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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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SCHEDULE 14D-9
SOLICITATION/RECOMMENDATION STATEMENT
PURSUANT TO SECTION 14(D)(4)
OF THE SECURITIES EXCHANGE ACT OF 1934
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NYNEX CABLECOMMS GROUP PLC
NYNEX CABLECOMMS GROUP INC.
(NAME OF SUBJECT COMPANY)
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NYNEX CABLECOMMS GROUP PLC
NYNEX CABLECOMMS GROUP INC.
(NAME OF PERSON(S) FILING STATEMENT)
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AMERICAN DEPOSITARY SHARES EVIDENCED BY AMERICAN DEPOSITARY RECEIPTS,
EACH REPRESENTING TEN UNITS, EACH UNIT CONSISTING OF ONE ORDINARY SHARE (PAR
VALUE 10P PER SHARE)
OF NYNEX CABLECOMMS GROUP PLC AND ONE SHARE OF COMMON STOCK (PAR VALUE $0.01 PER
SHARE)
OF NYNEX CABLECOMMS GROUP INC.
(TITLE OF CLASS OF SECURITIES)
UNITS, EACH UNIT CONSISTING OF ONE ORDINARY SHARE (PAR VALUE 10P PER SHARE) OF
NYNEX CABLECOMMS GROUP PLC AND ONE SHARE OF COMMON STOCK
(PAR VALUE $0.01 PER SHARE) OF NYNEX CABLECOMMS GROUP INC.
(TITLE OF CLASS OF SECURITIES)
ORDINARY SHARES (PAR VALUE 10P PER SHARE) OF NYNEX CABLECOMMS GROUP PLC
(TITLE OF CLASS OF SECURITIES)
COMMON STOCK (PAR VALUE $0.01 PER SHARE) OF NYNEX CABLECOMMS GROUP INC.
(TITLE OF CLASS OF SECURITIES)
670764-10-9 (AMERICAN DEPOSITARY SHARES)
(CUSIP NUMBER OF CLASS OF SECURITIES)
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PAUL H. REPP, ESQ.
CHIEF LEGAL AND REGULATORY OFFICER
AND COMPANY SECRETARY
THE TOLWORTH TOWER
EWELL ROAD
SURBITON, SURREY KT6 7ED
UNITED KINGDOM
011-44-181-873-2000
(NAME, ADDRESS AND TELEPHONE NUMBER OF PERSON AUTHORIZED TO RECEIVE
NOTICES AND COMMUNICATIONS ON BEHALF OF THE PERSON(S) FILING STATEMENT)
WITH A COPY TO:
MORTON A. PIERCE, ESQ.
DEWEY BALLANTINE
1301 AVENUE OF THE AMERICAS
NEW YORK, NEW YORK 10019-6092
(212) 259-8000
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THIS DOCUMENT IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION. If you
are in any doubt as to what action you should take, you are recommended to seek
your own financial advice immediately from your stockbroker, bank manager,
solicitor, accountant or other professional or financial advisor or, if you are
in the United Kingdom, an independent financial advisor authorized under the
Financial Services Act 1986.
If you have sold or transferred all of your holdings of Units of NYNEX
CableComms Group PLC and NYNEX CableComms Group Inc., please forward this
document as soon as possible, together with the accompanying documents, to the
purchaser or transferee or to the stockholder, bank or other agent through whom
the sale or transfer was effected, for delivery to the purchaser or transferee.
However, these documents should not be distributed, forwarded or transmitted in
or into Japan, Canada or Australia.
ITEM 1. SECURITY AND SUBJECT COMPANY.
The names of the subject companies are NYNEX CableComms Group PLC, a public
limited company incorporated under the laws of England and Wales ("NYNEX
CableComms UK"), and NYNEX CableComms Group Inc., a Delaware corporation ("NYNEX
CableComms US", and together with NYNEX CableComms UK, the "Companies"). The
address of the principal executive offices of the Companies is The Tolworth
Tower, Ewell Road, Surbiton, Surrey KT6 7ED, United Kingdom.
The titles of the classes of equity securities to which this statement
relates are (i) the Ordinary Shares, par value 10p per share, of NYNEX
CableComms UK (the "NYNEX CableComms UK Ordinary Shares"), (ii) the shares of
Common Stock, par value $0.01 per share, of NYNEX CableComms US (the "NYNEX
CableComms US Shares of Common Stock"), (iii) the Units of the Companies,
consisting of one NYNEX CableComms UK Ordinary Share and one NYNEX CableComms US
Share of Common Stock (the "Units"), and (iv) the American Depositary Shares
evidenced by American Depositary Receipts, each representing ten Units (the
"ADSs"). The NYNEX CableComms UK Ordinary Shares and the NYNEX CableComms US
Shares of Common Stock are "stapled" and trade together as Units. The Units may
separate only upon "de-stapling", subject to the approval of the shareholders of
NYNEX CableComms UK and NYNEX CableComms US of certain amendments to their
respective constitutional documents and certain actions taken by the Boards of
Directors, of a number of NYNEX CableComms UK Ordinary Shares and NYNEX
CableComms US Shares of Common Stock in an amount not to exceed 20 per cent. of
the outstanding NYNEX CableComms UK Ordinary Shares and NYNEX CableComms US
Shares of Common Stock to permit the Compulsory Acquisition and Merger (each as
defined under "De-stapling of Certain Units" in Item 3(b) below) contemplated by
the bidder after the Offers (as defined in Item 2 below) become or are declared
unconditional, as further described under "De-stapling of Certain Units" in Item
3(b) below. The NYNEX CableComms UK Ordinary Shares, NYNEX CableComms US Shares
of Common Stock, Units and ADSs are collectively referred to herein as the
"Shares".
ITEM 2. TENDER OFFER OF THE BIDDER.
This statement relates to the tender offer made by Cable & Wireless
Communications plc, a public limited company incorporated under the laws of
England and Wales ("CWC"), to purchase, upon the terms and subject to the
conditions set out in the Offers to Purchase/Prospectus, dated March 21, 1997,
included in CWC's Registration Statement on Form F-4 (the "Prospectus") and the
Letter of Transmittal, the Notice of Guaranteed Delivery and the Form of
Acceptance (together, the "Acceptance Forms") accompanying this Schedule 14D-9,
as disclosed in a Tender Offer Statement on Schedule 14D-1 filed by CWC with the
U.S. Securities and Exchange Commission (the "Commission") on March 24, 1997
(the "Schedule 14D-1"), (i) all NYNEX CableComms UK Ordinary Shares (including
those comprised in Units or represented by ADSs) for 0.330714 ordinary shares,
par value 50p per share, of CWC (the "CWC Ordinary Shares") per NYNEX CableComms
UK Ordinary Share (the "NYNEX CableComms UK Offer") and (ii) all NYNEX
CableComms US Shares of Common Stock (including those comprised in Units or
represented by ADSs) for 0.036746 CWC Ordinary Shares (the "NYNEX CableComms US
Offer") per NYNEX CableComms US Share of Common Stock. The NYNEX CableComms UK
Offer and the NYNEX CableComms US Offer are collectively referred to herein as
the "Offers". The
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consideration offered under the Offers is equivalent to 0.36746 CWC Ordinary
Shares per Unit and 3.67460 CWC Ordinary Shares per ADS.
The Schedule 14D-1 provides that:
All the NYNEX CableComms UK Ordinary Shares and NYNEX CableComms US Shares
of Common Stock presently comprise Units and cannot, absent de-stapling, be
traded, transferred or delivered separately. Acceptance of the NYNEX CableComms
UK Offer or the NYNEX CableComms US Offer can only be effective, prior to the
de-stapling of the Units, by acceptance in respect of both the NYNEX CableComms
UK Offer and the NYNEX CableComms US Offer. Acceptance of only the NYNEX
CableComms UK Offer or only the NYNEX CableComms US Offer will not become
effective until immediately after de-stapling of the Units takes effect, if at
all.
Instead of CWC Ordinary Shares, holders of Shares (particularly holders of
ADSs) may elect to receive CWC American Depositary Shares ("CWC ADSs") on the
basis of one CWC ADS for every five CWC Ordinary Shares to which such holders
would otherwise be entitled pursuant to the Offers (the "Alternative
Consideration"). A holder of Shares may elect to receive CWC ADSs only in
respect of all the Shares which he or she tenders in the Offers. Holders of ADSs
will receive the Alternative Consideration unless they otherwise elect.
The Offers will extend to any Shares (including those represented by ADSs)
which are unconditionally allotted or issued while the Offers remain open for
acceptance (or such shorter period as CWC may, subject to the City Code on
Takeovers and Mergers of the United Kingdom (the "City Code"), determine) upon
exercise of options granted under the NYNEX CableComms Limited Revenue Approved
Employee Share Option Plan and the NYNEX CableComms Limited Savings-Related
Share Option Plan (together, the "NYNEX CableComms Option Schemes") or
otherwise. NYNEX CableComms Limited is a wholly-owned subsidiary of the
Companies. According to the Schedule 14D-1, appropriate proposals will be made
to participants in the NYNEX CableComms Option Schemes, in due course, once the
Offers become or are declared unconditional. To the extent that options are not
exercised, and in the event that the Offers become or are declared
unconditional, CWC intends to offer participants in the NYNEX CableComms Option
Schemes the opportunity to exchange outstanding options for options over CWC
Ordinary Shares of an equivalent value.
A Transaction Agreement, dated as of October 22, 1996, as amended and
restated (the "Transaction Agreement"), was entered into among Cable and
Wireless plc ("C&W"), NYNEX Corporation ("NYNEX") and Bell Canada International
Inc. ("BCI"). Pursuant to the terms of the Transaction Agreement and subject to
certain conditions, C&W, NYNEX and BCI agreed to create a provider of integrated
telecommunication, information and entertainment services in the United Kingdom
by combining (a) Mercury Communications Limited ("Mercury"), (b) the Companies
and (c) Bell Cablemedia plc ("BCM"), as enlarged by BCM's acquisition of
Videotron Holdings Plc ("Videotron") (the "Videotron Acquisition"), under the
ownership of CWC, a newly formed holding company and direct wholly-owned
subsidiary of C&W (the "Transactions", including the acquisition by CWC of the
Minority Interests as defined under and set forth under "The Transaction
Agreement" in Item 3 below). The Transaction Agreement provides for the Offers
to be made pursuant to the terms and subject to certain conditions set out in
the Prospectus and the accompanying Acceptance Forms.
In addition to the foregoing, the Schedule 14D-1 states that the principal
executive offices of CWC are located at 26 Red Lion Square, London WC1R 4HQ,
United Kingdom.
ITEM 3. IDENTITY AND BACKGROUND.
(a) The name and business address of the Companies, which are the persons
filing this statement, are set forth in Item 1 above.
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(b) Certain contracts, agreements, arrangements and understandings and any
actual or potential conflict of interest between the Companies or their
affiliates and certain of their directors, executive officers or affiliates are
described in the Companies' Annual Report on Form 10-K for the fiscal year ended
December 31, 1996 (the "1996 10-K") under the sections, "Item 11. Executive
Compensation", "Item 12. Security Ownership of Certain Beneficial Owners and
Management", and "Item 13. Certain Relationships and Related Transactions" and
are incorporated herein by reference. A copy of the pertinent sections of the
1996 10-K is filed as Exhibit 1 hereto and is incorporated herein by reference.
The Boards of Directors of NYNEX CableComms UK and NYNEX CableComms US have
appointed the following directors to their respective Offer Committees of
independent directors (the "Offer Committees") to determine whether the Offers
are fair to and in the best interests of the Companies' respective shareholders
other than NYNEX and its subsidiary, NYNEX Network Systems, Inc. (the "Public
Shareholders"): John L. Rennocks (Chairman of each of the Offer Committees), Sir
Michael Checkland and John F. Killian. Other than Mr. Killian, who is President
and Chief Executive Officer of the Companies, none of the directors on the Offer
Committees is employed by either of the Companies or NYNEX.
Messrs. Robert T. Anderson, Richard W. Blackburn, Jeffrey A. Bowden, and
Melvin Meskin are directors of the Companies and also officers of NYNEX or one
or more of its affiliates. In addition, Mr. Blackburn is a member of the Merger
Steering Committee established by C&W, NYNEX and BCI and of a committee
established by CWC in connection with the proposed Transactions. Such directors
did not participate in any of the deliberations and decisions of the Offer
Committees. Mr. Nicholas P. Mearing-Smith is a director of the Companies and,
effective January 30, 1997, has delegated his duties as Chief Financial Officer
of the Companies. Mr. Mearing-Smith was originally appointed on October 29, 1996
as a member of the Offer Committees, but resigned from the Offer Committees on
January 23, 1997 when he was appointed by CWC as Finance Director designate of
CWC. Sir Bryan Victor Carsberg also was originally appointed on October 29, 1996
as a member of the Offer Committees. He resigned from the Offer Committees on
March 13, 1997 following his acceptance and that of Mr. Blackburn of their
respective appointments as non-executive directors of CWC upon the Offers
becoming or being declared unconditional in all respects. See "The Transaction
Agreement--Representation on CWC's Board of Directors" below.
Certain other contracts, agreements and understandings and any actual or
potential conflict of interest between the Companies or their affiliates and
their directors, executive officers and affiliates, and between the Companies or
their affiliates and CWC, its executive officers, directors or affiliates are
set forth below.
THE TRANSACTION AGREEMENT
The Schedule 14D-1 provides substantially the following summary of the
Transaction Agreement. The following discussion of the Transaction Agreement and
the transactions contemplated thereby, including the Offers and the
Transactions, does not purport to be complete and is qualified in its entirety
by reference to the complete text of the Transaction Agreement, a copy of which
has been filed as Exhibit 2 hereto and is incorporated herein by reference.
GENERAL. On October 22, 1996, C&W, BCI and NYNEX announced that they had
entered into the Transaction Agreement pursuant to which they agreed, subject to
certain conditions, to combine: (i) Mercury, (ii) BCM, as enlarged by the
Videotron Acquisition, and (iii) the Companies under a newly-formed holding
company, CWC, in order to create one provider that can offer UK customers local,
national and international voice, data and mobile telecommunications, together
with multichannel television and Internet services.
The parties to the Transaction Agreement have agreed that CWC will seek to
acquire all the outstanding Shares and BCM ordinary shares and american
depositary shares representing such ordinary shares (the "BCM Securities") in
exchange for CWC Ordinary Shares (including those represented by
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CWC ADSs) pursuant to each of (i) the Offers and (ii) the offer by CWC for BCM
Securities (the "BCM Offer") and, as so contemplated, CWC makes the Offers as
set out in, and upon the terms and subject to the conditions set out in, the
Prospectus and accompanying Acceptance Forms (including if the Offers are
revised, varied, extended or renewed, the terms and conditions of any such
revision, variation, extension or renewal).
Subsidiaries of BCI and C&W which hold BCM Securities have given irrevocable
undertakings to accept the BCM Offer in respect of their combined 65.0 per cent.
shareholding in BCM, and a subsidiary of NYNEX has given an irrevocable
undertaking to accept the Offers in respect of its 67.0 per cent. shareholding
in the Companies.
Pursuant to the terms of the Transaction Agreement, and upon the BCM Offer
and the Offers becoming or being declared unconditional, CWC will acquire from
NYNEX its minority interests (including those acquired by NYNEX from certain
third parties) in the cable TV and telephony operations controlled by the
Companies (the "Minority Interests") in exchange for CWC Ordinary Shares
representing approximately 3.317 percent of the issued ordinary share capital of
CWC on a fully diluted basis. The acquisition will be effected by CWC acquiring
the Winston Entities (as defined in the Prospectus), which indirectly hold a
minority interest in the ordinary share capital of the Companies' operating
cable companies. The Winston Entities were established to provide certain
financing arrangements to the Companies' operating cable companies. On or before
completion of this acquisition, and on the simultaneous refinancing by CWC of
the credit facilities granted by the Winston Entities to subsidiaries
undertakings of the Companies, NYNEX will cause all assets of the Winston
Entities (other than the holdings of the Winston Entities in subsidiaries of the
Companies) to be distributed to NYNEX (or at the direction of NYNEX to third
parties) after paying or providing for payment of all known liabilities of the
Winston Entities, other than certain inter-company liabilities (which may be
released, canceled or otherwise terminated without payment) so that following
this distribution the Winston Entities will have no current assets or
liabilities. The Winston Entities will remain responsible for contingent
liabilities in respect of deferred tax which is attributable to the subsidiaries
of the Companies and certain expenses incurred in connection with the
termination of the financing arrangements described in the Prospectus.
Each of the BCM Offer and the Offers are separate offers. Each of the BCM
Offer and the Offers is conditional on the other offer becoming or being
declared unconditional in all respects (other than in respect of any condition
relating to the other offer becoming or being declared so unconditional). Each
of the BCM Offer and the Offers will lapse if the other offer lapses.
TRANSACTION OBLIGATIONS. Pursuant to the Transaction Agreement, the parties
undertook the following obligations:
- C&W agreed to convene an extraordinary general meeting of its shareholders
and to propose at that meeting an ordinary resolution seeking approval of
the BCM Offer, the Offers, the acquisition of Mercury by CWC and the
acquisition of the Minority Interests. That general meeting has been
convened for April 17, 1997.
- C&W agreed, subject to certain conditions, to purchase from a subsidiary
of BCI 47,808 Mercury ordinary shares for L150 million in cash. This
acquisition was completed on January 17, 1997.
- Each of the parties agreed that as long as it is deemed to be acting in
concert with the other parties in relation to BCM, Videotron or the
Companies, it would not acquire or dispose of any shares, rights over
shares or derivatives relating to the shares of BCM, Videotron or the
Companies without the prior consent of the other parties.
Upon the BCM Offer and the Offers becoming or being declared unconditional:
- C&W agreed to amend CWC's articles of association as described in the
Prospectus.
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- C&W agreed to alter the composition of the CWC Board of Directors to
reflect the membership arrangement described in the Prospectus.
- C&W, BCI and NYNEX agreed to enter into a Registration Rights Agreement
(as described below) and it was agreed that CWC would enter into the NYNEX
Tax Agreement and the NYNEX Tax Allocation Agreement with NYNEX (as
described below).
CONDUCT OF BUSINESS COVENANTS FROM C&W, BCI AND NYNEX. C&W agreed that,
until the BCM Offer and the Offers become or are declared unconditional in all
respects, CWC will not engage in or conduct any business or carry on any
activities (other than holding interests in the share capital of Mercury and
certain administrative and other actions contemplated by the Transaction
Agreement) without the prior approval of all parties (such approval not to be
unreasonably withheld or delayed).
C&W and BCI undertook to use reasonable endeavors to procure that, until the
BCM Offer and the Offers become or are declared unconditional in all respects,
BCM carries on the business of the BCM Group (as defined in the Prospectus) in
the ordinary course and does not take any action which would amount to an action
requiring the approval of shareholders in a general meeting or the consent of
CWC under certain provisions of the City Code. NYNEX gave a similar covenant in
relation to the Companies and C&W gave a similar covenant in relation to the
Mercury Group (as defined in the Prospectus).
C&W and BCI covenanted in relation to Mercury, and C&W covenanted in
relation to CWC, that, until the BCM Offer and the Offers become or are declared
unconditional in all respects, the affairs of both Mercury and CWC,
respectively, will be conducted such that:
- neither they nor any of their subsidiaries will enter into or agree to
enter into any transaction which would, were Mercury or CWC, as the case
may be, listed on the London Stock Exchange, require the approval of their
respective shareholders; and
- neither Mercury nor CWC, as the case may be, will enter into any
transaction that, were Mercury or CWC (as the case may be) the subject of
an offer on the same conditions as the BCM Offer and the Offers, would
render such offer incapable of becoming wholly unconditional.
C&W and BCI also undertook to ensure that, until the BCM Offer and the
Offers become or are declared unconditional in all respects, Mercury and CWC, as
the case may be, will not take certain actions without the prior consent of
NYNEX (which may not be unreasonably withheld). Those actions include creating,
allotting or issuing new securities, making any substantial changes in the
nature of its business and making any distribution to shareholders (unless
expressly contemplated in the Transaction Agreement or the agreements relating
to the purchase of Mercury ordinary shares by CWC (the "Mercury Purchase
Agreements")).
C&W and BCI covenanted in relation to BCM, and NYNEX has covenanted in
relation to the Companies, that, until the BCM Offer and the Offers become
unconditional in all respects, they will not vote their shares (and their board
representatives will not vote) in favor of any proposal or resolution involving
the issue of shares other than in respect of options already granted by the
relevant company pursuant to the NYNEX CableComms Option Schemes or the option
schemes of BCM, as the case may be, or which prior to implementation would
require the approval of the shareholders of the relevant company.
C&W, BCI and NYNEX each gave an undertaking that CWC will procure the
release of NYNEX from its L200 million loan facility to the Companies by the
provision of a substitute facility which will be effective from the date on
which the BCM Offer and the Offers become or are declared unconditional in all
respects.
CONDUCT OF THE OFFERS. C&W, BCI and NYNEX agreed that the following
decisions relating to the BCM Offer and the Offers require the approval of all
parties: (a) a change to the form or amount of the consideration being offered
to the holders of BCM Securities and the Shares pursuant to the BCM Offer
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and the Offers, respectively; (b) an extension, lapse or withdrawal of the BCM
Offer and the Offers; and (c) the waiver of, or exercise of discretion in
relation to, the conditions to each of the BCM Offer and the Offers relating to
the minimum number of acceptances as described below (the "Minimum Acceptance
Condition") or to any condition relating to regulatory clearances.
C&W, BCI and NYNEX also undertook to use reasonable endeavors to reach
unanimous agreement on whether or not to waive or to exercise any discretion in
respect of any breach of any conditions to either the BCM Offer or the Offers
("Breached Condition") or any unfulfilled condition to either the BCM Offer or
the Offers ("Unfulfilled Condition"). In the event unanimous agreement on such
matters cannot be reached by the earlier of (i) two business days after the
parties become aware of the relevant events and (ii) the day before the last
date on which the BCM Offer and the Offers can become or be declared
unconditional in all respects in accordance with the City Code, a Breached
Condition or an Unfulfilled Condition may nonetheless be waived, or a discretion
in respect thereof exercised, under the following circumstances. If the Panel on
Takeovers and Mergers of the United Kingdom (the "Panel") has agreed that the
Breached Condition or Unfulfilled Condition could be invoked to prevent the
relevant offer from becoming or being declared unconditional, then such
condition may be waived or discretion in respect thereof exercised if C&W and
one of the other two parties agree to such a waiver or exercise of such
discretion. If, however, any party would suffer material prejudice as a result
of the waiver or exercise of discretion, no waiver may be effected or discretion
exercised without that party's consent. If the Panel has agreed that the
Breached Condition or Unfulfilled Condition cannot be invoked to prevent the
relevant offer from becoming or being unconditional or has not ruled on the
issue, then such condition must be waived. The Transaction Agreement also
contains similar provisions regarding a Breached Condition or Unfulfilled
Condition of the Mercury Purchase Agreements, except that the procedures do not
include reference to the Panel.
C&W, BCI and NYNEX also agreed that if, prior to the Offers becoming or
being declared unconditional in all respects, NYNEX advises CWC that:
(i) either (a) one or more persons has made certain filings with the
Commission indicating that such person owns 10 percent or more of either the
ordinary shares of the sole shareholders of BCI, C&W, or the common shares
of BCE Inc., the parent of BCI ("BCE"), or (b) NYNEX has knowledge that one
or more persons has acquired an ownership interest in C&W or BCE which will
require a filing described in (a);
(ii) the aggregate indirect ownership interest in CWC shares of all
persons described in (i) above is 15 percent or more; and
(iii) NYNEX reasonably believes that there is a risk that more than 50
percent of the equity of CWC would be considered for US tax purposes to be
owned by US persons that are "five--percent target shareholders" with
respect to the Companies for purposes of certain U.S. Treasury regulations,
or any successor provision relating to the ownership of CWC shares by
holders of Shares;
then NYNEX may request a legal opinion to the effect that certain U.S. Treasury
and tax regulations relating to the ownership of CWC shares by holders of Shares
have been satisfied.
C&W, BCI and NYNEX have also agreed that Additional Condition (F) (as
defined below) to the Offers relating to the legal opinion referred to above
cannot be waived, and no discretion will be exercised in relation to it, without
the prior approval of all the parties.
WARRANTIES. C&W has given representations and warranties in the Transaction
Agreement to BCI and NYNEX relating to the Mercury Group, subject to certain
limitations. C&W's liability is limited in time to June 30, 1999 for non-tax
warranties, and the seventh anniversary of completion of the purchase of Mercury
by CWC for tax warranties. C&W's liability under these representations and
warranties is limited in amount to an aggregate of L348,000,000.
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BCI has given representations and warranties to C&W and NYNEX in relation to
BCM, subject to certain limitations. BCI's liability is limited in time to June
30, 1998. BCI's liability under these representations and warranties is limited
in amount to an aggregate of L48,161,974.
NYNEX has given representations and warranties to BCI and C&W in relation to
the Companies, subject to certain limitations. NYNEX's liability is limited in
time to June 30, 1998. NYNEX's liability under these representations and
warranties is limited in amount to an aggregate of L147,300,428.
ADVANCE CORPORATION TAX AND CONSORTIUM RELIEF. The Transaction Agreement
provides that (i) dividends paid by CWC will be paid outside any election under
Section 247 of the United Kingdom Income and Corporation Taxes Act 1988
("ICTA"); (ii) C&W will be entitled to surrender to CWC and its subsidiaries
Advance Corporation Tax of the United Kingdom ("ACT") to the fullest extent
permitted by law (for payment); and (iii) all parties are to consider in good
faith any proposal made to structure surrenders of ACT so as to reduce or
eliminate any U.S. tax disadvantage suffered by NYNEX.
ARBITRATION. Any dispute arising in relation to the Transaction Agreement
is to be resolved by arbitration in London conducted in accordance with the
Rules of the London Court of International Arbitration.
