-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Dy20TurZ8sP/zaa5TBPWWhl/oy60VFtlyx6P038m68Ev2VY9b/PTKY/QxJ2FWI1t Uj1iPRt1QwhJ4ZZEsk6fkw== 0000950123-98-008981.txt : 19981015 0000950123-98-008981.hdr.sgml : 19981015 ACCESSION NUMBER: 0000950123-98-008981 CONFORMED SUBMISSION TYPE: S-3/A PUBLIC DOCUMENT COUNT: 9 FILED AS OF DATE: 19981014 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: NTL INC /DE/ CENTRAL INDEX KEY: 0000906347 STANDARD INDUSTRIAL CLASSIFICATION: CABLE & OTHER PAY TELEVISION SERVICES [4841] IRS NUMBER: 521822078 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-3/A SEC ACT: SEC FILE NUMBER: 333-63615 FILM NUMBER: 98725400 BUSINESS ADDRESS: STREET 1: 110 E 59TH ST STREET 2: 26TH FLOOR CITY: NEW YORK STATE: NY ZIP: 10022 BUSINESS PHONE: 2129068440 MAIL ADDRESS: STREET 1: 110 EAST 59TH STREET STREET 2: 26TH FLOOR CITY: NEW YORK STATE: NY ZIP: 10022 FORMER COMPANY: FORMER CONFORMED NAME: INTERNATIONAL CABLETEL INC DATE OF NAME CHANGE: 19930601 S-3/A 1 AMENDED FORM S-3 1 AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON OCTOBER 14, 1998 REGISTRATION NO. 333-63615 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION WASHINGTON, DC 20549 ------------------------ AMENDMENT NO. 2 TO FORM S-3 REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 ------------------------ NTL INCORPORATED (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER) DELAWARE 4899 52-1822078 (STATE OR OTHER JURISDICTION OF (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NUMBER)
110 EAST 59TH STREET NEW YORK, NEW YORK 10022 (212) 906-8440 (ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OR REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES) ------------------------ RICHARD J. LUBASCH, ESQ. SENIOR VICE PRESIDENT, GENERAL COUNSEL AND SECRETARY, NTL INCORPORATED 110 EAST 59TH STREET NEW YORK, NEW YORK 10022 (212) 906-8440 (NAME, ADDRESS INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF AGENT FOR SERVICE) ------------------------ COPY TO: THOMAS H. KENNEDY, ESQ. SKADDEN, ARPS, SLATE, MEAGHER & FLOM LLP 919 THIRD AVENUE NEW YORK, NEW YORK 10022 (212) 735-3000 ------------------------ APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as practicable after the Registration Statement becomes effective. If the only securities being registered on this form are being offered pursuant to dividend or interest reinvestment plans, please check the following box. [ ] If any of the securities being registered on this form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, other than securities offered only in connection with dividend or interest reinvestment plans, check the following box. [X] If this form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, please check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. [ ] If this form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. [ ] If delivery of the prospectus is expected to be made pursuant to Rule 434, please check the following box. [ ] ------------------------ CALCULATION OF REGISTRATION FEE
- --------------------------------------------------------------------------------------------------------------------------- - --------------------------------------------------------------------------------------------------------------------------- PROPOSED AMOUNT PROPOSED MAXIMUM AMOUNT OF TITLE OF EACH CLASS OF TO BE MAXIMUM AGGREGATE REGISTRATION SECURITIES TO BE REGISTERED REGISTERED OFFERING PRICE OFFERING PRICE FEE - --------------------------------------------------------------------------------------------------------------------------- Common Stock Purchase Warrants................ 1,641,414 Warrants $13.16 $21,601,008 $6,372.29(2) - --------------------------------------------------------------------------------------------------------------------------- Common Stock, par value $0.01 per share (including the associated Rights to purchase Series A Junior Participating Preferred Stock)...................................... 1,641,414 Shares(1) $43.00 $70,580,802(3) $20,821.33(4) - --------------------------------------------------------------------------------------------------------------------------- - ---------------------------------------------------------------------------------------------------------------------------
(1) Such number represents the number of shares of Common Stock as are initially issuable upon exercise of the Warrants registered hereby and, pursuant to Rule 416 under the Securities Act of 1933, such indeterminate number of shares of Common Stock as may be issued from time to time upon exercise of the Warrants by reason of adjustment of the exercise price in certain contingencies outlined in the Prospectus. (2) This amount was previously paid. (3) Determined pursuant to Rule 457(c) based on the average of the high and low prices on the Nasdaq Stock Market's National Market on September 30, 1998. (4) This amount was previously paid. THE REGISTRANT AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a), MAY DETERMINE. - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- 2 NTL INCORPORATED FORM S-3 CROSS-REFERENCE SHEET
ITEM NUMBER AND CAPTION HEADING IN PROSPECTUS - ----------------------- --------------------- 1. Forepart of the Registration Statement and Outside Front Cover of Prospectus........ Registration Statement Cover; Outside Front Cover Page of Prospectus 2. Inside Front and Outside Back Cover Pages of Prospectus............................ Inside Front and Outside Back Cover Pages of Prospectus; Available Information 3. Summary Information; Risk Factors and Ratio of Earnings to Fixed Charges............. Prospectus Summary; Risk Factors; Selected Consolidated Financial Information 4. Use of Proceeds............................ Use of Proceeds 5. Determination of Offering Price............ Determination of Offering Price 6. Dilution................................... Dilution 7. Selling Security Holders................... * 8. Plan of Distribution....................... Registration Statement Cover Page; Plan of Distribution 9. Description of Securities to be Registered................................. Outside Front Cover Page of Prospectus; Description of Warrants, Description of Capital Stock; Certain U.S. Federal Income Tax Considerations 10. Interests of Named Experts and Counsel..... Legal Matters; Experts 11. Material Changes........................... Prospectus Summary; Management's Discussion and Analysis of Results of Operations and Financial Condition; Business 12. Incorporation of Certain Information by Reference................. Available Information; Incorporation of Certain Documents by Reference 13. Disclosure of Commission Position on Indemnification for Securities Act Liabilities.............................. *
- --------------- * Omitted as inapplicable. i 3 PROSPECTUS 1,641,414 WARRANTS TO PURCHASE ONE SHARE OF COMMON STOCK OF NTL INCORPORATED The Prospectus relates to a maximum of 1,641,414 warrants (the "Warrants"), each of which entitle the holder to purchase one share of Common Stock, par value $.01 per share (the "Common Stock"), of NTL Incorporated, a Delaware corporation (the "Company"), offered hereby and the Common Stock issuable upon exercise of the Warrants. The Warrants are being offered to each registered holder of the Company's 12 3/4% Series A Senior Deferred Coupon Notes Due 2005, 11 1/2% Series B Deferred Coupon Notes Due 2006 and 10% Series B Senior Notes Due 2007 (collectively, the "Notes") at the close of business on September 8, 1998 whose properly executed consent to certain amendments (the "Proposed Amendments") to the indentures governing the Notes (the "Indentures") is received in accordance with the terms of a consent solicitation (the "Consent Solicitation") of such holders set forth in consent solicitation statements of the Company dated September 17, 1998, as amended (the "Solicitation Statements"), and who has elected in that consent to apply the cash consent payment payable by the Company pursuant to the terms of the Consent Solicitation in respect of that consent to purchase the Warrants. Issuance of the Warrants is conditional on (i) receipt by the Company of the Requisite Consents (as defined) and the Proposed Amendments being made effective by the execution and delivery of certain supplemental indentures (the "Supplemental Indentures") between the Company and The Chase Manhattan Bank (formerly known as Chemical Bank), as trustee under the Indentures; and (ii) the Registration Statement of which this Prospectus is a part being effective under the Securities Act of 1933, as amended (the "Act"), and no stop order suspending the effectiveness of the Registration Statement having been issued by the Securities and Exchange Commission (the "Commission"). Each Warrant will entitle the holder to purchase one share of Common Stock at a price per share equal to the "current market price per share of Common Stock", determined in accordance with the terms of the Warrant Agreement, on the date of original issuance of the Warrant, subject to adjustment under certain circumstances. The Warrants will entitle the holders thereof to purchase in the aggregate up to 1,641,414 shares of Common Stock, representing 4.0% of the outstanding Common Stock and 2.5% of the Common Stock on a fully diluted basis as of the date of the issuance of the Warrants. The Warrants will expire on the tenth anniversary of the respective date of original issuance of the Warrants). The exercise of the Warrants will be subject to compliance with applicable federal and state securities laws. See "Description of the Warrants." The Common Stock is traded on The Nasdaq Stock Market's National Market (the "NASDAQ") under the symbol "NTLI." Based on the closing stock price on October 12, 1998 of $38.00, the total market value of the Common Stock was approximately $1.57 billion. There is no public market for the Warrants and the Company does not intend to apply for listing of the Warrants on any securities exchange or seek the inclusion thereof on the NASDAQ. SEE "RISK FACTORS" BEGINNING ON PAGE 7 FOR A DISCUSSION OF CERTAIN INFORMATION THAT SHOULD BE CONSIDERED BY PROSPECTIVE INVESTORS. ------------------------ THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. THE DATE OF THIS PROSPECTUS IS OCTOBER 14, 1998 4 AVAILABLE INFORMATION The Company is currently subject to the informational requirements of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance therewith files reports, proxy statements, information statements and other information with the Commission. Any reports, proxy statements, information statements and other information filed by the Company, with the Commission may be inspected and copied at the public reference facilities maintained by the SEC at Room 1024, Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549 and will also be available for inspection and copying at the regional offices of the Commission located at 7 World Trade Center, Suite 1300, New York, New York 10048 and at Citicorp Building, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661. Copies of such material may also be obtained from the Public Reference Section of the Commission at 450 Fifth Street, N.W., Washington, D.C. 20549 at prescribed rates. The Commission also maintains a World Wide Web site at http://www.sec.gov which contains reports, proxy and information statements and other information regarding registrants that file electronically with the Commission. In addition, materials filed by NTL with the NASDAQ may be inspected at the offices of the NASDAQ at 1735 K Street, N.W., Washington, D.C. 20006. The Company has filed with the Commission a Registration Statement, of which this Prospectus is a part, on Form S-3 (herein together with all amendments and exhibits thereto, called the "Registration Statement") under the Securities Act with respect to the Warrants being offered by this Prospectus and the Common Stock issuable upon exercise of the Warrants. This Prospectus does not contain all the information set forth in the Registration Statement and the exhibits and schedules thereto, certain portions of which have been omitted as permitted by the rules and regulations of the Commission. For further information with respect to the Company and the securities offered by this Prospectus, reference is made to the Registration Statement and the exhibits filed or incorporated as a part thereof, which are on file at the offices of the Commission and may be obtained upon payment of the fee prescribed by the Commission, or may be examined without charge at the offices of the Commission. Statements contained in this Prospectus as to the contents of any documents referred to are not necessarily complete, and, in each such instance, are qualified in all respects by reference to the applicable documents filed with the Commission. ------------------------ INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE The following documents filed by the Company with the Commission are hereby incorporated by reference into this Prospectus: (a) The Company's Annual Report on Form 10-K for the year ended December 31, 1997, dated March 30, 1998; (b) The Company's Quarterly Reports on Form 10-Q for the quarter ended March 31, 1998, dated May 14, 1998, and the quarter ended June 30, 1998, dated August 14, 1998; (c) The Company's Current Reports on Form 8-K, dated February 5, 1998, March 6, 1998, March 18, 1998, May 29, 1998, June 16, 1998, August 14, 1998 and October 5, 1998. (d) The Company's Registration Statement on Form S-4 (Registration Statement 333-64727), dated September 30, 1998. All documents subsequently filed by the Company pursuant to Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act prior to the termination of the offering of securities hereunder, shall be deemed to be incorporated by reference in this Prospectus and to be a part of this Prospectus from the date of the filing thereof. Any statement contained in a document incorporated or deemed to be incorporated by reference herein shall be deemed to be modified or superseded for purposes of this Prospectus to the extent that a statement contained herein or in any other subsequently filed document which also is or is deemed to be incorporated by reference herein modifies or supersedes such statement. Any such statement so modified or superseded shall not be deemed, except as so modified or superseded, to constitute a part of this Prospectus. The Company hereby undertakes to provide without charge to each person to whom a copy of this Prospectus has been delivered, on the written or oral request of any such person, a copy of any or all of the 2 5 documents referred to above which have been or may be incorporated in this Prospectus by reference (other than certain exhibits). Requests for such copies should be directed to: NTL Incorporated, 110 East 59th Street, New York, New York 10022, Attention: Richard J. Lubasch, Esq., telephone (212) 906-8440. ------------------------ ENFORCEABILITY OF CIVIL LIABILITIES A substantial portion of the assets of the Company's subsidiaries are located in the United Kingdom. As a result, it may not be possible for investors to realize in the United States upon judgments of courts of the United States predicated upon the civil liability under the federal securities laws of the United States. The United States and England do not currently have a treaty providing for the reciprocal recognition and enforcement of judgments (other than arbitration awards) in civil and commercial matters. Therefore, a final judgment for the payment of a fixed debt or sum of money rendered by any United States court based on civil liability, whether or not predicated solely upon the United States federal securities laws, would not automatically be enforceable in England. In order to enforce in England a United States judgment, proceedings must be initiated by way of common law action before a court of competent jurisdiction in England. An English court will, subject to what is said below, normally order summary judgment on the basis that there is no defense to the claim for payment and will not reinvestigate the merits of the original dispute. In such an action, an English court will treat the United States judgment as creating a valid debt upon which the judgment creditor could bring an action for payment, as long as (i) the United States court had jurisdiction over the original proceeding, (ii) the judgment is final and conclusive on the merits, (iii) the judgment does not contravene English public policy, (iv) the judgment must not be for a tax, penalty or a judgment arrived at by doubling, trebling or otherwise multiplying a sum assessed as compensation for the loss or damage sustained and (v) the judgment has not been obtained by fraud or in breach of the principles of natural justice. Based on the foregoing, there can be no assurance that investors will be able to enforce in England judgments in civil and commercial matters obtained in any United States court. There is doubt as to whether an English court would impose civil liability in an original action predicated solely upon the United States federal securities laws brought in a court of competent jurisdiction in England. 