS BEFORE INCOME TAX EXPENSE......... (35,541) (30,352) (5,189)
Income tax expense (note 3)............ (129) (97) (32)
------- ------- ------
NET LOSS............................... (35,670) (30,449) (5,221)
======= ======= ======
</TABLE>
The accompanying notes are an integral part of these combined financial
statements.
F-110
<PAGE> 251
TELECENTIAL COMMUNICATIONS (CANADA) LIMITED
TELECENTIAL COMMUNICATIONS (UK) LIMITED
COMBINED BALANCE SHEET
<TABLE>
<CAPTION>
AT
DECEMBER 31,
1996
L
--------------
(IN THOUSANDS)
<S> <C>
ASSETS
Cash and cash equivalents................................... 6,501
Trade receivables (net of allowance for doubtful accounts of
L2,100 at December 31, 1996).............................. 3,299
Other assets................................................ 2,319
Property, plant and equipment, net (note 4)................. 222,157
Investments (note 5)........................................ 969
Franchise costs less accumulated amortisation of L1,109 at
December 31, 1996......................................... 6,187
-------
Total assets................................................ 241,432
=======
LIABILITIES AND SHAREHOLDERS' EQUITY
L
-------
(IN THOUSANDS)
Accounts payable............................................ 12,521
Other liabilities........................................... 11,375
Debt and capital lease obligations (note 6)................. 142,861
Shareholders' equity........................................ 74,675
-------
Total liabilities and shareholders' equity.................. 241,432
=======
</TABLE>
The accompanying notes are an integral part of these combined financial
statements.
F-111
<PAGE> 252
TELECENTIAL COMMUNICATIONS (CANADA) LIMITED
TELECENTIAL COMMUNICATIONS (UK) LIMITED
COMBINED STATEMENT OF SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
TOTAL
COMMON SHARES COMMON SHARE ADDITIONAL ACCUMULATED SHAREHOLDERS'
(NOTE 8) CAPITAL PAID-IN CAPITAL DEFICIT EQUITY
NUMBER L L L L
------------- ------------ --------------- ----------- -------------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
BALANCE AT SEPTEMBER 1, 1995... 200 -- 84,201 (37,344) 46,857
Shares issued and capital
contributions................ -- -- 60,000 -- 60,000
Net loss....................... -- -- -- (35,670) (35,670)
Interest imputed on
shareholders' subordinated
debt (note 6)................ -- -- -- 3,488 3,488
--- -- ------- ------- -------
BALANCE AT DECEMBER 31, 1996... 200 -- 144,201 (69,526) 74,675
=== == ======= ======= =======
</TABLE>
The accompanying notes are an integral part of these combined financial
statements.
F-112
<PAGE> 253
TELECENTIAL COMMUNICATIONS (CANADA) LIMITED
TELECENTIAL COMMUNICATIONS (UK) LIMITED
COMBINED STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
FOUR MONTHS
SIXTEEN MONTHS YEAR ENDED ENDED
ENDED DECEMBER 31, 1996 DECEMBER 31, 1995
DECEMBER 31, 1996 (UNAUDITED) (UNAUDITED)
L L L
-------------------- ----------------- -----------------
(IN THOUSANDS)
<S> <C> <C> <C>
Cash flows from operating activities:
Net loss for the period................ (35,670) (30,449) (5,221)
Adjustments to reconcile net loss to
net cash provided by/(used in)
operating activities:
Depreciation and amortisation........ 18,199 14,660 3,539
Amortisation of deferred financing
costs............................. 5,146 4,946 200
Interest imputed on shareholders'
subordinated debt................. 3,488 3,404 84
Change in operating assets and
liabilities:
Change in trade receivables.......... (1,923) (381) (1,542)
Change in other assets............... 2,513 3,444 (931)
Change in accounts payable........... 2,291 3,585 (1,294)
Change in other liabilities.......... 5,600 4,971 629
-------- ------- -------
Net cash (used in)/provided by
operating activities................. (356) 4,180 (4,536)
-------- ------- -------
Cash flows from investing activities:
Cash invested in property and
equipment......................... (99,044) (74,119) (24,925)
Cash invested in set up & prematurity
costs............................. (7,513) (5,847) (1,666)
Proceeds from disposition of
assets............................ 16 16 --
-------- ------- -------
Net cash used in investing
activities........................... (106,541) (79,950) (26,591)
-------- ------- -------
Cash flows from financing activities:
Shareholder advances................. 112,113 81,403 30,710
Repayment of shareholder advances.... (60,000) (60,000) --
Repayment of capital lease
obligations....................... (961) (434) (527)
Issue of share capital............... 60,000 60,000 --
-------- ------- -------
Net cash provided by financing
activities........................... 111,152 80,969 30,183
-------- ------- -------
Net increase/(decrease) in cash and
cash equivalents..................... 4,255 5,199 (944)
Cash and cash equivalents at beginning
of period............................ 2,246 1,302 2,246
-------- ------- -------
Cash and cash equivalents at end of
period............................... 6,501 6,501 1,302
======== ======= =======
</TABLE>
The accompanying notes are an integral part of these combined financial
statements.
F-113
<PAGE> 254
TELECENTIAL COMMUNICATIONS (CANADA) LIMITED
TELECENTIAL COMMUNICATIONS (UK) LIMITED
NOTES TO THE COMBINED FINANCIAL STATEMENTS
1. TELECENTIAL
Telecential Communications (Canada) Limited and Telecential Communications
(UK) Limited (collectively "Telecential") have exclusive licenses to operate a
cable television and telecommunications business through their partnerships and
subsidiaries focused on certain franchise areas located south and east of
Birmingham and north and west of London, England.
At December 31, 1996, Telecential was indirectly 50% owned by each of
Koninklijke PTT Nederland N.V. and TELUS Corporation of Canada.
All amounts herein are presented in thousands in pounds sterling ("L").
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The Telecential combined financial statements have been prepared in
accordance with United States of America generally accepted accounting
principles.
Principles of Combination -- The financial statements combine the accounts
of Telecential and those of all majority owned subsidiaries for the 16 month
period ended December 31, 1996. The subsidiaries are under common ownership and
common management. All significant intercompany accounts and transactions have
been eliminated on combination.
Use of Estimates -- The preparation of financial statements in conformity
with United States of America generally accepted accounting principles requires
management to make estimates and assumptions that affect the reported amounts of
assets and liabilities and disclosure of contingent assets and liabilities at
the date of the financial statements and the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from those
estimates.
Cable System Costs and Expenses -- Telecential accounts for costs and
expenses applicable to the construction and operation of its cable system under
Statement of Financial Accounting Standards ("SFAS") No. 51, "Financial
Reporting by Cable Television Companies". Costs and expenses incurred in each
franchise during the set up period of the cable system have been capitalised in
full. Certain expenses incurred during the prematurity period are apportioned
between capital and revenue on the basis of the average number of subscribers as
a fraction of the number of subscribers estimated at the end of the prematurity
period. The prematurity period is deemed to run from when the first subscriber
is connected to the system to the earlier of three years or when the number of
cable television and telephony subscribers represents an appropriate penetration
percentage of the number of homes passed.
Franchise Costs -- Costs arising on the acquisition of franchises are
capitalised in accordance with SFAS 51 and are amortised on a straight line
basis over twenty years.
Revenue Recognition -- Revenue is recognised as services are delivered.
Initial connection fees are recognised in the period of connection.
Income Tax Expense -- Deferred tax assets and liabilities are recognised
for the future tax consequences attributable to differences between the
financial statement carrying amounts of existing assets and liabilities and
their respective tax bases to the extent that they are available to Telecential.
Under this method, deferred tax assets and liabilities are measured using
enacted tax rates expected to apply to taxable income in the years in which
those temporary differences are expected to reverse. A valuation allowance is
raised against a deferred tax asset where it is more likely than not some
portion of the deferred tax asset will not be realised.
Investments -- Investments are stated at original cost less any appropriate
provisions for permanent diminution in value.
F-114
<PAGE> 255
TELECENTIAL COMMUNICATIONS (CANADA) LIMITED
TELECENTIAL COMMUNICATIONS (UK) LIMITED
NOTES TO THE COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Property, Plant and Equipment -- Property, plant and equipment is stated at
cost. Depreciation on equipment other than cable infrastructure is computed on a
straight line basis using estimated useful lives of five to ten years. Cable
infrastructure is depreciated over twenty years. Leasehold improvements are
depreciated on a straight line basis over the lease periods.
Cash and Cash Equivalents -- Cash and cash equivalents include highly
liquid investments with original maturity of three months or less that are
readily convertible to cash.
Foreign Currencies -- The primary economic environment in which Telecential
operates is the United Kingdom and hence its reporting currency is the United
Kingdom pound sterling. Transactions in foreign currencies are recorded using
the rate of exchange in effect on the date of the transaction or at the forward
rate if the transaction has been hedged. Monetary assets and liabilities
denominated in foreign currencies are translated using the rate of exchange in
effect on the balance sheet date and gains or losses on translation are included
in the statement of operations.
Leasing Commitments -- Assets held under finance leases are capitalised in
the balance sheet and are depreciated over their useful lives. The interest
element of the rental obligation is charged to expense over the period of the
lease and represents a constant proportion of the balance of capital repayments
outstanding.
Rentals paid under operating leases are charged to expense on a straight
line basis over the lease term.
Pension Plan -- Telecential operates a defined contribution pension plan
for eligible employees and contributes up to specified limits to a third party
plan of the employee's choice. Pension costs which totalled L437,000 in the
sixteen month period ended December 31, 1996 represent the contributions payable
to the selected plans.
Concentration of Credit Risk and Market Risk -- Telecential operates
predominantly in one industry segment, the provision of cable television and
telecommunications services in certain areas of England. Concentrations of
credit risk with respect to trade receivables are limited due to the large
number of customers comprising Telecential's customer base. Ongoing credit
evaluations of customers' financial condition are performed and generally, no
collateral is required. Telecential maintains reserves for potential credit
losses and such losses, in the aggregate, have not exceeded management's
estimates. No single customer accounts for 10% or more of combined revenues.
Fair Value of Financial Instruments -- Financial instruments are defined as
cash or contracts relating to the receipt, delivery or exchange of financial
instruments. Except as otherwise noted, fair value approximates the carrying
value of such instruments.
3. INCOME TAX EXPENSE
No provision for deferred taxation has been made due to operating losses
incurred to date. Various subsidiary entities of Telecential have net tax
operating losses carried forward of approximately L38 million at December 31,
1996.
The operating losses have an unlimited carry forward period under United
Kingdom tax law (subject to restrictions on a loss carried forward where there
is a change in group ownership and a major change in the nature or conduct of
the business), but are limited in their use to the type of business which
generated the loss and to those entities in which the losses arose.
F-115
<PAGE> 256
TELECENTIAL COMMUNICATIONS (CANADA) LIMITED
TELECENTIAL COMMUNICATIONS (UK) LIMITED
NOTES TO THE COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
3. INCOME TAX EXPENSE (CONTINUED)
Differences between the tax benefit recognised in the financial statements
and the expected tax benefit at the United Kingdom statutory rate of 33% are
summarised as follows:
<TABLE>
<CAPTION>
FOUR MONTHS
YEAR ENDED ENDED
SIX MONTHS ENDED DECEMBER 31, 1996 DECEMBER 31, 1995
DECEMBER 31, 1996 (UNAUDITED) (UNAUDITED)
L L L
-------------------- ----------------- -----------------
(IN THOUSANDS)
<S> <C> <C> <C>
Tax benefit on loss before
income tax expense at
statutory rate............... (10,706) (9,010) (1,696)
Non-deductible expenses........ 28 21 7
Tax benefit of operating losses
not recognised currently..... 10,807 9,086 1,721
------- ------ ------
Income tax expense............. 129 97 32
======= ====== ======
Deferred tax assets relating
to:
Net losses..................... 12,509 12,509 7,917
Valuation allowance............ (8,046) (8,046) (47)
------- ------ ------
4,463 4,463 7,870
Deferred tax liabilities
relating to:
Property, plant and
equipment.................... (4,463) (4,463) (7,870)
------- ------ ------
Deferred tax per balance
sheet........................ -- -- --
======= ====== ======
</TABLE>
The ultimate realisation of deferred tax assets is dependent upon the
generation of future taxable income during the periods in which those temporary
differences become deductible. Management considers the scheduled reversal of
deferred tax liabilities, projected future taxable income, the level of
historical taxable losses, and tax planning strategies in making its assessment
as to the appropriateness of the reported valuation allowance.
The income tax expense for the period represents current taxation on those
United Kingdom profits against which United Kingdom tax relief cannot be offset.
F-116
<PAGE> 257
TELECENTIAL COMMUNICATIONS (CANADA) LIMITED
TELECENTIAL COMMUNICATIONS (UK) LIMITED
NOTES TO THE COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
4. PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment is stated at cost and comprises:
<TABLE>
<CAPTION>
DECEMBER 31, 1996
L
-----------------
(IN THOUSANDS)
<S> <C>
Land and buildings and improvements......................... 3,922
Plant and equipment......................................... 234,593
Set-up and prematurity costs................................ 19,768
-------
258,283
Less accumulated depreciation............................... (36,126)
-------
222,157
=======
</TABLE>
Telecential leases certain plant and equipment under arrangements accounted
for as capital leases. The original cost of assets held under these arrangements
was L13,847 at December 31, 1996. Accumulated depreciation charged against these
assets was L3,693 at December 31, 1996.
Depreciation expense totalled L18,199 in the sixteen month period ended
December 31, 1996 of which L1,264 represented depreciation on assets held under
capital lease arrangements.
5. INVESTMENTS
Investments are stated at cost and comprise:
<TABLE>
<CAPTION>
DECEMBER 31, 1996
L
-----------------
(IN THOUSANDS)
<S> <C>
ComTel Coventry Limited.............................. 869
Other................................................ 100
---
969
===
</TABLE>
ComTel Coventry Limited is registered in England and Wales and holds the
cable television license for the Coventry franchise. The amount for ComTel
Coventry Limited represented a 12.25% shareholding in the company. The remaining
shares were held by a related company, Vision Networks UK Holding B.V., at
December 31, 1996 and to whom the above equity interest was transferred, at
cost, during 1997.
The fair value of the above investments is not less than original cost.
6. DEBT AND CAPITAL LEASE OBLIGATIONS
<TABLE>
<CAPTION>
DECEMBER 31, 1996
L
-----------------
(IN THOUSANDS)
<S> <C>
Bank loan............................................ 30,000
Shareholders' subordinated debt...................... 95,223
Capital lease obligations............................ 17,638
-------
142,861
=======
</TABLE>
F-117
<PAGE> 258
TELECENTIAL COMMUNICATIONS (CANADA) LIMITED
TELECENTIAL COMMUNICATIONS (UK) LIMITED
NOTES TO THE COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
6. DEBT AND CAPITAL LEASE OBLIGATIONS (CONTINUED)
Bank Loan
In December 1994, Telecential entered into a L140 million facility with a
syndicate of banks. Following initial drawdowns which totalled L30 million,
Telecential was unable to make any further drawdowns on the loan and the balance
of the facility was cancelled. The bank facility was therefore fully drawn at
December 31, 1996. Interest was at LIBOR plus 3%. At December 31, 1996, the rate
was 9.047%. Interest and commitment fees expense amounted to L4,313 during the
sixteen month period ended December 31, 1996. The loan was repaid in August 1997
and the remaining facility cancelled.
Shareholders' Subordinated Debt
The changes in shareholders' subordinated debt in the period were as
follows:
<TABLE>
<CAPTION>
1996
L
--------------
(IN THOUSANDS)
<S> <C>
As at September 1, 1995..................................... 43,110
Subordinated debt borrowings................................ 112,113
Subordinated debt converted to equity....................... (60,000)
-------
As at December 31, 1996..................................... 95,223
=======
</TABLE>
The shareholders' subordinated debt is interest free and has no specific
repayment terms. An imputed interest expense of L3,488,000 has been recognised
and accounted for as a capital contribution. The interest expense has been
calculated by applying a variable rate comprising the aggregate of a margin and
LIBOR applicable to the related loan made to the company's parent by ING Bank
NV. As at December 31, 1996, the margin was 15 basis points and the one month
LIBOR rate was 6.047%.
Capital Lease Obligations
Future minimum lease payments under non cancellable capital leases are
summarised as follows as of December 31, 1996:
<TABLE>
<CAPTION>
L
--------------
(IN THOUSANDS)
<S> <C>
1997........................................................ 1,588
1998........................................................ 2,283
1999........................................................ 1,242
2000........................................................ 1,961
2001........................................................ 1,547
Thereafter.................................................. 9,017
------
17,638
Imputed interest............................................ 602
------
18,240
======
</TABLE>
Cash paid for interest on capital leases totalled L1,059 for the sixteen
month period ended December 31, 1996.
F-118
<PAGE> 259
TELECENTIAL COMMUNICATIONS (CANADA) LIMITED
TELECENTIAL COMMUNICATIONS (UK) LIMITED
NOTES TO THE COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
7. COMMITMENTS AND CONTINGENCIES
Operating Leases
Telecential leases business offices and uses certain equipment under lease
agreements accounted for as operating leases. Minimum rental expenses under such
arrangements amounted to L2,533 for the sixteen month period ended December 31,
1996.
Future minimum lease payments under non cancellable operating leases are
summarised as follows as of December 31, 1996:
<TABLE>
<CAPTION>
L
--------------
(IN THOUSANDS)
<S> <C>
1997................................................... 1,806
1998................................................... 3,017
1999................................................... 1,646
2000................................................... 1,643
2001................................................... 4,586
Thereafter............................................. 28,113
------
40,811
======
</TABLE>
It is expected that, in the normal course of business, expiring leases will
be renewed or replaced by leases on other properties.
Milestones
Telecential is obligated under the terms of its existing licenses, and
under the milestone requirements of Local Delivery Licenses ("LDL's") to
construct cable systems passing a predefined number of premises. Should
Telecential fail to achieve these milestones, without license modifications, the
Director General could commence proceedings to require compliance. Similarly the
Independent Television Commission ("ITC") may commence proceedings to require
compliance with the build milestones in the LDL's.
If Telecential is unable to comply, its license in respect of which
milestones have not been met could be revoked and awarded to other cable
operators, which could have a material adverse effect on Telecential.
As of December 31, 1996 Telecential was in compliance with its milestone
obligations.
F-119
<PAGE> 260
TELECENTIAL COMMUNICATIONS (CANADA) LIMITED
TELECENTIAL COMMUNICATIONS (UK) LIMITED
NOTES TO THE COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
8. COMMON SHARE CAPITAL
Common Share Capital comprises:
<TABLE>
<CAPTION>
DECEMBER 31, 1996
L
-----------------
(IN THOUSANDS)
<S> <C>
Telecential Communications (Canada) Limited:
Authorised:
Unlimited number of Common Shares with no par value
Called up, allotted and fully paid:
200 Common Shares of no par value each...................... --
------
--
======
Telecential Communications (UK) Limited:
Authorised:
Unlimited number of Common Shares with L0.05 par value
Called up, allotted and fully paid:
200 Common Shares of L0.05 par value each (L10)............. --
------
--
======
</TABLE>
9. SUBSEQUENT EVENTS
On June 16, 1998, NTL Group Limited, a subsidiary of NTL Incorporated,
entered into an undertaking to acquire the entire issued share capital of ComTel
Limited, Heartland Cablevision (UK) Limited and Heartland Cablevision II (UK)
Limited, together with all interests in the Telecommunications Partnership and
LP5 and LP6 (the "Telecential Assets"). The Telecential Assets form
substantially all of Telecential's combined group as presented in these
financial statements. The completion of the acquisition of the Telecential
Assets is subject to compliance with certain obligations on all parties to the
sale before March 15, 1999 or, subject to specific exceptions, December 31,
2002.
F-120
<PAGE> 261
ANNEX A
AGREEMENT AND PLAN OF AMALGAMATION
AMONG
NTL INCORPORATED,
NTL (BERMUDA) LIMITED
AND
COMCAST UK CABLE PARTNERS LIMITED
DATED AS OF FEBRUARY 4, 1998
A-1
<PAGE> 262
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
ARTICLE I
THE AMALGAMATION
SECTION 1.1 The Amalgamation............................................ A-5
SECTION 1.2 Amalgamation Closing........................................ A-5
SECTION 1.3 Amalgamation Effective Time................................. A-5
SECTION 1.4 Effects of the Amalgamation................................. A-5
SECTION 1.5 Memorandum of Association and Bye-laws of the Amalgamated
Company..................................................... A-5
SECTION 1.6 Directors and Officers...................................... A-6
ARTICLE II
EFFECT OF THE AMALGAMATION ON THE CAPITAL STOCK
OF THE CONSTITUENT CORPORATIONS;
SECTION 2.1 Effect on Capital Stock..................................... A-6
SECTION 2.2 Exchange of Certificates.................................... A-8
SECTION 2.3 Certain Adjustments......................................... A-11
ARTICLE III
REPRESENTATIONS AND WARRANTIES
SECTION 3.1 Representations and Warranties of Partners.................. A-11
SECTION 3.2 Representations and Warranties of NTL....................... A-17
ARTICLE IV
COVENANTS RELATING TO CONDUCT OF BUSINESS
SECTION 4.1 Conduct of Business......................................... A-22
SECTION 4.2 No Solicitation by Partners................................. A-24
</TABLE>
A-2
<PAGE> 263
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
ARTICLE V
ADDITIONAL AGREEMENTS
SECTION 5.1 Preparation of the Form S-4 and the Joint Proxy Statement;
Stockholders Meetings....................................... A-25
SECTION 5.2 Letters of Partners's Accountants........................... A-26
SECTION 5.3 Letters of NTL's Accountants................................ A-26
SECTION 5.4 Access to Information; Confidentiality...................... A-26
SECTION 5.5 Reasonable Best Efforts..................................... A-27
SECTION 5.6 Stock Options and Stock Appreciation Rights................. A-27
SECTION 5.7 Partners Incentive Plans and Certain Employee Matters....... A-28
SECTION 5.8 Indemnification, Exculpation and Insurance.................. A-28
SECTION 5.9 Fees and Expenses........................................... A-29
SECTION 5.10 Public Announcements........................................ A-29
SECTION 5.11 NASDAQ Quotation............................................ A-29
SECTION 5.12 Stockholder Litigation...................................... A-29
SECTION 5.13 Purchase Rights............................................. A-29
SECTION 5.14 Standstill Agreements; Confidentiality Agreements........... A-30
SECTION 5.15 Conveyance Taxes............................................ A-30
SECTION 5.16 Debt Offers................................................. A-30
SECTION 5.17 Comcast Name................................................ A-30
SECTION 5.18 Structure................................................... A-31
SECTION 5.19 Relationship with Significant Affiliates.................... A-31
SECTION 5.20 NTL Preferred Stock......................................... A-31
ARTICLE VI
CONDITIONS PRECEDENT
SECTION 6.1 Conditions to Each Party's Obligation to Effect the
Amalgamation................................................ A-31
SECTION 6.2 Conditions to Obligations of NTL............................ A-33
SECTION 6.3 Conditions to Obligations of Partners....................... A-33
SECTION 6.4 Frustration of Amalgamation Closing Conditions.............. A-34
ARTICLE VII
TERMINATION, AMENDMENT AND WAIVER
SECTION 7.1 Termination................................................. A-34
SECTION 7.2 Effect of Termination....................................... A-35
SECTION 7.3 Amendment................................................... A-35
SECTION 7.4 Extension; Waiver........................................... A-35
SECTION 7.5 Procedure for Termination, Amendment, Extension or Waiver... A-35
</TABLE>
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<TABLE>
<CAPTION>
PAGE
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<S> <C> <C>
ARTICLE VIII
GENERAL PROVISIONS
SECTION 8.1 Nonsurvival of Representations and Warranties............... A-35
SECTION 8.2 Notices..................................................... A-35
SECTION 8.3 Definitions................................................. A-37
SECTION 8.4 Interpretation.............................................. A-38
SECTION 8.5 Counterparts................................................ A-38
SECTION 8.6 Entire Agreement; No Third-Party Beneficiaries.............. A-38
SECTION 8.7 Governing Law............................................... A-38
SECTION 8.8 Assignment.................................................. A-38
SECTION 8.9 Consent to Jurisdiction..................................... A-38
SECTION 8.10 Headings.................................................... A-39
SECTION 8.11 Severability................................................ A-39
</TABLE>
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AGREEMENT AND PLAN OF AMALGAMATION dated as of February 4, 1998, among NTL
INCORPORATED, a Delaware corporation ("NTL"), NTL (BERMUDA) LIMITED, a Bermuda
corporation ("Sub"), and COMCAST UK CABLE PARTNERS LIMITED, a Bermuda
corporation ("Partners").
WHEREAS, the respective Boards of Directors of NTL, Sub and Partners have
each approved the amalgamation of Sub with Partners (the "Amalgamation"), upon
the terms and subject to the conditions set forth in this Agreement, whereby
each issued and outstanding share of Class A Common Stock, par value L.01 per
share ("Class A Common"), and each share of Class B Common Stock, par value L.01
per share ("Class B Common"), of Partners (the Class A Common and Class B
Common, collectively, the "Partners Common Stock"), other than shares owned by
NTL or Dissenting Shares (as defined in Section 2.1(d)), will be cancelled in
consideration for the right to receive the Amalgamation Consideration (as
defined in Section 2.1(b));
WHEREAS, the respective Boards of Directors of NTL, Sub and Partners have
each determined that the Amalgamation and the other transactions contemplated
hereby are consistent with, and in furtherance of, their respective business
strategies and goals and are in the best interests of their respective
stockholders;
WHEREAS, the parties desire to make certain representations, warranties,
covenants and agreements in connection with the Amalgamation and also to
prescribe various conditions to the Amalgamation;
NOW, THEREFORE, in consideration of the representations, warranties,
covenants and agreements contained in this Agreement, the parties agree as
follows:
ARTICLE I
THE AMALGAMATION
SECTION 1.1 The Amalgamation. Upon the terms and subject to the
conditions set forth in this Agreement, and in accordance with the Bermuda
Companies Act 1981, as amended (the "Companies Act"), Sub shall be amalgamated
with Partners at the Amalgamation Effective Time (as defined in Section 1.3),
and the separate existence of Sub and Partners shall thereupon continue in the
form of the company resulting from the Amalgamation (the "Amalgamated Company").
The Amalgamated Company shall operate under the name of "NTL (Bermuda) Limited"
and continue under the provisions of the Companies Act and other applicable
Bermuda law.
SECTION 1.2 Amalgamation Closing. The closing of the Amalgamation (the
"Amalgamation Closing") will take place at 10:00 a.m. Eastern time on a date to
be specified by the parties (the "Amalgamation Closing Date"), which shall be no
later than the second Business Day after satisfaction or waiver of the
conditions set forth in Article VI, unless another time or date is agreed to by
the parties hereto. The Amalgamation Closing will be held at such locations in
the City of New York and Bermuda as is agreed to by the parties hereto.
SECTION 1.3 Amalgamation Effective Time. As soon as practicable after the
date hereof, NTL and Partners shall file a joint application for the consent of
the Bermuda Minister of Finance (the "Minister") to the Amalgamation and, as
soon as practicable after satisfaction or, to the extent permitted hereunder,
waiver of all conditions hereunder to the Amalgamation, Sub and Partners shall
make all filings or recordings required by the Companies Act to perfect or
complete the Amalgamation. The Amalgamation shall become effective upon the
issuance of a certificate of amalgamation (the "Certificate of Amalgamation") in
accordance with Section 108 of the Companies Act by the Registrar of Companies
in Bermuda, or at such subsequent date or time as Sub and Partners shall agree
and be specified in the Certificate of Amalgamation (the time the Amalgamation
becomes effective being hereinafter referred to as the "Amalgamation Effective
Time").
SECTION 1.4 Effects of the Amalgamation. The Amalgamation shall have the
effects set forth in Section 109 of the Companies Act.
SECTION 1.5 Memorandum of Association and Bye-laws of the Amalgamated
Company. The memorandum of association of Sub which is attached to this
Agreement as Schedule 1.5 (which Schedule
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should be read with and forms part of this Agreement) shall be the memorandum of
the Amalgamated Company (as provided in Section 109 of the Companies Act) until
thereafter changed or amended as provided therein or by applicable law. The
bye-laws of Sub, as in effect immediately prior to the Amalgamation Effective
Time, shall be the bye-laws of the Amalgamated Company until thereafter changed
or amended as provided therein or by applicable law.
SECTION 1.6 Directors and Officers. The directors and officers (and
resident representative, if any) of Sub at the Amalgamation Effective Time
shall, from and after the Amalgamation Effective Time, be the directors and
officers (and resident representative, if any), respectively, of the Amalgamated
Company until their successors shall have been duly elected or appointed or
qualified or until their earlier death, resignation or removal in accordance
with the Companies Act and the bye-laws of the Amalgamated Company. The name and
address of each proposed director and officer of the Amalgamated Company is set
forth in Section 1.6 of the NTL Disclosure Schedule (as defined in Section 3.2).
ARTICLE II
EFFECT OF THE AMALGAMATION ON THE CAPITAL STOCK
OF THE CONSTITUENT CORPORATIONS;
CANCELLATION OF PARTNERS COMMON STOCK
SECTION 2.1 Effect on Capital Stock. As of the Amalgamation Effective
Time, by virtue of the Amalgamation and without any action on the part of the
holder of any shares of Partners Common Stock:
(a) Cancellation of Treasury and NTL-Owned Partners Common Stock. Each
share of Partners Common Stock that is owned by NTL, any direct or indirect
wholly owed subsidiary of NTL or any direct or indirect wholly owned
subsidiary of Partners, shall automatically be cancelled and shall cease to
exist, and no consideration shall be delivered in consideration therefor.
(b) Cancellation of Partners Stock. The entirety of the authorized and
unissued capital stock of Partners shall be cancelled. Subject to Section
2.2(e), each issued and outstanding share of Partners Common Stock (other
than Dissenting Shares and shares to be cancelled in accordance with
Section 2.1(a)) shall be cancelled in consideration for the holder thereof
receiving .3745 (the "Exchange Ratio") validly issued, fully paid and
nonassessable shares of common stock, par value $.01 per share ("NTL Common
Stock"), of NTL from NTL, and NTL shall deliver NTL stock to such holder,
provided that:
(i) If, as of the fifth Business Day prior to the Amalgamation
Effective Time (the "Determination Time"), (x) the Purchase Rights
relating to Cable London and Birmingham Cable are of no legal effect
(i.e., such rights have been (A) waived or (B) have not been exercised
in accordance with their terms and, in the opinion of recognized counsel
of the jurisdiction of the governing law of such Purchase Rights, are of
no further legal force or effect), or (y) NTL and Partners shall have
entered into an agreement, arrangement or understanding with TeleWest
and/or General Cable directly or indirectly relating to the Purchase
Rights or ownership interests in Cable London and Birmingham Cable
(either of the circumstances in (x) or (y) hereinafter referred to as
"Resolved"), the Exchange Ratio will remain in effect.
(ii) If, as of the Determination Time, the Purchase Rights relating
to both Cable London and Birmingham Cable have been effectively
exercised other than pursuant to clause(y) of Section 2.1(b)(i) (such
circumstances hereinafter referred to as "Exercised"), each share of
Partners Common Stock shall be cancelled in consideration for the
receipt, at NTL's election, of (A).3745 validly issued, fully paid and
nonassessable shares of NTL Common Stock, (B) .3108 validly issued,
fully paid and nonassessable shares of NTL Common Stock and the Equity
Interest Proceeds (as defined in Section 8.3) from the sale of the
interest in Birmingham Cable under the applicable Purchase Rights,
(C).2584 validly issued, fully paid and nonassessable shares of NTL
Common Stock and the Equity Interest Proceeds from the sale of the
interest in Cable London under the applicable Purchase Rights, or (D)
.1947 validly issued, fully paid and nonassessable shares of NTL
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Common Stock and the Equity Interest Proceeds from the sale of the
interests in Cable London and Birmingham Cable under the applicable
Purchase Rights. Any Equity Interest
Proceeds payable pursuant to this Section 2.1(b) shall be payable,
at NTL's election, in cash or in validly issued, fully paid and
nonassessable shares of NTL Common Stock valued at the greater of (1)
$30.00 per share and (2) the NTL Average Market Price as of the
Determination Time.
(iii) If, as of the Determination Time, the Purchase Rights
relating to Birmingham Cable have been Exercised and the Purchase Rights
relating to Cable London have been Resolved, each share of Partners
Common Stock shall be cancelled in consideration for the receipt, at
NTL's election, of (A) .3745 validly issued, fully paid and
nonassessable shares of NTL Common Stock or (B) .3108 validly issued,
fully paid and nonassessable shares of NTL Common Stock and the Equity
Interest Proceeds from the sale of the interest in Birmingham Cable
under the applicable Purchase Rights payable in accordance with the last
sentence of Section 2.1(b)(ii).
(iv) If, as of the Determination Time, the Purchase Rights relating
to Cable London have been Exercised and the Purchase Rights relating to
Birmingham Cable have been Resolved, each share of Partners Common Stock
shall be cancelled in consideration for the receipt, at NTL's election,
of (A) .3745 validly issued, fully paid and nonassessable shares of NTL
Common Stock or (B) .2584 validly issued, fully paid and nonassessable
shares of NTL Common Stock and the Equity Interest Proceeds from the
sale of the interest in Cable London under the applicable Purchase
Rights payable in accordance with the last sentence of Section
2.1(b)(ii).
(v) If, as of the Determination Time, the Purchase Rights relating
to both Cable London and Birmingham Cable remain in legal effect but
have not been Exercised or otherwise Resolved ("Unresolved"), each share
of Partners Common Stock shall be cancelled in consideration for the
receipt, at the election of NTL, of either (x).3745 validly issued,
fully paid and nonassessable shares of NTL Common Stock or (y)(A) .1947
validly issued, fully paid and nonassessable shares of NTL Common Stock,
(B) .1161 (subject to adjustment as set forth in Section 5.20) validly
issued, fully paid and nonassessable shares of NTL Class C Redeemable
Preferred Stock having the terms set forth in Exhibit 2.1 ("NTL Class C
Stock"), and (C) .0637 (subject to adjustment as set forth in Section
5.20) validly issued, fully paid and nonassessable shares of NTL Class D
Redeemable Preferred Stock having the terms set forth in Exhibit 2.1
("NTL Class D Stock").
(vi) If, as of the Determination Time, only the Purchase Rights
relating to Cable London are Unresolved, each share of Partners Common
Stock shall be cancelled in consideration for the receipt of (A)(1) if
the Purchase Rights relating to Birmingham Cable have been Resolved,
.2584 validly issued, fully paid and nonassessable shares of NTL Common
Stock or (2) if the Purchase Rights relating to Birmingham Cable have
been Exercised, at NTL's election, (x) .2584 validly issued, fully paid
and nonassessable shares of NTL Common Stock or (y) .1947 validly
issued, fully paid and nonassessable shares of NTL Common Stock and the
Equity Interest Proceeds from the sale of the interest in Birmingham
Cable under the applicable Purchase Rights payable in accordance with
the last sentence of Section 2.1(b)(ii), and (B) .1161 (subject to
adjustment as set forth in Section 5.20) validly issued, fully paid and
nonassessable shares of NTL Class C Stock.
(vii) If, as of the Determination Time, only the Purchase Rights
relating to Birmingham Cable are Unresolved, each share of Partners
Common Stock shall be cancelled in consideration for the receipt of
(A)(1) if the Purchase Rights relating to Cable London have been
Resolved, .3108 validly issued, fully paid and nonassessable shares of
NTL Common Stock or (2) if the Purchase Rights relating to Cable London
have been Exercised, at NTL's election, (x) .3108 validly issued, fully
paid and nonassessable shares of NTL Common Stock or (y) .1947 validly
issued, fully paid and nonassessable shares of NTL Common Stock and the
Equity Interest Proceeds from the sale of the interest in Cable London
under the applicable Purchase Rights payable in accordance with the last
sentence of Section 2.1(b)(ii), and (B) .0637 (subject to adjustment as
set forth in Section 5.20) validly issued, fully paid and nonassessable
shares of NTL Class D Stock.
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The consideration to be issued to holders of Partners Common Stock
is referred to herein as the "Amalgamation Consideration." As of the
Amalgamation Effective Time, all the Partners Common Stock shall no
longer be outstanding and shall automatically be cancelled and shall
cease to exist, and each holder of a certificate representing any such
shares of Partners Common Stock (other than Dissenting Shares) shall
cease to have any rights with respect thereto, except the right to
receive the Amalgamation Consideration and any cash in lieu of
fractional shares of NTL Common Stock to be issued or paid in
consideration therefor upon surrender of such certificate in accordance
with Section 2.2, without interest.
(c) Conversion of Shares of Sub. Each issued and outstanding share,
par value L.01 per share, of Sub shall be converted into and become one
validly issued, fully paid and nonassessable share of the Amalgamated
Company by virtue of the Amalgamation and without any action on the part of
NTL.
(d) Shares of Dissenting Shareholders. Notwithstanding anything in
this Agreement to the contrary, any issued and outstanding shares of
Partners Common Stock held by a person who did not vote in favor of the
Amalgamation and who complies with all the provisions of Bermuda law
concerning the right of holders of Partners Common Stock to require
appraisal of their shares of Partners Common Stock by the Supreme Court of
Bermuda (such shareholder, a "Dissenting Shareholder", and such shares,
"Dissenting Shares") shall be cancelled at the Amalgamation Effective Time
in consideration for the right to receive such consideration as may be
payable to such Dissenting Shareholder upon completion of the Amalgamation
pursuant to the laws of Bermuda. In the event that a Dissenting Shareholder
fails to perfect, effectively withdraws or otherwise loses any right to
appraisal and payment under the Companies Act, such Dissenting Shareholder
shall no longer have any right to appraisal thereunder. Any such Dissenting
Shareholder shall be entitled to elect to receive the Amalgamation
Consideration and any cash in lieu of fractional shares of NTL Capital
Stock. Partners shall give NTL (i) prompt notice of any written demands for
appraisal of Dissenting Shares or withdrawals of such demands received by
Partners and (ii) the opportunity to participate in and direct all
negotiations and proceedings with respect to any such demands. Except as
required by Section 106 of the Companies Act, prior to the Amalgamation
Effective Time, Partners shall not, without the prior written consent of
NTL, make any payment with respect to, or settle, offer to settle or
otherwise negotiate, any such demands.
SECTION 2.2 Exchange of Certificates. (a) Exchange Agent. Prior to the
Amalgamation Effective Time, NTL shall enter into an agreement with such bank or
trust company as may be designated by NTL and be reasonably satisfactory to
Partners (the "Exchange Agent"), which shall provide that NTL shall deposit with
the Exchange Agent as of the Amalgamation Effective Time, for the benefit of the
holders of Partners Common Stock, for exchange in accordance with this Article
II, through the Exchange Agent, certificates representing NTL Capital Stock (as
defined below) (such shares of NTL Capital Stock, together with any dividends or
distributions with respect thereto with a record date after the Amalgamation
Effective Time, any Excess Shares (as defined in Section 2.2(e)) and any cash
(including cash proceeds from the sale of the Excess Shares) payable in lieu of
any fractional shares of NTL Capital Stock being hereinafter referred to as the
"Exchange Fund") issuable pursuant to Section 2.1 in exchange for outstanding
shares of Partners Common Stock.
(b) Exchange Procedures. Promptly after the Amalgamation Effective Time,
NTL will cause the Exchange Agent to mail to each registered holder of a
certificate or certificates other than Dissenting Shareholders, if any, which
immediately prior to the Amalgamation Effective Time represented outstanding
shares of Partners Common Stock (the "Certificates") whose shares were cancelled
in consideration of the receipt of the Amalgamation Consideration pursuant to
Section 2.1, (i) a letter of transmittal (which shall specify that delivery
shall be effected, and risk of loss and title to the Certificates shall pass,
only upon delivery of the Certificates to the Exchange Agent and shall be in
such form and have such other provisions as Partners and NTL may reasonably
specify) and (ii) instructions for use in surrendering the Certificates in
exchange for the Amalgamation Consideration. Upon surrender of a Certificate for
cancellation to the Exchange Agent, together with such letter of transmittal,
duly executed, and such other documents as may reasonably be required by the
Exchange Agent, the holder of such Certificate shall be entitled to receive in
consideration therefor a certificate representing that number of whole shares of
NTL Common Stock, NTL Class C Stock
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or NTL Class D Stock (collectively, "NTL Capital Stock") which such holder has
the right to receive pursuant to the provisions of this Article II, certain
dividends or other distributions in accordance with Section 2.2(c) and cash in
lieu of any fractional share of NTL Capital Stock in accordance with Section
2.2(e), and the Certificate so surrendered shall forthwith be cancelled. In the
event of a surrender of a Certificate representing shares of Partners Common
Stock which are not registered in the transfer records of Partners under the
name of the person surrendering such Certificate, a certificate representing the
proper number of shares of NTL Capital Stock may be issued to a person other
than the person in whose name the Certificate so surrendered is registered if
such Certificate shall be properly endorsed or otherwise be in proper form for
transfer and the person requesting such issuance shall pay any transfer or other
taxes required by reason of the issuance of shares of NTL Capital Stock to a
person other than the registered holder of such Certificate or establish to the
satisfaction of NTL that such tax has been paid or is not applicable. Until
surrendered as contemplated by this Section 2.2, each Certificate shall be
deemed at any time after the Amalgamation Effective Time to represent only the
right to receive upon such surrender the Amalgamation Consideration which the
holder thereof has the right to receive in respect of such Certificate pursuant
to the provisions of this Article II, certain dividends or other distributions
in accordance with Section 2.2(c) and cash in lieu of any fractional share of
NTL Capital Stock in accordance with Section 2.2(e). No interest shall be paid
or will accrue on any cash payable to holders of Certificates pursuant to the
provisions of this Article II.
(c) Distributions with Respect to Unexchanged Shares. No dividends or
other distributions with respect to NTL Capital Stock with a record date after
the Amalgamation Effective Time shall be paid to the holder of any unsurrendered
Certificate with respect to the shares of NTL Common Stock represented thereby,
and, in the case of Certificates representing Partners Common Stock, no cash
payment in lieu of fractional shares shall be paid to any such holder pursuant
to Section 2.2(e), and all such dividends, other distributions and cash in lieu
of fractional shares of NTL Capital Stock shall be paid by NTL to the Exchange
Agent and shall be included in the Exchange Fund, in each case until the
surrender of such Certificate in accordance with this Article II. Subject to the
effect of applicable escheat or similar laws, following surrender of any such
Certificate there shall be paid to the holder of the certificate representing
whole shares of NTL Capital Stock issued in consideration therefor, without
interest, (i) at the time of such surrender, the amount of dividends or other
distributions with a record date after the Amalgamation Effective Time
theretofore paid with respect to such whole shares of NTL Capital Stock and, in
the case of Certificates representing Partners Common Stock, the amount of any
cash payable in lieu of a fractional share of NTL Capital Stock to which such
holder is entitled pursuant to Section 2.2(e) and (ii) at the appropriate
payment date, the amount of dividends or other distributions with a record date
after the Amalgamation Effective Time and with a payment date subsequent to such
surrender payable with respect to such whole shares of NTL Capital Stock.
(d) No Further Ownership Rights in Partners Common Stock. All shares of
NTL Capital Stock issued upon the surrender of Certificates in accordance with
the terms of this Article II (including any cash paid pursuant to this Article
II) shall be deemed to have been issued (and paid) in full satisfaction of all
rights pertaining to the shares of Partners Common Stock, theretofore
represented by such Certificates, subject, however, to the Amalgamated Company's
obligation to pay any dividends or make any other distributions with a record
date prior to the Amalgamation Effective Time which may have been declared or
made by Partners on such shares of Partners Common Stock which remain unpaid at
the Amalgamation Effective Time, and there shall be no further registration of
transfers on the stock transfer books of the Amalgamated Company of the shares
of Partners Common Stock which were outstanding immediately prior to the
Amalgamation Effective Time. If, after the Amalgamation Effective Time,
Certificates are presented to the Amalgamated Company or the Exchange Agent for
any reason, they shall be cancelled in accordance with this Article II, except
as otherwise provided by law.
(e) No Fractional Shares. (i) No certificates or scrip representing
fractional shares of NTL Capital Stock shall be issued upon the surrender of
Certificates, no dividend or distribution of NTL shall relate to such fractional
share interests and such fractional share interests will not entitle the owner
thereof to vote or to any rights of a stockholder of NTL.
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(ii) As promptly as practicable following the Amalgamation Effective
Time, the Exchange Agent shall determine the excess of (A) the number of
whole shares of NTL Capital Stock delivered to the Exchange Agent by NTL
pursuant to Section 2.2(a) over (B) the aggregate number of whole shares of
NTL Capital Stock to be distributed to former holders of Partners Common
Stock pursuant to Section 2.2(b) (such excess being herein called the
"Excess Shares"). Following the Amalgamation Effective Time, the Exchange
Agent shall, on behalf of the former stockholders of Partners, sell the
Excess Shares at then-prevailing prices on the NASDAQ Stock Market
("NASDAQ") or otherwise all in the manner provided in Section 2.2(e)(iii).
(iii) The sale of the Excess Shares by the Exchange Agent shall be
executed on the NASDAQ through one or more member firms of the NASDAQ and
shall be executed in round lots to the extent practicable. The Exchange
Agent shall use reasonable efforts to complete the sale of the Excess
Shares as promptly following the Amalgamation Effective Time as, in the
Exchange Agent's sole judgment, is practicable consistent with obtaining
the best execution of such sales in light of prevailing market conditions.
Until the net proceeds of such sale or sales have been distributed to the
holders of Certificates formerly representing Partners Common Stock, the
Exchange Agent shall hold such proceeds in trust for such holders (the
"Common Shares Trust"). The Amalgamated Company shall pay all commissions,
transfer taxes and other out-of-pocket transaction costs, including the
expenses and compensation of the Exchange Agent incurred in connection with
such sale of the Excess Shares. The Exchange Agent shall determine the
portion of the Common Shares Trust to which each former holder of Partners
Common Stock is entitled, if any, by multiplying the amount of the
aggregate net proceeds comprising the Common Shares Trust by a fraction,
the numerator of which is the amount of the fractional share interest to
which such former holder of Partners Common Stock is entitled (after taking
into account all shares of Partners Common Stock held at the Amalgamation
Effective Time by such holder) and the denominator of which is the
aggregate amount of fractional share interests to which all former holders
of Partners Common Stock are entitled.