CONDITIONS TO THE BCM OFFER AND THE OFFERS. Each of the BCM Offer and the
Offers is subject to the following conditions (the "Conditions"):
(i) the passing at an extraordinary general meeting of C&W (or at any
adjournment thereof) of an ordinary resolution to approve and implement the
BCM Offer and the Offers and the acquisition of all outstanding shares of
Mercury;
(ii) the CWC ADSs being admitted for listing on the New York Stock
Exchange, Inc. subject only to official notice of issuance;
(iii) the London Stock Exchange announcing its decision to admit to the
Official List the CWC Ordinary Shares to be issued pursuant to the BCM Offer
and the Offers and such admission becoming effective in accordance with
paragraph 7.1 of the Listing Rules of the London Stock Exchange;
(iv) no Material Adverse Change (as defined under "Termination" below)
occurring in respect of CWC or Mercury;
(v) the Mercury Purchase Agreements becoming unconditional save in
respect of any condition relating to the BCM Offer and the Offers becoming
unconditional;
(vi) no government or governmental, quasi-governmental, supranational,
statutory or regulatory body, court, trade agency, professional association
or any other regulatory body in any jurisdiction (each a "Relevant
Authority") having announced an intention to take, or having instituted,
implemented or threatened any action, proceedings, suit, investigation or
inquiry, or made, proposed or enacted any statute, regulation or order or
taken any other steps and there not continuing to be outstanding any
statute, regulation or order thereof, which would or might:
(a) make the BCM Offer or the Offers or the acquisition by CWC of BCM
Securities or the Shares or of control of BCM or the Companies void,
illegal, unenforceable or otherwise restrict, restrain, prohibit or
otherwise interfere with the implementation of, or impose additional
conditions or obligations with respect thereto, or otherwise challenge or
interfere therewith in any such case to a materially adverse extent;
(b) result in a material delay in the ability of CWC, or render CWC
unable, to acquire some or all of the BCM Securities and the Shares;
(c) require or prevent the divestiture by any member of the BCM Group
or the NYNEX CableComms Group or the Mercury Group (each as defined in
the Prospectus) of all or any
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material portion of their respective businesses, assets or properties or
impose any material limitation on the ability of any of them to conduct
all or any material portion of their respective businesses or own all or
any material portion of their respective assets or property the result of
which in any such case is material to the BCM Group, the NYNEX CableComms
Group or the Mercury Group taken as a whole;
(d) impose any limitation on the ability of any member of the BCM
Group, the NYNEX CableComms Group or the Mercury Group to acquire or to
hold or to exercise effectively any rights of ownership of shares or
loans or securities convertible into shares of any member of the BCM
Group, NYNEX CableComms Groups or Mercury Group held or owned by it or to
exercise management control over any member of the BCM Group, NYNEX
CableComms Group or Mercury Group which, in such case, is material to the
BCM Group, NYNEX CableComms Group or the Mercury Group taken as a whole;
(e) require any member of the BCM Group, NYNEX CableComms Group or
Mercury Group to offer to acquire any securities in any member of the BCM
Group or NYNEX CableComms Group owned by any third party where such
acquisition would be material in the context of the CWC Group (as defined
in the Prospectus) taken as a whole or, as the case may be, the BCM Group
or NYNEX CableComms Group taken as a whole; or
(f) otherwise adversely affect in any material respect the business,
profits or prospects of any member of the BCM Group, NYNEX CableComms
Group or Mercury Group;
and all applicable waiting or other time periods during which any such Relevant
Authority could decide to take, institute, implement or threaten any such
action, proceeding, suit, investigation or inquiry having expired, lapsed or
been terminated;
(vii) all necessary filings having been made, and all appropriate waiting
periods under any applicable legislation or regulations of any jurisdiction
having expired, lapsed or been terminated, in each case in respect of the
relevant offer and the acquisition of BCM Securities or the Shares, or of
control of BCM or the Companies, by CWC, and all material authorizations,
orders, recognitions, grants, consents, licenses, confirmation, clearances,
permissions and approvals ("Authorizations") necessary for, or in respect
of, the relevant offer and the proposed acquisition of any BCM Securities or
the Shares, or of control of BCM or the Companies, and to carry on the
business of any member of the CWC Group or of the BCM Group or the NYNEX
CableComms Group having been obtained, in terms and in a form reasonably
satisfactory to CWC, from all appropriate Relevant Authorities and all such
Authorizations remaining in full force and effect and there having been no
intimation or notice of an intention to revoke or not to renew any of the
same and all necessary statutory or regulatory obligations in any
jurisdiction having been complied with;
(viii) there being no provision of any material arrangement, agreement,
license, permit, franchise or other instrument to which any member of the
BCM Group or NYNEX CableComms Group is a party or by or to which any such
member or any of their assets may be bound, entitled or subject and which,
in consequence of the proposed acquisition of any BCM Securities or Shares,
or control of BCM or the Companies, by CWC or otherwise, would or might
reasonably be expected to result in (in each case to an extent which is
material in the context of the BCM Group or NYNEX CableComms Group taken as
a whole except in the case of paragraph (h) below where it shall be to an
extent which is material in the context of the BCM Offer and the Offers):
(a) any moneys borrowed by, or other indebtedness actual or
contingent of, any such member of the BCM Group or NYNEX CableComms Group
being or becoming repayable or being capable of being declared repayable
immediately or prior to its stated maturity date or repayment date or the
ability of such member or associate to borrow moneys or incur any
indebtedness being withdrawn or inhibited;
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(b) the creation of any mortgage, charge or other security interest
over the whole or any part of the business, property, assets or interests
of any such member or any such security (whenever arising or having
arisen) becoming enforceable;
(c) any such arrangement, agreement, license, permit, franchise or
instrument being terminated or adversely modified or any action being
taken of an adverse nature or any obligation arising thereunder;
(d) any material assets or interests of any such member being or
becoming liable to be disposed of or charged or any right arising under
which any such assets or interest could be required to be disposed of or
charged in each case other than in the ordinary course of business;
(e) the interest or business of any such member in or with any firm,
body or person, or any arrangements relating to such interest or
business, being terminated or materially and adversely modified or
affected;
(f) any such member ceasing to be able to carry on business under any
name under which it presently does so;
(g) the creation of material liabilities by any such member; or
(h) the financial or trading positions or prospects of any member
being prejudiced or adversely affected;
(ix) except as publicly announced by BCM or the Companies prior to the
date of the Prospectus, no member of the BCM Group or the NYNEX CableComms
Group having, since the date of the balance sheet included in the last
published audited accounts of BCM or the Companies, as the case may be:
(a) issued or agreed to issue or authorized or proposed the issue of
additional securities of any class, or securities convertible into, or
rights, warrants or options to subscribe for or acquire, any such
securities or convertible securities (except as between BCM and
wholly-owned subsidiaries of BCM and between the Companies and
wholly-owned subsidiaries of the Companies and except for options
granted, and for any BCM Securities or Shares allotted upon exercise of
options granted under the option schemes of BCM or the NYNEX CableComms
Option Schemes or upon conversion of certain convertible loan notes of
BCM) or redeemed, purchased or reduced any part of its share capital;
(b) declared, paid, made or proposed to declare, pay or make any
bonus in respect of BCM Securities or Shares, dividends or other
distribution other than to other members of the BCM Group or NYNEX
CableComms Group, as the case may be;
(c) authorized or proposed or announced its intention to propose any
merger or demerger or material acquisition or disposal of assets or BCM
Securities or Shares (other than in the ordinary course of trading or as
between members of the BCM Group or NYNEX CableComms Group, as the case
may be);
(d) authorized or proposed or announced its intention to propose any
material change in its share or loan capital except for options granted
pursuant to the option schemes of BCM or the NYNEX CableComms Option
Schemes and for any BCM Securities or Shares allotted upon exercise of
such options and except for intragroup issues;
(e) issued or authorized or proposed the issue of any debentures or
incurred or increased any indebtedness or become subject to any
contingent liability which is material in the context of the BCM Group or
NYNEX CableComms Group taken as a whole;
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(f) disposed of or transferred, mortgaged, charged, encumbered or
created any security interest over the whole or part of any asset or any
right, title or interest in any asset otherwise than in the ordinary
course of business which is material in the context of the BCM Group or
NYNEX CableComms Group taken as a whole;
(g) entered into any contract or commitment (whether in respect of
capital expenditure or otherwise) which is of a long-term or unusual
nature or involves or could involve an obligation of a nature or
magnitude, in either case, which is material in the context of the BCM
Group or NYNEX CableComms Group taken as a whole;
(h) entered into any reconstruction, amalgamation, transaction or
arrangement (otherwise than in the ordinary course of business) which is
material in the context of the BCM Group or NYNEX CableComms Group taken
as a whole;
(i) taken any corporate action, or had any order made, for its
winding-up, dissolution or reorganization or for the appointment of a
receiver, administrator, administrative receiver, trustee or similar
officer of all or any of its assets and revenues or any analogous
proceedings in any jurisdiction or had any such person appointed;
(j) entered into any agreement which consents to the restriction to a
material extent of the scope of the business of the BCM Group or NYNEX
CableComms Group;
(k) waived or compromised any material claim otherwise than in the
ordinary course of business;
(l) entered into or varied (in any material respect) the terms of any
service agreement with any of the directors of BCM or the Companies; or
(m) entered into any agreement or commitment or passed any resolution
with respect to any of the transactions or events referred to in this
paragraph (ix);
(x) since the date of the balance sheet included in the last published
audited accounts of BCM or the Companies, as the case may be, except as
publicly announced by BCM or the Companies, as the case may be, prior to the
date of the Prospectus:
(a) there having been no adverse change in the business, financial or
trading position or profits or prospects of BCM or the Companies or of
any other member of the BCM Group or NYNEX CableComms Group which in any
such case is material in the context of the BCM Group or NYNEX CableComms
Group taken as a whole;
(b) no litigation, arbitration proceedings, prosecution or other
legal proceedings having been instituted, announced or threatened by or
against or remaining outstanding against any member of the BCM Group or
NYNEX CableComms Group which in any such case could have a material
effect on the BCM Group or NYNEX CableComms Group taken as a whole; and
(c) no contingent liability having arisen which would or might be
likely materially and adversely to affect the BCM Group or NYNEX
CableComms Group;
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(xi) CWC not having discovered that:
(a) the financial or business or other information concerning the BCM
Group or NYNEX CableComms Group as contained in the information publicly
disclosed at any time by any member of the BCM Group or NYNEX CableComms
Group either contains a material misrepresentation of fact or omits to
state a fact necessary to make the information contained therein not
materially misleading; or
(b) any member of the BCM Group or NYNEX CableComms Group is subject
to any liability, contingent or otherwise, which is not disclosed in the
last published audited accounts of BCM or the Companies, as the case may
be, and which is material in the context of the BCM Group or NYNEX
CableComms Group taken as a whole; and
(xii) CWC not having discovered that:
(a) any past or present member of the BCM Group or NYNEX CableComms
Group or predecessor of any member of such group has not complied with
all applicable laws, statutes, ordinances or regulations of any
jurisdiction or other requirements of any Relevant Authority with regard
to environmental matters, including, without limitation, to the emission,
disposal, discharge, spillage or leak of any waste or hazardous substance
or any substance likely to impair the environment or harm human health,
which non-compliance or any other emission, disposal, discharge, spillage
or leak which has occurred would be likely to give rise to any liability
(whether actual or contingent) on the part of any member of the BCM Group
or NYNEX CableComms Group and which is material in the context of the BCM
Group or NYNEX CableComms Group taken as a whole; and
(b) there is, or is reasonably expected to be, any liability (whether
actual or contingent) to make good, remedy, repair, reinstate or clean up
any property now or previously owned, occupied, made use of or harmed,
contaminated or in any way affected by any past or present member of the
BCM Group or NYNEX CableComms Group or predecessor of any member of such
group under any environmental legislation, regulation, notice, circular
or order of any Relevant Authority or any common law liability
(including, without limitation, contract) and which is material in the
context of such group taken as a whole.
ADDITIONAL CONDITIONS TO THE OFFERS. The Offers are also subject to the
following additional Conditions (the "Additional Conditions"):
(A) (i) in the case of the NYNEX CableComms UK Offer, valid acceptances
being received (and not, where permitted, validly withdrawn) by 2:30 p.m.
(London time), 9:30 a.m. (New York City time), on the Initial Closing Date (as
defined in the Prospectus) (or such later time(s) and/or date(s) as CWC may,
subject to the rules of the City Code, decide) in respect of not less than 90
per cent. (or such lesser percentage as CWC may decide) of the NYNEX CableComms
UK Ordinary Shares to which the NYNEX CableComms UK Offer relates, provided that
this condition will not be satisfied unless CWC shall have acquired or agreed to
acquire, whether pursuant to the NYNEX CableComms UK Offer or otherwise, NYNEX
CableComms UK Ordinary Shares carrying in aggregate more than 50 per cent. of
the voting rights currently exercisable at a general meeting of NYNEX CableComms
UK, including for this purpose, to the extent (if any) required by the Panel,
any such voting rights which will attach on entry of the securities in the
register of members of NYNEX CableComms UK to any NYNEX CableComms UK Ordinary
Shares that may be unconditionally allotted or issued while the NYNEX CableComms
UK Offer remains open for acceptance or such shorter period as CWC may, subject
to the City Code, determine, whether pursuant to the exercise of any outstanding
conversion or subscription rights or otherwise, and for this purpose:
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(a) the expression "NYNEX CableComms UK Ordinary Shares to which the
NYNEX CableComms UK Offer relates" shall be construed in accordance with
Sections 428 to 430F of the Companies Act 1985, as amended (the
"Companies Act");
(b) NYNEX CableComms UK Ordinary Shares which have been
unconditionally allotted shall be deemed to carry the voting rights which
they will carry upon issue;
(c) for the purpose of this Condition, the expression "NYNEX
CableComms UK Ordinary Shares" shall include NYNEX CableComms UK Ordinary
Shares comprised in Units or represented by ADSs, as the case may be;
(ii) in the case of the NYNEX CableComms US Offer, valid acceptances
being received (and not, where permitted, validly withdrawn) by 2:30 p.m.
(London time), 9:30 a.m. (New York City time), on the Initial Closing Date
(or such later time(s) and/or date(s) as CWC may, subject to the rules of
the City Code, decide) in respect of not less than 90 per cent. (or such
lesser percentage as CWC may decide) of the NYNEX CableComms US Shares of
Common Stock to which the NYNEX CableComms US Offer relates, provided that
this condition will not be satisfied unless CWC shall have acquired or
agreed to acquire, whether pursuant to the NYNEX CableComms US Offer or
otherwise, NYNEX CableComms US Shares of Common Stock carrying in aggregate
more than 50 per cent. of the voting rights currently exercisable at a
shareholders' meeting of NYNEX CableComms US, including for this purpose, to
the extent (if any) required by the Panel, any such voting rights which will
attach on entry of the securities in the register of members of NYNEX
CableComms US to any NYNEX CableComms US Shares of Common Stock that may be
unconditionally allotted or issued while the NYNEX CableComms US Offer
remains open for acceptance or such shorter period as CWC may, subject to
the City Code, determine, whether pursuant to the exercise of any
outstanding conversion or subscription rights or otherwise, and for this
purpose:
(a) the expression "NYNEX CableComms US Shares of Common Stock to
which the NYNEX CableComms US Offer relates" shall be construed in
accordance with Sections 428 to 430F of the Companies Act as if such
provisions were applicable to NYNEX CableComms US Shares of Common Stock;
(b) NYNEX CableComms US Shares of Common Stock which have been
unconditionally allotted shall be deemed to carry the voting rights which
they will carry upon issue;
(c) for the purpose of this Condition, the expression "NYNEX
CableComms US Shares of Common Stock" shall include NYNEX CableComms US
Shares of Common Stock comprised in Units or represented by ADSs, as the
case may be;
(B) receipt by CWC of written indication from the Department of Trade and
Industry of the United Kingdom (the "DTI") and from the Independent Television
Commission (the "ITC"), to the effect that CWC's acquisition of the Companies
will not lead to the revocation of any licenses (issued pursuant to either the
UK Cable and Broadcasting Act 1984 or the UK Broadcasting Act 1990, as amended
by the Broadcasting Act 1996 in the United Kingdom (the "Broadcasting Act")) or
the revocation of the telecommunication licenses (issued by the DTI pursuant to
the UK Telecommunications Act 1984) which are held by any member of the Mercury
Group or any member of the NYNEX CableComms Group;
(C) receipt by CWC of written confirmation from the Office of the Director
General of Telecommunication that the Director General has not (i) issued any
directions to any member of the NYNEX CableComms Group or the Mercury Group in
connection with their telecommunication licenses issued pursuant to the UK
Telecommunications Act 1984, (ii) given notice to any member of the NYNEX
CableComms Group or the Mercury Group of its intention to make modifications to
such license (other than modifications which are to be made to all or
substantially all of the licenses issued pursuant to the UK Telecommunications
Act 1984), or (iii) taken any steps pursuant to Section 16 of the UK
Telecommunications Act 1984 in relation to enforcement of such license;
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(D) receipt by CWC of written confirmation from the ITC that the ITC has not
(i) issued any directions to any member of the NYNEX CableComms Group in
connection with any license issued pursuant to the UK Cable and Broadcasting Act
1984 or the Broadcasting Act, (ii) given notice to any member of the NYNEX
CableComms Group 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 UK Cable and Broadcasting Act 1984 or the
Broadcasting Act, as the case may be), or (iii) taken any steps in relation to
enforcement of any such license;
(E) the BCM Offer becoming or being declared unconditional in all respects
(except in respect of any condition relating to the Offers becoming or being
declared so unconditional);
(F) NYNEX (if it has advised C&W and BCI that it is entitled, and intends,
to request an opinion pursuant to clause 9(L)(i) of the Transaction Agreement)
having received, at or immediately prior to the time at which the Offers would
otherwise become or be declared unconditional in all respects, an opinion of
Chadbourne & Parke LLP or, if Chadbourne & Parke LLP is unable to give such
opinion, an opinion of independent counsel of international standing in the
field of US federal income tax reasonably satisfactory to NYNEX, C&W and BCI to
the effect that, based upon evidence of share ownership which may reasonably be
relied upon pursuant to US Treasury Regulations and the ruling received from the
US Internal Revenue Service pursuant to the Additional Condition (G) below, the
condition set forth in US Treasury Regulations section 1.367(a)-3(c)(1)(ii), or
any successor provision relating to the ownership of the shares of CWC by
holders of Shares, is met; and
(G) NYNEX and the Companies having received the rulings requested from the
US Internal Revenue Service in connection with the US tax treatment of NYNEX and
US holders of Units who accept the Offers, or NYNEX in connection with the
transfer to CWC of the Winston Entities and of the Companies following its
proposed domestication.
The BCM Offer is also subject to additional conditions with respect to BCM
that are similar to the above Additional Conditions to the Offers with respect
to the Companies, except that the BCM Offer does not have a condition relating
to receipt of an opinion or rulings as described in Additional Conditions (F)
and (G), respectively, above.
CWC reserves the right, subject to the provisions of the Transaction
Agreement, to waive, in whole or in part, all or any of Conditions (iv) to (xii)
inclusive as well as the Additional Conditions and the corresponding additional
conditions to the BCM Offer, other than Additional Condition (A) and the
corresponding condition to the BCM Offer, provided that CWC may only waive or
exercise any discretion in relation to Conditions (vi) and (vii), and Additional
Conditions (B), (C) and (D) and the corresponding additional conditions to the
BCM Offer, and, with respect to the Offers only, Additional Conditions (F) and
(G) with the consent of BCI and NYNEX. Reducing the Minimum Acceptance Condition
requires the agreement of each of C&W, BCI and NYNEX.
On March 21, 1997, C&W, NYNEX and BCI agreed that none of the Conditions to
the BCM Offer will be invoked by reason of:
(i) the termination of any bank or other borrowing facilities available
to any member of the BCM Group, or the making of any new borrowings by any
such member to refinance such facilities, by reason or in pursuance of the
implementation of the provisions of the Transaction Agreement; or
(ii) the expenditure of any monies or the incurring of any indebtedness
or any liability to expend monies by any member of the BCM Group for the
purpose of implementing the network buildout program of the BCM Group in the
ordinary course of business.
A similar agreement was reached on March 21, 1997 in relation to the NYNEX
CableComms Group and, in addition, the parties agreed that none of the
Conditions to the Offers will be invoked by reason of
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any member of the NYNEX Cablecomms Group ceasing to be able to use the NYNEX
name by reason or in pursuance of any provision of the Transaction Agreement.
Subject to the above, CWC shall be under no obligation to waive (where
permitted) or treat as satisfied any of the Conditions by a date earlier than
Monday, May 26, 1997 (or such later date as may be agreed by the Panel)
notwithstanding that the other Conditions of the BCM Offer and the Offers have
been waived or fulfilled and that there are at such earlier date no
circumstances to indicate that any such Conditions may not be capable of
fulfillment. If CWC is required by the Panel to make an offer for any of the BCM
Securities or the Shares under the provisions of Rule 9 of the City Code, CWC
may make such alterations to the above Conditions, including the Minimum
Acceptance Condition, as are necessary to comply with the provisions of Rule 9
provided that CWC will only make such alteration to Conditions (vi) and (vii)
and Additional Conditions (B), (C) and (D) and the corresponding additional
conditions to the BCM Offer and, with respect to the Offers only, Additional
Conditions (F) and (G) with the consent of BCI and NYNEX.
If Additional Condition (G) to the Offers is not satisfied by the latest
date on which in accordance with the City Code and/or with the consent of the
Panel the Offers may become or be declared unconditional, such condition will,
in accordance with the provisions of the Transaction Agreement, be waived unless
NYNEX has previously notified C&W and BCI that such condition must be invoked.
TERMINATION. The Transaction Agreement may be terminated by any party by
written notice to the others during the period from the date of such agreement
to the date upon which the BCM Offer and the Offers are announced in accordance
with Rule 2.5 of the City Code if, in that party's reasonable opinion and having
consulted to the extent practicable with the other parties, a Material Adverse
Change has occurred in respect of any of CWC, the Companies, BCM or Mercury
provided that neither C&W nor BCI may terminate in respect of a Material Adverse
Change in respect of CWC, Mercury or BCM, and NYNEX may not terminate in respect
of a Material Adverse Change in respect of the Companies. "Material Adverse
Change" generally means with respect to any of Mercury, BCM, the Companies, or
CWC, any event, occurrence, fact, condition or change occurring after October
22, 1996 that has a materially adverse effect on the business, operations,
results of operations, financial condition, assets or liabilities of the
relevant person, provided that such effect is sufficiently adverse such as to
alter to a significant extent the relative values of Mercury, BCM, the
Companies, or CWC, as the case may be, reflected in the consideration payable
under the BCM Offer and the Offers or in respect of the acquisition of Mercury
by CWC.
The Transaction Agreement shall terminate automatically (unless the parties
otherwise agree) in the following circumstances: (i) if the BCM Offer and the
Offers have not been announced for the purposes of Rule 2.5 of the City Code by
9:00 a.m. on June 30, 1997; or (ii) if either of the BCM Offer or the Offers
lapses or is withdrawn with the consent of all of the parties to the Transaction
Agreement.
REPRESENTATION ON CWC'S BOARD OF DIRECTORS. The Transaction Agreement
provides that, upon the BCM Offer and the Offers becoming or being declared
unconditional in all respects, C&W will be entitled to appoint six directors to
CWC's Board (including the Chairman and chief executive officer), BCI two
directors and NYNEX two directors. Three directors will be appointed by
agreement among C&W, BCI and NYNEX.
NYNEX has appointed Mr. Blackburn, a director of the Companies and an
officer of an affiliate of NYNEX, and Mr. Frederic V. Salerno, an officer of
NYNEX, as non-executive directors on CWC's Board. Sir Bryan Victor Carsberg, a
director of the Companies, has accepted his appointment as an independent
non-executive director on CWC's Board.
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DE-STAPLING OF CERTAIN UNITS
Subject to the requisite approvals of holders of NYNEX CableComms UK
Ordinary Shares at the NYNEX CableComms UK extraordinary general meeting and the
holders of NYNEX CableComms US Shares of Common Stock at the NYNEX CableComms US
special meeting, the NYNEX CableComms UK Articles of Association and the NYNEX
CableComms US Restated Certificate of Incorporation will be amended to provide,
among other things, that notwithstanding the provisions therein requiring that
NYNEX CableComms UK Ordinary Shares and NYNEX CableComms US Shares of Common
Stock be transferred together and otherwise treated as Units, the Boards of
Directors of NYNEX CableComms UK and NYNEX CableComms US, respectively, shall be
authorized to permit the transfer or other dealing of a number of NYNEX
CableComms UK Ordinary Shares and the transfer, or conversion by way of merger
or other dealing, of a number of NYNEX CableComms US Shares of Common Stock, in
each case in an amount not to exceed 20 per cent. of the NYNEX CableComms UK
Ordinary Shares or NYNEX CableComms US Shares of Common Stock, as the case may
be, outstanding immediately prior to the commencement of the Offers, free of the
restrictions on transfer or other dealing contained in the NYNEX CableComms UK
Articles of Association and the restrictions on transfer or conversion by way of
merger or other dealing contained in the NYNEX CableComms US Restated
Certificate of Incorporation. These amendments to the NYNEX CableComms UK
Articles of Association (the "UK De-stapling Amendment") and the NYNEX
CableComms US Restated Certificate of Incorporation (the "US De-stapling
Amendment") will allow certain NYNEX CableComms UK Ordinary Shares and NYNEX
CableComms US Shares of Common Stock to be transferred or converted separately
in order to facilitate the Compulsory Acquisition (as defined below) relating to
the NYNEX CableComms UK Offer and the Merger (as defined below).
The "Compulsory Acquisition" means the compulsory purchases, pursuant to
Sections 428 through 430F of the Companies Act, of all NYNEX CableComms UK
Ordinary Shares (including those comprised in Units or represented by ADSs),
which have not been purchased pursuant to the Offers. The "Merger" means the
merger of Cable & Wireless Communications Delaware Inc., a wholly-owned
subsidiary of CWC incorporated in Delaware (the "CWC Merger Sub") with and into
NYNEX CableComms US pursuant and subject to Section 251 of the Delaware General
Corporation Law (the "DGCL"), with NYNEX CableComms US remaining as the
surviving corporation. In the Merger, holders of NYNEX CableComms US Shares of
Common Stock will receive CWC Ordinary Shares or CWC ADSs, as the case may be,
and, as a result of the Merger, NYNEX CableComms US will continue as the
surviving corporation and as a wholly-owned subsidiary of CWC.