3 6 PROSPECTUS SUMMARY The following summary is qualified in its entirety by the more detailed information and financial statements appearing elsewhere in this Prospectus or incorporated by reference in this Prospectus. Prospective investors should carefully consider the factors set forth under the caption "Risk Factors." Capitalized terms not defined in this Summary have the meanings given them elsewhere in this Prospectus. THE CONSENT SOLICITATION Pursuant to the terms and conditions of (i) a Consent Solicitation Statement of the Company dated September 17, 1998 (the "12 3/4% Notes Solicitation Statement") relating to its 12 3/4% Series A Senior Deferred Coupon Notes Due 2005 (the "12 3/4% Notes"), (ii) a Consent Solicitation of the Company dated September 17, 1998 (the "11 1/2% Solicitation Statement") relating to the 11 1/2% Series B Senior Deferred Coupon Notes Due 2006 (the "11 1/2% Notes") and (iii) a Consent Solicitation Statement of the Company dated September 17, 1998 (the "10% Notes Solicitation Statement", and together with the 12 3/4% Solicitation Statement and the 11 1/2% Solicitation Statement, the "Solicitation Statements") relating to the 10% Series B Senior Notes Due 2007 (the "10% Notes", and together with the 12 3/4% Notes and the 11 1/2% Notes, the "Notes"), the Company is soliciting (the "Consent Solicitation") the consents (the "Consents") of registered holders of the Notes to certain proposed amendments (the "Proposed Amendments") to the indenture governing the 12 3/4% Notes, dated as of April 20, 1995, as amended by a First Supplemental Indenture, dated as of January 22, 1996 (the "12 3/4% Indenture"), between the Company and The Chase Manhattan Bank (formerly known as Chemical Bank) ("Chase"), as trustee (the "Trustee"), the indenture governing the 11 1/2% Notes, dated January 30, 1996 (the "11 1/2% Indenture"), between the Company and the Trustee, and the indenture governing the 10% Notes, dated February 12, 1997, between the Company and the Trustee (the "10% Indenture" and, together with the 12 3/4% Indenture and the 11 1/2% Indenture, the "Indentures"). In general, the Proposed Amendments would permit the acquisition of Comcast UK Cable Partners Limited ("Comcast UK") and Diamond Cable Communications plc ("Diamond") using equity of the Company, permit the Company to obtain more favorable terms under its Credit Facility and allow for the creation of Unrestricted Subsidiaries. The Proposed Amendments will also make certain conforming and other changes to the Indentures. The purpose and effect of the Consent Solicitation and the Proposed Amendments are more fully described in the Solicitation Statements. If the Proposed Amendments are effected, the Company will make a payment (a "Consent Payment") to each registered holder of Notes (the "Registered Holders") as of the close of business on September 8, 1998 (the "Record Date"), whose properly completed and executed Consent is received prior to the Expiration Date (as defined below) and not revoked by following the procedure for revoking Consents described in the Solicitation Statements. The Consent Payment will be $12.50 in cash for each $1,000 in principal amount at maturity of Notes with respect to which a Consent to the Proposed Amendments is received and not revoked as aforesaid. Each Registered Holder who so consents is given the option to elect, on the form of Consent, to apply the Consent Payment to purchase a 0.95 Warrant for each $1,000 in principal amount at maturity of Notes with respect to which a Consent to the Proposed Amendments is received and not revoked as aforesaid. The Warrants are being offered pursuant to, upon the terms and subject to the conditions set forth in, this Prospectus. The Consent Payment and the Warrants are collectively referred to herein as the "Consent Consideration." 4 7 THE COMPANY'S OBLIGATION TO PAY THE CONSENT CONSIDERATION IS CONTINGENT UPON (I) RECEIPT OF THE VALID AND UNREVOKED CONSENT OF THE REGISTERED HOLDERS OF AT LEAST A MAJORITY IN AGGREGATE PRINCIPAL AMOUNT AT MATURITY OF THE NOTES OUTSTANDING ON THE RECORD DATE (THE "REQUISITE CONSENTS") AND THE EXECUTION AND DELIVERY OF THE CERTAIN SUPPLEMENTAL INDENTURES CONTAINING THE PROPOSED AMENDMENTS OR THE PROPOSED AMENDMENTS AS MODIFIED IN ACCORDANCE WITH THE PROCEDURES DESCRIBED IN THE SOLICITATION STATEMENTS AND (II) IN THE CASE OF THE ISSUANCE OF THE WARRANTS, THE REGISTRATION STATEMENT OF WHICH THIS PROSPECTUS IS A PART REMAINING EFFECTIVE UNDER THE ACT AND NO STOP ORDER SUSPENDING OR WITHDRAWING THE EFFECTIVENESS OF THE REGISTRATION STATEMENT HAVING BEEN ISSUED BY THE COMMISSION. Consents will not be effective unless completed in accordance with the instructions set forth therein and returned to the Trustee in accordance with the Solicitation Statements no later than 5:00 P.M., New York City time, on October 13, 1998, unless extended (the "Expiration Date"). UNDER THE TERMS OF THE CONSENT SOLICITATION, HOLDERS WHO DO NOT DELIVER A PROPERLY COMPLETED CONSENT ON OR PRIOR TO THE EXPIRATION DATE WILL NOT BE ENTITLED TO RECEIVE ANY CONSENT CONSIDERATION, BUT WILL BE BOUND BY THE PROPOSED AMENDMENTS IF THEY BECOME EFFECTIVE. 5 8 THE OFFERING Securities Offered............ Warrants to purchase one share of the Company's Common Stock, par value $.01 per share (the "Common Stock"), issued pursuant and subject to a warrant agreement (the "Warrant Agreement") to be entered into by the Company and Chase as Warrant Agent, and shares of Common Stock issuable upon exercise of such Warrants. See "Description of Warrants". Number of Warrants and Shares........................ 1,641,414 Warrants to purchase an aggregate of 1,641,414 shares of Common Stock, representing approximately 2.5% of Common Stock on a fully diluted basis as of the time of the closing of the offering. Warrant Offering Price........ $13.16 per Warrant. Payment of the offering price shall be made by application of the Consent Payment. Warrant Exercise Price........ Each Warrant will entitle the holder thereof to purchase one share of Common Stock (collectively, the "Warrant Shares") at a price per share equal to the Current Market Price of such shares, determined in accordance with the terms of the Warrant Agreement, on the date of issuance of the Warrants, subject to adjustment under certain circumstances (the "Exercise Price"). The "Current Market Price," determined in accordance with the Warrant Agreement, shall be the average of the Quoted Prices of the Common Stock for 30 consecutive trading days commencing 45 trading days before the date of issuance of the Warrant. The "Quoted Price" of the Common Stock is the last reported sales price of the Common Stock as reported by the NASDAQ. Payment of the Exercise Price may be made in the form of cash or by certified or official bank check payable to the order of the Company. Cashless Exercise............. In lieu of the payment of the Exercise Price as aforesaid, the holder of a Warrant may upon exercise request the payment by the Company of "Spread", which shall be delivered by the Company to such holder by delivery of Common Stock with an aggregate current market price (as of the date of receipt of the request by the Company) equal to the difference between the current market price of per share of Common Stock less the Exercise Price multiplied by the number of Warrants being exercised for "Spread". Exercise Period............... The Warrants will be exercisable at any time on or after the date of their issuance and prior to 5:00 p.m., New York City time, on the date that is the tenth anniversary of the date of issuance of the Warrants. The exercise of the Warrants also will be subject to applicable federal and state securities laws. See "Description of Warrants." Use of Proceeds............... The proceeds to be received by the Company from the issuance and sale of the Warrants will reduce the amount of cash which would otherwise be used to fund the Consent Payment. The net proceeds from the receipt of the Exercise Price on exercise of the Warrants will be used to finance the construction and working capital requirements of the Company's residential cable television and residential and business cable/telephone or telecommunications services and other general corporate purposes. RISK FACTORS Prospective purchasers of the Warrants should consider carefully all of the information set forth in this Prospectus and, in particular, should evaluate the matters set forth under "Risk Factors" for risks involved with an investment in the Warrants and the Warrant Shares. 6 9 RISK FACTORS Prospective investors should consider carefully all of the information set forth in this Prospectus and, in particular, should evaluate the following risks before deciding whether or not to elect to apply the Consent Payment to which they may be entitled under the Consent Solicitations to purchase Warrants or to exercise the Warrants. ADVERSE CONSEQUENCES OF LEVERAGE The Company is and, for the foreseeable future will continue to be, highly leveraged. At June 30, 1998, the accrued value of the Company's total long-term indebtedness (including the Company's 13% Senior Redeemable Exchangeable Preferred Stock (the "13% Preferred")) was approximately $3.1 billion, representing approximately 104% of total capitalization. In connection with the Company's acquisition of certain assets of Vision Networks, the Company borrowed L275 million in June 1998 from Chase under an eight-year term loan facility, dated October 17, 1997 (the "New Credit Facility"), as amended, between Chase and NTL (UK) Group, Inc., and the Company borrowed an additional L200 million under the New Credit Facility to complete such acquisition. The indentures governing the existing indebtedness of the Company permit the Company and its subsidiaries to incur substantial indebtedness. The ability of the Company and its subsidiaries to make scheduled payments under present and future indebtedness will depend upon, among other things, the Company's and its subsidiaries' ability to complete the build-out of the franchises on a timely and cost effective basis, the Company's ability to access the earnings of its subsidiaries (which may be subject to significant contractual and legal limitations), the future operating performance of the Company and its subsidiaries and the Company's ability to refinance its indebtedness when necessary. Each of these factors is to a large extent subject to economic, financial, competitive, regulatory and other factors that are beyond the Company's and its subsidiaries' control. See "-- Network Construction Costs; Need for Additional Financing," "-- Holding Company Structure; Dependence Upon Cash Flow from Subsidiaries" and "-- Uncertainty of Construction Progress and Costs." The New Credit Facility contains, and future agreements and debt instruments may contain, various covenants which, among other things, require the Company to maintain certain financial ratios, restrict or prohibit the payment of dividends and other distributions to the Company by its subsidiaries, restrict asset sales and dictate the use of proceeds from the sale of assets. Although the Company believes that it and its subsidiaries are in compliance with their respective covenants and restrictions, continued compliance with these restrictions, in combination with the leveraged nature of the Company, could limit the ability of the Company to respond to market conditions or meet extraordinary capital needs or otherwise could restrict corporate activities and the ability of certain subsidiaries of the Company to make payments to the Company which might otherwise fund the Company's obligations as they fall due. See "-- Holding Company Structure; Dependence Upon Cash Flow from Subsidiaries." There can be no assurance that such restrictions will not adversely affect the Company's ability to finance its future operations or capital needs, to service and repay indebtedness or to engage in other business activities, such as acquisitions, which may be in the interest of the Company. The acquisition of Comcast UK will result in a change of control under the L200 million bank facility of Comcast UK Holdings Limited, a wholly-owned subsidiary of Comcast UK (the "Comcast UK Facility"). Upon a change of control, all amounts outstanding under the Comcast UK Facility will become immediately due and payable. At June 30, 1998, there was L86 million outstanding under the Comcast UK Facility. Although Comcast UK had substantial cash reserves of L92.3 million at June 30, 1998, there can be no assurance that such funds will be available to repay the Comcast UK Facility or that the Company will be able to refinance the Comcast UK Facility. The degree to which the Company is leveraged could have important consequences to stockholders, including the following: (i) increasing the Company's vulnerability to adverse changes in general economic conditions or increases in prevailing interest rates; (ii) limiting the Company's ability to obtain additional financing for working capital, capital expenditures, acquisitions and general corporate purposes, including the build-out of the networks in the franchises and the development and expansion of the Company's business; 7 10 (iii) requiring a substantial portion of the Company's and its subsidiaries' cash flow from operations to be dedicated to debt service requirements, thereby reducing the funds available for dividends, operations and future business opportunities; and (iv) increasing the Company's and its subsidiaries' exposure to increases in interest rates given that certain of the Company's and its subsidiaries' borrowings may be at variable rates of interest. In addition, the Company may, in the event of a change of control or certain asset sales, be obligated to offer to repurchase its outstanding debt securities prior to maturity and there can be no assurance that the Company will have the financial resources necessary or otherwise be able to repurchase those securities in such circumstances. NETWORK CONSTRUCTION COSTS; NEED FOR ADDITIONAL FINANCING Following the completion of the acquisitions of Comcast UK and Diamond, the development, construction and operations of the combined telecommunications networks of the Company, will continue to require substantial capital. In addition, the Company will require significant amounts of capital to finance the other capital expenditures and the cost of operations of the Company, its subsidiaries and joint ventures and meet all other obligations as they fall due. The Company intends to fund a portion of the requirements referred to in this paragraph from cash, cash equivalents and marketable securities on hand, and funds internally generated by the operations of the Company's subsidiaries. However, the Company estimates that significant amounts of additional funding will be necessary to meet these requirements. There can be no assurance that (i) additional financing will be obtained or will be available on acceptable terms, (ii) actual construction costs will not exceed the amount estimated or that additional funding substantially