(iv) Notwithstanding the provisions of Section 2.2(e)(ii) and (iii),
the Amalgamated Company may, at the option of NTL exercised prior to the
Amalgamation Effective Time, in lieu of the issuance and sale of Excess
Shares and the making of the payments hereinabove contemplated, pay each
former holder of Partners Common Stock an amount in cash equal to the
product obtained by multiplying (A) the fractional share interest to which
such former holder (after taking into account all shares of Partners Common
Stock held at the Amalgamation Effective Time by such holder) would
otherwise be entitled by (B) the NTL Average Stock Price determined as of
the fifth trading day prior to the Amalgamation Closing Date, and, in such
case, all references herein to the cash proceeds of the sale of the Excess
Shares and similar references shall be deemed to mean and refer to the
payments calculated as set forth in this Section 2.2(e)(iv).
(v) As soon as practicable after the determination of the amount of
cash, if any, to be paid to holders of Certificates formerly representing
Partners Common Stock with respect to any fractional share interests, the
Exchange Agent shall make available such amounts to such holders of
Certificates formerly representing Partners Common Stock subject to and in
accordance with the terms of Section 2.2(c).
(f) Termination of Exchange Fund. Any portion of the Exchange Fund which
remains undistributed to the holders of the Certificates for six months after
the Amalgamation Effective Time shall be delivered to NTL, upon demand, and any
holders of the Certificates who have not theretofore complied with this Article
II shall thereafter look only to NTL for payment of their claim for Amalgamation
Consideration, any dividends or distributions with respect to NTL Capital Stock
and any cash in lieu of fractional shares of NTL Capital Stock.
(g) No Liability. None of NTL, Sub, Partners, the Amalgamated Company or
the Exchange Agent shall be liable to any person in respect of any shares of NTL
Capital Stock, any dividends or distributions with respect thereto, any cash in
lieu of fractional shares of NTL Capital Stock or any cash from the Exchange
Fund, in each case delivered to a public official pursuant to any applicable
abandoned property, escheat or similar law.
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(h) Investment of Exchange Fund. The Exchange Agent shall invest any cash
included in the Exchange Fund, as directed by NTL, on a daily basis. Any
interest and other income resulting from such investments shall be paid to NTL.
(i) Lost Certificates. If any Certificate shall have been lost, stolen or
destroyed, upon the making of an affidavit of that fact by the person claiming
such Certificate to be lost, stolen or destroyed and, if required by the
Amalgamated Company, the posting by such person of a bond in such reasonable
amount as the Amalgamated Company may direct as indemnity against any claim that
may be made against it with respect to such Certificate, the Exchange Agent
shall issue in exchange for such lost, stolen or destroyed Certificate the
Amalgamation Consideration and, if applicable, any unpaid dividends and
distributions on shares of NTL Capital Stock deliverable in respect thereof and
any cash in lieu of fractional shares, in each case pursuant to this Agreement.
SECTION 2.3 Certain Adjustments. If between the date hereof and the
Amalgamation Effective Time, the outstanding shares of Partners Common Stock or
of NTL Common Stock shall be changed into a different number of shares,
including by reason of any reclassification, recapitalization, split-up,
combination or exchange of shares, or any dividend payable in stock or other
securities shall be declared thereon with a record date within such period, the
Exchange Ratio or, in the cases of clause (b)(i), (ii), (iii), (iv) or (v) of
Section 2.1, the number of shares of NTL Common Stock, NTL Class C Stock and NTL
Class D Stock issuable, shall be adjusted accordingly to provide to the holders
of Partners Common Stock the same economic effect as contemplated by this
Agreement prior to such change.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
SECTION 3.1 Representations and Warranties of Partners. Except as
disclosed in the Partners SEC Documents (as defined in Section 3.1(g)) or as set
forth on the Disclosure Schedule delivered by Partners to NTL in connection with
the execution of this Agreement (the "Partners Disclosure Schedule") and making
reference to the particular subsection of this Agreement to which exception is
being taken, Partners represents and warrants to NTL as follows:
(a) Organization, Standing and Corporate Power. (i) Each of Partners
and its subsidiaries (as defined in Section 8.3) is a corporation or other
legal entity duly organized, validly existing and in good standing (with
respect to jurisdictions which recognize such concept) under the laws of
the jurisdiction in which it is organized and has the requisite corporate
or other power, as the case may be, and authority to carry on its business
as now being conducted, except, as to subsidiaries, for those jurisdictions
where the failure to be so organized, existing or in good standing
individually or in the aggregate would not have a material adverse effect
(as defined in Section 8.3) on Partners. Each of Partners and its
subsidiaries is duly qualified or licensed to do business and is in good
standing (with respect to jurisdictions which recognize such concept) in
each jurisdiction in which the nature of its business or the ownership,
leasing or operation of its properties makes such qualification or
licensing necessary, except for those jurisdictions where the failure to be
so qualified or licensed or to be in good standing individually or in the
aggregate would not have a material adverse effect on Partners.
(ii) Partners has delivered to NTL prior to the execution of this
Agreement complete and correct copies of its memorandum of association and
bye-laws, as amended to date.
(iii) In all material respects, the minute books of Partners contain
accurate records of all meetings and accurately reflect all other actions
taken by the stockholders, the Board of Directors and all committees of the
Board of Directors of Partners since January 1, 1996 and prior to September
25, 1997.
(b) Subsidiaries and Affiliates. Section 3.1(b) of the Partners
Disclosure Schedule sets forth all the subsidiaries of Partners which as of
the date of this Agreement are Significant Subsidiaries (as defined in Rule
1-02 of Regulation S-X of the SEC) and each Significant Affiliate (as
defined herein) and the ownership interest of Partners in such entity.
Except as set forth in Section 3.1(b) of the
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Partners Disclosure Schedule, all such outstanding shares of capital stock
of, or other equity interests in, each such Significant Subsidiary or
Significant Affiliate have been validly issued and are fully paid and
nonassessable and are owned directly or indirectly by Partners, free and
clear of all pledges, claims, liens, charges, encumbrances and security
interests of any kind or nature whatsoever (collectively, "Liens") and free
of any other restriction (including any restriction on the right to vote,
sell or otherwise dispose of such capital stock or other ownership
interests). At the Amalgamation Effective Time, the Amalgamated Company
will have legal and beneficial title of Partners' ownership interests of
the Significant Affiliates, subject to (i) the Purchase Rights and (ii)
Liens existing as of the date hereof in respect of Debt Agreements (as
defined in Section 3.1(o)).
(c) Capital Structure. The authorized capital stock of Partners
consists of 50,000,000 shares of Class A Common, 50,000,000 shares of Class
B Common and 10,000,000 shares of preferred stock, par value L.01 per
share. At the close of business on January 30, 1998: (i) 37,231,997 shares
of Class A Common were issued and outstanding; (ii) 12,872,605 shares of
Class B Common were issued and outstanding; (iii) no shares of Partners
Preferred Stock were issued and outstanding; and (iv) 20,250 shares of
Partners Common Stock were reserved for issuance pursuant to the 1995 Stock
Option Plan, complete and correct copies of which have been delivered to
NTL (such plan, the "Partners Stock Plan"). Section 3.1(c) of the Partners
Disclosure Schedule sets forth a complete and correct list, as of January
30, 1998, of the number of shares of Partners Common Stock subject to
employee stock options or other rights to purchase or receive Partners
Common Stock granted under the Partners Stock Plan (collectively, "Partners
Employee Stock Options"), the dates of grant and exercise prices thereof.
All outstanding shares of capital stock of Partners are, and all shares
which may be issued prior to the Amalgamation Effective Time will be, when
issued, duly authorized, validly issued, fully paid and nonassessable and
not subject to preemptive rights. Except as set forth in this Section
3.1(c) and except for changes since January 30, 1998 resulting from the
issuance of shares of Partners Common Stock pursuant to the Partners
Employee Stock Options or as permitted by Section 4.1(a)(i)(y) and
4.1(a)(ii), (x) there are not issued, reserved for issuance or outstanding
(A) any shares of capital stock or other voting securities of Partners, (B)
any securities of Partners or any Partners subsidiary convertible into or
exchangeable or exercisable for shares of capital stock or voting
securities of Partners, (C) any warrants, calls, options or other rights to
acquire from Partners or any Partners subsidiary, and any obligation of
Partners or any Partners subsidiary to issue, any capital stock, voting
securities or securities convertible into or exchangeable or exercisable
for capital stock or voting securities of Partners, and (y) there are no
outstanding obligations of Partners or any Partners subsidiary to
repurchase, redeem or otherwise acquire any such securities or to issue,
deliver or sell, or cause to be issued, delivered or sold, any such
securities. Except as set forth in Section 3.1(c) of the Partners
Disclosure Schedule, there are no outstanding (A) securities of Partners or
any Partners subsidiary convertible into or exchangeable or exercisable for
shares of capital stock or other voting securities or ownership interests
in any Partners subsidiary, (B) warrants, calls, options or other rights to
acquire from Partners or any Partners subsidiary, and any obligation of
Partners or any Partners subsidiary to issue, any capital stock, voting
securities or other ownership interests in, or any securities convertible
into or exchangeable or exercisable for any capital stock, voting
securities or ownership interests in, any Partners subsidiary or
Significant Affiliate or (C) obligations of Partners or any Partners
subsidiary to repurchase, redeem or otherwise acquire any such outstanding
securities of Partners subsidiaries or to issue, deliver or sell, or cause
to be issued, delivered or sold, any such securities. Except as set forth
in Section 3.1(c) of the Partners Disclosure Schedule, neither Partners nor
any Partners subsidiary is a party to any agreement restricting the
transfer of, relating to the voting of, requiring registration of, or
granting any preemptive or, except as provided by the terms of the Partners
Employee Stock Options, antidilutive rights with respect to, any securities
of the type referred to in the two preceding sentences. Other than the
Partners subsidiaries and the Significant Affiliates, Partners does not
directly or indirectly beneficially own any securities or other beneficial
ownership interests in any other entity except for non-controlling
investments made in the ordinary course of business in entities which are
not individually or in the aggregate material to Partners and its
subsidiaries as a whole.
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(d) Authority; Noncontravention. Partners has all requisite corporate
power and authority to enter into this Agreement and, subject, in the case
of the Amalgamation, to the Partners Stockholder Approval (as defined in
Section 3.1(k)) to consummate the transactions contemplated by this
Agreement. The execution and delivery of this Agreement by Partners and the
consummation by Partners of the transactions contemplated by this Agreement
have been duly authorized by all necessary corporate action on the part of
Partners, subject, in the case of the Amalgamation, to the Partners
Stockholder Approval. This Agreement has been duly executed and delivered
by Partners and, assuming the due authorization, execution and delivery by
NTL and Sub, constitutes the legal, valid and binding obligation of
Partners, enforceable against Partners in accordance with its terms, except
as such enforceability may be limited by applicable bankruptcy and similar
laws or by general principles of equity (whether considered in a proceeding
in equity or at law). Except as set forth in Section 3.1(d) of the Partners
Disclosure Schedule, the execution and delivery of this Agreement do not,
and the consummation of the transactions contemplated by this Agreement and
compliance with the provisions of this Agreement will not, conflict with,
or result in any violation of, or default (with or without notice or lapse
of time, or both) under, or give rise to a right of termination,
cancellation or acceleration of any obligation or loss of a benefit under,
or result in the creation of any Lien upon any of the properties or assets
of Partners or any of its subsidiaries under, (i) the memorandum of
association or bye-laws of Partners or the comparable organizational
documents of any of its subsidiaries, (ii) any loan or credit agreement,
note, bond, mortgage, indenture, lease or other agreement, instrument,
permit, concession, franchise, license or similar authorization applicable
to Partners or any of its subsidiaries or their respective properties or
assets or (iii) subject to the governmental filings and other matters
referred to in the following sentence, any judgment, order, decree,
statute, law, ordinance, rule or regulation applicable to Partners or any
of its subsidiaries or their respective properties or assets, other than,
in the case of clauses (ii) and (iii), any such conflicts, violations,
defaults, rights, losses or Liens that individually or in the aggregate
would not (x) have a material adverse effect on Partners or (y) reasonably
be expected to impair in any material way the ability of Partners to
perform its obligations under this Agreement. No consent, approval, order
or authorization of, action by or in respect of, or registration,
declaration or filing with, any federal, state, local or foreign
government, any court, administrative, regulatory or other governmental
agency, commission or authority or any nongovernmental self-regulatory
agency, commission or authority (a "Governmental Entity") is required by or
with respect to Partners or any of its subsidiaries in connection with the
execution and delivery of this Agreement by Partners or the consummation by
Partners of the transactions contemplated by this Agreement, except for (1)
the filing with the SEC of (A) a proxy statement relating to the Partners
Stockholders Meeting (as defined in Section 5.1(b)) (such proxy statement,
together with the proxy statement relating to the NTL Stockholders Meeting
(as defined in Section 5.1(c)), in each case as amended or supplemented
from time to time, the "Joint Proxy Statement"), and (B) such reports under
the Securities Exchange Act of 1934, as amended (the "Exchange Act"), as
may be required in connection with this Agreement and the transactions
contemplated by this Agreement; (2) the consent of the Minister in
connection with the Amalgamation and the registration of the Amalgamated
Company with the Registrar of Companies in Bermuda in accordance with the
Companies Act, (3) such filings with Governmental Entities to satisfy the
applicable requirements of state securities or "blue sky" laws; (4) receipt
of the Amalgamation Required British Approvals (as defined); and (5) such
consents, approvals, orders or authorizations the failure of which to be
made or obtained individually or in the aggregate would not (x) have a
material adverse effect on Partners or (y) reasonably be expected to impair
in any material way the ability of Partners to perform its obligations
under this Agreement.
(e) SEC Documents; Undisclosed Liabilities; Financial Statements. (i)
Partners has filed all required registration statements, prospectuses,
reports, schedules, forms, statements and other documents (including
exhibits and all other information incorporated therein) with the SEC since
September 20, 1994 (the "Partners SEC Documents"). As of their respective
dates, the Partners SEC Documents complied in all material respects with
the requirements of the Securities Act of 1933, as amended (the "Securities
Act"), or the Exchange Act, as the case may be, and the rules and
regulations of the SEC promulgated thereunder applicable to such Partners
SEC Documents, and none of the Partners
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SEC Documents when filed contained any untrue statement of a material fact
or omitted to state a material fact required to be stated therein or
necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading.
(ii) The financial statements of Partners included in the Partners SEC
Documents comply as to form, as of their respective dates of filing with
the SEC, in all material respects with applicable accounting requirements
and the published rules and regulations of the SEC with respect thereto,
have been prepared in accordance with GAAP (except, in the case of
unaudited statements, as permitted by Form 10-Q of the SEC) applied on a
consistent basis during the periods involved (except as may be indicated in
the notes thereto) and fairly present in all material respects the
consolidated financial position of Partners and its consolidated
subsidiaries as of the dates thereof and the consolidated results of their
operations and cash flows for the periods then ended (subject, in the case
of unaudited statements, to normal year-end audit adjustments). Except (A)
as reflected in such financial statements or in the notes thereto or (B)
for liabilities incurred in connection with this Agreement or the
transactions contemplated hereby, neither Partners nor any of its
subsidiaries has any liabilities or obligations of any nature which,
individually or in the aggregate, would have a material adverse effect on
Partners.
(iii) Section 3.1(e) of the Partners Disclosure Schedule (the
"Preliminary Financial Statements") accurately sets forth as of the date
hereof the most recently available version of the unaudited balance sheet
and financial statements of Partners, its subsidiaries and Significant
Affiliates as of and for the year ended December 31, 1997.
(f) Information Supplied. None of the information supplied or to be
supplied in writing by Partners specifically for inclusion or incorporation
by reference in (i) the registration statement on Form S-4 to be filed with
the SEC by NTL in connection with the issuance of NTL Common Stock in the
Amalgamation (the "Form S-4") will, at the time the Form S-4 becomes
effective under the Securities Act, contain any untrue statement of a
material fact or omit to state any material fact required to be stated
therein or necessary to make the statements therein not misleading or (ii)
the Joint Proxy Statement will, at the date it is first mailed to
Partners's stockholders or at the time of the Partners Stockholders
Meeting, contain any untrue statement of a material fact or omit to state
any material fact required to be stated therein or necessary in order to
make the statements therein, in light of the circumstances under which they
are made, not misleading. The Joint Proxy Statement will comply as to form
in all material respects with the requirements of the Exchange Act and the
rules and regulations thereunder, except that no representation or warranty
is made by Partners with respect to statements made or incorporated by
reference therein based on information supplied by NTL specifically for
inclusion or incorporation by reference in the Joint Proxy Statement.
(g) Absence of Certain Changes or Events. Except (x) as disclosed in
Section 3.1(g) of the Partners Disclosure Schedule, (y) for liabilities
incurred in connection with this Agreement or the transactions contemplated
hereby or (z) as permitted by Section 4.1(a), since December 31, 1996
Partners and its subsidiaries have conducted their business only in the
ordinary course or as disclosed in any Partners SEC Document filed since
such date and prior to the date hereof, and there has not been (i) any
material adverse change in Partners, (ii) any declaration, setting aside or
payment of any dividend or other distribution (whether in cash, stock or
property) with respect to any of Partners's capital stock, (iii) any split,
combination or reclassification of any of Partners's capital stock or any
issuance or the authorization of any issuance of any other securities in
respect of, in lieu of or in substitution for shares of Partners's capital
stock, except for issuances of Partners Common Stock upon the exercise of
Partners Employee Stock Options awarded prior to the date hereof in
accordance with their present terms, (iv)(A) any granting by Partners or
any of its subsidiaries to any current or former director, executive
officer or other key employee of Partners or its subsidiaries of any
increase in compensation, bonus or other benefits, except for normal
increases as a result of promotions, normal increases of base pay in the
ordinary course of business or as was required under any employment
agreements in effect as of December 31, 1996, (B) any granting by Partners
or any of its subsidiaries to any such current or former director,
executive officer or key employee of any increase in severance or
termination pay, or (C) any entry by Partners or any of its subsidiaries
into, or any amendment of, any
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employment, deferred compensation, consulting, severance, termination or
indemnification agreement with any such current or former director,
executive officer or key employee, (v) except insofar as may have been
required by a change in GAAP, any change in accounting methods, principles
or practices by Partners materially affecting its assets, liabilities or
business, (vi) any tax election that individually or in the aggregate would
have a material adverse effect on Partners or any of its tax attributes or
any settlement or compromise of any material income tax liability, or (vii)
any action taken by Partners or any of the Partners subsidiaries during the
period from December 31, 1996 through the date of this Agreement that, if
taken during the period from the date of this Agreement through the
Amalgamation Effective Time would constitute a breach of Section 4.1(a).
(h) Compliance with Applicable Laws; Litigation. (i) Partners, its
subsidiaries, Significant Affiliates and employees hold all permits,
licenses, variances, exemptions, orders, registrations and approvals of all
Governmental Entities which are required for the operation of the
respective businesses of Partners, its subsidiaries and its Significant
Affiliates (the "Partners Permits"), except where the failure to have any
such Partners Permits individually or in the aggregate would not have a
material adverse effect on Partners. Partners and its subsidiaries and its
Significant Affiliates are in compliance with the terms of the Partners
Permits and all applicable statutes, laws, ordinances, rules and
regulations, except where the failure so to comply individually or in the
aggregate, would not have a material adverse effect on Partners. No action,
demand, requirement or investigation by any Governmental Entity and no
suit, action or proceeding by any person, in each case with respect to
Partners or any of its subsidiaries or Significant Affiliates or any of
their respective properties is pending or, to the knowledge (as defined in
Section 8.3) of Partners, threatened, other than, in each case, those the
outcome of which individually or in the aggregate would not (A) have a
material adverse effect on Partners or (B) reasonably be expected to impair
in any material way the ability of Partners to perform its obligations
under this Agreement or prevent or materially delay the consummation of any
of the transactions contemplated by this Agreement.
(ii) None of Partners, any Partners subsidiary, or any Significant
Affiliate is subject to any outstanding order, injunction or decree which
has had or, insofar as can be reasonably foreseen, individually or in the
aggregate will have a material adverse effect on Partners.
(i) Incentive Compensation/Benefit Plans. Partners has delivered to
NTL true and complete copies of the documents listed on Schedule 3.1(i) of
the Partners Disclosure Schedule.
(i) With respect to any employee benefit plans and arrangements of
Partners and its subsidiaries (the "Partners Benefit Plans"), Partners,
its subsidiaries and any Partners Benefit Plans have been operated, and
are, in compliance with the applicable provisions of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA"), the Code
and all other applicable laws.
(ii) No Partners Benefit Plan is subject to Title IV of ERISA or is
a "multiemployer plan" within the meaning of Section 3(37) of ERISA.
Neither Partners nor any of its subsidiaries has incurred any
unsatisfied liability under Title IV of ERISA. None of Partners nor any
of its subsidiaries has any contingent liability under Section 4204 of
ERISA.
(iii) None of Comcast Teesside Limited ("Comcast Teesside"),
Comcast Darlington Limited ("Comcast Darlington") or Cambridge Cable
Limited ("Cambridge Cable") has any outstanding liability to pay
compensation for loss of office or employment to any present or former
employee or any payment under the provisions of the Employment Rights
Act 1996 which would have a material adverse effect on Partners.
(iv) There are no terms of employment for any employee of Comcast
Teesside, Comcast Darlington or Cambridge Cable which provide that a
change in control of any Comcast Teesside, Comcast Darlington or
Cambridge Cable (however change of control may be defined if at all)
shall entitle the employee to treat the change of control as amounting
to a breach of contract or entitling him to any payment or benefit
whatsoever or entitling him to treat himself as redundant or otherwise
dismissed or released from any obligation.
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(v) None of Comcast Teesside, Comcast Darlington or Cambridge Cable
is a party to any collective agreement, dismissal procedures agreement,
union membership agreement, or trade dispute (within the meaning of the
Trade Union and Labour Relations (Consolidation) Act 1992) which would
reasonably be expected to have a material adverse effect on Partners.
(vi) "Schemes" means all and each of the pension schemes identified
in the Section 3.1(i) of the Partners Disclosure Schedule, and "Scheme
Documents" means the documents relating to the Schemes identified in
Section 3.1(i) of the Partners Disclosure Schedule, which documents
comprise all the material documents governing the Schemes. Except
pursuant to the Schemes, Comcast Teesside, Comcast Darlington and
Cambridge Cable have not paid, provided or contributed towards and are
not under any obligation (whether or not legally enforceable) to pay,
provide or contribute towards and are not under any obligation (whether
or not legally enforceable) to pay, provide or contribute towards any
retirement/death/disability benefit for or in respect of any present or
past employee (or any spouse, child or dependant of any of them) of
Comcast Teesside, Comcast Darlington and Cambridge Cable which would
reasonably be expected to have a material adverse effect on Partners.
The Schemes are approved by the Board of the Inland Revenue as an exempt
approved Scheme (within the meaning of Section 592, Income Taxes and
Corporation Act 1988).
(j) Taxes. (i) Each of Partners and its subsidiaries has filed all
material tax returns and reports required to be filed by it and all such
returns and reports are complete and correct in all material respects, or
requests for extensions to file such returns or reports have been timely
filed, granted and have not expired, except to the extent that such
failures to file, to be complete or correct or to have extensions granted
that remain in effect individually or in the aggregate would not have a
material adverse effect on Partners. Partners and each of its subsidiaries
has paid (or Partners has paid on its behalf) all taxes (as defined herein)
shown as due on such returns, and the most recent financial statements
contained in the Partners Filed SEC Documents reflect an adequate reserve
in accordance with GAAP for all taxes payable by Partners and its
subsidiaries for all taxable periods and portions thereof accrued through
the date of such financial statements.
(ii) No deficiencies for any taxes have been proposed, asserted or
assessed against Partners or any of its subsidiaries that are not
adequately reserved for, except for deficiencies that individually or in
the aggregate would not have a material adverse effect on Partners.
Partners has never been included as a member of any United States
consolidated tax group.
(iii) As used in this Agreement, "taxes" shall include all (x)
national, state, provincial or local income, property, sales, excise and
other taxes or similar governmental charges, including any interest,
penalties or additions with respect thereto, (y) liability for the payment
of any amounts of the type described in (x) as a result of being a member
of an affiliated, consolidated, combined or unitary group, and (z)
liability for the payment of any amounts as a result of being party to any
tax sharing agreement or as a result of any express or implied obligation
to indemnify any other person with respect to the payment of any amounts of
the type described in clause (x) or (y).
(k) Voting Requirements. The affirmative vote at the Partners
Stockholders Meeting (the "Partners Stockholder Approval") of the holders
of a majority of the total votes able to be cast at general meetings of
Partners to adopt this Agreement is the only vote of the holders of any
class or series of Partners's capital stock necessary to approve and adopt
this Agreement and the transactions contemplated hereby, including the
Amalgamation.
(l) Brokers. No broker, investment banker, financial advisor or other
person other than HSBC Investment Bank plc, the fees and expenses of which
will be paid by Partners, is entitled to any broker's, finder's, financial
advisor's or other similar fee or commission in connection with the
transactions contemplated by this Agreement based upon arrangements made by
or on behalf of Partners.
(m) Opinion of Financial Advisor. Partners has received the opinion
of HSBC Investment Bank plc dated the date of this Agreement, to the effect
that, as of such date, the Amalgamation Consideration is fair from a
financial point of view to holders of shares of Partners Class A Common
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Stock (other than NTL and its affiliates), a signed copy of which opinion
has been delivered to NTL, it being understood and agreed by NTL that such
opinion is for the benefit of the Board of Directors of Partners and may
not be relied upon by NTL, its affiliates or any of their respective
stockholders.
(n) Intellectual Property. Partners and its subsidiaries own or have
a valid license to use all trademarks, service marks, trade names, patents
and copyrights (including any registrations or applications for
registration of any of the foregoing) (collectively, the "Partners
Intellectual Property") necessary to carry on its business substantially as
currently conducted, except for such Partners Intellectual Property the
failure of which to own or validly license individually or in the aggregate
would not have a material adverse effect on Partners. Neither Partners nor
any such subsidiary has received any notice of infringement of or conflict
with, and, to Partners's knowledge, there are no infringements of or
conflicts (i) with the rights of others with respect to the use of, or (ii)
by others with respect to, any Partners Intellectual Property that
individually or in the aggregate, in either such case, would have a
material adverse effect on Partners.
(o) Certain Contracts. Except as set forth in Section 3.1(o) of the
Partners Disclosure Schedule, (A) neither Partners nor any of its
subsidiaries is a party to or bound by (i) any "material contract" (as such
term is defined in Item 601(b)(10) of Regulation S-K of the SEC), (ii) any
non-competition agreement or any other agreement or obligation which
purports to limit in any material respect the manner in which, or the
localities in which, all or any material portion of the business of
Partners and its subsidiaries (including, for purposes of this Section
3.1(s), NTL and its subsidiaries, assuming the Amalgamation has taken
place), taken as a whole, is or would be conducted, (iii) any agreement
between Partners or any Partners subsidiary, on the one hand, and any
Significant Affiliate, on the other, or (iv) any contract or other
agreement which would prohibit or materially delay the consummation of the
Amalgamation or any of the transactions contemplated by this Agreement and
(B) none of Partners, any subsidiary of Partners or any Significant
Affiliate is subject to any agreements related to indebtedness for borrowed
money ("Debt Agreements") (all contracts of the type described in clauses
(A)(i), (ii) and (iii) and all Debt Agreements being referred to herein as
"Partners Material Contracts"). Each Partners Material Contract is valid
and binding on Partners (or, to the extent a Partners subsidiary or
Significant Affiliate is a party, such entity) and is in full force and
effect, and Partners and each Partners subsidiary and Significant Affiliate
have in all material respects performed all obligations required to be
performed by them to date under each Partners Material Contract, except
where such noncompliance, individually or in the aggregate, would not have
a material adverse effect on Partners and provided that (except as to Debt
Agreements) any representation in this sentence with respect to a
Significant Affiliate is qualified to the knowledge of Partners. Neither
Partners nor any Partners subsidiary knows of, or has received notice of,
any violation or default under (nor, to the knowledge of Partners, does
there exist any condition which with the passage of time or the giving of
notice or both would result in such a violation or default under) any
Partners Material Contract.
SECTION 3.2 Representations and Warranties of NTL. Except as disclosed in
the NTL SEC Documents (as defined in Section 3.2(e)) or as set forth on the
Disclosure Schedule delivered by NTL to Partners prior to the execution of this
Agreement (the "NTL Disclosure Schedule") and making reference to the particular
subsection of this Agreement to which exception is being taken, NTL represents
and warrants to Partners as follows:
(a) Organization, Standing and Corporate Power. (i) Each of NTL and
its subsidiaries (including Sub) is a corporation or other legal entity
duly organized, validly existing and in good standing (with respect to
jurisdictions which recognize such concept) under the laws of the
jurisdiction in which it is organized and has the requisite corporate or
other power, as the case may be, and authority to carry on its business as
now being conducted, except, as to subsidiaries, for those jurisdictions
where the failure to be so organized, existing or in good standing
individually or in the aggregate would not have a material adverse effect
on NTL. Each of NTL and its subsidiaries is duly qualified or licensed to
do business and is in good standing (with respect to jurisdictions which
recognize such concept) in each jurisdiction in which the nature of its
business or the ownership, leasing or operation of its properties makes
such qualification or licensing necessary, except for those jurisdictions
where the failure to be so qualified or
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licensed or to be in good standing individually or in the aggregate would
not have a material adverse effect on NTL.
(ii) NTL has delivered to Partners prior to the execution of this
Agreement complete and correct copies of its certificate of incorporation
and by-laws, as amended to date.
(b) Subsidiaries. Exhibit 21 to NTL's Annual Report on Form 10-K for
the fiscal year ended December 31, 1996 includes all the subsidiaries of
NTL which as of the date of this Agreement are Significant Subsidiaries.
All the outstanding shares of capital stock of, or other equity interests
in, each such Significant Subsidiary have been validly issued and are fully
paid and nonassessable and are owned directly or indirectly by NTL, free
and clear of all Liens and free of any other restriction (including any
restriction on the right to vote, sell or otherwise dispose of such capital
stock or other ownership interests).
(c) Capital Structure. The authorized capital stock of NTL consists of
100,000,000 shares of NTL Common Stock and 2,500,000 shares of preferred
stock, par value $.01 per share, of NTL ("NTL Preferred Stock"). At the
close of business on January 28, 1998: (i) 32,246,544 shares of NTL Common
Stock were issued and outstanding; (ii) no shares of NTL Common Stock were
held by NTL in its treasury; (iii) 780 shares of Series A Non-Voting
Convertible Preferred Stock ("NTL Series A Preferred") were issued and
outstanding; (iv) 110,187.358 shares of 13% Senior Redeemable Exchangeable
Preferred Stock were issued and outstanding (the "NTL 13% Preferred"), (v)
1,000,000 shares of Series A Junior Participating Preferred Stock were
reserved for issuance pursuant to a Rights Agreement, dated as of October
13, 1993, between NTL and Continental Stock Transfer & Trust Company (the
"Rights Agreement"); (vi) 16,167,642 shares of NTL Common Stock were
reserved for issuance pursuant to the conversion of the NTL Series A
Preferred, the 7 1/4% Convertible Subordinated Debentures due 2005 ("2005
Debentures") and the 7% Convertible Subordinated Notes due 2008 ("2008
Notes") and 976,426 shares of NTL Common Stock were reserved for issuance
upon the exercise of certain warrants (the NTL Series A Preferred, 2005
Debentures, 2008 Notes and such warrants, the "NTL Convertible
Securities"); and (vii) 8,121,836 shares of NTL Common Stock were reserved
for issuance pursuant to various NTL employee and director stock option
plans (such plans, collectively, the "NTL Stock Plans"). Section 3.2(c) of
the NTL Disclosure Schedule sets forth a complete and correct list, as of
January 30, 1998, of the number of shares of NTL Common Stock subject to
employee stock options or other rights to purchase or receive NTL Common
Stock granted under the NTL Stock Plans (collectively, "NTL Employee Stock
Options"), the dates of grant and exercise prices thereof. All outstanding
shares of capital stock of NTL are, and all shares which may be issued
pursuant to this Agreement or otherwise will be, when issued, duly
authorized, validly issued, fully paid and nonassessable and not subject to
preemptive rights. Except as set forth in this Section 3.2(c) and except
for changes since January 28, 1998 resulting from the issuance of shares of
NTL Common Stock pursuant to the conversion or exercise of NTL Convertible
Securities or the exercise of NTL Employee Stock Options, as of the date
hereof, (x) there are not issued, reserved for issuance or outstanding (A)
any shares of capital stock or other voting securities of NTL, (B) any
securities of NTL or any NTL subsidiary convertible into or exchangeable or
exercisable for shares of capital stock or voting securities of NTL, (C)
any warrants, calls, options or other rights to acquire from NTL or any NTL
subsidiary, and any obligation of NTL or any NTL subsidiary to issue, any
capital stock, voting securities or securities convertible into or
exchangeable or exercisable for capital stock or voting securities of NTL,
and (y) there are no outstanding obligations of NTL or any NTL subsidiary
to repurchase, redeem or otherwise acquire any such securities or to issue,
deliver or sell, or cause to be issued, delivered or sold, any such
securities. As of the date hereof, there are no outstanding (A) securities
of NTL or any NTL subsidiary convertible into or exchangeable or
exercisable for shares of capital stock or other voting securities or
ownership interests in any NTL subsidiary, (B) warrants, calls, options or
other rights to acquire from NTL or any NTL subsidiary, and any obligation
of NTL or any NTL subsidiary to issue, any capital stock, voting securities
or other ownership interests in, or any securities convertible into or
exchangeable or exercisable for any capital stock, voting securities or
ownership interests in, any NTL subsidiary or (C) obligations of NTL or any
NTL subsidiary to repurchase, redeem or otherwise acquire
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any such outstanding securities of NTL subsidiaries or to issue, deliver or
sell, or cause to be issued, delivered or sold, any such securities.
(d) Authority; Noncontravention. NTL and Sub each has all requisite
corporate power and authority to enter into this Agreement and, subject to
the NTL Stockholder Approval (as defined in Section 3.2(l)), to consummate
the transactions contemplated by this Agreement. The execution and delivery
of this Agreement by each of NTL and Sub and the consummation by each of
NTL and Sub of the transactions contemplated by this Agreement have been
duly authorized by all necessary corporate action on the part of NTL and
Sub, subject, in the case of the Amalgamation and the issuance of NTL
Common Stock in connection with the Amalgamation, to the NTL Stockholder
Approval. This Agreement has been duly executed and delivered by each of
NTL and Sub and, assuming the due authorization, execution and delivery by
Partners, constitutes the legal, valid and binding obligations of each of
NTL and Sub, enforceable against each of NTL and Sub in accordance with its
terms, except as such enforceability may be limited by applicable
bankruptcy and similar laws or by general principles of equity (whether
considered in a proceeding in equity or at law). Except as set forth in
Section 3.2(d) of the NTL Disclosure Schedule, the execution and delivery
of this Agreement do not, and the consummation of the transactions
contemplated by this Agreement and compliance with the provisions of this
Agreement will not, conflict with, or result in any violation of, or
default (with or without notice or lapse of time, or both) under, or give
rise to a right of termination, cancellation or acceleration of any
obligation or loss of a benefit under, or result in the creation of any
Lien upon any of the properties or assets of NTL or any of its subsidiaries
(including Sub) under, (i) the certificate of incorporation or by-laws of
NTL or the comparable organizational documents of any of its subsidiaries
(including Sub), (ii) any loan or credit agreement, note, bond, mortgage,
indenture, lease or other agreement, instrument, permit, concession,
franchise, license or similar authorization applicable to NTL or any of its
subsidiaries (including Sub) or their respective properties or assets or
(iii) subject to the governmental filings and other matters referred to in
the following sentence, any judgment, order, decree, statute, law,
ordinance, rule or regulation applicable to NTL or any of its subsidiaries
(including Sub) or their respective properties or assets, other than, in
the case of clauses (ii) and (iii), any such conflicts, violations,
defaults, rights, losses or Liens that individually or in the aggregate
would not (x) have a material adverse effect on NTL or (y) reasonably be
expected to impair the ability of NTL to perform its obligations under this
Agreement. No consent, approval, order or authorization of, action by, or
in respect of, or registration, declaration or filing with, any
Governmental Entity is required by or with respect to NTL or any of its
subsidiaries (including Sub) in connection with the execution and delivery
of this Agreement by each of NTL or Sub or the consummation by NTL and Sub
of the transactions contemplated by this Agreement, except for (1) the
filing with the SEC of (A) the Joint Proxy Statement relating to the NTL
Stockholders Meeting, (B) the Form S-4 and (C) such reports under Section
13(a), 13(d), 15(d) or 16(a) of the Exchange Act as may be required in
connection with this Agreement and the transactions contemplated by this
Agreement; (2) the consent of the Minister in connection with the
Amalgamation and the registration of the Amalgamated Company with the
Registrar of Companies in Bermuda in accordance with the Companies Act; (3)
such filings with Governmental Entities to satisfy the applicable
requirements of state securities or "blue sky" laws; (4) such filings with
and approvals of the NASDAQ to permit the shares of NTL Capital Stock that
are to be issued in the Amalgamation and under the Partners Stock Plans to
be approved for quotation on the NASDAQ; (5) the receipt of the
Amalgamation Required British Approvals; and (6) such consents, approvals,
orders or authorizations the failure of which to be made or obtained
individually or in the aggregate would not (x) have a material adverse
effect on NTL or (y) reasonably be expected to impair the ability of NTL to
perform its obligations under this Agreement.
(e) SEC Documents; Undisclosed Liabilities. NTL has filed all
required registration statements, prospectuses, reports, schedules, forms,
statements and other documents (including exhibits and all other
information incorporated therein) with the SEC since January 1, 1996 (the
"NTL SEC Documents"). As of their respective dates, the NTL SEC Documents
complied in all material respects with the requirements of the Securities
Act or the Exchange Act, as the case may be, and the rules and regulations
of the SEC promulgated thereunder applicable to such NTL SEC Documents, and
none of the NTL
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SEC Documents when filed contained any untrue statement of a material fact
or omitted to state a material fact required to be stated therein or
necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading. The financial
statements of NTL included in the NTL SEC Documents comply as to form, as
of their respective dates of filing with the SEC, in all material respects
with applicable accounting requirements and the published rules and
regulations of the SEC with respect thereto, have been prepared in
accordance with GAAP (except, in the case of unaudited statements, as
permitted by Form 10-Q of the SEC) applied on a consistent basis during the
periods involved (except as may be indicated in the notes thereto) and
fairly present the consolidated financial position of NTL and its
consolidated subsidiaries as of the dates thereof and the consolidated
results of their operations and cash flows for the periods then ended
(subject, in the case of unaudited statements, to normal year-end audit
adjustments). Except (i) as reflected in such financial statements or in
the notes thereto or (ii) for liabilities incurred in connection with this
Agreement or the transactions contemplated hereby, neither NTL nor any of
its subsidiaries has any liabilities or obligations of any nature which,
individually or in the aggregate, would have a material adverse effect on
NTL.
(f) Information Supplied. None of the information supplied or to be
supplied in writing by NTL specifically for inclusion or incorporation by
reference in (i) the Form S-4 will, at the time the Form S-4 becomes
effective under the Securities Act, contain any untrue statement of a
material fact or omit to state any material fact required to be stated
therein or necessary to make the statements therein not misleading or (ii)
the Joint Proxy Statement will, at the date it is first mailed to NTL's
stockholders or at the time of the NTL Stockholders Meeting, contain any
untrue statement of a material fact or omit to state any material fact
required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they are made, not
misleading. The Form S-4 and the Joint Proxy Statement will comply as to
form in all material respects with the requirements of the Securities Act
and the Exchange Act and the rules and regulations thereunder, except that
no representation or warranty is made by NTL with respect to statements
made or incorporated by reference therein based on information supplied by
Partners specifically for inclusion or incorporation by reference in the
Form S-4 or the Joint Proxy Statement.
(g) Absence of Certain Changes or Events. Except for liabilities
incurred in connection with this Agreement or the transactions contemplated
hereby, and except as permitted by Section 4.1(b), since December 31, 1996,
NTL and its subsidiaries have conducted their business only in the ordinary
course or as disclosed in any NTL SEC Document filed since such date and
prior to the date hereof, and there has not been (i) any material adverse
change in NTL, (ii) any declaration, setting aside or payment of any
dividend or other distribution (whether in cash, stock or property) with
respect to any of NTL's capital stock, (iii) any split, combination or
reclassification of any of NTL's capital stock or any issuance or the
authorization of any issuance of any other securities in respect of, in
lieu of or in substitution for shares of NTL's capital stock, except for
issuances of NTL Common Stock upon conversion or exercise of NTL
Convertible Securities or exercise of NTL Employee Stock Options, in each
case, awarded prior to the date hereof in accordance with their present
terms or issued pursuant to Section 4.1(b), (iv) except as required by a
change in GAAP, any change in accounting methods, principles or practices
by NTL materially affecting its assets, liabilities or business, (v) any
tax election that individually or in the aggregate would have a material
adverse effect on NTL or any of its tax attributes or any settlement or
compromise of any material income tax liability or (vi) any action taken by
NTL or any of the NTL subsidiaries during the period from December 31, 1996
through the date of this Agreement that, if taken during the period from
the date of this Agreement through the Amalgamation Effective Time would
constitute a breach of Section 4.1(b).
(h) Compliance with Applicable Laws; Litigation. (i) NTL, its
subsidiaries and employees hold all permits, licenses, variances,
exemptions, orders, registrations and approvals of all Governmental
Entities which are required for the operation of the businesses of NTL and
its subsidiaries (the "NTL Permits"), except where the failure to have any
such NTL Permits individually or in the aggregate would not have a material
adverse effect on NTL. NTL and its subsidiaries are in compliance with the
terms of the NTL Permits and all applicable statutes, laws, ordinances,
rules and regulations, except
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where the failure so to comply individually or in the aggregate would not
have a material adverse effect on NTL. As of the date of this Agreement, no
action, demand, requirement or investigation by any Governmental Entity and
no suit, action or proceeding by any person, in each case with respect to
NTL or any of its subsidiaries or any of their respective properties, is
pending or, to the knowledge of NTL, threatened, other than, in each case,
those the outcome of which individually or in the aggregate would not (A)
have a material adverse effect on NTL or (B) reasonably be expected to
impair in any material way the ability of NTL to perform its obligations
under this Agreement or prevent or materially delay the consummation of any
of the transactions contemplated by this Agreement.
(ii) Neither NTL nor any NTL subsidiary is subject to any outstanding
order, injunction or decree which has had or, insofar as can be reasonably
foreseen, individually or in the aggregate will have a material adverse
effect on NTL.
(i) Absence of Changes in Benefit Plans. Since December 31, 1996,
there has not been any adoption or amendment in any material respect by NTL
or any of its subsidiaries of any collective bargaining agreement or any
material bonus, pension, profit sharing, deferred compensation, incentive
compensation, stock ownership, stock purchase, stock option, phantom stock,
retirement, vacation, severance, disability, death benefit,
hospitalization, medical or other plan, arrangement or understanding
providing benefits to any current or former employee, officer or director
of NTL or any of its wholly owned subsidiaries (collectively, the "NTL
Benefit Plans"), or any material change in any actuarial or other
assumption used to calculate funding obligations with respect to any NTL
pension plans, or any material change in the manner in which contributions
to any NTL pension plans are made or the basis on which such contributions
are determined.
(j) ERISA Compliance. (i) With respect to the NTL Benefit Plans, no
event has occurred and, to the knowledge of NTL, there exists no condition
or set of circumstances, in connection with which NTL or any of its
subsidiaries could be subject to any liability that individually or in the
aggregate would have a material adverse affect on NTL under ERISA, the Code
or any other applicable law.
(ii) Neither NTL nor any of its subsidiaries has incurred any
unsatisfied liability under Title IV of ERISA (other than liability for
premiums to the Pension Benefit Guaranty Corporation arising in the
ordinary course). No NTL Benefit Plan has incurred an "accumulated funding
deficiency" (within the meaning of Section 302 of ERISA or Section 412 of
the Code) whether or not waived. To the knowledge of NTL, there are not any
facts or circumstances that would materially change the funded status of
any NTL Benefit Plan that is a "defined benefit" plan (as defined in
Section 3(35) of ERISA) since the date of the most recent actuarial report
for such plan. No NTL Benefit Plan is a "multiemployer plan" within the
meaning of Section 3(37) of ERISA.
(k) Taxes. (i) Each of NTL and its subsidiaries has filed all
material tax returns and reports required to be filed by it and all such
returns and reports are complete and correct in all material respects, or
requests for extensions to file such returns or reports have been timely
filed, granted and have not expired, except to the extent that such
failures to file, to be complete or correct or to have extensions granted
that remain in effect individually or in the aggregate would not have a
material adverse effect on NTL. NTL and each of its subsidiaries has paid
(or NTL has paid on its behalf) all taxes shown as due on such returns, and
the most recent financial statements contained in the NTL SEC Documents
reflect an adequate reserve in accordance with GAAP for all taxes payable
by NTL and its subsidiaries for all taxable periods and portions thereof
accrued through the date of such financial statements.
(ii) No deficiencies for any taxes have been proposed, asserted or
assessed against NTL or any of its subsidiaries that are not adequately
reserved for, except for deficiencies that individually or in the aggregate
would not have a material adverse effect on NTL. The federal income tax
returns of NTL and each of its subsidiaries consolidated in such returns
for tax years through 1992 have closed by virtue of the applicable statute
of limitations.
(l) Voting Requirements. The affirmative vote at the NTL Stockholders
Meeting (the "NTL Stockholder Approval") of the holders of a majority of
all shares of NTL Common Stock casting votes is
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the only vote of the holders of any class or series of NTL's capital stock
necessary to approve, in accordance with the applicable rules of the
NASDAQ, the issuance of NTL Common Stock pursuant to the Amalgamation.
(m) Brokers. No broker, investment banker, financial advisor or other
person, other than Donaldson, Lufkin & Jenrette Securities Corporation, the
fees and expenses of which will be paid by NTL, is entitled to any
broker's, finder's, financial advisor's or other similar fee or commission
in connection with the transactions contemplated by this Agreement based
upon arrangements made by or on behalf of NTL.
(n) Opinion of Financial Advisor. NTL has received the opinion of
Donaldson, Lufkin & Jenrette Securities Corporation, dated the date of this
Agreement, to the effect that, as of such date, the Exchange Ratio is fair
to NTL from a financial point of view, a signed copy of which opinion has
been delivered to Partners, it being understood and agreed by Partners that
such opinion is for the benefit of the Board of Directors of NTL and may
not be relied upon by Partners, its affiliates or any of their respective
stockholders.