The Schedule 14D-1 states that following the Compulsory Acquisition relating
to the NYNEX CableComms UK Offer and the Merger, CWC, as the sole beneficial
shareholder of NYNEX CableComms UK and NYNEX CableComms US, intends to approve
the domestication of NYNEX CableComms UK as a Delaware corporation pursuant to
Section 388 of the DGCL and amendments to the NYNEX CableComms US Restated
Certificate of Incorporation and the NYNEX CableComms UK Articles of Association
to remove completely the restrictions on the NYNEX CableComms UK Ordinary Shares
and the NYNEX CableComms US Shares of Common Stock, including those owned by
CWC, which require the transfer of, or other dealing in, such shares only as
Units. The Schedule 14D-1 further states that thereafter, NYNEX CableComms UK
will file a certificate of domestication and a certificate of incorporation with
the Secretary of State of the State of Delaware and become a Delaware
corporation for purposes of Delaware law. Notwithstanding the domestication in
Delaware, NYNEX CableComms UK will also continue to be governed by the laws of
England and Wales. Following the domestication of NYNEX CableComms UK, NYNEX
CableComms UK and NYNEX CableComms US will file the amendments to the NYNEX
CableComms UK Articles of Association and the NYNEX CableComms US Restated
Certificate of Incorporation, respectively.
COMPULSORY ACQUISITION. The Schedule 14D-1 states that if, on or before
July 27, 1997, as a result of the Offers or otherwise, CWC acquires or contracts
to acquire NYNEX CableComms UK Ordinary Shares
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(including those comprised in Units or represented by ADSs) representing at
least 90 per cent. of NYNEX CableComms UK Ordinary Shares (including those
comprised in Units or represented by ADSs) to which the NYNEX CableComms UK
Offer relates, then (i) immediately prior to the consummation of the Compulsory
Acquisition relating to the NYNEX CableComms UK Offer, the respective Boards of
Directors of NYNEX CableComms UK and NYNEX CableComms US currently propose,
pursuant to the authority granted to them in the proposed amendments to the
NYNEX CableComms UK Articles of Association and the NYNEX CableComms US Restated
Certificate of Incorporation, if such amendments are approved by the holders of
NYNEX CableComms UK Ordinary Shares and the holders of NYNEX CableComms US
Shares of Common Stock, respectively, to effect the de-stapling of certain Units
in order to facilitate the Compulsory Acquisition relating to the NYNEX
CableComms UK Offer and the Merger; and (ii) (a) CWC will be entitled and
intends to effect a Compulsory Acquisition to compel the purchase of the
remainder of the outstanding NYNEX CableComms UK Ordinary Shares (including
those represented by ADSs) on the same terms as those offered in the NYNEX
CableComms UK Offer in accordance with Sections 428-430F of the Companies Act;
and/or (b) a holder of NYNEX CableComms UK Ordinary Shares (including those
represented by ADSs) may require CWC to purchase his or her NYNEX CableComms UK
Ordinary Shares on the same terms as those offered in the NYNEX CableComms UK
Offer in accordance with Sections 430A and 430B of the Companies Act.
THE MERGER. The Schedule 14D-1 states that subject to the requisite
approvals of the holders of NYNEX CableComms US Shares of Common Stock at the
NYNEX CableComms US special meeting, CWC intends to become the 100 per cent.
owner of all the outstanding NYNEX CableComms US Shares of Common Stock by means
of a merger of the CWC Merger Sub with and into NYNEX CableComms US pursuant and
subject to Section 251 of the DGCL. Following the Merger, the separate corporate
existence of the acquisition subsidiary will cease and NYNEX CableComms US will
continue as the surviving corporation under the name "NYNEX CableComms Group
Inc." In the Merger, NYNEX CableComms US Shares of Common Stock (other than
NYNEX CableComms US Shares of Common Stock held by NYNEX CableComms US as
treasury shares or by its subsidiaries or by CWC and other than NYNEX CableComms
US Shares of Common Stock for which appraisal rights, if any, have been properly
asserted under Section 262 of the DGCL), including those represented by ADSs,
will be converted into the right to receive the same number of CWC Ordinary
Shares as such holders of NYNEX CableComms US Shares of Common Stock would have
received in the NYNEX CableComms US Offer (including those represented by ADSs)
with respect to their NYNEX CableComms US Shares of Common Stock. NYNEX
CableComms US Shares of Common Stock held by NYNEX CableComms US as treasury
shares or by its subsidiaries will be cancelled in the Merger, and NYNEX
CableComms US Shares of Common Stock held by CWC will remain unchanged and
outstanding (upon the election by CWC to forego the conversion of the shares of
the CWC Merger Sub into shares of the surviving corporation). The directors of
the CWC Merger Sub will become the directors of NYNEX CableComms US as the
surviving corporation, and the officers of NYNEX CableComms US will become the
officers of the surviving corporation.
CWC, CWC Merger Sub and NYNEX CableComms US have entered into an Agreement
and Plan of Merger (the "Merger Agreement") in connection with the Merger. The
Merger Agreement provides that the respective obligations of each party to
effect the Merger is subject to the satisfaction at or prior to the effective
time of the Merger of (i) the US De-stapling Amendment, the Merger Agreement and
the Merger having been approved and adopted by the requisite votes of the
shareholders of NYNEX CableComms US; (ii) the UK De-stapling Amendment having
been approved by the requisite votes of the shareholders of NYNEX CableComms UK;
(iii) the Offers becoming or having been declared unconditional in all respects;
and (iv) subject to the approvals of the UK De-stapling Amendment and the US De-
stapling Amendment, the Boards of Directors of NYNEX CableComms UK and NYNEX
CableComms US having taken such action, in their absolute discretion, as is
necessary to permit the de-stapling of up to 20 per cent. of the outstanding
NYNEX CableComms UK Ordinary Shares and NYNEX CableComms US Shares of Common
Stock.
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The Merger will become effective at the date and time which is the later of
(i) the date and time of the filing of the certificate of merger relating to the
Merger with the Secretary of State of the State of Delaware or (ii) such other
date and time as the parties to the Merger Agreement may agree as is set forth
in such certificate of merger.
Pursuant to the Merger Agreement, the parties have agreed that all rights to
indemnification existing in favor of the directors and officers of NYNEX
CableComms US as provided in the Restated Certificate of Incorporation and
By-laws of NYNEX CableComms US on the date of the Merger Agreement with respect
to actions or omissions occurring at or prior to the effective time of the
Merger, shall survive the Merger and shall continue in full force and effect
without amendment, repeal or modification for a period of six years after the
effective time of the Merger, unless such modification is required by law, and
CWC has agreed to guarantee the obligations of the surviving corporation with
respect thereto. For a period of six years after the effective time of the
Merger, CWC has agreed to cause the surviving corporation to use its reasonable
best efforts to maintain, if available, the existing directors' and officers'
liability insurance policies on terms no less advantageous to such directors and
officers of NYNEX CableComms US who are currently covered by NYNEX' policies,
with respect to matters occurring prior to the effective time of the Merger.
The foregoing summary of the Merger and the Merger Agreement does not
purport to be complete and is qualified in its entirety by reference to the
complete text of the Merger Agreement, a copy of which has been filed as Exhibit
3 hereto and is incorporated herein by reference.
Proxy materials relating to the approval of the UK De-stapling Amendment,
the US De-stapling Amendment and the Merger accompany this Schedule 14D-9. The
Offer Committee of NYNEX CableComms UK has unanimously recommended approval of
the UK De-stapling Amendment to the Board of Directors of NYNEX CableComms UK.
The Offer Committee of NYNEX CableComms US has unanimously recommended approval
of the US De-stapling Amendment and the Merger to the Board of Directors of
NYNEX CableComms US. See Item 4 below. NYNEX has informed the Companies that the
NYNEX subsidiary that holds the NYNEX CableComms UK Ordinary Shares and the
NYNEX CableComms US Shares of Common Stock intends to vote all of its 67.0 per
cent. interest in NYNEX CableComms UK Ordinary Shares and NYNEX CableComms US
Shares of Common Stock owned by it in favor of the UK De-stapling Amendment and
the US De-stapling Amendment, and has informed NYNEX CableComms US that it
intends to cause such subsidiary to vote all of its NYNEX CableComms US Shares
of Common Stock in favor of the Merger to satisfy the shareholder approval
requirements of Section 251 of the DGCL and as required by NYNEX CableComms US'
Restated Certificate of Incorporation. NYNEX also has informed the Companies
that it will cause to be voted the Shares owned, indirectly, by NYNEX in favor
of any resolutions to adjourn the meetings of the Companies in order to permit
the obtaining of such further votes as may be required and further solicitation
of proxies in favor of such resolutions. If approved by the requisite vote, it
is contemplated that the Merger will become effective at the later of (i) the
time as the Compulsory Acquisition relating to the NYNEX CableComms UK Offer
becomes effective (if at all) and (ii) the exercise or lapse of all options
outstanding under the NYNEX CableComms Option Schemes or the exchange of such
options for options over CWC Ordinary Shares. The Schedule 14D-1 states that
these shareholder votes are not conditions to either of the Offers.
CWC SHAREHOLDERS' AGREEMENT
The Schedule 14D-1 provides substantially the following summary of the CWC
Shareholders' Agreement (as defined below). The following discussion of the CWC
Shareholders' Agreement does not purport to be complete and is qualified in its
entirety by reference to the complete text of the CWC Shareholders' Agreement, a
copy of which has been filed as Exhibit 4 hereto and is incorporated herein by
reference.
GENERAL. On March 21, 1997 C&W, BCI, BCM Holdco Limited ("BCMH"), Bell
Canada International Holdings Limited ("BCIH"), NYNEX and CWC entered into an
agreement setting out the terms of the relationship among them in respect of CWC
(the "CWC Shareholders' Agreement"). The CWC
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Shareholders' Agreement contains the provisions described below which will take
effect upon the BCM Offer and the Offers becoming or being declared
unconditional. For the purposes of the description of the CWC Shareholders'
Agreement below, each of C&W, BCI (together with BCIH and BCMH), NYNEX and each
New Shareholder (as defined below) are referred to as "Shareholders" or a
"Shareholder", and a director of CWC appointed by a Shareholder is referred to
as a Shareholder-Appointed Director. "Group", when used with respect to any
entity, means that entity and its subsidiary undertakings within the meaning of
that expression in the Companies Act; provided, however, that references to or
including the C&W Group exclude the CWC Group. References to the MTSA, the
Secondment Agreement, the Tax Sharing Agreement, the C&W License and the NYNEX
Termination Agreement are defined under "Management and Technical Services
Agreement", "Secondment Agreement", "Tax Agreements," "C&W License" and "NYNEX
Termination Agreement" below.
CWC'S BUSINESS. The parties to the CWC Shareholders' Agreement have agreed
that the business of CWC ("CWC's Business") will be: (i) to carry on in the
United Kingdom businesses consisting of the operation and/or licensing of owned
or leased telecommunication networks (including fixed, mobile and satellite
networks and broadband networks) and cable TV networks, and the supply and/or
licensing of telecommunication services and products in each case irrespective
of the technologies being used (including voice, data, software and image
services and products) and of cable TV services and products, (ii) to carry on
such businesses outside the United Kingdom as are, at the date of the CWC
Shareholders' Agreement, carried on outside the United Kingdom by the CWC Group
and (iii) such other businesses as the CWC Board may decide, subject to the
Shareholder-Appointed Directors' veto rights described under "Reserved Matters"
below.
Certain restrictions relating to mobile, private branch exchanges ("PBXs")
and paging operations in the United Kingdom apply to members of the CWC Group.
In relation to mobile, members of the CWC Group may not, while CWC is a
subsidiary undertaking of C&W and while C&W has an interest in One 2 One, carry
on or have an economic interest in a person which carries on, or has applied for
a license to carry on, as all or part of its business, the activity of running a
mobile radio voice telephony network for the provision of telecommunication
services to the general public within any part of the United Kingdom.
In relation to PBXs, subject to certain exceptions, Mercury and its
subsidiary undertakings may not within three years from October 31, 1995 be
involved in the United Kingdom in a business which sells, rents, distributes,
installs or maintains a PBX involving a private telephone switch located in a
customer's premises that provides switching as well as enhanced features to the
customer's premises (including private automatic branch exchanges), other than
as permitted in a co-operation agreement with the Siemens subsidiary to which
Mercury sold its PBX business.
In relation to paging, subject to certain exceptions, Mercury and its
subsidiary undertakings may not within three years from July 15, 1996 be
involved in owning, operating, selling, marketing, distributing or otherwise
dealing in or with one-way paging or two-way paging provided by means of a
paging system in the United Kingdom, I.E., a telecommunication system operating
through the use of certain radio frequencies, other than as permitted under a
supply and marketing agreement with its former subsidiary, Page One
Communications Limited. In the same period, the restriction extends to selling,
leasing, marketing or distributing in the United Kingdom pagers or other
subscriber equipment commonly used in a paging system or marketing and/or
re-selling one-way paging and/or two-way paging, or carrying on one-way paging
or two-way paging, in any case, to the extent that it involves the use of a
paging system.
C&W, BCI and NYNEX have each agreed that while its Group holds 10 percent or
more of the aggregate issued and outstanding share capital of CWC at the
relevant time, it will, if its board or the board of directors of one of its
subsidiaries decides to establish a business in the United Kingdom which falls
within CWC's Business (a) inform the CWC Board immediately before the earlier of
establishing that business and any public announcement of the same, (b) use its
best endeavors to prevent disclosure to the competing business of any
confidential information relating to CWC's Business, and (c) use its best
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endeavors to ensure that no director of CWC appointed by it has any executive
involvement or holds any position in the competing business.
No notification or other obligation (as discussed in the preceding
paragraph) will arise in respect of (a) a business which is incorporated and
operating outside the United Kingdom which offers, provides or seeks to provide
services or products to customers in the United Kingdom where those services or
products are offered as part of that business's ordinary business to customers
throughout the world or any part of the world which includes, but is not limited
to, the United Kingdom, (b) the offering of services or products on a global or
international basis covering an area including (but not limited to) the United
Kingdom, (c) acquiring or holding shares in or debentures of a company the
shares of which are listed or dealt in on any stock exchange and which are
shares or debentures, which when aggregated with the holdings of the relevant
Group, confer not more than 10 per cent. of the votes that could be cast in a
general meeting of the relevant company, and (d) the ownership, installation
and/or maintenance of undersea cables. If any Shareholder's Group acquires a
competing business in the United Kingdom then, so long as the main purpose of
the acquisition was not to acquire the competing business and the competing
business is not a major and substantial part of the total activities of the
company, group or business acquired, the notification obligation does not arise
but the obligations described above regarding disclosure of confidential
information and avoiding the involvement of CWC's Directors in the competing
business will apply.
Each of C&W, BCI and NYNEX have agreed that its Group (while such Group owns
10 percent or more of the issued and outstanding ordinary share capital of CWC)
will, if it carries on business outside the United Kingdom, consider, subject to
certain exceptions, using CWC as its preferred agent, representative or carrier
in the United Kingdom in respect of activities falling within CWC's Business.
Equally, CWC will, while any of the C&W, BCI or NYNEX Groups holds 10 percent or
more of the ordinary share capital of CWC, consider using that Shareholder's
Group as its preferred agent, representative or carrier in countries where a
member of that Group offers the relevant services.
C&W has also agreed that while its Group holds 30 per cent. or more of the
aggregate issued and outstanding ordinary share capital of CWC it will not
establish, acquire or carry on any business in the United Kingdom which involves
the ownership or leasing of telecommunications networks or cable television
networks of the nature acquired by CWC pursuant to the Transactions. CWC is not
so acquiring C&W's business of Cable & Wireless Business Networks, Cable &
Wireless Network Services and Cable & Wireless Marine.
The directors of CWC who are not appointed by the Shareholders may by
majority vote approve the acquisition or carrying on by C&W of any business
described in the preceding paragraph (a "Restricted Business").
C&W may also acquire a Restricted Business which CWC has the financial
resources to acquire provided that C&W has offered CWC the opportunity to
acquire the Restricted Business and CWC has decided by a vote of the directors
of CWC not appointed by the Shareholders not to acquire the Restricted Business.
If C&W acquires a business which includes a Restricted Business which CWC
has the financial resources to acquire when the main purpose of the acquisition
is not the acquisition of the Restricted Business and the Restricted Business is
not a major part of the business acquired, then C&W will procure that the
Restricted Business is offered to CWC at the acquisition price for the
Restricted Business. If any decision of CWC not to acquire the Restricted
Business does not include the directors not appointed by the Principal
Shareholders voting against the acquisition, then C&W shall not carry on the
Restricted Business.
C&W may also hold shares or debentures in a Restricted Business if such
shares or debentures are listed or dealt in on any stock exchange and the
holding does not exceed 10 per cent. of the voting capital.
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SHAREHOLDER-RELATED ARRANGEMENTS. Each Shareholder has agreed that members
of its Group will enter into contracts with CWC on a normal commercial basis and
on arm's length terms. In addition, each Shareholder has agreed that any
agreement or arrangement proposed to be entered into between (a) any member of
the CWC Group and (b) any member of that Shareholder's Group will be submitted
to the CWC Board for approval in accordance with the "disinterested vote
procedure" described below.
The parties to the CWC Shareholders' Agreement have agreed that, after the
BCM Offer and the Offers become or are declared unconditional, the CWC Board
will review existing arrangements, agreements, policies and undertakings (other
than the MTSA, the Secondment Agreement, the C&W License and the NYNEX
Termination Agreement) between (a) members of the CWC Group and (b) members of
any Shareholder's Group. The CWC Board will conduct this review with a view to
determining whether it is in the interests of the relevant member of the CWC
Group to continue with the agreement, arrangement, policy or undertaking (each
an "Arrangement") on the same terms, to terminate it or to seek its amendment to
arm's length terms. Any decision shall be taken by a simple majority of those
directors of CWC in attendance and voting but excluding any directors of CWC
appointed by the Shareholder whose Group includes the party to the Arrangement
in question (the "disinterested vote procedure"). If the CWC Board decides to
terminate an Arrangement, then any costs of the CWC Group arising from such
termination will be borne by the relevant Shareholder.
This review is expected to take place within six months after the BCM Offer
and the Offers become or are declared unconditional in all respects. If an
Arrangement which should be subject to this review comes to the attention of the
CWC Board at a later date, the CWC Board will conduct is review at that point in
accordance with the disinterested vote procedure. If the CWC Board decides to
terminate any such Arrangement at that point, then the relevant Shareholder
will, in addition to termination costs, make a compensation payment to CWC to
the extent that the CWC Group has paid more or received less than an arm's
length amount under the relevant Arrangement after the latest date intended for
the CWC Board review.
The parties to the CWC Shareholders' Agreement have also agreed that the
disinterested vote procedure will apply (a) before a member of the CWC Group
enters into any new Arrangement with any members of any Shareholder's Group and
(b) to any amendment to, or implementation of, any existing Arrangement.
BCI has agreed that if an Arrangement between a member of the CWC Group and
a member of the BCE Group (other than the BCI Group) comes to the CWC Board for
review, the disinterested vote procedure will apply and no director appointed by
BCI will be entitled to vote in respect of that Arrangement. In addition, the
parties have agreed that the disinterested vote procedure will apply to any
decision to be taken by the CWC Board relating to the conduct of any dispute or
the enforcement of any Arrangement between a Shareholder, on the one hand, and
CWC, on the other hand, including the MTSA, the Secondment Agreement, the Tax
Sharing Agreement, the C&W License and the NYNEX Termination Agreement.
The parties have agreed that certain existing Arrangements between the
Companies, BCM, and Mercury, on the one hand, and their current shareholders
and/or such shareholders' subsidiaries, on the other hand, will terminate when
the BCM Offer and the Offers become or are declared unconditional. The parties
have also agreed that, with certain exceptions, any costs which would otherwise
be borne by the CWC Group as a result of such termination will be borne by the
relevant Shareholder.
The parties to the CWC Shareholders' Agreement have agreed that the MTSA,
the Tax Sharing Agreement and the Secondment Agreement will be entered into by
the relevant parties as soon as the BCM Offer and the Offers become or are
declared unconditional. Any subsequent amendment of those agreements as well any
agreements or other documents relating to their implementation will be subject
to the disinterested vote procedure.
C&W has agreed to execute and deliver to CWC the C&W License and NYNEX has
agreed to execute and deliver to CWC the NYNEX Termination Agreement.
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C&W currently participates, with other companies within its Group (including
Mercury), in group development programs. C&W has agreed that CWC will have the
right, for so long as it is a subsidiary undertaking of C&W, to participate in
existing and future group development programs, either on the terms, from time
to time, set out by the Group Development Board responsible for managing such
programs, or on such other terms as may be agreed between C&W and CWC subject to
the disinterested vote procedure.
TRANSACTION AGREEMENT. The parties to the CWC Shareholders' Agreement have
agreed that certain provisions of the Transaction Agreement will be superseded
by the CWC Shareholders' Agreement and other agreements upon the BCM Offer and
the Offers becoming or being declared unconditional. In all other respects, the
Transaction Agreement will remain in full force and effect.
CWC ARTICLES. The parties to the CWC Shareholders' Agreement have agreed
that the CWC Articles of Association (the "CWC Articles") will come into force
on the date the BCM Offer and the Offers become or are declared unconditional.
The CWC Articles contain rights for the Shareholders to appoint directors and
other matters as described in the Prospectus and is filed as Exhibit 5 hereto
and is incorporated herein by reference. The Shareholders have also agreed that
they will comply with the provisions of the CWC Articles.
RESERVED MATTERS. The CWC Articles and the CWC Shareholders' Agreement
provide and the Shareholders have agreed, subject to the global alliance
provisions described below, that:
(a) the following matters will require approval at a meeting of the CWC
Board and shall not be approved if any Shareholder-Appointed Director votes
against the relevant resolution:
(i) acquisitions and disposals by the CWC Group with a value of more
than L100 million, other than in the ordinary course of business;
(ii) a change in the nature or scope of CWC's Business;
(iii) the issue by CWC or any of its subsidiary undertakings of shares or
other securities or rights to acquire shares or other securities;
(iv) an investment by a strategic partner in CWC or any of its
subsidiary undertakings;
(v) the proposal of any resolution to change the CWC Articles at any
meeting of the shareholders of CWC and any proposal to change the articles
of association or other constitutional documents of any subsidiary
undertaking of CWC at any meeting of the shareholders of that subsidiary
undertaking;
(vi) the adoption or amendment of all or part of the annual capital
expenditure budget for CWC and its subsidiary undertakings;
(vii) the appointment or re-appointment of any director of CWC other than
a Shareholder-Appointed Director, including the proposal of any resolution
so to appoint or re-appoint any such director at a meeting of the
shareholders of CWC and/or any director of a subsidiary undertaking of CWC;
and
(b) no allotment or issue of equity securities (within the meaning of
sections 94(2) and 94(3) of the Companies Act) or voting securities of CWC or
grant of rights in respect of any voting securities of CWC either pursuant to an
offer to Principal Shareholders made by CWC in accordance with the CWC
Shareholders' Agreement or otherwise, shall be made unless both that allotment,
issue or grant and any allotment or issue of equity securities (as so defined)
or voting securities of CWC, pursuant to an offer made to Principal Shareholders
under the CWC Shareholders' Agreement in connection with that allotment, issue
or grant, is approved by resolution of shareholders of CWC in general meeting or
otherwise where such approval is required by the rules of the London Stock
Exchange or otherwise.
The Shareholders have also agreed, subject to the global alliance provisions
described below, that the following matters will require approval at a meeting
of the CWC Board and shall not be approved if either
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(a) a director appointed by a Shareholder entitled to appoint five or more
directors or (b) at least two Shareholder-Appointed Directors or their Groups,
vote or votes, as the case may be, against the relevant resolutions:
(i) the borrowing of money or granting of any form of security by any
member of the CWC Group if the aggregate amount borrowed or secured by the
CWC Group as a whole exceeds L100 million;
(ii) the adoption or amendment of the whole or any part of the annual
operating budget and annual business plan for CWC and its subsidiary
undertakings; and
(iii) the appointment of any senior manager (not being a director of CWC)
of CWC or any of its subsidiary undertakings and for this purpose a "senior
manager" is any of (a) the Chief Operating Officer, Marketing Director,
Finance Director, Human Resources Director, Information Technology Director,
Legal Director, Company Secretary and Business Development Director, and (b)
the Managing Directors of Consumer Markets, SME Markets, Corporate Markets,
International and Partner Services, Customer Operations and Networks and any
successors to any such function.
POTENTIAL GLOBAL ALLIANCE. The parties to the CWC Shareholders' Agreement
have agreed that CWC management and any of BCI, NYNEX and C&W (in each case
while its Group owns 10 percent, or more of the issued and outstanding CWC
Ordinary Shares at the relevant time) may put a proposal to the board of CWC
that the CWC Group participates in a global alliance involving commercial
co-operation on an international basis between any of BCI, NYNEX or C&W and
another company or group of companies that provide telecommunication or
entertainment services either entirely or in significant part outside the United
Kingdom. If such a proposal is made, the following provisions (the "global
alliance provisions") will apply.
The decision whether or not to participate, and the terms and conditions of
such participation, in such global alliance will be taken by simple majority
vote of the directors of CWC. However, the disinterested vote procedure will
apply in respect of any term or condition of the global alliance, or CWC's
participation in such alliance, that would involve an agreement or arrangement
between any member of the CWC Group on the one hand, and any member of a
Shareholder's Group, on the other hand, pursuant to which goods or services
would be provided between them. If that agreement or arrangement is necessary
for the purposes of the participation by BCI, NYNEX or C&W in the global
alliance and does not include projected or actual billings in any one year of
more than one per cent. of the CWC Group's total revenues or, in the case of a
global alliance proposed prior to the production of CWC's first audited
financial results, or where such results cover a period of six months or less,
more than L20 million, the parties have agreed that the Shareholder-Appointed
Directors entitled to vote under the disinterested vote procedure may not reject
it unless it is not on arm's length terms and/or it involves a transfer of value
out of CWC.
Any term or condition of a global alliance, or CWC's participation in such
global alliance, that involves any matter which is the subject of veto rights
(see "Reserved Matters" above), remains subject to those veto rights except that
those veto rights shall not apply to and a simple majority vote of the directors
of CWC will be sufficient to approve:
(i) a change in the geographic scope of CWC's Business to enable the CWC
Group to participate in the proposed global alliance, subject to certain
restrictions designed to avoid breach of existing contractual restriction
imposed upon the Shareholders and their parent undertakings;
(ii) incremental capital expenditures to be incurred by the CWC Group in
connection with its participation in the global alliance, provided that
neither the projected nor the actual capital expenditure shall exceed L50
million in the aggregate over the five-year period covered by the business
plan presented for that proposed participation;
(iii) the adoption or amendment or any element of the annual operating
budget for the CWC Group, to the extent that such element involves an
increase or decrease in budgeted operating income resulting from
participation in the global alliance, provided that neither the projected
nor the actual
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decrease in such operating income shall exceed L50 million in the aggregate
for those years (falling within a five-year period covered by the business
plan presented for that proposed participation) during which the global
alliance is projected to or produces a loss for the CWC Group; and
(iv) the adoption or amendment of any element of the annual business
plan for CWC to the extent that it reflects any of (i), (ii) or (iii) above,
and to the extent that any such element reflects any change other than those
which are otherwise subject to the vetoes described under "Reserved Matters"
above.