in excess of the amounts estimated will not be required, (iii) conditions precedent to advances under future credit facilities will be satisfied when funds are required, (iv) the Company will not acquire additional businesses that would require additional capital, (v) the Company and its subsidiaries will be able to generate sufficient cash from operations to meet capital requirements, debt service and other obligations when required, (vi) the Company will be able to access such cash flow or (vii) the Company's subsidiaries will not incur losses from their exposure to exchange rate fluctuations or be adversely affected by interest rate fluctuations. The Company does not have any firm additional financing plans to address the foregoing at this time, except as described below. Pursuant to an amendment to the New Credit Facility, as amended, dated June 16, 1998, entered into as a result of the acquisition of certain assets of Vision Networks, Chase's commitment under the New Credit Facility has been reduced to the L475 million that the Company requires for the cash portion of the purchase price. The Company borrowed L275 million in June 1998 to complete the first stage of such acquisition. The Company also borrowed the remaining L200 million and issued L75 million in a new pay-in-kind Preferred Stock of the Company to complete the final stage of the such acquisition on September 22, 1998. Chase has committed to make available to the Company a L480 million senior secured credit facility upon the repayment in full of the L475 million Vision Networks acquisition facility and subject to the renegotiations of the New Credit Facility structure and pricing. The Company is required to repay the amount outstanding under the L475 million Vision Networks acquisition facility on January 31, 1999, which may be extended in certain circumstances to June 30, 1999. Management does not anticipate that the Company and its subsidiaries will generate sufficient cash flow from operations to repay at maturity the entire principal amount of the outstanding indebtedness of the Company and its subsidiaries. Accordingly, the Company will be required to consider a number of measures, including (i) refinancing all or a portion of such indebtedness, (ii) seeking modifications of the terms of such indebtedness, (iii) seeking additional debt financing, which would be subject to obtaining necessary lender consents, (iv) seeking additional equity financing or (v) a combination of the foregoing. The particular measures the Company may undertake and the ability of the Company to accomplish those measures will depend on the financial condition of the Company and its subsidiaries at the time, as well as a number of factors beyond the control of the Company and its subsidiaries, including prevailing economic and market conditions and financial, business and other factors. No assurance can be given that any of the foregoing measures can be accomplished, or can be accomplished in sufficient time to make timely payments with 8 11 respect to the Company's indebtedness. In addition, there can be no assurance that any such measures can be accomplished on terms which are favorable to the Company and its subsidiaries. The Company will continue to consider strategic acquisitions and combinations involving businesses operating, or owning licenses to operate, cable, telephone, television or telecommunications systems or services and related businesses principally in the UK, as attractive opportunities arise. The Company is currently involved in various stages of exploration, development and negotiation of certain transactions, some of which, if completed, would be significant and may involve the incurrence of substantial indebtedness or the raising of additional equity by the Company and its subsidiaries to finance such transactions. There can be no assurances that such transactions will occur. The indentures governing the existing indebtedness of the Company permit indebtedness to be incurred to finance acquisitions only if such acquisitions are acquisitions of either tangible or intangible assets, licenses and computer software used in connection with a Cable Business (as defined in such indentures) or certain entities, directly or indirectly engaged in a Cable Business if such entities meet certain qualifying criteria specified in such indentures. HOLDING COMPANY STRUCTURE; DEPENDENCE UPON CASH FLOW FROM SUBSIDIARIES The Company is a holding company that conducts its operations through its direct and indirect wholly-owned subsidiaries and affiliated joint ventures. Consequently, prior to and following the acquisitions of Comcast UK and Diamond, the Company will hold no significant assets other than its investments in and advances to its subsidiaries and affiliated joint ventures. The Company is, therefore, dependent upon its receipt of sufficient funds from its subsidiaries and affiliated joint ventures to meet its own obligations. The ability of the Company to benefit in the distribution of any assets of any of the Company's subsidiaries and affiliated joint ventures upon any liquidation of any such subsidiary or joint venture will be subject to the prior claims of the subsidiary's or joint venture's creditors, including trade creditors and, to the extent that such subsidiary or joint venture is not directly owned by the Company, to the prior claims of the creditors of any other persons directly or indirectly owning such subsidiary or joint venture. Each of the Company's subsidiaries that is a Delaware corporation may pay dividends, under the Delaware General Corporation Law (the "DGCL"), only out of its surplus, or, in the event that it has no surplus, out of its net profits for the fiscal year in which the dividend is declared or for the immediately preceding fiscal year. Each of the Company's subsidiaries that is a UK company is, under applicable UK law, prohibited from paying dividends unless such payments are made out of profits available for distribution ("distributable profits"), which consist of accumulated, realized profits, so far as not previously utilized by distribution or capitalization, less accumulated, realized losses, so far as not previously written off in a reduction or reorganization of capital duly made. Other statutory and general English law obligations also affect the ability of directors of the Company's subsidiaries to declare dividends and the ability of the Company's subsidiaries to make payments to the Company on account of intercompany loans. In addition, the UK may impose a withholding tax on payments of interest and advance corporation tax on distributions (of interest, dividends or otherwise) by UK subsidiaries of the Company. In addition, the terms of the New Credit Facility limit, and the terms of existing and future indebtedness of the Company's subsidiaries may limit, the payment of dividends, loans or other distributions to the Company. In the absence of a default, the New Credit Facility generally permits payments to the Company to pay the interest and principal of existing indebtedness of the Company. As of June 30, 1998, the total liabilities of the Company's subsidiaries was approximately $863 million. In light of the Company's strategy of continued growth, in part through acquisitions, the Company and its subsidiaries may incur substantial indebtedness in the future. Borrowings under the New Credit Facility and a substantial portion of the Company's and its subsidiaries' future indebtedness are expected to be secured by liens and other security interests over the assets of the Company's subsidiaries and the Company's equity interests in the Company's subsidiaries. In addition, the ability of the Company and, therefore, the stockholders of the Company, to benefit from distributions of assets of the Company's subsidiaries may be limited to the extent that the outstanding shares of any of its subsidiaries and such subsidiary's assets are pledged to secure other debt of the Company or its subsidiaries. Any right of the Company to receive assets of 9 12 any subsidiary upon such subsidiary's liquidation or reorganization will be structurally subordinated to the claims of that subsidiary's creditors, except to the extent that the Company is itself recognized as an unsubordinated creditor of such subsidiary. However, to the extent that the Company is so recognized, the claims of the Company would still be subject to any security interests in the assets of such subsidiary and any liabilities of such subsidiary senior to those held by the Company and may otherwise be challenged by third parties in a liquidation or reorganization proceeding. In addition, the New Credit Facility requires the Company to subordinate its right to repayment of indebtedness outstanding between it and the borrower under such agreement or any other subsidiary of the Company to the rights of the lenders under the agreement. In particular, the rights of the Company and other subsidiaries to repayment of principal and interest lent by them to the borrower or other subsidiaries under the New Credit Facility have been and will be subordinated to the rights of the lenders under the New Credit Facility pursuant to subordination agreements with such lenders. The principal fixed assets of the Company's subsidiaries are cable headends, cable television and telecommunications distribution equipment, telecommunications switches and customer equipment, transmission towers, masts and antennas and the sites on which they are located. The value of a substantial portion of these fixed assets is derived from their employment in the Company's and its subsidiaries' businesses. These assets are highly specialized and, taken individually, can be expected to have limited marketability. Consequently, in the event that secured creditors seek to realize on the collateral securing debt of the Company's subsidiaries, these creditors would be likely to seek to sell the business as a going concern (possibly through a sale of pledged shares of subsidiaries), either in its entirety, or by franchise or other business unit, in order to maximize the proceeds realized. OPERATING LOSSES The Company had net (loss) for the six months ended June 30, 1998 and 1997 and for the years ended December 31, 1997, 1996, 1995, 1994 and 1993 of $(198.0 million), $(173.4 million), $(333.1 million), $(254.5 million), $(90.8 million), $(29.6 million) and $(11.1 million), respectively. As of June 30, 1998, the Company's accumulated deficit was $915.0 million. The development of the business of the Company to date has resulted in significant expenditures, and the continued construction and expansion of each network will require considerable additional expenditures. Construction and operating expenditures have resulted in negative cash flow, which is expected to continue at least until an adequate customer base is established. The Company also expects to incur substantial additional operating losses, and there can be no assurance that the Company will achieve or sustain profitability in the future. Failure to become profitable could adversely affect the Company's ability to sustain operations and obtain additional required funds. See "-- Network Construction Costs; Need for Additional Financing." Moreover, such a failure would adversely affect the Company's ability to pay the required payments on its indebtedness and the 13% Preferred. See "-- Potential Adverse Consequences of Leverage," "-- Network Construction Costs; Need for Additional Financing" and "-- Holding Company Structure; Dependence Upon Cash Flow from Subsidiaries." REQUIREMENT TO MEET BUILD MILESTONES The telecommunications license for each franchise contains specific construction milestones. Under the terms of its current telecommunications licenses, by the end of 2005 the Company is required to construct cable television systems passing an aggregate of approximately 2,090,000 premises (residential and business). The Office of Telecommunications ("OFTEL") has the authority to modify the construction milestones in the licenses other than the Northern Ireland and Gwent and Glamorgan local delivery operator licenses (in respect of which the Independent Television Commission (the "ITC") is the relevant authority for modifying construction milestones). Based on current network construction, the Company believes that it will be able to satisfy its milestones in the future, but there can be no assurance that such milestones will be met. See "-- Network Construction Costs; Need for Additional Financing" and "-- Uncertainty of Construction Progress and Costs." 10 13 If the Company is unable to meet the construction milestones required by any of its licenses and is unable to obtain modifications to the milestones, the relevant license or licenses could be revoked, which would have a material adverse effect on the Company. UNCERTAINTY OF CONSTRUCTION PROGRESS AND COSTS At December 31, 1997, construction of the Company's network had passed in excess of 48% of its final regulatory milestone requirements for all its franchises. Successful construction and development of the combined network will depend on, among other things, the Company's ability to continue to design network routes, install facilities, obtain and maintain any required government licenses or approvals and finance construction and development, all in a timely manner, at reasonable costs and on satisfactory terms and conditions. The exact amounts and timing of all of these expenditures are subject to a variety of factors which may vary greatly by market and be beyond the control of the Company. Accordingly, there can be no assurance that the actual costs of network construction will not exceed the aggregate cost of network construction estimated under "-- Network Construction Costs; Need for Additional Financing" above or that additional funding substantially in excess of that amount will not be required. In building its network, the Company is generally required by its licenses to use underground construction, which is more expensive and time consuming than aerial construction. Mechanized construction methods often cannot be used to install network infrastructure in the Company's franchise areas due to existing underground utility infrastructure. In addition, the Company is responsible for restoring the surface area after its underground construction is completed. Although the Company has recently been able to negotiate construction contracts at rates which it believes are competitive relative to the cable industry as a whole, construction costs could increase significantly over the next few years as existing contracts expire and as demand for cable construction services grows due to anticipated increases in the cable industry's overall construction activity. Accordingly, there can be no assurance that the Company will be able to construct its network in a timely manner or at a reasonable cost. SIGNIFICANT COMPETITION The Company faces significant competition from established and new competitors in the areas of residential telephony, business telecoms services and cable television. The Company believes that competition will intensify in each of these business areas, particularly business telecommunications. Residential Telephony. The Company competes primarily with British Telecommunications plc ("BT") in providing telephone services to residential customers. BT, formerly the only major national public telephone operator ("PTO") in the UK, has an established market presence, fully built networks and resources substantially greater than those of NTL. According to OFTEL, at March 31, 1997, nearly 90% of UK residential telephone exchange line customers were customers of BT. The Company's growth in telecommunications services, therefore, depends upon its ability to convince BT's customers to switch to telecommunications services of the Company. The Company believes that value for money is currently one of the most important factors influencing the decision of UK customers to switch from BT to a cable telecommunications service. BT has, however, introduced price reductions in certain categories of calls and, due