ARTICLE IV
COVENANTS RELATING TO CONDUCT OF BUSINESS
SECTION 4.1 Conduct of Business. (a) Conduct of Business by Partners.
Except as set forth in Section 4.1(a) of the Partners Disclosure Schedule, as
otherwise contemplated by this Agreement or the transactions con templated
hereby or as consented to by NTL in writing, such consent not to be unreasonably
withheld or delayed, during the period from the date of this Agreement to the
Amalgamation Effective Time, Partners shall, and shall cause its subsidiaries
to, carry on their respective businesses in the ordinary course consistent with
past practice and, to the extent consistent therewith, use all reasonable
efforts to preserve intact their current business organizations, use reasonable
efforts to keep available the services of their current officers and other key
employees and preserve their relationships with those persons having business
dealings with them. Without limiting the generality of the foregoing (but
subject to the above exceptions), during the period from the date of this
Agreement to the Amalgamation Effective Time, Partners shall not, and shall not
permit any of its subsidiaries to:
(i) other than dividends and distributions by a direct or indirect
wholly owned subsidiary of Partners to its parent, or by a subsidiary that
is partially owned by Partners or any of its subsidiaries, provided that
Partners or any such subsidiary receives or is to receive its proportionate
share thereof, (x) declare, set aside or pay any dividends on, make any
other distributions in respect of, or enter into any agreement with respect
to the voting of, any of its capital stock, (y) split, combine or
reclassify any of its capital stock or issue or authorize the issuance of
any other securities in respect of, in lieu of or in substitution for
shares of its capital stock, except for issuances of Partners Common Stock
upon the exercise of Partners Employee Stock Options, in each case,
outstanding as of the date hereof in accordance with their present terms,
or (z) purchase, redeem or otherwise acquire any shares of capital stock of
Partners or any of its subsidiaries or any other securities thereof or any
rights, warrants or options to acquire any such shares or other securities;
(ii) issue, deliver, sell, pledge or otherwise encumber or subject to
any Lien any shares of its capital stock, any other voting securities or
any securities convertible into, or any rights, warrants or options to
acquire, any such shares, voting securities or convertible securities
(other than the issuance of Partners Common Stock upon the exercise of
Partners Employee Stock Options, in each case, outstanding as of the date
hereof in accordance with their present terms;
(iii) amend its memorandum of association, bye-laws or other
comparable organizational documents;
(iv) acquire or agree to acquire by merging or consolidating with, or
by purchasing a substantial portion of the assets of, or by any other
manner, any business or any person;
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(v) subject to compliance with Section 5.15, sell, lease, license,
mortgage or otherwise encumber or subject to any Lien or otherwise dispose
of any of its properties or assets (including securitizations), other than
(A) in the ordinary course of business consistent with past practice or (B)
the sale, lease, license or other disposition of up to $1 million of such
assets, in the aggregate or (C) the mortgage, encumbrance or subjecting to
Liens of up to $5 million of such assets, in the aggregate;
(vi) take any action that would cause the representations and
warranties set forth in Section 3.1(g) (with each reference therein to
"ordinary course of business" being deemed for purposes of this Section
4.1(a) (vi) to be immediately followed by "consistent with past practice")
to no longer be true and correct;
(vii) incur any indebtedness for borrowed money, other than pursuant
to agreements or arrangements in effect as of the date hereof, or issue any
debt securities or assume, guarantee or endorse, or otherwise as an
accommodation become responsible for the obligations of any person for
borrowed money;
(viii) make any additional equity investment in, or enter into any new
agreement, arrangement or understanding with, any Significant Affiliate; or
(ix) authorize, or commit or agree to take, any of the foregoing
actions;
provided that the limitations set forth in this Section 4.1(a) (other than
clause (iii)) shall not apply to any transaction between Partners and any wholly
owned subsidiary or between any wholly owned subsidiaries of Partners. Except as
set forth in Section 4.1(a) of the Partners Disclosure Schedule, Partners shall
not, and shall not permit its subsidiaries to, and shall use its reasonable best
efforts to cause its Significant Affiliates not to, enter into any material
agreement, arrangement or understanding with respect to programming; software;
provisioning of cable modem internet service; billing; provisioning of digital
CATV service; and the acquisition of set-top boxes or switching equipment or
other computer and telecommunications equipment with a value in excess of L1
million; or technology or similar strategic business issues without prior
approval from NTL. NTL shall treat as confidential any information which
Partners discloses to NTL in respect of any Significant Affiliate and designates
as confidential.
(b) Conduct of Business by NTL. Except as set forth in Section 4.1(b) of
the NTL Disclosure Schedule, as otherwise expressly contemplated by this
Agreement or as consented to by Partners in writing, such consent not to be
unreasonably withheld or delayed, during the period from the date of this
Agreement to the Amalgamation Effective Time, NTL shall, and shall cause its
subsidiaries to, carry on their respective businesses in the ordinary course
consistent with past practice and, to the extent consistent therewith, use all
reasonable efforts to preserve intact their current business organizations, use
reasonable efforts to keep available the services of their current officers and
other key employees and preserve their relationships with those persons having
business dealings with them. Without limiting the generality of the foregoing
(but subject to the above exceptions), during the period from the date of this
Agreement to the Amalgamation Effective Time, NTL shall not, and shall not
permit any of its subsidiaries to:
(i) other than dividends and distributions by a direct or indirect
wholly owned subsidiary of NTL to its parent, or by a subsidiary that is
partially owned by NTL or any of its subsidiaries, provided that NTL or any
such subsidiary receives or is to receive its proportionate share thereof,
declare, set aside or pay any dividends on, make any other distributions
(whether by recapitalization, restructuring or otherwise) in respect of, or
enter into any agreement with respect to the voting of, any of its capital
stock, other than reasonable quarterly dividends on NTL Common Stock if the
Board of Directors of NTL shall so determine;
(ii) adopt a plan of complete or partial liquidation;
(iii) enter into any agreement, arrangement or understanding for a
merger, acquisition or other business combination unless the Board of
Directors of NTL determines that such transaction is in the best interest
of the stockholders of NTL and those persons who will become stockholders
of NTL as a result of the Amalgamation;
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(iv) except as contemplated hereby (including in connection with a
transaction permitted by clause (iii)), amend its certificate of
incorporation; or
(v) authorize, or commit or agree to take, any of the foregoing
actions;
provided that the limitations set forth in this Section 4.1(b) shall not apply
to any transaction between NTL and any wholly owned subsidiary or between any
wholly owned subsidiaries of NTL.
(c) Other Actions. Except as required by law, Partners and NTL shall not,
and shall not permit any of their respective subsidiaries to, voluntarily take
any action that would, or that could reasonably be expected to, result in (i)
any of the representations and warranties of such party set forth in this
Agreement that are qualified as to materiality becoming untrue at the
Amalgamation Effective Time, (ii) any of such representations and warranties
that are not so qualified becoming untrue in any material respect at the
Amalgamation Effective Time, or (iii) any of the conditions to the Amalgamation
set forth in Article VI not being satisfied.
(d) Advice of Changes. Partners and NTL shall promptly advise the other
party orally and in writing to the extent it has knowledge of (i) any
representation or warranty made by it contained in this Agreement that is
qualified as to materiality becoming untrue or inaccurate in any respect or any
such representation or warranty that is not so qualified becoming untrue or
inaccurate in any material respect, (ii) the failure by it to comply in any
material respect with or satisfy in any material respect any covenant, condition
or agreement to be complied with or satisfied by it under this Agreement and
(iii) any change or event having, or which, insofar as can reasonably be
foreseen, could reasonably be expected to have a material adverse effect on such
party or on the truth of their respective representations and warranties or the
ability of the conditions set forth in Article VI to be satisfied; provided,
however, that no such notification shall affect the representations, warranties,
covenants or agreements of the parties (or remedies with respect thereto) or the
conditions to the obligations of the parties under this Agreement.
SECTION 4.2 No Solicitation by Partners. (a) Partners shall not, nor
shall it permit any of its subsidiaries to, nor shall it authorize or permit any
of its directors, officers or employees or any investment banker, financial
advisor, attorney, accountant or other representative retained by it or any of
its subsidiaries to, directly or indirectly through another person, (i) solicit,
initiate or encourage or take any other action designed to facilitate, any
inquiries or the making of any proposal which constitutes any Partners Takeover
Proposal (as defined below) or (ii) participate in any discussions or
negotiations regarding any Partners Takeover Proposal or furnish any nonpublic
information relating to Partners and its subsidiaries to any person that may be
considering making, or has made, a Partners Takeover Proposal; provided that,
Partners may, in response to an unsolicited written proposal from a third party
regarding a Partners Takeover Proposal, engage in the activities specified in
clause (ii) if (A) the Board of Directors of Partners determined in good faith,
after obtaining and taking into account the advice of outside counsel, that such
action is required for the Board of Directors to comply with its fiduciary
duties under applicable law and (B) Partners has received from such third party
an executed confidentiality agreement with terms not materially less favorable
to NTL than those contained in the Confidentiality Agreement (as defined in
Section 5.4). For purposes of this Agreement, "Partners Takeover Proposal" means
any inquiry, proposal or offer from any person relating to any direct or
indirect acquisition or purchase of a business that constitutes 10% or more of
the net revenues, net income or the assets of Partners and its subsidiaries,
taken as a whole, or 10% or any equity securities of Partners, any tender offer
or exchange offer that if consummated would result in any person beneficially
owning any equity securities of Partners, or any merger, consolidation, business
combination, recapitalization, liquidation, dissolution or similar transaction
involving Partners (or any Partners subsidiary whose business constitutes 10% or
more of the net revenues, net income or the assets of Partners and its
subsidiaries, taken as whole) or the Partners Common Stock, other than the
transactions contemplated by this Agreement; provided that Partners Takeover
Proposal shall not include any matters relating to the Purchase Rights and the
equity interests of Partners subject thereto.
(b) Except as provided in the next sentence, the Board of Directors of
Partners shall recommend approval and adoption of this Agreement and the
Amalgamation by Partners's stockholders and shall not withdraw or modify, or
propose publicly to withdraw or modify, in a manner adverse to NTL, the approval
or
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recommendation by such Board of Directors. The Board of Directors of Partners
shall be permitted to withdraw or modify in a manner adverse to NTL (or, if not
previously made, not to make) its recommendation to Partners's stockholders, but
only if and to the extent such Board of Directors determines, after obtaining
and taking into account the advice of outside counsel, that such action is
required in response to an unsolicited bona fide written Superior Partners
Takeover Proposal in order for such Board of Directors to comply with its
fiduciary duties under applicable law. "Superior Partners Takeover Proposal"
means any bona fide Partners Takeover Proposal for at least a majority of the
outstanding shares of Partners Common Stock on terms the Board of Directors of
Partners determines in its good faith judgment (taking in to account the advice
of its financial advisor, all of the terms and conditions of such Partners
Takeover Proposal and the conditions to consummation) are more favorable and
provide greater value to Partners and all of its stockholders than this
Agreement and the Amalgamation taken as a whole.
(c) In addition to the obligations of Partners set forth in paragraphs (a)
and (b) of this Section 4.2, Partners shall immediately advise NTL orally and in
writing of any request for information or of any Partners Takeover Proposal, the
material terms and conditions of such request or Partners Takeover Proposal and
the identity of the person making such request or Partners Takeover Proposal.
Partners will, to the extent consistent with the fiduciary duties of its Board
of Directors under applicable law, keep NTL reasonably informed of the status
and details (including amendments or proposed amendments) of any such request or
Partners Takeover Proposal.
(d) Nothing contained in this Section 4.2 shall prohibit Partners from
taking and disclosing to its stockholders a position contemplated by Rule
14e-2(a) promulgated under the Exchange Act or from making any disclosure to
Partners's stockholders if, in the good faith judgment of the Board of Directors
of Partners, after consultation with outside counsel, failure so to disclose
would be inconsistent with its obligations under applicable law.
ARTICLE V
ADDITIONAL AGREEMENTS
SECTION 5.1 Preparation of the Form S-4 and the Joint Proxy Statement;
Stockholders Meetings. (a) As soon as practicable following the date of this
Agreement, Partners and NTL shall prepare and file with the SEC the Joint Proxy
Statement and NTL shall prepare and file with the SEC the Form S-4, in which the
Joint Proxy Statement will be included as a prospectus. Each of Partners and NTL
shall use best efforts to have the Form S-4 declared effective under the
Securities Act as promptly as practicable after such filing. Partners will use
all best efforts to cause the Joint Proxy Statement to be mailed to Partners's
stockholders, and NTL will use all best efforts to cause the Joint Proxy
Statement to be mailed to NTL's stockholders, in each case as promptly as
practicable after the Form S-4 is declared effective under the Securities Act.
NTL shall also take any action (other than qualifying to do business in any
jurisdiction in which it is not now so qualified or to file a general consent to
service of process) required to be taken under any applicable state securities
laws in connection with the issuance of NTL Capital Stock in the Amalgamation
and Partners shall furnish all information concerning Partners and the holders
of Partners Common Stock as may be reasonably requested in connection with any
such action. No filing of, or amendment or supplement to, the Form S-4 or the
Joint Proxy Statement will be made by NTL without the prior consent of Partners,
such consent not to be unreasonably withhold or delayed. NTL will advise
Partners, promptly after it receives notice thereof, of the time when the Form
S-4 has become effective or any supplement or amendment has been filed, the
issuance of any stop order, the suspension of the qualification of the NTL
Capital Stock issuable in connection with the Amalgamation for offering or sale
in any jurisdiction, or any request by the SEC for amendment of the Joint Proxy
Statement or the Form S-4 or comments thereon and responses thereto or requests
by the SEC for additional information. If at any time prior to the Amalgamation
Effective Time any information relating to Partners or NTL, or any of their
respective affiliates, officers or directors, should be discovered by Partners
or NTL which should be set forth in an amendment or supplement to any of the
Form S-4 or the Joint Proxy Statement, so that any of such documents would not
include any misstatement of a material fact or omit to state any material fact
necessary to make the statements therein, in light of the circumstances under
which
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they were made, not misleading, the party which discovers such information shall
promptly notify the other parties hereto and an appropriate amendment or
supplement describing such information shall be promptly filed with the SEC and,
to the extent required by law, disseminated to the stockholders of Partners and
NTL.
(b) Partners shall duly call, give notice of, convene and hold a meeting of
its stockholders (the "Partners Stockholders Meeting") in accordance with the
Companies Act and Partners's bye-laws for the purpose of obtaining the Partners
Stockholder Approval and, subject to Sections 4.2(b) and (d), through its Board
of Directors, recommend to its stockholders the approval and adoption of this
Agreement and the Amalgamation. Partners agrees that its obligations to convene
the Partners Stockholders Meeting pursuant to this Section 5.1(b) shall not be
affected by the commencement, public proposal, public disclosure or
communication to Partners of any Partners Takeover Proposal.
(c) NTL shall, as promptly as practicable after the Form S-4 is declared
effective under the Securities Act, duly call, give notice of, convene and hold
a meeting of its stockholders (the "NTL Stockholders Meeting") in accordance
with the Delaware General Corporation Law for the purpose of obtaining the NTL
Stockholder Approval and shall, through its Board of Directors, recommend to its
stockholders the approval and adoption of this Agreement, and the other
transactions contemplated hereby. The Board of Directors of NTL or Sub or any
committee thereof shall not withdraw or modify, or propose publicly to withdraw
or modify in a manner adverse to Partners, the approval or recommendation by
such Board of Directors or such committee of this Agreement and the transactions
contemplated hereby.
(d) NTL and Partners will use best efforts to hold the Partners
Stockholders Meeting and the NTL Stockholders Meeting on the same date and as
soon as reasonably practicable after the date hereof.
SECTION 5.2 Letters of Partners's Accountants. Partners shall use
reasonable efforts to cause to be delivered to NTL two letters from Partners's
independent accountants, one dated a date within two business days before the
date on which the Form S-4 shall become effective and one dated a date within
two business days before the Amalgamation Closing Date, each addressed to NTL,
in form and substance reasonably satisfactory to NTL and customary in scope and
substance for comfort letters delivered by independent public accountants in
connection with registration statements similar to the Form S-4.
SECTION 5.3 Letters of NTL's Accountants. NTL shall use reasonable
efforts to cause to be delivered to Partners two letters from NTL's independent
accountants, one dated a date within two business days before the date on which
the Form S-4 shall become effective and one dated a date within two business
days before the Amalgamation Closing Date, each addressed to Partners, in form
and substance reasonably satisfactory to Partners and customary in scope and
substance for comfort letters delivered by independent public accountants in
connection with registration statements similar to the Form S-4.
SECTION 5.4 Access to Information; Confidentiality. Subject to the
Confidentiality Agreement dated March 10, 1997, between NTL and Partners (the
"Confidentiality Agreement"), and subject to restrictions contained in
confidentiality or other agreements to which such party is subject (which such
party will use its reasonable efforts to have waived) and applicable law, each
of Partners and NTL shall, and shall cause each of its respective subsidiaries
to, afford to the other party and to the officers, employees, accountants,
counsel, financial advisors and other representatives of such other party,
reasonable access during normal business hours during the period prior to the
Amalgamation Effective Time to all their respective properties, books,
contracts, commitments, personnel and records and, during such period, each of
Partners and NTL shall, and shall cause each of its respective subsidiaries to,
furnish promptly to the other party (a) a copy of each report, schedule,
registration statement and other document filed by it during such period
pursuant to the requirements of federal or state securities laws and (b) all
other information concerning its business, properties and personnel as such
other party may reasonably request. No review pursuant to this Section 5.4 shall
affect any representation or warranty given by the other party hereto. Each of
Partners and NTL will hold, and will cause its respective officers, employees,
accountants, counsel, financial advisors and other representatives and
affiliates to hold, any nonpublic information in accordance with the terms of
the Confidentiality Agreement.
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SECTION 5.5 Reasonable Best Efforts. (a) Upon the terms and subject to
the conditions set forth in this Agreement, each of the parties agrees to use
reasonable best efforts to take, or cause to be taken, all actions, and to do,
or cause to be done, and to assist and cooperate with the other parties in
doing, all things necessary, proper or advisable to consummate and make
effective, in the most expeditious manner practicable, the Amalgamation and the
other transactions contemplated by this Agreement, including (i) the obtaining
of all necessary actions or nonactions, waivers, consents and approvals from
Governmental Entities and the making of all necessary registrations and filings
and the taking of all steps as may be necessary to obtain an approval or waiver
from, or to avoid an action or proceeding by, any Governmental Entity, (ii) the
obtaining of all necessary consents, approvals or waivers from third parties,
(iii) the defending of any lawsuits or other legal proceedings, whether judicial
or administrative, challenging this Agreement or the consummation of the
transactions contemplated by this Agreement, including seeking to have any stay
or temporary restraining order entered by any court or other Governmental Entity
vacated or reversed, and (iv) the execution and delivery of any additional
instruments necessary to consummate the transactions contemplated by, and to
fully carry out the purposes of, this Agreement. Without limitation of the
foregoing, Partners and NTL shall, and shall cause each of their subsidiaries
to, and, in the case of Partners, shall use its reasonable best efforts to cause
its Significant Affiliates to, promptly supply such information as is reasonably
necessary to enable the confirmations and indications referred to in Section
6.1(c) to be obtained.
(b) In connection with and without limiting the foregoing, Partners and NTL
shall (i) take all action necessary to ensure that no takeover statute or
similar statute or regulation (other than the U.K. City Code on Takeovers and
Mergers in relation to Cable London) is or becomes applicable to the
Amalgamation, this Agreement, or any of the other transactions contemplated by
this Agreement and (ii) if any takeover statute or similar statute or regulation
becomes applicable to the Amalgamation, this Agreement, or any other transaction
contemplated by this Agreement, take all action necessary to ensure that the
Amalgamation and the other transactions contemplated by this Agreement may be
consummated as promptly as practicable on the terms contemplated by this
Agreement and otherwise to minimize the effect of such statute or regulation on
the Amalgamation and the other transactions contemplated by this Agreement.
SECTION 5.6 Stock Options and Stock Appreciation Rights. (a) As soon as
practicable following the date of this Agreement, the Board of Directors of
Partners (or, if appropriate, any committee administering the Partners Stock
Plan or Partners 1995 Stock Appreciation Rights Plan (the "Partners SAR Plan",
and together with the Partners Stock Plan, the "Partners Incentive Plans"), if
requested by NTL, shall, subject to the rights of the holders thereunder, adopt
such resolutions or take such other actions as may be required to effect the
following:
(i) adjust the terms of all outstanding Partners Employee Stock
Options granted under Partners Stock Plan, whether vested or unvested, as
necessary to provide that, at the Amalgamation Effective Time, each
Partners Employee Stock Option outstanding immediately prior to the
Amalgamation Effective Time shall be adjusted and thereafter represent an
option to acquire, on the same terms and conditions as were applicable
under such Partners Employee Stock Option, the number of shares of NTL
Common Stock equal to the number of shares of Partners Common Stock subject
to the Partners Employee Stock Option, multiplied by the Exchange Ratio
(such product rounded up to the nearest whole number), at an exercise price
per share of NTL Common Stock (rounded down to nearest whole cent) equal to
(A) the aggregate exercise price for the shares of Partners Common Stock
otherwise purchasable pursuant to such Partners Employee Stock Option
divided by (B) the aggregate number of whole shares of NTL Common Stock
deemed to be subject to such Partners Employee Stock Option in accordance
with the foregoing (each, as so adjusted, an "Adjusted Option");
(ii) adjust the terms of all outstanding Partners stock appreciation
rights (the "Partners SARs") granted under the Partners SAR Plan as
necessary to provide that, at the Amalgamation Effective Time, each
Partners SAR outstanding immediately prior to the Amalgamation Effective
Time shall be adjusted and thereafter represent a right to receive an
amount of cash, on the same terms and conditions as were applicable under
such Partners SAR, without regard to any provision reducing the period of
exercise of such Partners SAR pursuant to the cessation of service as a
director of Partners, equal to the amount by which the Fair Market Value
(as defined in the Partners SAR Plan) per share of NTL Common Stock
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multiplied by the Exchange Ratio (rounded to the nearest cent) exceeds a
base price per share of NTL Common Stock equal to the base price for the
Partners Class A Common share subject to such Partners SAR (each, as so
adjusted, an "Adjusted SAR"); and
(iii) take such other actions relating to the Partners Incentive Plans
as Partners and NTL may agree are appropriate to give effect to the
Amalgamation, including as provided in Section 5.7.
(b) As soon as practicable after the Amalgamation Effective Time, NTL shall
deliver to the holders of Partners Employee Stock Options and Partners SARs
appropriate notices setting forth such holders' rights pursuant to the
respective Partners Incentive Plan and the agreements evidencing the grants of
awards thereunder and that such awards and agreements shall be assumed by NTL
and shall continue in effect on the same terms and conditions (subject to the
provisions of this Section 5.6, including adjustments required by this Section
5.6 after giving effect to the Amalgamation).
(c) A holder of an Adjusted Option or Adjusted SAR may exercise such
Adjusted Option or Adjusted SAR in whole or in part in accordance with its terms
by delivering a properly executed notice of exercise to NTL, together with the
consideration therefor and the federal withholding tax information, if any,
required in accordance with the related Partners Incentive Plan.
(d) Except as otherwise contemplated by this Section 5.6 and except to the
extent required under the respective terms of the Partners Employee Stock
Options and Partners SARs in effect as of the date hereof, all restrictions or
limitations on transfer and vesting with respect to Partners Employee Stock
Options and Partners SARs awarded under the Partners Incentive Plans or any
other plan, program or arrangement of Partners or any of its subsidiaries, to
the extent that such restrictions or limitations shall not have already lapsed,
shall remain in full force and effect with respect to such options and SARs
after giving effect to the Amalgamation and the assumption by NTL as set forth
above.
SECTION 5.7 Partners Incentive Plans and Certain Employee Matters. (a) At
the Amalgamation Effective Time, the Partners Incentive Plans shall be assumed
by NTL, with the result that all obligations of Partners under the Partners
Incentive Plans, including with respect to awards outstanding at the
Amalgamation Effective Time under each Partners Incentive Plan, shall be
obligations of NTL following the Amalgamation Effective Time. Prior to the
Amalgamation Effective Time, NTL shall take all necessary actions (including, if
required to comply with Section 162(m) or 422 of the Code (and the regulations
thereunder) or applicable law or rule of the NASDAQ, obtaining the approval of
its stockholders at the NTL Stockholders Meeting) for the assumption of the
Partners Incentive Plans, including the reservation, issuance and quotation of
NTL Common Stock in a number at least equal to (x) the number of shares of NTL
Common Stock that will be subject to Amalgamation Adjusted Options and (y) the
product of the Exchange Ratio and the number of shares of Partners Common Stock
available for future awards under the Partners Stock Plan immediately prior to
the Amalgamation Effective Time. No later than the Amalgamation Effective Time,
NTL shall prepare and file with the SEC a registration statement on Form S-8 (or
another appropriate form) registering a number of shares of NTL Common Stock
determined in accordance with the preceding sentence. Such registration
statement shall be kept effective (and the current status of the prospectus or
prospectuses required thereby shall be maintained) at least for so long as
Amalgamation Adjusted Options remain outstanding and until such time as the
shares of NTL Common Stock subject to such Amalgamation Adjusted Options are no
longer subject to resale restrictions under the Securities Act.
(b) Following the Amalgamation Effective Time, NTL will honor all
obligations of Partners or its subsidiaries under employment agreements of
Partners or its subsidiaries as amended and/or restated as contemplated in this
Agreement.
SECTION 5.8 Indemnification, Exculpation and Insurance. (a) For six years
after the Amalgamation Effective Time and thereafter with respect to any claims
during such six year period, NTL shall indemnify, defend and hold harmless the
current or former directors and officers of Partners and its subsidiaries (each,
an "Indemnified Party") against all costs or expenses (including reasonable
attorneys' fees), judgments, fines, losses, claims, damages or liabilities
(collectively, "Costs") incurred in connection with any claim, action, suit,
proceeding or investigation, whether civil, criminal, administrative or
investigative,
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arising out of acts or omissions occurring at or prior to the Amalgamation
Effective Time to the fullest extent that Partners is permitted to indemnify
such persons under the laws of Bermuda and Partners's bye-laws as in effect on
the date hereof (and NTL shall advance expenses (including expenses constituting
Costs described in Section 5.8(d)) as incurred to the fullest extent permitted
under applicable law. In addition, from and after the Amalgamation Effective
Time, directors and officers of Partners who become directors or officers of NTL
or the Amalgamated Company will be entitled to the same indemnity rights and
protections as are afforded to other directors and officers of NTL.
(b) In the event that NTL or any of its successors or assigns (i)
consolidates with or merges into any other person and is not the continuing or
surviving corporation or entity of such consolidation or merger or (ii)
transfers or conveys all or substantially all of its properties and assets to
any person, then, and in each such case, proper provision will be made so that
the successors and assigns of NTL assume the obligations set forth in this
Section 5.8.
(c) For six years after the Amalgamation Effective Time, NTL shall provide
to Partners's current directors and officers liability insurance covering acts
or omissions occurring prior to the Amalgamation Effective Time with respect to
those persons who are currently covered by Comcast Corporation's directors' and
officers' liability insurance policy on terms with respect to such coverage and
amount no less favorable than those of such policy in effect on the date hereof,
provided that in no event shall NTL be required to expend more than $360,000 in
the aggregate to maintain such coverage.
(d) The provisions of this Section 5.8 (i) are intended to be for the
benefit of, and will be enforceable by, each Indemnified Party, his or her heirs
and his or her representatives and (ii) are in addition to, and not in
substitution for, any other rights to indemnification or contribution that any
such person may have by contract or otherwise. Each Indemnified Party is hereby
expressly made a third party beneficiary of the provisions in favor of the
Indemnified Parties set forth in this Section 5.8. NTL will pay all reasonable
Costs, including attorney's fees, that may be incurred by any Indemnified Party
in enforcing the indemnity and other obligations provided for in this Section
5.8.
SECTION 5.9 Fees and Expenses. All fees and expenses incurred in
connection with the Amalgamation, this Agreement, and the transactions
contemplated by this Agreement shall be paid by the party incurring such fees or
expenses, whether or not the Amalgamation is consummated.
SECTION 5.10 Public Announcements. NTL and Partners will consult with
each other before issuing, and provide each other the opportunity to review,
comment upon and concur with and use reasonable efforts to agree on, any press
release or other public statements with respect to the transactions contemplated
by this Agreement, including the Amalgamation, and shall not issue any such
press release or make any such public statement prior to such consultation,
except as either party may determine is required by applicable law, court
process or by obligations pursuant to any listing agreement with any national
securities exchange. The parties agree that the initial press release to be
issued with respect to the transactions contemplated by this Agreement shall be
in the form heretofore agreed to by the parties.
SECTION 5.11 NASDAQ Quotation. NTL shall use reasonable best efforts to
cause the NTL Common Stock issuable under Article II and upon exercise of
Amalgamation Adjusted Options pursuant to Section 5.6 to be approved for
quotation on the NASDAQ, subject to official notice of issuance, as promptly as
practicable after the date hereof, and in any event prior to the Amalgamation
Closing Date. NTL shall use reasonable best efforts to cause the NTL Class C
Preferred and NTL Class D Preferred to be approved for quotation on the NASDAQ,
subject to official notice of issuance, prior to the 60th day following the
Amalgamation Closing Date if either or both of such preferred stocks are then
outstanding.
SECTION 5.12 Stockholder Litigation. Each of Partners and NTL shall give
the other the reasonable opportunity to participate in the defense of any
stockholder litigation against Partners or NTL, as applicable, and its directors
relating to the transactions contemplated by this Agreement.
SECTION 5.13 Purchase Rights. (a) From the date hereof until the
Amalgamation Closing Date, the parties hereto shall consult with each other as
to any actions to be taken in connection with the Purchase Rights. The parties
hereto agree that NTL shall have the primary role in any negotiations in respect
of
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the Purchase Rights; provided that (i) Partners shall have received prior notice
of and shall have the right to participate in any such negotiations, (ii) if any
offer is made to settle in cash either or both of the Purchase Rights, Partners
shall have the right, in its sole discretion, to veto any such settlement, (iii)
Partners shall not accept any offer or proposed value for Partners' interests in
either of the Significant Affiliates without NTL's consent and (iv) except as
otherwise provided herein, Partners shall take such actions as are requested by
NTL in connection with such negotiations following such consultation. In
connection with any negotiated agreement, arrangement or understanding that
would result in the Purchase Rights being Resolved for purposes of Section
2.1(b)(i), (x) NTL shall have the sole right to determine the terms and
conditions of any such agreement, arrangement or understanding so long as such
terms and conditions would not adversely affect the right of Partners
stockholders to receive in the Amalgamation the Amalgamation Consideration
provided for in Section 2.1(b)(i) and (y) in the event of the entering into of
any such agreement, arrangement or understanding, Partners shall take such
actions as are necessary to effect the transactions contemplated thereby.
(b) Notwithstanding the provisions of Section 5.13(a),(i) Partners shall
not be obligated to take an action requested by NTL if Partners determines in
good faith, after obtaining and taking into account the advice of outside
counsel (which outside counsel shall be made available to NTL and NTL's outside
counsel prior to Partners's final determination), that such action would
reasonably be likely to cause Partners to be in breach of its contractual
obligations or to violate its legal duties and (ii) Partners shall not be
obligated to commence a proceeding or initiate litigation in respect of the
Purchase Rights unless (A) such proceeding or litigation is in the nature of a
declaratory judgment or (B) a recognized law firm practicing the law of the
applicable jurisdiction retained by NTL shall be of the view that such
proceeding or litigation has a reasonable likelihood of success on the merits.
SECTION 5.14 Standstill Agreements; Confidentiality Agreements. During
the period from the date of this Agreement through the Amalgamation Effective
Time, Partners shall not terminate, amend, modify or waive any provision of any
confidentiality or standstill agreement to which it or any of its respective
subsidiaries is a party. During such period, Partners shall enforce, to the
fullest extent permitted under applicable law, the provisions of any such
agreement, including by obtaining injunctions to prevent any breaches of such
agreements and to enforce specifically the terms and provisions thereof in any
court having jurisdiction.
SECTION 5.15 Conveyance Taxes. NTL and Partners shall cooperate in the
preparation, execution and filing of all returns, questionnaires, applications
or other documents regarding any real property transfer or gains, sales, use,
transfer, value added, stock transfer and stamp taxes, any transfer, recording,
registration and other fees or any similar taxes which become payable in
connection with the transactions contemplated by this Agreement that are
required or permitted to be filed on or before the Amalgamation Effective Time.
NTL shall pay, and Partners shall pay, without deduction or withholding from any
amount payable to the holders of Partners Common Stock, any such taxes or fees
imposed by any Governmental Entity (and any penalties and interest with respect
to such taxes and fees), which become payable in connection with the
transactions contemplated by this Agreement, on behalf of their respective
stockholders.
SECTION 5.16 Debt Offers. NTL and Partners will each use its respective
reasonable best efforts to obtain, upon terms and conditions which are
reasonably satisfactory to NTL, the consents of the holders of its various debt
securities in order to permit the Amalgamation. The costs, fees and expenses
payable by Partners in connection with its debt offer shall be subject to the
reasonable approval of NTL.
SECTION 5.17 Comcast Name. Promptly following the Amalgamation Closing
Date, NTL shall cause the Amalgamated Company and each of its subsidiaries, to
the extent necessary, to file with the applicable governmental body, agency or
official an amendment to its organizational documents to delete from its name
the name "Comcast", and to do or cause to be done all other acts, including the
payment of any fees required in connection therewith, to cause such amendment to
become effective. As promptly as reasonably practicable following the
Amalgamation Closing Date in a commercially reasonable manner, NTL shall cause
the Amalgamated Company and each of its subsidiaries to cease use of any
materials bearing the name "Comcast" or any derivative thereof.
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SECTION 5.18 Structure. (a) During the first 45 days after the date
hereof, the parties will explore in good faith the structure of the transactions
contemplated herein to determine whether tax efficiencies can be achieved
without affecting in any adverse manner the value of the transactions to NTL or
the stockholders of Partners or impairing the ability of the parties to complete
the transactions by the End Date. If such efficiencies are identified, the
parties will use reasonable best efforts to restructure the transaction in a
manner consistent therewith.
(b) As soon as practicable after the date hereof and prior to the
Amalgamation Closing, the parties will use their reasonable best efforts to
agree on a rate (the "Tax Rate") which reflects the tax which the parties
anticipate will be payable by Partners on any transfer of its interest in a
Significant Affiliate pursuant to the applicable Purchase Rights.
SECTION 5.19 Relationship with Significant Affiliates. Subject to Section
5.13, Partners hereby agrees that (i) it will not vote for or consent to any
changes to the agreements or understandings relating to its investment in Cable
London or Birmingham Cable and (ii) it will cause its representative(s) on the
boards of directors of Cable London and Birmingham Cable, subject to their legal
obligations and contractual obligations in effect as of the date hereof, not to
take any action which is likely to have a material adverse effect on Partners
or, after giving effect to the Amalgamation, the Amalgamated Company, in each
case, without the prior approval of NTL, which approval shall not be
unreasonably withheld or delayed.
SECTION 5.20 NTL Preferred Stock. (a) If the NTL Class C Stock or NTL
Class D Stock, or both, are to be issued as part of the Amalgamation
Consideration, prior to the Amalgamation Effective Time, NTL shall take all
necessary steps to file with the Secretary of State of the State of Delaware the
Certificates of Designation with respect to the NTL Class C Stock or NTL Class D
Stock, or both, as the case may be, with such further changes as the parties
hereto may agree, all in accordance with applicable provisions of the Delaware
General Corporation Law, and to amend the Rights Agreement under which the
Series A Junior Participating Preferred Stock ("Rights") are reserved for
issuance to cause such Rights to be issuable in respect of the NTL Class C Stock
or NTL Class D Stock, or both, as the case may be, as contemplated hereby. If,
upon formal designation, each share of NTL Class C Stock or NTL Class D Stock is
not equivalent to a share of NTL Common Stock, the amounts set forth in Section
2.1 and the number (1.00) set forth in Exhibit 2.1 shall be appropriately
adjusted.
(b) The definition of Equity Interest Proceeds in the Certificates of
Designation for the NTL Class C Stock and the NTL Class D Stock will reflect the
Tax Rate determined pursuant to Section 5.18(b).
ARTICLE VI
CONDITIONS PRECEDENT
SECTION 6.1 Conditions to Each Party's Obligation to Effect the
Amalgamation. The respective obligation of each party to effect the
Amalgamation is subject to the satisfaction or waiver on or prior to the
Amalgamation Closing Date of the following conditions:
(a) Stockholder Approvals. Each of the Partners Stockholder Approval
and the NTL Stockholder Approval shall have been obtained.
(b) Minister Consent. The consent of the Minister to the Amalgamation
shall have been obtained.
(c) Amalgamation Required British Approvals. The following shall have
occurred:
(i) NTL shall have received a written indication from The Secretary
of State for Trade and Industry ("DTI") and from the Independent
Television Commission ("ITC"), in terms reasonably satisfactory to NTL,
to the effect that the Amalgamation will not lead to the revocation of
any licenses (issued pursuant to other the Cable and Broadcasting Act
1984 or the Broadcasting Act 1980 (as amended) or the revocation or any
of the telecommunications or wireless telegraphy licenses insured by the
DTI pursuant to the Telecommunications Act 1984 or the Wireless
Telegraphy Act 1949) which are held by Partners or any of its
subsidiaries or any Significant
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Affiliate, except for any licenses the loss of which would not have a
material adverse effect on the licensee;
(ii) NTL shall have received written confirmation from the Office
of Telecommunications, in terms reasonably satisfactory to NTL, that the
Director General has not after the date hereof (a) issued any directions
to Partners or any of its subsidiaries or any Significant Affiliate in
connection with their telecommunication licenses issued pursuant to the
Telecommunications Act 1984 or their wireless telegraphy licenses issued
pursuant to the Wireless Telegraphy Act 1949, (b) given notice to
Partners or any of its subsidiaries or Significant Affiliate of its
intention to make modifications to such licenses (other than
modifications which are to be made to all or substantially all of the
licenses issued pursuant to the Telecommunications Act 1984 or the
Wireless Telegraphy Act 1949 (as appropriate), or (c) taken any steps
pursuant to Section 18 of the Telecommunications Act 1984 or the
Wireless Telegraphy Act 1948 in relation to enforcement of any such
licenses, except for, in the case of clause (a), such directions, in the
case of clause (b), such modifications, or, in the case of clause (c),
such enforcement steps as would not have a material adverse effect on
the licensee;
(iii) NTL shall have received written confirmation from the ITC, in
terms reasonably satisfactory to NTL, that the ITC has not after the
date hereof (a) issued any directions to Partners or any of its
subsidiaries or any Significant Affiliate in connection with any license
issued pursuant to the Cable and Broadcasting Act 1984 or the
Broadcasting Act 1990 (as amended), (b) given notice to Partners or any
of its subsidiaries or any Significant Affiliate of its intention to
make modifications to any such license (other than modifications which
are to be made to all or substantially all licenses issued pursuant to
the Cable and Broadcasting Act 1984 or the Broadcasting Act 1990 as the
case may be), or (c) taken any steps in relation to enforcement of any
such license, except for, in the case of clause (a), such directions, in
the case of clause (b), such modifications, or, in the case of clause
(c), such enforcement steps as would not have a material adverse effect
on the licensee;
(iv) the Office of Fair Trading shall have indicated to NTL, in
terms reasonably satisfactory to NTL, either that the Amalgamation does
not qualify for investigation by the Monopolies and Mergers Commission
pursuant to the Fair Trading Act 1973 or that The Secretary of State for
Trade and Industry has decided not to refer the Amalgamation to the
Monopolies and Mergers Commission;
(v) The UK Panel on Takeovers and Mergers shall have confirmed to
NTL, in terms reasonably satisfactory to NTL, that the Amalgamation will
not give rise to any obligation upon NTL or Partners or any of its
subsidiaries or associates to make a mandatory cash offer for the shares
in Cable London not owned by Partners pursuant to the principles laid
down in Note 7 of Rule 9.1 of The City Code on Takeovers and Mergers.
(d) Governmental and Regulatory Approvals. Other than the filing
provided for under Section 1.3 and the Minister Consent and the
Amalgamation Required British Approvals (which are addressed in Sections
6.1(b) and 6.1(c)), all consents, approvals and actions of, filings with
and notices to any Governmental Entity required of Partners, NTL or any of
their subsidiaries to consummate the Amalgamation and the other
transactions contemplated hereby, the failure of which to be obtained or
taken (i) is reasonably expected to have a material adverse effect on the
Amalgamated Company and its prospective subsidiaries, taken as a whole, or
(ii) will result in a material violation of any laws, shall have been
obtained, all in form and substance reasonably satisfactory to Partners and
NTL.
(e) No Injunctions or Amalgamation Restraints. No judgment, order,
decree, statute, law, ordinance, rule or regulation, entered, enacted,
promulgated, enforced or issued by any court or other Governmental Entity
of competent jurisdiction or other legal restraint or prohibition
(collectively, "Amalgamation Restraints") shall be in effect (i) preventing
the consummation of the Amalgamation, or (ii) which otherwise is reasonably
likely to have a material adverse effect on Partners or NTL, as applicable;
provided, however, that each of the parties shall have used its best
efforts to prevent the entry of any such Amalgamation Restraints and to
appeal as promptly as possible any such Amalgamation Restraints that may be
entered.
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(f) Form S-4. The Form S-4 shall have become effective under the
Securities Act prior to the mailing of the Joint Proxy Statement by each of
Partners and NTL to their respective stockholders and no stop order or
proceedings seeking a stop order shall be threatened by the SEC or shall
have been initiated by the SEC.
(g) NASDAQ Quotation. The shares of NTL Common Stock issuable to
Partners's stockholders as contemplated by Article II and the shares of NTL
Common Stock issuable upon exercise of Amalgamation Adjusted Options
pursuant to Section 5.6 shall have been approved for quotation on the
NASDAQ, subject to official notice of issuance.
(h) Amalgamation Required Consents. NTL or Partners, as the case may
be, shall have obtained all consents designated as "Amalgamation Required
Consents" in the NTL Disclosure Schedule or the Partners Disclosure
Schedule.
SECTION 6.2 Conditions to Obligations of NTL. The obligation of NTL to
effect the Amalgamation is further subject to satisfaction or waiver of the
following conditions:
(a) Representations and Warranties. The representations and
warranties of Partners set forth herein shall be true and correct both when
made and at and as of the Amalgamation Closing Date, as if made at and as
of such time (except to the extent expressly made as of an earlier date, in
which case as of such date), except where the failure of such
representations and warranties to be so true and correct (without giving
effect to any limitation as to "materiality" or "material adverse effect"
set forth therein) does not have, and is not likely to have, individually
or in the aggregate, a material adverse effect on NTL or Partners.
(b) Performance of Obligations of Partners. Partners shall have
performed in all material respects all obligations required to be performed
by it under this Agreement at or prior to the Amalgamation Closing Date.
(c) No Material Adverse Change. As of the Amalgamation Closing Date,
there shall not have occurred any material adverse change relating to
Partners from the date hereof.
(d) Lock-Up. Each of Comcast and Warburg, Pincus Investors, L.P.
shall have agreed to a "lock-up" agreement with NTL preventing them from
selling, transferring or disposing of any interest in the Amalgamation
Consideration received by them for a period of 180 days after the
Amalgamation Closing Date.
(e) Dissenting Shares. The number of Dissenting Shares shall not be
more than 5% of the total issued and outstanding shares of Partners Class A
Common Stock.
(f) Audited Balance Sheet. The audited balance sheet and other
financial statements of Partners as at December 31, 1997 and for the
quarter and year then ended shall have been received by NTL and there shall
be no material adverse difference in the amounts reflected therein for
revenue and operating income (earnings before interest, taxes, depreciation
and amortization) for the year and quarter ended December 31, 1997 and
thereon for cash and cash equivalents, net working capital (current assets
less current liabilities), third party debt, shareholder loans and equity
as of December 31, 1997 from the amounts set forth on or in the Preliminary
Financial Statements.
SECTION 6.3 Conditions to Obligations of Partners. The obligation of
Partners to effect the Amalgamation is further subject to satisfaction or waiver
of the following conditions:
(a) Representations and Warranties. The representations and
warranties of NTL set forth herein shall be true and correct both when made
and at and as of the Amalgamation Closing Date, as if made at and as of
such time (except to the extent expressly made as of an earlier date, in
which case as of such date), except where the failure of such
representations and warranties to be so true and correct (without giving
effect to any limitation as to "materiality," or "material adverse effect"
set forth therein) does not have, and is not likely to have, individually
or in the aggregate, a material adverse effect on NTL.
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(b) Performance of Obligations of NTL. NTL shall have performed in
all material respects all obligations required to be performed by it under
this Agreement at or prior to the Amalgamation Closing Date.
(c) No Material Adverse Change. As of the Amalgamation Closing Date,
there shall not have occurred any material adverse change relating to NTL
from the date hereof.
(d) Registration Rights. NTL shall have executed an Amalgamation
Registration Rights Agreement implementing the terms set forth on Exhibit
6.3(d).
SECTION 6.4 Frustration of Amalgamation Closing Conditions. Neither NTL
nor Partners may rely on the failure of any condition set forth in Section 6.1,
6.2 or 6.3, as the case may be, to be satisfied if such failure was caused by
such party's failure to use best efforts to consummate the Amalgamation and the
other transactions contemplated by this Agreement, as required by and subject to
Section 5.5.
ARTICLE VII
TERMINATION, AMENDMENT AND WAIVER
SECTION 7.1 Termination. This Agreement may be terminated at any time
prior to the Amalgamation Effective Time, and (except in the case of 7.1(d) or
7.1(e)) whether before or after the Partners Stockholder Approval or the NTL
Stockholder Approval:
(a) by mutual written consent of NTL and Partners;
(b) by either NTL or Partners:
(i) if the Amalgamation shall not have been consummated by August
4, 1998 (the "End Date"), provided, however, that (x) if there shall
occur at any time subsequent to June 4, 1998 and prior to August 4, 1998
any Amalgamation Restraint prohibiting, delaying or restricting the
Partners Stockholders Meeting, the voting of shares by Comcast
Corporation in favor of the Amalgamation or the consummation of the
Amalgamation, the End Date shall be extended to October 4, 1998, (y) if,
as of August 4, 1998, the Required Consent of the bondholders of
Partners shall not have been obtained, the End Date shall be extended to
October 4, 1998, and (z) the right to terminate this Agreement pursuant
to this Section 7.1(b)(i) shall not be available to any party whose
failure to perform any of its obligations under this Agreement results
in the failure of the Amalgamation to be consummated by such time;
provided, however, that this Agreement may be extended not more than 30
days (but in no event to a date later than September 4, 1998) by either
party by written notice to the other party if the Amalgamation shall not
have been consummated as a direct result of NTL or Partners having
failed to receive all regulatory approvals required to be obtained with
respect to the Amalgamation.