CWC INFORMATION. The parties to the Shareholders' Agreement have agreed
that Shareholders will have access to necessary financial, accounting, taxation
and other information regarding CWC to allow them to comply with their
obligations in relation to announcements of financial results, audits, tax and
regulatory filings and for the purposes of the conduct of certain types of
litigation. In addition, each Shareholder has certain rights to audit the
financial statements of CWC.
PURCHASES OF CWC SHARES. Each Shareholder has undertaken that, if it wishes
to purchase additional CWC Ordinary Shares, each other Shareholder who, or whose
Group, holds 10 percent or more of the issued and outstanding CWC Ordinary
Shares at the relevant time, will be entitled to sell a proportion of those
shares to that person (the "Purchaser"). The Purchaser will notify the other
Shareholders of the total number of CWC Ordinary Shares it wishes to purchase.
Each other Shareholder may offer to sell CWC Ordinary Shares to the Purchaser
and such offers will be accepted in accordance with the procedures set forth in
the CWC Shareholders' Agreement. The price for any such purchases will be the
price at which the same number of CWC Ordinary Shares could have been purchased
on the market in London at the close of business on the day prior to the date on
which the Purchaser notifies the other Shareholders that it wishes to make a
purchase.
The Purchaser is entitled to buy CWC Ordinary Shares from third parties only
to the extent that the other Shareholders either fail to offer to sell or fail
to tender their shares within certain specified periods. No purchases will be
made otherwise than from other Shareholders to the extent that, following such
purchase, the public shareholdings in CWC would be insufficient to retain a
quotation or trading facility or listing on all stock exchanges or security
markets upon which CWC is, for the time being, quoted, traded or listed.
C&W SALES. C&W has agreed that if, following a disposal of CWC Ordinary
Shares or any direct or indirect interest in such shares, the C&W Group would
own less than 50.1 percent but 10 percent or more, of the total issued ordinary
share capital of CWC, C&W will use all reasonable endeavors to procure that on
that disposal (and any subsequent disposal) either (i) an offer is made to each
of the other Shareholders to purchase the same proportion of their or their
Groups' respective holdings or interests in CWC Ordinary Shares as the number of
CWC Ordinary Shares (or interests in them) disposed of by the C&W Group
represents of its total holding before such disposal, on the same terms and
conditions as are applicable to that disposal, or (ii) the purchaser of such CWC
Ordinary Shares makes a takeover offer for CWC on the terms set out in Rule 9 of
the City Code, whether or not such rule would normally be applicable under the
relevant circumstances. This right will remain available to a Shareholder even
if it and its Group ceases to hold 10 percent of CWC's issued and outstanding
ordinary share capital.
NEW SHARE ISSUES. The parties to the CWC Shareholders' Agreement have
agreed the following in relation to any allotment by CWC of equity securities
(within the meaning of section 94(2) of the Companies Act) or other securities
which confer on the holder the right to vote at general meetings of CWC on all,
or substantially all matters.
Where such securities are to be paid up in cash, CWC will first offer each
Shareholder, on the same terms, the right to subscribe for up to such number of
those securities as will leave its Group holding such proportion of the equity
or voting share capital in CWC as it held immediately prior to the allotment or
issue (assuming that each Shareholder's Group takes up its entitlement in full).
Where such securities are to be paid up otherwise than in cash, each Shareholder
will be entitled to subscribe in cash at the value
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attributable to those securities by reference to that non-cash consideration for
up to such number of those securities as will leave its Group holding such
proportion of the equity or voting share capital of CWC as it held immediately
prior to that allotment or issue (assuming that each Shareholder's Group takes
up its entitlement in full). If the Shareholders and CWC are unable to agree the
value attributable to equity securities for the purposes of the above
provisions, then the matter may be submitted to an independent merchant bank for
final determination.
In addition, each Shareholder has an option to elect to subscribe for
whatever number of additional securities it wishes in the event that any of the
other Shareholders do not subscribe their PRO RATA entitlement in full. If such
elections are made, as between competing Shareholders, securities will be
allocated, to the extent possible, PRO RATA by reference to each electing
Shareholder Group's holdings of relevant securities of CWC at the date of the
offer to subscribe.
The above provisions will continue to apply for the benefit of a Shareholder
even if its Group ceases to hold 10 percent of CWC's issued and outstanding
ordinary share capital. The provisions do not apply to the issue of shares
pursuant to the exercise of any options granted under any CWC employee share
option schemes.
NYNEX PROTECTION. The Shareholders have agreed that they will take all
steps open to them to procure that CWC does not, at any time before the expiry
of the two year period following the consummation of the merger of NYNEX and
Bell Atlantic Corporation or, if earlier, such time as NYNEX ceases to account
for the financial results of CWC and its subsidiary undertakings using the
equity method in NYNEX's consolidated accounts, issue any share or grant any
options over its shares if the effect would reasonably be expected in NYNEX's
judgment, supported by the opinion of its independent auditors (addressed to
each of the Shareholders), to prejudice its and Bell Atlantic Corporation's
accounting treatment of their merger as a pooling of interests under applicable
US accounting rules. NYNEX has agreed that it will notify the other Shareholders
of the consummation of the merger of NYNEX and Bell Atlantic Corporation and
NYNEX ceasing to account for the financial results of CWC using the equity
method in NYNEX's consolidated accounts.
The parties to the CWC Shareholders' Agreement have agreed that, for so long
as CWC remains an affiliate of NYNEX (for the purposes of the US Communications
Act of 1934 as amended by the US Telecommunications Act of 1996 (the "US
Telecommunications Act")), CWC will not do anything which would result in it or
NYNEX being in breach of the US Telecommunications Act. In addition, the
Shareholders and CWC have agreed to put in place certain compliance, monitoring
and reporting procedures in respect of the US Telecommunications Act.
SHAREHOLDER INDEMNITIES. Each of C&W, BCI, NYNEX has given an indemnity to
CWC and each other (for its own benefit and for the benefit of certain other
companies within each of their Groups and their respective directors, officers
and employees) relating to information contained in the Prospectus and other
documents. Each indemnitor has agreed to indemnify each indemnified person
against all claims and losses which the indemnified person may suffer as a
result of any such document containing any untrue statement (or any allegedly
untrue statement) of a material fact about the indemnitor, its Group or its
Relevant Target (as defined below) or omitting or allegedly omitting to state
therein, a material fact about the indemnitor, its Group or its Relevant Target
required to be stated therein or necessary to make the statements therein about
it, its Group or its Relevant Target, in the light of the circumstances in which
they were made, not misleading in any material respect. For this purpose,
"Relevant Target" means (a) in the case of C&W, Mercury, its subsidiaries and
associates and CWC, (b) in the case of NYNEX, the Companies, its subsidiaries
and associates and the Winston Entities and (c) in the case of BCI, BCM and its
subsidiaries and associates.
DURATION OF AGREEMENT. Unless expressly stated otherwise in the CWC
Shareholders' Agreement, the provisions of the CWC Shareholders' Agreement apply
to a Shareholder Group for so long as its Group holds 10 percent or more of the
CWC Ordinary Shares.
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The parties have agreed that any New Shareholder (as defined below) will be
entitled to join in and adhere to the CWC Shareholders' Agreement and, if it
does so, it will have the same rights and be subject to the same restrictions as
any other Shareholder who is party to the CWC Shareholders' Agreement. For this
purpose a "New Shareholder" means any of:
(i) a person who is not a company and who holds 10 percent or more of
the issued and outstanding ordinary share capital of CWC (a "Qualifying
Holding");
(ii) a company which has no parent undertaking and which (alone or
together with subsidiary undertakings) holds a Qualifying Holding; and
(iii) the parent undertaking of a company or companies which together or
alone hold a Qualifying Holding;
provided that, in each case, the Qualifying Holding was acquired directly or
indirectly from any member or members of (a) the C&W Group, (b) the BCI Group,
or (c) the NYNEX Group or any successor in title to their CWC Ordinary Shares.
OTHER. The parties have agreed that, save in certain limited circumstances,
none of their rights or obligations under the CWC Shareholders' Agreement may be
assigned or transferred.
The parties to the CWC Shareholders' Agreement have given confidentiality
undertakings in respect of the confidential information of or relating to each
of the other parties.
Disputes arising in relation to the CWC Shareholders' Agreement are to be
resolved by arbitration in London conducted in accordance with the rules of the
London Court of International Arbitration. The parties are not, however,
precluded from seeking injunctive relief in respect of any matter arising under
the CWC Shareholders' Agreement in any court of competent jurisdiction.
MANAGEMENT AND TECHNICAL SERVICES AGREEMENT
The Schedule 14D-1 provides that:
BCI, NYNEX or C&W (together the "Principal Shareholders") and CWC will, as
soon as the BCM Offer or the Offers become or are declared unconditional, enter
into a management and technical services agreement (the "MTSA"). Pursuant to the
terms of the MTSA, each of the Principal Shareholders will provide various
services to CWC at CWC's request including tax, legal, treasury and corporate
finance and human resource services. Under the MTSA, the services which may be
provided by CWC to each of the Principal Shareholders include payroll and
accounting, car fleet management and VAT services. The terms and conditions of
any services requested will be negotiated and agreed on an arm's length basis,
subject to the disinterested vote procedure described under "Shareholder Related
Arrangements" above. Each of the parties will be free to obtain services from
third parties in respect of matters covered in the MTSA.
The MTSA can be terminated with respect to a Principal Shareholder (i) on
one year's notice in the event that the voting rights of that Principal
Shareholder together with its Group in CWC fall below 10 per cent., or (ii) at
any time in the event of a material breach of the MTSA or in the provision of
services under the MTSA.
The foregoing summary of the MTSA does not purport to be complete and is
qualified in its entirety by reference to the complete text of the form of the
MTSA to be entered into among the Principal Shareholders and CWC, a copy of
which has been filed as Exhibit 6 hereto and is incorporated herein by
reference.
SECONDMENT AGREEMENT
The Schedule 14D-1 provides that:
The Principal Shareholders and CWC will also, as soon as the BCM Offer and
the Offers become or are declared unconditional, enter into the Secondment
Agreement pursuant to which each of the Principal Shareholders, on the one hand,
and CWC, on the other hand, will, subject to certain conditions, be able to
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second their employees or employees of their subsidiary undertakings to each
other, respectively, or to companies within their respective Groups. The fee for
any such secondment will broadly be based on the employee's salary, remuneration
and other benefits paid or provided to the employee by the providing company.
The Secondment Agreement is expressed to be for an initial two year term and
shall continue thereafter, with respect to a party, unless three months' written
notice is given by CWC, with respect to all or any of the Principal
Shareholders, or by all or any of the Principal Shareholders with respect to
CWC. It is terminable immediately with respect to a Principal Shareholder if
that Principal Shareholder is subject to any insolvency proceedings or with
respect to all parties if CWC is subject to any insolvency proceeding.
The foregoing summary of the Secondment Agreement does not purport to be
complete and is qualified in its entirety by reference to the complete text of
the form of Secondment Agreement to be entered into among C&W, BCI, NYNEX and
CWC, a copy of which has been filed as Exhibit 7 hereto and is incorporated
herein by reference.
TAX AGREEMENTS
The Schedule 14D-1 provides that:
TAX SHARING AGREEMENT. Under the Tax Sharing Agreement entered into on March
21, 1997 among C&W, BCI, BCMH, BCIH, NYNEX and CWC (i) the tax affairs of CWC
will be managed on a "stand alone" basis; (ii) dividends paid by CWC will be
paid outside of any election under Section 247 of the ICTA; (iii) C&W will be
entitled to surrender to CWC ACT to the fullest extent permitted by law (such
surrender to be for payment); (iv) the Shareholders will consider proposals to
structure such surrenders in such a way as to reduce any tax disadvantage for
NYNEX; (v) CWC will make, at the request of NYNEX, certain elections with regard
to its subsidiaries for the purposes of reducing US tax disadvantages to NYNEX,
unless such elections would have a detrimental effect on the affairs of CWC, its
subsidiaries, or the other Shareholders; and (vi) CWC will consult generally
with the Shareholders regarding its tax affairs.
NYNEX TAX AGREEMENT. Under this agreement entered into on March 21, 1997
between NYNEX and CWC, CWC undertakes to NYNEX not to take certain actions which
would result in NYNEX realizing a taxable gain under section 367 of the US
Internal Revenue Code. CWC also agrees to cause its subsidiaries to join with
NYNEX in requesting the US Internal Revenue Service to enter a US tax closing
agreement assuring that an exchange of shares by NYNEX or the Winston Entities
pursuant to the Transaction Agreement will not constitute a "triggering event"
in respect of certain dual consolidated losses which have previously been
claimed by NYNEX. In this respect, CWC also agrees not to take certain actions
which would result in loss recapture for NYNEX.
NYNEX TAX ALLOCATION AGREEMENT. This agreement entered into on March 21,
1997 between NYNEX and CWC provides for various undertakings to be given by
NYNEX to CWC in respect of the taxation affairs of the Winston Entities
including various indemnities in relation to the same.
The foregoing summaries of the Tax Sharing Agreement, NYNEX Tax Agreement
and NYNEX Tax Allocation Agreement do not purport to be complete and are
qualified in their entirety by reference to the complete text of the forms of
the respective agreements, copies of which have been filed as Exhibits 8, 9 and
10 respectively, hereto and are incorporated herein by reference.
C&W LICENSE
The Schedule 14D-1 provides that:
C&W has agreed to grant to CWC, effective from the date on which the Mercury
Purchase Agreements are completed, the right to use the "Cable & Wireless",
"C&W" and Globe Device trade marks (together with other trade marks relating to
C&W products currently offered by Mercury) in the United Kingdom on a royalty
free basis. In particular, CWC will be able to use "Cable & Wireless" as part
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of its corporate name. CWC's use of the trade marks must be in accordance with
the guidelines issued by C&W.
CWC will also be licensed by C&W to use those marks in any territories into
which the CWC Board intends CWC to expand, unless the trade marks have already
been exclusively licensed to a third party within that territory. CWC may not
sub-license the use of the marks other than to its own subsidiary undertakings.
Either party may terminate the license in the event of certain breaches or
if the other becomes insolvent. C&W can also terminate when its shareholding in
CWC falls below 10 per cent. (or if CWC challenges the validity of the trade
marks).
The foregoing summary of the C&W License does not purport to be complete and
is qualified in its entirety by reference to the complete text of the form of
C&W License, a copy of which has been filed as Exhibit 11 hereto and is
incorporated herein by reference.
NYNEX TERMINATION AGREEMENT
The Schedule 14D-1 provides that under the NYNEX Trade Mark Termination
Agreement (the "NYNEX Termination Agreement") to become effective on the Offers
becoming or being declared unconditional, among NYNEX, the Companies and NYNEX
CableComms Limited, the parties agree to terminate an earlier Trade Mark
Agreement dated May 15, 1995, between NYNEX ("the Licensor") and the other
parties to the NYNEX Transitional License (the "Licensees"). The effect of the
NYNEX Termination Agreement is to provide that the Licensees cease use of the
NYNEX trade mark in accordance with the termination provisions of the original
license, within 180 days of the date of the NYNEX Termination Agreement and
that, despite early termination of the license, no further royalties shall be
payable (with the exception of royalties due in the month that the NYNEX
Termination Agreement is signed). The foregoing summary of the NYNEX Termination
Agreement does not purport to be complete and is qualified in its entirety by
reference to the complete text of the form of NYNEX Termination Agreement, a
copy of which has been filed as Exhibit 12 hereto and is incorporated herein by
reference.
REGISTRATION RIGHTS AGREEMENT
The Schedule 14D-1 provides that the Principal Shareholders and CWC have
agreed, effective upon completion of the BCM Offer and the Offers, that, subject
to certain exceptions, each Principal Shareholder will have the right, at CWC's
expense, (i) to require CWC to include all or any portion of the CWC Ordinary
Shares beneficially owned by them in any registered offering by CWC of CWC
Ordinary Shares or CWC ADSs under the US Securities Act of 1933, as amended and
(ii) after completion of the BCM Offer and the Offers, to cause CWC to prepare
and file a registration statement with the Commission under the Securities Act,
and to comply with applicable state securities laws, for an offering in the U.S.
of all or any part of the CWC Ordinary Shares beneficially owned by the
Principal Shareholders ("Demand Registration") representing not less than 2
percent of the outstanding CWC Ordinary Shares. Certain costs associated with
Demand Registrations will be borne by CWC; PROVIDED, HOWEVER, that CWC shall
have no obligation to pay costs for more than five consummated Demand
Registrations for any Principal Shareholder. The foregoing summary of the
Registration Rights Agreement does not purport to be complete and is qualified
in its entirety by reference to the complete text of the form of the
Registration Rights Agreement among the Principal Shareholders and CWC, a copy
of which has been filed as Exhibit 13 hereto and is incorporated herein by
reference.
INTERCONNECTION AGREEMENT
The Companies entered into an interconnection agreement with Mercury on
November 11, 1996, as amended of February 11, 1997 (the "Interconnection
Agreement"), pursuant to which the Companies' digital switches interconnect with
the networks of Mercury for national and international calls, and for
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local calls where only one party is a customer of the Companies. The
Interconnection Agreement expires on March 31, 1998. The foregoing summary of
the Interconnection Agreement does not purport to be complete and is qualified
in its entirety by reference to the complete text of the Interconnection
Agreement and amendment thereto, entered into by the Companies and Mercury,
copies of which have been filed as Exhibit 14 and Exhibit 15 hereto and are
incorporated herein by reference.
COST ALLOCATION POLICY
C&W, BCI and NYNEX have agreed among themselves to bear their own respective
costs in connection with the Transactions, except that costs (including certain
costs of the Companies) relating to the listing of CWC securities, the
preparation of CWC's Registration Statement on Form F-4 and the integrated
offering documents will be borne by CWC. All costs in excess of L50,000 which
will be borne by CWC are subject to approval by CWC's Merger Steering Committee,
which consists of a representative from each of C&W, NYNEX and BCI.
In the event the Transactions do not take place, (i) C&W, BCI and NYNEX will
be liable for their PRO RATA portion of the costs of forming CWC based on their
respective equity stakes as if the Transactions had been consummated (excluding
the proportion of shares to be publicly listed); (ii) C&W, BCI and NYNEX will
bear costs related to their respective subsidiaries in connection with the due
diligence investigation undertaken; and (iii) BCM and the Companies will bear
their respective costs associated with their respective financial and legal
advisors in connection with the consideration of the BCM Offer and the Offers,
respectively. The foregoing summary of the Cost Allocation Policy does not
purport to be complete and is qualified in its entirety by reference to the
complete text of the Cost Allocation Policy, a copy of which has been filed as
Exhibit 16 hereto and is incorporated herein by reference.
INDEMNIFICATION AND INSURANCE
NYNEX CableComms US' Restated Certificate of Incorporation provides that no
director of NYNEX CableComms US shall be liable to NYNEX CableComms US or its
stockholders for monetary damages resulting from a breach of his fiduciary duty
as a director except as may otherwise be required by the General Corporation Law
of the State of Delaware.
In addition, NYNEX CableComms US' By-Laws generally provide that NYNEX
CableComms US shall indemnify directors and officers (a) against expenses,
judgments, fines and amounts paid in settlement in connection with any action,
suit or proceeding involving such person by reason of his capacity as such if,
other than in an action by or in the right of NYNEX CableComms US, such person
acted in good faith and in a manner such person reasonably believed to be in or
not opposed to the best interests of NYNEX CableComms US and, with respect to
any criminal action or proceeding, such person had no reasonable cause to
believe such person's conduct was unlawful, or (b) against expenses in
connection with any action or suit involving such person by reason of his
capacity as such if, in any action or suit by or in the right of NYNEX
CableComms US, such person acted in good faith and in a manner he reasonably
believed to be in or not opposed to the best interests of NYNEX CableComms US,
and except that no indemnification shall be made where such person has been
adjudged to be liable to NYNEX CableComms US unless and only to the extent that
the Court of Chancery of the State of Delaware or the court in which such action
or suit was brought determines upon application that such person is fairly and
reasonably entitled to indemnity for such expenses which such court shall deem
proper.
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Pursuant to the Merger Agreement, CWC has agreed to keep the indemnification
arrangements of NYNEX CableComms US in place for a period of six years after the
effective time of the Merger. See "De-Stapling of Certain Units--The Merger"
above.
NYNEX CableComms UK's Articles of Association provide that NYNEX CableComms
UK, subject to the Companies Act, shall indemnify every director, alternate
director, auditor, secretary or other officer of NYNEX CableComms UK all costs,
charges, losses, expenses and liabilities incurred by such person in the
execution and discharge of his or her duties or in relation thereto, including
any liability incurred by such person in defending any proceedings, civil or
criminal, which relate to anything done or omitted or alleged to have been done
or omitted by such person as an officer or employee of NYNEX CableComms UK and
in which judgment is given in such person's favor (or the proceedings were
otherwise disposed of without any finding or admission of any material breach of
duty on such person's part) or in which such person is acquitted or in
connection with any application under any statute for relief from liability in
respect of any such act or omission in which relief is granted by the relevant
court.
Except as described above, to the best knowledge of the Companies, as of the
date hereof, there is no material contract, agreement, arrangement or
understanding and no actual or potential conflict of interest between the
Companies or their affiliates and (i) the Companies' executive officers,
directors or affiliates or (ii) CWC, its executive officers, directors or
affiliates.
ITEM 4. THE SOLICITATION OR RECOMMENDATION.
(a) RECOMMENDATION; BACKGROUND.
On October 22, 1996, C&W, BCI and NYNEX announced that they had entered into
the Transaction Agreement. On October 29, 1996, the Boards of Directors of the
Companies met to discuss the implications of the proposed Transactions and
potential Offers. At the meeting, the Boards and certain members of the
Companies' management met with representatives from the financial advisors and
legal counsel to NYNEX and with representatives of SBC Warburg, a division of
Swiss Bank Corporation ("SBC Warburg"). NYNEX's financial advisors provided a
detailed review of the structure of the proposed Transactions and potential
Offers and a summary of the perceived benefits of the proposed Transactions from
the perspective of NYNEX. In connection with such review the Board was informed,
in response to a question raised by SBC Warburg, that no cash alternative would
be available for holders of Shares. The Boards then excused NYNEX's financial
advisors and legal counsel from the meeting and discussed further with SBC
Warburg and management of the Companies the potential implications of the
proposed Transactions and potential Offers and the various legal and regulatory
implications resulting therefrom. Following the discussions, the Boards
established their respective Offer Committees, and the Offer Committees met with
SBC Warburg to discuss the status of the proposed Transactions and the
timetable. On October 29, 1996, the Boards authorized SBC Warburg to act solely
on behalf of the Offer Committees in connection with its consideration of the
Offers and any other proposal, subject to subsequent negotiation of an
appropriate fee arrangement and formal engagement agreement. Simmons & Simmons
were engaged as independent U.K. legal counsel and Dewey Ballantine as
independent U.S. legal counsel.
On December 5, 1996 and January 23, 1997, the Offer Committees met with SBC
Warburg and management of the Companies to discuss the status of and timetable
for the proposed Transactions, the terms and conditions of the Offers and the
Transaction Agreement, the due diligence being undertaken with respect to the
proposed Transactions and the responsibilities of the Offer Committees in
forming their recommendations. On February 18, 1997, the Offer Committees met
with SBC Warburg, U.K. and U.S. legal counsel, Coopers & Lybrand, the Companies'
independent accountants, and management of the Companies to discuss the progress
of the due diligence investigation undertaken with respect to the proposed
Transactions and the responsibilities of the Offer Committees in forming their
recommendation. Coopers & Lybrand presented to the Offer Committees a report on
the due diligence undertaken by Coopers & Lybrand, in consultation with
management of the Companies, with respect to the Companies
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and their operations and prospects, and the methodologies used in connection
with such due diligence. SBC Warburg presented the Offer Committees with the
status of its financial due diligence investigation with respect to the
Companies, CWC, Mercury, BCM and Videotron in connection with its assessment of
the fairness, from a financial point of view, of the Offers. U.K. counsel to the
Companies also summarized the legal due diligence performed by them with respect
to the Companies and their review of legal due diligence reports prepared with
respect to Mercury, BCM and Videotron. Between February 18, 1997 and March 13,
1997, members of the Offer Committees and management of the Companies
participated with SBC Warburg and U.K. legal counsel in meetings and on
conference calls, and on March 3, 1997, there was a working session among the
Offer Committees, SBC Warburg, U.K. legal counsel, independent accountants of
the Companies, and management of the Companies to discuss further the work being
undertaken in relation to the Offers, including their respective due diligence
investigations, the responsibilities of the Offer Committees in forming their
recommendation and the status of the documentation relating to the Offers. A
further working session of the Offer Committees and SBC Warburg, independent
accountants of the Companies and management of the Companies, took place on
March 11, 1997. During the course of the preparation of the Offers, financial
advisors to CWC reiterated in discussions with SBC Warburg that no cash
alternative would be available to holders of Shares and the Offers would not be
subject to renegotiation.