to regulatory price controls, BT will be making further reductions in its telecommunications prices. Accordingly, although the Company intends to remain competitive, in the future it may be unable to offer residential telephone services at rates lower than those offered by BT. In such case, the Company may experience a decline in its average per line residential telecommunications revenues, may not achieve desired penetration rates and may experience a decline in total revenues. There can be no assurance that any such decline in revenues or penetration rates will not adversely affect the Company. In addition to BT, other telecommunications competitors which may have substantially greater resources than those of the Company could prevent the Company from increasing its share of the residential telecommunications market. On February 8, 1996, the DTI announced the award of two licences to operate radio fixed access services in the 2 GHz band. These new licenses enable the two licensees, BT and RadioTEL Systems, to provide telecommunications services to customers living in defined remote rural areas mainly in Scotland, Wales and 11 14 Northern Ireland and create potential additional competition for the Company's residential telephony services in certain remote rural areas of the Company's Northern Ireland franchise. The Company also competes with mobile networks. This technology could grow to become a competitive threat to the Company's networks, particularly if call charges are reduced further on the mobile networks. The Company's Radio Communications group may enable the Company to benefit from the growth in this technology. There can be no assurance, however, that the Company will be able to compete successfully with BT or such other telecommunications operators. The Company believes that it has a competitive advantage in the residential market because of its ability to offer integrated telephone, CATV, telecommunications services (including interactive and on-line services) and dual product packages designed to encourage customers to subscribe to multiple services. However, there can be no assurance that this competitive advantage will continue. Indeed, the UK recently announced that BT and all other operators would be permitted to provide and convey CATV services throughout the UK from January 1, 2001. In addition, all areas currently unfranchised will be opened to general competition, rather than awarded as exclusive franchises, from now onwards. British Sky Broadcasting ("BSkyB") currently markets telecommunications services on an indirect access basis (which involves the customer dialing additional digits before the normal telephone number to divert calls onto another operator's network). In addition, it has proposed a joint venture with BT, Midland Bank and Matsushita, known as British Interactive Broadcasting ("BiB"), to enter the interactive digital services market. BiB is currently under review by the competition directorate of the European Commission. Given the respective market positions of BT and BSkyB, the Company believes that, if the two companies successfully combine their respective marketing strengths, the resulting combination would provide significant competition to cable operators including the Company. Business Telecommunications. BT is also the Company's principal competitor in providing business telecommunications services. In addition, the Company competes with C&WC, Energis Communications Limited, a subsidiary of the National Grid Company plc ("Energis"), Scottish Telecom in Scotland and with other companies that have been granted telecommunications licenses such as WorldCom and Colt and the new non-network based resellers, such as Citibell. In the future, the Company may compete with additional entrants to the business telecommunications market, such as AT&T U.K. Competition is based on price range and quality of services, and the Company expects price competition to intensify if C&WC, Energis and other new market entrants compete aggressively. Most of these competitors have substantial resources and there can be no assurance that these or other competitors will not expand their businesses in the Company's existing markets or that the Company will be able to continue to compete successfully with such competitors in the business telecommunications market. CATV. The Company's CATV systems compete with direct reception over-the-air broadcast television, direct-to-home ("DTH") satellite services and satellite master antenna systems. In addition, pay television and pay-per-view services offered by the Company compete to varying degrees with other communications and entertainment media, including home video, cinema exhibition of feature films, live theater and newly emerging multimedia services. On September 29, 1993, the ITC issued a statement pursuant to which it took the position (shared by OFTEL and DTI) that BT and the other national PTOs may provide "video-on-demand" services under their existing licenses. The Company expects that, in the future, it may face competition from programming provided by video-on-demand services, including those that may be provided by PTOs with national licenses, as well as (after 2001) from companies which seek to provide CATV services in the Company's franchises under the recently announced change of government policy. The Broadcasting Act 1996 provides for the regulation of digital terrestrial television ("DTT") that will initially provide an additional 18 or more new terrestrial channels serving between 60% and 90% of the UK's population. Some of the channels are reserved for digital simultaneous broadcasting by the existing terrestrial broadcasters. The introduction of DTT, as well as digital satellite television, will provide both additional programming sources as well as increased competition for the Company and its subsidiaries. There can be no 12 15 assurance that satisfactory (or any) terms of carriage will be obtained by the Company for digital satellite programs or channels. The full extent to which existing or future competitors using existing or developing media will compete with cable television systems may not be known for several years. There can be no assurance, however, that existing, proposed or as yet undeveloped technologies will not become dominant in the future and render cable television systems less profitable or even obsolete. Broadcast Services. In February 1997, the UK Government sold the Home Service and World Service transmission businesses of the British Broadcasting Corporation (the "BBC") to a consortium led by Castle Tower Corporation ("CTI"). There can be no assurance that the Company will not encounter significant competition from CTI (as successor to the BBC) for its transmission business from expiration of the Company's current contracts with the Independent Television ("ITV") contractors and Channel 4 and the Welsh Fourth Channel ("S4C"). LIMITED ACCESS TO PROGRAMMING The Company's ability to make competitive offerings of cable television services is dependent on their ability to obtain access to programming at a reasonable cost. While various sources of programming are available to cable system operators in the UK, BSkyB is currently the most important supplier of cable programming and the exclusive supplier of certain programming. BSkyB provides the industry with a range of programming, including the most popular mainstream premium movie channels available in the UK and, currently, exclusive English premier league soccer games. BSkyB also competes with the Company by operating a DTH satellite service that provides programming, including programming that is also offered by the Company, to approximately 4 million subscribers in the UK. BSkyB's programming is important in attracting and retaining cable television subscribers and, in the absence of more alternative programming sources, BSkyB may be able to set and raise prices for its programming without significant competitive pricing pressure. The Company, like many other cable operators, obtains most of its programming through arrangements with BSkyB and other programming suppliers which are not reflected in signed written agreements. To date, the Company has not had a formal contract with BSkyB, although it has been in discussions with BSkyB for some time. There can be no assurance that the Company will be able to enter into a definitive agreement with BSkyB, that the terms of such definitive agreement will not be less favorable to the Company than the current arrangement, or that BSkyB will continue to supply programming to the Company on reasonable commercial terms or at all. Moreover, the Company has not, to date, entered into written contracts with many of its other program suppliers. The loss of BSkyB or other programming, a deterioration in the perceived quality of BSkyB or other programming, or a material increase in the price that the Company is required to pay for BSkyB or other programming could have a material adverse effect on the Company. Because of the factors described in the preceding paragraphs, there can be no assurance that their current programming will continue to be available to the Company on acceptable commercial terms, or at all. POSSIBLE CHANGES IN GOVERNMENT REGULATION The principal business activities of the Company in the UK are regulated and supervised by various governmental bodies, the ITC, the Department of Culture, Media and Sport, the Radio Communications Agency, the Radio Authority and OFTEL under the directions of the Director General and the DTI on behalf of The Secretary of State for Trade and Industry. Changes in laws, regulations or governmental policy (or the interpretations of such laws or regulations) affecting the activities of the Company and those of its competitors, such as licensing requirements, changes in price regulation and deregulation of interconnection arrangements, could have a material adverse effect on the Company. A substantial portion of the Company's business is also subject to regulation. In particular, the prices that the Company may charge the ITV companies, Channel 4 and S4C for television transmissions services are subject to price controls imposed by OFTEL. On December 24, 1996, the Director General of OFTEL issued 13 16 the formal modification to the Company's Telecommunications Act License to deal with the new price control for the television transmission services provided by the Company to the ITV companies, Channel 4 and S4C. Under the new arrangements, the total revenues receivable by the Company for such services (excluding certain insignificant items) could not exceed L53.15 million in 1997 and, thereafter through 2002, will be adjusted annually by the Retail Prices Index minus 4%. There is no assurance that these price controls will not be reviewed again by OFTEL prior to 2002 or that price controls for the years following December 31, 2002 will not have a material adverse effect on the revenues receivable from the ITV companies, Channel 4 and S4C. As the UK is a member of the European Union ("EU"), the Company may be subject to regulatory initiatives of the European Commission ("EC"). Changes promulgated in EU Directives, particularly to the extent that they require an EU television "production" and "programming" quota, may reduce the range of programs which can be offered and increase the costs of purchasing television programming. In addition, EU Directives may introduce provisions requiring the Company and its subsidiaries to provide access to their cable network infrastructure to other service providers, which could have material adverse effect on the Company. MANAGEMENT OF GROWTH AND EXPANSION The Company has experienced rapid growth and development in a relatively short period of time and plans to continue to do so to meet its strategic objectives and regulatory milestones. The management of such growth will require, among other things, stringent control of construction and other costs, continued development of the Company's financial and management controls, increased marketing activities and the training of new personnel. Failure to manage its rapid growth and development successfully could have a material adverse effect on the Company. DEPENDENCE UPON KEY PERSONNEL The Company's businesses are managed by a small number of key executive officers, the loss of one or more of whom could have a material adverse effect on the Company. The Company believes that its future success will depend in large part on its continued ability to attract and retain highly skilled and qualified personnel. The Company has not entered into written employment contracts or non-compete agreements with, nor has it obtained life insurance policies covering, such key executive officers. Certain senior managers of the Company also serve as members of senior management of other companies in the telecommunications business. RISKS OF RAPID TECHNOLOGICAL CHANGES The telecommunications industry is subject to rapid and significant changes in technology and the effect of technological changes on the businesses of the Company cannot be predicted. However, the cost of implementation of emerging and future technologies could be significant, and the Company's ability to fund such implementation will depend on its ability to obtain additional financing. See "-- Network Construction Costs; Need for Additional Financing." CURRENCY RISK To the extent that the Company obtains financing in United States dollars and incurs construction and operating expenses in British pounds sterling, it will encounter currency exchange rate risks. In addition, the Company's revenues are generated primarily in British pounds sterling while its interest and principal obligations with respect to most of the Company's existing indebtedness are payable in United States dollars. While the Company may consider entering into transactions to hedge the risk of exchange rate fluctuations, there can be no assurance that the Company will engage in such transactions, or, if the Company decides to engage in such transactions, that they will be successful and that shifts in the currency exchange rates will not have a material adverse effect on the Company. The Company has entered into an option agreement to hedge some of the risk of exchange rate fluctuations related to debt service and corporate expenses. 14 17 RISKS OF LIMITED INSURANCE COVERAGE The Company obtains insurance of the type and in the amounts that they believe are customary in the UK for similar companies. Consistent with this practice, they do not insure the underground portion of their cable network. Accordingly, any catastrophe affecting a significant portion of a system's underground cable network could result in substantial uninsured losses. LACK OF PUBLIC MARKET FOR THE WARRANTS The Warrants are new securities for which there currently is no market and are being offered only to the holders of the Notes. The Company does not intend to apply for listing of the Warrants on any securities exchange or to seek approval for quotation through any automated quotation system. Accordingly, there can be no assurance as to the development or liquidity of any market for the Warrants. USE OF PROCEEDS The proceeds received by the Company from the issuance and sale of the Warrants will reduce the amount of cash which would otherwise be used to fund the Consent Payment. The net proceeds received by the Company from the payment of the Exercise Price upon exercise of the Warrants will be used to finance the construction and working capital requirements of the Company's residential cable television and residential and business cable/telephony services in the United Kingdom and for other general corporate purposes. PRICE RANGE OF COMMON STOCK The Common Stock is quoted and traded on the Nasdaq Stock Market's National Market (the "NASDAQ") under the symbol "NTLI." From October 14, 1993 through March 26, 1997, the Common Stock was quoted and traded on the NASDAQ under the symbol "ICTL." The following table sets forth, for the periods indicated, the high and low reported sale prices per share of Common Stock, as reported on the NASDAQ.