(ii) if the Partners Stockholder Approval shall not have been
obtained at an Partners Stockholders Meeting duly convened therefor or
at any adjournment or postponement thereof;
(iii) if the NTL Stockholder Approval shall not have been obtained
at a NTL Stockholders Meeting duly convened therefor or at any
adjournment or postponement thereof; or
(iv) if any Amalgamation Restraint having any of the effects set
forth in Section 6.1(e) shall be in effect and shall have become final
and nonappealable; provided, that the party seeking to terminate this
Agreement pursuant to this Section 7.1(b)(iv) shall have used best
efforts to prevent the entry of and to remove such Amalgamation
Restraint;
(c) by NTL, if Partners shall have breached or failed to perform in
any material respect any of its representations, warranties, covenants or
other agreements contained in this Agreement, which breach or failure to
perform would give rise to the failure of a condition set forth in Section
6.2(a) or (b), and such condition is incapable of being satisfied by the
End Date;
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(d) by Partners, if NTL shall have breached or failed to perform in
any material respect any of its representations, warranties, covenants or
other agreements contained in this Agreement, which breach or failure to
perform would give rise to the failure of a condition set forth in Section
6.3(a) or (b), and such condition is incapable of being satisfied by the
End Date; or
(e) by Partners, prior to receipt of the Partners Stockholder
Approval, if, (i) as of a date not more than ten Business Days before the
Partners Stockholders Meeting, the NTL Average Stock Price determined as of
such date is less than $26.70, (ii) notice shall have been provided to NTL
hereunder of an intent to terminate and (iii) within five Business Days of
receipt of such notice, NTL shall not have offered (by notice to NTL) to
increase the Exchange Ratio such that the value of the Amalgamation
Consideration shall be $10 per share of Partners Common Stock or more at
such time.
SECTION 7.2 Effect of Termination. In the event of termination of this
Agreement by either Partners or NTL as provided in Section 7.1, this Agreement
shall forthwith become void and have no effect, without any liability or
obligation on the part of NTL or Partners, other than the provisions of Section
3.1(l), Section 3.2(m), the last sentence of Section 5.4, Section 5.9, this
Section 7.2 and Article VIII, which provisions survive such termination, and
except to the extent that such termination results from the willful and material
breach by a party of any of its representations, warranties, covenants or
agreements set forth in this Agreement.
SECTION 7.3 Amendment. This Agreement may be amended by the parties at
any time before or after the Partners Stockholder Approval or the NTL
Stockholder Approval; provided, however, that after any such approval, there
shall not be made any amendment that by law requires further approval by the
stockholders of Partners or NTL without the further approval of such
stockholders. This Agreement may not be amended except by an instrument in
writing signed on behalf of each of the parties.
SECTION 7.4 Extension; Waiver. At any time prior to the Amalgamation
Effective Time, a party may (a) extend the time for the performance of any of
the obligations or other acts of the other parties, (b) waive any inaccuracies
in the representations and warranties of the other parties contained in this
Agreement or in any document delivered pursuant to this Agreement or (c) subject
to the proviso of Section 7.3, waive compliance by the other party with any of
the agreements or conditions contained in this Agreement. Any agreement on the
part of a party to any such extension or waiver shall be valid only if set forth
in an instrument in writing signed on behalf of such party. The failure of any
party to this Agreement to assert any of its rights under this Agreement or
otherwise shall not constitute a waiver of such rights.
SECTION 7.5 Procedure for Termination, Amendment, Extension or Waiver. A
termination of this Agreement pursuant to Section 7.1, an amendment of this
Agreement pursuant to Section 7.3 or an extension or waiver pursuant to Section
7.4 shall, in order to be effective, require, in the case of NTL or Partners,
action by its Board of Directors or, with respect to any amendment to this
Agreement, the duly authorized committee of its Board of Directors to the extent
permitted by law.
ARTICLE VIII
GENERAL PROVISIONS
SECTION 8.1 Nonsurvival of Representations and Warranties. None of the
representations and warranties in this Agreement or in any instrument delivered
pursuant to this Agreement shall survive the Amalgamation Effective Time. This
Section 8.1 shall not limit any covenant or agreement of the parties which by
its terms contemplates performance after the Amalgamation Effective Time.
SECTION 8.2 Notices. All notices, requests, claims, demands and other
communications under this Agreement shall be in writing and shall be deemed
given if delivered personally, telecopied (which is
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confirmed) or sent by overnight courier (providing proof of delivery) to the
parties at the following addresses (or at such other address for a party as
shall be specified by like notice):
(a) if to NTL or Sub, to
NTL Incorporated
110 East 59th Street
New York, New York 10022
Telecopy No.: (212) 906-8497
Attention: Richard J. Lubasch
with a copy to:
Skadden, Arps, Slate, Meagher & Flom LLP
919 Third Avenue
New York, New York 10022
Telecopy No.: (212) 735-2000
Attention: Thomas H. Kennedy
Appleby, Spurling & Kempe
Cedar House
Hamilton, HM EX, Bermuda
Telecopy: (441) 292-8666
Attention: Hugh Gillespie
(b) if to Partners, to
Comcast UK Cable Partners Limited
Clarendon House
2 Church Street West
Hamilton, HM11, Bermuda
Telecopy No.: (441) 292-4720
Attention: Company Secretary
with a copy to:
Davis Polk & Wardwell
450 Lexington Avenue
New York, New York 10017
Telecopy No.: (212) 450-4800
Attention: John Knight
Conyers, Dill & Pearman
Clarendon House, Church Street
P.O. Box HM 666
Hamilton 11M CX, Bermuda
Telecopy No.: (441) 292-4720
Attention: David Lamb
Comcast Corporation
1500 Market Street
Philadelphia, Pennsylvania 19102
Telecopy No: (215) 981-7794
Attention: General Counsel
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SECTION 8.3 Definitions. For purposes of this Agreement:
(a) an "affiliate" of any person means another person that directly or
indirectly, through one or more intermediaries, controls, is controlled by,
or is under common control with, such first person, where "control" means
the possession, directly or indirectly, of the power to direct or cause the
direction of the management policies of a person, whether through the
ownership of voting securities, by contract, as trustee or executor, or
otherwise;
(b) "knowledge" of any person which is not an individual means the
actual knowledge of such person's executive officers or senior management
of such person's operating divisions and segments or (in the case of
Partners) representatives on the board of directors of a Significant
Affiliate, in each case after due inquiry;
(c) "material adverse change" or "material adverse effect" means, when
used in connection with Partners or NTL, any change, effect, event,
occurrence or state of facts that is, or would reasonably be expected to
be, materially adverse to the business, financial condition or results of
operations of such party and its subsidiaries taken as a whole, other than
changes, effects, events, occurrences or facts caused by changes in general
economic or securities market conditions, changes that affect the U.K.
cable industry generally or changes in the business of Partners that result
from the announcement or proposed consummation of the Amalgamation or of
the transactions contemplated hereby, including, without limitation, the
existence and possible exercise of the Purchase Rights and actions taken by
the parties in accordance with Section 5.13; and the terms "material" and
"materially" have correlative meanings;
(d) "person" means an individual, corporation, partnership, limited
liability company, joint venture, association, trust, unincorporated
organization or other entity;
(e) a "subsidiary" of any person means another person, an amount of
the voting securities, other voting ownership or voting partnership
interests of which is sufficient to elect at least a majority of its Board
of Directors or other governing body (or, if there are no such voting
interests, 50% or more of the equity interests of which) is owned directly
or indirectly by such first person; provided that, for purposes of this
Agreement, neither Birmingham Cable nor Cable London shall be a subsidiary
of Partners;
(f) "Birmingham Cable" means Birmingham Cable Corporation Limited.
(g) "Business Day" shall mean a day on which both (i) NASDAQ if
functional for a normal trading day and (ii) banks in the City of New York
are open for business, provided that with respect to the Amalgamation
Closing Date, Business Day shall also mean that the Bermuda Ministry of
Finance is operating on a normal schedule on such day;
(h) "Cable London" means Cable London PLC.
(i) "Equity Interest Proceeds" shall mean, with respect to Partners'
interests in Cable London and Birmingham Cable, the pro rata net proceeds
(i.e., the net amount received for the relevant equity interest (without
regard to debt, loans from Partners to Significant Affiliates or the debt
component (i.e., face amount and accrued and unpaid interest)) of any
convertible security) from the consummation of the sale of the relevant
interest under the applicable Purchase Rights less the Tax Adjustment;
provided that, in the case of Partners' interest in Cable London, such
amount shall be adjusted as follows: (i) if the convertible debt in Cable
London has been converted prior to or in connection with the exercise of
the Purchase Rights relating to Partners' interest in Cable London, the
Equity Interest Proceeds shall be decreased by an amount equal to the debt
component of Partners' share of such convertible debt and (ii) if such
convertible debt has not been converted prior to or in connection with the
exercise of such Right of First Refusal, the Equity Interest Proceeds shall
be increased by an amount equal to the value of Partners' share of such
convertible debt (less the debt component of such convertible debt).
(j) "NTL Average Stock Price" shall mean the average of the average
high and low sales prices of the NTL Common Stock or NASDAQ for each of the
five trading days ending on the trading day prior to the date of
determination;
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(k) "Required British Approval" shall mean those approvals and
contents set forth in Section 6.1(c);
(l) "Purchase Rights" shall mean in the case of Birmingham Cable, the
right of first refusal set forth in Section 5.2 of the Co-Ownership
Agreement, dated March 12, 1990, between US West International Holdings
Inc. and Comcast Cablevision of Birmingham, Inc., as subsequently amended,
supplemented and novated and, in the case of Cable London, the right of
preemption set forth in Article 15(c) of the Articles of Association of
Cable London;
(m) "Significant Affiliate" shall mean Birmingham Cable and Cable
London; and
(n) "Tax Adjustment" shall mean a percentage of the gross proceeds
which would be payable under the Tax Rate, without giving effect to any
credits or adjustments available to NTL or Partners or any of their
subsidiaries as a result of factors not related to the dispositions of such
interest in the particular Significant Affiliate.
SECTION 8.4 Interpretation. When a reference is made in this Agreement to
an Article, Section or Exhibit, such reference shall be to an Article or Section
of, or an Exhibit to, this Agreement unless otherwise indicated. The table of
contents and headings contained in this Agreement are for reference purposes
only and shall not affect in any way the meaning or interpretation of this
Agreement. Whenever the words "include", "includes" or "including" are used in
this Agreement, they shall be deemed to be followed by the words "without
limitation". The words "hereof", "herein" and "hereunder" and words of similar
import when used in this Agreement shall refer to this Agreement as a whole and
not to any particular provision of this Agreement. All terms defined in this
Agreement shall have the defined meanings when used in any certificate or other
document made or delivered pursuant hereto unless otherwise defined therein. The
definitions contained in this Agreement are applicable to the singular as well
as the plural forms of such terms and to the masculine as well as to the
feminine and neuter genders of such term. Any agreement, instrument or statute
defined or referred to herein or in any agreement or instrument that is referred
to herein means such agreement, instrument or statute as from time to time
amended, modified or supplemented, including (in the case of agreements or
instruments) by waiver or consent and (in the case of statutes) by succession of
comparable successor statutes and references to all attachments thereto and
instruments incorporated therein. References to a person are also to its
permitted successors and assigns.
SECTION 8.5 Counterparts. This Agreement may be executed in one or more
counterparts, all of which shall be considered one and the same agreement and
shall become effective when one or more counterparts have been signed by each of
the parties and delivered to the other parties.
SECTION 8.6 Entire Agreement; No Third-Party Beneficiaries. This
Agreement (including the documents and instruments referred to herein) and the
Confidentiality Agreement (a) constitute the entire agreement, and supersede all
prior agreements and understandings, both written and oral, between the parties
with respect to the subject matter of this Agreement and (b) except for the
provisions of Article II, Section 5.6 and Section 5.8, are not intended to
confer upon any person other than the parties any rights or remedies.
SECTION 8.7 Governing Law. Except for Article I, Article II, Section 4.2,
Section 5.7 and Section 5.17 (collectively, the "Bermuda Provisions"), which
shall be governed by the laws of Bermuda, this Agreement shall be governed by,
and construed in accordance with, the laws of the State of Delaware, regardless
of the laws that might otherwise govern under applicable principles of conflict
of laws thereof.
SECTION 8.8 Assignment. Neither this Agreement nor any of the rights,
interests or obligations under this Agreement shall be assigned, in whole or in
part, by operation of law or otherwise by either of the parties hereto without
the prior written consent of the other party. Any assignment in violation of the
preceding sentence shall be void. Subject to the preceding two sentences, this
Agreement will be binding upon, inure to the benefit of, and be enforceable by,
the parties and their respective successors and assigns.
SECTION 8.9 Consent to Jurisdiction.
(a) Each of the parties hereto (i) consents to submit itself to the
personal jurisdiction of any federal court located in the State of Delaware or
any Delaware state court in the event any dispute arises out of
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this Agreement or any of the transactions contemplated by this Agreement, (ii)
agrees that it will not attempt to deny or defeat such personal jurisdiction by
motion or other request for leave from any such court, and (iii) agrees (except
as provided in clause (b) of this Section 8.9) that it will not bring any action
relating to this Agreement or any of the transactions contemplated by this
Agreement in any court other than a federal court sitting in the State of
Delaware or a Delaware state court.
(b) With respect to the Bermuda Provisions, each of the parties hereto (i)
consents to submit itself to the personal jurisdiction of any court located in
Bermuda in the event any dispute arises out of the Bermuda Provisions, (ii)
agrees that it will not attempt to deny or defeat such personal jurisdiction by
motion or other request for leave from any such court, and (iii) agrees that it
will not bring any action relating to the Bermuda Provisions in any court other
than a court sitting in Bermuda.
SECTION 8.10 Headings. The headings contained in this Agreement are for
reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
SECTION 8.11 Severability. If any term or other provision of this
Agreement is invalid, illegal or incapable of being enforced by any rule of law
or public policy, all other conditions and provisions of this Agreement shall
nevertheless remain in full force and effect. Upon such determination that any
term or other provision is invalid, illegal or incapable of being enforced, the
parties hereto shall negotiate in good faith to modify this Agreement so as to
effect the original intent of the parties as closely as possible to the fullest
extent permitted by applicable law in an acceptable manner to the end that the
transactions contemplated hereby are fulfilled to the extent possible.
IN WITNESS WHEREOF, NTL, Sub and Partners have caused this Agreement to be
signed by their respective officers thereunto duly authorized, all as of the
date first written above.
NTL INCORPORATED
By /s/ JOHN GREGG
------------------------------------
John Gregg
Title: Managing Director,
Corporate Development
NTL (BERMUDA) LIMITED
By /s/ RICHARD J. LUBASCH
------------------------------------
Richard J. Lubasch
Title: Vice President
COMCAST UK CABLE PARTNERS LIMITED
By /s/ KEN MIKALAUSKAS
------------------------------------
Ken Mikalauskas
Title: Vice President, Finance
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EXHIBIT 2.1-C
FORM OF
CERTIFICATE OF DESIGNATION, PREFERENCES
AND RIGHTS OF CLASS C JUNIOR
PARTICIPATING PREFERRED STOCK
OF
NTL INCORPORATED
PURSUANT TO SECTION 151 OF THE GENERAL CORPORATION LAW
OF THE STATE OF DELAWARE
NTL Incorporated, a corporation organized and existing under the General
Corporation Law of the State of Delaware, in accordance with the provisions of
Section 103 thereof, HEREBY CERTIFIES:
That pursuant to the authority conferred upon the Board of Directors by the
Certificate of Incorporation of the said Corporation, the said Board of
Directors on , 1998 adopted the following resolution creating a series of
shares of Preferred Stock designated as Class C Junior Participating Preferred
Stock:
RESOLVED, that pursuant to the authority vested in the Board of Directors
of this Corporation in accordance with the provisions of its Certificate of
Incorporation, a series of Preferred Stock of the Corporation be and it hereby
is created, and that the designation and amount thereof and the voting powers,
preferences and relative, participating, optional and other special rights of
the shares of such series, and the qualifications, limitations or restrictions
thereof are as follows:
1. Designation and Amount. The shares of such series shall be
designated as "Class C Junior Participating Preferred Stock," par value
$.01 per share (the "Class C Junior Preferred Stock"), and the number of
shares constituting such series shall be .
2. Dividends and Distributions. (a) Each share of Class C Junior
Preferred Stock shall be entitled to receive, when, as and if declared by
the Board of Directors, out of funds legally available for the payment of
dividends, contemporaneously with any dividends with respect to shares of
Common Stock (as defined in Section 11), dividends in an amount per share
(rounded to the nearest cent) equal to, subject to the provision for
adjustment hereinafter set forth, 1.00* times the aggregate per share
amount of cash dividends declared by the Board of Directors with respect to
the Common Stock, and 1.00* times the aggregate per share amount (payable
in kind) of all non-cash dividends or other distributions (other than a
dividend payable in shares of Common Stock or a subdivision of the
outstanding shares of Common Stock, by reclassification or otherwise)
declared by the Board of Directors with respect to the Common Stock, to the
same extent as, on the same basis as, and in the same form as (whether
payable in cash or in kind), any dividends with respect to shares of Common
Stock. With respect to each dividend payable in respect of the Class C
Junior Preferred Stock, the record date for such dividend shall be the same
as the record date for the corresponding dividend in respect of the Common
Stock. Such dividends shall be payable on the dates specified by the Board
of Directors as the dates for payment of dividends in respect of shares of
Common Stock (each of such dates being a "dividend payment date")(unless
such day is not a business day, in which event on the next succeeding
business day). Such dividends shall be paid to the holders of record at the
close of business on the date (the "record date") specified by the Board of
Directors of the Corporation at the time such dividend is declared;
provided that such date shall not be more than 60 days nor less than 10
days prior to the respective dividend payment date. In the event the
Corporation shall at any time after the date of initial issuance of the
Class C Junior Preferred Stock (the "Issuance Date"), (i) declare any
dividend on Common Stock payable in shares of Common Stock, (ii) subdivide
the outstanding Common Stock, or (iii) combine the outstanding Common Stock
into a smaller number of shares, then in each such case the amount to which
each share of Class C Junior Preferred Stock was entitled to receive
immediately prior to such event under the first sentence of this Section
2(a) shall be adjusted by multiplying such amount by a fraction the
numerator of which is the
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number of shares of Common Stock outstanding immediately after such event
and the denominator of which is the number of shares of Common Stock that
were outstanding immediately prior to such event.
(b) So long as any shares of the Class C Junior Preferred Stock are
outstanding, no dividends shall be declared or paid or set apart for
payment or other distribution declared or made upon Parity Securities or
Junior Securities by the Corporation, unless a dividend in the amount and
form provided for herein is paid or set apart for payment on or in respect
of the Class C Junior Preferred Stock.
3. Voting Rights. The holders of shares of Class C Junior Preferred
Stock shall have the following voting rights:
(a) Except as otherwise provided herein, in the Certificate of
Incorporation or under applicable law, (i) each share of Class C Junior
Preferred Stock and each share of Class D Junior Preferred Stock shall be
entitled to vote together with the Common Stock on all matters submitted
for a vote of holders of Common Stock as a single class, (ii) subject to
the provision for adjustment hereinafter set forth, shall be entitled to
1.00* votes per share of Class C Junior Preferred Stock and (iii) shall be
entitled to notice of any stockholders' meeting in accordance with the
Certificate of Incorporation and bylaws of the Corporation. In the event
the Corporation shall at any time after the Issuance Date (i) declare any
dividend on Common Stock payable in shares of Common Stock, (ii) subdivide
the outstanding Common Stock, or (iii) combine the outstanding Common Stock
into a smaller number of shares, then in each such case the number of votes
per share to which holders of shares of Class C Junior Preferred Stock were
entitled immediately prior to such event shall be adjusted by multiplying
such number by a fraction, the numerator of which is the number of shares
of Common Stock outstanding immediately after such event and the
denominator of which is the number of shares of Common Stock that were
outstanding immediately prior to such event.
(b) So long as any shares of Class C Junior Preferred Stock are
outstanding, the Corporation shall not, without the written consent or
affirmative vote at a meeting called for that purpose of the holders of
two-thirds or more of the shares of Class C Junior Preferred Stock then
outstanding, amend, alter or repeal, whether by merger, consolidation,
combination, reclassification or otherwise, the Certificate of
Incorporation or by-laws of the Corporation or of any provision thereof
(including the adoption of a new provision thereof) which would result in
an alteration or circumvention of the voting powers, designation and
preferences and relative participating, optional and other special rights,
and qualifications, limitations and restrictions of the Class C Junior
Preferred Stock.
(c) The consent or votes required in Section 3(b) shall be in addition
to any approval of stockholders of the Corporation which may be required by
law or pursuant to any provision of the Certificate of Incorporation or
bylaws, which approval shall be obtained by vote of the stockholders of the
Corporation in the manner provided in Section 3(a).
4. Reacquired Shares. Any shares of Class C Junior Preferred Stock
purchased or otherwise acquired by the Corporation in any manner whatsoever
shall be retired and cancelled promptly after the acquisition thereof. All
such shares shall upon their cancellation become authorized but unissued
shares of Preferred Stock and may be reissued as part of a new series of
Preferred Stock to be created by resolution or resolutions of the Board of
Directors, subject to the conditions and restrictions on issuance set forth
herein.
5. Liquidation, Dissolution or Winding Up.
(a) Upon any voluntary or involuntary liquidation, dissolution or
winding up of the Corporation, no distribution shall be made to the holders
of Junior Securities unless, prior thereto, the holders of shares of Class
C Junior Preferred Stock shall have received $0.01 per share (the "Class C
Liquidation Preference"), and the holders of Parity Securities shall have
received any liquidation preference due them (the "Parity Preference").
Following the payment of the full amount of the Class C Liquidation
- ---------------
* See Section 5.20.
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Preference, no additional distributions shall be made to the holders of
shares of Class C Junior Preferred Stock unless, prior thereto, the holders
of shares of Common Stock shall have received an amount per share (the
"Common Adjustment") equal to the quotient obtained by dividing (i) the
Class C Liquidation Preference by (ii) 1.00* (as appropriately adjusted as
set forth in Section 5(c) below to reflect such events as stock splits,
stock dividends and recapitalizations with respect to the Common Stock)
(such number in clause (ii) being hereinafter referred to as the
"Adjustment Number"). Following the payment of the full amount of the Class
C Liquidation Preference, the Parity Preference and the Common Adjustment
in respect of all outstanding shares of Class C Junior Preferred Stock,
Class D Junior Preferred Stock and Common Stock, respectively, holders of
shares of Class C Junior Preferred Stock, Class D Junior Preferred Stock
and Common Stock shall receive their ratable and proportionate share of the
remaining assets to be distributed in the ratio of the Adjustment Number to
1 with respect to such Class C Junior Preferred Stock and Class D Junior
Preferred Stock, and Common Stock, on a per share basis, respectively.
(b) In the event, however, that there are not sufficient assets
available to permit payment in full of the Class C Liquidation Preference
and the Parity Preference, then such remaining assets shall be distributed
ratably to the holders of all such shares in proportion to their respective
liquidation preferences. In the event, however, that there are not
sufficient assets available to permit payment in full of the Common
Adjustment, then such remaining assets shall be distributed ratably to the
holders of Common Stock.
(c) In the event the Corporation shall at any time after the Issuance
Date (i) declare any dividend on Common Stock payable in shares of Common
Stock, (ii) subdivide the outstanding Common Stock, or (iii) combine the
outstanding Common Stock into a smaller number of shares, then in each such
case the Adjustment Number in effect immediately prior to such event shall
be adjusted by multiplying such Adjustment Number by a fraction, the
numerator of which is the number of shares of Common Stock outstanding
immediately after such event and the denominator of which is the number of
shares of Common Stock that were outstanding immediately prior to such
event.
6. Consolidation, Merger, Share Exchange, etc. In case the
Corporation shall enter into any consolidation, merger, share exchange,
combination or other transaction in which the shares of Common Stock are
exchanged for or changed into other stock or securities, cash and/or any
other property, then in any such case the shares of Class C Junior
Preferred Stock shall at the same time be similarly exchanged or changed in
an amount per share (subject to the provision for adjustment hereinafter
set forth) equal to 1.00* times the aggregate amount of stock, securities,
cash and/or any other property (payable in kind), as the case may be, into
which or for which each share of Common Stock is changed or exchanged. In
the event the Corporation shall at any time after the Issuance Date (i)
declare any dividend on Common Stock payable in shares of Common Stock,
(ii) subdivide the outstanding Common Stock, or (iii) combine the
outstanding Common Stock into a smaller number of shares, then in each such
case the amount set forth in the preceding sentence with respect to the
exchange or change of shares of Class C Junior Preferred Stock shall be
adjusted by multiplying such amount by a fraction, the numerator of which
is the number of shares of Common Stock outstanding immediately after such
event and the denominator of which is the number of shares of Common Stock
that were outstanding immediately prior to such event.
7. Redemption. (a) Except as set forth in Section 7(b) the shares of
Class C Junior Preferred Stock shall not be redeemable.
(b) If the Right of First Refusal is Exercised, each share of Class C
Junior Preferred Stock shall, within 45 days of the receipt by the
Corporation of the Equity Interest Proceeds, be redeemed by the Corporation
for a pro rata (by number of shares of Class C Junior Preferred Stock
originally issued) share of the Equity Interest Proceeds. Such redemption
shall be, at the election of the Corporation, payable either (i) in cash,
subject to any requirements of law or the Corporation's debt instruments,
or
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* See Section 5.20.
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(ii) in shares of Common Stock of the Corporation valued at the greater of
$30 per share [subject to adjustment if change in NTL Common Stock prior to
Issuance Date] or the NTL Average Market Price as of the date of receipt of
the proceeds by the Corporation.
(c) "Equity Interest Proceeds" shall mean the net proceeds received
for the Corporation's equity interest (as of the Issuance Date) in Cable
London (without regard to debt, loans from the Corporation to Cable London
or the debt component (i.e., face amount and accrued and unpaid interest)
of any convertible security) from the consummation of the sale of the
interest under the Purchase Rights); provided that such amount shall be
adjusted as follows: (i) if the convertible debt in Cable London has been
converted prior to or in connection with the exercise of the Right of First
Refusal, the Equity Interest Proceeds shall be decreased by an amount equal
to the debt component of the Corporation's share of such convertible debt,
(ii) if such convertible debt has not been converted prior to or in
connection with the exercise of the Right of First Refusal, the Equity
Interest Proceeds shall be increased by an amount equal to the value of the
Corporation's share of such convertible debt (less the debt component of
such convertible debt) and (iii) such amount will be reduced by taxes which
would be payable on such sale at the Tax Rate, without giving effect to any
credits or other adjustments available to the Corporation or its
subsidiaries as a result of factors not related to the Corporation's
interest in Cable London.
(d) Nothing contained herein shall be deemed to restrict or prohibit
the Corporation from acquiring shares of Class C Preferred Stock otherwise
then pursuant to redemption pursuant to Section 7(b) hereof.
8. Exchange. If (i) the Corporation shall so elect in its sole
discretion or (ii) the Right of First Refusal is Resolved, the Corporation
shall, within 45 days of the date of election with respect to clause (i) or
the date the Rights of Refusal is Resolved with respect to clause (ii),
exchange each share of Class C Junior Preferred Stock into 1.00* shares
(or, if there has been one or more adjustments pursuant to the last
sentence of Section 2(a), the adjusted number of shares) of Common Stock of
the Corporation.
9. Procedure for Redemption or Exchange. (a) In the event of
redemption of the Class C Junior Preferred Stock pursuant to Section 7 or
an exchange of the shares of Class C Junior Preferred Stock pursuant to
Section 8, notice of such redemption or exchange shall be given to each
holder of record of the shares to be redeemed or exchanged at such holder's
address as the same appears on the stock transfer books of the Corporation
at least 30 but not more than 45 days before the date fixed for redemption
or exchange, as the case may be, provided, however, that no failure to give
such notice nor any defect therein shall affect the validity of the
redemption or exchange of any share of Class C Junior Preferred Stock to be
redeemed or exchanged except as to the holder to whom the Corporation has
failed to give said notice or except as to the holder whose notice was
defective. Each such notice shall state: (i) the redemption date or
exchange date; (ii) the amount and nature of the consideration to be paid
in respect of each share; (iii) the place or places where certificates for
such shares are to be surrendered for redemption or exchange; (iv) the
specific provision hereof pursuant to which such redemption or exchange is
to be made; and (v) that dividends on the shares to be redeemed or
exchanged will cease to accrue on such redemption date or exchange date.
Upon giving any notice of a redemption pursuant to Section 7 or notice of
exchange pursuant to Section 8, the Corporation shall become obligated to
redeem or exchange the shares of Class C Junior Preferred Stock specified
in such notice on the redemption date or exchange date, as the case may be,
specified in such notice.
(b) Notice having been given as aforesaid, from and after the
redemption date or the exchange date (unless, in the case of a redemption,
default shall be made by the Corporation in providing money for the payment
of the redemption price of the shares called for redemption or, in the case
of an exchange, the Corporation defaults in issuing Common Stock or fails
to pay or set aside for payment accrued and unpaid dividends on the Class C
Junior Preferred Stock to the exchange date), dividends on the shares of
- ---------------
* See Section 5.20.
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<PAGE> 304
Class C Junior Preferred Stock called for redemption or exchange shall
cease to accrue, and all rights of the holders thereof as stockholders of
the Corporation (except the right to receive from the Corporation the
redemption price without interest or the Common Stock and accrued and
unpaid dividends on the Class C Junior Preferred Stock to the exchange
date) shall cease. Upon surrender in accordance with said notice of the
certificates for any shares so redeemed or exchanged (properly endorsed or
assigned for transfer, if the Board of Directors of the Corporation shall
so require and the notice shall so state), such share shall be redeemed or
exchanged by the Corporation at the redemption price or rate of exchange
aforesaid.
(c) The Corporation will pay any and all issuance and delivery taxes
that may be payable in respect of the issuance or delivery of Common Stock
in exchange for shares of Class C Junior Preferred Stock. The Corporation
shall not, however, be required to pay any tax which may be payable in
respect of any transfer involved in the issuance and delivery of Common
Stock in a name other than that in which the shares of Class C Junior
Preferred Stock so exchange were registered, and no such issuance or
delivery shall be made unless and until the person requesting such issuance
has paid to the Corporation the amount of any such tax or has established
to the satisfaction of the Corporation that such tax has been paid.
(d) If a notice of redemption shall have been given, such redemption
is for consideration consisting solely of cash and if, prior to the
redemption date, the Corporation shall have irrevocably deposited the
aggregate redemption price of the shares of Class C Junior Preferred Stock
to be redeemed in trust for the pro rata benefit of the holders of the
shares of Class C Junior Preferred Stock to be redeemed, so as to be and to
continue to be available therefor, with a bank or trust company that (i) is
organized under the laws of the United States of America or any state
thereof, (ii) has capital and surplus of not less than $250,000,000 and
(iii) has, or, if it has no publicly traded debt securities rated by a
nationally recognized rating agency, is the subsidiary of a bank holding
company that has, publicly traded debt securities rated at least "A" or the
equivalent thereof by Standard & Poor's Corporation or "A-2" or the
equivalent by Moody's Investor Service Inc., then upon making such deposit,
all rights of holders of the shares so called for redemption shall cease,
except the right of holders of such shares to receive the redemption price
against delivery of such shares, but without interest, and such shares
shall cease to be outstanding. Any funds so deposited that are unclaimed by
holders of shares at the end of three years from such redemption date shall
be repaid to the Corporation upon its request, after which repayment the
holders of shares of Class C Junior Preferred Stock so called for
redemption shall thereafter be entitled to look only to the Corporation for
payment of the redemption price.
(e) In the event of redemption of shares of Class C Junior Preferred
Stock for shares of Common Stock pursuant to Section 7 or an exchange of
Class C Junior Preferred Stock for shares of Common Stock pursuant to
Section 8:
(i) such redemption or exchange shall be deemed to have been
effected on the redemption date or the exchange date, as the case may
be, and the person in whose name or names any certificate or
certificates for shares of Common Stock shall be issuable upon such
redemption or exchange shall be deemed to have become the holder of
record of the shares of Common Stock represented thereby as of the close
of business on the redemption date or the exchange date, as the case may
be;
(ii) all such shares of Common Stock issued upon redemption or
exchange of the Class C Junior Preferred Stock will upon issuance be
duly and validly issued and fully paid and non-assessable, free of all
liens and charges and not subject to any preemptive rights;
(iii) effective as of the close of business on the redemption date
or exchange date, as the case may be, the holder thereof shall be deemed
to be the holder of the shares of Common Stock for which such shares of
Class C Junior Preferred Stock were redeemed or exchanged, as the case
may be, and, as from the redemption date or the exchange date, as the
case may be, such holder shall be entitled to all rights of a Common
Stock holder;
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<PAGE> 305
(iv) prior to the issuance of any such shares of Common Stock, the
Corporation shall comply with all applicable federal and state laws and
regulations which require action to be taken by the Corporation; and
(v) no fractional shares of Common Stock shall be issued, but in
lieu thereof the Corporation shall pay a cash adjustment in respect of
such fractional interest in an amount equal to such fractional interest
multiplied by the closing price reported by the principal securities
exchange on which the shares of Common Stock are listed and traded on
the redemption date or exchange date, as the case may be.
(f) The Corporation covenants that it will at all times reserve and
keep available, free from preemptive rights, such number of its authorized
but unissued shares of Common Stock and/or its shares of Common Stock held
as treasury stock as shall be required for the purpose of effecting the
redemption or exchange of the Class C Junior Preferred Stock.
10. Fiduciary Duty. The Board of Directors of the Corporation shall,
with respect to all matters except those set forth in Sections 5, 7, 8, 9
and 13, have the obligations and duties (including fiduciary duties) to the
holders of the Class C Junior Preferred Stock to the same extent and as if
they were holders of the Common Stock. With respect to the matters set
forth in Section 5, 7, 8, 9 and 13, the Board of Directors of the
Corporation shall act in good faith and, in the event that the Corporation
is not reasonably likely to enter into any agreement, arrangement or
understanding directly or indirectly relating to the Right of First Refusal
or the ownership interest in Cable London which would result in an exchange
pursuant to clause (ii) of Section 8, and the Right of First Refusal is
reasonably likely to be exercised, the Corporation shall use its reasonable
efforts to maximize the proceeds to be received from the exercise thereof.
11. Ranking. The Class C Junior Preferred Stock shall, with respect
to dividend rights, rank on a parity with, the common stock, par value $.01
per share, of the Corporation (the "Common Stock") and the Class D Junior
Participating Preferred Stock, par value $.01 per share, of the Corporation
(the "Class D Junior Preferred Stock"). With respect to rights on
liquidation, dissolution and winding up, the Class C Junior Preferred Stock
shall rank prior to all classes of the Common Stock, on a parity with the
Class D Junior Preferred Stock and junior to all other series of Preferred
Stock. All equity securities of the Corporation to which the Class C Junior
Preferred Stock ranks prior (whether with respect to dividends or upon
liquidation, dissolution, winding up or otherwise), are collectively
referred to herein as the "Junior Securities." All equity securities of the
Corporation with which the Class C Junior Preferred Stock ranks on a parity
(whether with respect to dividends or upon liquidation, dissolution or
winding up), including the Class D Junior Preferred Stock, are collectively
referred to herein as the "Parity Securities." All equity securities of the
Corporation to which the Class C Junior Preferred Stock ranks junior
(whether with respect to dividends or upon liquidation, dissolution or
winding up) are collectively referred to herein as "Senior Securities". The
respective definitions of Junior Securities, Parity Securities and Senior
Securities shall also include any options exercisable for or convertible
into any of the Junior Securities, Parity Securities and Senior Securities,
as the case may be.
12. Reports. So long as any of the Class C Junior Preferred Stock is
outstanding, the Corporation will furnish the holders thereof with the
quarterly and annual financial reports that the Corporation is required to
file with the Securities and Exchange Commission pursuant to Section 13 or
Section 15(d) of the Securities Exchange Act of 1934 or, in the event the
Corporation is not required to file such reports, reports containing the
same information as would be required in such reports.
13. Definitions. "Exercised" shall mean that the Right of First
Refusal has been validly exercised by TeleWest (other than pursuant to
Clause (B) of the definition of "Resolved") and the Corporation (or the
relevant subsidiary of the Corporation) has received the proceeds therefrom
in consideration for the delivery of the equity interests thereunder.
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<PAGE> 306
"NTL Average Market Price" means the average of the average of the high and
low sales prices of the Common Stock of the Corporation on the principal market
on which it is traded for each of the five trading days ending on the last
trading day prior to the date of determination.
"Resolved" shall mean that (A) the Right of First Refusal is no longer of
any legal force and effect or (B) that the Corporation shall have entered into
an agreement, arrangement or understanding with TeleWest directly or indirectly
relating to a business combination between the Corporation and TeleWest or the
Right of First Refusal or the ownership interests in Cable London.
"Right of First Refusal" shall mean the right of preemption set forth in
Article 15(c) of the Articles of Association of Cable London.
IN WITNESS WHEREOF, NTL INCORPORATED has caused this Certificate to be made
under the seal of the Corporation and signed by ,
its , and attested by
, its , this day of
, 1998.
NTL INCORPORATED
By:
--------------------------------------
Name:
Title:
[SEAL]
Attest:
- ---------------------------------------------------------
Name:
Title:
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<PAGE> 307
EXHIBIT 2.1-D
FORM OF
CERTIFICATE OF DESIGNATION, PREFERENCES
AND RIGHTS OF CLASS D JUNIOR
PARTICIPATING PREFERRED STOCK
OF
NTL INCORPORATED
PURSUANT TO SECTION 151 OF THE GENERAL CORPORATION LAW
OF THE STATE OF DELAWARE
NTL Incorporated, a corporation organized and existing under the General
Corporation Law of the State of Delaware, in accordance with the provisions of
Section 103 thereof, HEREBY CERTIFIES:
That pursuant to the authority conferred upon the Board of Directors by the
Certificate of Incorporation of the said Corporation, the said Board of
Directors on , 1998 adopted the following resolution creating a series
of shares of Preferred Stock designated as Class D Junior
Participating Preferred Stock:
RESOLVED, that pursuant to the authority vested in the Board of Directors
of this Corporation in accordance with the provisions of its Certificate of
Incorporation, a series of Preferred Stock of the Corporation be and it hereby
is created, and that the designation and amount thereof and the voting powers,
preferences and relative, participating, optional and other special rights of
the shares of such series, and the qualifications, limitations or restrictions
thereof are as follows:
1. Designation and Amount. The shares of such series shall be
designated as "Class D Junior Participating Preferred Stock," par value
$.01 per share (the "Class D Junior Preferred Stock"), and the number of
shares constituting such series shall be .
2. Dividends and Distributions. (a) Each share of Class D Junior
Preferred Stock shall be entitled to receive, when, as and if declared by
the Board of Directors, out of funds legally available for the payment of
dividends, contemporaneously with any dividends with respect to shares of
Common Stock (as defined in Section 11), dividends in an amount per share
(rounded to the nearest cent) equal to, subject to the provision for
adjustment hereinafter set forth, 1.00* times the aggregate per share
amount of cash dividends declared by the Board of Directors with respect to
the Common Stock, and 1.00* times the aggregate per share amount (payable
in kind) of all non-cash dividends or other distributions (other than a
dividend payable in shares of Common Stock or a subdivision of the
outstanding shares of Common Stock, by reclassification or otherwise)
declared by the Board of Directors with respect to the Common Stock, to the
same extent as, on the same basis as, and in the same form as (whether
payable in cash or in kind), any dividends with respect to shares of Common
Stock. With respect to each dividend payable in respect of the Class D
Junior Preferred Stock, the record date for such dividend shall be the same
as the record date for the corresponding dividend in respect of the Common
Stock. Such dividends shall be payable on the dates specified by the Board
of Directors as the dates for payment of dividends in respect of shares of
Common Stock (each of such dates being a "dividend payment date")(unless
such day is not a business day, in which event on the next succeeding
business day). Such dividends shall be paid to the holders of record at the
close of business on the date (the "record date") specified by the Board of
Directors of the Corporation at the time such dividend is declared;
provided that such date shall not be more than 60 days nor less than 10
days prior to the respective dividend payment date. In the event the
Corporation shall at any time after the date of initial issuance of the
Class D Junior Preferred Stock (the "Issuance Date"), (i) declare any
dividend on Common Stock payable in shares of Common Stock, (ii) subdivide
the outstanding Common Stock, or (iii) combine the outstanding Common Stock
into a
- ---------------
* See Section 5.20.
A-47
<PAGE> 308
smaller number of shares, then in each such case the amount to which each share
of Class D Junior Preferred Stock was entitled to receive immediately prior to
such event under the first sentence of this Section 2(a) shall be adjusted by
multiplying such amount by a fraction the numerator of which is the number of
shares of Common Stock outstanding immediately after such event and the
denominator of which is the number of shares of Common Stock that were
outstanding immediately prior to such event.
(b) So long as any shares of the Class D Junior Preferred Stock are
outstanding, no dividends shall be declared or paid or set apart for
payment or other distribution declared or made upon Parity Securities or
Junior Securities by the Corporation, unless a dividend in the amount and
form provided for herein is paid or set apart for payment on or in respect
of the Class D Junior Preferred Stock.
3. Voting Rights. The holders of shares of Class D Junior Preferred
Stock shall have the following voting rights:
(a) Except as otherwise provided herein, in the Certificate of
Incorporation or under applicable law, (i) each share of Class D Junior
Preferred Stock and each share of Class C Junior Preferred Stock shall
be entitled to vote together with the Common Stock on all matters
submitted for a vote of holders of Common Stock as a single class, (ii)
subject to the provision for adjustment hereinafter set forth, shall be
entitled to 1.00* votes per share of Class D Junior Preferred Stock and
(iii) shall be entitled to notice of any stockholders' meeting in
accordance with the Certificate of Incorporation and bylaws of the
Corporation. In the event the Corporation shall at any time after the
Issuance Date (i) declare any dividend on Common Stock payable in shares
of Common Stock, (ii) subdivide the outstanding Common Stock, or (iii)
combine the outstanding Common Stock into a smaller number of shares,
then in each such case the number of votes per share to which holders of
shares of Class D Junior Preferred Stock were entitled immediately prior
to such event shall be adjusted by multiplying such number by a
fraction, the numerator of which is the number of shares of Common Stock
outstanding immediately after such event and the denominator of which is
the number of shares of Common Stock that were outstanding immediately
prior to such event.
(b) So long as any shares of Class D Junior Preferred Stock are
outstanding, the Corporation shall not, without the written consent or
affirmative vote at a meeting called for that purpose of the holders of
two-thirds or more of the shares of Class D Junior Preferred Stock then
outstanding, amend, alter or repeal, whether by merger, consolidation,
combination, reclassification or otherwise, the Certificate of
Incorporation or by-laws of the Corporation or of any provision thereof
(including the adoption of a new provision thereof) which would result
in an alteration or circumvention of the voting powers, designation and
preferences and relative participating, optional and other special
rights, and qualifications, limitations and restrictions of the Class D
Junior Preferred Stock.
(c) The consent or votes required in Section 3(b) shall be in
addition to any approval of stockholders of the Corporation which may be
required by law or pursuant to any provision of the Certificate of
Incorporation or bylaws, which approval shall be obtained by vote of the
stockholders of the Corporation in the manner provided in Section 3(a).
4. Reacquired Shares. Any shares of Class D Junior Preferred Stock
purchased or otherwise acquired by the Corporation in any manner whatsoever
shall be retired and cancelled promptly after the acquisition thereof. All
such shares shall upon their cancellation become authorized but unissued
shares of Preferred Stock and may be reissued as part of a new series of
Preferred Stock to be created by resolution or resolutions of the Board of
Directors, subject to the conditions and restrictions on issuance set forth
herein.
5. Liquidation, Dissolution or Winding Up. (a) Upon any voluntary or
involuntary liquidation, dissolution or winding up of the Corporation, no
distribution shall be made to the holders of Junior Securities unless,
prior thereto, the holders of shares of Class D Junior Preferred Stock
shall have received $0.01 per share (the "Class D Liquidation Preference"),
and the holders of Parity Securities
- ---------------
* See Section 5.20.
A-48
<PAGE> 309
shall have received any liquidation preference due them (the "Parity
Preference"). Following the payment of the full amount of the Class D
Liquidation Preference, no additional distributions shall be made to the
holders of shares of Class D Junior Preferred Stock unless, prior thereto,
the holders of shares of Common Stock shall have received an amount per
share (the "Common Adjustment") equal to the quotient obtained by dividing
(i) the Class D Liquidation Preference by (ii) 1.00* (as appropriately
adjusted as set forth in Section 5(c) below to reflect such events as stock
splits, stock dividends and recapitalizations with respect to the Common
Stock) (such number in clause (ii) being hereinafter referred to as the
"Adjustment Number"). Following the payment of the full amount of the Class
D Liquidation Preference, the Parity Preference and the Common Adjustment
in respect of all outstanding shares of Class C Junior Preferred Stock,
Class D Junior Preferred Stock and Common Stock, respectively, holders of
shares of Class C Junior Preferred Stock, Class D Junior Preferred Stock
and Common Stock shall receive their ratable and proportionate share of the
remaining assets to be distributed in the ratio of the Adjustment Number to
1 with respect to such Class C Junior Preferred Stock and Class D Junior
Preferred Stock, and Common Stock, on a per share basis, respectively.
(b) In the event, however, that there are not sufficient assets
available to permit payment in full of the Class D Liquidation Preference
and the Parity Preference, then such remaining assets shall be distributed
ratably to the holders of all such shares in proportion to their respective
liquidation preferences. In the event, however, that there are not
sufficient assets available to permit payment in full of the Common
Adjustment, then such remaining assets shall be distributed ratably to the
holders of Common Stock.