The Offer Committees met on March 13, 1997 with their financial and U.K. and
U.S. legal advisors, the independent accountants of the Companies and management
of the Companies to discuss the status of the proposed Transactions and the
terms and conditions of the Offer. The Offer Committees reviewed (i) with their
U.K. and U.S. legal advisors the terms and conditions of the Offers and the
responsibilities of the Offer Committees in forming their recommendations, (ii)
with U.K. and U.S. legal advisors to the Offer Committees the proposed UK
De-stapling Amendment and US De-stapling Amendment and the impact of the
de-stapling, Compulsory Acquisition and Merger on the proposed Transactions and
the expected benefits to be achieved therefrom, (iii) with their independent
accountants the due diligence undertaken with respect to the Companies and their
operations and prospects, and their review of due diligence reports prepared
with respect to Mercury, BCM and Videotron; (iv) with U.K. legal counsel the
legal due diligence undertaken by them with respect to the Companies, and their
review of legal due diligence reports prepared with respect to Mercury, BCM and
Videotron, and (v) with SBC Warburg certain financial information relating to
the business combination contemplated by the Offers prepared by SBC Warburg in
connection with its assessment of the fairness of the Offers. In connection with
their consideration of such matters, the Offer Committees discussed with SBC
Warburg concerning its financial presentation and analyses including, among
other things, (a) the methods used by SBC Warburg to analyze the Offers,
including a discounted cash flow analysis of the Companies, CWC, Mercury, BCM
and Videotron, (b) the assumptions and bases considered and used by SBC Warburg
in such analyses, including certain financial forecasts supplied to it by the
Companies, CWC, Mercury, BCM and Videotron, (c) SBC Warburg's investigation of
the proposed Transactions and the Companies, CWC, Mercury, BCM and Videotron and
interviews with the management of the Companies, CWC, Mercury, BCM and
Videotron, (d) information regarding comparable companies and transactions, and
(e) the terms and conditions of the Offers and the Transaction Agreement.
On March 21, 1997, the Offer Committees met in person and by teleconference
with their financial and U.K. and U.S. legal advisors, and management of the
Companies to review the status of the proposed Transactions and the terms and
conditions of the Offers and to discuss any further developments that occurred
since their previous meeting of March 13, 1997. SBC Warburg, U.K. and U.S. legal
counsel, and management of the Companies provided an update of the information
provided to the Offer Committees at the previous meeting of March 13, 1997. SBC
Warburg confirmed that there was no material change to the analyses presented to
the Offer Committees at the previous meeting and delivered its opinion that the
consideration to be received by the Public Shareholders pursuant to the Offers
is fair to such shareholders from a financial point of view. A copy of SBC
Warburg's opinion accompanies this Schedule 14D-9 and is filed herewith as
Exhibit 17. Following receipt of the SBC Warburg opinion and after extensive
discussion
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and consideration, the Offer Committees unanimously determined (i) that the
Offers were fair to, and in the best interests of, the Public Shareholders, and
(ii) to recommend that the Public Shareholders accept the Offers and tender
their Shares pursuant to the Offers. The Offer Committee of NYNEX CableComms UK
then unanimously determined to recommend to the Board of Directors of NYNEX
CableComms UK the approval of the UK De-stapling Amendment, and the Offer
Committee of NYNEX CableComms US unanimously determined to recommend to the
Board of Directors of NYNEX CableComms US the approval of the US De-stapling
Amendment and the Merger.
At meetings held immediately thereafter, based in part upon the
presentation, findings, conclusions and unanimous recommendations of the Offer
Committees in relation to the Offers and the unanimous recommendation of the
Offer Committee of NYNEX CableComms UK to approve the UK De-stapling Amendment,
and the unanimous recommendation of the Offer Committee of NYNEX CableComms US
to approve the US De-stapling Amendment and the Merger, the Board of Directors
of NYNEX CableComms UK determined to recommend that holders of NYNEX CableComms
UK Ordinary Shares vote in favor of the UK De-stapling Amendment, and the Board
of Directors of NYNEX CableComms US determined to recommend that holders of
NYNEX CableComms US Shares of Common Stock vote in favor of the US De-stapling
Amendment and the Merger.
(b) REASONS FOR RECOMMENDATION; OPINION OF FINANCIAL ADVISOR.
In reaching their conclusions set forth in paragraph (a), the Offer
Committees considered a number of factors, including, without limitation, the
following:
(i) the presentation by SBC Warburg, described above, as to the various
financial considerations deemed relevant to the Offer Committees' evaluation
of the Offers, including SBC Warburg's financial due diligence concerning
the Companies, CWC, Mercury, BCM and Videotron in connection with its
assessment of the fairness of the Offers, and the opinion of SBC Warburg,
described below, to the effect that the consideration to be received by the
Public Shareholders in the Offers is fair, from a financial point of view,
to the Public Shareholders;
(ii) the Offer Committees' knowledge of the Companies' business,
including its financial condition, results of operations, prospects and the
Companies' industry in general;
(iii) a review of, and presentation by management to the Offer Committees
regarding, the financial condition, results of operations, business and
prospects of the Companies, and current industry, economic and market
conditions and trends;
(iv) presentations made by the Companies' independent accountants to the
Offer Committees regarding the due diligence undertaken with respect to the
Companies and their review of due diligence reports prepared with respect to
Mercury, BCM and Videotron;
(v) a review of the reports prepared by U.S. and U.K. legal advisors to
NYNEX regarding the legal due diligence undertaken with respect to the
Companies;
(vi) a review of the reports and presentations made by U.K. legal
advisors to the Offer Committees regarding the legal due diligence
undertaken by them with respect to the Companies, and their presentations
regarding their review of due diligence reports prepared with respect to
Mercury, BCM and Videotron;
(vii) the terms and conditions of the Transaction Agreement and the
Offers, including, among other things, the fact that the Offers are subject
to a minimum acceptance condition;
(viii) the relationship between the consideration to be received by
holders of Shares as a result of the Offers and the value of their existing
Shares in the Companies, assessed by reference to a number of factors,
including the historical market prices and recent trading activity of the
Units and ADSs;
31
<PAGE>
(ix) the strategic fit among Mercury, the Companies and BCM (including
Videotron), which would create a leading provider of integrated
telecommunications, information and entertainment services, creating a
larger, more strategically positioned company with potential economies of
scale;
(x) the potential for reduced volatility in the cash flow and earnings
of CWC, as compared to the Companies, were the Companies to remain
independent;
(xi) the fact that CWC should have the ability to borrow funds on more
favorable credit terms and to access additional sources of capital as
compared to the Companies, were the Companies to remain independent;
(xii) the ability to enhance the contiguity and demographics of existing
operations and to realize synergies and operational benefits from increasing
the scale and scope of operations;
(xiii) the challenge of growing the Companies' business as stand-alone
companies in light of existing competition, the significant capital required
by the Companies to complete the build-out of cable systems in its existing
franchise and to complete the build-out of cable systems in its existing
franchise areas and the risks to the Companies of remaining as stand-alone
companies;
(xiv) SBC Warburg's discussion of the views of the investment community
on the proposed Transactions and the potential negative effect on the market
prices of the Units and ADSs if the Offers were not to proceed;
(xv) a review of the preliminary pro forma financial information of CWC
assuming consummation of the proposed Transactions;
(xvi) certain consequences of the Offers, including the reduced liquidity
of the Shares, the possibility of de-listing the Units on the London Stock
Exchange and the cessation of quotation of the ADSs on the National Nasdaq
Market and the reduction in publicly available information regarding the
Companies;
(xvii) the fact that there can be no assurance as to the level of growth
or profits to be attained by CWC in the future, or as to the ability of CWC
to integrate the Companies, Mercury, BCM and Videotron or to respond to
future regulatory, competitive and technological developments;
(xviii) the fact that no public market exists currently for CWC Ordinary
Shares or CWC ADSs and, therefore, the trading prices of such securities
cannot be predicted;
(xix) the opportunity for the Public Shareholders to maintain an
investment in the UK cable television and telecommunications industry by
receiving publicly traded CWC Ordinary Shares or CWC ADSs pursuant to the
Offers;
(xx) a review of the possible alternatives to the Offers and the
Transactions, including, among others, the possibility of continuing to
operate the Companies as an independent entity;
(xxi) the presentation given to the Boards of Directors of the Companies
by the financial advisors to NYNEX on October 29, 1996 with respect to the
perceived benefits of the proposed Transactions from the perspective of
NYNEX and its impact on the Companies;
(xxii) the fact that, although the Companies are not a party to the
Transaction Agreement, NYNEX owns approximately 67 percent of the
outstanding Shares and, as a practical matter, effecting any strategic
alternative to the Offers and the Transactions would require the support of
NYNEX; and the fact that, since the announcement of the proposed
Transactions on October 22, 1996, no person has approached the Offer
Committees or the Companies proposing a strategic alternative to the Offers
or the Transactions;
(xxiii) the potential impact of the Offers and the Transactions on the
Companies' employees and customers, while noting CWC's intentions in respect
of the Companies and existing employment
32
<PAGE>
rights, including pension rights of the management and employees of the
Companies which CWC intends to fully safeguard, as stated in the Schedule
14D-1;
(xxiv) the intent of CWC that, and the terms of the Merger Agreement (with
respect to the NYNEX CableComms US Shares of Common Stock) pursuant to
which, holders of NYNEX CableComms UK Ordinary Shares and NYNEX CableComms
US Shares of Common Stock not purchased in the Offers will receive the same
form and amount of consideration as such shares purchased in the Offers
pursuant to the Compulsory Acquisition and Merger contemplated by CWC;
(xxv) a review of the impact of the UK De-stapling Amendment, the US
De-stapling Amendment, the Compulsory Acquisition and the Merger on the
proposed Transactions and the expected benefits to be achieved by the
de-stapling, Compulsory Acquisition and Merger; and
(xxvi) based on the written advice of U.S. legal counsel to NYNEX and the
Companies, the expected tax-free nature of the proposed Transactions to the
holders of Shares.
In view of the wide variety of factors considered in connection with its
evaluation of the Offers, the Offer Committees did not find it practicable to,
and did not, quantify or otherwise attempt to assign relative weight to the
specific factors considered in reaching its determination.
OPINION OF FINANCIAL ADVISOR
As described above under "Recommendation; Background", at the meeting of the
Offer Committees held on March 21, 1997, SBC Warburg delivered its opinion to
the effect that, based upon the assumptions made, matters considered and limits
of the review undertaken, as set forth in such opinion, the consideration of CWC
Ordinary Shares to be received by the Public Shareholders in the Offers is fair
to such holders from a financial point of view. The full text of SBC Warburg's
opinion, dated March 21, 1997, accompanies this Schedule 14D-9 and is filed as
Exhibit 17 hereto. Holders of Shares are urged to read the opinion in its
entirety for the assumptions made, matters considered and limits of the review
undertaken by SBC Warburg.
SBC Warburg has given and not withdrawn its written consent to the inclusion
of the reference to its name and opinion in this Schedule 14D-9 in the form and
context in which it is included.
ITEM 5. PERSONS RETAINED, EMPLOYED OR TO BE COMPENSATED.
The Companies retained SBC Warburg on an exclusive basis to render financial
advisory services for the Offer Committees with respect to the proposed
Transactions. Under the engagement letter, SBC Warburg (i) received an
engagement fee of L50,000 upon its execution of the engagement letter, (ii)
received a retainer fee of L50,000 per calendar month or part of a month, from
and including December 1996 up to the date of publication of the Prospectus, and
(iii) will receive a publication fee of L150,000 upon the printing of the
Prospectus. Upon the Offers being declared or becoming unconditional in all
respects, SBC Warburg will receive a completion fee of L1,000,000, whereby all
fees paid under (i) to (iii) above will be credited against the amount of the
completion fee so that the total fee will not exceed L1,000,000. The Companies
also agreed to reimburse SBC Warburg for its reasonable out-of-pocket expenses
subject to a maximum of L50,000 and to indemnify SBC Warburg and certain related
persons against certain liabilities arising out of its engagement, including
liability under the federal securities laws.
In the ordinary course of business, members of the Swiss Bank Corporation
group may, subject to the Rules of the United Kingdom Code on Takeovers and
Mergers, actively trade, make a market or act as principal in transactions
relating to the securities (or related options, warrants, or rights to or
interests in, such securities) of the Companies, NYNEX, C&W, CWC, BCI and BCM
for their own account and for the accounts of customers and, accordingly, may at
any time hold long or short positions in such securities. In the past, SBC
Warburg has provided certain financial advisory services to the Companies,
NYNEX, and their affiliates and has received customary fees for the rendering of
such services.
33
<PAGE>
SBC Warburg, which is regulated in the United Kingdom by the Securities and
Futures Authority Limited, is acting as financial advisor to the Offer
Committees and no one else in connection with the matters described in this
document and will not be responsible (under UK law) to anyone other than the
Offer Committees for providing the protections afforded to its customers or for
providing advice in relation to the matters described in this document.
The Companies and CWC have appointed D.F. King & Co., Inc. to aid in the
solicitation of proxies (or obtaining of proxy votes) in the United States in
connection with the UK De-stapling Amendment, US De-stapling Amendment and
Merger, at a cost of approximately $15,000, plus an additional fee of $3.00 for
each shareholder contact and line charges, plus reimbursement of reasonable
out-of-pocket expenses.
Neither the Companies nor any person acting on either of their behalves
intends to employ, retain or compensate any other person to make solicitations
or recommendations to the holders of Shares of the Companies in connection with
the Offers.
ITEM 6. RECENT TRANSACTIONS AND INTENT WITH RESPECT TO SECURITIES.
(a) To the best of the Companies' knowledge, no transactions in Shares have
been effected within the past 60 days by either of the Companies or by any
executive officer, director, affiliate or subsidiary of either of the Companies
except for the allotment of (i) 148,549 Units to Mr. Nicholas Mearing-Smith on
January 30, 1997 and (ii) 191,692 Units to Mr. John F. Killian on January 30,
1997, in each case pursuant to the vesting of their respective allocation rights
to acquire such Units.
(b) To the best of the Companies' knowledge, all of the Companies' executive
officers, directors and affiliates currently intend to tender their Shares
pursuant to the Offers.
ITEM 7. CERTAIN NEGOTIATIONS AND TRANSACTIONS BY SUBJECT COMPANY.
(a) Except as described in Item 3(b) and Item 4 above, no negotiation is
being undertaken or is underway by the Companies in response to the Offers which
relates to or would result in (i) an extraordinary transaction such as a merger
or reorganization, involving the Companies or any subsidiary of either of the
Companies; (ii) a purchase, sale or transfer of a material amount of assets by
the Companies or any subsidiary of either of the Companies; (iii) a tender offer
for, or other acquisition of, securities by or of the Companies; or (iv) any
material change in the present capitalization or dividend policy of the
Companies.
(b) Except as set forth in Items 3(b) and 4 above, there are no
transactions, Board resolutions, agreements in principle or signed contracts in
response to the Offers which relate to or would result in one or more of the
matters referred to in Item 7(a) above.
ITEM 8. ADDITIONAL INFORMATION TO BE FURNISHED.
None.
ITEM 9. MATERIAL TO BE FILED AS EXHIBITS.
The following exhibits will be filed with the U.S. Securities and Exchange
Commission, 450 Fifth Street, N.W., Washington, D.C. 20549, and will be on
display during the course of the Offers during the normal business hours on any
business day at the offices of Simmons & Simmons, U.K. legal advisors to the
Companies, at 21 Wilson Street, London EC2M 2TX, England.
(1) Pages 38 to 52 of the Companies' Annual Report on Form 10-K for the
fiscal year ended December 31, 1996 containing the pertinent sections
thereof referred to in Item 3(b) of this Schedule 14D-9.
34
<PAGE>
(2) Transaction Agreement, dated as of October 22, 1996, as amended and
restated, among C&W, NYNEX and BCI (incorporated by reference to Exhibit 2.1
to CWC's Registration Statement on Form F-4 filed with the U.S. Securities
and Exchange Commission on March 21, 1997 (File No. 333-6672) (the "CWC
Registration Statement on F-4")).
(3) Agreement and Plan of Merger, dated March 21, 1997, among NYNEX
CableComms US, CWC and the CWC Merger Sub (incorporated by reference to
Exhibit 2.2 to the CWC Registration Statement on Form F-4).
(4) CWC Shareholders' Agreement, dated as of March 21, 1997, among C&W,
BCI, BCMH, BCIH, NYNEX and CWC (incorporated by reference to Exhibit 9.1 to
the CWC Registration Statement on Form F-4).
(5) Form of Articles of Association of CWC to be adopted upon the Offers
becoming or being declared unconditional (incorporated by reference to the
Articles of Association of CWC filed as part of Exhibit 3.1 to the CWC
Registration Statement on Form F-4)
(6) Form of Management and Technical Services Agreement among C&W, BCI,
NYNEX and CWC (incorporated by reference to Exhibit 10.12 to the CWC
Registration Statement on Form F-4).
(7) Form of Secondment Agreement among C&W, BCI, NYNEX and CWC
(incorporated by reference to Exhibit 10.6 to the CWC Registration Statement
on Form F-4).
(8) Form of Tax Sharing Agreement among C&W, BCI, BCMH, BCIH, NYNEX and
CWC (incorporated by reference to Exhibit 10.9 to the CWC Registration
Statement on Form F-4).
(9) Form of NYNEX Tax Agreement between NYNEX and CWC (incorporated by
reference to Exhibit 10.10 to the CWC Registration Statement on Form F-4).
(10) Form of NYNEX Tax Allocation Agreement between NYNEX and CWC
(incorporated by reference to Exhibit 10.11 to the CWC Registration
Statement on Form F-4).
(11) Form of C&W License between C&W and CWC (incorporated by reference
to Exhibit 10.7 to the CWC Registration Statement on Form F-4).
(12) Form of NYNEX Termination Agreement among NYNEX, the Companies and
NYNEX CableComms Limited (incorporated by reference to Exhibit 10.8 to the
CWC Registration Statements on Form F-4).
(13) Principal Shareholders Registration Rights Agreement, dated March
21, 1997, among C&W, NYNEX, BCI and CWC (incorporated by reference to
Exhibit 10.5 to the CWC Registration Statement on Form F-4).
(14) Interconnection Agreement, dated as of November 11, 1996, between
Mercury and NYNEX CableComms Limited (incorporated by reference to Exhibit
10.12 to the Companies' Annual Report on Form 10-K for the fiscal year ended
December 31, 1996).
(15) Amendment to Interconnection Agreement, dated as of February 11,
1997, between Mercury and NYNEX CableComms Limited (incorporated by
reference to Exhibit 10.12(c) to the Companies' Annual Report on Form 10-K
for the fiscal year ended December 31, 1996).
(16) Cost Allocation Policy among CWC, BCI and NYNEX.
(17) Opinion of SBC Warburg dated March 21, 1997.*
(18) Letter to holders of Units and ADSs of the Companies dated March 24,
1997.*
(19) Press release issued by the Companies on March 24, 1997.
- ------------------------
* Included in copies of this Schedule 14D-9 mailed to holders of Shares.
35
<PAGE>
Other than in respect of
(i) information contained in the recommendations of the Offer Committees
of the Boards of Directors of NYNEX CableComms UK and NYNEX CableComms US
(which shall be information for which the respective Offer Committees accept
responsibility);
(ii) information contained in this Schedule 14D-9 which is extracted
from the Schedule 14D-1, including the information incorporated by reference
to the Prospectus therein, for which persons other than NYNEX CableComms UK
and NYNEX CableComms US and their directors are taking responsibility in
accordance with its terms; and
(iii) information relating to CWC and CWC Merger Sub and all other
information contained in this Schedule 14D-9 which has been compiled from
publicly available sources (including the Schedule 14D-1 and the information
incorporated by reference to the Prospectus therein) and in respect of which
the directors have ensured that such information has been accurately
reproduced or presented,
the directors of NYNEX CableComms UK and NYNEX CableComms US, whose names are
set out in paragraph 2(3) of Part III of the Prospectus, accept responsibility
for the information contained in this Schedule 14D-9.
To the best of the knowledge and belief of the directors of NYNEX CableComms
UK and NYNEX CableComms US (who have taken all reasonable care to ensure that
such is the case), such information contained in this document for which they
accept responsibility is in accordance with the facts and does not omit anything
likely to affect the import of such information.
The foregoing statements of responsibility are included solely to comply
with Rule 19.2 of the City Code and shall not be deemed to establish or expand
or limit liability under the US federal securities laws or under the laws of any
state of the US.
36
<PAGE>
SIGNATURE
After reasonable inquiry and to the best of the knowledge and belief of the
undersigned, the undersigned certify that the information set forth in this
statement is true, complete and correct.
NYNEX CABLECOMMS GROUP PLC
By: /s/ PAUL H. REPP
-----------------------------------------
Name: Paul H. Repp
Title: CHIEF LEGAL AND REGULATORY OFFICER
AND COMPANY SECRETARY
Dated: March 24, 1997
NYNEX CABLECOMMS GROUP INC.
By: /s/ PAUL H. REPP
-----------------------------------------
Name: Paul H. Repp
Title: CHIEF LEGAL AND REGULATORY OFFICER
AND COMPANY SECRETARY
Dated: March 24, 1997
37
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
- --------- --------------------------------------------------------------------------------------------------------
<C> <S>
(1) Pages 38 to 52 of the Companies' Annual Report on Form 10-K for the fiscal year ended December 31, 1996
containing the pertinent sections thereof referred to in Item 3(b) of this Schedule 14D-9.
(2) Transaction Agreement, dated as of October 22, 1996, as amended and restated, among C&W, NYNEX and BCI
(incorporated by reference to Exhibit 2.1 to CWC's Registration Statement on Form F-4 filed with the
U.S. Securities and Exchange Commission on March 21, 1997 (File No. 333-6672) (the "CWC Registration
Statement on F-4")).
(3) Agreement and Plan of Merger, dated March 21, 1997, among NYNEX CableComms US, CWC and the CWC Merger
Sub (incorporated by reference to Exhibit 2.2 to the CWC Registration Statement on Form F-4).
(4) CWC Shareholders' Agreement, dated as of March 21, 1997, among C&W, BCI, BCMH, BCIH, NYNEX and CWC
(incorporated by reference to Exhibit 9.1 to the CWC Registration Statement on Form F-4).
(5) Form of Articles of Association of CWC to be adopted upon the Offers becoming or being declared
unconditional (incorporated by reference to the Articles of Association of CWC filed as part of Exhibit
3.1 to the CWC Registration Statement on Form F-4)
(6) Form of Management and Technical Services Agreement among C&W, BCI, NYNEX and CWC (incorporated by
reference to Exhibit 10.12 to the CWC Registration Statement on Form F-4).
(7) Form of Secondment Agreement among C&W, BCI, NYNEX and CWC (incorporated by reference to Exhibit 10.6 to
the CWC Registration Statement on Form F-4).
(8) Form of Tax Sharing Agreement among C&W, BCI, BCMH, BCIH, NYNEX and CWC (incorporated by reference to
Exhibit 10.9 to the CWC Registration Statement on Form F-4).
(9) Form of NYNEX Tax Agreement between NYNEX and CWC (incorporated by reference to Exhibit 10.10 to the CWC
Registration Statement on Form F-4).
(10) Form of NYNEX Tax Allocation Agreement between NYNEX and CWC (incorporated by reference to Exhibit 10.11
to the CWC Registration Statement on Form F-4).
(11) Form of C&W License between C&W and CWC (incorporated by reference to Exhibit 10.7 to the CWC
Registration Statement on Form F-4).
(12) Form of NYNEX Termination Agreement among NYNEX, the Companies and NYNEX CableComms Limited
(incorporated by reference to Exhibit 10.8 to the CWC Registration Statements on Form F-4).
(13) Principal Shareholders Registration Rights Agreement, dated March 21, 1997, among C&W, NYNEX, BCI and
CWC (incorporated by reference to Exhibit 10.5 to the CWC Registration Statement on Form F-4).
(14) Interconnection Agreement, dated as of November 11, 1996, between Mercury and NYNEX CableComms Limited
(incorporated by reference to Exhibit 10.12 to the Companies' Annual Report on Form 10-K for the fiscal
year ended December 31, 1996).
(15) Amendment to Interconnection Agreement, dated as of February 11, 1997, between Mercury and NYNEX
CableComms Limited (incorporated by reference to Exhibit 10.12(c) to the Companies' Annual Report on
Form 10-K for the fiscal year ended December 31, 1996).
(16) Cost Allocation Policy among CWC, BCI and NYNEX.
(17) Opinion of SBC Warburg dated March 21, 1997.
(18) Letter to holders of Units and ADSs of the Companies dated March 24, 1997.
(19) Press release issued by the Companies on March 24, 1997.
</TABLE>
<PAGE>
ITEM 11. EXECUTIVE COMPENSATION
COMPENSATION OF DIRECTORS
Each of the non-executive independent Directors receives L22,000 annually
plus L1,000 for each meeting attended. The position of Deputy Chairman (if any)
receives an additional L5,000 annually. All Directors are reimbursed for
reasonable expenses incurred in the performance of their duties as Directors.
Directors who are executive Directors of the Companies and NYNEX-appointed
Directors do not receive compensation in connection with their services as
Directors.
The compensation packages of the executive Directors and other senior
executives of the Companies are determined by the Remuneration Committees. The
total fees for all of the Directors of each of the Boards, in their capacity as
Directors (therefore excluding any remuneration payable to executive Directors
for their services pursuant to any service agreement entered into with the
Companies or their subsidiaries), may not exceed L500,000 per annum in respect
of both the NYNEX CableComms UK Board and NYNEX CableComms US Board unless the
relevant shareholders, by a majority vote of such shareholders, authorize a
greater amount. Directors may be paid their reasonable expenses incurred in
attending meetings of the Boards (or Committees thereof) and of the
shareholders.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Remuneration Committees are responsible for reviewing, monitoring and
approving all compensation decisions affecting the Companies' Executive
Officers. The Remuneration Committees endeavor to have the entire remuneration
paid to Executive Officers be consistent with the Companies' interest in
providing market competitive compensation opportunities, reflective of its
pay-for-performance philosophy, and supportive of its short term and long term
business mission. The Remuneration Committees will continue to actively monitor
the effectiveness of the Companies' Executive Officer compensation plans and
assess the appropriateness of executive pay levels to assure prudent use of the
Companies' resources. For the year ending December 31, 1996, the Remuneration
Committees were comprised of Sir Michael Checkland (Chairman), Robert T.
Anderson, Richard W. Blackburn, Sir Bryan Carsberg and John L. Rennocks.
No member of the Remuneration Committees was an officer or employee of the
Companies during the year ended December 31, 1996, or at any prior time. In
addition, there are no transactions, relationships or indebtedness for which
disclosure is required under the rules of the SEC with respect to any member of
the Remuneration Committees.
DESCRIPTION OF EXECUTIVE OFFICER COMPENSATION POLICIES AND EMPLOYEE CONTRACTS
Details of the compensation packages for Executive directors are given
below. Information on the individual positions of the executive Directors and
each non-executive Director is also included. Copies of executive Directors' and
non-executive Directors' employment contracts and agreements, together with
documentation supporting the various plans, are available for inspection by
shareholders at the Companies' registered office.