1995 HIGH LOW - ---- ---- ---- First Quarter............................................... $26 5/8 $20 1/4 Second Quarter.............................................. 26 1/4 20 1/4 Third Quarter............................................... 28 7/8 24 3/8 Fourth Quarter.............................................. 28 1/4 23 5/8
1996 - ---- First Quarter............................................... $30 1/8 $21 5/8 Second Quarter.............................................. 34 1/8 27 3/4 Third Quarter............................................... 30 22 5/8 Fourth Quarter.............................................. 28 1/4 22 5/8
1997 - ---- First Quarter............................................... $26 3/4 $18 1/8 Second Quarter.............................................. 27 1/4 19 Third Quarter............................................... 27 7/8 20 1/8 Fourth Quarter.............................................. 29 3/8 25 1/4
1998 - ---- First Quarter............................................... $45 3/4 $26 3/4 Second Quarter.............................................. 53 1/2 37 5/8 Third Quarter (through September 30, 1998).................. 65 35 1/2
On October 12, 1998, the closing sale price per share of the Common Stock, as reported on the NASDAQ, was $38.00. As of September 30, 1998, there were approximately 535 record holders of the Common Stock. This figure does not reflect beneficial ownership of shares held in nominee name. 15 18 DIVIDEND POLICY Since its inception, the Company has never paid cash dividends on its Common Stock. Pursuant to the indentures relating to the Senior Notes, certain limitations apply to, and the Proposed Credit Facilities or any other credit facility may restrict, the future payment of dividends on the Company's capital securities. In addition, the Company does not currently intend to pay cash dividends in the foreseeable future on shares of the Company's capital stock as it intends to retain earnings to fund construction of the systems and the growth of its business. DETERMINATION OF OFFERING PRICE The offering price and Exercise Price of the Warrants were determined by the Company after discussions with a holder of the Notes concerning the Consent Solicitation. DILUTION As of June 30, 1998, the negative net tangible book value of the Common Stock was approximately ($679.3 million), or ($16.45) per currently outstanding share. The negative net tangible book value per currently outstanding share of Common Stock has been determined by dividing the net tangible book value of the Company attributable to the Common Stock by the number of shares of Common Stock outstanding as of June 30, 1998. The sale of a Warrant in lieu of a cash Consent Payment does not affect the Company's net tangible book value. After giving effect to the sale by the Company of 1,641,414 shares of Common Stock upon exercise of the Warrants and assuming net proceeds of $38.00 per Warrant, the adjusted negative net tangible book value of the Common Stock as of June 30, 1998 decreases to approximately ($617.0 million), or ($14.37) per currently outstanding share of Common Stock. Accordingly, the present stockholders of the Company would sustain an immediate decrease of $2.08 per share of Common Stock in negative net tangible book value and the purchasers of the Common Stock offered hereby upon exercise of the Warrants would sustain an immediate dilution of $57.37 per share of Common Stock from the Exercise Price. The foregoing calculations do not give effect to the exercise of any outstanding rights to acquire Common Stock inasmuch as such conversion and/or exercise would be anti-dilutive. DESCRIPTION OF WARRANTS The Warrants will be issued pursuant to a Warrant Agreement (the "Warrant Agreement") between the Company and Chase, as Warrant Agent (the "Warrant Agent"), a form of which is filed as an Exhibit to the Registration Statement of which the Prospectus is a part. The following summary of certain provisions of the Warrant Agreement does not purport to be complete and is qualified in its entirety by reference to the Warrant Agreement, including the definitions therein of certain terms used below. GENERAL Each Warrant, when exercised, will entitle the holder thereof to receive one fully paid and nonassessable share of the Common Stock (the "Warrant Shares") at an initial exercise price per share equal to the Current Market Price of such share, determined in accordance with the Warrant Agreement, on the date of original issuance of the Warrants, subject to adjustment (the "Exercise Price"). The Exercise Price and the number of Warrant Shares are both subject to adjustment in certain cases referred to below. The Warrants will entitle the holders thereof to purchase, in the aggregate, up to 1,641,414 Warrant Shares, or approximately 4.0% of the outstanding Common Stock and 2.5% of the Common Stock on a fully diluted basis as of the date of the issuance of the Warrants. The Warrants will be exercisable at any time after their date of issuance and prior to 5:00 p.m., New York City time on the date that is the tenth anniversary of the date of original issuance of the Warrants. The exercise and transfer of the Warrants will be subject to applicable federal and state securities laws. 16 19 The Warrants may be exercised by surrendering to the Company the warrant certificates evidencing the Warrants to be exercised with the accompanying form of election to purchase properly completed and executed, together with payment of the Exercise Price. Payment of the Exercise Price may be made in the form of cash or by certified or official bank check payable to the order of the Company. Upon surrender of the warrant certificate and payment of the Exercise Price, the Company will deliver or cause to be delivered, to or upon the written order of such holder, stock certificates representing the number of whole shares of Common Stock to which the holder is entitled. If less than all of the Warrants evidenced by a warrant certificate are to be exercised, a new warrant certificate will be issued for the remaining number of Warrants. In lieu of the payment of the Exercise Price as aforesaid, the holder of a Warrant may upon exercise request the payment by the Company of "Spread", which shall be delivered by the Company to such holder by delivery of Common Stock with an aggregate current market price (as of the date of receipt of the request by the Company) equal to the difference between the current market price of per share of Common Stock less the Exercise Price multiplied by the number of Warrants being exercised for "Spread". No fractional shares of Common Stock will be issued upon exercise of the Warrants. The Company will pay to the holder of the Warrant at the time of exercise an amount in cash equal to the current market value of any such fractional share of Common Stock less a corresponding fraction of the Exercise Price. The holders of the Warrants will have no right to vote on matters submitted to the stockholders of the Company and will have no right to receive dividends. The holders of the Warrants will not be entitled to share in the assets of the Company in the event of liquidation, dissolution or the winding up of the Company. In the event a bankruptcy or reorganization is commenced by or against the Company, a bankruptcy court may hold that unexercised Warrants are executory contracts which may be subject to rejection by the Company with approval of the bankruptcy court, and the holders of the Warrants may, even if sufficient funds are available, receive nothing or a lesser amount as a result of any such bankruptcy case than they would be entitled to if they had exercised their Warrants prior to the commencement of any such case. In the event of a taxable distribution to holders of Common Stock that results in an adjustment to the number of shares of Common Stock or other consideration for which a Warrant may be exercised, the holders of the Warrants may, in certain circumstances, be deemed to gave received a distribution subject to United States federal income tax as a dividend. See "Certain Federal Income Tax Considerations". ADJUSTMENTS The number of shares of Common Stock purchasable upon exercise of Warrants and the Exercise Price will be subject to adjustments in certain events including: (i) the payment by the Company of dividends (and other distributions) on its Common Stock in Common Stock; (ii) subdivisions, combinations and reclassifications of the Common Stock, (iii) the issuance to all holders of Common Stock of rights, options or warrants entitling them to subscribe for Common Stock or securities convertible into, or exchangeable or exercisable for, Common Stock within sixty (60) days after the record date for such issuance of rights, options or warrants at an offering price (or with an initial conversion, exchange or exercise price) which is less than the current market price per share (as defined) of Common Stock, (iv) the distribution to all holders of Common Stock of any of the Company's assets (including cash), debt securities, preferred stock or any rights or warrants to purchase any such securities (excluding (a) those rights and warrants referred to in clause (iii) above; (b) securities convertible into or exchangeable for shares of Common Stock referred to in clause (vi) below; (c) a dividend payable in shares of Common Stock; and (d) cash dividends that do not exceed 5% of the current market price of the Common Stock), (v) the issuance of shares of Common Stock for a consideration per share less than the then current market price per share of Common Stock (excluding securities issued in transactions referred to in clauses (i) through (iv) above and certain other issuances of Common Stock specified in the Warrant Agreement), (vi) the issuance of securities convertible into or exchangeable for Common Stock for a conversion or exchange price plus consideration received upon issuance less than the then current market price per share of Common Stock (excluding securities issued in transactions referred to in clauses (iii) or (iv) above and certain other issuances of convertible securities) specified in the Warrant Agreement and (vii) certain other events that could have the effect of depriving holders of the Warrants of the benefit of all or a portion of the purchase rights evidenced by the Warrants. 17 20 No adjustment in the Exercise Price will be required unless such adjustment would require an increase or decrease of at least one percent (1%) in the Exercise Price; provided, however, that any adjustment that is not made will be carried forward and taken into account in any subsequent adjustment. In the case of certain consolidations or mergers of the Company, or the sale of all or substantially all of the assets of the Company to another corporation, each Warrant will thereafter be exercisable for the right to receive the kind and amount of securities, cash, or property to which such holder would have been entitled as a result of such consolidation, merger or sale had the Warrants been exercised immediately prior thereto. DESCRIPTION OF CAPITAL STOCK AUTHORIZED CAPITAL STOCK The authorized capital stock of the Company consists of 100,000,000 shares of Common Stock, and 2,500,000 shares of preferred stock, par value $.01 per share (the "Preferred Stock"). At the close of business on September 15, 1998: (i) approximately 41,383,000 shares of Common Stock were issued and outstanding; (ii) no shares of Common Stock were held by the Company in its treasury; (iii) approximately 121,000 shares of the Company's 13% Preferred were issued and outstanding; (iv) 1,000,000 shares of Series A Junior Participating Preferred Stock (the "Rights Preferred Stock") were reserved for issuance pursuant to the Rights Agreement, dated as of October 13, 1993 (the "Rights Agreement"), between the Company and Continental Stock Transfer & Trust Company, as Rights Agent; (v) approximately 7,261,000 shares of Common Stock were reserved for issuance pursuant to the conversion of the 7% Convertible Subordinated Notes Due 2008 (vi) approximately 939,000 shares of Common Stock were reserved for issuance upon the exercise of certain warrants; and (vii) approximately 15,547,000 shares of Common Stock were reserved for issuance pursuant to various Company employee and director stock options. COMMON STOCK The holders of Common Stock are entitled to one vote for each share held of record on all matters submitted to a vote of the stockholders of the Company and do not have cumulative voting rights in the election of directors. Holders of Common Stock are entitled to receive ratably such dividends as may from time to time be declared by the Company's Board of Directors out of funds legally available therefor. In the event of a liquidation, dissolution or winding of the Company, holders of Common Stock would be entitled to share ratably in all assets of the Company available for distribution to holders of Common Stock remaining after payment of liabilities and liquidation preference of any outstanding Preferred Stock. Holders of Common Stock have no preemptive rights and have no rights to convert their Common Stock into any other securities, and there are no redemption provisions with respect to such shares. All of the outstanding shares of Common Stock are fully paid and nonassessable. PREFERRED STOCK The Company's Board of Directors has the authority to issue Preferred Stock in one or more series and to fix as to any such series the designation, title, voting powers and any other preferences, and relative, participating, optional or other special rights and qualifications, limitations or restrictions, without any further vote or action by the stockholders of the Company. 13% Preferred. The 13% Preferred ranks prior to the Common Stock and Rights Preferred Stock with respect to dividend rights and rights on liquidation, winding up and dissolution, and each share of 13% Preferred has a liquidation preference of $1,000. Holders of shares of 13% Preferred are entitled to receive, when, as and if declared by the Company's Board of Directors, quarterly dividends per share at a rate of 13% per annum ($130 per share). Dividends accruing on or prior to February 15, 2004 may, at the Company's option, be paid in cash, by issuing additional shares of 13% Preferred having an aggregate liquidation preference equal to the amount of such dividends, or in any combination of the foregoing. Dividends accruing after February 15, 2004 must be paid in cash. The Company may redeem any or all of the 13% Preferred on or after February 15, 2002 at declining redemption prices as set forth in the certificate of designation with respect 18 21 to the 13% Preferred, plus accrued and unpaid dividends to the date of redemption. The Company must redeem all outstanding shares of 13% Preferred on February 15, 2009 at a price equal to 100% of the liquidation preference thereof, plus accrued and unpaid dividends to the date of redemption. Holders of 13% Preferred have no general voting rights, except as otherwise required under Delaware law and except in certain circumstances as set forth in the certificate of designation with respect to the 13% Preferred including (i) amending certain rights of the holders of the 13% Preferred Stock and (ii) the issuance of any class of equity securities that ranks on a parity with or senior to the 13% Preferred, other than additional shares of the 13% Preferred issued in lieu of cash dividends or parity securities issued to finance the redemption by the Company of the 13% Preferred. In addition, if (i) dividends are in arrears for six quarterly periods (whether or not consecutive) or (ii) the Company fails to make a mandatory redemption or an offer to purchase all of the outstanding shares of 13% Preferred Stock following a Change of Control Triggering Event (as defined in the certificate of designation with respect to the 13% Preferred) as required or fails to pay pursuant to such redemption or offer, holders of a majority of the outstanding shares of 13% Preferred, voting as a class, will be entitled to elect two directors to the Company's Board of Directors. In the event of a Change of Control Triggering Event, the Company will, subject to certain conditions, offer to purchase all outstanding shares of 13% Preferred Stock at a purchase price equal to 101% of the liquidation preference thereof, plus accrued and unpaid dividends to the date of purchase. Moreover, in the event of a Change of Control Call Event (as defined in the certificate of designation with respect to the 13% Preferred), the Company will have the option to redeem all of the outstanding shares of 13% Preferred Stock