(c) In the event the Corporation shall at any time after the Issuance
Date (i) declare any dividend on Common Stock payable in shares of Common
Stock, (ii) subdivide the outstanding Common Stock, or (iii) combine the
outstanding Common Stock into a smaller number of shares, then in each such
case the Adjustment Number in effect immediately prior to such event shall
be adjusted by multiplying such Adjustment Number by a fraction, the
numerator of which is the number of shares of Common Stock outstanding
immediately after such event and the denominator of which is the number of
shares of Common Stock that were outstanding immediately prior to such
event.
6. Consolidation, Merger, Share Exchange, etc. In case the
Corporation shall enter into any consolidation, merger, share exchange,
combination or other transaction in which the shares of Common Stock are
exchanged for or changed into other stock or securities, cash and/or any
other property, then in any such case the shares of Class D Junior
Preferred Stock shall at the same time be similarly exchanged or changed in
an amount per share (subject to the provision for adjustment hereinafter
set forth) equal to 1.00* times the aggregate amount of stock, securities,
cash and/or any other property (payable in kind), as the case may be, into
which or for which each share of Common Stock is changed or exchanged. In
the event the Corporation shall at any time after the Issuance Date (i)
declare any dividend on Common Stock payable in shares of Common Stock,
(ii) subdivide the outstanding Common Stock, or (iii) combine the
outstanding Common Stock into a smaller number of shares, then in each such
case the amount set forth in the preceding sentence with respect to the
exchange or change of shares of Class D Junior Preferred Stock shall be
adjusted by multiplying such amount by a fraction, the numerator of which
is the number of shares of Common Stock outstanding immediately after such
event and the denominator of which is the number of shares of Common Stock
that were outstanding immediately prior to such event.
7. Redemption. (a) Except as set forth in Section 7(b) the shares of
Class D Junior Preferred Stock shall not be redeemable.
(b) If the Right of First Refusal is Exercised, each share of Class D
Junior Preferred Stock shall, within 45 days of the receipt by the
Corporation of the Equity Interest Proceeds, be redeemed by the Corporation
for a pro rata (by number of shares of Class D Junior Preferred Stock
originally issued) share of the Equity Interest Proceeds. Such redemption
shall be, at the election of the Corporation,
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* See Section 5.20.
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<PAGE> 310
payable either (i) in cash, subject to any requirements of law or the
Corporation's debt instruments, or (ii) in shares of Common Stock of the
Corporation valued at the greater of $30 per share [subject to adjustment
if change in NTL Common Stock prior to Issuance Date] or the NTL Average
Market Price as of the date of receipt of the proceeds by the Corporation.
(c) "Equity Interest Proceeds" shall mean the net proceeds received
for the equity interest (as of the Issuance Date) in Birmingham Cable
(without regard to debt, loans from the Corporation to Birmington Cable or
the debt component (i.e., face amount and accrued and unpaid interest) of
any convertible security) from the consummation of the sale of the interest
under the Purchase Rights less taxes which would be payable on such sale at
the Tax Rate without giving effect to any credits or other adjustments
available to the Corporation or its subsidiaries as a result of factors not
related to the Corporation's interest in Birmingham Cable.
(d) Nothing contained herein shall be deemed to restrict or prohibit
the Corporation from acquiring shares of Class D Preferred Stock otherwise
then pursuant to redemption pursuant to Section 7(b) hereof.
8. Exchange. If (i) the Corporation shall so elect in its sole
discretion or (ii) the Right of First Refusal is Resolved, the Corporation
shall, within 45 days of the date of election with respect to clause (i) or
the date the Rights of Refusal is Resolved with respect to clause (ii),
exchange each share of Class D Junior Preferred Stock into 1.00* share (or,
if there has been one or more adjustments pursuant to the last sentence of
Section 2(a), the adjusted number of shares) of Common Stock of the
Corporation.
9. Procedure for Redemption or Exchange. (a) In the event of
redemption of the Class D Junior Preferred Stock pursuant to Section 7 or
an exchange of the shares of Class D Junior Preferred Stock pursuant to
Section 8, notice of such redemption or exchange shall be given to each
holder of record of the shares to be redeemed or exchanged at such holder's
address as the same appears on the stock transfer books of the Corporation
at least 30 but not more than 45 days before the date fixed for redemption
or exchange, as the case may be, provided, however, that no failure to give
such notice nor any defect therein shall affect the validity of the
redemption or exchange of any share of Class D Junior Preferred Stock to be
redeemed or exchanged except as to the holder to whom the Corporation has
failed to give said notice or except as to the holder whose notice was
defective. Each such notice shall state: (i) the redemption date or
exchange date; (ii) the amount and nature of the consideration to be made
in respect of each share; (iii) the place or places where certificates for
such shares are to be surrendered for redemption or exchange; (iv) the
specific provision hereof pursuant to which such redemption or exchange is
to be made; and (v) that dividends on the shares to be redeemed or
exchanged will cease to accrue on such redemption date or exchange date.
Upon giving any notice of a redemption pursuant to Section 7 or notice of
exchange pursuant to Section 8, the Corporation shall become obligated to
redeem or exchange the shares of Class D Junior Preferred Stock specified
in such notice on the redemption date or exchange date, as the case may be,
specified in such notice.
(b) Notice having been given as aforesaid, from and after the
redemption date or the exchange date (unless, in the case of a redemption,
default shall be made by the Corporation in providing money for the payment
of the redemption price of the shares called for redemption or, in the case
of an exchange, the Corporation defaults in issuing Common Stock or fails
to pay or set aside for payment accrued and unpaid dividends on the Class D
Junior Preferred Stock to the exchange date), dividends on the shares of
Class D Junior Preferred Stock called for redemption or exchange shall
cease to accrue, and all rights of the holders thereof as stockholders of
the Corporation (except the right to receive from the Corporation the
redemption price without interest or the Common Stock and accrued and
unpaid dividends on the Class D Junior Preferred Stock to the exchange
date) shall cease. Upon surrender in accordance with said notice of the
certificates for any shares so redeemed or exchanged (properly endorsed or
assigned for transfer, if the Board of Directors of the Corporation shall
so require and the notice shall so state), such
- ---------------
* See Section 5.20.
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share shall be redeemed or exchanged by the Corporation at the redemption
price or rate of exchange aforesaid.
(c) The Corporation will pay any and all issuance and delivery taxes
that may be payable in respect of the issuance or delivery of Common Stock
in exchange for shares of Class D Junior Preferred Stock. The Corporation
shall not, however, be required to pay any tax which may be payable in
respect of any transfer involved in the issuance and delivery of Common
Stock in a name other than that in which the shares of Class D Junior
Preferred Stock so exchange were registered, and no such issuance or
delivery shall be made unless and until the person requesting such issuance
has paid to the Corporation the amount of any such tax or has established
to the satisfaction of the Corporation that such tax has been paid.
(d) If a notice of redemption shall have been given, such redemption
is for consideration solely of cash and if, prior to the redemption date,
the Corporation shall have irrevocably deposited the aggregate redemption
price of the shares of Class D Junior Preferred Stock to be redeemed in
trust for the pro rata benefit of the holders of the shares of Class D
Junior Preferred Stock to be redeemed, so as to be and to continue to be
available therefor, with a bank or trust company that (i) is organized
under the laws of the United States of America or any state thereof, (ii)
has capital and surplus of not less than $250,000,000 and (iii) has, or, if
it has no publicly traded debt securities rated by a nationally recognized
rating agency, is the subsidiary of a bank holding company that has,
publicly traded debt securities rated at least "A" or the equivalent
thereof by Standard & Poor's Corporation or "A-2" or the equivalent by
Moody's Investor Service Inc., then upon making such deposit, all rights of
holders of the shares so called for redemption shall cease, except the
right of holders of such shares to receive the redemption price against
delivery of such shares, but without interest, and such shares shall cease
to be outstanding. Any funds so deposited that are unclaimed by holders of
shares at the end of three years from such redemption date shall be repaid
to the Corporation upon its request, after which repayment the holders of
shares of Class D Junior Preferred Stock so called for redemption shall
thereafter be entitled to look only to the Corporation for payment of the
redemption price.
(e) In the event of redemption of shares of Class D Junior Preferred
Stock for shares of Common Stock pursuant to Section 7 or an exchange of
Class D Junior Preferred Stock for shares of Common Stock pursuant to
Section 8:
(i) such redemption or exchange shall be deemed to have been
effected on the redemption date or the exchange date, as the case may
be, and the person in whose name or names any certificate or
certificates for shares of Common Stock shall be issuable upon such
redemption or exchange shall be deemed to have become the holder of
record of the shares of Common Stock represented thereby as of the close
of business on the redemption date or the exchange date, as the case may
be;
(ii) all such shares of Common Stock issued upon redemption or
exchange of the Class D Junior Preferred Stock will upon issuance be
duly and validly issued and fully paid and non-assessable, free of all
liens and charges and not subject to any preemptive rights;
(iii) effective as of the close of business on the redemption date
or exchange date, as the case may be, the holder thereof shall be deemed
to be the holder of the shares of Common Stock for which such shares of
Class D Junior Preferred Stock were redeemed or exchanged, as the case
may be, and, as from the redemption date or the exchange date, as the
case may be, such holder shall be entitled to all rights of a Common
Stock holder;
(iv) prior to the issuance of any such shares of Common Stock, the
Corporation shall comply with all applicable federal and state laws and
regulations which require action to be taken by the Corporation;
(v) no fractional shares of Common Stock shall be issued, but in
lieu thereof the Corporation shall pay a cash adjustment in respect of
such fractional interest in an amount equal to such fractional interest
multiplied by the closing price reported by the principal securities
exchange on
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<PAGE> 312
which the shares of Common Stock are listed and traded on the redemption
date or exchange date, as the case may be; and
(f) The Corporation covenants that it will at all times reserve and
keep available, free from preemptive rights, such number of its authorized
but unissued shares of Common Stock and/or its shares of Common Stock held
as treasury stock as shall be required for the purpose of effecting the
redemption or exchange of the Class D Junior Preferred Stock.
10. Fiduciary Duty. The Board of Directors of the Corporation shall,
with respect to all matters except those set forth in Sections 5, 7, 8, 9
and 13, have the obligations and duties (including fiduciary duties) to the
holders of the Class D Junior Preferred Stock to the same extent and as if
they were holders of the Common Stock. With respect to the matters set
forth in Section 5, 7, 8, 9 and 13, the Board of Directors of the
Corporation shall act in good faith and, in the event that the Corporation
is not reasonably likely to enter into any agreement, arrangement or
understanding directly or indirectly relating to the Right of First Refusal
or the ownership interest in Birmingham Cable which would result in an
exchange pursuant to clause (ii) of Section 8, and the Right of First
Refusal is reasonably likely to be exercised, the Corporation shall use its
reasonable efforts to maximize the proceeds to be received from the
exercise thereof.
11. Ranking. The Class D Junior Preferred Stock shall, with respect
to dividend rights, rank on a parity with, the common stock, par value $.01
per share, of the Corporation (the "Common Stock") and the Class C Junior
Participating Preferred Stock, par value $.01 per share, of the Corporation
(the "Class C Junior Preferred Stock"). With respect to rights on
liquidation, dissolution and winding up, the Class D Junior Preferred Stock
shall rank prior to all classes of the Common Stock, on a parity with the
Class C Junior Preferred Stock and junior to all other series of Preferred
Stock. All equity securities of the Corporation to which the Class D Junior
Preferred Stock ranks prior (whether with respect to dividends or upon
liquidation, dissolution, winding up or otherwise), are collectively
referred to herein as the "Junior Securities." All equity securities of the
Corporation with which the Class D Junior Preferred Stock ranks on a parity
(whether with respect to dividends or upon liquidation, dissolution or
winding up), including the Class C Junior Preferred Stock, are collectively
referred to herein as the "Parity Securities." All equity securities of the
Corporation to which the Class D Junior Preferred Stock ranks junior
(whether with respect to dividends or upon liquidation, dissolution or
winding up) are collectively referred to herein as "Senior Securities". The
respective definitions of Junior Securities, Parity Securities and Senior
Securities shall also include any options exercisable for or convertible
into any of the Junior Securities, Parity Securities and Senior Securities,
as the case may be.
12. Reports. So long as any of the Class D Junior Preferred Stock is
outstanding, the Corporation will furnish the holders thereof with the
quarterly and annual financial reports that the Corporation is required to
file with the Securities and Exchange Commission pursuant to Section 13 or
Section 15(d) of the Securities Exchange Act of 1934 or, in the event the
Corporation is not required to file such reports, reports containing the
same information as would be required in such reports.
13. Definitions. "Exercised" shall mean that the Right of First
Refusal has been validly exercised by TeleWest and/or General Cable (other
than pursuant to clause (B) of the definition of "Resolved") and the
Corporation (or the relevant subsidiary of the Corporation) has received
the proceeds therefrom in consideration for the delivery of the equity
interests thereunder.
"NTL Average Market Price" means the average of the average of the high and
low sales prices of the Common Stock of the Corporation on the principal market
on which it is traded for each of the five trading days ending on the last
trading day prior to the date of determination.
"Resolved" shall mean that (A) the Right of First Refusal is no longer of
any legal force and effect or (B) that the Corporation shall have entered into
an agreement, arrangement or understanding with TeleWest and/or General Cable
directly or indirectly relating to a business combination between the
Corporation and TeleWest or the Right of First Refusal or the ownership interest
in Birmingham Cable.
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<PAGE> 313
"Right of First Refusal" shall mean the right of first refusal set forth in
Section 5.2 of the CoOwnership Agreement, dated March 12, 1990, between US West
International Holdings Inc. and Comcast Cablevision of Birmingham, Inc., as
subsequently amended, supplemented and novated.
made under the seal of the Corporation and signed by , its , and
attested by , its , this day of , 1998.
NTL INCORPORATED
By:
--------------------------------------
Name:
Title:
[SEAL]
Attest:
- ---------------------------------------------------------
Name:
Title:
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<PAGE> 314
EXHIBIT 6.3(d)
REGISTRATION RIGHTS
Beneficiaries: Comcast Incorporated
Warburg, Pincus Investors, L.P. ("WP")
Demand Rights: Each of Comcast and WP has two demand rights with
respect to the NTL Capital Stock received in the
Amalgamation, provided that (i) neither Comcast nor
WP may demand more than one registration in any
12-month period and (ii) NTL will not be required
to effect more than one demand registration in any
3-month period. Each of Comcast and WP may
participate in the demand of the other. Except as
previously disclosed, no other stockholders have
the right, or will be given the right, to
"piggyback" on any such demand.
Piggyback: Each of Comcast and WP may "piggyback" on up to two
registrations filed by NTL, subject to customary
terms, including priority of NTL primary shares.
Terms: Customary terms and conditions. Expenses (other
than underwriting discount) paid by NTL.
Other: From and after one year from the signing of the
Amalgamation Agreement, if WP delivers a
satisfactory written legal opinion to the
Corporation and its transfer agent, the Corporation
will cause the transfer agent to issue to WP
unlegended certificates in respect of WP's shares
of NTL Capital Stock.
Governing Law: Delaware.
A-54
<PAGE> 315
ANNEX B
AMENDMENT NO. 1 TO
AGREEMENT AND PLAN OF AMALGAMATION
Amendment No. 1 dated as of May 28, 1998 (the "AMENDMENT") to the Agreement
and Plan of Amalgamation dated as of February 4, 1998 (the "AMALGAMATION
AGREEMENT") among NTL Incorporated ("NTL"), NTL (Bermuda) Limited ("SUB") and
Comcast UK Cable Partners Limited ("PARTNERS").
W I T N E S S E T H:
WHEREAS, on February 4, 1998, the parties hereto entered into the
Amalgamation Agreement; and
WHEREAS, the parties hereto now desire to amend certain provisions of the
Amalgamation Agreement;
NOW, THEREFORE, the parties hereto agree as follows:
1. Section 7.1(b)(i) of the Amalgamation Agreement is hereby amended in
its entirety to read as follows:
(i) if the Amalgamation shall not have been consummated by October 5,
1998 (the "END DATE"), provided, however, that (x) if there shall
occur at any time subsequent to August 4, 1998 and prior to October
5, 1998 any Restraint prohibiting, delaying or restricting the
Partners Stockholders Meeting, the voting of shares by Comcast
Corporation in favor of the Amalgamation or the consummation of the
Amalgamation, the End Date shall be extended to December 4, 1998, (y)
if, as of October 5, 1998, the Required Consents of the bondholders
of Partners shall not have been obtained, the End Date shall be
extended to December 4, 1998, and (z) the right to terminate this
Agreement pursuant to this Section 7.1(b)(i) shall not be available
to any party whose failure to perform any of its obligations under
this Agreement results in the failure of the Amalgamation to be
consummated by such time; provided, however, that this Agreement may
be extended not more than 30 days (but in no event to a date later
than November 4, 1998) by either party by written notice to the other
party if the Amalgamation shall not have been consummated as a direct
result of NTL or Partners having failed to receive all regulatory
approvals required to be obtained with respect to the Amalgamation.
2. Unless otherwise specifically defined herein, each term used herein
which is defined in the Amalgamation Agreement shall have the meaning assigned
to such term in the Amalgamation Agreement. Each reference to "hereof",
"hereunder", "herein" and "hereby" and each other similar reference and each
reference to "this Agreement" and each similar reference contained in the
Amalgamation Agreement shall from and after the date hereof refer to the
Amalgamation Agreement as amended hereby.
3. This Amendment shall be governed by and construed in accordance with the
laws of the State of Delaware without giving effect to the principles of
conflict of laws thereof.
4. This Amendment may be signed in any number of counterparts, each of
which shall be an original, with the same effect as if the signatures thereto
and hereto were upon the same instrument. This Amendment shall become effective
as of the date hereof.
5. Except as amended hereby, all of the terms of the Amalgamation Agreement
shall remain and continue in full force and effect and are hereby confirmed in
all respects.
B-1
<PAGE> 316
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
duly executed by their respective authorized officers as of the day and year
first above written.
NTL INCORPORATED
By: /s/ JOHN GREGG
------------------------------------
Name: John Gregg
Title: Managing Director,
Corporate Development
NTL (BERMUDA) LIMITED
By: /s/ RICHARD J. LUBASCH
------------------------------------
Name: Richard J. Lubasch
Title: Vice President
COMCAST UK CABLE PARTNERS LIMITED
By: /s/ KEN MIKALAUSKAS
------------------------------------
Name: Ken Mikalauskas
Title: Vice President, Finance
B-2
<PAGE> 317
ANNEX C
AMENDMENT NO. 2 TO
AGREEMENT AND PLAN OF AMALGAMATION
Amendment No. 2 dated as of August 14, 1998 (the "AMENDMENT") to the
Agreement and Plan of Amalgamation dated as of February 4, 1998, as amended (the
"AMALGAMATION AGREEMENT"), among NTL Incorporated ("NTL"), NTL (Bermuda) Limited
("SUB") and Comcast UK Cable Partners Limited ("PARTNERS").
W I T N E S S E T H:
WHEREAS, the parties hereto have previously entered into the Amalgamation
Agreement;
WHEREAS, concurrent herewith, NTL and Partners are entering into an
agreement dated August 14, 1998 (the "TELEWEST AGREEMENT") with TeleWest
Communications Plc and TeleWest Communications Holdings Limited relating to
Birmingham Cable and Cable London; and
WHEREAS, the parties hereto now desire to amend and supplement certain
provisions of the Amalgamation Agreement;
NOW, THEREFORE, the parties hereto agree as follows:
1. Section 7.1(b)(i) of the Amalgamation Agreement is hereby amended in
its entirety to read as follows:
(i) if the Amalgamation shall not have been consummated by November 4,
1998 (the "END DATE"), provided, however, that (x) if there shall
occur at any time subsequent to September 4, 1998 and prior to
November 4, 1998 any Restraint prohibiting, delaying or restricting
the Partners Stockholders Meeting, the voting of shares by Comcast
Corporation in favor of the Amalgamation or the consummation of the
Amalgamation, the End Date shall be extended to December 31, 1998,
(y) if, as of November 4, 1998, the Required Consents of the
bondholders of Partners shall not have been obtained, the End Date
shall be extended to December 31, 1998, and (z) the right to
terminate this Agreement pursuant to this Section 7.1(b)(i) shall
not be available to any party whose failure to perform any of its
obligations under this Agreement results in the failure of the
Amalgamation to be consummated by such time; provided, however, that
this Agreement may be extended not more than 30 days (but in no
event to a date later than December 4, 1998) by either party by
written notice to the other party if the Amalgamation shall not have
been consummated as a direct result of NTL or Partners having failed
to receive all regulatory approvals required to be obtained with
respect to the Amalgamation.
2. Section 5.5 and Section 5.16 of the Amalgamation Agreement are hereby
amended by deleting the phrase "reasonable best efforts" each place it appears
in such Sections and replacing it with the phrase "best efforts".
Notwithstanding the provisions of Section 5.5, the parties agree that it shall
not be a breach of any party's obligations thereunder if, prior to October 14,
1998, the conditions to closing set forth in Article VI have been satisfied and
the Closing does not take place until October 14, 1998 in order to permit BC
Completion (as defined in the TeleWest Agreement) to take place
contemporaneously with the Closing.
3. Section 6.2(d) of the Amalgamation Agreement is hereby amended by
deleting the number "180" and replacing it with the number "150".
4. NTL and Sub hereby expressly consent to the TeleWest Agreement and the
transactions contemplated thereby and, for purposes of Section 8.6 of the
Amalgamation Agreement, the TeleWest Agreement is hereby deemed to be a document
referred to in the Amalgamation Agreement. It is expressly understood that if
the Amalgamation is not consummated, Partners shall be entitled to exercise all
of its rights under the TeleWest Agreement without any obligation of any kind to
NTL.
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<PAGE> 318
5. As a result of the entering into of the TeleWest Agreement, the parties
agree that (i) the Rights of First Refusal relating to Birmingham Cable have
been "Resolved"; provided that if, as of the Closing, the BC Completion shall
not have taken place or shall not be taking place contemporaneously with the
Closing, the Rights of First Refusal relating to Birmingham Cable shall be
deemed to be "Unresolved", and (ii) the Rights of First Refusal relating to
Cable London have been "Resolved".
6. Unless otherwise specifically defined herein, each term used herein
which is defined in the Amalgamation Agreement shall have the meaning assigned
to such term in the Amalgamation Agreement. Each reference to "hereof",
"hereunder", "herein" and "hereby" and each other similar reference and each
reference to "this Agreement" and each similar reference contained in the
Amalgamation Agreement shall from and after the date hereof refer to the
Amalgamation Agreement as amended hereby.
7. This Amendment shall be governed by and construed in accordance with
the laws of the State of Delaware without giving effect to the principles of
conflict of laws thereof.
8. This Amendment may be signed in any number of counterparts, each of
which shall be an original, with the same effect as if the signatures thereto
and hereto were upon the same instrument. This Amendment shall become effective
as of the date hereof.
9. Except as amended hereby, all of the terms of the Amalgamation
Agreement shall remain and continue in full force and effect and are hereby
confirmed in all respects.
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
duly executed by their respective authorized officers as of the day and year
first above written.
NTL INCORPORATED
By: /s/ JOHN GREGG
-----------------------------------
Name: John Gregg
Title: Managing Director,
Corporate Development
NTL (BERMUDA) LIMITED
By: /s/ RICHARD J. LUBASCH
-----------------------------------
Name: Richard J. Lubasch
Title: Vice President
COMCAST UK CABLE PARTNERS LIMITED
By: /s/ KEN MIKALAUSKAS
-----------------------------------
Name: Ken Mikalauskas
Title: Vice President, Finance
C-2
<PAGE> 319
ANNEX D
[DONALDSON, LUFKIN & JENRETTE LETTERHEAD]
February 3, 1998
Board of Directors
NTL Incorporated
110 East 59th Street
26th Floor
New York, NY 10022
Dear Sirs:
You have requested our opinion as to the fairness from a financial point of
view to NTL Incorporated (the "Company") of the consideration to be paid by the
Company pursuant to the terms of the Agreement and Plan of Amalgamation to be
dated as of February 3, 1998 (the "Agreement"), between the Company, NTL Bermuda
Limited ("Sub"), a wholly-owned subsidiary of the Company, and Comcast UK Cable
Partners Limited ("CUKC"), pursuant to which Sub will be amalgamated (the
"Amalgamation") with CUKC.
Pursuant to the Agreement, each share of Class A Common Stock, par value
L.01 per share ("Class A Common Stock"), of CUKC and each share of Class B
Common Stock, par value L.01 per share ("Class B Common Stock" and, together
with the Class A Common Stock, the "CUKC Common Stock"), of CUKC will, subject
to certain exceptions, be canceled in consideration for the right to receive
0.3745 shares (the "Exchange Ratio") of common stock, $.01 par value per share
("Company Common Stock"), of the Company. With your consent, we have assumed
that the Exchange Ratio will be as set forth in the opening paragraph of Section
2.1(b) of the Agreement without regard to the subsequent paragraphs of Section
2.1(b) thereof.
In arriving at our opinion, we have reviewed the draft dated February 2,
1998 of the Agreement. We also have reviewed financial and other information
that was publicly available or furnished to us by the Company and CUKC including
information provided during discussions with Company management. Included in the
information provided during discussions with management were certain financial
projections of CUKC for the period beginning January 1, 1998 and ending December
31, 2005 prepared by the management of the Company, certain financial
projections of the Company for the period beginning January 1, 1998 and ending
December 31, 2005 prepared by the management of the Company, certain financial
projections of Birmingham Cable Corporation Limited ("Birmingham Cable") for the
period beginning January 1, 1998 and ending December 31, 2005 supplied by the
management of the Company and certain financial projections of Cable London plc
("Cable London") for the period beginning January 1, 1998 and ending December
31, 2005 supplied by the management of the Company. In addition, we have
compared certain financial and securities data of the Company and CUKC with
various other companies whose securities are traded in public markets, reviewed
the historical stock prices of Company Common Stock and CUKC Common Stock,
reviewed prices and premiums paid in certain other business combinations and
conducted such other financial studies, analyses and investigations as we deemed
appropriate for purposes of this opinion.
In rendering our opinion, we have relied upon and assumed the accuracy and
completeness of all of the financial and other information that was available to
us from public sources, that was provided to us by the Company or its
representatives, or that was otherwise reviewed by us. In particular, we have
relied upon the
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<PAGE> 320
estimates of the management of the Company of the operating improvements
achievable as a result of the Amalgamation and upon our discussion of such
improvements with the management of the Company. With respect to the financial
projections supplied to us, we have assumed that they have been reasonably
prepared and reflect the best currently available estimates and judgments of the
management of the Company as to the future operating and financial performance
of the Company, CUKC, Birmingham Cable and Cable London. We have not assumed any
responsibility for making any independent evaluation of any assets or
liabilities or for making any independent verification of any of the information
reviewed by us. We have relied as to certain legal matters on advice of counsel
to the Company.
Our opinion is necessarily based on economic, market, financial and other
conditions as they exist on, and on the information made available to us as of,
the date of this letter. It should be understood that, although subsequent
developments may affect this opinion, we do not have any obligation to update,
revise or reaffirm this opinion. We are expressing no opinion herein as to the
prices at which Company Common Stock will actually trade at any time. Our
opinion does not address the relative merits of the Amalgamation and the other
business strategies being considered by the Company's Board of Directors, nor
does it address the Board's decision to proceed with the Amalgamation. Our
opinion does not constitute a recommendation to any shareholder as to how such
shareholder should vote on the proposed transaction.
Donaldson, Lufkin & Jenrette Securities Corporation ("DLJ"), as part of its
investment banking services, is regularly engaged in the valuation of businesses
and securities in connection with mergers, acquisitions, underwritings, sales
and distributions of listed and unlisted securities, private placements and
valuations for corporate and other purposes. DLJ has performed investment
banking and other services for the Company, CUKC and their affiliates in the
past and has been compensated for such services, including (i) acting as (a)
lead manager for the offering in 1996 of approximately $600 million of Senior
Deferred Coupon Notes by International CableTel Incorporated ("ICTI"), the
Company's predecessor, (b) ICTI's financial advisor and agent in the 1996
consent solicitation for approximately $489 million of Senior Deferred Coupon
Notes issued thereby, (c) lead manager for the offering in 1996 of approximately
$275 million of Subordinated Convertible Notes by ICTI, (d) lead manager for the
offering in 1997 of approximately $400 million of Senior Notes by ICTI and (e)
lead manager for the offering in 1997 of approximately $100 million of Senior
Redeemable Exchangeable Preferred Stock by ICTI, (ii) acting as (a) co-manager
for the offering in 1996 of approximately $112 million of Class A Common Stock
by CUKC, (b) financial advisor in 1996 to Comcast Corporation, an affiliate of
CUKC, with respect to the sale of a 25% interest in Eastern Telelogic
Corporation, (c) co-manager for the offering in 1997 of approximately $1,700
million of Notes by Comcast Cable Communications, Inc., an affiliate of CUKC and
(d) lead manager for the offering in 1997 of approximately $1,000 million of
Senior Notes by Comcast Cellular Holdings, Inc., an affiliate of CUKC, and (iii)
providing a valuation opinion in 1997 to Comcast Cellular Corporation ("CCC"),
an affiliate of CUKC, with respect to CCC's redemption of its Series A Senior
Participating Zero Coupon Notes due 2000 in an aggregate principal amount of
approximately $500 million and its Series B Senior Participating Zero Coupon
Notes due 2000 in an aggregate principal amount of approximately $500 million.
Based upon the foregoing and such other factors as we deem relevant, we are
of the opinion that the Exchange Ratio is fair to the Company from a financial
point of view.
Very truly yours,
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
By: /s/ MICHAEL J. CONNELLY
------------------------------------
Michael J. Connelly
Managing Director
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<PAGE> 321
ANNEX E
[HSBC LTRHEAD]
The Board of Directors
Comcast UK Cable Partners Limited
Clarendon House
2 Church Street West
Hamilton HM11
Bermuda 4 February, 1998
Dear Sirs
We understand that NTL Incorporated ("NTL"), NTL (Bermuda) Limited ("Sub")
and Comcast UK Cable Partners Limited ("Partners") have entered into an
Agreement and Plan of Amalgamation, dated as of February 4, 1998 (the
"Agreement"), pursuant to which Sub will be amalgamated with Partners (the
"Amalgamation"). Pursuant to the Agreement, upon consummation of the
Amalgamation, each issued and outstanding share of Class A Common Stock of
Partners, par value L0.01 per share ("Partners A Shares"), and each issued and
outstanding share of Class B Common Stock of Partners, par value L0.01 per share
("Partners B Shares") (together "Partners Shares"), other than shares owned by
NTL or dissenting shares, will be cancelled in consideration for the right to
receive the Amalgamation Consideration (as defined in the Agreement).
Capitalised terms used but not otherwise defined herein have the respective
meanings set forth in the Agreement.
You have requested our opinion as to the fairness, from a financial point
of view, to the holders of Partners A Shares (the "Partners A Shareholders") of
the Amalgamation Consideration. In connection with this opinion we have:
(i) reviewed the financial terms and conditions of the Agreement;
(ii) analysed certain historical business and financial information
relating to Partners and NTL;
(iii) reviewed various financial forecasts and other data provided to
us by Partners and NTL relating to their respective businesses;
(iv) participated in discussions with members of the senior
managements of Partners and NTL with respect to the business and prospects
of Partners and NTL and the strategic objectives of each;
(v) reviewed public information with respect to certain other
companies in lines of business we believe to be generally comparable to
those of Partners and NTL;
(vi) reviewed the financial terms of certain business combinations
involving companies in lines of business we believe to be generally
comparable to those of Partners and NTL, and in other industries generally;
(vii) reviewed the historical stock prices and trading volumes of the
Partners A Shares and the shares of Common Stock of NTL ("NTL Shares");
(viii) reviewed preliminary indications of interest expressed by
parties other than NTL and resulting potential values in connection with an
acquisition of all of the Partners shares;
(ix) held discussions with your attorneys concerning the results of
their due diligence procedures in connection with the Amalgamation; and
(x) conducted such other financial studies, analyses and
investigations as we deemed appropriate.
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We have relied upon the accuracy and completeness of the foregoing
information, and have not assumed any responsibility for any independent
verification of such information or any independent valuation or appraisal of
any of the assets or liabilities of Partners or NTL. In arriving at our opinion
we have not conducted a physical inspection of the properties and facilities of
Partners or NTL and have not made or obtained any evaluations or appraisals of
the assets or liabilities of Partners or NTL. With respect to financial
forecasts, we have assumed that they have been reasonably prepared on bases
reflecting the best currently available estimates and judgments of the
respective management of Partners and NTL as to the future financial performance
of Partners and NTL, respectively. We have relied on the commercial assessment
of the Directors and management of both Partners and NTL and we assume no
responsibility for and express no view as to such forecasts or the assumptions
on which they are based. We have not been asked to review the synergy benefits
or additional costs which may arise from the transaction.
Our opinion is directed only to the fairness of the Amalgamation
Consideration to be received by the Partners A Shareholders (other than NTL and
its affiliates) in the Amalgamation pursuant to the Agreement from a financial
point of view. In arriving at our opinion, we have not considered any rights
which Warburg Pincus, one of the Partners A Shareholders, may hold in addition
to its rights as a Partners A Shareholder. Our opinion does not address the
fairness of the consideration to be received by the holder of Partners B Shares.
Our opinion is necessarily based on accounting standards, economic,
monetary, market and other conditions as in effect on, and the information made
available to us as of, the date hereof. In addition, we have not taken into
account the time value of money to a Partners A Shareholder, the tax
consequences of the Amalgamation for a Partners A Shareholder or any change to
the currency exchange risk which may arise for a Partners A Shareholder in
accepting the Amalgamation Consideration.
In rendering our opinion, we have assumed the Amalgamation will be
consummated on the terms described in the Agreement without any waiver of any
material terms or conditions by Partners or the obtaining of any further
consents or approvals from holders of Partners' Shares or holders of NTL Shares
and that obtaining the necessary regulatory approvals for the Amalgamation and
any further consents or approvals from holders of Partners' debt securities or
holders of NTL's debt securities will not have a material adverse effect on the
Amalgamation, Partners, NTL or the market price of NTL Shares. In addition, we
have not been requested to and do not express any opinion as to the prices at
which NTL Shares may trade at any time prior to or following the date of this
opinion, and we have not considered the possible effects of any potential
offering of securities by or other transaction involving NTL or the absence
thereof on the market price of NTL Shares.
In rendering our opinion, we have also assumed that, in the event the
Rights of First Refusal relating to Cable London and/or Birmingham Cable have
not been Resolved as of the Determination Date, (i) the net proceeds per
Partners A Share ultimately received by a Partners A Shareholder upon Exercise
of such Right(s) of First Refusal will not be materially different from the
respective proportions of the Amalgamation Consideration set forth in the
Agreement, and (ii) if the net proceeds per Partners A Share are paid in NTL
Shares, the market value of the NTL Shares paid as consideration to Partners A
Shareholders will be equal to the said net proceeds. In addition, if as of the
Determination Date such Right(s) of First Refusal remain Unresolved, we have
assumed that any NTL Class C Stock or NTL Class D Stock issued to a Partners A
Shareholder will be redeemed by NTL in accordance with the terms thereof.
We are acting as financial adviser to Partners in connection with the
Amalgamation and will receive a fee for our services, a substantial portion of
which is contingent upon the consummation of the Amalgamation. In addition,
Partners has agreed to indemnify us for certain liabilities that may arise out
of the rendering of our services. In the ordinary course of our business, we
actively trade in debt and equity securities, which may from time to time
include those of Partners and NTL, for our own account and for the accounts of
our customers and, accordingly, may at any time hold a significant long or short
position in such securities. As you are aware, Mr. Jonathan Perry, who is a
Director of Partners, is Vice Chairman of HSBC Investment Bank plc. Mr. Perry
has had no involvement in the preparation of our opinion.
Our engagement and the opinion expressed herein are for the benefit of the
Partners Board of Directors and our opinion is rendered in connection with their
consideration of the Amalgamation. This opinion is not
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intended to and does not constitute a recommendation to any shareholder of
Partners as to whether such holder should vote to approve the Amalgamation and
the transactions contemplated by the Agreement. It is understood that, except
for inclusion of this letter in its entirety in a proxy statement from Partners
to its security holders, this letter may not be disclosed or otherwise referred
to without our prior written consent, except as may otherwise be required by law
or by a court of competent jurisdiction.
Based on and subject to the foregoing, we are of the opinion that, as of
the date hereof, the Amalgamation Consideration is fair to Partners A
Shareholders (other than NTL and its affiliates) from a financial point of view.
Yours faithfully
/s/ STEPHEN C. ROUTLEDGE
--------------------------------------
Stephen C. Routledge
Director -- Corporate Finance and
Advisory
For and on behalf of HSBC Investment
Bank plc
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ANNEX F
The undersigned, WARBURG, PINCUS INVESTORS, L.P., on behalf of itself and
its affiliates, hereby irrevocably agrees (i) to comply with the provisions of
Section 4.2(a) of the Agreement and Plan of Amalgamation (the "Agreement") of
even date herewith among NTL Incorporated ("NTL"), an acquisition subsidiary of
NTL and Comcast UK Cable Partners Limited ("Partners"), (ii) not to sell,
transfer, dispose or assign, directly or indirectly, all or any part of its
interest in Partners other than pursuant to the Agreement and (iii) to vote in
favor of and otherwise support and not take any actions inconsistent with the
Agreement at the Partners Stockholders Meeting (as defined in the Agreement).
WARBURG, PINCUS INVESTORS, L.P. acknowledges that NTL will be entering into the
Agreement and otherwise acting in specific reliance on this agreement.
Warburg, Pincus Investors, L.P. hereby consents to the Agreement for
purposes of the Shareholders Agreement dated September 20, 1994 between Comcast
Corporation, Warburg, Pincus Investors L.P., Comcast UK Holdings Inc. and
Partners and acknowledges that such agreement shall terminate at the Effective
Time (as defined in the Agreement).
This agreement shall automatically terminate and be of no further force and
effect, upon termination of the Agreement pursuant to Section 7.1 thereof.
This agreement shall be governed by the laws of the State of Delaware.
WARBURG, PINCUS INVESTORS, L.P.
By: Warburg, Pincus & Co. its General
Partner
/s/ JEFFREY HARRIS
By:
--------------------------------------
Accepted:
NTL INCORPORATED
/s/ JOHN GREGG
By:
- ------------------------------------
Dated: February 4, 1998
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The undersigned, COMCAST CORPORATION ("Comcast"), hereby acknowledges that
NTL Incorporated ("NTL") will be entering into the Agreement and Plan of
Amalgamation (the "Agreement") among NTL, NTL (Bermuda) Limited, and Comcast UK
Cable Partners Limited ("Partners") and otherwise acting in specific reliance on
this agreement.
Comcast irrevocably agrees that it will, and will procure that each of its
subsidiaries will, during the period commencing on the date hereof and ending on
the earlier of the Effective Time (as defined in the Agreement) and the
termination of this agreement:
(i) comply with the provisions of Section 4.2(a) of the Agreement;
(ii) not sell, transfer, dispose or assign, directly or indirectly,
all or any part of its interest in Partners other than pursuant to the
Agreement;
(iii) vote in favor of the Agreement at the Partners Shareholder
Meetings (as defined in the Agreement);
(iv) not enter into any new agreement or other arrangement between
Comcast and its subsidiaries (other than Partners and its subsidiaries), on
the one hand, and Partners or any subsidiary of Partners or any Significant
Affiliate (as defined in the Agreement), on the other hand, or amend any
such existing agreement or other arrangement; and
(v) if any interest in any Significant Affiliate is transferred by
Partners or any subsidiary of Partners to Comcast or any subsidiary of
Comcast, Comcast shall make arrangements to effectively transfer such
interest to NTL at the Effective Time without any additional consideration
(other than the Amalgamation Consideration) being payable by NTL.
Comcast further agrees, on behalf of Comcast and its subsidiaries (other
than Partners and its subsidiaries), that from and after the Effective Time (as
defined in the Agreement) it will:
(i) for so long as Comcast shall be subject to the filing requirements
of Section 13 of the Securities Exchange Act of 1934 with respect to NTL
Capital Stock (as defined in the Agreement), vote any shares of NTL Capital
Stock in the same proportion as voted by stockholders of NTL generally
(other than any affiliate thereof), provided that this covenant shall not
apply to any class vote of the NTL Class C Preferred or NTL Class D
Preferred (in each case, as defined in the Agreement);
(ii) use its reasonable efforts to provide that any person now serving
as a director of a Significant Affiliate at the request of Comcast or any
of its subsidiaries continue to so serve until NTL shall otherwise direct
and use its reasonable efforts to cause such person to consult with NTL
with respect to their duties; and
(iii) assign to NTL any rights which Comcast or any of its
subsidiaries (other than Partners and its subsidiaries) may have with
respect to any management, consulting or similar agreement with Partners,
any subsidiary of Partners or any Significant Affiliate and transfer and
pay, promptly upon receipt, to NTL or its designee, any proceeds therefrom
received by Comcast or any subsidiary of Comcast in respect thereof;
provided that NTL shall have agreed to assume or otherwise be responsible
for any obligations thereunder.
This agreement shall automatically terminate, and be of no further force
and effect, upon termination of the Agreement pursuant to Section 7.1 thereof.
NTL hereby agrees that, without the prior consent of Comcast, which will
not be unreasonably withheld or delayed, it will not (i) amend or otherwise
modify the Agreement in any way, or waive any condition, right or other term
thereof, that would adversely affect the rights of Comcast as a stockholder of
Partners thereunder, or (ii) extend the End Date (as defined in the Agreement)
other than as provided in the Agreement.
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This agreement shall be governed by the laws of the State of Delaware.
COMCAST CORPORATION
By: /s/ KEN MIKALAUSKAS
------------------------------------
Accepted:
NTL INCORPORATED
By: /s/ JOHN GREGG
----------------------------------
Dated: February 4, 1998
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<PAGE> 327
ANNEX G
REGISTRATION RIGHTS AGREEMENT
BY AND AMONG
NTL INCORPORATED,
AND
COMCAST CORPORATION
AND
WARBURG, PINCUS INVESTORS, L.P.
------------------------
DATED AS OF , 1998
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TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C> <C>
Section 1. Definitions...................................................... G-1
Section 2. Registration Rights.............................................. G-3
2.1 Demand Rights............................................... G-3
2.2 "Piggy-Back" Rights......................................... G-4
2.3 Allocation of Securities Included in a Public Offering...... G-4
2.4 Requirements with Respect to Registration................... G-5
2.5 Alternative Disposition..................................... G-8
Section 3. Hold-Back Agreement.............................................. G-8
Section 4. Registration Expenses............................................ G-8
Section 5. Representations, Warranties and Agreements....................... G-9
(a) NTL Representations, Warranties and Agreements.............. G-9
(b) Holder Representations, Warranties and Agreements........... G-10
Section 6. Survival of Representations and Agreements....................... G-10
Section 7. Indemnification.................................................. G-10
(a) Indemnification by NTL...................................... G-10
(b) Indemnification by Holder of Registrable Securities......... G-11
(c) Conduct of Indemnification Proceedings...................... G-11
(d) Contribution................................................ G-12
(e) Remedies Cumulative......................................... G-13
(f) Underwriting Agreement Controls............................. G-13
Section 8. Underwritten Registration........................................ G-13
Section 9. Unregistered Offerings........................................... G-13
Section 10. Miscellaneous.................................................... G-13
(a) Remedies.................................................... G-13
(b) Amendments and Waivers...................................... G-14
(c) Notices..................................................... G-14
(d) Interpretation.............................................. G-15
(e) Counterparts................................................ G-15
(f) Entire Agreement; No Third Party Beneficiaries.............. G-15
(g) Confidential Information.................................... G-15
(h) Governing Law............................................... G-15
(i) Severability................................................ G-15
(j) Assignment.................................................. G-15
(k) Attorney's Fees............................................. G-15
(l) Use of Terms................................................ G-16
</TABLE>
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REGISTRATION RIGHTS AGREEMENT
This Registration Rights Agreement (this "Agreement") is dated as of
, 1998, and is being entered into by and among NTL Incorporated,
a Delaware corporation ("NTL"), Comcast Corporation, a Pennsylvania corporation
("Comcast"), and Warburg, Pincus Investors, L.P., a Delaware limited partnership
("Warburg, Pincus"), each of which are sometimes referred to herein individually
as a "Holder" and collectively as the "Holders."
RECITALS
WHEREAS, NTL is a party to the separate Agreement and Plan of Amalgamation,
dated as of February 4, 1998, as amended (the "Amalgamation Agreement"), with
NTL (Bermuda) Limited, a Bermuda corporation and a wholly-owned subsidiary of
NTL ("Sub"), and Comcast UK Cable Partners Limited, a Bermuda corporation
("Partners"), pursuant to which NTL has agreed, among other things, to issue
approximately 18.8 million shares of common stock, par value $.01 per share (the
"Common Stock"), to shareholders of Partners in connection with the amalgamation
of Sub with Partners (the "Amalgamation"), subject to the terms and conditions
of the Amalgamation Agreement. This Agreement shall become effective upon the
issuance of Common Stock to Comcast and Warburg, Pincus pursuant to the
Amalgamation Agreement. Certain capitalized terms used in this Agreement are
defined in Section 1 hereof. References to sections shall be to sections of this
Agreement.
NOW, THEREFORE, in consideration of the premises and of the mutual
covenants, representations, warranties and agreements contained herein, the
parties agree as follows:
SECTION 1. DEFINITIONS.
As used in this Agreement, the following terms shall have the following
meanings:
"Affiliate" shall mean, with respect to any Person, any other Person that
directly, or indirectly through one or more intermediaries, controls, or is
controlled by, or is under common control with such Person.
"Amalgamation" shall have the meaning set forth in the first recital of
this Agreement.
"Amalgamation Agreement" shall have the meaning set forth in the first
recital of this Agreement.
"Blackout Period" shall have the meaning set forth in Section 2.1(b).
"Closing" shall mean the closing of the Amalgamation under the Amalgamation
Agreement.
"Commission" shall mean the United States Securities and Exchange
Commission or any other United States federal agency at the time administering
the Securities Act or the Exchange Act.
"Common Stock" shall mean the meaning set forth in the first recital of
this Agreement.
"Demand Request" shall have the meaning set forth in Section 2.1(a).
"Demanding Holder" shall have the meaning set forth in Section 2.1(a).
"Effectiveness Period" shall have the meaning set forth in Section 2.4(b).
"Exchange Act" shall mean the United States Securities Exchange Act of
1934, as amended, or any United States federal statute then in effect that has
replaced such statute, and a reference to a particular section thereof shall be
deemed to include a reference to the comparable section, if any, of any such
replacement United States federal statute.