SALARY AND BENEFITS
Basic salary levels and the provision of benefits which include car, death,
disability, housing, enhanced pension and medical benefits are reviewed by the
Remuneration Committees each year. In conducting the annual review, the
Remuneration Committees may take the advice of independent consultants and
undertake external surveys. Increases in salaries and benefits reflect the
performance of the Companies and, separately, of the individual Executive
directors.
38
<PAGE>
ANNUAL AND LONGER-TERM INCENTIVE PLANS
A) TARGET SETTING
Financial targets are agreed annually by the Boards through a systematic
planning and budgeting review process. These targets are reviewed by the
Remuneration Committees to ensure they are appropriate for use as yardsticks in
judging performance of the Companies and the individual.
B) ANNUAL BONUS
Each Executive director of the Companies is eligible to be considered to
receive an annual bonus which is determined by the Remuneration Committees,
depending on performance against company and personal objectives.
SHARE OPTION AND RELATED SCHEMES
Mr. Mearing-Smith is eligible to participate in the Employee Share Option
Plan and the SAYE Plan. He did not, however, participate in the grants under the
Employee Share Option Plan which took place after completion of the initial
public offering (and has not participated in the SAYE plan).
RETIREMENT BENEFITS
Mr. Killian is a member of the NYNEX Management Pension Plan. Benefits for
management employees under this plan are based on a modified career average pay.
Contributions are made, to the extent of permissible deductions under the
provisions of the US Internal Revenue Code, to an irrevocable trust for the sole
benefit of pension plan participants. Mr. Mearing-Smith is entitled to have an
annual pension contribution from NYNEX CableComms Limited, equivalent to 13.5%
of basic salary, paid to a personal pension arrangement nominated by him.
EXECUTIVE DIRECTORS' SERVICE AGREEMENTS AND CHANGE OF CONTROL ARRANGEMENTS
Each of the Executive directors have entered into agreements with the
Companies and with NYNEX CableComms Limited under which the Executive directors
are employed by NYNEX CableComms Limited, such agreements are continuing unless
and until terminated on three months' notice by either party.
Pursuant to their employment agreements, Messrs. Killian and Mearing-Smith
were awarded a right in 1995 (an "Allocation Right") to acquire Units (68,710
and 91,613, respectively, having an aggregate value of $150,000 and $200,000,
respectively), for no payment on the vesting date. In addition Messrs. Killian
and Mearing-Smith were awarded on January 2, 1996 a further Allocation Right to
acquire Units (122,982 and 56,936, respectively, having an aggregate value of
$216,000 and $100,000, respectively), for no payment on the vesting date. As
NYNEX CableComms Limited is not in a position to procure the grant of Units,
NYNEX CableComms UK and NYNEX CableComms US are joined as parties to the
employment agreements.
The Allocation Right and further Allocation Right vested on December 31,
1996. The Units were issued in January 1997.
Prior to joining NYNEX CableComms Limited, Mr. Killian was employed by
various companies within NYNEX. Under the terms of an Assignment Letter, he is
employed by NYNEX WSG, an indirect, wholly-owned subsidiary of NYNEX, for the
purpose only of ensuring that he retains certain benefits under the NYNEX
benefit plans. Mr. Killian's compensation is paid to him by NYNEX WSG and NYNEX
CableComms Limited has agreed, pursuant to a Secondment Agreement, to reimburse
NYNEX WSG in respect of the full cost including the costs of bonuses, foreign
service premium and benefits of paying Mr. Killian. Both Mr. Killian and NYNEX
WSG have agreed that he should perform duties solely
39
<PAGE>
for NYNEX CableComms Limited or any of its associated companies during the term
of the Secondment Agreement (in addition to his services as a Director of each
of the Companies).
Effective October 1, 1996, the Assignment Letter was amended to permit Mr.
Killian to participate in the NYNEX 1987 Restricted Stock Award Plan. Mr.
Killian was awarded 3,589 restricted shares of common stock of NYNEX at the
time, plus the right to dividends reinvested in restricted stock (the "Retention
Award").
The Retention Award shall be forfeited to NYNEX if Mr. Killian voluntary
separates from NYNEX without the consent of the Chairman and Chief Executive
Officer of NYNEX or if Mr. Killian is terminated by NYNEX for cause. If Mr.
Killian were to transfer between NYNEX affiliates, such transfer would not be
treated as a termination of employment and the Retention Award would remain as
currently in place. The Retention Award will not be forfeited, however, if Mr.
Killian voluntary separates from service with NYNEX with the consent of the
Chairman and Chief Executive Officer of NYNEX, if the Companies cease to be
affiliates of NYNEX for any reason, or if he is terminated without cause or dies
or becomes disabled. Notwithstanding Mr. Killian's entitlement to keep the
Retention Award, the Retention Award is not transferable at any time prior to
his death or disability.
If Mr. Killian were to have met the requirements discussed above for a
Retention Award, his Retention Award, calculated as of December 31, 1996, would
have been 3,635 restricted shares of common stock of NYNEX.
NYNEX maintains the NYNEX Executive Severance Pay Plan and pursuant thereto
enters into Executive Retention Agreements with certain officers of NYNEX and
its subsidiaries. The purpose of the Severance Pay Plan and the Executive
Retention Agreements is to enable NYNEX and its subsidiaries to remain
competitive in attracting and retaining the best executive talent. The Executive
Retention Agreements provide certain senior employees with certain benefits upon
termination of employment under specified conditions.
Effective October 1, 1996, Mr. Killian, NYNEX CableComms Limited and the
Companies amended his Service Agreement to provide him with a severance amount
(the "Severance Amount") which is substantially equivalent to the amount to
which he would have been entitled had he entered into an Executive Retention
Agreement pursuant to the NYNEX Executive Severance Pay Plan.
Mr. Killian's Severance Amount, which is payable as discussed in the next
paragraph, would equal the sum of (i) the monetary value, calculated as of the
date of termination, of his Retention Award (defined above) and (ii) $225,000
(which represents one year's salary) plus interest accrued based upon the
earnings of the Global Balanced Fund investment option of the NYNEX Savings Plan
for Salaried Employees (and in no event less than $225,000).
Mr. Killian's Severance Amount is payable if (i) he voluntary separates from
employment with NYNEX CableComms Limited with the consent of the Remuneration
Committees, (ii) NYNEX CableComms Limited terminates his employment upon three
months' notice in accordance with his Service Agreement, or (iii) he dies or
becomes disabled. The Severance Amount is not payable if (i) he voluntary
separates from employment with NYNEX CableComms Limited without the consent of
the Remuneration Committees, (ii) NYNEX CableComms Limited terminates his
employment without notice for cause or (iii) within sixty days after leaving the
employment of NYNEX CableComms Limited, he is employed or offered employment by
NYNEX, the Companies, any of their respective 100% or majority-owned
subsidiaries or partnerships, any successor to any of the aforementioned, or any
acquirer of NYNEX CableComms Limited or any of its affiliates. The Severance
Payment may be reduced to the extent the payment would be subject to an excise
tax, as an "excess parachute payment", under Section 4999 of the US Internal
Revenue Code.
If Mr. Killian were to have met the requirements discussed above for a
Severance Amount, his Severance Amount, calculated as of December 31, 1996,
would have been $420,336 in cash.
40
<PAGE>
NYNEX CABLECOMMS ARRANGEMENTS
In the light of the transactions contemplated by the Transaction Agreement,
the Companies have entered into agreements with certain employees of the
Companies, including each of the Executive directors of the Companies. The
agreements provide for the payment by the Companies of a loyalty bonus (the
"Loyalty Bonus") upon successful completion of the transactions or upon
confirmation that the transactions will not proceed; provided that such payee is
an employee of NYNEX CableComms or a successor company on such date. The Loyalty
Bonus is within the discretion of the President and Chief Executive Officer who,
in consultation with the Chairman, will make a recommendation, subject to review
by the Remuneration Committees, based on the employee's performance and
contribution to the Companies.
In addition, the agreements provide for payment by the Companies of a
severance payment (the "Severance Payment") in the event of a dismissal of the
employee by reason of redundancy (within the meaning of UK employment law) as a
result of completion of the transactions. The Severance Payment is not available
to secondees of NYNEX, including Messrs Repp, Schieck and Hatch.
For Executive directors, the agreements provide for a Loyalty Bonus of up to
60% of base salary and a Severance Payment of twelve months compensation,
including three months in lieu of notice pay and nine months basic pay. As a
Director of the Companies, Mr. Mearing-Smith's eligibility to receive the
Loyalty Bonus and the Severance Payment was subject to clearance by the Panel on
Takeovers and Mergers, which clearance has been obtained.
Based on their current levels of compensation, the maximum Loyalty Bonuses
for Messrs. Repp, Mearing-Smith, Schieck and Hatch under the agreements
described above would be $95,160, $138,696, $77,940 and $78,240, respectively,
and the Severance Payment for Mr. Mearing-Smith under the agreements described
above would be $251,432.
OTHER BENEFITS
Mr. Killian entered into an agreement with NYNEX, effective June 14, 1995,
which provides that he will retain certain benefits under NYNEX's employee
pensions and other benefit plans relating to his respective prior service with
NYNEX.
Executive directors and most other senior employees receive a car or car
allowance and health benefits provided by the Companies. During 1996 Mr. Killian
also received benefits under miscellaneous NYNEX Group benefit plans.
41
<PAGE>
SUMMARY COMPENSATION TABLE
The following table sets forth the compensation awarded to, earned by or
paid to the Chief Executive Officer of the Companies and each of the four other
most highly compensated Executive Officers. Except as noted below, all such
compensation for 1996 was paid by NYNEX CableComms Limited, which provides
substantially all of the management, operations and other business functions.
<TABLE>
<CAPTION>
ANNUAL COMPENSATION LONG TERM COMPENSATION
----------------------------------- ---------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
OTHER RESTRICTED SECURITIES ALL
ANNUAL STOCK UNDERLYING LTIP OTHER
NAME AND PRINCIPAL SALARY COMPENSATION AWARDS OPTONS PAYOUTS COMPENSATION
POSITION YEAR ($) BONUS ($) ($) ($) ($) ($) ($)
- ------------------------- --------- --------- --------- ------------- ----------- ------------- ----------- -------------
JOHN F. KILLIAN(1)
President and Chief
Executive Officer...... 1996 225,000 243,400 157,604(2) 216,000(3) -0- 28,507(4) 372,599(5)
1995 179,398 68,160 223,389(6) 150,000(7) -0- 24,456(4) 34,661(8)
PAUL H. REPP(9)
Executive director,
Chief Legal and
Regulatory Officer and
Company Secretary...... 1996 152,600 58,600 255,493(10) -0- 7,690 -0- 62,708(11)
1995 146,600 53,800 214,234(12) -0- -0- -0- 28,740(13)
NICHOLAS
MEARING-SMITH(14)
Chief Financial
Officer................ 1996 231,161 67,800 3,082(15) 100,000(3) -0- -0- 31,771(16)
1995 183,324 60,644 9,742(17) 200,000(7) -0- -0- 1,298,769(18)
MICHAEL T. SCHIECK(19)
Executive director,
Customer Operations
Support................ 1996 121,567 47,500 190,468(20) -0- 1,120 -0- 52,492(21)
1995 115,175 34,600 175,692(22) -0- -0- -0- 22,911(23)
EDWARD L. HATCH(24)
Executive director,
Merger Planning...... 1996 118,633 48,700 176,821(25) -0- 1,120 -0- 51,442(26)
1995 113,000 37,600 157,263(27) -0- -0- -0- 23,141(28)
</TABLE>
- ------------------------------
(1) Mr. Killian was a secondee to the Companies from an affiliate of NYNEX and
consequently received his compensation from such affiliate, which was
reimbursed by NYNEX CableComms Limited.
(2) Mr. Killian's "Other Annual Compensation" for 1996 consists of $95,969 in
respect of housing expenses, $11,790 in respect of automobile expenses,
$6,678 in respect of travel expenses, $37,935 in respect of school fees,
$1,979 in respect of accountancy fees and consultancy, $600 in telephone
allowances and $2,653 in dividend equivalents paid pursuant to the Senior
Management Long Term Incentive Plan of NYNEX.
(3) In 1996, Messrs. Killian and Mearing-Smith were awarded the right to acquire
for no payment on the vesting date 122,982 and 56,936 NYNEX CableComms
Units, respectively, with a value of $216,000 and $100,000, respectively,
from NYNEX CableComms, pursuant to their employment contracts. These rights
vested on December 31, 1996.
(4) Mr. Killian's LTIP payouts were received under NYNEX's Senior Management and
Executive Long Term Incentive Plans.
(5) Mr. Killian's "All Other Compensation" for 1996 consists of $254,090 in
respect of special foreign service payment, $67,965 in respect of foreign
service premiums and other expatriate compensation; contributions by NYNEX
to the NYNEX tax qualified savings plan, the NYNEX non-qualified savings
plan and the NYNEX Executive Retirement Account of $6,503, $5,672 and
$35,450, respectively; and the amount of the dollar benefit for 1996
projected on an actuarial basis which represents the excess of the amount
needed to fund the death benefit under the split-dollar life insurance
policy of $2,919.
(6) Mr. Killian's "Other Annual Compensation" for 1995 consists of $114,675 in
respect of additional income taxes resulting from his secondment to the
Companies, $59,734 in respect of housing expenses, $7,948 in respect of
automobile expenses, $5,489 in respect of travel expenses and $31,539 in
respect of school fees and $4,004 in dividend equivalents paid pursuant to
the Senior Management Long Term Incentive Plan of NYNEX.
(7) In 1995, Messrs. Killian and Mearing-Smith were awarded the right to acquire
for no payment on the vesting date 68,710 and 91,613 NYNEX CableComms Units,
respectively with a value of $150,000 and $200,000, respectively, following
the successful completion of the Combined Offering, pursuant to their
employment contracts. These rights vested on December 31, 1996.
(8) Mr. Killian's "All Other Compensation" for 1995 consists of $22,294 in
respect of foreign service premiums and other expatriate compensation;
contributions by NYNEX to the NYNEX tax qualified saving plan and NYNEX
non-qualified savings plan of
42
<PAGE>
$6,355 and $3,920, respectively; and the amount of the dollar benefit for
1995 projected on an actuarial basis which represents the excess of the
amount needed to fund the death benefit under the split-dollar life
insurance policy of $2,092.
(9) Mr. Repp was a secondee to the Companies from an affiliate of NYNEX and
consequently received his compensation from such affiliate, which was
reimbursed by NYNEX CableComms Limited.
(10) Mr. Repp's "Other Annual Compensation" for 1996 consists of $163,904 in
respect of additional income taxes resulting from his secondment to the
Companies, $69,368 in respect of housing expenses, $9,294 in respect of
automobile expenses, $3,101 in respect of travel expenses, $8,726 in respect
of school fees, $500 in respect of accountancy fees and $600 in telephone
allowances.
(11) Mr. Repp's "All Other Compensation" for 1996 consists of $56,135 in respect
of Mr. Repp's foreign service premiums and other expatriate compensation and
$6,573 in contributions by NYNEX to the NYNEX tax qualified savings plan.
(12) Mr. Repp's "Other Annual Compensation" for 1995 consists of $142,268 in
respect of additional income taxes resulting from his secondment to the
Companies, $62,949 in respect of housing expenses, $8,938 in respect of
automobile expenses and $79 in respect of other miscellaneous benefits.
(13) Mr. Repp's "All Other Compensation" for 1995 consists of $21,990 in respect
of Mr. Repp's foreign service premiums and other expatriate compensation and
$6,750 in contributions by NYNEX to the NYNEX tax qualified savings plan.
(14) Payments to Mr Mearing-Smith were made in pounds sterling, but are
presented in this table in US dollars based on an exchange rate of $1.7123
to L1.00, the Noon Buying Rate on December 31, 1996.
(15) Mr. Mearing-Smith's "Other Annual Compensation" for 1996 consists of $3,082
in respect of automobile expenses.
(16) Mr. Mearing-Smith's "All Other Compensation" for 1996 consists of $31,207
in respect of pension benefits and $565 in respect of insurance benefit
premiums.
(17) Mr. Mearing-Smith's "Other Annual Compensation" for 1995 consists of $9,742
in respect of automobile expenses.
(18) Mr. Mearing-Smith's "All Other Compensation" for 1995 consists of $24,747
in respect of pension benefits, $716 in respect of insurance benefit
premiums and $683,540 in cash and approximately $589,766 in Units issued to
Mr. Mearing-Smith, under an agreement with respect to the acquisition from
him of interests in certain franchises.
(19) Mr. Schieck was a secondee to the Companies from an affiliate of NYNEX and
consequently received his compensation from such affiliate, which was
reimbursed by NYNEX CableComms Limited.
(20) Mr. Schieck's "Other Annual Compensation" for 1996 consists of $106,790 in
respect of additional income taxes resulting from his secondment to the
Companies, $64,826 of housing expenses, $9,875 in respect of travel
expenses, $8,297 in respect of automobile expenses, $500 in respect of
accountancy fees and $180 telephone allowance.
(21) Mr. Schieck's "All Other Compensation" for 1996 consists of $46,319 in
respect of foreign service premiums and other expatriate compensation and
$6,173 in contributions by NYNEX to the NYNEX tax qualified savings plan.
(22) Mr. Schieck's "Other Annual Compensation" for 1995 consists of $99,622 in
respect of additional income taxes resulting from his secondment to the
Companies, $60,750 of housing expenses, $7,299 in respect of travel
expenses, $8,021 in respect of automobile expenses.
(23) Mr. Schieck's "All Other Compensation" for 1995 consists of $17,276 in
respect of foreign service premiums and other expatriate compensation and
$5,635 in contributions by NYNEX to the NYNEX tax qualified savings plan.
(24) Mr. Hatch was a secondee to the Companies from an affiliate of NYNEX and
consequently received his compensation from such affiliate, which was
reimbursed by NYNEX CableComms Limited.
(25) Mr. Hatch's "Other Annual Compensation" for 1996 consists of $89,367 in
respect of additional income taxes resulting from his secondment to the
Companies, $74,056 of housing expenses, $8,297 in respect of automobile
expenses, $4,001 in respect of travel expenses, $500 in respect of
accountancy fees and $600 telephone allowance.
(26) Mr. Hatch's "All Other Compensation" for 1996 consists of $45,106 in
respect of foreign service premiums and other expatriate compensation and
$6,336 in contributions by NYNEX to the NYNEX Tax Qualified Savings Plan.
(27) Mr. Hatch's "Other Annual Compensation" for 1995 consists of $86,236 in
respect of additional income taxes resulting from his secondment to the
Companies, $58,431 of housing expenses, $8,021 in respect of automobile
expenses, $4,575 in respect of travel expenses.
(28) Mr. Hatch's "All Other Compensation" for 1995 consists of $16,950 in
respect of foreign service premiums and other expatriate compensation and
$6,191 in contributions by NYNEX to the NYNEX Tax Qualified Savings Plan.
43
<PAGE>
OPTION GRANTS IN FISCAL YEAR 1996
The following table contains information concerning the grant of options on
shares of Common Stock of NYNEX under the NYNEX 1995 Stock Option Plan and NYNEX
1992 Management Stock Option Plan to the named Executive Officer during 1996.
<TABLE>
<CAPTION>
NUMBER OF SECURITIES % OF TOTAL GRANT DATE
UNDERLYING OPTIONS GRANTED EXERCISE OR PRESENT
OPTIONS GRANTED TO EMPLOYEES BASE PRICE EXPIRATION VALUE
NAME OF INDIVIDUAL (#)(1) IN 1996 ($/SHARE)(2) DATE(3) ($)(3)(4)
- ------------------------------------ --------------------- ------------------- ------------- ----------- -----------
<S> <C> <C> <C> <C> <C>
John F. Killian..................... 0 0 0 0 0
Paul H. Repp........................ 7,690 0.21 50.69 1/11/06 43,600
Edward L. Hatch*.................... 1,120 0.01 50.69 1/11/06 8,254
Michael T. Schieck*................. 1,120 0.01 50.69 1/11/06 8,254
----- --- ----- ----------- -----------
</TABLE>
- ------------------------
* NYNEX 1992 Management Stock Option Plan.
(1) The date of grant for options subject to this footnote is January 11, 1996.
(2) The exercise price of the options is equal to the fair market value of
shares of Common Stock of NYNEX on the date of grant of the options. The
exercise price may be paid in cash or by tendering already owned shares of
Common Stock of NYNEX with a fair market value on the date of exercise equal
to the exercise price. For exercises where shares of Common Stock of NYNEX
have been tendered in payment of the exercise price, a new grant of options
will be made equal to the number of shares tendered. A grant made under
these circumstances will have an exercise price equal to the fair market
value on the date of such exercise and grant.
(3) Options expire ten years from date of grant or, in case of retirement, on
the fifth anniversary date of cessation of employment. Options become
one-third exercisable one year after the date of grant, two-thirds
exercisable two years after the date of grant, and fully exercisable three
years after the date of grant. To the extent not already exercisable, the
options become fully exercisable in the event of a "change of control", as
defined in the NYNEX 1996 Stock Option Plan.
(4) As permitted by SEC rules, the Black-Scholes method of option valuation has
been used to determine grant date present value. The assumptions used in the
Black-Scholes option valuation calculation are: estimated future annual
stock price volatility of 0.153; risk-free rate of return of 5.96%; and
estimated future dividend yield of 4.66%. NYNEX does not advocate or
necessarily agree that the Black-Scholes method or any other method
permitted by the SEC can properly determine the value of an option. However,
no gain to the optionees is possible without an increase in the stock price.
Thus a zero increase or decrease in stock price, compared to the exercise
price, will not produce any gain for the optionee.
AGGREGATED OPTION EXERCISE IN FISCAL YEAR 1996 AND 1996 FY-END OPTION VALUES
The following table shows information with respect to the named Executive
Officer concerning the exercise of options to purchase shares of Common Stock of
NYNEX during 1996 and unexercised stock options held as of the end of 1996.
<TABLE>
<CAPTION>
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED
OPTIONS AT 1996 FISCAL IN-THE-MONEY OPTIONS AT
YEAR-END 1996 FISCAL YEAR-END($)(1)
---------------------------- --------------------------
<S> <C> <C> <C> <C> <C> <C>
VALUE
SHARES ACQUIRED REALIZED
NAME OF INDIVIDUAL BY EXERCISE ($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ------------------------------------ ----------------- ----------- ----------- --------------- ----------- -------------
John F. Killian..................... 2,566 34,704 10,845 1,285 72,445 11,488
Edward L. Hatch..................... 0 0 1,120 1,120 13,300 0
Paul H. Repp........................ 0 0 280 7,690 2,870 0
Michael T. Schieck.................. 0 0 280 1,120 2,870 0
----- ----------- ----------- ----- ----------- ------
</TABLE>
- ------------------------------
(1) Amounts reflect potential gains on outstanding options based upon the
December 31, 1996 average stock price of $48.82.
44
<PAGE>
NYNEX MANAGEMENT PENSION PLAN
NYNEX maintains the NYNEX Management Pension Plan, a non-contributory
pension plan which covers all management employees, including Messrs. Hatch,
Repp and Schieck. The normal retirement age under this plan is 65; however,
retirement before age 65 can be elected under certain conditions.
The following table sets forth the highest estimated annual retirement
benefits payable to persons in the specified compensation and years of service
classifications upon retirement at normal retirement age under the NYNEX
Management Pension Plan:
PENSION PLAN TABLE
<TABLE>
<CAPTION>
YEARS OF SERVICE
-----------------------------------------------------
<S> <C> <C> <C> <C> <C>
REMUNERATION 15 20 25 30 35
- --------------------------------------- --------- --------- --------- --------- ---------
$200,000............................... $ 36,000 $ 48,000 $ 60,000 $ 72,000 $ 84,000
300,000............................... 36,000 48,000 60,000 72,000 84,000
400,000............................... 36,000 48,000 60,000 72,000 84,000
500,000............................... 36,000 48,000 60,000 72,000 84,000
600,000............................... 36,000 48,000 60,000 72,000 84,000
700,000............................... 36,000 48,000 60,000 72,000 84,000
800,000............................... 36,000 48,000 60,000 72,000 84,000
</TABLE>
- ------------------------
Note: Benefits shown in this table may be further limited under the US Internal
Revenue Code.
Under the NYNEX Management Pension Plan, annual pensions are computed on a
straight-life annuity basis and are not reduced for Social Security or other
offset amounts except in cases where a joint or survivor annuity is selected.
Participants receive a pension based on an adjusted career income times 1.6%.
The adjusted career income is the average annual compensation from January 1,
1986 to December 31, 1990 times net credited service through December 31, 1990;
plus actual compensation from January 1, 1991 until last day of service.
The US Internal Revenue Code limits the benefits which may be paid from a
tax-qualified retirement plan. As permitted by the Employee Retirement Income
Security Act of 1974, NYNEX has a non-qualified pension plan to provide for the
full payment of the pension when the pension amounts exceed tax-qualified
limits. The pension amounts that exceed tax-qualified limits will be accounted
for by NYNEX as operating expense.
The compensation covered by the NYNEX Management Pension Plan includes
compensation that would fall under the categories of "Salary" and "Bonus" in the
Summary Compensation Table shown above. The years of service of Messrs. Hatch,
Repp and Schieck are 27, 14 and 30, respectively. If Messrs. Hatch, Repp and
Schieck continue in their present positions and retire at the normal retirement
age of 65, the estimated annual pension amounts payable under the NYNEX
Management Pension Plan would be $76,515, $102,446 and $89,364, respectively.
Mr. Killian will receive a benefit under the NYNEX Management Pension Plan
described above except that Mr. Killian will not be eligible to receive any
benefits on average compensation over $150,000. Mr. Killian is not eligible for
the non qualified pension plan described above which provides for pension
amounts exceeding US Internal Revenue Code tax-qualified limits.
Mr. Killian will receive a pension based upon average compensation up to
$150,000 multiplied by 1.6%. Average compensation is determined as five-year
average base pay for the period January 1, 1986 to December 31, 1990, times
years of service on December 31, 1990, plus all future base pay.
In 1995, NYNEX terminated its supplemental executive defined benefit
non-qualified pension plan and replaced it with a defined contribution plan
which applies to Mr. Killian only (among the Executive
45
<PAGE>
Officers named in the Summary Compensation Table). The annual company
contribution to the defined contribution plan is determined as 25% of base
salary that exceeds $150,000, plus 25% of bonus. This amount is included in the
"All Other Compensation" column of the Summary Compensation Table.