at a redemption price equal to 100% of the liquidation preference thereof plus the applicable premium and accrued and unpaid dividends to the date of repurchase. On any scheduled dividend payment date, the Company may, at its option, exchange all, but not less than all, of the shares of 13% Preferred then outstanding into the Company's 13% Series B Subordinated Exchange Debentures Due 2009. TRANSFER AGENT AND REGISTRAR The transfer agent and registrar for the Common Stock is Continental Stock Transfer & Trust Company. CERTAIN SPECIAL CHARTER PROVISIONS The Amended and Restated Certificate of Incorporation of the Company (the "Charter") as currently in effect contains the provisions described below. Such charter provisions may have the effect, alone or in combination with each other or with the existence of authorized but unissued Common Stock and any series of Preferred Stock, of precluding or rendering more difficult a hostile takeover making it more difficult to remove or change the composition of the Company's incumbent board of directors and its officers, being adverse to stockholders who desire to participate in a tender offer and depriving stockholders of possible opportunities to sell their shares at temporarily higher prices. Classified Board and Filling of Vacancies on the Board of Directors. The Charter provides that the directors shall be divided into three classes, each of which shall serve a staggered three-year term, and that vacancies on the Board of Directors that may occur between annual meetings may be filled by the Board of Directors. In addition, this provision specifies that any director elected to fill a vacancy on the Board will serve for the balance of the term of the replaced director. Removal of Directors. The Charter provides that directors can be removed only by the stockholders for cause and then only by the affirmative vote of the holders of not less than two-thirds of the combined voting power of the Company. Voting Requirement for Certain Business Combinations. The Charter also provides that, in addition to any affirmative vote required by law, the affirmative vote of holders of two-thirds of the voting power of the Company shall be necessary to approve any "Business Combination" (as hereinafter defined) proposed by an "Interested Stockholder" (as hereinafter defined). The additional voting requirements will not apply, however, if: (i) the Business Combination was approved by not less than a majority of the Continuing Directors or (ii) a 19 22 series of conditions are satisfied requiring, in summary, the following: (A) that the consideration to be paid to the Company's stockholders in the Business Combination must be at least equal to the higher of (x) the highest per-share price paid by the Interested Stockholder in acquiring any shares of Common Stock during the two years prior to the announcement date of the Business Combination or in the transaction in which it became an Interested Stockholder (the "Determination Date"), whichever is higher or (y) the fair market value per share of Common Stock on the announcement date or Determination Date, whichever is higher, in either case appropriately adjusted for any stock dividend, stock split, combination of shares or similar event (non-cash consideration is treated similarly) and (B) certain "procedural" requirements are complied with, such as the Consent Solicitation of proxies pursuant to the rules of the Commission and no decrease in regular dividends (if any) after the Interested Stockholder became an Interested Stockholder (except as approved by a majority of the Continuing Directors). An "Interested Stockholder" is defined as anyone who is the beneficial owner of more than 15% of the voting power of the voting stock, other than the Company and any employee stock plans sponsored by the Company, and includes any person who is an assignee of or has succeeded to any shares of voting stock in a transaction not involving a public offering that were at any time within the prior two-year period beneficially owned by an Interested Stockholder. The term "beneficial owner" includes persons directly and indirectly owning or having the right to acquire or vote the stock. Interested Stockholders participate fully in all stockholder voting. A "Business Combination" includes the following transactions: (i) merger or consolidation of the Company on any subsidiary with an Interested Stockholder or with any other corporation or entity which is, or after such merger or consolidation would be, an affiliate of an Interested Stockholder; (ii) the sale or other disposition by the Company or a subsidiary of assets having a fair market value of $5,000,000 or more if an Interested Stockholder (or an affiliate thereof) is a party to the transaction; (iii) the adoption of any plan or proposal for the liquidation or dissolution of the Company proposed by or on behalf of an Interested Stockholder (or an affiliate thereof); or (iv) any reclassification of securities, recapitalization, merger with a subsidiary, or other transaction which has the effect, directly or indirectly, of increasing the proportionate share of any class of the outstanding stock (or securities convertible into stock) of the Company or a subsidiary owned by an Interested Stockholder (or an affiliate thereof). Determinations of the fair market value of non-cash consideration are made by a majority of the Continuing Directors. The term "Continuing Directors" means any member of the Company's Board of Directors, while such person is a member of the Company's Board of Directors, who is not an Affiliate or Associate or representative of the Interested Stockholder and was a member of the Company's Board of Directors prior to the time that the Interested Stockholder became an Interested Stockholder, and any successor of a Continuing Director while such successor is a member of the Company's Board of Directors, who is not an Affiliate or Associate or representative of the Interested Stockholder and is recommended or elected to succeed the Continuing Director by a majority of Continuing Directors. Voting Requirements for Certain Amendments to the Charter. The Charter provides that the provisions set forth in this section under the heading "Certain Special Charter Provisions" may not be repealed or amended in any respect, unless such action is approved by the affirmative vote of the holders or not less than two-thirds of the voting power of the Company. The requirement of an increased stockholder vote is designed to prevent a stockholder who controls a majority of the voting power of the Company from avoiding the requirements of the provisions discussed above by simply amending or repealing such provisions. STOCKHOLDER RIGHTS PLAN The following description of the Rights Agreement is qualified in its entirety by reference to the Rights Agreement, a copy of which may be obtained as described under "Available Information." On August 27, 1993, the Company's Board of Directors adopted the Rights Agreement. The Rights Agreement provides that one Right will be issued with each share of the Common Stock issued (whether originally issued or from the Company's treasury) on or after the date of the Merger and prior to the Rights Distribution Date (as hereinafter defined). The Rights are not exercisable until the Rights Distribution Date 20 23 and will expire at the close of business on the date which is 10 years from the date of the Distribution unless previously redeemed by the Company as described below. When exercisable, each Right entitles the owner to purchase from the Company one one-hundredth of a share of Rights Preferred Stock at a purchase price of $100.00. Except as described below, the Rights will be evidenced by all the Common Stock certificates will be distributed. The Rights will separate from the Common Stock and a "Rights Distribution Date" will occur upon the earlier of (i) 10 days following a public announcement that a person or group of affiliated or associated persons (an "Acquiring Person") has acquired, or obtained the right to acquire, beneficial ownership of 15% or more of the outstanding shares of the Common Stock (the "Stock Acquisition Date") and (ii) 10 business days following the commencement of a tender offer or exchange offer that would result in a person or group becoming an Acquiring Person. After the Rights Distribution Date, Rights certificates will be mailed to holders of record of the Common Stock as of the Rights Distribution Date and thereafter the separate Rights certificates alone will represent the Rights. The Rights Preferred Stock issuable upon exercise of the Rights will be entitled to a minimum preferential quarterly dividend payment of $.01 per share and will be entitled to an aggregate dividend of 100 times the dividend, if any, declared per share of Common Stock. In the event of liquidation, the holders of the Rights Preferred Stock will be entitled to a minimum preferential liquidation payment of $1.00 per share and will be entitled to an aggregate payment of 100 times the payment made per share of the Common Stock. Each share of Rights Preferred Stock will have 100 votes and will vote together with the Common Stock. In the event of any merger, consolidation or other transaction in which shares of the Common Stock are changed or exchanged, each share of Rights Preferred Stock will be entitled to receive 100 times the amount received per share of the Common Stock. These rights are protected by customary antidilution provisions. Because of the nature of the Rights Preferred Stock's dividend, liquidation and voting rights, the value of one one-hundredth of a share of Rights Preferred Stock purchasable upon exercise of each Right should approximate the value of one share of the Common Stock. In the event that a person becomes an Acquiring Person (except pursuant to a tender offer or an exchange offer for all outstanding shares of Common Stock at a price and on terms determined by at least a majority of the members of the Company's Board of Directors who are not officers of the Company and who are not representatives, nominees, affiliates or associates of an Acquiring Person, to be (i) at a price which is fair to the Company's stockholders and (ii) otherwise in the best interests of the Company and its stockholders (a "Qualifying Offer")), each holder of a Right will thereafter have the right to receive, upon the exercise thereof at the then current exercise price, the Common Stock (or, in certain circumstances, cash, property or other securities of the Company) having a value equal to two times the exercise price of the Right. Notwithstanding any of the foregoing, following the occurrence of any such event, all Rights that are, or (under certain circumstances specified in the Rights Agreement) were beneficially owned by any Acquiring Person (or certain related parties) will be null and void. However, Rights are not exercisable following the occurrence of the event set forth above until such time as the Rights are no longer redeemable by the Company as set forth below. In the event that, at any time following the Stock Acquisition Date, (i) the Company is acquired in a merger or other business combination transaction in which the Company is not the surviving corporation or the Common Stock is changed or exchanged (other than a merger which follows a Qualifying Offer and satisfies certain other requirements) or (ii) 50% or more of the Company's assets or earning power is sold or transferred, each holder of a Right (except Rights which previously have been voided as set forth above) shall thereafter have the right to receive, upon the exercise thereof at the then current exercise price, common stock of the acquiring company having a value equal to two times the exercise price of the Right. At any time until 10 days following the Stock Acquisition Date, the Company may redeem the Rights in whole, but not in part, at a price of $.01 per Right. Immediately upon the action of the Company's Board of Directors ordering redemption of the Rights, the Rights will terminate and the only right of the holders of the Rights will be to receive the $.01 redemption price. 21 24 Until a Right is exercised, the holder thereof, as such, all have no rights as a stockholder of the Company, including without limitation, the right to vote or to receive dividends. While the distribution of the Rights will not be taxable to stockholders or to the Company, stockholders may, depending upon the circumstances, recognize taxable income in the event that the Rights become exercisable for the Common Stock (or other consideration) or for common stock of the acquiring company as set forth above. Other than those provisions relating to the principal terms of the Rights, any of the provisions of the Rights Agreement may be amended by the Company's Board of Directors prior to the Rights Distribution Date. After the Rights Distribution Date, the provisions of the Rights Agreement may be amended by the Company's Board of Directors in order to cure any ambiguity, to make changes which do not adversely affect the interests of holders of Rights (excluding the interests of any Acquiring Person) or to shorten or lengthen any time period under the Rights Agreement, provided that no amendment to adjust the time period governing redemption shall be made at such time as the Rights are not redeemable. The Rights have certain anti-takeover effects as they will cause substantial dilution to a person or group that acquires a substantial interest in the Company without the prior approval of the Company's Board of Directors. The effect of the Rights may be to inhibit a change in control of the Company (including through a third party tender offer at a price which reflects a premium to then prevailing trading prices) that may be beneficial to the Company's stockholders. 22 25 CERTAIN U.S. FEDERAL INCOME TAX CONSIDERATIONS The following is a discussion of certain anticipated U.S. Federal income tax consequences of the ownership of the Warrants as of the date hereof. It deals only with Warrants held as capital assets by initial purchasers that are United States holders and does not deal with special situations, such as those of foreign persons, dealers in securities, financial institutions, life insurance companies, holders whose "functional currency" is not the U.S. dollar, or special rules with respect to certain "straddle" or hedging transactions. The discussion below is based upon the Internal Revenue Code of 1986, as amended, and regulations, rulings and judicial decisions thereunder as of the date hereof, and such authorities may be repealed or modified (including retroactively) so as to result in Federal income tax consequences different from those discussed below. HOLDERS CONSIDERING AN INVESTMENT IN THE WARRANTS ARE URGED TO CONSULT THEIR TAX ADVISORS CONCERNING THE FEDERAL INCOME TAX CONSIDERATIONS THAT MAY BE SPECIFIC TO THEM AS WELL AS ANY TAX CONSEQUENCES ARISING UNDER THE LAWS OF ANY OTHER TAXING JURISDICTION. Exercise or Lapse of Warrants. Generally, a holder will not recognize gain or loss on the exercise of a Warrant (except to the extent cash is received in lieu of fractional shares). The Warrant Shares acquired on exercise will have an adjusted tax basis equal to the sum of the exercise price plus the holder's adjusted tax basis in the Warrant. The holding period for the Warrant Shares will not include the period during which the Warrant was held and will begin on the day after the date on which the Warrant is exercised. A holder who allows a Warrant to lapse unexercised generally will recognize a loss in an amount equal to the holder's adjusted tax basis in the Warrant. Such loss generally will be capital loss, provided that the Warrant Shares issuable upon exercise of such Warrants would have been a capital asset if acquired by the holder, and will be long-term capital loss if the Warrant has been held by the holder for more than one year on the date of lapse. Sale or Exchange of Warrants. Generally, any sale or exchange of Warrants will result in taxable gain or loss equal to the difference between the amount of cash or other property received and the holder's adjusted tax basis in the Warrant. Any such gain or loss generally will be capital gain or loss, provided that the Warrant Shares issuable upon exercise of such Warrants would have been a capital asset if acquired by the holder, and will be long-term capital gain or loss if the Warrant has been held by the holder for more than one year. Adjustments. Adjustments to the number of shares of Warrant Shares that may be purchased upon the exercise of a Warrant or to the Exercise Price, or the failure to make such