"Existing Holders" shall have the meaning set forth in Section 2.2.
"Holder" or "Holders" shall have the meaning set forth in the introductory
paragraph to this Agreement and shall also include any assignee or transferee of
a Registrable Security (i) that is an Affiliate of an initial Holder or (ii)
that is otherwise approved by NTL (such approval not to be unreasonably
withheld) which, in any such case, agrees in writing at the time of such
assignment or transfer to be bound by the restrictions set forth herein.
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"Joining Request" shall have the meaning set forth in Section 2.1(a).
"Maximum Number" shall have the meaning set forth in Section 2.1(b).
"Notice of Demand Request" shall have the meaning set forth in Section
2.1(a).
"Other Securities" shall have the meaning set forth in the definition of
Registrable Securities.
"Person" shall mean an individual, trustee, corporation, partnership,
limited liability company, joint stock company, trust, unincorporated
association, union, business association, firm or other entity.
"Preliminary Prospectus" shall mean any preliminary prospectus that may be
included in any Registration Statement.
"Prospectus" shall mean the prospectus included in any Registration
Statement (including, without limitation, a prospectus that includes any
information previously omitted from a prospectus filed as part of an effective
Registration Statement in reliance upon Rule 430A promulgated under the
Securities Act), as amended or supplemented by any prospectus supplement, with
respect to the terms of the offering of any portion of the Registrable
Securities covered by such Registration Statement, and all other amendments and
supplements to the Prospectus, including post-effective amendments, and all
material incorporated by reference or deemed to be incorporated by reference in
such Prospectus.
"Public Offering" shall mean the offer of shares of Common Stock or
securities convertible into or exchangeable for Common Stock on a
broadly-distributed basis, not limited to sophisticated investors (except for
qualified institutional buyers pursuant to Rule 144A), pursuant to a
firm-commitment or best-efforts underwriting or purchase arrangement.
"Registrable Securities" shall mean all shares of Common Stock beneficially
owned by a Holder. As to any particular Registrable Securities, such shares
shall cease to be Registrable Securities (a) when a Registration Statement with
respect to the sale of such shares shall have become effective under the
Securities Act and such securities shall have been disposed of in accordance
with such Registration Statement, (b) when such shares shall have been sold
under Rule 144 (or any successor provision) under the Securities Act or (c) when
such shares shall have ceased to be outstanding. If as a result of any
reclassification, stock split, stock dividend, business combination, exchange
offer or other transaction or event, any capital stock, evidences of
indebtedness, warrants, options, rights or other securities (collectively "Other
Securities") are issued or transferred to a Holder in respect of Registrable
Securities held by such Holder, references herein to Registrable Securities
shall be deemed to include such Other Securities.
"Registration Expenses" shall have the meaning set forth in Section 4.
"Registration Statement" shall mean any registration statement of NTL (or
any successor thereof) under the Securities Act that covers any of the
Registrable Securities, including the prospectus, amendments and supplements to
such registration statement, including post-effective amendments, all exhibits,
and all material incorporated by reference or deemed to be incorporated by
reference in such registration statements.
"Regulations" shall mean the General Rules and Regulation of the Commission
under the Securities Act.
"Rule 144" shall mean Rule 144 of the Regulations, as such Rule may be
amended from time to time, or any similar rule (other than Rule 144A) or
regulation hereafter adopted by the Commission providing for offers and sales of
securities made in compliance therewith resulting in offers and sales by
subsequent holders of such securities being free of the registration and
prospectus delivery requirements of the Securities Act.
"Securities Act" shall mean the United States Securities Act of 1933, as
amended, or any United States federal statute then in effect which has replaced
such statute, and a reference to a particular section thereof shall be deemed to
include a reference to the comparable section, if any, of any such replacement
statute.
"Seller" shall have the meaning set forth in Section 2.3.
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"underwritten registration or underwritten offering" shall mean a
registration in which securities of NTL (or any successor thereof) are sold to
an underwriter for reoffering to the public.
SECTION 2. REGISTRATION RIGHTS.
2.1 DEMAND RIGHTS. (a) Subject to Section 2.1(b) below, at any time, and
from time to time, any Holder or group of Holders who hold and propose to sell
Registrable Securities (herein, individually or collectively, as the case may
be, a "Demanding Holder") shall have the right to require NTL to file a
Registration Statement under the Securities Act for a Public Offering of all or
part of such Demanding Holder's Registrable Securities to be lead managed by an
underwriter designated by such Demanding Holders and reasonably acceptable to
NTL by delivering written notice thereof to NTL specifying the number of
Registrable Securities to be included in such registration and the intended
method of distribution thereof (the "Demand Request"). NTL shall, within 10 days
after receipt, give written notice by facsimile transmission (the "Notice of
Demand Request") of such Demand Request to all Holders of any Registrable
Securities. Thereupon NTL shall prepare and file with the Commission as promptly
as practicable following the receipt of the Demand Request, and in any event
within 45 days thereafter, a Registration Statement covering, and shall use its
best efforts to effect the registration under the Securities Act of, (i) the
Registrable Securities included in the Demand Request, and (ii) all other
Registrable Securities as to which the Holders thereof that have received a
Notice of Demand Request and shall have made a written request (a "Joining
Request") to NTL for registration thereof within 15 days after the transmittal
of such Notice of Demand Request, all to the extent necessary to permit the sale
or other disposition by such Holders of such Registrable Securities.
(b) NTL's obligations pursuant to Section 2.1(a) above are subject to the
following limitations and conditions: (i) NTL shall not be obligated to fulfill
the requirements or file the Registration Statement referred to therein (A)
during any period of time (not to exceed 90 consecutive days in the aggregate
with respect to each Demand Request) when NTL has determined to proceed with a
Public Offering (whether for its own account or that of any Holder pursuant to
any previously received Demand Request and related Joining Request) and, in the
judgment of the managing underwriter thereof, the fulfillment of such
requirements or such filing would have an adverse effect on such offering, (B)
during any period of time (not to exceed 60 consecutive days with respect to
each Demand Request) when NTL is in possession of material information that NTL
(x) has determined, upon the advice of NTL's recognized U.S. securities counsel,
would be required to be disclosed in an offering registered under the Securities
Act and (y) reasonably deems is in NTL's best interests not to publicly
disclose, and during which period NTL has not otherwise filed and does not
otherwise have effective, a Registration Statement under which its securities
may be offered or sold, or (C) during the 90-day period following the
effectiveness of any previous Registration Statement (the periods of time
referred to in subclauses (A), (B) and (C) hereof being hereinafter referred to
as "Blackout Periods"); provided, that the aggregate period of time during which
NTL shall be relieved from its obligation to file such a Registration Statement
pursuant to this clause (i) shall in no event exceed 60 or 90, as the case may
be, consecutive days with respect to each Demand Request; provided, further,
that, in the case of a Blackout Period pursuant to subclause (i)(A) above, the
Blackout Period shall earlier terminate upon the completion or abandonment of
the relevant securities offering; provided, further, that in the case of a
Blackout Period pursuant to subclause (i)(B) above, the Blackout Period shall
earlier terminate upon public disclosure by NTL or public admission by NTL of
such material nonpublic information or such time as such material nonpublic
information shall be publicly disclosed; provided, further, that in the case of
a Blackout Period pursuant to subclauses (i)(A), (B) or (C) above, NTL shall
furnish to the Holders a certificate of an executive officer of NTL to the
effect that an event permitting a Blackout Period has occurred and is continuing
(and no other reason need be given); and provided, further, that if prior to the
expiration of any Blackout Period the Demanding Holders withdraw their Demand
Request, such request shall not be considered a Demand Request for purposes of
this Section 2.1 and such Demand Request and any Joining Request related thereto
shall be of no further effect; (ii) the aggregate number of days included in all
Blackout Periods during any consecutive 12 months shall not exceed 180 days;
(iii) the minimum number of shares of Common Stock to be sold in any such Public
Offering shall be at least [1,000,000]; (iv) the number of shares of Common
Stock to be sold in any such Public Offering shall not exceed the maximum number
which the managing underwriter thereof considers in good faith to be appropriate
based on market conditions and other
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relevant factors (the "Maximum Number"); (v) neither initial Holder may demand
more than one Demand Registration in any 12-month period; and (vi) NTL shall not
be obligated to effect more than one Demand Registration in any three-month
period or more than four Demand Registrations in total (two of which may be
exercised by each initial Holder).
(c) Subject to Section 2.3, NTL may elect to include in any Registration
Statement filed pursuant to this Section 2.1 any authorized but unissued shares
of Common Stock for its account and NTL shall not, without the prior consent of
the Holders include in any such Registration Statement any other securities
(other than Registrable Securities); provided, that such inclusion shall be
permitted only to the extent that it is pursuant to and subject to the terms of
any underwriting agreement or arrangement entered into by the Demanding Holders
whose Registrable Securities are also included therein.
(d) A request by any Holder or Holders that NTL file a Registration
Statement shall not be considered a Demand Request if (i) the Registration
Statement relating thereto does not become effective and remain effective for at
least 90 days, (ii) the Holders are not able to sell shares of Common Stock as a
result of any stop order issued by the Commission suspending the effectiveness
of a Registration Statement, or as a result of the initiation of any proceeding
for such a stop order by the Commission, through no fault of the Holders or
(iii) the Holders have withdrawn a Demand Request based on the reduction of the
number of Registrable Securities originally specified in such Demand Request
pursuant to Section 2.3.
2.2 "PIGGY-BACK" RIGHTS. If NTL proposes to register any shares of Common
Stock for itself or any of its stockholders (the "Existing Holders") under the
Securities Act on a Registration Statement on Form S-1, Form S-2 or Form S-3 (or
an equivalent general registration form then in effect) for purposes of a Public
Offering of such shares, NTL shall give written notice of such proposal at least
20 days before the anticipated filing date, which notice shall include the
intended method of distribution of such shares, to each of the Holders who hold
Registrable Securities. Such notice shall specify at a minimum the number of
shares of Common Stock proposed to be registered, the proposed filing date of
such Registration Statement, any proposed means of distribution of such shares
and the proposed managing underwriter, if any. Subject to Section 2.3, upon the
written request of any such Holder, given within 10 days after the receipt of
any such written notice by facsimile confirmed by mail (which request shall
specify the Registrable Securities intended to be disposed of by such Holder),
NTL will use its best efforts to include in the Registration Statement with
respect to such Public Offering the number of Registrable Securities referred to
in such Holder's request; provided, that, any participation in such Public
Offering by such Holders shall be on substantially the same terms as NTL's (or
its other stockholders') participation therein; provided, further, that the
number of Registrable Securities to be included in any such Public Offering
shall not exceed the Maximum Number; and provided, further, that each Holder
shall have the right to participate in no more than two such Public Offerings.
Any such Holder shall have the right to withdraw a request to include
Registrable Securities in any Public Offering pursuant to this Section 2.2 by
giving written notice to NTL of its election to withdraw such request at least
five days prior to the proposed effective date of such Registration Statement.
Notwithstanding the foregoing, the provisions of this Section 2.2 shall not
apply to an offering contemplated by the registration rights to be provided to
(i) the former shareholders of Diamond Cable Communications Plc ("Diamond") as
contemplated by the Share Exchange Agreement among NTL and the shareholders of
Diamond or (ii) Vision Networks III B.V. ("Vision Networks") as contemplated by
the acquisition agreement between NTL and Vision Networks for the acquisition of
the operations of ComTel Limited and Telecential Communications, to the extent
that such provisions would violate such agreements.
2.3. ALLOCATION OF SECURITIES INCLUDED IN A PUBLIC OFFERING. If the lead
managing underwriter for any Public Offering to be effected pursuant to Section
2.1 or Section 2.2 of this Agreement shall advise NTL and the selling Holders
(each, a "Seller" and, collectively, the "Sellers") in writing that the number
of shares of Common Stock sought to be included in such Public Offering
(including those sought to be offered by NTL, those sought to be offered by the
Sellers and those sought to be offered by Existing Holders) is more than the
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Maximum Number, the shares of Common Stock to be included in such Public
Offering shall be allocated pursuant to the following procedures:
(a) if, such registration or Public Offering is pursuant to Section
2.1 of this Agreement, and (i) if the total number of Registrable
Securities included in the Demand Request and any Joining Request exceeds
the Maximum Number, Registrable Securities included in the Demand Request
and any Joining Request shall be reduced pro rata among the Sellers on the
basis of the relative number of shares of Registrable Securities requested
to be registered to the extent necessary to reduce the total number of
Registrable Securities to be included in such Public Offering to the
Maximum Number and (ii) if the total number of Registrable Securities
included in the Demand Request and any Joining Request is less than the
Maximum Number, any additional shares of Common Stock sought to be included
at the request of NTL may be included, subject to not exceeding the Maximum
Number; or
(b) if such registration or Public Offering is pursuant to Section 2.2
of this Agreement, (i) first, securities sought to be included at the
request of NTL shall be included, and (ii) second, if the number of
securities to be registered exceeds the Maximum Number, the amount of
Registrable Securities proposed to be offered by Holders shall be reduced
as agreed among such Holders, to the extent necessary to reduce the total
amount of securities to be included in such offering to the Maximum Number;
provided that if no such agreement can be reached, the number of
Registrable Securities shall be reduced pro rata on the basis of the
relative number of shares of Registrable Securities requested to be
registered.
2.4. REQUIREMENTS WITH RESPECT TO REGISTRATION. Subject to Section 4, if
and whenever NTL is required by the provisions hereof to use its best efforts to
register any Registrable Securities under the Securities Act, NTL shall:
(a) As promptly as practicable, prepare and file with the Commission a
Registration Statement with respect to such Registrable Securities and use
its best efforts to cause such Registration Statement to become and remain
effective; provided, however, that, before filing any Registration
Statement or Prospectus or any amendments or supplements thereto, NTL shall
furnish to and afford the Holders of the Registrable Securities covered by
such Registration Statement, and the managing underwriters, if any, a
reasonable opportunity within a reasonable time period to review and
comment on copies of all such documents (including a reasonable opportunity
to review copies of any documents to be incorporated by reference therein
and all exhibits thereto) proposed to be filed and such other documents as
any Holder may reasonably request in order to facilitate the disposition of
the Registrable Securities owned by such Holder.
(b) As promptly as practicable, prepare and file with the Commission
such amendments and supplements to such Registration Statement and the
Prospectus used in connection therewith as may be necessary and use its
best efforts to keep such Registration Statement current and effective for
a period equivalent to the longer of (i) 90 days or (ii) the period
provided for in any underwriting or purchase agreement under which such
Registrable Securities are offered and sold and to comply with the
provisions of the Securities Act, and the Regulations, with respect to the
sale or disposition of such Registrable Securities (the "Effectiveness
Period").
(c) Promptly notify each Seller of any Registrable Securities covered
by such Registration Statement (i) when the Registration Statement or any
related Prospectus or any amendment or supplement has been filed, and, with
respect to the Registration Statement or any post-effective amendment, when
the same has become effective, (ii) of any request by the Commission for
amendments or supplements to the Registration Statement or the related
Prospectus or for additional information, (iii) of any order issued or
threatened by the Commission suspending the effectiveness of such
Registration Statement, preventing or suspending the use of a Prospectus or
suspending the qualification (or exemption from qualification) of any of
the Registrable Securities for sales in any jurisdiction, and NTL shall use
its best efforts to prevent the issuance of any such order and, if any such
order is issued, shall use its best efforts to obtain the withdrawal of any
such order at the earliest possible moment or (iv) of the receipt by NTL of
any notification with respect to the suspension of the qualification of the
Registrable Securities for sale in any jurisdiction or the initiation of
any proceedings for such purpose.
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(d) Immediately upon becoming aware thereof, notify each Seller and
underwriter of such Registrable Securities, at any time when a Prospectus
relating thereto is required to be delivered under the Securities Act, of
the occurrence of an event requiring the preparation of a supplement or
amendment to such Prospectus so that, as thereafter delivered to the
purchasers of such Registrable Securities, such Prospectus will not contain
an untrue statement of a material fact or omit to state any material fact
required to be stated therein or necessary to make the statements therein,
in the light of the circumstances under which they were made, not
misleading and promptly make available to each Seller and underwriter any
such supplement or amendment. Each such Seller agrees that, upon receipt of
any notice from NTL of the happening of any event of the kind described in
this Section 2.4(d), such Seller will forthwith discontinue disposition of
Registrable Securities pursuant to the Registration Statement covering such
Registrable Securities until such Seller's receipt of the copies of the
supplemented or amended Prospectus contemplated by this Section 2.4(d),
and, if so directed by NTL, such Seller will deliver to NTL all copies,
other than any permanent file copies then in such Seller's possession, of
the most recent Prospectus covering such Registrable Securities at the time
of receipt of such notice. In the event that NTL shall give such notice,
NTL shall extend the period during which such Registration Statement shall
be maintained effective (including the period referred to in Section
2.4(b)) by the number of days during the period from and including the date
of the giving of notice pursuant to this Section 2.4(d) to the date when
NTL shall make available to such Seller a Prospectus supplemented or
amended to conform with the requirements of this Section 2.4(d).
(e) Use its best efforts to (i) register or qualify the Registrable
Securities covered by such Registration Statement under such securities or
blue sky laws of such jurisdictions in the United States as the Holders or
the managing underwriter of any Public Offering shall reasonably request,
(ii) cause such Registrable Securities to be registered with or approved by
such other governmental agencies or authorities as may be necessary by
virtue of the business and operations of NTL, and (iii) do any and all
other acts and things that may be reasonably necessary to enable each
participating Seller or underwriter to consummate the disposition of the
Registrable Securities in such jurisdictions; provided, however, that in no
event shall NTL be required to qualify to do business as a foreign
corporation in any jurisdiction where it is not so qualified, or to execute
or file any general consent to service of process under the laws of any
jurisdiction.
(f) Make available upon reasonable advance notice for inspection by
any Seller of such Registrable Securities, any underwriter participating in
any disposition pursuant to such Registration Statement and any attorney,
accountant or other professional retained by any such Seller or underwriter
(collectively, the "Inspectors"), all financial and other records,
pertinent corporate documents and properties of NTL (collectively, the
"Records") as shall be reasonably necessary to enable them to conduct a
"reasonable" investigation for purposes of Section 11(a) of the Securities
Act and cause NTL's officers, directors and employees to supply all
information reasonably requested by any Inspectors in connection with such
Registration Statement; provided, that such Seller shall maintain
confidential any such information received from NTL and designated as such
except information which is (i) in the public domain, (ii) becomes public
knowledge through no fault of such Seller, (iii) is required to be
disclosed by court order or other government process or the disclosure of
which is necessary to enable such Seller to comply with applicable law or
defend against claims or (iv) is necessary to avoid or correct a
misstatement or omission in such Registration Statement. In the event that
such Seller shall be required to make disclosure pursuant to the provisions
of clause (iii) of the proviso to the preceding sentence, such Seller shall
to the extent practicable promptly notify NTL and take, at the expense of
NTL, all reasonably necessary steps requested by NTL to defend against the
enforcement of such court order or other government process, and permit NTL
to participate with counsel of its choice in any proceeding relating to the
enforcement thereof.
(g) Use its best efforts to cause all Registrable Securities covered
by such Registration Statement to be (i) listed or qualified for trading on
the principal national securities exchange or quotation service on which
the outstanding Common Stock is listed or quoted (which for the avoidance
of doubt is currently the National Association of Securities Dealers
Automated Quotation -- National Market
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System ("NASDAQ")) and (ii) listed or qualified for trading on any other
stock exchange or quotation service on which the Common Stock is listed or
qualified for trading.
(h) Furnish to each Seller and each underwriter of the Registrable
Securities covered by such Registration Statement such number of copies of
such Registration Statement, each amendment and supplement thereto (in each
case including all exhibits thereto and documents incorporated by reference
therein), the Prospectus included in such Registration Statement (including
each Preliminary Prospectus) and such other documents as such Seller or
underwriter may reasonably request in order to facilitate the disposition
of the Registrable Securities owned by such Seller.
(i) In connection with an underwritten offering of Registrable
Securities, enter into an underwriting agreement in such form as is
customary in underwritten offerings made by selling security holders and
take all such other actions as are reasonably requested by the managing
underwriters for such underwritten offering in order to expedite or
facilitate the registration or the disposition of such Registrable
Securities, and in such connection, (i) make such representations and
warranties to the underwriters and the Sellers with respect to the business
of NTL and its subsidiaries, and the Registration Statement, Prospectus and
documents, if any, incorporated or deemed to be incorporated by reference
therein, in each case, as are customarily made by issuers to underwriters
in underwritten offerings made by selling security holders, and confirm the
same on the settlement date for the offering; (ii) cause opinions of
counsel to NTL (which counsel and opinions shall be reasonably satisfactory
to the managing underwriters), to be delivered to the underwriters and the
Sellers covering the matters customarily covered in opinions requested in
underwritten offerings by selling security holders; (iii) cause "cold
comfort" letters and updates thereof (which letters and updates shall be
reasonably satisfactory to the managing underwriters) from the independent
certified public accountants of NTL (and, if necessary, any other
independent certified public accountants of any subsidiary of NTL or of any
business acquired by NTL for which financial statements and financial data
are, or are required to be, included in the Registration Statement), to be
delivered to each of the underwriters and the Sellers of such Registrable
Securities included in such underwritten offering (if such accountants are
permitted under applicable law and accounting literature to so address
"cold comfort" letters), such letters to be in customary form and covering
matters of the type customarily covered in "cold comfort" letters in
connection with underwritten offerings by selling security holders; and
(iv) if an underwriting agreement is entered into, the same shall contain
customary indemnification provisions and procedures from NTL in favor of
both the Sellers of such Registrable Securities and the underwriters or
selling agents. The delivery of certificates, opinions and letters referred
to above shall be done at each closing under such underwriting agreement,
as and to the extent required thereunder.
(j) Comply with all applicable rules and regulations of the Commission
and make generally available to security holders earning statements
satisfying the provisions of Section 11(a) of the Securities Act and Rule
158 thereunder (or any similar rule promulgated under the Securities Act)
not later than 45 days after the end of any 12-month period (or 90 days
after the end of any 12-month period if such period is a fiscal year) (i)
commencing at the end of any fiscal quarter in which Registrable Securities
are sold to underwriters in a Public Offering and (ii) if not sold to
underwriters in such an offering, commencing on the first day of the fiscal
quarter of NTL after the effective date of a Registration Statement, which
statements shall cover said 12-month periods.
(k) Cooperate with each Seller and the managing underwriter, if any,
participating in the disposition of such Registrable Securities in
connection with any filings required to be made with the National
Association of Securities Dealers, Inc. (the "NASD").
(l) Use its best efforts to take all other steps reasonably necessary
to effect the registration, offering and sale of the Registrable Securities
covered by a Registration Statement contemplated hereby and enter into any
other customary agreements and take such other actions, including
participation in "roadshows" in connection with any Demand Registration, as
are reasonably required in order to expedite or facilitate the disposition
of such Registrable Securities.
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(m) Until there are no Registrable Securities outstanding at the
reasonable request of the Holders, hold periodic meetings with
representatives of the Holders to report on the market for NTL's shares and
opportunities for such Holders to effect sales of Registrable Securities.
(n) With respect to any Registration Statement under Section 2 hereof,
NTL may require each Holder disposing of Registrable Securities covered by
such Registration Statement to furnish such information regarding the
Holder and such Holder's intended disposition of Registrable Securities as
NTL may from time to time reasonably request (with reasonable prior notice)
in writing and such other information as may be legally required in
connection with such registration. If any such information with respect to
the Holder is not furnished within a reasonable period of time after
receipt of such request, NTL may exclude such Holder's Registrable
Securities from such Registration Statement.
2.5 ALTERNATIVE DISPOSITION.
Holders may request registration of Registrable Securities pursuant to this
Section 2 in connection with any offering of (i) Registrable Securities or (ii)
securities of a trust or other special purpose vehicle formed for the purpose of
disposing of Registrable Securities, alone or in conjunction with other
securities, on a current or delayed basis, in connection with which Registrable
Securities are required to be registered under the Securities Act and the
provisions of this Agreement shall apply mutatis mutandis to any registration
of, or Registration Statement relating to, such trust or special purpose
vehicle; provided, that the obligations under Section 8 to indemnify
underwriters of Registrable Securities shall also extend to any such trust or
special purpose vehicle to the extent it may be deemed to be an "underwriter" of
Registrable Securities for purposes of the Securities Act.
SECTION 3. HOLD-BACK AGREEMENT.
NTL and each Holder whose Registrable Securities are covered by a
Registration Statement filed pursuant hereto each agrees that, upon the
reasonable request (pursuant to a timely written notice) of the managing
underwriter or underwriters in an underwritten offering, it will not effect any
public sale or distribution of any of the securities of NTL being registered, or
any similar security of NTL, or any securities convertible or exchangeable or
exercisable for such securities, including any sale pursuant to Rule 144 (except
in each case as part of such underwritten offering), during the period beginning
10 days prior to, and ending 90 days after, the closing date of each
underwritten offering made pursuant to such Registration Statement, to the
extent timely notified in writing by NTL or by the managing underwriter of such
underwritten offering.
SECTION 4. REGISTRATION EXPENSES.
(a) Except as provided in clause (b) below, all fees and expenses incident
to the registration and sale of the Registrable Securities shall be borne by NTL
whether or not a Registration Statement is filed or becomes effective,
including, without limitation, (i) all registration and filing fees (including,
without limitation, (A) fees with respect to filings required to be made with
the NASD in connection with an underwritten offering and (B) fees and expenses
of compliance with state securities or Blue Sky laws (including, without
limitation, fees and disbursements of counsel for NTL or the underwriters, or
both, in connection with Blue Sky qualifications of the Registrable
Securities)), (ii) printing expenses (including, without limitation, expenses of
printing certificates for Registrable Securities in a form eligible for deposit
with The Depository Trust Company, printing Preliminary Prospectuses,
Prospectuses, and printing or preparing any underwriting agreement, agreement
among underwriters and related syndicate or selling group agreements, pricing
agreements and Blue Sky memoranda), (iii) fees and disbursements of counsel for
NTL, (iv) fees and disbursements of all independent certified public accountants
for NTL (including, without limitation, the expenses of any "cold comfort"
letters required by or incident to such performance), (v) reasonable fees and
expenses of one legal counsel for the Sellers, (vi) the fees and expenses of any
"qualified independent underwriter" or other independent appraiser participating
in an offering pursuant to Section 3 of Rule 2720 of the Conduct Rules of the
NASD (unless such qualified independent underwriter is required as a result of
an affiliation between an underwriter designated by the Sellers under Section
2.1 hereof and one of such Sellers, in which case such fees and expenses will be
borne by the Sellers), (vii) Securities Act liability insurance, if
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NTL so desires such insurance, (viii) all out-of-pocket expenses of NTL
(including, without limitation, expenses incurred by officers and employees of
NTL performing legal or accounting duties or participating in "roadshow"
presentations or of any public relations, investor relations or other
consultants retained by NTL in connection with any roadshow), and (ix) the fees
and expenses incurred in connection with the quotation or listing of shares of
Common Stock on any securities exchange or automated securities quotation system
((i) through (ix) above collectively, "Registration Expenses").
(b) Each Seller shall pay all underwriting discounts and commissions or
broker's commissions incurred in connection with the sale or other disposition
of Registrable Securities for or on behalf of such Seller's account.
SECTION 5. REPRESENTATIONS, WARRANTIES AND AGREEMENTS.
(a) NTL Representations, Warranties and Agreements. NTL represents and
warrants to, and agrees with, each Holder that:
(i) NTL has all requisite corporate power and authority to execute,
deliver, and perform this Agreement. This Agreement has been duly
authorized, executed, and delivered by NTL. No consent, authorization,
approval, order, license, certificate, or permit of or from, or declaration
or filing with, any United States federal, state, local, or other
governmental authority or any court or other tribunal is required by NTL
for the execution, delivery or performance of this Agreement by NTL (except
filings under the Securities Act which will be made and any consents under
Blue Sky or state securities laws which will be obtained).
(ii) NTL shall not enter into any transaction involving the issuance
or transfer by any other Person of Other Securities to any Holder, or any
merger or consolidation in which it is not the surviving Person, or any
sale, lease or other transfer of all or substantially all the assets of
NTL, unless effective provision is made for the assumption by such other
Person, jointly and severally with NTL if NTL shall remain in existence, of
all of the obligations of NTL hereunder, and in the case of any such
issuance or transfer, the registration of such Other Securities on the same
or no more favorable basis as the registration of the other Registrable
Securities hereunder.
(iii) The execution and delivery of this Agreement by NTL do not, and
the consummation of the transactions contemplated hereby will not, violate,
conflict with, or result in a breach of any provision of, or constitute a
default (with or without notice or lapse of time or both) under, or result
in the termination of, or accelerate the performance required by, or result
in a right of termination, cancellation, or acceleration of any obligation
or the loss of a material benefit under, or result in the creation of any
lien, security interest, charge or encumbrance upon any of the properties
or assets of NTL or any of its subsidiaries pursuant to any provisions of
(i) the articles of incorporation, by-laws or similar governing documents
of NTL or any of its subsidiaries, (ii) any statute, law, ordinance, rule,
regulation, judgment, decree, order, injunction, writ, permit or license of
any governmental authority applicable to NTL or any of its subsidiaries or
any of their respective properties or assets or (iii) any note, bond,
mortgage, indenture, deed of trust, license, franchise, permit, concession,
contract, lease or other instrument, obligation or agreement of any kind to
which NTL or any of its subsidiaries is a party or by which it or any of
its properties or assets may be bound or affected.
(iv) NTL covenants that it will file any reports required to be filed
by it under the Securities Act and the Exchange Act, will make available
"adequate current public information concerning NTL within the meaning of
paragraph (c) of Rule 144" and that it will take such further action as any
Holder may reasonably request, all to the extent required from time to time
to enable Holders to sell Registrable Securities without registration under
the Securities Act pursuant to the exemptions provided by Rule 144. Upon
the request of any Holder, NTL will deliver to such Holder a written
statement as to whether it has complied with such requirements.
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(b) Holder Representations, Warranties and Agreements. Each Holder
represents and warrants to, and agrees with, NTL, that:
(i) Such Holder is duly organized, validly existing, and in good
standing under the laws of its jurisdiction of organization. Such Holder
has all requisite power and authority to execute, deliver, and perform this
Agreement. This Agreement has been duly authorized by such Holder and has
been duly executed and delivered by such Holder.
(ii) Neither such Holder nor any such Holder's Affiliates will take,
directly or indirectly, during the term of this Agreement, any action
designed to stabilize (except as may be permitted by applicable law) or
manipulate the price of any security of NTL.
(iii) Such Holder shall promptly furnish to NTL upon NTL's reasonable
request any and all information as may be required by, or as may be
necessary or advisable to comply with the provisions of, the Securities
Act, the Regulations, the Exchange Act, and the rules and regulations of
the Commission thereunder in connection with the preparation and filing of
any Registration Statement pursuant hereto, or any amendment or supplement
thereto, or any Preliminary Prospectus or Prospectus included therein.
SECTION 6. SURVIVAL OF REPRESENTATIONS AND AGREEMENTS.
All representations, warranties, covenants and agreements contained in this
Agreement shall be deemed to be representations, warranties, covenants and
agreements at the effective date of each Registration Statement contemplated by
this Agreement, and such representations, warranties, covenants and agreements,
shall remain operative and in full force and effect regardless of any
investigation made by or on behalf of NTL, any Holder, or any other Person and
shall survive termination of this Agreement.
SECTION 7. INDEMNIFICATION
(a) Indemnification by NTL. NTL shall, without limitation as to time,
indemnify and hold harmless, to the fullest extent permitted by law, each Holder
of Registrable Securities, and any underwriter participating in the
distribution, their respective officers, directors, partners and agents and
employees of each of them, each Person who controls each such Holder or any such
underwriter (within the meaning of Section 15 of the Securities Act and Section
20 of the Exchange Act) and the officers, directors, partners, agents and
employees of each such controlling person (individually, an "Indemnified
Person") from and against any and all losses, claims, damages, liabilities,
costs (including, without limitation, costs of investigating, preparing to
defend, defending and appearing as a third-party witness and attorney's fees and
disbursements) and expenses, including any amounts paid in respect of any
settlements (collectively, "Losses"), joint or several, without duplication, as
incurred, arising out of or based upon any untrue or alleged untrue statement of
a material fact contained in any Registration Statement, Prospectus or form of
prospectus, or in any amendment or supplements thereto or in any Preliminary
Prospectus, or arising out of or based upon, in the case of the Registration
Statement or any amendments thereto, any omission or alleged omission of a
material fact required to be stated therein or necessary to make the statements
therein not misleading, and, in the case of the Prospectus or form of
prospectus, or in any amendments or supplements thereto, or in any Preliminary
Prospectus, any omission or alleged omission of a material fact required to be
stated therein or necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading except, in either case,
(i) to the extent, but only to the extent, that such untrue or alleged untrue
statement or omission or alleged omission has been made therein in reliance upon
and in conformity with information furnished in writing to NTL by such
Indemnified Person expressly for use therein and (ii) if the person asserting
any such Losses who purchased the Registrable Securities which are the subject
thereof did not receive a copy of an amended Preliminary Prospectus or the final
Prospectus (or the final Prospectus as amended or supplemented) at or prior to
the written confirmation of the sale of such Registrable Securities to such
person (if it is determined that NTL has provided such Preliminary Prospectus
and it was the responsibility of such Indemnified Person to provide such person
with a current copy of the Prospectus or amended or supplemented Prospectus, as
the case may be ) and the untrue statement or alleged untrue statement or
omission or alleged omission of a material fact made in such Preliminary
Prospectus was
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corrected in the amended Preliminary Prospectus or the final Prospectus (or the
final Prospectus as amended and supplemented).
(b) Indemnification by Holder of Registrable Securities. In connection
with any Registration Statement in which a Holder of Registrable Securities is
participating, such Holder of Registrable Securities shall severally but not
jointly, without limitation as to time, indemnify and hold harmless, to the
fullest extent permitted by law, NTL, any underwriter participating in the
distribution and their respective directors, officers, agents and employees,
each Person who controls NTL or any such underwriter (within the meaning of
Section 15 of the Securities Act and Section 20 of the Exchange Act), and the
directors, officers, agents or employees of such controlling person, from and
against any and all Losses, as incurred, arising out of or based upon (i) any
untrue or alleged untrue statement of a material fact contained in any
Registration Statement, Prospectus, or form of prospectus, or in any amendment
or supplement thereto or in any Preliminary Prospectus, or arising out of or
based upon, in the case of the Registration Statement or any amendments thereto,
any omission or alleged omission of a material fact required to be stated
therein or necessary to make the statements therein not misleading, and, in the
case of the Prospectus, or form of prospectus, or in any amendments or
supplements thereto, or in any Preliminary Prospectus, any omission or alleged
omission of a material fact required to be stated therein or necessary to make
the statements therein, in the light of the circumstances under which they were
made, not misleading, in either case, (i) to the extent, but only to the extent,
that such untrue or alleged untrue statement or omission or alleged omission has
been made therein in reliance upon and in conformity with information furnished
in writing to NTL by such Holder expressly for use therein or (ii) the failure
of such participating Holder or any underwriter acting for such participating
Holder at or prior to the written confirmation of the sale of the Registrable
Securities to send or deliver a copy of an amended Preliminary Prospectus or the
final Prospectus (or the final Prospectus as amended or supplemented) to the
person asserting any such Losses who purchased the Registrable Securities which
are the subject thereof and the untrue statement or alleged untrue statement or
omission or alleged omission of a material fact made in such Preliminary
Prospectus was corrected in the amended Preliminary Prospectus or the final
Prospectus (or the final Prospectus as amended and supplemented). In no event
shall the liability of any Seller of Registrable Securities hereunder be, or be
claimed by NTL to be, greater in amount than the dollar amount of the proceeds
actually received by such Seller upon the sale of the Registrable Securities
giving rise to such indemnification obligation.
(c) Conduct of Indemnification Proceedings. Each Indemnified Person shall
give prompt notice to the party or parties from which such indemnity is sought
(the "indemnifying parties") of the commencement of any action or proceeding
(including any governmental investigation) (collectively "Proceedings" and
individually a "Proceeding") with respect to which such Indemnified Person seeks
indemnification or contribution pursuant hereto; provided, however, that the
failure so to notify the indemnifying parties shall not relieve the indemnifying
parties from any obligation or liability except to the extent that the
indemnifying party was otherwise unaware of such Proceeding and the indemnifying
parties shall have been materially prejudiced by such failure. The indemnifying
parties shall have the right, exercisable by giving written notice to an
indemnified party promptly after the receipt of written notice from such
indemnified party of such Proceeding, to assume, at the indemnifying parties'
expense, the defense of any such proceeding, with counsel reasonably
satisfactory to such indemnified party and shall pay as incurred the fees and
disbursements of such counsel related to such Proceeding; provided, however,
that an indemnified party or parties (if more than one such indemnified party is
named in any Proceeding) shall have the right to employ separate counsel in any
such Proceeding and to participate in the defense thereof, but the fees and
expenses of such counsel shall be at the expense of such indemnified party or
parties unless: (i) the indemnifying party or parties agree to pay such fees and
expenses; or (ii) the indemnifying parties fail promptly to assume the defense
of such Proceeding or fail to employ counsel reasonably satisfactory to such
indemnified party or parties; or (iii) the named parties to any such action
(including any impleaded parties) include both the indemnified party and the
indemnifying party, and the indemnified party or parties shall have been advised
by counsel that there may be a conflict between the positions of the
indemnifying party or an affiliate of the indemnifying party and such
indemnified party or parties in conducting the defense of such action or
proceeding or that there may be legal defenses available to such indemnified
party or parties different from or in addition to those available to the
indemnifying party or such affiliate, in which case, if such indemnified party
or parties notifies the
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indemnifying parties in writing that it elects to employ separate counsel at the
expense of the indemnifying parties, the indemnifying parties shall not have the
right to assume the defense thereof and such counsel shall be at the expense of
the indemnifying parties, it being understood, however, that the indemnifying
parties shall not, in connection with any one such Proceeding or separate but
substantially similar or related Proceedings in the same jurisdiction, arising
out of the same general allegations or circumstances, be liable for the
reasonable fees and expenses of more than one separate firm of attorneys
(together with appropriate local counsel) at any time for such indemnified party
or parties. Whether or not such defense is assumed by the indemnifying parties,
such indemnifying parties or indemnified party or parties will not be subject to
any liability for any settlement made without its or their consent (but such
consent will not be unreasonably withheld). No indemnifying party shall be
liable for any settlement of any such action or proceeding effected without its
written consent, but if settled with its written consent each indemnifying party
jointly and severally agrees, subject to the exception and limitations set forth
above, to indemnify and hold harmless each indemnified party from and against
any loss or liability by reason of such settlement. No indemnification provided
for in Section 7(a) or Section 7(b) shall be available to any party who shall
fail to give notice as provided in this Section 7(c) if the party to whom notice
was not given was unaware of the proceeding to which such notice would have
related and was materially prejudiced by the failure to give such notice, but
the failure to give such notice shall not relieve the indemnifying party or
parties from any liability which it or they may have to the indemnified party
otherwise than on account of the provisions of Section 7(a) or Section 7(b).
(d) Contribution. If the indemnification provided for in this Section 7 is
unavailable to an indemnified party or is insufficient to hold such indemnified
party harmless for any Losses in respect to which this Section 7 would otherwise
apply by its terms, except by reasons of Section 7(a)(i) or (ii) hereof or the
failure of the indemnified party to give notice as required in Section 7(c)
hereof (provided that the indemnifying party was unaware of the proceeding to
which such notice would have related and was prejudiced by the failure to give
such notice), then each applicable indemnifying party, in lieu of indemnifying
such indemnified party, shall have an obligation to contribute to the amount
paid or payable by such indemnified party as a result of such Losses, in such
proportion as is appropriate to reflect the relative fault of the indemnifying
party, on the one hand, and such indemnified party, on the other hand, in
connection with the actions, statements or omissions that resulted in such
Losses as well as any other relevant equitable considerations. Where the
indemnified party is an underwriter participating in the distribution of
Registrable Securities, however, each indemnifying party, and, in addition, if
the indemnifying party is a Holder, NTL, shall have an obligation to contribute
to the amount paid or payable by such indemnified part as the result of such
Losses in such proportion as is appropriate to reflect not only (i) the relative
fault of NTL, the Holders and the underwriters in connection with the actions,
statements or omissions that resulted in such Losses, as well as any other
relevant equitable considerations, but also (ii) the relative benefits received
by the Holders on the one hand and the underwriters on the other hand from the
distribution of the Registrable Securities. The relative benefit derived by the
parties shall be determined by reference to, among other things, the fact that
NTL entered into this Agreement to induce the Holders to engage in the
transaction pursuant to which the Registrable Securities were acquired. The
relative benefits received by the Holders on the one hand and the underwriters
on the other shall be deemed to be in the same proportion as the total net
proceeds from any such offering (before deducting expenses) received by the
Holders bear to the total underwriting discounts or commissions received by the
underwriters. The relative fault of such indemnifying party, on the one hand,
and indemnified party, on the other hand, shall be determined by reference to,
among other things, whether any action in question, including any untrue or
alleged untrue statement of a material fact or omission or alleged omission to
state a material fact, has been taken by, or relates to information supplied by,
such indemnifying party or indemnified party, and the parties' relative intent,
knowledge, access to information and opportunity to correct or prevent any such
action, statement or omission. The amount paid or payable by a party as a result
of any Losses shall be deemed to include any legal or other fees or expenses
incurred by such party in connection with any Proceeding, to the extent such
party would have been indemnified for such expenses if the indemnification
provided for in Section 7(a) or 7(b) were available to such party.
The parties hereto agree that it would not be just and equitable if
contribution pursuant to this Section 7(d) were determined by pro rata
allocation or by any other method of allocation that does not take account of
the equitable considerations referred to in the immediately preceding paragraph.
Notwithstanding
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the provisions of this Section 7(d), an indemnifying party that is a selling
Holder of Registrable Securities shall not be required to contribute any amount
in excess of the amount by which the total price at which the Registrable
Securities sold by such indemnifying party and distributed to the public were
offered to the public (net of any underwriting discounts and commissions and
expenses) exceeds the amount of any damages that such indemnifying party has
otherwise been required to pay or has paid by reason of such untrue or alleged
untrue statement or omission or alleged omission. No Person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Securities Act)
shall be entitled to contribution from any Person who was not guilty of such
fraudulent misrepresentation.
(e) Remedies Cumulative. The indemnity, contribution and expense
reimbursement obligations under this Section 7 shall be in addition to any
liability each indemnifying person may otherwise have and shall remain operative
and in full force and effect regardless of any investigation made by or on
behalf of any indemnified party.
(f) Underwriting Agreement Controls. In the event of any conflict between
the indemnification and contribution terms as herein set forth and as set forth
in any underwriting agreement entered pursuant hereto, the underwriting
agreement shall control.
SECTION 8. UNDERWRITTEN REGISTRATION
No Holder of Registrable Securities may participate in any underwritten
registration hereunder unless such Holder (i) agrees to sell such Holder's
Registrable Securities on the basis provided in any underwriting arrangements
approved by the Holders of a majority of Registrable Securities included in such
offering, and (ii) completes and executes all questionnaires, powers of
attorney, indemnities, underwriting agreements, custodial or escrow agreements
and other documents required under the terms of such underwriting arrangements.
SECTION 9. UNREGISTERED OFFERINGS
The parties hereto hereby agree that, in the event that NTL or one or more
Holders propose to make an underwritten Public Offering of shares of Common
Stock (i) that is exempt from, or not subject to, the registration requirements
of the Securities Act pursuant to Regulation S (or any successor or similar
regulation) thereunder and (ii) with respect to which the Holder or Holders
proposing such underwritten offering request the cooperation and participation
of NTL or the management of NTL in performing due diligence and marketing such
offering to potential investors, the relevant notice provisions of Section 2.1
or 2.2 will state that the offering is proposed to be made on an unregistered
basis pursuant to Regulation S. In that event, the parties agree to proceed with
such an offering on an unregistered basis pursuant to Regulation S in good faith
as and to the extent provided herein with respect to a registered offering and
that the provisions of this Agreement will apply mutatis mutandis to such
unregistered offering, including, without limitation, provisions relating to
Joining Notices, NTL's ability to delay an offering, allocations of securities
included in an offering, NTL's obligations with respect to an offering
(including indemnification provisions and procedures), selection of
underwriters, hold-back agreements, expenses associated with an offering and
representations and warranties.
SECTION 10. MISCELLANEOUS
(a) Remedies. In the event of a breach by any party of any of its
obligations under this Agreement, the other parties, in addition to being
entitled to exercise all rights provided herein or granted by law, including
recovery of damages, will be entitled to specific performance of their rights
under this Agreement. NTL and each Holder agrees that monetary damages would not
be adequate compensation for any loss incurred by reason of a breach by NTL or
such Holder, as the case may be, of any of the provisions of this Agreement and
hereby further agrees that, in the event of any action for specific performance
in respect of such breach, NTL or such Holder, as the case may be, shall waive
the defense that a remedy at law would be adequate. No failure or delay on the
part of NTL or any Holder in exercising any right, power or remedy hereunder
shall
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operate as a waiver thereof, nor shall any single or partial exercise of any
such right, power or remedy preclude any other or further exercise thereof or
the exercise of any other right, power or remedy.
(b) Amendments and Waivers. The provisions of this Agreement, including
the provisions of this sentence, may not be amended, modified or supplemented,
and waivers or consents to departures from the provisions hereof may not be
given, unless NTL has obtained the written consent of Holders of at least two-
thirds of the then outstanding Registrable Securities. Notwithstanding the
foregoing, a waiver or consent to depart from the provisions hereof with respect
to a matter that relates exclusively to the rights of Holders of Registrable
Securities whose securities are being sold pursuant to a Registration Statement
and that does not directly or indirectly affect, impair, limit or compromise the
rights of other Holders of Registrable Securities may be given by Holders of at
least a majority of the Registrable Securities being sold by Holders pursuant to
such Registration Statement; provided, however, that the provisions of this
sentence may not be amended, modified or supplemented except in accordance with
the provisions of the immediately preceding sentence.