The compensation covered by the NYNEX Management Pension Plan includes
compensation that would fall under the category of "Salary" in the Summary
Compensation Table. Mr. Killian has 17 years of service. If Mr. Killian
continues in the employment of NYNEX at his present level of compensation and
retires at the normal retirement age of 65, his estimated annual pension amount
payable under the NYNEX Management Pension Plan would be $98,000.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
(A) SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
The following table sets forth, as of January 31, 1997, certain information
regarding the beneficial ownership (within the meaning of Rule 13d-3(d) (1)
under the Exchange Act) of the Units by the owners of 5% or more of the Units.
<TABLE>
<CAPTION>
AMOUNT AND
NATURE OF
BENEFICIAL
TITLE OF CLASS NAME AND ADDRESS OF BENEFICIAL OWNER OWNERSHIP % OF CLASS
- ------------------------------------------ ------------------------------------------ ------------- -------------
<S> <C> <C> <C>
NYNEX CableComms Units.................... NYNEX Corporation 620,000,000 67.0
1095 Avenue of the Americas,
New York, New York 10036, USA
NYNEX CableComms Units.................... Mercury Asset Management 65,295,000 7.1
33 King William Street, EC4R 9AS
</TABLE>
Pursuant to the NYNEX CableComms UK Articles and the NYNEX CableComms US
Certificate, NYNEX has the right to appoint a number of Directors ("NYNEX
Appointees") to each of the Boards of the Companies based on the percentage
voting power of, in the case of NYNEX CableComms UK, all issued NYNEX CableComms
UK Ordinary Shares and, in the case of NYNEX CableComms US, all outstanding
NYNEX CableComms US Shares of Common Stock, directly or indirectly controlled by
NYNEX. In addition, NYNEX has the right to remove and replace the NYNEX
Appointees and such NYNEX Appointees do not stand for election by the
shareholders. NYNEX currently has indirect control of approximately 67% of the
outstanding NYNEX CableComms Units (comprising equal percentages of the issued
NYNEX CableComms UK Ordinary Shares and NYNEX CableComms US Shares of Common
Stock) and therefore, in accordance with the NYNEX CableComms UK Articles and
the NYNEX CableComms US Certificate NYNEX is currently entitled to appoint four
of the nine current Directors of each of the Boards. Control over the
appointment of Directors in effect gives NYNEX, through the vote of such
Directors, a veto power with respect to any actions by the Boards that require
the approval of a two-thirds vote of the Directors. This two-thirds vote
requirement applies to certain important acts of the Boards, such as the
acquisition or disposal of any business outside the ordinary course of business,
the approval of the annual budget, the approval of borrowings above L10 million,
the appointment of any new Director (other than NYNEX Appointees) and the
appointment and removal of certain Executive directors.
NYNEX has the right to vote with the other shareholders in the election of
Directors for each of the remaining seats on each Board. Because NYNEX owns a
majority of the outstanding NYNEX CableComms Units, NYNEX has sufficient voting
power to elect Directors to all of the remaining seats. However, the London
Stock Exchange requires, and the constitutional documents of the Companies
provide, that at all times a majority of the Directors must be independent of
NYNEX ("Independent Directors"). In a relationship agreement with the Companies
(the "NYNEX Relationship Agreement"), NYNEX has, among other things, confirmed
its intention to vote the NYNEX CableComms UK Ordinary
46
<PAGE>
Shares and the NYNEX CableComms US Shares of Common Stock beneficially owned by
it in a manner to ensure, so far as it is able by the exercise of such voting
rights, that a majority of each Board is composed of Independent Directors for
London Stock Exchange purposes.
Currently the Boards of the Companies consist of four NYNEX Appointees and
five Independent Directors.
Shareholdings of the Companies' Directors and Executive directors can be
found below.
(B) SECURITY OWNERSHIP OF MANAGEMENT
Certain members of senior management of the Companies have the title
"Executive director" which under UK practice, is generally equivalent to that of
an executive officer under US practice and does not connote a position on the
Boards of Directors.
THE COMPANIES
The following table sets forth, as of January 31, 1997, beneficial ownership
(as defined in Rule 13d-3(d)(1) under the Exchange Act) of the NYNEX CableComms
Units by each Director, named Executive director and all Directors and Executive
directors (as a group), including NYNEX CableComms Units which they had the
right within 60 days to acquire pursuant to the exercise of options to purchase
NYNEX CableComms Units.
<TABLE>
<CAPTION>
AMOUNT AND
NATURE OF
BENEFICIAL
TITLE OF CLASS NAME OF BENEFICIAL OWNER OWNERSHIP PERCENT(1)
- -------------------- ------------------------------------------------------------------ ----------- ---------------
<S> <C> <C> <C>
NYNEX
CableComms
Units............... Robert Anderson--Director -0- -0-
Richard Blackburn--Director -0- -0-
Jeffrey Bowden--Director -0- -0-
Sir Bryan Carsberg--Director -0- -0-
Sir Michael Checkland--Director -0- -0-
John Killian--President and Chief Executive Officer, Director 191,692 *
Nicholas Mearing-Smith--Chief Financial Officer(2), Director 418,955 *
Mel Meskin--Director -0- -0-
John Rennocks--Director -0- -0-
Edward Hatch--Executive director--Merger Planning -0- -0-
Paul Repp--Chief Legal and Regulatory Officer and Company
Secretary -0- -0-
Michael Schieck--Executive director--Customer Operations Support -0- -0-
All Directors and Executive directors (as a group) 610,647 *
</TABLE>
- ------------------------------
(1) An interest of less than 1% is represented by an asterisk.
(2) Mr. Mearing-Smith delegated his duties as Chief Financial Officer of the
Companies effective January 30, 1997, but remains as a Director.
47
<PAGE>
NYNEX
The following table sets forth as of January 31, 1997, for each Director,
each named Executive director and all Directors and Executive directors (as a
group), their beneficial ownership (as defined in Rule 13d-3(d)(1) under the
Exchange Act) shares of Common Stock of NYNEX including shares of Common Stock
of NYNEX which they had the right within 60 days to acquire pursuant to the
exercise of options granted by NYNEX, plus the number of shares of Common Stock
of NYNEX held on January 31, 1997 by the trustee of the NYNEX Corporation
Savings Plan for Salaried Employees ("Savings Plan") for their accounts.
<TABLE>
<CAPTION>
AMOUNT AND
NATURE OF
BENEFICIAL PERCENT OF
TITLE OF CLASS NAME OF BENEFICIAL OWNER OWNERSHIP(1)(2) CLASS(3)
- ----------------- ----------------------------------------------------------------- --------------- -------------
<S> <C> <C> <C>
Common Stock Robert Anderson--Director 52,365 *
Richard Blackburn--Director 74,887 *
Jeffrey Bowden--Director 84,078 *
Sir Bryan Carsberg--Director -0- -0-
Sir Michael Checkland--Director -0- -0-
John Killian--President and Chief Executive Officers, Director 18,745 *
Nicholas Mearing-Smith--Chief Financial Officer(4), Director -0- -0-
Mel Meskin--Director 70,593 *
John Rennocks--Director -0- -0-
Edward Hatch--Executive director--Merger Planning 2,911
Paul Repp--Chief Legal and Regulatory Officer and Company
Secretary 4,139 *
Michael Schieck--Executive director--Customer Operations Support 1,615 *
All Directors and Executive directors (as a group) 314,020 *
</TABLE>
- ------------------------
(1) The number of shares held in the Savings Plan included in the numbers shown
above are as follows: Richard Blackburn, 12,348; John Killian, 2,848; Robert
Anderson, 1,178; Jeffrey Bowden, 323; Mel Meskin, 1,192; Paul Repp, 1,205;
Michael Schieck, 735 and Edward Hatch, 975. The number of shares of
restricted stock granted under the NYNEX 1987 Restricted Stock Award Plan
included in the numbers shown above are as follows: Richard Blackburn,
6,571; John Killian, 3,635; Robert Anderson, 3,895; Jeffrey Bowden, 5,866
and Mel Meskin, 5,624. (These shares include dividends that have been
reinvested in additional restricted shares.)
(2) The numbers of shares which the named persons had the right within 60 days
to acquire beneficial ownership pursuant to the exercise of options granted
by NYNEX included in the numbers shown above are as follows: Richard
Blackburn, 47,118; John Killian, 9,597; Robert Anderson, 43,991; Jeffrey
Bowden, 66,157; Mel Meskin, 59,338; Paul Repp, 2,844; Michael Schieck, 840
and Edward Hatch, 1,680. In addition, at the time of the completion of the
proposed merger of NYNEX and Bell Atlantic Corporation ("Bell Atlantic")
(see "Changes in Control" below), while not exercisable within 60 days,
stock options for the following number of shares will become exercisable for
the following persons and for all Executive directors as a group: Richard
Blackburn, 113,519; Robert Anderson, 52,784; Jeffrey Bowden, 115,576; Mel
Meskin, 63,906; Paul Repp, 12,641; Michael Schieck, 560; Edward Hatch, 560
and all Executive directors as a group, 360,906.
(3) An interest of less than 1% is represented by an asterisk.
(4) Mr. Mearing-Smith delegated his duties as Chief Financial Officer of the
Companies effective January 30, 1997, but remains as a Director.
(C) CHANGES IN CONTROL
As announced on October 22, 1996, Cable and Wireless plc, Bell Canada
International Inc. and NYNEX have entered into the Transaction Agreement
pursuant to which, subject to the satisfaction of
48
<PAGE>
certain conditions precedent, the parties have agreed to combine Mercury, BCM
(as enlarged by the acquisition of Videotron Holdings Plc) and NYNEX CableComms
under a new holding company, CWC. Pursuant to the Transaction Agreement, CWC has
offered to purchase NYNEX CableComms UK Ordinary Shares and NYNEX CableComms US
Shares of Common Stock (represented by NYNEX CableComms Units and NYNEX
CableComms ADSs) in exchange for ordinary shares of CWC ("the NYNEX CableComms
Offers").
If the transactions contemplated by the Transaction Agreement are
consummated, among other things, (i) NYNEX will exchange all of its NYNEX
CableComms Units, and its indirect interests in the Operating Companies, for
ordinary shares of CWC; (ii) NYNEX CableComms will become part of the combined
CWC group and thus will be an affiliate of Mercury, which is currently a
competitor of NYNEX CableComms primarily in the business telecommunications
market; and (iii) the entities identified as the North limited partner and the
South limited partner in the diagram under "Organization" in Item 1 above will
become indirect wholly-owned subsidiaries of CWC, thereby providing CWC with
indirect interests in the Operating Companies held other than through NYNEX
CableComms. For a more complete discussion of the Transaction Agreement, see
"Business--Introduction" in Item 1 above.
Options under NYNEX CableComms' Employee Share Option Plan are exercisable
within a limited period in the event of a take-over of NYNEX CableComms UK or
NYNEX CableComms US and will in certain circumstances lapse if not so exercised,
but may, with the agreement of the acquiring company, be exchanged for options
over the acquiring company's shares. The holders of options will, upon the NYNEX
CableComms Offers becoming unconditional, be entitled to exercise their options
and deal with their NYNEX CableComms Units pursuant to the NYNEX Cablecomms
Offers on the same basis as other holders of NYNEX CableComms Units.
NYNEX has entered into an Amended and Restated Agreement and Plan of Merger
dated as of April 21, 1996, as amended as of July 2, 1996, with Bell Atlantic,
pursuant to which a wholly-owned subsidiary of Bell Atlantic will merge with and
into NYNEX and NYNEX will become a wholly-owned subsidiary of Bell Atlantic. In
the merger, each shareholder of NYNEX will receive 0.768 shares of Bell Atlantic
common stock in exchange for one share of NYNEX Common Stock.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Effective on June 14 1995, the Companies and NYNEX CableComms Limited, an
indirect wholly-owned subsidiary of the Companies which provides substantially
all the management, operations and other business functions for the Companies,
entered into a trademark agreement with NYNEX under which the Companies and
NYNEX CableComms Limited are required to pay L4.0 million per annum for 5 years
for use of the "NYNEX" name.
Effective on June 14, 1995, the Companies and NYNEX CableComms Limited
entered into a services and technology sharing agreement with NYNEX pursuant to
which NYNEX provides certain services to the Companies and NYNEX CableComms
Limited. This agreement covers both the scope and method of calculation of the
cost of such services. The level of charges under this agreement is intended to
arrive at arm's length transaction costs. Payments to NYNEX under the services
agreement totalled L5.0 million and L2.6 million for 1996 and 1995,
respectively.
The Companies and NYNEX CableComms Limited also entered into a secondment
agreement dated May 15, 1995 with NYNEX which provides that NYNEX will, subject
to certain conditions, second employees to the Companies and their subsidiaries
upon the request of the Companies. The Companies have agreed to reimburse NYNEX
for all costs NYNEX incurs in respect of any employees so seconded. Currently,
11 of the senior management of NYNEX CableComms Limited are on secondment from
NYNEX, including Messrs. Hatch, Doherty, McHale, Repp, Schieck and Welsh who are
Executive directors of NYNEX CableComms Limited. Mr. Repp is also a Director of
NYNEX CableComms
49
<PAGE>
Limited. Under this agreement, NYNEX was reimbursed by the Companies in the
aggregate of L1.6 million and L2.7 million for such secondees during 1996 and
1995, respectively.
The Companies and Mr. Mearing-Smith (the Chief Financial Officer and
Director of the Companies, who delegated his duties as Chief Financial Officer
as of January 30, 1997) were party to an agreement which terminated Mr.
Mearing-Smith's right of first refusal and right to deferred consideration with
respect to his interest in certain franchises purchased by the Companies in
exchange for consideration which consisted of grants of NYNEX CableComms Units
and cash approximately equal in value to the deferred consideration. Under the
agreement, Mr. Mearing-Smith received L440,000 in cash in 1995 and 270,406 NYNEX
CableComms Units in 1996.
Approximately 67% of the outstanding Units of the Companies is held by a
wholly-owned subsidiary of NYNEX. The Companies, through various wholly-owned
subsidiaries and two partnerships in which they exercise management control and
hold a majority interest, control the exercise of all the voting rights in the
16 companies that hold the licenses in the Companies' franchise areas (the
"Operating Companies"). Other wholly-owned subsidiaries of NYNEX have direct and
indirect equity interests in lenders to the Operating Companies and indirect
equity interests in the Operating Companies separate from NYNEX's interest as a
shareholder of the Companies. This includes indirect equity interests in the two
limited partnerships (the "North Partnership" and the "South Partnership") which
own substantially all of the ordinary shares of the Operating Companies. The
lenders to the Operating Companies hold (in addition to loans to the Operating
Companies) limited partnership interests in the North Partnership and the South
Partnership. Under the partnership agreements the limited partners generally
have a 15% interest in all items of income, gain, loss deduction or credit,
except in respect of initial losses and profits (being specified amounts of
profits or losses calculated in accordance with US tax principles) of the
relevant partnership.
Initial losses up to a maximum cumulative amount of L200.0 million in the
case of the North Partnership and L40.0 million in the case of the South
Partnership will be allocated to the limited partners. After that, losses will
be allocated to the Companies up to the point that their share of the cumulative
losses of the relevant partnership reaches 85%. At that point any further losses
will be allocated 85% to the Companies and 15% to the limited partners. Initial
profits will be allocated between the Companies and the limited partners in
proportion to the cumulative losses allocated to each partner until such losses
have been fully offset by profits. Thereafter, all profits are to be allocated
85% to the Companies and 15% to the limited partners. Initial losses for the
South Partnership reached L40.0 million in the first quarter of 1996. Initial
losses for the North Partnership have not yet reached L200 million.
For the purposes of preparing the combined financial statements, the profit
or loss of the relevant partnership is allocated between the Companies and the
limited partners in accordance with the profit and loss allocations set out in
the relevant partnership agreement.
The limited partners have contributed L211.7 million to the North
Partnership and the South Partnership as of both December 31, 1996 and December
31, 1995. Minority interests of the limited partners in the North Partnership
and South Partnership were L18.8 million and L57.8 million, respectively, at
December 31, 1996 and L76.2 million and L55.9 million, respectively, at December
31, 1995.
The North and South Partnerships are included in the Companies' US GAAP
combined financial statements. The limited partners are entitled to
distributions only if declared and their capital contributions in the North and
South Partnerships, respectively, are reflected in the Companies' US GAAP
combined financial statements under "Minority interest". The revolving loans
from the limited partners to the Northern and Southern Operating Companies are
reflected in the Companies' US GAAP combined financial statements under
"Long-term debt".
The Northern Operating Companies borrowed L292.9 million and L96.5 million
under the revolving credit facilities from the limited partners at December 31,
1996 and 1995, respectively. The Southern
50
<PAGE>
Operating Companies borrowed L154.8 million and L28.9 million under the
revolving credit facilities from the limited partners at December 31, 1996 and
1995, respectively. Neither the North Partnership nor the South Partnership had
made any borrowings under the revolving credit facilities from the limited
partners at December 31, 1996 and 1995.
Interest and fees paid to the lenders under the revolving credit facilities
for the years ended December 31, 1996 and December 31, 1995, aggregated L14.6
million and L6.5 million, respectively, for the Northern Operating Companies and
L7.5 million and L8.7 million, respectively, for the Southern Operating
Companies.
The revolving loans are unsecured obligations of the Operating Companies.
However, the Companies have pledged their interests in the North and South
Partnerships as collateral for repayment of the Northern Operating Companies'
and Southern Operating Companies' revolving loans, respectively, and significant
restrictions exist on the rights of the Operating Companies to encumber any
assets or incur any additional indebtedness.
The Companies have certain rights to purchase the equity interests held by
the limited partners in the North Partnership and South Partnership. The
purchase option provides for the acquisition of these equity interests at a
price equal to fair market value, but in no event less than the unrecovered
investment of the limited partners. Under certain circumstances, following the
occurrence of certain adverse events, the failure to purchase the limited
partner's interest could result in a liquidation of the North Partnership and
South Partnership.
The Operating Companies have entered into two forward sterling interest rate
swaps to reduce potential exposure to interest rate risks inherent in the
financing arrangements for Northern Operating Companies and Southern Operating
Companies. Under the interest rate swaps, the Companies agreed to exchange with
NYNEX, on a quarterly basis, the difference between fixed-rate (9.15% for the
Northern financing arrangement and 7.02% for the Southern financing arrangement)
and floating-rate three month Sterling LIBOR interest amounts calculated by
reference to an agreed notional principal amount. The notional principal amounts
of the swaps are L700.0 million and L273.7 million for swaps entered into on
December 31, 1994 and December 31, 1993, respectively. The net effect of the
interest rate swap is to fix the net cash outflow of the Companies to 9.15% and
7.02% of the appropriate financing arrangement. In order to correspond to the
underlying financing arrangements for the Northern Operating Companies and
Southern Operating Companies, the effective date of the swaps is the first
payment date after the earlier of five years from commencement of the
arrangements or the date all completion requirements are met, and expire by
December 31, 2004 and 2003, respectively.
In addition, the Operating Companies have entered into two agreements with
NYNEX to reduce the notional amount of the interest rate swaps at the Operating
Companies' option. The notional amount may be reduced at any time, and from time
to time, in whole or in part, without any penalty or additional payments. The
effective dates and expiration dates of these options are the same as the swap
transactions. The Operating Companies paid premiums of L18.3 million and L7.0
million in respect of the Northern and Southern financing arrangements,
respectively, which are being amortised over the life of the options.
NYNEX has entered into the credit facility with NYNEX CableComms to make
available up to L200 million (the "NYNEX Facility"). NYNEX CableComms may make
drawings under the NYNEX Facility at any time before May 31, 1998. Amounts
borrowed are to be paid in full by May 31, 1998. The rate of interest applicable
to amounts drawn under the NYNEX Facility is three month sterling LIBOR plus 4%.
NYNEX CableComms paid NYNEX a fee of L375,000 during 1996 for NYNEX commitment
to provide the NYNEX Facility. No drawings have yet been made on the NYNEX
Facility.
NYNEX has entered into an agreement with the Companies whereby it has agreed
to indemnify the Companies for certain US and UK tax liabilities of NYNEX and
its affiliates (including the affiliates that were transferred to the Companies
as part of a reorganization of NYNEX's cable television and
51
<PAGE>
telecommunications operations in the UK effected immediately prior to the
initial public offering) arising from or attributable to periods prior to the
completion of the initial public offering.
Prior to June 14, 1995, NYNEX CableComms' US corporations were included in
the NYNEX consolidated federal income tax return and in New York State and New
York City combined income tax filings. While included in the NYNEX tax filings,
NYNEX CableComms' US corporations were allocated payments in accordance with the
effect their losses had on reducing the consolidated group's taxable income. As
a result of the reorganization which occurred immediately prior to the
completion of the NYNEX CableComms' initial public offering, the Companies and
their US corporations no longer qualify to be included in the NYNEX consolidated
US federal tax return or in any state or local combined tax returns. As such,
any equivalent payments will no longer be made to the Companies by NYNEX for any
future losses generated. For periods after June 14, 1995, NYNEX UK Holdings and
its US subsidiaries will be treated as a consolidated group of corporations for
US tax return purposes. However, neither NYNEX CableComms UK nor NYNEX
CableComms US will be consolidated with NYNEX UK Holdings or its subsidiaries
for US tax purposes. As a result, NYNEX CableComms UK and NYNEX CableComms US
will file their own US federal tax returns separately from NYNEX UK Holdings.
On May 15, 1995, the Companies and NYNEX entered into a registration rights
agreement pursuant to which, subject to compliance with London Stock Exchange
requirements and subject to certain other exceptions, NYNEX has the right, at
its own expense, (i) to require the Companies to include all or any portion of
the NYNEX CableComms Units beneficially owned by NYNEX or its affiliates in any
registered offering by any the Companies in the United States (or in any
prospectus for the offering and sale to the public in the United Kingdom) and
(ii) for ten years beginning one year after the initial public offering, to
cause the Companies on up to two separate occasions to file a registration
statement for an offering in the United States and to take such other action to
facilitate an offering and sale in the United Kingdom.
52
<PAGE>
COST ALLOCATION POLICY
OVERVIEW
Over the next few months, it is expected that significant costs will be
incurred as Cable and Wireless Communications ("CWC") is formed from the merger
of Bell Cablemedia ("BCM"), Videotron, Nynex CableComms ("NCC") and Mercury. The
purpose of this paper is to ensure that the policy for the assignment of costs
to CWC is agreed beforehand and plans are made for the unlikely event that the
deal does not progress as planned.
SUGGESTED POLICY
INTERNAL COSTS
Internal costs are those costs related to principal shareholders or
operating unit personnel, their travel and related costs. Each principal or
operating unit shall bear its own internal costs. These costs shall not be
shared.
EXTERNAL COSTS
External costs are those costs associated with external suppliers to the
principals and operating units. These costs will cover bankers, lawyers,
consultants, accountants and any other legitimate external costs.
External costs shall be borne by the principals or operating unit which
incurred them except where the costs are related to the listing of CWC, the
preparation of the US registration statement and the integrated offer documents.
All costs in excess of 50K which will be borne by CWC must be approved by
the Merger Steering Committee ("MSC").
Please see Attachment 1 for more detail about the proposed distribution of
external costs.
DIVORCE
In the event that the merger does not take place:
- CWC shareholders shall be liable for their portion of the costs relating
to the formation of CWC in proportions determined by their respective
equity stakes, as if the merger had gone ahead (excluding the proportion
of shares which will be publicly listed).
- Parent companies will bear costs related to their subsidiaries in respect
of long form reports, short form reports, working capital reports and
legal due diligence.
- Subsidiaries will bear costs associated with independent financial and
legal advice in respect of considering the offers.
If a single party exits for any reason (including a condition precedent upon
which closing that has not been satisfied), then that party must still absorb
its pro-rata percentage of the costs--once again, this will be on the basis of
its intended equity participation in CWC.
MULTIPLE ADVISORS
Several advisors will be acting on behalf of one of the principals as well
as CWC on the listing of CWC (e.g. KPMG, Barings etc). It is the responsibility
of the MSC to ensure that the work associated with CWC is billed separately and
does not include costs directly associated with the principal shareholders.
SETTLEMENT PROCEDURE
Each party shall make disbursements on behalf of CWC in respect of prior MSC
approved costs and shall present statements at the end of the month of these
costs. The MSC staff shall collate these costs and send a statement to each
shareholder. Ninety days after the deal is completed, the costs shall be settled
among the parties.
<PAGE>
Attachment 1--External Costs
<TABLE>
<CAPTION>
LEVEL PARTIES APPROVALS BY COSTS TREATMENT
- ------------- --------------- ------------ ------------------------------------------------ -----------------------
<S> <C> <C> <C> <C> <C> <C>
Shareholder C&W, NYNEX and Individual Costs of the shareholders in the sale of assets Wholly for account of
BCI companies to CWC and participation as shareholders in CWC. relevant shareholder
Example
All fees in connection with shareholders'
agreement, bankers fees.
<CAPTION>
S/HLDR BANKER LAWYER
--------- --------- --------------------------
<S> <C> <C> <C> <C> <C> <C>
C&W Barings Allen & Overy (UK) Cleary,
Gottlieb, Steen & Hamilton
(US)
NYNEX Bear Slaughter & May (UK)
Stearns Chadbourne & Parke (US)
BCI CS First Clifford Chance (UK) Davis
Boston Polk & Wardwell (US)
CWC CWC as a MSC Costs legitimately incurred by (or on behalf of) Upon successful merger,
holding/ CWC's holding/operating company activities, the costs will be
operating including pre-incorporation and listing attributed to CWC and
company expenses. capitalized and
recorded on CWC's
balance sheet. If the
merger is unsuccessful
the costs shall be
borne by shareholders
in proportion to
intended shareholdings
(excluding public
shares) -C&W 61.7%
-NYNEX 21.7% - BCI
16.6%
Examples
-Management appointments
-Merger integration long form (KPMG)
-Legal--Allen & Overy
-Sponsor--Barings
-Post merger integration (BCG)
-Printing
Operating MCI, BMC, NCC Senior Costs of the 3 units as on-going operating Wholly for account of
Companies Management companies and costs of due diligence associated operating units.
of BCM, NCC with listing. (This includes Videotron
and MCL acquisition by BCM).
Example
Independent financial advice, audit costs and If the merger is
individual long forms costs. unsuccessful the costs
of due diligence
associated with listing
shall be borne by the
parent companies.