adjustments, could result in constructive distributions to the holders of the Warrants which could be taxable as dividends, even though no cash or property would be actually received by the holders of Warrants. PLAN OF DISTRIBUTION The Company is offering the Warrants to the Registered Holders of the Notes whose properly completed and executed Consent is received on or prior to the Expiration Date and who has elected in that Consent to apply the cash Consent Payment in respect of that Consent to purchase the Warrants. The Warrants and the Common Stock issuable upon exercise thereof may be sold from time to time in one or more transactions at fixed prices, at prevailing market prices at the time of sale, at varying prices determined at the time of sale or at negotiated prices. The sale of the Warrants and the Common Stock issuable upon exercise thereof may be effected in transactions (which may involve crosses or block transactions) (i) on any national securities exchange or quotation service on which the Warrants or the Common Stock may be listed or quoted at the time of sale, (ii) in the over-the-counter market, (iii) in transactions otherwise than on such exchanges or in the over-the-counter market or (iv) through the writing of options. To comply with the securities laws of certain jurisdictions, if applicable, the Warrants and the Common Stock issuable upon exercise of the Warrants will be offered or sold in such jurisdictions only through registered or licensed brokers or dealers. In addition, in certain jurisdictions the Warrants and the Common Stock issuable upon exercise of the Warrants may not be offered or sold unless they have been registered or 23 26 qualified for sale in such jurisdictions or any exemption from registration or qualification is available and is complied with. Pursuant to the Warrant Agreement, substantially all of the expenses of the registration, offering and sale of the Warrants to the Electing Holders and the issuance of the Common Stock upon exercise thereof will be paid by the Company, including, without limitation, Commission filing fees and expenses, expenses of compliance with state securities or "blue sky" laws. LEGAL MATTERS The validity of the Warrants and the shares of Common Stock issuable upon exercise thereof will be passed upon for the Company by Skadden, Arps, Slate, Meagher & Flom LLP, New York, New York, special counsel to the Company. EXPERTS The consolidated financial statements and schedule of the Company appearing in the Company's Annual Report (Form 10-K) for the year ended December 31, 1997, have been audited by Ernst & Young LLP, independent auditors, as set forth in their report thereon included therein and incorporated herein by reference. Such consolidated financial statements and schedule are incorporated herein by reference in reliance upon such report given upon the authority of such firm as experts in accounting and auditing. The consolidated financial statements as of December 31, 1997 and 1996 and for each of the three years in the period ended December 31, 1997 of Comcast UK Cable Partners Limited and subsidiaries have been incorporated herein by reference and have been audited by Deloitte & Touche LLP, independent auditors, as stated in their report, which is also incorporated by reference herein and has been so incorporated in reliance upon the report of such firm given upon their authority as experts in accounting and auditing. The consolidated financial statements as of December 31, 1997 and 1996 and for each of the three years in the period ended December 31, 1997 of Birmingham Cable Corporation Limited and Cable London PLC have been incorporated herein by reference and have been audited by Deloitte & Touche, independent auditors, as stated in their reports, which are also incorporated by reference herein and have been so incorporated in reliance upon the reports of such firm given upon their authority as experts in accounting and auditing. The combined financial statements of ComTel UK Finance, B.V. and its subsidiaries as of and for the year ended December 31, 1997 and the combined financial statements of Telecential as of and for the 16 months ended December 31, 1996, each have been incorporated herein by reference in reliance up on the report of Deloitte & Touche with respect thereto given upon their authority as experts in accounting and auditing. The combined financial statements as of and for the year ended December 31, 1996 of ComTel UK Finance B.V. have been incorporated herein by reference in reliance on the report of Coopers & Lybrand, independent Chartered Accountants, given on the authority of such firm as experts in accounting and auditing. 24 27 - ------------------------------------------------------ - ------------------------------------------------------ NO DEALER, SALESMAN OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS IN CONNECTION WITH THE OFFER MADE BY THIS PROSPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY OR ANY OF ITS AGENTS. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL UNDER ANY CIRCUMSTANCES CREATE ANY IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER OR CONSENT SOLICITATION BY ANYONE IN ANY JURISDICTION IN WHICH SUCH OFFER OR CONSENT SOLICITATION IS NOT AUTHORIZED OR IN WHICH THE PERSON MAKING SUCH OFFER OR CONSENT SOLICITATIONS IS NOT QUALIFIED TO DO SO OR TO ANYONE TO WHOM IT IS UNLAWFUL TO MAKE SUCH CONSENT SOLICITATION. ------------------------ TABLE OF CONTENTS
PAGE ---- Available Information............... 2 Incorporation of Certain Documents by Reference...................... 2 Enforceability of Civil Liabilities....................... 3 Prospectus Summary.................. 4 Risk Factors........................ 7 Use of Proceeds..................... 15 Price Range of Common Stock......... 15 Dividend Policy..................... 16 Determination of Offering Price..... 16 Dilution............................ 16 Description of Warrants............. 16 Description of Capital Stock........ 18 Certain U.S. Federal Income Tax Considerations.................... 23 Plan of Distribution................ 23 Legal Matters....................... 24 Experts............................. 24
- ------------------------------------------------------ - ------------------------------------------------------ - ------------------------------------------------------ - ------------------------------------------------------ NTL INCORPORATED 1,641,414 WARRANTS TO PURCHASE ONE SHARE OF COMMON STOCK ------------------------ PROSPECTUS ------------------------ DATED OCTOBER 14, 1998 - ------------------------------------------------------ - ------------------------------------------------------ 28 PART II INFORMATION NOT REQUIRED IN PROSPECTUS ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION The following is an itemization of all expenses (subject to future contingencies) incurred or expected to be incurred by the Company in connection with the Offering. SEC registration fee...................................... $ 27,194 Legal fees and expenses................................... 35,000 Accounting fees and expenses.............................. 15,000 Printing and engraving fees............................... 35,000 Warrant Exchange Agent fees............................... 5,000 Miscellaneous expenses.................................... 12,806 -------- Total................................................... $130,000 ========
- --------------- * To be filed by amendment. ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS As permitted by Section 102 of the Delaware General Corporation Law (the "DGCL"), the Company's Amended and Restated Certificate of Incorporation eliminates a director's personal liability for monetary damages to the Company and its stockholders arising from a breach or alleged breach of a director's fiduciary duty except for liability under Section 174 of the DGCL or liability for a breach of the director's duty of loyalty to the Company or its stockholders, for acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law or for any transaction in which the director derived an improper personal benefit. The effect of this provision in the certificate of incorporation is to eliminate the rights of the Company and its stockholders (through stockholders, derivative suits on behalf of the Company) to recover monetary damages against a director for breach of fiduciary duty as a director (including breaches resulting from negligent or grossly negligent behavior) except in the situations described above. The Company's Restated By-laws provide that directors and officers of the Company shall be indemnified against liabilities arising from their service as directors and officers to the full extent permitted by law. Section 145 of the DGCL empowers a corporation to indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative (other than an action by or in the right of the corporation) by reason of the fact that he is or was a director, officer, employee or agent of the corporation or is or was serving at the request of the corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, against expenses (including attorney's fees), judgments, fines and amounts paid in settlement actually and reasonably incurred by him in connection with such action, suit or proceeding if he acted in good faith and in a manner he reasonably believed to be in, or not opposed to, the best interests of the corporation, and, with respect to any criminal action or proceeding, had no reasonable cause to believe his conduct was unlawful. Section 145 also empowers a corporation to indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action or suit by or in the right of the corporation to procure a judgment in its favor by reason of the fact that such person acted in any of the capacities set forth above, against expenses (including attorney's fees) actually and reasonably incurred by him in connection with the defense or settlement of such action or suit if he acted under similar standards, except that no indemnification may be made in respect of any claim, issue or matter as to which such person shall have been adjudged to be liable to the corporation unless, and only to the extent that, the Court of Chancery or the court II-1 29 in which such action was brought shall determine that despite the adjudication of liability such person is fairly and reasonably entitled to indemnify for such expenses which the court shall deem proper. Section 145 further provides that to the extent that a director or officer of a corporation has been successful in the defense of any action, suit or proceeding referred to above or in the defense of any claim, issue or matter therein, he shall be indemnified against expenses (including attorneys' fees) actually and reasonably incurred by him in connection therewith; that indemnification provided for by Section 145 shall not be deemed exclusive of any other rights to which the indemnified party may be entitled; and that the corporation is empowered to purchase and maintain insurance on behalf of a director or officer of the corporation against any liability asserted against him and incurred by him in any such capacity, or arising out of his status as such, whether or not the corporation would have the power to indemnify him against such liabilities under Section 145. The Company has entered into a director and officer indemnity agreement ("Indemnity Agreement") with each officer and director of the Company (an "Indemnitee"). Under the bylaws and these Indemnity Agreements, the Company must indemnify an Indemnitee to the fullest extent permitted by the DGCL for losses and expenses incurred in connection with actions in which the indemnitee is involved by reason of having been a director or officer of the Company. The Company is also obligated to advance expenses an indemnitee may incur in connection with such actions before any resolution of the action. ITEM 16. EXHIBITS The following exhibits are filed as part of this Registration Statement:
EXHIBIT NO. DESCRIPTION - ----------- ----------- 3.1 Restated Certificate of Incorporation of the Registrant, as amended by the Certificate of Amendment, dated June 5, 1996* 3.2 Restated By-laws of the Registrant** 4.1 Form of Warrant Agreement by and between the Registrant and The Chase Manhattan Bank (as amended from previously filed version) 4.2 Form of Warrant Certificate (included in Exhibit 4.1) 4.3 Specimen of Common Stock Certificate of the Registrant** 5.1 Opinion of Skadden, Arps, Slate, Meagher & Flom LLP as to the legality of the securities being registered hereby 23.1 Consent of Ernst & Young LLP 23.2 Consent of Deloitte & Touche LLP 23.3 Consent of Deloitte & Touche -- Birmingham Cable 23.4 Consent of Deloitte & Touche -- Cable London 23.5 Consent of Deloitte & Touche -- ComTel 23.6 Consent of Coopers & Lybrand -- ComTel 23.7 Consent of Skadden, Arps, Slate, Meagher & Flom LLP (included in Exhibit 5.1) 24 Powers of Attorney (included in the signature pages to the Registration Statement)
- --------------- * Incorporated by reference to the Registrant's Registration Statement on Form S-3, File No. 333-07879. ** Incorporated by reference from the Registrant's Registration Statement on Form S-1, File No. 33-63570. ITEM 17. UNDERTAKINGS (A) The undersigned Registrant hereby undertakes that, for purposes of determining any liability under the Securities Act, each filing of the Registrant's annual report pursuant to section 13(a) or section 15(d) of the Securities Exchange Act (and, where applicable, each filing of an employee benefit plan's annual report pursuant to section 15(d) of the Securities Exchange Act) that is incorporated by reference in the Registration Statement shall be deemed to be a new registration statement relating to the securities offered II-2 30 therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. (B) Insofar as indemnification for liabilities arising under the Securities Act may be permitted to directors, officers and controlling persons of the registrant pursuant to the foregoing provisions, or otherwise, the registrant has been advised that in the opinion of the Commission such indemnification is against public policy as expressed in the Securities Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the Registrant of expenses incurred or paid by a director, officer or controlling person of the Registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the Registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Securities Act and will be governed by the final adjudication of such issue. (C) The undersigned registrant hereby undertakes that: (1) For purposes of determining any liability under the Securities Act, the information omitted from the form of prospectus filed as part of this Registration Statement in reliance upon Rule 430A and contained in a form of prospectus filed by the registrant pursuant to Rule 424(b)(1) or (4) or 497(h) under the Securities Act shall be deemed to be part of this Registration Statement as of the time it was declared effective. (2) For the purposes of determining any liability under the Securities Act, each post-effective amendment that contains a form of prospectus shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. (D) The undersigned Registrant hereby undertakes: (1) To file, during any period in which offers or sales are being made, a post-effective amendment to this Registration Statement to include any material information with respect to the plan of distribution not previously disclosed in the Registration Statement or any material change to such information in the Registration Statement; (2) That, for the purpose of determining any liability under the Securities Act, each such post-effective amendment shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. (3) To remove from registration by means of a post-effective amendment any of the securities being registered which remain unsold at the termination of the offering. II-3 31 SIGNATURES Pursuant to the requirements of the Securities Act of 1933, as amended, the Registrant certifies that it has reasonable grounds to believe that it meets all of the requirements for filing on Form S-3 and has duly caused this Amendment No. 2 to Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of New York, State of New York, on the 14th day of October, 1998. NTL INCORPORATED By /s/ RICHARD J. LUBASCH ------------------------------------ Richard J. Lubasch Senior Vice President- General Counsel and Secretary Pursuant to the requirements of the Securities Act of 1933, this Amendment No. 2 to Registration Statement has been signed by the following persons in the capacities and on the dates indicated.