(c) Notices. All notices and other communications hereunder shall be in
writing and shall be deemed given if delivered personally, by telecopier
(receipt of which is confirmed) or mailed by registered or certified mail
(return receipt requested) to the parties at the following addresses (or at such
other address for a party as shall be specified by like notice):
if to NTL, to:
NTL Incorporated
110 East 59th Street
New York, New York 10022
Telecopy No.: (212) 906-8497
Attention: Richard J. Lubasch
with a copy to:
Skadden, Arps, Slate, Meagher & Flom LLP
919 Third Avenue
New York, New York 10022
Telecopy No.: (212) 735-2000
Attention: Thomas H. Kennedy
if to Comcast, to:
Comcast Corporation
1500 Market Street, 35th Floor
Philadelphia, Pennsylvania 19102-2148
Telecopy No.: (215) 981-7790
Attention: Ken Mikalauskas
with a copy to:
Davis Polk & Wardwell
450 Lexington Avenue
New York, New York 10017
Telecopy No.: (212) 450-4800
Attention: John Knight
if to Warburg, Pincus, to:
[TO COME]
with a copy to:
[TO COME]
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(d) Interpretation. When a reference is made in this Agreement to a
Section, such reference shall be to a Section of this Agreement unless otherwise
indicated. The headings contained in this Agreement are for reference purposes
only and shall not affect in any way the meaning or interpretation of this
Agreement.
(e) Counterparts. This Agreement may be executed in two or more
counterparts, all of which shall be considered one and the same agreement and
shall become effective when two or more counterparts have been signed by each of
the parties and delivered to the other parties, it being understood that all
parties need not sign the same counterpart.
(f) Entire Agreement; No Third Party Beneficiaries. This Agreement
(including the documents and the instruments referred to herein) (i) constitutes
the entire agreement and supersedes all prior agreements and understandings,
both written and oral, among the parties with respect to the subject matter
hereof, and (ii) except as contemplated by the definition of "Holders" in
Section 1 hereof, is not intended to confer upon any Person other than the
parties hereto any rights or remedies hereunder.
(g) Confidential Information. The Holders and NTL each agree that they
shall keep confidential and not at any time after the date of this Agreement
disclose any confidential information regarding NTL (in the case of the Holders)
and regarding the Holders (in the case of NTL) received in connection with the
performance of this Agreement except information which is (i) in the public
domain, (ii) becomes public knowledge through no fault of such party or (iii) is
required to be disclosed by court order or other government process or the
disclosure of which is necessary to enable such party to comply with applicable
law or defend against claims. In the event that such party shall be required to
make disclosure pursuant to the provisions of clause (iii) of the preceding
sentence, such party shall promptly notify the other party and take all
reasonably necessary steps requested by such other party at such other party's
expense to defend against the enforcement of such court order or other
government process, and permit such other party to participate with counsel of
its choice in any proceeding relating to the enforcement thereof.
(h) Governing Law. This Agreement shall be governed and construed in
accordance with the laws of the State of Delaware, USA, without regard to
principles of conflicts of law.
(i) Severability. Wherever possible, each provision hereof shall be
interpreted in such a manner as to be valid, legal and enforceable under
applicable law, but in case any one or more of the provisions contained herein
shall, for any reason, be held to be invalid, illegal or unenforceable in any
respect, such provision shall be ineffective to the extent, but only to the
extent, of such invalidity, illegality or unenforceability without invalidating
or rendering unenforceable the remainder of this Agreement, unless such a
construction would be unreasonable or materially impair the rights of any party
hereto.
(j) Assignment. Neither this Agreement nor any of the rights, interests or
obligations hereunder shall be assigned by any of the parties hereto (whether by
operation of law or otherwise) without the prior written consent of the other
parties, except as may otherwise occur by operation of the definition of
"Holders" in Section 1 hereof or to another Holder who, by such assignment,
agrees to be bound by the restrictions set forth herein; provided, however, that
NTL may assign its rights and obligations hereunder to a holding company formed
in accordance with Section 251(g) of the Delaware General Corporation Law.
Notwithstanding the foregoing, a Holder that is a trust may, in connection with
any distribution of the assets of the trust to the beneficiaries thereof, assign
its rights under this Agreement to such beneficiaries, and any Holder may with
the consent of NTL (which consent shall not be unreasonably withheld) in
connection with a private sale of shares of Common Stock assign its rights under
this Agreement to any single purchaser that acquires shares of Common Stock from
such Holder in a private sale for a purchase price of $25 million or more.
Subject to the preceding sentence, this Agreement will be binding upon, inure to
the benefit of and be enforceable by the parties hereto and their respective
successors and assigns.
(k) Attorney's Fees. As between the parties to this Agreement, in any
action or proceeding brought to enforce any provision of this Agreement, or
where any provision hereof is validly asserted as a defense, the successful
party shall be entitled to recover reasonable attorney's fees in addition to its
costs and expenses and any other available remedy.
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(l) Use of Terms. This Agreement contemplates the filing of Registration
Statements under the Securities Act on numerous occasions involving various
offers of securities. In connection with such Registration Statements, there may
be identified therein one or more underwriters through which securities are to
be offered on behalf of NTL or one or more of the Holders, or both, pursuant to
either a "firm-commitment" or "best-efforts" arrangement, and, in the case where
there is more than one underwriter, one or more of the underwriters may be
designated as the "manager" or "representative" or the "co-managers" or
"representatives" of the several underwriters. Accordingly, all references
herein to an "underwriter" or "underwriters" are intended to refer to a
"principal underwriter" (as defined in Rule 405 of the Regulations) and to
provide for those transactions in which securities may be offered by or through
one or more underwriters, and not to imply that any of the transactions
contemplated hereby is conditioned in any manner whatsoever on the participation
therein by one or more underwriters on behalf of any party. Nothing contained
herein relating to NTL's obligation to enter into an underwriting agreement at
any time or from time to time in the future shall impair, alter, restrict or
otherwise affect in any manner whatsoever the duties of the Board of Directors
of NTL under applicable law in approving the form, terms and provisions thereof.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first written above.
NTL INCORPORATED
By:
------------------------------------
Name:
Title:
COMCAST CORPORATION
By:
------------------------------------
Name:
Title:
WARBURG, PINCUS INVESTORS, L.P.
By:
------------------------------------
Name:
Title:
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<PAGE> 345
ANNEX H
WARBURG, PINCUS INVESTORS, L.P.
LOCK-UP LETTER
, 1998
NTL Incorporated
110 East 59th Street
New York, New York 10022
Ladies and Gentlemen:
The undersigned understands that NTL Incorporated ("NTL") has entered into
an Agreement and Plan of Amalgamation, dated as of February 4, 1998, as amended
(the "Amalgamation Agreement"), with Comcast UK Cable Partners Limited, a
Bermuda corporation ("Partners"), and NTL (Bermuda) Limited, a Bermuda
corporation and a wholly-owned subsidiary of NTL ("Sub"), providing for, among
other things, the amalgamation of Sub with Partners (the "Amalgamation").
Subject to the terms and conditions of the Amalgamation Agreement, the
outstanding Class A Common Shares, par value L.01 per share, and the Class B
Common Shares, par value L.01 per share, will be cancelled in consideration for
the receipt of shares of Common Stock, par value $.01 per share, of NTL (the
"Common Stock").
In consideration of the execution of the Amalgamation Agreement by NTL, and
for other good and valuable consideration, the undersigned hereby irrevocably
agrees that the undersigned will not, directly or indirectly, offer for sale,
sell, contract to sell, transfer, give, pledge, assign, irrevocably hypothecate,
grant any option for the sale of or otherwise dispose of any shares of Common
Stock or any security convertible into or exchangeable or exercisable for shares
of Common Stock which the undersigned may beneficially own (within the meaning
of Rule 13d-3 of the Securities Exchange Act of 1934, as amended) nor enter into
any agreement regarding the same during the period beginning on the closing date
of the Amalgamation and ending 150 days thereafter. The foregoing agreements
shall be binding on the undersigned and the undersigned's successors and
assigns.
Very truly yours,
WARBURG, PINCUS INVESTORS, L.P.
By:
--------------------------------------
Name:
Title:
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<PAGE> 346
COMCAST CORPORATION
LOCK-UP LETTER
, 1998
NTL Incorporated
110 East 59th Street
New York, New York 10022
Ladies and Gentlemen:
The undersigned understands that NTL Incorporated ("NTL") has entered into
an Agreement and Plan of Amalgamation, dated as of February 4, 1998, as amended
(the "Amalgamation Agreement"), with Comcast UK Cable Partners Limited, a
Bermuda corporation ("Partners"), and NTL (Bermuda) Limited, a Bermuda
corporation and a wholly-owned subsidiary of NTL ("Sub"), providing for, among
other things, the amalgamation of Sub with Partners (the "Amalgamation").
Pursuant to the terms and conditions of the Amalgamation Agreement, the
outstanding Class A Common Shares, par value L.01 per share, and the Class B
Common Shares, par value L.01 per share, will be cancelled in consideration for
the receipt of shares of Common Stock, par value $.01 per share, of NTL (the
"Common Stock").
In consideration of the execution of the Amalgamation Agreement by NTL, and
for other good and valuable consideration, the undersigned hereby irrevocably
agrees that the undersigned will not, directly or indirectly, offer for sale,
sell, contract to sell, transfer, give, pledge, assign, irrevocably hypothecate,
grant any option for the sale of or otherwise dispose of any shares of Common
Stock or any security convertible into or exchangeable or exercisable for shares
of Common Stock which the undersigned may beneficially own (within the meaning
of Rule 13d-3 of the Securities Exchange Act of 1934, as amended) nor enter into
any agreement regarding the same during the period beginning on the closing date
of the Amalgamation and ending 150 days thereafter. The foregoing agreements
shall be binding on the undersigned and the undersigned's successors and
assigns.
Very truly yours,
COMCAST CORPORATION
By:
--------------------------------------
Name:
Title:
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<PAGE> 347
ANNEX I
FORM OF
CERTIFICATE OF DESIGNATION, PREFERENCES
AND RIGHTS OF CLASS D JUNIOR
PARTICIPATING PREFERRED STOCK
OF
NTL INCORPORATED
PURSUANT TO SECTION 151 OF THE GENERAL CORPORATION LAW
OF THE STATE OF DELAWARE
NTL Incorporated, a corporation organized and existing under the General
Corporation Law of the State of Delaware, in accordance with the provisions of
Section 103 thereof, HEREBY CERTIFIES:
That pursuant to the authority conferred upon the Board of Directors by the
Certificate of Incorporation of the said Corporation, the said Board of
Directors on , 1998 adopted the following resolution creating a series
of shares of Preferred Stock designated as Class D Junior
Participating Preferred Stock:
RESOLVED, that pursuant to the authority vested in the Board of Directors
of this Corporation in accordance with the provisions of its Certificate of
Incorporation, a series of Preferred Stock of the Corporation be and it hereby
is created, and that the designation and amount thereof and the voting powers,
preferences and relative, participating, optional and other special rights of
the shares of such series, and the qualifications, limitations or restrictions
thereof are as follows:
1. Designation and Amount. The shares of such series shall be
designated as "Class D Junior Participating Preferred Stock," par value
$.01 per share (the "Class D Junior Preferred Stock"), and the number of
shares constituting such series shall be .
2. Dividends and Distributions. (a) Each share of Class D Junior
Preferred Stock shall be entitled to receive, when, as and if declared by
the Board of Directors, out of funds legally available for the payment of
dividends, contemporaneously with any dividends with respect to shares of
Common Stock (as defined in Section 11), dividends in an amount per share
(rounded to the nearest cent) equal to, subject to the provision for
adjustment hereinafter set forth, 1.00* times the aggregate per share
amount of cash dividends declared by the Board of Directors with respect to
the Common Stock, and 1.00* times the aggregate per share amount (payable
in kind) of all non-cash dividends or other distributions (other than a
dividend payable in shares of Common Stock or a subdivision of the
outstanding shares of Common Stock, by reclassification or otherwise)
declared by the Board of Directors with respect to the Common Stock, to the
same extent as, on the same basis as, and in the same form as (whether
payable in cash or in kind), any dividends with respect to shares of Common
Stock. With respect to each dividend payable in respect of the Class D
Junior Preferred Stock, the record date for such dividend shall be the same
as the record date for the corresponding dividend in respect of the Common
Stock. Such dividends shall be payable on the dates specified by the Board
of Directors as the dates for payment of dividends in respect of shares of
Common Stock (each of such dates being a "dividend payment date")(unless
such day is not a business day, in which event on the next succeeding
business day). Such dividends shall be paid to the holders of record at the
close of business on the date (the "record date") specified by the Board of
Directors of the Corporation at the time such dividend is declared;
provided that such date shall not be more than 60 days nor less than 10
days prior to the respective dividend payment date. In the event the
Corporation shall at any time after the date of initial issuance of the
Class D Junior Preferred Stock (the "Issuance Date"), (i) declare any
dividend on Common Stock payable in shares of Common Stock, (ii) subdivide
the outstanding Common Stock, or (iii) combine the outstanding Common Stock
into a
- ---------------
* See Section 5.20.
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<PAGE> 348
smaller number of shares, then in each such case the amount to which each share
of Class D Junior Preferred Stock was entitled to receive immediately prior to
such event under the first sentence of this Section 2(a) shall be adjusted by
multiplying such amount by a fraction the numerator of which is the number of
shares of Common Stock outstanding immediately after such event and the
denominator of which is the number of shares of Common Stock that were
outstanding immediately prior to such event.
(b) So long as any shares of the Class D Junior Preferred Stock are
outstanding, no dividends shall be declared or paid or set apart for
payment or other distribution declared or made upon Parity Securities or
Junior Securities by the Corporation, unless a dividend in the amount and
form provided for herein is paid or set apart for payment on or in respect
of the Class D Junior Preferred Stock.
3. Voting Rights. The holders of shares of Class D Junior Preferred
Stock shall have the following voting rights:
(a) Except as otherwise provided herein, in the Certificate of
Incorporation or under applicable law, (i) each share of Class D Junior
Preferred Stock and each share of Class C Junior Preferred Stock shall
be entitled to vote together with the Common Stock on all matters
submitted for a vote of holders of Common Stock as a single class, (ii)
subject to the provision for adjustment hereinafter set forth, shall be
entitled to 1.00* votes per share of Class D Junior Preferred Stock and
(iii) shall be entitled to notice of any stockholders' meeting in
accordance with the Certificate of Incorporation and bylaws of the
Corporation. In the event the Corporation shall at any time after the
Issuance Date (i) declare any dividend on Common Stock payable in shares
of Common Stock, (ii) subdivide the outstanding Common Stock, or (iii)
combine the outstanding Common Stock into a smaller number of shares,
then in each such case the number of votes per share to which holders of
shares of Class D Junior Preferred Stock were entitled immediately prior
to such event shall be adjusted by multiplying such number by a
fraction, the numerator of which is the number of shares of Common Stock
outstanding immediately after such event and the denominator of which is
the number of shares of Common Stock that were outstanding immediately
prior to such event.
(b) So long as any shares of Class D Junior Preferred Stock are
outstanding, the Corporation shall not, without the written consent or
affirmative vote at a meeting called for that purpose of the holders of
two-thirds or more of the shares of Class D Junior Preferred Stock then
outstanding, amend, alter or repeal, whether by merger, consolidation,
combination, reclassification or otherwise, the Certificate of
Incorporation or by-laws of the Corporation or of any provision thereof
(including the adoption of a new provision thereof) which would result
in an alteration or circumvention of the voting powers, designation and
preferences and relative participating, optional and other special
rights, and qualifications, limitations and restrictions of the Class D
Junior Preferred Stock.
(c) The consent or votes required in Section 3(b) shall be in
addition to any approval of stockholders of the Corporation which may be
required by law or pursuant to any provision of the Certificate of
Incorporation or bylaws, which approval shall be obtained by vote of the
stockholders of the Corporation in the manner provided in Section 3(a).
4. Reacquired Shares. Any shares of Class D Junior Preferred Stock
purchased or otherwise acquired by the Corporation in any manner whatsoever
shall be retired and cancelled promptly after the acquisition thereof. All
such shares shall upon their cancellation become authorized but unissued
shares of Preferred Stock and may be reissued as part of a new series of
Preferred Stock to be created by resolution or resolutions of the Board of
Directors, subject to the conditions and restrictions on issuance set forth
herein.
5. Liquidation, Dissolution or Winding Up. (a) Upon any voluntary or
involuntary liquidation, dissolution or winding up of the Corporation, no
distribution shall be made to the holders of Junior Securities unless,
prior thereto, the holders of shares of Class D Junior Preferred Stock
shall have received $0.01 per share (the "Class D Liquidation Preference"),
and the holders of Parity Securities
- ---------------
* See Section 5.20.
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<PAGE> 349
shall have received any liquidation preference due them (the "Parity
Preference"). Following the payment of the full amount of the Class D
Liquidation Preference, no additional distributions shall be made to the
holders of shares of Class D Junior Preferred Stock unless, prior thereto,
the holders of shares of Common Stock shall have received an amount per
share (the "Common Adjustment") equal to the quotient obtained by dividing
(i) the Class D Liquidation Preference by (ii) 1.00* (as appropriately
adjusted as set forth in Section 5(c) below to reflect such events as stock
splits, stock dividends and recapitalizations with respect to the Common
Stock) (such number in clause (ii) being hereinafter referred to as the
"Adjustment Number"). Following the payment of the full amount of the Class
D Liquidation Preference, the Parity Preference and the Common Adjustment
in respect of all outstanding shares of Class C Junior Preferred Stock,
Class D Junior Preferred Stock and Common Stock, respectively, holders of
shares of Class C Junior Preferred Stock, Class D Junior Preferred Stock
and Common Stock shall receive their ratable and proportionate share of the
remaining assets to be distributed in the ratio of the Adjustment Number to
1 with respect to such Class C Junior Preferred Stock and Class D Junior
Preferred Stock, and Common Stock, on a per share basis, respectively.
(b) In the event, however, that there are not sufficient assets
available to permit payment in full of the Class D Liquidation Preference
and the Parity Preference, then such remaining assets shall be distributed
ratably to the holders of all such shares in proportion to their respective
liquidation preferences. In the event, however, that there are not
sufficient assets available to permit payment in full of the Common
Adjustment, then such remaining assets shall be distributed ratably to the
holders of Common Stock.
(c) In the event the Corporation shall at any time after the Issuance
Date (i) declare any dividend on Common Stock payable in shares of Common
Stock, (ii) subdivide the outstanding Common Stock, or (iii) combine the
outstanding Common Stock into a smaller number of shares, then in each such
case the Adjustment Number in effect immediately prior to such event shall
be adjusted by multiplying such Adjustment Number by a fraction, the
numerator of which is the number of shares of Common Stock outstanding
immediately after such event and the denominator of which is the number of
shares of Common Stock that were outstanding immediately prior to such
event.
6. Consolidation, Merger, Share Exchange, etc. In case the
Corporation shall enter into any consolidation, merger, share exchange,
combination or other transaction in which the shares of Common Stock are
exchanged for or changed into other stock or securities, cash and/or any
other property, then in any such case the shares of Class D Junior
Preferred Stock shall at the same time be similarly exchanged or changed in
an amount per share (subject to the provision for adjustment hereinafter
set forth) equal to 1.00* times the aggregate amount of stock, securities,
cash and/or any other property (payable in kind), as the case may be, into
which or for which each share of Common Stock is changed or exchanged. In
the event the Corporation shall at any time after the Issuance Date (i)
declare any dividend on Common Stock payable in shares of Common Stock,
(ii) subdivide the outstanding Common Stock, or (iii) combine the
outstanding Common Stock into a smaller number of shares, then in each such
case the amount set forth in the preceding sentence with respect to the
exchange or change of shares of Class D Junior Preferred Stock shall be
adjusted by multiplying such amount by a fraction, the numerator of which
is the number of shares of Common Stock outstanding immediately after such
event and the denominator of which is the number of shares of Common Stock
that were outstanding immediately prior to such event.
7. Redemption. (a) Except as set forth in Section 7(b) the shares of
Class D Junior Preferred Stock shall not be redeemable.
(b) If the Right of First Refusal is Exercised, each share of Class D
Junior Preferred Stock shall, within 45 days of the receipt by the
Corporation of the Equity Interest Proceeds, be redeemed by the Corporation
for a pro rata (by number of shares of Class D Junior Preferred Stock
originally issued) share of the Equity Interest Proceeds. Such redemption
shall be, at the election of the Corporation,
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* See Section 5.20.
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<PAGE> 350
payable either (i) in cash, subject to any requirements of law or the
Corporation's debt instruments, or (ii) in shares of Common Stock of the
Corporation valued at the greater of $30 per share [subject to adjustment
if change in NTL Common Stock prior to Issuance Date] or the NTL Average
Market Price as of the date of receipt of the proceeds by the Corporation.
(c) "Equity Interest Proceeds" shall mean the net proceeds received
for the equity interest (as of the Issuance Date) in Birmingham Cable
(without regard to debt, loans from the Corporation to Birmington Cable or
the debt component (i.e., face amount and accrued and unpaid interest) of
any convertible security) from the consummation of the sale of the interest
under the Purchase Rights less taxes which would be payable on such sale at
the Tax Rate without giving effect to any credits or other adjustments
available to the Corporation or its subsidiaries as a result of factors not
related to the Corporation's interest in Birmingham Cable.
(d) Nothing contained herein shall be deemed to restrict or prohibit
the Corporation from acquiring shares of Class D Preferred Stock otherwise
then pursuant to redemption pursuant to Section 7(b) hereof.
8. Exchange. If (i) the Corporation shall so elect in its sole
discretion or (ii) the Right of First Refusal is Resolved, the Corporation
shall, within 45 days of the date of election with respect to clause (i) or
the date the Rights of Refusal is Resolved with respect to clause (ii),
exchange each share of Class D Junior Preferred Stock into 1.00* share (or,
if there has been one or more adjustments pursuant to the last sentence of
Section 2(a), the adjusted number of shares) of Common Stock of the
Corporation.
9. Procedure for Redemption or Exchange. (a) In the event of
redemption of the Class D Junior Preferred Stock pursuant to Section 7 or
an exchange of the shares of Class D Junior Preferred Stock pursuant to
Section 8, notice of such redemption or exchange shall be given to each
holder of record of the shares to be redeemed or exchanged at such holder's
address as the same appears on the stock transfer books of the Corporation
at least 30 but not more than 45 days before the date fixed for redemption
or exchange, as the case may be, provided, however, that no failure to give
such notice nor any defect therein shall affect the validity of the
redemption or exchange of any share of Class D Junior Preferred Stock to be
redeemed or exchanged except as to the holder to whom the Corporation has
failed to give said notice or except as to the holder whose notice was
defective. Each such notice shall state: (i) the redemption date or
exchange date; (ii) the amount and nature of the consideration to be made
in respect of each share; (iii) the place or places where certificates for
such shares are to be surrendered for redemption or exchange; (iv) the
specific provision hereof pursuant to which such redemption or exchange is
to be made; and (v) that dividends on the shares to be redeemed or
exchanged will cease to accrue on such redemption date or exchange date.
Upon giving any notice of a redemption pursuant to Section 7 or notice of
exchange pursuant to Section 8, the Corporation shall become obligated to
redeem or exchange the shares of Class D Junior Preferred Stock specified
in such notice on the redemption date or exchange date, as the case may be,
specified in such notice.
(b) Notice having been given as aforesaid, from and after the
redemption date or the exchange date (unless, in the case of a redemption,
default shall be made by the Corporation in providing money for the payment
of the redemption price of the shares called for redemption or, in the case
of an exchange, the Corporation defaults in issuing Common Stock or fails
to pay or set aside for payment accrued and unpaid dividends on the Class D
Junior Preferred Stock to the exchange date), dividends on the shares of
Class D Junior Preferred Stock called for redemption or exchange shall
cease to accrue, and all rights of the holders thereof as stockholders of
the Corporation (except the right to receive from the Corporation the
redemption price without interest or the Common Stock and accrued and
unpaid dividends on the Class D Junior Preferred Stock to the exchange
date) shall cease. Upon surrender in accordance with said notice of the
certificates for any shares so redeemed or exchanged (properly endorsed or
assigned for transfer, if the Board of Directors of the Corporation shall
so require and the notice shall so state), such
- ---------------
* See Section 5.20.
I-4
<PAGE> 351
share shall be redeemed or exchanged by the Corporation at the redemption
price or rate of exchange aforesaid.
(c) The Corporation will pay any and all issuance and delivery taxes
that may be payable in respect of the issuance or delivery of Common Stock
in exchange for shares of Class D Junior Preferred Stock. The Corporation
shall not, however, be required to pay any tax which may be payable in
respect of any transfer involved in the issuance and delivery of Common
Stock in a name other than that in which the shares of Class D Junior
Preferred Stock so exchange were registered, and no such issuance or
delivery shall be made unless and until the person requesting such issuance
has paid to the Corporation the amount of any such tax or has established
to the satisfaction of the Corporation that such tax has been paid.
(d) If a notice of redemption shall have been given, such redemption
is for consideration solely of cash and if, prior to the redemption date,
the Corporation shall have irrevocably deposited the aggregate redemption
price of the shares of Class D Junior Preferred Stock to be redeemed in
trust for the pro rata benefit of the holders of the shares of Class D
Junior Preferred Stock to be redeemed, so as to be and to continue to be
available therefor, with a bank or trust company that (i) is organized
under the laws of the United States of America or any state thereof, (ii)
has capital and surplus of not less than $250,000,000 and (iii) has, or, if
it has no publicly traded debt securities rated by a nationally recognized
rating agency, is the subsidiary of a bank holding company that has,
publicly traded debt securities rated at least "A" or the equivalent
thereof by Standard & Poor's Corporation or "A-2" or the equivalent by
Moody's Investor Service Inc., then upon making such deposit, all rights of
holders of the shares so called for redemption shall cease, except the
right of holders of such shares to receive the redemption price against
delivery of such shares, but without interest, and such shares shall cease
to be outstanding. Any funds so deposited that are unclaimed by holders of
shares at the end of three years from such redemption date shall be repaid
to the Corporation upon its request, after which repayment the holders of
shares of Class D Junior Preferred Stock so called for redemption shall
thereafter be entitled to look only to the Corporation for payment of the
redemption price.
(e) In the event of redemption of shares of Class D Junior Preferred
Stock for shares of Common Stock pursuant to Section 7 or an exchange of
Class D Junior Preferred Stock for shares of Common Stock pursuant to
Section 8:
(i) such redemption or exchange shall be deemed to have been
effected on the redemption date or the exchange date, as the case may
be, and the person in whose name or names any certificate or
certificates for shares of Common Stock shall be issuable upon such
redemption or exchange shall be deemed to have become the holder of
record of the shares of Common Stock represented thereby as of the close
of business on the redemption date or the exchange date, as the case may
be;
(ii) all such shares of Common Stock issued upon redemption or
exchange of the Class D Junior Preferred Stock will upon issuance be
duly and validly issued and fully paid and non-assessable, free of all
liens and charges and not subject to any preemptive rights;
(iii) effective as of the close of business on the redemption date
or exchange date, as the case may be, the holder thereof shall be deemed
to be the holder of the shares of Common Stock for which such shares of
Class D Junior Preferred Stock were redeemed or exchanged, as the case
may be, and, as from the redemption date or the exchange date, as the
case may be, such holder shall be entitled to all rights of a Common
Stock holder;
(iv) prior to the issuance of any such shares of Common Stock, the
Corporation shall comply with all applicable federal and state laws and
regulations which require action to be taken by the Corporation;
(v) no fractional shares of Common Stock shall be issued, but in
lieu thereof the Corporation shall pay a cash adjustment in respect of
such fractional interest in an amount equal to such fractional interest
multiplied by the closing price reported by the principal securities
exchange on
I-5
<PAGE> 352
which the shares of Common Stock are listed and traded on the redemption
date or exchange date, as the case may be; and
(f) The Corporation covenants that it will at all times reserve and
keep available, free from preemptive rights, such number of its authorized
but unissued shares of Common Stock and/or its shares of Common Stock held
as treasury stock as shall be required for the purpose of effecting the
redemption or exchange of the Class D Junior Preferred Stock.
10. Fiduciary Duty. The Board of Directors of the Corporation shall,
with respect to all matters except those set forth in Sections 5, 7, 8, 9
and 13, have the obligations and duties (including fiduciary duties) to the
holders of the Class D Junior Preferred Stock to the same extent and as if
they were holders of the Common Stock. With respect to the matters set
forth in Section 5, 7, 8, 9 and 13, the Board of Directors of the
Corporation shall act in good faith and, in the event that the Corporation
is not reasonably likely to enter into any agreement, arrangement or
understanding directly or indirectly relating to the Right of First Refusal
or the ownership interest in Birmingham Cable which would result in an
exchange pursuant to clause (ii) of Section 8, and the Right of First
Refusal is reasonably likely to be exercised, the Corporation shall use its
reasonable efforts to maximize the proceeds to be received from the
exercise thereof.
11. Ranking. The Class D Junior Preferred Stock shall, with respect
to dividend rights, rank on a parity with, the common stock, par value $.01
per share, of the Corporation (the "Common Stock") and the Class C Junior
Participating Preferred Stock, par value $.01 per share, of the Corporation
(the "Class C Junior Preferred Stock"). With respect to rights on
liquidation, dissolution and winding up, the Class D Junior Preferred Stock
shall rank prior to all classes of the Common Stock, on a parity with the
Class C Junior Preferred Stock and junior to all other series of Preferred
Stock. All equity securities of the Corporation to which the Class D Junior
Preferred Stock ranks prior (whether with respect to dividends or upon
liquidation, dissolution, winding up or otherwise), are collectively
referred to herein as the "Junior Securities." All equity securities of the
Corporation with which the Class D Junior Preferred Stock ranks on a parity
(whether with respect to dividends or upon liquidation, dissolution or
winding up), including the Class C Junior Preferred Stock, are collectively
referred to herein as the "Parity Securities." All equity securities of the
Corporation to which the Class D Junior Preferred Stock ranks junior
(whether with respect to dividends or upon liquidation, dissolution or
winding up) are collectively referred to herein as "Senior Securities". The
respective definitions of Junior Securities, Parity Securities and Senior
Securities shall also include any options exercisable for or convertible
into any of the Junior Securities, Parity Securities and Senior Securities,
as the case may be.
12. Reports. So long as any of the Class D Junior Preferred Stock is
outstanding, the Corporation will furnish the holders thereof with the
quarterly and annual financial reports that the Corporation is required to
file with the Securities and Exchange Commission pursuant to Section 13 or
Section 15(d) of the Securities Exchange Act of 1934 or, in the event the
Corporation is not required to file such reports, reports containing the
same information as would be required in such reports.
13. Definitions. "Exercised" shall mean that the Right of First
Refusal has been validly exercised by TeleWest and/or General Cable (other
than pursuant to clause (B) of the definition of "Resolved") and the
Corporation (or the relevant subsidiary of the Corporation) has received
the proceeds therefrom in consideration for the delivery of the equity
interests thereunder.
"NTL Average Market Price" means the average of the average of the high and
low sales prices of the Common Stock of the Corporation on the principal market
on which it is traded for each of the five trading days ending on the last
trading day prior to the date of determination.
"Resolved" shall mean that (A) the Right of First Refusal is no longer of
any legal force and effect or (B) that the Corporation shall have entered into
an agreement, arrangement or understanding with TeleWest and/or General Cable
directly or indirectly relating to a business combination between the
Corporation and TeleWest or the Right of First Refusal or the ownership interest
in Birmingham Cable.
I-6
<PAGE> 353
"Right of First Refusal" shall mean the right of first refusal set forth in
Section 5.2 of the CoOwnership Agreement, dated March 12, 1990, between US West
International Holdings Inc. and Comcast Cablevision of Birmingham, Inc., as
subsequently amended, supplemented and novated.
made under the seal of the Corporation and signed by , its , and
attested by , its , this day of , 1998.
NTL INCORPORATED
By:
--------------------------------------
Name:
Title:
[SEAL]
Attest:
- ---------------------------------------------------------
Name:
Title:
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<PAGE> 354
ANNEX J
DETACH HERE
<TABLE>
<S> <C>
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
OF
COMCAST UK CABLE PARTNERS LIMITED
The undersigned, a holder of CLASS A COMMON SHARES of
COMCAST UK CABLE PARTNERS LIMITED, hereby constitutes and
P appoints RALPH J. ROBERTS and STANLEY L. WANG, and each of
R them acting individually, as the attorney and proxy of the
O undersigned, with full power of substitution, for and in the
X name and stead of the undersigned, to attend the Special
Y General Meeting of Shareholders of the Company to be held on
Thursday, October 29, 1998 at 10:00 a.m. local time at
Comcast Corporation, 1500 Market Street, 33rd Floor,
Philadelphia, Pennsylvania 19102-2148 and any adjournment or
postponement thereof, and thereat to vote all CLASS A COMMON
SHARES which the undersigned would be entitled to vote if
personally present, as follows on the reverse side.
</TABLE>
<TABLE>
<S> <C>
------------------
PLEASE SIGN AND DATE ON REVERSE SIDE SEE REVERSE
SIDE
------------------
</TABLE>
DETACH HERE
<TABLE>
<S> <C>
- ------ PLEASE MARK YOUR
X VOTES AS IN THIS
EXAMPLE.
- ------
</TABLE>
Unless otherwise specified, the shares will be voted "FOR" the proposals
set forth below. This Proxy also delegates discretionary authority to vote
with respect to any other incidental business which may properly come
before the meeting and any adjournment or postponement thereof.
1. To approve the Agreement and Plan of Amalgamation, dated
February 4, 1998, as amended (the "Amalgamation
Agreement"), among NTL Incorporated, a Delaware
corporation ("NTL"), NTL (Bermuda) Limited, a Bermuda
corporation and a wholly-owned subsidiary of NTL ("Sub"),
and the Company pursuant to which Sub will amalgamate
with the Company and the issued and outstanding Class A
Common Shares, par value L.01 per share and Class B
Common Shares, par value L.01 per share of the Company
(collectively, the "Common Shares"), other than Common
Shares held by NTL, any subsidiary of NTL or any
subsidiary of the Company and Common Shares held by the
shareholders if any, who properly exercise their
dissenters' rights under Bermuda law, will be cancelled
in consideration for the receipt of the consideration
provided for in the Amalgamation Agreement.
FOR AGAINST ABSTAIN
[ ] N N
<TABLE>
<CAPTION>
<S> <C>
1. To approve the Agreement and Plan of Amalgamation, dated 2. To vote on such other incidental business which may
February 4, 1998, as amended (the "Amalgamation properly come before the meeting.
Agreement"), among NTL Incorporated, a Delaware
corporation ("NTL"), NTL (Bermuda) Limited, a Bermuda THE UNDERSIGNED HEREBY ACKNOWLEDGES RECEIPT OF THE NOTICE OF
corporation and a wholly-owned subsidiary of NTL ("Sub"), SPECIAL GENERAL MEETING AND JOINT PROXY
and the Company pursuant to which Sub will amalgamate STATEMENT/PROSPECTUS.
with the Company and the issued and outstanding Class A
Common Shares, par value L.01 per share and Class B PLEASE SIGN, DATE AND RETURN IN THE ENCLOSED POSTAGE-
Common Shares, par value L.01 per share of the Company PREPAID ENVELOPE.
(collectively, the "Common Shares"), other than Common
Shares held by NTL, any subsidiary of NTL or any NOTE: Please sign exactly as name(s) appear(s) in address.
subsidiary of the Company and Common Shares held by the When signing as attorney-in-fact, executor, administrator,
shareholders if any, who properly exercise their trustee or guardian, please add your title as such, and if
dissenters' rights under Bermuda law, will be cancelled signer is a corporation, please sign with full corporate
in consideration for the receipt of the consideration name by duly authorized officer or officers and affix the
provided for in the Amalgamation Agreement. corporate seal. When shares are issued in the name of two or
more persons, all such persons should sign.
FOR AGAINST ABSTAIN
[ ] N N To be valid, this Proxy must be received at the address on
the enclosed envelope prior to the time of the Special
General Meeting or adjourned meeting at which the person
named in the Proxy proposes to vote.
</TABLE>
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<PAGE> 355
ANNEX K
NTL INCORPORATED
110 EAST 59TH STREET
NEW YORK, NEW YORK 10022
PROXY
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF NTL
INCORPORATED FOR THE SPECIAL MEETING OF STOCKHOLDERS OF NTL INCORPORATED.
The undersigned stockholder of NTL Incorporated ("NTL") hereby appoints
George S. Blumenthal, J. Barclay Knapp and Richard J. Lubasch, and each of them
individually, with full power of substitution, as Proxies of the undersigned,
and hereby authorizes them to represent and to vote and act for the undersigned
at the Special Meeting of Stockholders of NTL to be held on Thursday, October
29, 1998, at 10:00 a.m., local time, at the Essex House Hotel, 160 Central Park
South, Hyde Park Suite, New York, New York 10019, and any adjournment,
continuation or postponement thereof, according to the number of votes which the
undersigned is now, or may then be, entitled to cast. This proxy revokes all
prior proxies given by the undersigned with respect to the matters covered
hereby. The undersigned acknowledges receipt of the Joint Proxy Statement/
Prospectus, dated , 1998, and the related Notice of Special Meeting
of Stockholders.
All powers may be exercised by both said Proxies or substitutes voting or
acting or, if only one votes and acts, then by that one. The undersigned
instructs such Proxies or their substitutes to vote as specified on the reverse
side on the proposals set forth in the Joint Proxy Statement/Prospectus.
(SEE REVERSE SIDE)
<TABLE>
<C> <S>
---- PLEASE MARK
X YOUR VOTES
WITH AN "X"
----
</TABLE>
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED HEREIN BY
THE UNDERSIGNED STOCKHOLDER AND AT THE DISCRETION OF THE PROXY HOLDERS AS TO ANY
OTHER BUSINESS THAT MAY PROPERLY COME BEFORE THE MEETING. IF NO DIRECTION IS
MADE, THIS PROXY WILL BE VOTED FOR PROPOSAL 1 AND PROPOSAL 2 AND AT THE
DISCRETION OF THE PROXY HOLDERS AS TO ANY OTHER BUSINESS THAT MAY PROPERLY COME
BEFORE THE MEETING.
<TABLE>
<S> <C> <C> <C>
1. AUTHORIZATION AND APPROVAL OF THE ISSUANCE OF SHARES of FOR AGAINST ABSTAIN
common stock, par value $.01 per share, of NTL (the "NTL [ ] [ ] [ ]
Common Stock") pursuant to an Agreement and Plan of
Amalgamation, dated February 4, 1998, as amended, among
NTL, NTL (Bermuda) Limited, a Bermuda corporation and a
wholly-owned subsidiary of NTL ("Sub"), and Comcast UK
Cable Partners Limited, a Bermuda corporation
("Partners"), which agreement provides, among other
things, (i) for the amalgamation of Sub with Partners
(the "Amalgamation") and (ii) for the conversion of all
issued and outstanding Class A Common Shares, par value
L.01 per share, and Class B Common Shares, par value L.01
per share, of Partners, other than shares held by NTL,
any subsidiary of NTL or any subsidiary of Partners and
shares held by shareholders, if any, who properly
exercise their dissenters' rights under Bermuda law, into
the right to receive the consideration to be paid in
connection with the Amalgamation.
2. AUTHORIZATION AND APPROVAL OF THE SHARES AMENDMENT to FOR AGAINST ABSTAIN
increase the maximum number of authorized shares of NTL [ ] [ ] [ ]
Common Stock from 100,000,000 to 400,000,000 shares and
to increase the maximum number of authorized shares of
preferred stock, par value $.01 per share, of NTL from
2,500,000 to 10,000,000 shares.
</TABLE>
3. In their discretion, the Proxies are authorized to vote upon such other
business as may properly come before the meeting.
Please sign exactly as name(s)
appear(s) herein. When shares are held
by joint tenants, both should sign.
When signing as attorney-in-fact,
executor, administrator, trustee or
guardian, please give full title as
such. If a corporation, please sign in
full corporate name by president or
other authorized corporate officer. If
a partnership, please sign the
partnership name by authorized
person(s).
Dated: , 1998
--------------------------------------
--------------------------------------
Signature
--------------------------------------
Signature
PLEASE MARK, SIGN, DATE AND RETURN THIS PROXY CARD PROMPTLY USING THE ENCLOSED
ENVELOPE
K-1
<PAGE> 356
ANNEX L
TELEWEST AGREEMENT
DATED: 14 AUGUST 1998
(1) TELEWEST COMMUNICATIONS PLC
(2) TELEWEST COMMUNICATIONS HOLDINGS LIMITED
(3) COMCAST UK CABLE PARTNERS LIMITED
(4) NTL INCORPORATED
Agreement in respect of the rights of first refusal
relating to Birmingham Cable and Cable London
THIS AGREEMENT is made on 14 August 1998
BETWEEN:
(1) TELEWEST COMMUNICATIONS PLC (registered number 298307) whose
registered office is at Genesis Business Park, Albert Drive, Woking, Surrey
GU21 5RW ("Telewest");
(2) TELEWEST COMMUNICATIONS HOLDINGS LIMITED (registered number
02982404) whose registered office is at Genesis Business Park as aforesaid
("TCHL");
(3) COMCAST UK CABLE PARTNERS LIMITED whose registered office is at
Clarendon House, 2 Church Street West, Hamilton, HM 11, Bermuda ("CUKCP");
and
(4) NTL INCORPORATED whose principal place of business is at 110 East
59th Street, New York, New York 10022, USA ("NTL").
IT IS AGREED as follows:
1. DEFINITIONS AND INTERPRETATION
1.1 The following words and expressions where used in this Agreement have
the meanings given to them below:-
"acceptance period" as defined in clause 4.2;
"Acquisition" the acquisition of shares in Cable London upon
CL Completion pursuant to clause 4.6;
"Amalgamation" the proposed amalgamation to be made between
NTL (Bermuda) Limited and CUKCP pursuant to the
Agreement and Plan of Amalgamation dated 4
February 1998 between NTL (1), NTL (Bermuda)
Limited (2) and CUKCP (3), as such agreement
may be amended or restructured, or any similar
business combination involving CUKCP and NTL or
their affiliates;
"Approvals" (a) the purchaser (as defined in clause 4.5)
receiving written confirmation from the
Secretary of State for Trade and Industry
("DTI") and from the Independent Television
Commission ("ITC"), in terms reasonably
satisfactory to the purchaser, to the effect
that the Acquisition will not lead to the
revocation of any licenses (issued pursuant to
the Cable and Broadcasting Act 1984 or the
Broadcasting Act 1990 (as amended)) or the
revocation of any of the telecommunications or
wireless telegraphy licenses
L-1
<PAGE> 357
issued by the DTI pursuant to the
Telecommunications Act 1984 or the Wireless
Telegraphy Act 1949 or 1998 which are held by
Cable London and any of its subsidiary
undertakings;
(b) the Office of Fair Trading having indicated
to the purchaser, in terms reasonably
satisfactory to the purchaser, either that the
Acquisition does not qualify for investigation
by the Monopolies and Mergers Commission
pursuant to the Fair Trading Act 1973 or that
the Secretary of State for Trade and Industry
has decided not to refer the Acquisition to the
Monopolies and Mergers Commission; and
(c) CIBC consenting, in terms reasonably
satisfactory to the purchaser, to (i) the
Acquisition (ii) the capitalisation referred to
in clause 4.7 (unless the CL Loans and Fees are
to be assigned), (iii) the release of the
shares in Cable London to be sold by the vendor
pursuant to the Acquisition from the security
granted to CIBC over such shares and the
termination of any deed of subordination
between the vendor and CIBC and (iv) the
assignment of the CL Loans and Fees to the
purchaser, in each case with effect from CL
Completion (unless the CL Loans and Fees are to
be capitalized pursuant to Clause 4.7);
"BC Completion" the performance of the obligations to complete
the sale and purchase of the Joint BC Shares
and such other interest (if any) which CUKCP
has in any other shares in Birmingham Cable in
accordance with clause 2;
"BC Consultant Agreement" the Consultant Agreement for Operational
Assistance dated 25 April 1990 between
Birmingham Cable (1) Birmingham Cable Limited
(2) and Comcast UK Consulting Inc. (formerly
Comcast BV Inc.) (3) as amended by a
Supplemental Agreement dated 8 April 1994
between Birmingham Cable (1), Birmingham Cable
Limited (2) and Comcast UK Consulting Inc. (3);
"BC Loans and Fees" the subordinated loans (including interest) and
fees due to CUKCP and Comcast UK Consulting
Inc. from Birmingham Cable and its subsidiary
undertakings;
"BC Management Agreement" the Management Agreement dated 25 April 1990
between Birmingham Cable (1), Birmingham Cable
Limited (2), US West International Holdings
Inc. (3) and Comcast Cablevision of Birmingham
Inc. (4) as novated pursuant to the Assignment
Agreement dated 27 August 1990 between
Birmingham Cable (1), Birmingham Cable Limited
(2), US West International Holdings Inc. (3),
Comcast Cablevision of Birmingham Inc. (4), US
West Cable Communications Limited (5) and
Comcast UK Consulting Inc. (6) and the
Assignment and Amendment Agreement dated 5
August 1992 between Birmingham Cable (1),
Birmingham Cable Limited (2), US West Cable
Communications Limited (3), Comcast UK
Consulting Inc. (4) and TeleWest Communications
Group Limited (5);
"BC Offer Notice" the offer notice despatched by the board of
directors of Birmingham Cable pursuant to
Article 59(D) of the Articles of Association of
Birmingham Cable following the receipt by
Birmingham
L-2
<PAGE> 358
Cable of a transfer notice from General Cable
PLC dated August 1998;
"Birmingham Cable" Birmingham Cable Corporation Limited
(registered number 2170379);
"Birmingham Link Agreement" the Agreement concerning Birmingham-Croyden
Link dated February 13, 1993 between National
Transcommunications Limited and Birmingham
Cable;
"Business Day" a weekday (other than a Saturday) on which
clearing banks are ordinarily open for business
in both the City of London and New York;
"Cable London" Cable London PLC (registered number 01794264);
"CIBC" Canadian Imperial Bank of Commerce (as agent
and security trustee under the terms of the
L170 million credit facility in favor of Cable
London);
"CL Completion" the performance of the obligations to complete
the sale and purchase of shares in Cable London
in accordance with clause 4;
"CL Loans and Fees" the subordinated loans (including interest
thereon) and fees due to the vendor and
MediaOne Cable Communications (if the vendor is
Telewest) and Comcast UK Consulting Inc. (if
the vendor is CUKCP) and any of their
respective subsidiaries and parent undertakings
from Cable London and its subsidiary
undertakings;
"Co-ownership Agreement" the Co-ownership Agreement dated 12 March 1990
originally between US West International
Holdings Inc. (1) and Comcast Cablevision of
Birmingham Inc. (2) as subsequently amended,
supplemented and novated, it being acknowledged
by the parties to this Agreement that the
parties to the Co-ownership Agreement are now
TCHL and CUKCP;
"CUKCP Consultant Agreement" the Consultant Agreement for Operational
Assistance dated 17 August 1989 between Cable
London (1) and Comcast Corporation (2), as
subsequently assigned to Comcast UK Consulting
Inc. (for so long as it remained a subsidiary
of Comcast Corporation) pursuant to an
Assignment Agreement dated 14 September 1990
between Comcast Corporation (1), Comcast UK
Consulting Inc. (2), Cable London (3) and Cable
Camden Limited, Cable Enfield Limited, Cable
Hackney & Islington Limited and Cable Haringey
Limited (4);
"Equalisation Deed" the Equalisation Deed dated 17 July 1996
between Telewest (1) and CUKCP (2);
"GC Shares" the 22,958,319 ordinary shares of L1 each in
Birmingham Cable registered in the name of
General Cable PLC;
"Joint BC Shares" the 28,060,167 ordinary shares of L1 each in
Birmingham Cable registered in the joint names
of TCHL and CUKCP;
"offer" as defined in clause 4.1;
"offer notice" as defined in clause 4.1;
L-3
<PAGE> 359
"prescribed period" the period of 90 calendar days after the expiry
of the acceptance period or, if an appropriate
election is made pursuant to sub-clause 4.5.2
to extend such period, the period ending up to
90 calendar days after the Long Stop Date (as
defined in clause 4.5.2);
"purchaser" as defined in clause 4.5;
"Shoot-out Period" the period commencing on the date which is the
earlier of (i) six calendar months after (x)
the date of completion of the Amalgamation or
(y) if earlier, 31 December 1998 and (ii) the
earlier of (a) the date on which a public
announcement is made of a firm intention to
make a recommended offer for the ordinary
shares of Telewest (other than those owned or
contracted to be acquired by the offeror or
persons acting in concert with the offeror) or
of a merger between NTL and a third party
(being a person which prior to such merger is
not a member of the same group as NTL) where
NTL is not the surviving entity whether or not,
in either case, subject to the satisfaction of
any pre-conditions and (b) completion of any
such offer or merger whether or not
recommended, and ending at midnight on the date
which is three calendar months thereafter (both
dates inclusive);
"Subscription Agreements" (a) the subscription agreement dated 4 May 1989
between Birmingham Cable (1) and US West
International Holdings Inc. (2);
(b) the BCC Subscription Agreement dated 31 May
1989 between Birmingham Cable (1), US West
International Holdings Inc. (2), Compagnie
Generale des Eaux (3), The Cable Corporation
Limited (4) and The Standard Life Assurance
Company (5);
(c) the Supplemental Subscription Agreement
dated 16 March 1990 between Birmingham Cable
(1), US West International Holdings Inc. (2),
Compagnie Generale des Eaux (3), The Cable
Corporation Limited (4), The Standard Life
Assurance Company (5), Comcast Cablevision of
Birmingham Inc. (6) and General Cable Limited
(7);
(d) the Second Supplemental Subscription
Agreement dated 16 March 1990 between
Birmingham Cable (1), US West International
Holdings Inc. (2), Compagnie Generale des Eaux
(3), The Cable Corporation Limited (4), The
Standard Life Assurance Company (5), Comcast
Cablevision of Birmingham Inc. (6) and General
Cable Limited (7);
(e) the Third Supplemental Subscription
Agreement dated 12 May 1992 between Birmingham
Cable (1), US West International Holdings Inc.