</TABLE>
<TABLE>
<CAPTION>
OP CO. BANKER LAWYER ACCOUNTANTS
- --------- ------------- --------------------- --------------
<S> <C> <C> <C>
MCL Allen & Overy KPMG
NCC SBC Warburg Slaughter & May Coopers &
Lybrand
BCM Salomon Bros Linklaters Deloitte &
& Paines (UK) Touche
Davis Polk & Wardwell
(US)
</TABLE>
2
<PAGE>
<TABLE>
<S> <C>
SWISS BANK CORPORATION
[LOGO] 2 Finsbury Avenue
London EC2M 2PP
Telephone: 0717-860 1090
Telex: 920301
Facsimile: 0171-860 0901 (Corporate
Finance)
</TABLE>
21 March 1997
To: The Offer Committees of the Boards of Directors
NYNEX CableComms Group PLC and NYNEX CableComms Group Inc.
The Tolworth Tower
Ewell Road
Surbiton
Surrey KT6 7ED
United Kingdom
Members of the Offer Committees:
OFFERS BY CABLE & WIRELESS COMMUNICATIONS PLC ("CWC" OR THE "OFFEROR") FOR
UNITS OF NYNEX CABLECOMMS GROUP PLC AND NYNEX CABLECOMMS GROUP INC. ("NYNEX
CABLECOMMS")
You have requested our opinion as investment bankers as to the fairness,
from a financial point of view, to the holders, other than NYNEX Corporation
("NYNEX Corporation") (the "Public Shareholders") of the issued and outstanding
(a) Ordinary Shares, par value 10p per share, of NYNEX CableComms Group PLC, (b)
shares of Common Stock, par value $0.01 per share, of NYNEX CableComms Group
Inc., (c) the Units of NYNEX CableComms, consisting of one Ordinary Share of
NYNEX CableComms Group PLC and one share of Common Stock of NYNEX CableComms
Group Inc. and (d) the American Depositary Shares ("ADSs") evidenced by American
Depositary Receipts, each representing ten Units, of NYNEX CableComms (together,
the "Shares"), of the consideration to be received by the Public Shareholders
under the offers (the "Offers") by CWC to purchase all the Shares held by the
Public Shareholders pursuant to the restated transaction agreement dated 22
October 1996 between Cable & Wireless plc ("C&W"), Bell Canada International
Inc. ("BCI") and NYNEX Corporation (the "Transaction Agreement"). The Offers are
of (1) 0.330714 CWC Ordinary Shares of 50p each for each Ordinary Share of NYNEX
CableComms Group PLC held (including those comprised in Units or represented by
ADSs) and, (2) 0.036746 CWC Ordinary Shares for each share of Common Stock of
NYNEX CableComms Group Inc. held (including those comprised in Units or
represented by ADSs). The consideration offered under the Offers is equivalent
to 0.36746 CWC Ordinary Shares per Unit and 3.6746 CWC Ordinary Shares per ADS.
In arriving at our opinion, we have reviewed and analysed, among other
things, the following: (i) the Transaction Agreement, including the exhibits and
the disclosure schedules thereto; (ii) CWC's Registration Statement on Form F-4,
including the exhibits and schedules thereto and the Offers to Purchase/
Prospectus dated 21 March 1997 included therein; (iii) NYNEX CableComms'
Solicitation/Recommendation Statement on Schedule 14D-9 in which this letter is
reproduced; (iv) certain publicly available information concerning NYNEX
CableComms, including the Annual Reports on Forms 10-K of NYNEX CableComms for
each of the years ended 31 December 1995 and 1996, and the Quarterly Reports of
NYNEX CableComms for the three months ended 31 March 1996, 30 June 1996 and 30
September 1996, and the form of Proxy Statement of NYNEX CableComms presented to
the Board of Directors on 21
Swiss Bank Corporation is registered in England & Wales under branch
registration number BR000326
(A public company limited by shares, incorporated in Switzerland whose
registered office is at Aeschenvorstadt 1, 4051, Basel)
Regulated in the U.K. by The Securities and Futures Authority. A member of the
London Stock Exchange.
<PAGE>
[LOGO]
Page 2
March 1997; (v) certain publicly available information concerning Mercury
Communications Limited ("Mercury"), Bell Cablemedia plc ("BCM") and Videotron
Holdings Plc ("Videotron"), (vi) certain other information, primarily financial
in nature, including certain projections, concerning the business and operations
of NYNEX CableComms, CWC, Mercury, BCM and Videotron furnished to us by those
companies, (vii) certain publicly available information concerning the trading
of, and the trading market for, the Units and ADSs of NYNEX CableComms and the
ADSs of BCM; (viii) certain publicly available information with respect to
certain other companies that we believe to be comparable in certain respects to
NYNEX CableComms, Mercury, BCM and/or Videotron, and the trading markets for
certain of such other companies' securities; and (ix) certain publicly available
information concerning the nature and terms of certain other transactions that
we consider relevant to our inquiry. We have also met with certain officers and
employees of and certain advisers to NYNEX CableComms, NYNEX Corporation, CWC,
Mercury, C&W, BCM and Videotron, to discuss the foregoing and such other matters
as we considered relevant to our inquiries. We have also considered such other
public information, financial studies, analyses, investigations and financial,
economic and market criteria which we deemed relevant. We have, subject to the
above, relied upon and assumed the accuracy of, completeness and fairness of all
the financial and other information that was available from public sources, that
was provided to SBC Warburg by NYNEX CableComms, NYNEX Corporation, CWC,
Mercury, BCM and Videotron and their respective representatives, or which was
otherwise received by SBC Warburg, and have taken into account your commercial
assessments. With respect to the financial projections supplied to SBC Warburg,
we have assumed that they have been reasonably prepared on the basis reflecting
the best currently available estimates and judgments of the respective
managements of the Companies, CWC, Mercury, BCM and Videotron as to the
respective future operating and financial performance of the Companies, CWC,
Mercury, BCM and Videotron.
In rendering our opinion we have not made or obtained, or assumed any
responsibility for making or obtaining, any independent evaluations or
appraisals of any of the assets (including properties or facilities) or
liabilities of NYNEX CableComms, Mercury, BCM or Videotron as shown in the
published accounts of those companies. We are not authorised to, and we did not,
solicit alternative prospective purchasers of all or part of NYNEX CableComms.
Our opinion necessarily is based upon conditions as they exist and can be
evaluated on the date hereof. Our opinion does not address CWC's underlying
business decision with respect to the Offers. Our opinion is delivered for your
use and consideration, and does not constitute a recommendation to any Public
Shareholder as to whether to retain their Shares or to accept the Offers.
Our opinion as expressed below does not imply any indication as to the
likely trading range for the ordinary share capital of CWC following the
consummation of the Offers, which may vary depending upon, among other factors,
changes in interest rates, dividend rates, market conditions, general economic
conditions and other factors that generally influence the price of securities.
As you are aware, we are acting as adviser to you in connection with the
Offers under Rule 3 of the City Code on Takeovers and Mergers and will receive
fees from NYNEX CableComms for our services, including the rendering of this
opinion. In addition, in the ordinary course of business members of the Swiss
Bank Corporation group may, subject to the Rules of the United Kingdom Code on
Takeovers and Mergers, actively trade, make a market or act as principal in
transactions relating to the securities (or related options, warrants, or rights
to, or interests in, such securities) of NYNEX CableComms, NYNEX Corporation,
C&W, CWC, BCI, and BCM for their own account and for the accounts of customers
and, accordingly, may at any time hold long or short positions in such
securities.
This letter, and our opinion expressed herein, is not to be quoted,
summarised or referred to, in whole or in part without our prior written
consent. Notwithstanding the foregoing, this opinion may be included
<PAGE>
[LOGO]
Page 3
or referred to in any solicitation/recommendation statement sent to the Public
Shareholders of NYNEX CableComms with respect to the Offers.
Based upon and subject to the foregoing, we are of the opinion as investment
bankers that as at the date hereof the consideration to be received by the
Public Shareholders in connection with the Offers is fair, from a financial
point of view, to the Public Shareholders.
Yours faithfully
for and on behalf of SBC Warburg
a division of Swiss Bank Corporation
<TABLE>
<S> <C>
/s/ ADRIAN J. HAXBY /s/ AIDAN C.B. CLEGG
--------------------- ---------------------
Adrian J. Haxby Aidan C.B. Clegg
EXECUTIVE DIRECTOR ASSOCIATE DIRECTOR
CORPORATE FINANCE CORPORATE FINANCE
</TABLE>
<PAGE>
THIS DOCUMENT IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION. If you are in
any doubt as to what action you should take, you are recommended to seek your
own financial advice immediately from your stockbroker, bank manager, solicitor,
accountant or other professional or financial advisor or, if you are in the
United Kingdom, an independent financial advisor authorized under the Financial
Services Act 1986.
If you have sold or transferred all of your holdings of Units of NYNEX
CableComms Group PLC and NYNEX CableComms Group Inc., please forward this
document as soon as possible, together with the accompanying documents, to the
purchaser or transferee or to the stockholder, bank or other agent through whom
the sale or transfer was effected, for delivery to the purchaser or transferee.
However, these documents should not be distributed, forwarded or transmitted in
or into Japan, Canada or Australia.
Application will be made for the Cable & Wireless Communications plc ("CWC")
ordinary shares of 50p each ("CWC Ordinary Shares") to be issued pursuant to the
Offers to be admitted to the Official List of the London Stock Exchange Limited.
It is expected that admission to the Official List of the London Stock Exchange
will become effective, and dealings will commence on the day the Offers become
or are declared unconditional. Application will also be made to list the Cable &
Wireless Communications plc American Depository Shares, each representing five
CWC Ordinary Shares, on the New York Stock Exchange, Inc.
<TABLE>
<S> <C>
NYNEX CABLECOMMS GROUP PLC
NYNEX CABLECOMMS GROUP INC. [LOGO]
The Tolworth Tower
Ewell Road
Surbiton
Surrey KT6 7ED
Telephone: 0181 873 2000
Facsimile: 0181 390 9993
</TABLE>
Members of the Offer Committees:
John Leonard Rennocks (Chairman)
John Francis Killian
Sir Michael Checkland
March 24, 1997
To NYNEX CableComms Unitholders and holders of American Depositary Shares:
Re: Recommended Offers for NYNEX CableComms Group PLC and NYNEX
CableComms Group Inc. by Cable & Wireless Communications plc
On October 22, 1996 it was announced that Cable and Wireless plc, Bell
Canada International Inc. and NYNEX Corporation ("NYNEX") had conditionally
agreed to combine their respective interests in Mercury Communications Limited,
Bell Cablemedia plc (as enlarged by its acquisition of Videotron Holdings Plc)
and your companies under the ownership of a newly formed holding company to be
called Cable & Wireless Communications plc ("CWC") (the "Transactions"). In
order to implement the Transactions, CWC is now making offers for (i) all
ordinary shares of 10p each in the capital of NYNEX CableComms Group PLC ("NYNEX
CableComms UK Ordinary Shares"), including those comprised in Units, each Unit
(the "Units") comprised of one NYNEX CableComms UK Ordinary Share and one share
of common stock, par value $0.01 per share, of NYNEX CableComms Group Inc. (the
"NYNEX CableComms US Shares of Common Stock") or represented by American
Depositary Shares evidenced by American Depositary Receipts of NYNEX CableComms,
each representing ten Units (the "ADSs"), and (ii) all shares of NYNEX
CableComms US Shares of Common Stock, including those comprised in Units
NYNEX CableComms Group PLC:
Registered in England and Wales with Number 3024703
Registered Office: as above
NYNEX CableComms Group Inc.:
A Delaware, United States of America, corporation
The liability of members is limited
Head office: as above.
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or represented by ADSs (collectively, the "Offers"). The NYNEX CableComms UK
Ordinary Shares, NYNEX CableComms US Shares of Common Stock, Units and ADSs are
collectively referred to herein as the "Shares".
Due to the interests in the Transactions of the NYNEX-appointed directors on
the Boards of Directors of NYNEX CableComms Group PLC and NYNEX CableComms Group
Inc., the Boards of Directors each appointed an Offer Committee consisting of
independent directors (together, the "Offer Committees") to consider the Offers
now being made and, if thought fit, to make recommendations to the shareholders
of your companies, other than NYNEX and its subsidiary, NYNEX Network Systems,
Inc. (the "Public Shareholders"). None of the NYNEX-appointed directors nor Mr.
Mearing-Smith, as Finance Director designate of CWC, nor Sir Bryan Carsberg, as
a proposed candidate for non-executive director on the CWC Board, have joined in
the recommendation by the Offer Committees to the Public Shareholders. A
description of the deliberations of the Offer Committees and of their decision
to recommend the Offers are contained in the enclosed
Solicitation/Recommendation Statement on Schedule 14D-9. NYNEX' subsidiary,
which currently owns 67 per cent. of the Shares, has given an irrevocable
undertaking to accept the Offers in respect of its shareholding. Messrs. Killian
and Mearing-Smith intend to accept the Offers in respect of their own beneficial
holdings of Shares, which amount in total to 610,647 Units.
OFFER DOCUMENTATION
Because the Offers are being made in both the UK and the US and for both
NYNEX CableComms Group PLC and NYNEX CableComms Group Inc., you are being sent
more documents than would be customary with respect to a UK transaction only.
Summarised below are the documents you have been sent:
- The document enclosed with this letter, which is a
Solicitation/Recommendation Statement on Schedule 14D-9 (the "Schedule
14D-9") under US securities law, sets out the recommendations of the
independent Offer Committees together with the rationale for those
recommendations (see Item 4 on pages 29 to 33);
- The Offers to Purchase/Prospectus, dated March 21, 1997 (the "Offers to
Purchase/Prospectus"), which is included in CWC's Registration Statement
on Form F-4 and which contains the formal Offers of CWC, together with
information (including certain financial information) on CWC, Mercury
Communications Limited, NYNEX CableComms, Bell Cablemedia plc and
Videotron Holdings plc;
- The Form of Acceptance for NYNEX CableComms Units;
- The Letter of Transmittal to Tender American Depositary Shares Evidenced
by American Depositary Receipts of NYNEX CableComms Group PLC and NYNEX
CableComms Group Inc.;
- The Notice of Guaranteed Delivery for American Depositary Shares Evidenced
by American Depositary Receipts of NYNEX CableComms Group PLC and NYNEX
CableComms Group Inc.; and
- The Proxy Statement (the "Proxy Statement"), which gives notices of an
Extraordinary Meeting of NYNEX CableComms Group PLC and a Special Meeting
of NYNEX CableComms Group Inc. to consider passing certain resolutions
with respect to the de-stapling of the Units and the merger of a newly
incorporated and wholly owned subsidiary of CWC with NYNEX CableComms
Group Inc. after the Offers become or are declared unconditional in all
respects as further described below, and the accompanying voting
instruction cards.
YOU ARE RECOMMENDED TO CONSIDER ALL THE DOCUMENTS CAREFULLY BEFORE TAKING
ANY ACTION.
D.F. King has been appointed to aid in the solicitation of proxies. Any
questions or requests for assistance with respect to the procedure for filling
in and returning the proxy voting instruction cards may be directed to D.F. King
at 011-44-171-600-5005 (call collect) in the U.K. and at 1-800-659-5550
(toll-free) in the U.S.
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TERMS OF THE OFFER
CWC is offering to acquire all the issued and outstanding Shares on the
following basis:
0.330714 CWC Ordinary Shares per NYNEX CableComms UK Ordinary Share;
0.036746 CWC Ordinary Shares per NYNEX CableComms US Share of Common Stock;
which is equivalent to
0.36746 CWC Ordinary Shares per Unit;
and
3.67460 CWC Ordinary Shares per ADS.
All the NYNEX CableComms UK Ordinary Shares and NYNEX CableComms US Shares
of Common Stock comprise Units and cannot, absent de-stapling, be traded,
transferred or delivered separately. Acceptance of the offer for the NYNEX
CableComms UK Ordinary Shares or the NYNEX CableComms US Shares of Common Stock
can only be effective, prior to the de-stapling of the Units, by acceptance in
respect of both the offer for the NYNEX CableComms UK Ordinary Shares and the
offer for the NYNEX Cablecomms US Shares of Common Stock. Accordingly, holders
of Units or ADSs who wish to accept the Offers must accept both of the Offers
set forth above and complete the applicable acceptance forms. Acceptance of only
the offer for the NYNEX CableComms UK Ordinary Shares or only the NYNEX
CableComms US Shares of Common Stock will not become effective until immediately
after de-stapling of the Units takes effect, if at all.
Instead of CWC Ordinary Shares, holders of Shares (particularly holders of
ADSs) may elect to receive CWC American Depositary Shares ("CWC ADSs") on the
basis of one CWC ADS for every five CWC Ordinary Shares to which such holders
would otherwise be entitled pursuant to the Offers.
Further information setting out the rights attaching to the CWC Ordinary
Shares and the CWC ADSs is given in Part II, pages 65 to 74 of CWC's Offers to
Purchase/Prospectus which is enclosed with this document. Financial information
relating to CWC is also set out in the Offers to Purchase/Prospectus. In
relation to CWC Ordinary Shares issued in certificated form, temporary documents
of title will not be issued pending the dispatch by post of definitive
certificates for such CWC Ordinary Shares in accordance with the terms of the
Offers set out in Part I, pages 11, 12 and 25 of the Offers to
Purchase/Prospectus.
Fractions of CWC Ordinary Shares will not be allotted to holders of Shares
who accept the Offers but will be aggregated and sold in the market and net
proceeds of sale distributed pro rata to such holders. However, individual
entitlements to amounts less than L3.00 will not be paid, but will be retained
for the benefit of CWC. CWC has disclosed that it will not have any liability to
any person for any loss or alleged loss arising from the price, timing or manner
of any such sale.
Details of the delivery of CWC Ordinary Shares or CWC ADSs issued as
consideration for Shares are set forth in Part I, pages 25 to 26 of the Offers
to Purchase/Prospectus. The CWC Ordinary Shares may be held in uncertificated
form, provided that CWC may (if for any reason it wishes to do so) determine
that all or any such CWC Ordinary Shares shall be issued in certificated form.
Share certificates and/or other documents of title should be forwarded with
the applicable acceptance forms. If any Shares are not purchased because of an
invalid acceptance, the termination of the Offers due to the occurrence of any
event set out in the conditions to the Offers set out in Part I, pages 3 to 11
of the Offers to Purchase/Prospectus, or otherwise, the certificates evidencing
such Shares and any other documents of title, if any, will be returned under the
terms set out in Part I, page 26.
Fractions of CWC ADSs will not be issued to holders of Shares who accept the
Offers and elect to receive CWC ADSs. Instead, whole CWC Ordinary Shares
underlying such fractions of CWC ADSs will be allotted to holders entitled
thereto, with any fractions of CWC Ordinary Shares being dealt with as described
above.
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The formal Offers are set out in the Offers to Purchase/Prospectus, together
with related documents to be used for tendering your Shares and accepting the
Offers. The documents set forth the terms and conditions of the Offers and
provide instructions as to how to tender your Shares if you decide to accept the
Offers. We urge you to read the enclosed documents carefully before making your
decision with respect to tendering your Shares and accepting the Offers.
The Offers are conditional upon the concurrent offer (the "BCM Offer") by
CWC for Bell Cablemedia plc ("BCM") becoming or being declared unconditional in
all respects and certain other conditions set forth in the Offers to
Purchase/Prospectus, including a minimum acceptance condition of 90 per cent. of
the Shares (or such lesser percentage as CWC may decide). The
Solicitation/Recommendation Statement on Schedule 14D-9 of BCM states that the
offer committee of the board of directors of BCM has unanimously determined that
the terms of the BCM Offer are fair and reasonable and unanimously recommends
that the holders of ordinary shares and american depositary shares representing
such ordinary shares of BCM (the "BCM Securities") accept the BCM Offer and
tender all BCM Securities pursuant to the BCM Offer.
NYNEX CABLECOMMS OPTION SCHEMES
The Offers will extend to any Shares which are unconditionally allotted or
issued (including those represented by ADSs), while the Offers remain open for
acceptance (or such shorter period as CWC may, subject to the City Code on
Takeovers and Mergers of the U.K., determine) upon the exercise of options
granted under the NYNEX CableComms Limited Revenue Approved Employee Share
Option Plan and the NYNEX CableComms Limited Savings-Related Share Option Plan
(together, the "NYNEX CableComms Option Schemes") or otherwise. The Offers will
also extend to any ADSs which are issued while the Offers remain open for
acceptance. CWC has disclosed that appropriate proposals will be made to
participants in the NYNEX CableComms Option Schemes, in due course, once the
Offers become or are declared unconditional. To the extent that the options are
not exercised, and in the event that the Offers become or are declared
unconditional, CWC has disclosed its intention to offer to participants in the
NYNEX CableComms Option Schemes the opportunity to exchange outstanding options
for options over CWC Ordinary Shares of an equivalent value.
TAXATION
Your attention is drawn to the section "Tax Considerations" on pages 55 to
59 of Part I of the Offers to Purchase/Prospectus. If you are in any doubt as to
your own tax position, you should consult your independent tax advisor.
OTHER ACTION TO BE TAKEN
The Offers to Purchase/Prospectus states that if CWC acquires or contracts
to acquire in excess of 90% of the Shares under the Offers, it is the intention
of CWC to acquire any remaining outstanding Shares in both NYNEX CableComms
Group PLC and NYNEX CableComms Group Inc. In order for CWC to acquire such
remaining shares, it will be necessary for such remaining shares in the two
companies, which currently trade as a Unit, to be "de-stapled". Thereafter, CWC
intends to become the sole beneficial owner of all the NYNEX CableComms UK
Ordinary Shares by means of a compulsory acquisition under U.K. law and of all
the NYNEX CableComms US Shares of Common Stock by means of a merger of a newly
incorporated acquisition subsidiary into NYNEX CableComms Group Inc. (the
"Merger") under Delaware law, each as further described in the Offers to
Purchase/Prospectus. You have, therefore, been sent a Notice of Meetings for an
Extraordinary General Meeting of NYNEX CableComms Group PLC and a Special
Meeting of NYNEX CableComms Group Inc., as well as a Proxy Statement and
accompanying voting instruction cards, for voting in respect of resolutions to
give conditional effect to the de-stapling of the Units and to give conditional
approval to the Merger. The meetings are currently scheduled to convene on April
24, 1997.
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ADVICE OF THE OFFER COMMITTEES' INDEPENDENT FINANCIAL ADVISORS
The Offer Committees have retained SBC Warburg to render financial advice as
to the fairness of the Offers to the Public Shareholders from a financial point
of view. SBC Warburg has advised the Offer Committees that in its opinion as
investment bankers the consideration to be received by the Public Shareholders
of NYNEX CableComms Group PLC and NYNEX CableComms Group Inc. under the Offers
is fair, from a financial point of view, to the Public Shareholders.
The full text of SBC Warburg's opinion accompanies the enclosed Schedule
14D-9 and the above summary is qualified by the contents of the opinion itself.
SBC Warburg has given and not withdrawn its written consent to the issue of this
document with the inclusion of its name, opinion and references to it in the
formal context in which they are included.
RECOMMENDATION
- The Offer Committees have determined that the Offers are fair to, and in
the best interests of, the Public Shareholders of NYNEX CableComms. The
Offer Committees recommend that the Public Shareholders accept the Offers
and tender their Shares pursuant to the Offers.
- In addition, your Boards of Directors, having taken into account the
unanimous recommendation of the Offer Committees in relation to the Offers
and their unanimous recommendation to approve the resolutions in respect
of the de-stapling of the Units and the Merger, recommend that (i) holders
of Shares vote in favor of the resolutions set forth in the Proxy
Statement to approve the de-stapling of the Units and (ii) holders of
NYNEX CableComms US Shares of Common Stock vote in favor of the
resolutions approving the Merger.
YOURS SINCERELY,
John L. Rennocks,
Chairman of the
Offer Committees
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Not for release, publication, or distribution in whole or in part in or into
Canada, Australia or Japan.
24 March 1997
NYNEX CABLECOMMS GROUP PLC/NYNEX CABLECOMMS GROUP INC.
("NYNEX CABLECOMMS" OR THE "COMPANIES")
RECOMMENDED OFFERS BY CABLE & WIRELESS COMMUNICATIONS PLC ("CWC")
The Boards of NYNEX CableComms draw the attention of shareholders to the
announcement today by CWC of recommended offers ("the Offers") to be made for
the Companies. The independent Offer Committees of the Boards of Directors of
NYNEX CableComms (together, the "Offer Committees") have determined that the
Offers are fair to, and in the best interests of, the public shareholders of
NYNEX CableComms and have recommended that the public shareholders accept the
Offers and tender their shares pursuant to the Offers.
Full details of the Offers are contained in CWC's Offers to
Purchase/Prospectus dated 21 March 1997, which will be sent to shareholders
shortly. The recommendations of the independent Offer Committees, and the basis
for them, are contained in NYNEX CableComms' Solicitation/Recommendation
Statement on Schedule 14D-9 filed under the U.S. Securities Exchange Act of
1934, which will be sent to shareholders shortly. SBC Warburg, a division of
Swiss Bank Corporation, is acting as adviser to the independent Offer
Committees.
John F. Killian, President and Chief Executive Office of NYNEX CableComms,
said: "The Offers represent the culmination of much hard work by the many
parties concerned, including the employees of NYNEX CableComms. I congratulate
those involved on their contribution. The merger with Mercury Communications and
Bell Cablemedia within CWC represents a major milestone for NYNEX CableComms and
in the development of the cable industry in the U.K.."
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<S> <C> <C>
Enquiries:
NYNEX CableComms Graham Robertson 0181 873 2000
Allen Saunders
SBC Warburg Aidan Clegg 0171 606 1066
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Issued by NYNEX CableComms Group PLC and NYNEX CableComms Group Inc. whose
directors accept responsibility for the information contained herein. To the
best of the knowledge and belief of such directors (who have taken reasonable
care to ensure such is the case) such information is in accordance with the
facts and does not omit any information likely to affect its import.
The foregoing statements of responsibility are included solely to comply
with the City Code on Takeovers and Mergers and shall not be deemed to establish
or expand or limit liability under the U.S. securities laws or under the laws of
any state of the U.S.
SBC Warburg, a division of Swiss Bank Corporation, which is regulated in the
United Kingdom by the Securities and Futures Authority Limited, is acting as
financial adviser to the independent Offer Committees and no one else in
connection with the Offers and will not be responsible (under U.K. law) to
anyone other than the independent Offer Committees for providing the protections
afforded to its customers or for providing advice in relation to the Offers.