(2), Compagnie Generale des Eaux (3), The Cable
Corporation Limited (4), The Standard Life
Assurance Company (5), Comcast Cablevision of
Birmingham Inc. (6), General Cable Limited (7)
and US West Cable Programming Corporation (8);
(f) the Agreement dated 30 March 1994 between
General Cable Limited (1), Compagnie Generale
des Eaux (2), TCI/US West Communications Inc.
(3), US West International Holdings Inc. (4),
United Artists Cable Television International
Holdings Inc. (5), CUKCP (6), Comcast
Corporation (7), The Cable Corporation Limited
(8), Birmingham Cable (9), Birmingham Cable
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Limited (10) and The Standard Life Assurance
Company (11); and
(g) the Novation Agreement dated 21 November
1994 between General Cable PLC (1), Compagnie
Generale des Eaux (2), TCI/US West Cable
Communications Inc. (3), US West International
Holdings Inc. (4), United Artists Cable
Television International Holdings Inc. (5),
CUKCP (6), Comcast Corporation (7), Comcast
Cablevision of Birmingham Inc. (8), The Cable
Corporation Limited (9), Birmingham Limited
(10), Birmingham Cable Limited (11), The
Standard Life Assurance Company (12), TCHL (13)
and Telewest Communications plc (14);
"Sum" as defined in clause 4.1;
"Telewest Consultant
Agreement" the Consultant Agreement for Technical
Assistance between Cable London (1) and
MediaOne Cable Communications Limited (2);
"vendor" as defined in clause 4.5.
1.2 Where used in this Agreement, the terms "subsidiary undertaking",
"parent undertaking" and "director" shall have the meanings respectively
attributed to them by the Companies Act 1985 (as amended).
1.3 The headings used in this Agreement are for convenience only and shall
not affect its meaning.
1.4 References to a clause or schedule are (unless otherwise stated) to a
clause of or schedule to this Agreement.
1.5 Words importing one gender shall (where appropriate) include any other
gender and words importing the singular shall (where appropriate) include the
plural and vice versa.
1.6 References in this Agreement to times and dates are references to times
and dates prevailing in London.
2. SALE OF JOINT BC SHARES
2.1 CUKCP shall sell or procure to be sold and Telewest shall purchase:
2.1.1 CUKCP's interest in the Joint BC Shares with full title
guarantee and such other interest (if any) which CUKCP has in any other
shares in Birmingham Cable;
2.1.2 CUKCP's right to, and interest in, the BC Loans and Fees;
in each case, upon and subject to the terms and conditions of this
Agreement.
2.2 CUKCP shall procure that Telewest shall acquire CUKCP's interest in the
Joint BC Shares and such other interest (if any) which CUKCP has in any other
shares in Birmingham Cable free from all liens, charges and encumbrances and any
other third party rights whatsoever and together with all rights now or
hereafter attaching to them.
2.3 The consideration for the sale and purchase of CUKCP's interest in the
Joint BC Shares and such other interest (if any) which CUKCP has in any other
shares in Birmingham Cable shall be the sum of L125,000,000 and L5,000,000 (or
L2,500,000 if the Amalgamation does not occur on or prior to BC Completion with
a further L2,500,000 to be paid forthwith on the Amalgamation being completed)
in respect of CUKCP's interest in the BC Loans and Fees, which consideration
shall be payable in cash.
2.4 BC Completion
2.4.1 BC Completion shall take place at the offices of Freshfields, 65
Fleet Street, London EC4 immediately prior to the Amalgamation being
completed or, if the Amalgamation occurs before 16 October 1998, on 16
October 1998 PROVIDED THAT if the Amalgamation has not taken place by
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31 December 1998, BC Completion shall occur on 31 December 1998. Each of
CUKCP and NTL undertakes to give to Telewest not less than 5 days prior
notice of the date on which the Amalgamation is expected to be completed
provided that the Amalgamation shall not be completed prior to such date.
Where BC Completion is to take place immediately prior to the Amalgamation,
BC Completion shall take place in escrow at the offices of Freshfields as
aforesaid on the Business Day immediately prior to the expected date of the
Amalgamation when each of CUKCP and Telewest shall deliver the documents to
be provided by it pursuant to Clause 2.5 to the other's solicitors and
Telewest shall telegraphically transfer the consideration due by it
pursuant to sub-clause 2.5.2.1 to CUKCP's solicitors. Such documents and
monies shall be held to the order of the deliveror pending satisfaction of
the escrow. The sole escrow condition shall be the Amalgamation being
completed when the documents shall be dated and the documents and monies
automatically released from the escrow to the order of the holder of such
documents and monies. If the escrow condition is not satisfied within two
Business Days of such delivery, the documents and monies (together with any
interest accrued thereon) shall be returned to the deliverors.
2.4.2 CUKCP agrees with Telewest that between the date of this
Agreement and BC Completion it shall not, except with the prior written
consent of Telewest:
2.4.2.1 sell, transfer, assign, grant options over, dispose of, or
otherwise deal in any manner whatsoever with the legal title to, or the
beneficial ownership of, or any other interest in, any shares in
Birmingham Cable beneficially owned by it or any loans due to it (other
than as contemplated by this Agreement);
2.4.2.2 demand repayment of any of the loans or accrued consulting
fees due to it or any of its subsidiary or parent undertakings by
Birmingham Cable or any of its subsidiary undertakings or the payment of
interest thereon (other than as contemplated by this Agreement); and
2.4.2.3 enter into any agreement to do any of the foregoing in
relation to such shares in Birmingham Cable (other than as aforesaid).
2.5 On BC Completion:
2.5.1 CUKCP shall deliver to Telewest (subject to the right of
Telewest to waive any such requirement):
2.5.1.1 a stock transfer form duly executed by CUKCP only
transferring the Joint BC Shares to Telewest (subject to TCHL executing
the same in its capacity as a joint transferor);
2.5.1.2 resignation letters executed as deeds in a form reasonably
acceptable to Telewest from Ronald Lawley and Gary Mizga resigning as
directors of Birmingham Cable with effect from BC Completion without any
compensation for loss of office and waiving any other claims which they
may have in their capacity as directors against Birmingham Cable;
2.5.1.3 an agreement in the form set out in Schedule 1 to this
Agreement duly executed by Comcast UK Consulting Inc.;
2.5.1.4 a letter duly signed by CUKCP consenting to Telewest (or,
if so directed by Telewest, TCHL) being registered as the sole holder of
the Joint BC Shares for the purposes of Article 67(C) of Birmingham
Cable's Articles of Association;
2.5.1.5 an assignment in a form reasonably acceptable to Telewest
duly executed by CUKCP and Comcast UK Consulting Inc. assigning their
respective rights and interests in the BC Loans and Fees to Telewest
conditional upon Telewest entering into a deed of subordination in a
form reasonably acceptable to Chemical Investment Bank Limited
("Chemical") and providing to Chemical such evidence as is required by
clause 12.1(b) of the L175 million Revolving Credit Facility Agreement
dated 15 February 1995 in favor of Birmingham Cable Limited;
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2.5.2 Telewest shall (subject to the right of CUKCP to waive any such
requirement):
2.5.2.1 procure the telegraphic transfer of L130,000,000 (or, if
the Amalgamation does not occur on or prior to BC Completion,
L127,500,000) in cleared funds to an account specified by CUKCP, receipt
of which shall discharge Telewest from its obligation to pay the
consideration for CUKCP's interest in the Joint BC Shares, such other
interest (if any) which CUKCP has in any other shares in Birmingham
Cable and the BC Loans and Fees;
2.5.2.2 deliver to CUKCP the counterpart of the agreement referred
to in sub-clause 2.5.1.3 duly executed by all of the parties to that
agreement (other than Comcast UK Consulting Inc.); and
2.5.2.3 if required by CUKCP, deliver to CUKCP or, if so directed,
to Chemical Investment Bank Limited, the deed of subordination and
evidence referred to in sub-clause 2.5.1.5 duly executed by Telewest.
2.6 Subject to CUKCP complying with its obligations under sub-clause 2.5.1,
each of CUKCP, Telewest and TCHL hereby agrees that the sale of CUKCP's interest
in the Joint BC Shares to Telewest (or TCHL) pursuant to clauses 2.1 to 2.5
(inclusive) shall supersede the provisions of section 5 of the Co-ownership
Agreement which would otherwise apply as a result of the Amalgamation being
implemented.
2.7 Each of CUKCP and TCHL hereby (i) waives any claims and rights it may
have as at the date of this Agreement against the other or any of its subsidiary
or parent undertakings as of the date of this Agreement and (ii) agrees that
with effect from BC Completion, the Co-ownership Agreement shall forthwith
terminate without any liability for any of the parties to that Agreement.
2.8 Each of Telewest and TCHL undertakes that with effect from BC
Completion, it shall procure that CUKCP and its parent and subsidiary
undertakings are released from all past, present and future obligations under
the Subscription Agreements.
2.9 Promptly following the signing of this Agreement, each of CUKCP and
TCHL shall inform the appraiser appointed under the Co-ownership Agreement of
the settlement reached under this Agreement and CUKCP and TCHL shall each use
its best endeavors to ensure that the appraisal process under such agreement is
terminated as soon as practicable. Any fees and expenses incurred in such
appraisal process shall be payable by CUKCP.
2.10 CUKCP hereby agrees to exercise all voting rights and other powers
available to it and to procure that those persons nominated by it as directors
of Birmingham Cable will vote and act in a manner so as to assist TCHL complying
with its obligations under sub-clause 2.5.2.
2.11 Following BC Completion, Telewest undertakes to CUKCP to use all
reasonable endeavors to obtain the release of CUKCP and its subsidiary and
parent undertakings as at the date of this Agreement from all guarantees,
indemnities, counter-indemnities and letters of comfort of any nature whatsoever
(together the "Guarantees") given to any third party by CUKCP or any of its
subsidiary or parent undertakings as at the date of this Agreement in respect of
any liability or obligation of Birmingham Cable or any of its subsidiary
undertakings and pending such release, to indemnify CUKCP (for itself and as
agent for its subsidiary and parent undertakings as at the date of this
Agreement ) against all amounts paid by any of them to any third party pursuant
to any such Guarantees arising after BC Completion. Telewest undertakes to CUKCP
(for itself and as agent for its subsidiary and parent undertakings as at the
date of this Agreement) that it will pay any amounts properly due and payable
under the Guarantees as and when the same shall come due.
2.12 If the Amalgamation is completed, NTL agrees that Birmingham Cable may
terminate the Birmingham Link Agreement by giving six months prior written
notice such notice to be served at any time on or after January 1, 2000.
Accordingly, NTL agrees that it shall, and shall procure that National
Transcommunications Limited shall, agree to an appropriate amendment to the
Birmingham Link Agreement to enable such termination in the event that the
Amalgamation occurs and CUKCP receives all sums due to it under clause 2.3.
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3. SALE OF GC SHARES
3.1 CUKCP hereby agrees to exercise all voting rights and other powers
available to it and to procure that those persons nominated by it as directors
of Birmingham Cable will vote and act in a manner so as to ensure (so far as it
is within its power to do so) the BC Offer Notice is withdrawn and the
pre-emption procedure commenced by such notice is terminated as soon as
practicable after the signing of this Agreement.
3.2 In the event that such BC Offer Notice is not withdrawn and/or the
pre-emption procedure is not terminated, CUKCP (a) waives any objection it may
have to the BC Offer Notice or the transfer notice issued by General Cable plc
in connection with the BC Offer Notice, whether under Article 59 or Article 67
of Birmingham Cable's Articles of Association, or otherwise; (b) undertakes not
to acquire any GC Shares under the pre-emption provisions set out in Article 59
of Birmingham Cable's Articles of Association pursuant to the BC Offer Notice
(save as required to do so by TCHL to enable TCHL and CUKCP (at the expense of
TCHL and not CUKCP) to take up TCHL's rights under such pre-emption provisions);
and (c) hereby waives all and any rights it may have in any such shares acquired
by TCHL (whether jointly with CUKCP or otherwise) under the Co-ownership
Agreement and/or the Articles of Association of Birmingham Cable by virtue of
the operation of such pre-emption provisions (or otherwise).
3.3 CUKCP and NTL hereby agree (a) to waive all and any rights, claims and
potential claims each may have in relation to the takeover of General Cable PLC
by Telewest under the Co-ownership Agreement (and, in particular, clause 4.4
thereof) and (b) to waive all and any rights, claims and potential claims
arising under the Co-ownership Agreement, the Articles of Association of
Birmingham Cable and/or the Articles of Association of Cable London in relation
to such takeover whether by virtue of any change of control of TCHL and/or
Telewest or otherwise.
3.4 CUKCP and NTL agrees to the provisions contained in this clause 3 in
consideration for Telewest and TCHL agreeing to the other provisions of this
Agreement.
4. CABLE LONDON SHOOT-OUT
4.1 At any time during the Shoot-out Period CUKCP may give notice and not
later than the end of the Shoot-out Period CUKCP shall give notice (an "offer
notice") to Telewest offering to sell to Telewest all of the shares in Cable
London which are or will at CL Completion be owned by CUKCP (including any
shares issued to CUKCP pursuant to clause 4.7) and all of the rights and
interests of CUKCP and its subsidiary undertakings in the CL Loans and Fees for
the cash sum certain (not to be calculated by reference to a formula) (the
"Sum") specified in the offer notice on the terms and conditions set out in this
clause 4 (the "offer"). If CUKCP fails to give the offer notice prior to the end
of the Shoot-out Period, then CUKCP shall be deemed to have delivered an offer
notice for a sum equal to L100 million. At any time after the date of a public
announcement by CUKCP and NTL that the Amalgamation will not become effective
but prior to 31 December 1998, CUKCP shall have the right to give a notice to
Telewest electing to participate in the procedure specified in this clause 4.
Where this applies, for the purposes of this clause 4 and the definition of the
"Shoot-out Period" the date of such notice shall be substituted for the date on
which the Amalgamation is completed.
4.2 Telewest shall have a period of 30 calendar days ("the acceptance
period") commencing with and including the date of service of the offer notice
and expiring at the close of business on the twenty-ninth calendar day
thereafter in which to accept or decline the offer by notice to CUKCP.
4.3 If Telewest accepts the offer by notice given within the acceptance
period, CUKCP shall sell, and procure that its subsidiary undertakings shall
sell, subject to and conditional upon the Approvals being obtained or waived by
Telewest, to Telewest with full title guarantee free from all liens, charges and
encumbrances (save as provided in sub-clause 4.6.2.2) and any other third party
rights whatsoever and with all rights then or thereafter attaching thereto and
Telewest shall purchase from CUKCP or any of its subsidiary undertakings all of
the shares in the capital of Cable London owned or to be owned, or in which
CUKCP has an interest, at CL Completion by CUKCP or its subsidiary undertakings
(including any shares issued to
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CUKCP pursuant to clause 4.7) and from CUKCP and its subsidiary undertakings
their respective rights and interests in the CL Loans and Fees at the Sum
specified in the offer notice.
4.4 If Telewest declines the offer by notice given within the acceptance
period, or no notice is given by Telewest within the acceptance period, Telewest
shall sell, and procure that its subsidiary undertakings and MediaOne Cable
Communications Limited shall sell, subject to and conditional upon the Approvals
being obtained or waivedby CUKCP, to CUKCP with full title guarantee free from
all liens, charges and encumbrances (save as provided in sub-clause 4.6.2.2) and
any other third party rights whatsoever and with all rights then or thereafter
attaching thereto and CUKCP shall purchase from Telewest or any of its
subsidiary undertakings all of the shares in the capital of Cable London owned
and to be owned, or in which Telewest has an interest, at CL Completion by
Telewest or its subsidiary undertakings (including any shares issued to Telewest
pursuant to clause 4.7) and from Telewest and its subsidiary undertakings their
respective rights and interests in the CL Loans and Fees, at the Sum specified
in the offer notice.
4.5 ...
4.5.1 If either Telewest or CUKCP ("the purchaser") becomes obliged or
agrees under the terms of clauses 4.3 or 4.4 to purchase the shares in
Cable London which are owned by the other ("the vendor"), the sale of such
shares ("the CL Sale Shares") shall be completed on such date as the
purchaser may (subject as provided herein) specify on giving not less than
ten Business Days' prior notice to the vendor (provided that at CL
Completion all of the Approvals have been obtained or, to the extent
permitted, waived by the purchaser).
4.5.2 If CL Completion has not occurred within 90 calendar days after
the end of the acceptance period ("the Long Stop Date"), the purchaser
shall cease to be entitled to purchase the CL Sale Shares and the CL Loans
and Fees unless it shall have elected, by notice in writing to the vendor
prior to such date to delay the date of CL Completion by a period of up to
a further 90 calendar days from the Long Stop Date. If the purchaser
exercises such option, it shall pay to the vendor at CL Completion an
amount equal to 5% of the Sum for every 30 calendar days (or part thereof)
by which the date for CL Completion is extended from the Long Stop Date up
to a maximum of 90 days. If the CL Sale Shares have not been purchased by
the end of the prescribed period, the purchaser shall cease to be entitled
to purchase the CL Sale Shares or the CL Loan and Fees and thereafter
(subject to clauses 4.5.3 and 4.5.4) the vendor shall have the option (to
be exercised and completed within 60 days) to purchase the CL Sale Shares
and the CL Loans and Fees from the purchaser for an amount equal to 70
percent of the Sum and this shall be the only remedy of the vendor for any
failure by the purchaser to acquire the CL Sale Shares and CL Loans and
Fees. If the vendor exercises this option, it shall give to the purchaser
not less than 10 Business Days' prior notice of the date of CL Completion.
4.5.3 If the purchaser is prohibited from acquiring the CL Sale Shares
solely because it is unable to obtain either of the Approvals referred to
in paragraphs (a) and (b) of the definition of "Approvals" by the expiry of
the prescribed period and the purchaser elects not to waive such Approvals,
the vendor shall have the option (to be exercised and completed within 60
days) to purchase the CL Sale Shares from the purchaser for the Sum. If the
vendor exercises this option, it shall give to the purchaser not less than
10 Business Days' prior notice of the date of CL Completion.
4.5.4 If the purchaser is unable to acquire the CL Sale Shares because
it is unable to obtain the Approval referred to in paragraph (c) of the
definition of "Approvals" by the expiry of the prescribed period, then
(subject to the provisions of clause 4.7) the provisions of clauses 4.1 to
4.8 (inclusive) shall cease to apply (without prejudice to any breaches of
such clauses prior to such date).
4.6 At CL Completion:
4.6.1 the vendor shall deliver to the purchaser:
4.6.1.1 a duly executed transfer of the shares in Cable London
owned by the vendor as at CL Completion (including any shares issued to
the vendor pursuant to clause 4.7) together with the share certificates
relating to such shares;
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4.6.1.2 resignation letters executed as deeds in a form reasonably
acceptable to the purchaser from those directors of Cable London
appointed by the vendor resigning as directors of Cable London and its
subsidiary undertakings with effect from CL Completion without any
compensation for loss of office and waiving any other claims whatsoever
against Cable London;
4.6.1.3 if the Amalgamation shall not previously have been
completed, an agreement in a form reasonably satisfactory to the
purchaser duly executed by CUKCP (if CUKCP is the vendor) or MediaOne
Cable Communications Ltd. (if Telewest is the seller) terminating the
CUKCP Consultant Agreement (if CUKCP is the vendor) or the Telewest
Consultant Agreement (if Telewest is the seller) with effect from CL
Completion without any liability or obligations upon either party to
that Agreement (and, in the case of the termination of the CUKCP
Consultant Agreement, upon Comcast Corporation) other than for accrued
fees;
4.6.1.4 if CUKCP is the vendor, an agreement in a form reasonably
acceptable to Telewest, duly executed by CUKCP terminating the
Equalisation Deed with effect from CL Completion;
4.6.1.5 if Telewest is the vendor, an agreement in a form
reasonably acceptable to CUKCP, terminating all of the provisions of the
Equalisation Deed other than those contained in clauses 1, 4.1, 4.3, 7
and 10 to 14 (inclusive); and
4.6.1.6 unless the CL Loans and Fees are to be capitalized under
clause 4.7, an assignment in a form reasonably acceptable to the
purchaser duly executed by the vendor and MediaOne Cable Communications
Limited (if Telewest is the seller) and, where appropriate, any of their
respective subsidiary or parent undertakings assigning their respective
rights and interests in the CL Loans and Fees to the purchaser;
4.6.2 the purchaser shall:
4.6.2.1 procure the telegraphic transfer of the Sum (or such lesser
amount in accordance with clause 4) in cleared funds to such account as
the vendor shall specify and any further amount payable to the vendor
pursuant to sub-clause 4.5.1;
4.6.2.2 if required by the vendor, deliver to the vendor or, if so
directed, to CIBC, a mortgage and deed of subordination in a form
reasonably acceptable to CIBC duly executed by the purchaser, together
with a legal opinion in a form reasonably acceptable to CIBC confirming
the capacity of the purchaser to enter into such documents and that the
purchaser's obligations thereunder are legal, valid and binding and
enforceable in accordance with their terms;
4.6.2.3 deliver to the vendor the counterparts of the agreements
referred to in sub-clauses 4.6.1.3, 4.6.1.4 or 4.6.1.5 (as appropriate)
and 4.6.1.6 duly executed by Cable London (in the case of the document
referred to in sub-clause 4.6.1.3) and the vendor (in the case of the
documents referred to in sub-clauses 4.6.1.4, 4.6.1.5 and 4.6.1.6).
4.7 Each of CUKCP and Telewest agrees that if a capitalization will result
in the Approval contained in paragraph (c) of the definition of "Approvals"
being obtained, or if requested by the proposed buyer of the CL Sale Shares, it
shall, conditional upon the consent of CIBC being obtained, exercise all voting
rights and other powers of control available to it, and procure that each
director of Cable London appointed by it will vote and act in a manner, so as to
procure that all loans and fees outstanding from the vendor (or any subsidiary
or parent undertaking of the vendor) (as defined in clause 4.5) including any
interest on such loans immediately prior to CL Completion are capitalised into
ordinary shares of L1 each in Cable London immediately prior to or at CL
Completion.
4.8 Each of Telewest and CUKCP undertakes and agrees that prior to CL
Completion it shall exercise all rights and comply with all obligations which it
may have under the Equalisation Deed so as to ensure that any shares in Cable
London which are registered in the name of the other but held as nominee for it
shall be transferred to it.
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4.9 The purchaser may waive any of the Approvals (other than the one
referred to in paragraph (c) of the definition of Approvals). Each of the
parties agrees to use best endeavours to procure that the Approvals are obtained
following service of an offer notice and shall cooperate and procure that Cable
London and its subsidiary undertakings shall cooperate to obtain the Approvals.
In particular, each of the parties agrees to take such action as CIBC may
reasonably require in order to obtain the Approval referred to in paragraph (c)
of the definition of Approvals.
4.10 The purchaser undertakes that with effect from CL Completion it shall
procure that the vendor and its parent and subsidiary undertakings as at the
date of this Agreement are released from all past, present and future
obligations under the Agreement dated 10 July 1989 between Cable London (1), US
West International Holdings (2), Comcast Corporation (3), Jerold Samuel Nathan
(4), Malcolm Gee (5), Sally Margaret Davids (6) and Stephen Michael Kirk (7).
4.11 Each of Telewest and CUKCP undertakes to the other that between the
date of this Agreement and the expiry of the Shoot-out Period it shall not and
shall procure that none of its subsidiary or parent undertakings shall, except
with the prior written consent of the other:-
4.11.1 sell, transfer, assign, grant options over, dispose of, or
otherwise deal in any manner whatsoever with the legal title to, or the
beneficial ownership of, or any other interest in, any shares in Cable
London owned by it or any loans due to it (other than as contemplated by
this Agreement or the Equalisation Deed);
4.11.2 demand repayment of any of the loans or accrued consultancy
fees due to it or any of its subsidiary or parent undertakings by Cable
London or any of its subsidiary undertakings or the payment of interest
thereon (other than as contemplated by this Agreement);
4.11.3 enter into any agreement to do any of the foregoing in relation
to such shares in Cable London (other than as aforesaid).
4.12 Each of Telewest and CUKCP agrees that it will consult with the other
following the expiry of the acceptance period and will take such action as the
purchaser may reasonably request, at the expense of the purchaser, in order to
minimise the payment of stamp duty on the transfer of any shares or the
assignment of any loans at CL Completion.
4.13 The vendor agrees with the purchaser that it shall exercise all voting
rights and other powers available to it and shall procure that each director of
Cable London appointed by it will act and vote in a manner so as not to prevent
the purchaser complying with its obligations under sub-clause 4.6.2.
4.14 Following CL Completion, the purchaser undertakes to the vendor to use
all reasonable endeavors to obtain the release of the vendor and its subsidiary
and parent undertakings as of the date of this Agreement from all guarantees,
indemnities, counter-indemnities and letters of comfort of any nature whatsoever
(together, the "Guarantees") given in relation to any liability or obligation
ofCable London or any of its subsidiary undertakings and pending such release,
to indemnify the vendor (for itself and as agent for its parent and subsidiary
undertakings) against all amounts paid by it (or any of them) to any third party
pursuant to any such Guarantees arising after CL Completion. The purchaser
further undertakes to the vendor (for itself and as agent for its subsidiary and
parent undertakings) that it will pay any amounts properly due and payable under
the Guarantees as and when the same fall due.
4.15 If CUKCP is the purchaser, Telewest undertakes to CUKCP, at the
expense of CUKCP, that it shall cooperate, shall exercise all voting rights and
other powers of control available to it and shall procure that each director of
Cable London appointed by it will act and vote in a manner, so as (i) to
procure, if so requested by CUKCP, that Cable London and its subsidiary
undertakings are acquired by CUKCP pursuant to the Acquisition free from all
indebtedness (being indebtedness which is accounted for as such for the purposes
of US GAAP) at CL Completion and (ii) to enable CUKCP to refinance the existing
L170 million facility in favour of Cable London with effect from, or immediately
prior to, CL Completion.
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5. CABLE LONDON HOUSEKEEPING
5.1 Each of Telewest and CUKCP hereby agrees that as soon as reasonably
practicable after the date of this Agreement and in any event prior to 31 August
1998, it shall exercise all voting rights and other powers of control available
to it, and shall procure that each director of Cable London appointed by it will
act and vote in a manner, so as to procure that:--
5.1.1 immediately following the Amalgamation being implemented, the
CUKCP Consultant Agreement and the Telewest Consultant Agreement are
terminated without any liability for any of the parties to those agreements
and that each of Telewest and CUKCP waives any claims and rights it may
have against the other or any of its subsidiary or parent undertakings with
respect to those agreements as of the date of this Agreement;
5.1.2 immediately following the Amalgamation being implemented, George
Blumenthal, Barclay Knapp, Leigh Wood and Mark Wynn are appointed as
directors of Cable London and Gary Mizga and Ronald Lawley resign as
directors of Cable London without any compensation for loss of office;
5.1.3 the special resolution set out in Schedule 2 is duly passed.
5.2 Each of Telewest and CUKCP hereby agrees that immediately following the
Amalgamation being implemented, the following persons shall be treated as having
been appointed by it as its Nominated Directors (as defined in Cable London's
Articles of Association) and shall give notice of such fact to Cable London:--
Telewest Charles Burdick
David Van Valkenburg
Mark Wynn
CUKCP Barclay Knapp
Leigh Wood
George Blumenthal
5.3 Notwithstanding the Articles of Association of Cable London, CUKCP and
Telewest shall ensure that its Nominated Directors (as defined in such Articles)
do not claim any travelling, hotel and other expenses incurred by such directors
in connection with their duties.
6. TELEWEST GUARANTEE
6.1 In consideration of CUKCP entering into this Agreement with TCHL and
Telewest at the request of Telewest, Telewest hereby irrevocably and
unconditionally, as primary obligor, undertakes and guarantees the full, prompt
and complete performance by TCHL of all its obligations under this Agreement and
the due and punctual payment of all sums now or subsequently payable by TCHL to
CUKCP under this Agreement when the same shall become due and undertakes with
CUKCP that if TCHL shall default in the payment of any sum under this Agreement,
Telewest shall forthwith on demand by CUKCP pay such sum to CUKCP.
6.2 The guarantee contained in clause 6.1 is a continuing guarantee and
shall remain in force until all the obligations of TCHL under this Agreement
have been fully performed and all sums payable by TCHL have been fully paid.
6.3 The obligations of Telewest shall not be affected by any act, omission,
matter or thing which, but for this provision, might operate to release or
otherwise exonerate Telewest from its obligations or affect such obligations,
including without limitation and whether or not known to Telewest:--
6.3.1 any time, indulgence, waiver or consent at any time given to
TCHL or any other person;
6.3.2 any compromise or release of or abstention from perfecting or
enforcing any right or remedy against TCHL or any other person;
6.3.3 any legal limitation, disability, incapacity or other
circumstance relating to TCHL or any other person or any amendment to or
variation of the terms of this Agreement or any other document referred to
in this Agreement; and
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6.3.4 any irregularity, unenforceability or invalidity of any
obligations of TCHL under this Agreement or the dissolution, amalgamation,
reconstruction or insolvency of TCHL.
6.4 The guarantee contained in clause 6.1 may be enforced by CUKCP without
CUKCP first taking any steps or proceedings against TCHL.
6.5 All payments to be made by Telewest shall be made in full, without
set-off or counterclaim and without any deduction whatsoever except to the
extent required by law.
6.6 The obligations of Telewest under this clause 6 shall not take effect
until, and are conditional upon, Telewest exercising its rights under clause
11.10.
7. NTL GUARANTEE
7.1 In consideration of TCHL and Telewest entering into this Agreement with
CUKCP and NTL at the request of NTL, NTL hereby irrevocably and unconditionally,
as primary obligor, undertakes and guarantees, the full, prompt and complete
performance by CUKCP of all its obligations under this Agreement and the due and
punctual payment of all sums now or subsequently payable by CUKCP to TCHL under
this Agreement when the same shall become due and undertakes with TCHL that if
CUKCP shall default in the payment of any sum under this Agreement, NTL shall
forthwith on demand by TCHL pay such sum to TCHL.
7.2 The guarantee contained in clause 7.1 is a continuing guarantee and
shall remain in force until all the obligations of CUKCP under this Agreement
have been fully performed and all sums payable by CUKCP have been fully paid.
7.3 The obligations of NTL shall not be affected by any act, omission,
matter or thing which, but for this provision, might operate to release or
otherwise exonerate NTL from its obligations or affect such obligations,
including without limitation and whether or not known to NTL:--
7.3.1 any time, indulgence, waiver or consent at any time given to
CUKCP or any other person;
7.3.2 any compromise or release of or abstention from perfecting or
enforcing any right or remedy against CUKCP or any other person;
7.3.3 any legal limitation, disability, incapacity or other
circumstance relating to CUKCP or any other person or any amendment to or
variation of the terms of this Agreement or any other document referred to
in this Agreement; and
7.3.4 any irregularity, unenforceability or invalidity of any
obligations of CUKCP under this Agreement or the dissolution, amalgamation,
reconstruction or insolvency of CUKCP.
7.4 The guarantee contained in clause 7.1 may be enforced by TCHL or
Telewest without TCHL or Telewest first taking any steps or proceedings against
CUKCP.
7.5 All payments to be made by NTL shall be made in full, without set-off
or counterclaim and without any deduction whatsoever except to the extent
required by law.
7.6 The obligations of NTL under this clause 7 shall not take effect until,
and are conditional upon, the completion of the Amalgamation.
8. NOTICES
8.1 Any notice, consent, request, approval or other communication (a
"Notice") to be given or made under this Agreement shall be in writing and
signed by or on behalf of the person giving it and shall be irrevocable without
the written consent of the party or parties on whom it is served.
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8.2 Any Notice may only be served:
8.2.1 personally by giving it to any director or the secretary of the
party to be served;
8.2.2 by leaving it at, or sending it by prepaid first class post (or
by prepaid first class airmail if from one country to another country) to
the address of the party to be served which is referred to in clause 8.4 or
if another address shall have been notified to all the other parties for
the purposes of this clause 8 by notice given in accordance with this
clause 8.2, then to the address of such party which shall have been so
notified, for which purpose the latest notification shall supersede all
previous notifications;
8.2.3 by sending it by facsimile transmission to the number for the
party to whom it is to be sent which is referred to in clause 8.4 or if
another number shall have been notified to all the other parties for the
purposes of this clause 8 by notice given in accordance with this clause
8.2, then to the number of such party which shall have been so notified,
for which purpose the latest notification shall supersede all previous
notifications.
8.3 A Notice shall be deemed served as follows:
8.3.1 in the case of personal service, at the time of such service;
8.3.2 in the case of leaving the notice at the relevant address, at
the time of leaving it there;
8.3.3 in the case of service by post, on the second Business Day (or
the fourth Business Day if sent by airmail) following the day on which it
was posted and in proving such service it shall be sufficient to prove that
the notice was properly addressed, stamped and posted in the United
Kingdom; and
8.3.4 in the case of service by facsimile transmission, at the time of
transmission.
8.4 If to Telewest or TCHL: Address for service:
Genesis Business Park
Albert Drive
Woking
Surrey GU21 5RW
Fax No: 01483 295165
For the attention of: Victoria Hull
With a copy to:
Charles Burdick
Fax No.: 01483 295278
Freshfields
65 Fleet Street
London EC4Y IHS
Fax No: 0171 832 7001
For the attention of:
Barry O'Brien and Ben Spiers
and
Weil Gotshal & Manges
One South Place
London EC2
Fax No: 0171 903 0990
For the attention of:
David Lefkowitz and Michael Brady
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If to CUKCP: Address for service:
Comcast UK Cable Partners Limited
Clarendon House
2 Church Street West
Hamilton, HM11, Bermuda
Fax No.: (441) 292-4720
For the attention of: Company Secretary
With a copy to:--
NTL Incorporated
110 East 59th Street
26th Floor
New York, NY 10022 (USA)
Fax No: 001 212 906 8497
For the attention of: Richard Lubasch, Esq.
NTL Incorporated
63/65 Petty France
London SW1H 9EU
Fax No: 0171 227 8719
For the attention of: John Gregg, Esq.
Comcast Corporation
1500 Market Street
Philadelphia, Pennsylvania 19102
Fax No.: (215) 981-7794
For the attention of: General Counsel
Allen & Overy
One New Change
London EC4W 9QQ
Fax No.: 0171 330 9999
For the attention of: Michael Scargill
and
Travers Smith Braithwaite
10 Snow Hill
London EC1A 2AL
Fax No: 0171 236 3728
For the attention of: Spencer Summerfield Esq.
If to NTL:
NTL Incorporated
110 East 59th Street -- 26th Floor
New York, NY 10022 (USA)
Fax No: 001 212 906 8497
For the attention of: Richard Lubasch, Esq.
With a copy to:
NTL Incorporated
63/65 Petty France
London SW1H 9EU
Fax No: 0171 227 8719
For the attention of: John Gregg, Esq.
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and
Travers Smith Braithwaite
10 Snow Hill
London EC1A 2AL
Fax No: 0171 236 3728
For the attention of:
Spencer Summerfield Esq.
9. COSTS
Each party shall be responsible for its own costs and expenses in
connection with the preparation and implementation of this Agreement except
where expressly stated otherwise.
10. ANNOUNCEMENTS
None of the parties to this Agreement shall, without the prior written
consent of the others, make any announcement or statement to the press or to any
third party relating to the contents of this Agreement (a "Relevant
Announcement"), otherwise than where such announcement or statement is required
by law or by any governmental, regulatory or statutory body or by any securities
exchange on which the securities of the relevant party or any of its parent
undertakings are, or are to be, listed or traded (including, without limitation,
the London Stock Exchange and the Nasdaq Stock Market's National Market) or is
necessary in order to obtain the Approvals.
11. GENERAL
11.1 No failure or delay by any party or time or indulgence given by it in
or before exercising any remedy or right under or in relation to this Agreement
shall operate as a waiver of the same nor shall any single or partial exercise
of any remedy or right preclude any further exercise of the same or the exercise
of any other remedy or right.
11.2 No waiver by any party of any requirement of this Agreement or of any
remedy or right under this Agreement shall have effect unless given by notice in
writing signed by such party. No waiver of any particular breach of the
provisions of this Agreement shall operate as a waiver of any repetition of such
breach.
11.3 Any release, waiver or compromise or any other arrangement which any
party gives or enters into with any other party to this Agreement in connection
with this Agreement shall not affect any right or remedy of the first-mentioned
party as regards any other party's liabilities under or in relation to this
Agreement and such other party shall continue to be bound by this Agreement as
if it had been the sole contracting party.
11.4 Time shall be of the essence of this Agreement, both as regards the
dates and periods specifically mentioned and as to any dates and periods which
may by agreement in writing between the parties be substituted for any of them.
11.5 This Agreement may be executed in two or more counterparts and
execution by each of the parties of any one of such counterparts will constitute
due execution of this Agreement.
11.6 Rights under this Agreement may not be assigned other than by
operation of law. It is acknowledged by the parties that upon implementation of
the Amalgamation, CUKCP will be subsumed into NTL (Bermuda) Limited and that
accordingly thereafter references herein to CUKCP shall be deemed to be
references to the amalgamated company arising from the amalgamation of NTL
(Bermuda) Limited and CUKCP.
11.7 Save as expressly provided in this Agreement, all representations,
warranties and conditions, express or implied and whether statutory or otherwise
are to the extent permitted by law, excluded from, and in relation to, the sale
of any shares pursuant to this Agreement PROVIDED THAT nothing in this clause
11.7 shall purport to exclude liability for fraudulent misrepresentation.
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11.8 NTL consents to CUKCP entering into this Agreement.
11.9 Each of CUKCP and Telewest undertakes to the other at the expense of
the other to do or procure to be done all such further acts and things, and
execute or procure the execution of all such other documents (so far as is
within its power so to do) as the other may from time to time reasonably
require, for the purpose of giving to the other the full benefit of all of the
provisions of this Agreement.
11.10 Telewest may, at its option by notice to CUKCP at any time prior to
BC Completion, substitute TCHL as the purchaser of the Joint BC Shares, any
other interest of CUKCP in any other shares in Birmingham Cable and the BC Loans
and Fees and to satisfy the consideration payable in respect thereof. If such
option is exercized, the guarantee in clause 6 shall become effective.
12. APPLICABLE LAW AND JURISDICTION; SERVICE OF PROCESS
12.1 This Agreement shall be governed by and construed in accordance with
the laws of England.
12.2 The parties irrevocably submit to the exclusive jurisdiction of the
Courts of England and Wales in respect of any claim, dispute or difference
arising out of or in connection with this Agreement.
12.3 CUKCP and NTL shall at all times maintain an agent for service of
process and any other documents in proceedings in England or any other
proceedings in connection with this Agreement. For CUKCP such agent shall be
Fleetside Legal Representatives Services Limited, 9 Cheapside, London EC2V 6AD
and for NTL such agent shall be NTL Groups Limited, Bristol House, 1 Lakeside
Road, Farmborough, Hants GU14 6XP and any writ, judgment or other notice of
legal process shall be sufficiently served on CUKCP and NTL if delivered to such
agent at its address for the time being (and, in the case of NTL, marked for the
attention of Robert McKenzie/Richard Lubasch). Each of CUKCP and NTL undertakes
not to revoke the authority of the agent appointed by it. Notwithstanding the
aforesaid, if CUKCP or NTL shall revoke any such appointment or such appointment
shall cease and if, for any reason, TCHL requests CUKCP or NTL to do so, CUKCP
or NTL (as the case may be) shall promptly appoint another such agent with an
address in England and advise TCHL thereof. If following such a request CUKCP or
NTL (as the case may be) fails to appoint another agent, TCHL shall be entitled
to appoint one on behalf of CUKCP or NTL (as the case may be).
SCHEDULE 1
We refer to the Agreement in respect of the rights of first refusal
relating to Birmingham Cable and Cable London dated 14 August 1998 (the
"Agreement").
Words and expressions defined in the Agreement have the same meaning when
used herein.
In consideration of the mutual promises contained therein, we hereby agree
to terminate the BC Consultant Agreement and the BC Management Agreement with
effect from BC Completion without any liability to any party thereto (save for
accrued fees and expenses or claims arising after the date of the Agreement) and
we hereby waive all present and future claims and rights we may have against
each other under such agreements.
- --------------------------------------
For and on behalf of Comcast UK
Consulting Inc.
- --------------------------------------
For and on behalf of Birmingham Cable
Corporation Limited
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- --------------------------------------
For and on behalf of Birmingham Cable
Limited
- --------------------------------------
For and on behalf of Telewest
Communications Group Limited
- --------------------------------------
For and on behalf of Media One Cable
Communications Limited
SCHEDULE 2
SPECIAL RESOLUTION
THAT, pursuant to section 9 of the Companies Act 1985, the Articles of
Association of the Company be altered with immediate effect by:--
(a) adding the following words to the end of the last sentence of
Article 15(C):--
"PROVIDED THAT the amalgamation of Comcast UK Cable Partners
Limited and NTL (Bermuda) Limited (or any other subsidiary of NTL
Incorporated) shall be deemed not to result in a change of control of
Comcast UK Cable Partners Limited or any subsidiary or parent
undertaking of Comcast UK Cable Partners Limited and provided further
that the provisions of the first two sentences of this article 15(c)
shall not be capable of applying to any change in control such as is
mentioned in the first sentence of this article 15(c) which occurs at
any time during the "Shoot-out Period" as such expression is defined in
an agreement dated 14th August 1998 between (1) Telewest Communications
plc, (2) Telewest Communications Holdings Limited, (3) Comcast UK Cable
Partners Limited and (4) NTL Incorporated, a copy of which has been
deposited with the Company prior to the adoption of this amendment to
these articles."
(b) replacing all references to "Comcast" in Article 17 with
references to Comcast UK Cable Partners Limited;
(c) replacing Article 24(A) with the following new article:
"24(A) Unless and until otherwise agreed by each Significant
Investor, the number of Directors shall be not less than two and not
more than six."
(d) (i) replacing in article 24(C)(a), the words "one Director
("Nominated Director") with the words "up to three Directors (each a
"Nominated Director")" and the words "him" and "his" with the words "them"
and "their"; and
(ii) replacing in Article 24(c)(b), the words "remove the" with the
words "remove any"; and
(e) adding to Article 24, after article 24(D), the following new
article:
"24(E) Notwithstanding any other provisions of these Articles, the
quorum for the transaction of any business at any meeting of the
Directors shall be at least one Nominated Director appointed by each
Significant Investor."; and
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(f) amending Article 33 by replacing the words "such number of
Significant Investors as hold (directly or indirectly), either individually
or together" with the words "each Significant Investor as holds (directly
or indirectly)".
AS WITNESS this Agreement has been executed on the date first stated above.
SIGNED by
for and on behalf of
TELEWEST COMMUNICATIONS PLC
/s/ CHARLES J. BURDICK
-----------------------------------
SIGNED by
for and on behalf of
TELEWEST COMMUNICATIONS
HOLDINGS LIMITED
/s/ CHARLES J. BURDICK
-----------------------------------
SIGNED by
for and on behalf of
COMCAST UK CABLE PARTNERS LIMITED
/s/ KENNETH MIKALAUSKAS
-----------------------------------
SIGNED by
for and on behalf of
NTL INCORPORATED
/s/ JOHN F. GREGG
-----------------------------------
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