SIGNATURE TITLE DATE --------- ----- ---- /s/ GEORGE S. BLUMENTHAL* Chairman of the Board, Treasurer October 14, 1998 - ------------------------------------------------ and Director George S. Blumenthal /s/ J. BARCLAY KNAPP* President, Chief Executive and October 14, 1998 - ------------------------------------------------ Financial Officer and Director J. Barclay Knapp /s/ GREGG GORELICK* Vice President -- Controller October 14, 1998 - ------------------------------------------------ Gregg Gorelick /s/ SIDNEY R. KNAFEL* Director October 14, 1998 - ------------------------------------------------ Sidney R. Knafel /s/ TED H. MCCOURTNEY* Director October 14, 1998 - ------------------------------------------------ Ted H. McCourtney /s/ DEL MINTZ* Director October 14, 1998 - ------------------------------------------------ Del Mintz /s/ ALAN J. PATRICOF* Director October 14, 1998 - ------------------------------------------------ Alan J. Patricof /s/ WARREN POTASH* Director October 14, 1998 - ------------------------------------------------ Warren Potash /s/ MICHAEL S. WILLNER* Director October 14, 1998 - ------------------------------------------------ Michael S. Willner
*By /s/ RICHARD J. LUBASCH ----------------------------- Richard J. Lubasch, Attorney-in-Fact EX-4.1 2 FORM OF WARRANT AGREEMENT 1 =============================================================================== WARRANT AGREEMENT Dated as of October ___, 1998 by and between NTL INCORPORATED and THE CHASE MANHATTAN BANK as Warrant Agent =============================================================================== 2 WARRANT AGREEMENT TABLE OF CONTENTS(1)
Page SECTION 1. Appointment of Warrant Agent.................................................. 2 SECTION 2. Issuance of Warrants.......................................................... 2 SECTION 3. Warrant Certificates.......................................................... 2 SECTION 4. Execution of Warrant Certificates............................................. 2 SECTION 5. Registration and Countersignature............................................. 3 SECTION 6. Registration of Transfers and Exchanges....................................... 3 SECTION 7. Terms of Warrants; Exercise of Warrants....................................... 4 SECTION 8. Reports....................................................................... 6 SECTION 9. Payment of Taxes.............................................................. 7 SECTION 10. Mutilated or Missing Warrant Certificates..................................... 7 SECTION 11. Reservation of Warrant Shares................................................. 7 SECTION 12. Obtaining Stock Exchange Listings............................................. 8 SECTION 13. Adjustment of Exercise Price and Number of Warrant Shares Issuable...................................................................... 8 (a) Adjustment for Change in Capital Stock................................. 8 (b) Adjustment for Rights Issue............................................ 9 (c) Adjustment for Other Distributions..................................... 10 (d) Adjustment for Common Stock Issue...................................... 11 (e) Adjustment for Convertible Securities Issue............................ 13 (f) Current Market Price................................................... 16 (g) Consideration Received................................................. 16 (h) When De Minimis Adjustment May Be Deferred............................. 17
- -------- (1) This Table of Contents does not constitute a part of this Agreement or have any bearing upon the interpretation of any of its terms or provisions. i 3
Page (i) When No Adjustment Required............................................ 17 (j) Notice of Adjustment................................................... 17 (k) Voluntary Reduction.................................................... 17 (l) Reorganization of the Company.......................................... 18 (m) The Company Determination Final........................................ 19 (n) Warrant Agent's Disclaimer............................................. 19 (o) When Issuance or Payment May Be Deferred............................... 19 (p) Adjustment in Number of Shares......................................... 19 (q) Form of Warrants....................................................... 20 SECTION 14. No Dilution or Impairment..................................................... 20 SECTION 15. Fractional Interests.......................................................... 21 SECTION 16. Notices to Warrant Holders.................................................... 21 SECTION 17. Merger, Consolidation or Change of Name of Warrant Agent...................... 23 SECTION 18. Warrant Agent................................................................. 23 SECTION 19. Registration Statement........................................................ 26 (a) Shelf Registration of Warrant Shares................................... 26 (b) Registration Expenses.................................................. 26 SECTION 20. Change of Warrant Agent....................................................... 26 SECTION 21. Notices to the Company and Warrant Agent...................................... 27 SECTION 22. Supplements and Amendments.................................................... 28 SECTION 23. Successors.................................................................... 28 SECTION 25. Governing Law; Jurisdiction................................................... 28 SECTION 26. Benefits of This Agreement.................................................... 29 SECTION 27. Counterparts.................................................................. 29 SECTION 28. Further Assurances............................................................ 29 EXHIBIT A Form of Initial Warrant Certificate............................................................... A-1
ii 4 WARRANT AGREEMENT dated as of October __, 1998, between NTL INCORPORATED, a Delaware corporation (the "Company"), and THE CHASE MANHATTAN BANK, a New York banking corporation, as Warrant Agent (the "Warrant Agent"). WHEREAS, pursuant to the terms and conditions of (i) a Consent Solicitation Statement of the Company dated September 17, 1998 (the "12 3/4% Notes Consent Solicitation") relating to its 12 3/4% Series A Senior Deferred Coupon Notes Due 2005 (the "12 3/4% Notes"), (ii) a Consent Solicitation of the Company dated September 17, 1998 (the "11 1/2% Notes Consent Solicitation") relating to the 11 1/2% Series B Senior Deferred Coupon Notes Due 2006 (the "11 1/2% Notes") and (iii) a Consent Solicitation Statement of the Company dated September 17, 1998 (the "10% Notes Consent Solicitation", and together with the 12 3/4% Notes Consent Solicitation and the 11 1/2% Notes Consent Solicitation, the "Consent Solicitation") relating to its 10% Series B Senior Notes Due 2007 (the "10% Notes", and together with the 12 3/4% Notes and the 11 1/2% Notes, the "Notes"), the registered holders of the Notes were given the right to elect to apply the consent payments payable by the Company pursuant to the Consent Solicitation to purchase the Warrants hereinafter described (the "Warrants"), to purchase shares of Common Stock, par value $.01 per share (the "Common Stock"), of the Company (the Common Stock issuable upon exercise of the Warrants being referred to herein as the "Warrant Shares"); and WHEREAS, each Warrant entitles the holder of the Warrant, upon exercise to receive from the Company, as adjusted as provided herein, one fully paid and nonassessable share of Common Stock of the Company at the Exercise Price (as defined herein) and accordingly, a maximum of 863,902 Warrants are being offered pursuant to, and upon the terms and conditions set forth in, the prospectus (the "Prospectus") of the Company which forms part of a registration statement on Form S-3 dated September 18, 1998 (SEC No. 333-63015), filed by the Company with the Securities and Exchange Commission (the "SEC") under the Securities Act of 1933, as amended (the "Act") (such registration statement, as amended, being referred to herein as the "Registration Statement"); and WHEREAS, the Warrants shall bear the legend set forth in the form of Warrant Certificate in Exhibit A attached hereto (the "Warrant Legend") subject to the terms of the Warrant Agreement; and WHEREAS, the Company desires the Warrant Agent to act on behalf of the Company, and the Warrant Agent is willing so to act, in connection with the issuance of Warrant certificates and other matters as provided herein. NOW, THEREFORE, in consideration of the premises and the mutual agreements herein set forth, the parties hereto agree as follows: 5 SECTION 1. Appointment of Warrant Agent. The Company hereby appoints the Warrant Agent to act as agent for the Company in accordance with the instructions set forth hereinafter in this Agreement, and the Warrant Agent hereby accepts such appointment SECTION 2. Issuance of Warrants. Warrants shall be originally issued, in accordance with Section 5, to each registered holder of the Notes as of September 8, 1998 who elected in a properly executed consent to certain amendments of the indenture governing the 12 3/4% Notes (the "12 3/4% Indenture"), the indenture governing the 11 1/2% Notes (the "11 1/2% Indenture") or the indenture governing the 10% Notes (the "10% Indenture", and together with the 12 3/4% Indenture and the 11 1/2% Indenture, the "Indentures"), prior to the expiration date of the Consent Solicitation, to apply the cash payment payable in respect of that consent to purchase the Warrants (each such registered holder, an "Electing Holder"). Issuance of the Warrants is conditional on (i) the Registration Statement being declared effective by the SEC and no stop order suspending the effectiveness of the Registration Statement having been issued by the SEC and (ii) the Warrant Agent receiving from each Electing Holder a confirmation, completed and executed in a manner reasonably satisfactory to the Company, acknowledging receipt of the Prospectus and confirming that Electing Holder's election to apply the cash payment to purchase Warrants. SECTION 3. Warrant Certificates. The certificates evidencing the Warrants to be delivered pursuant to this Agreement shall be in registered form only and shall be substantially in the form set forth in Exhibit A attached hereto. SECTION 4. Execution of Warrant Certificates. Warrant certificates shall be signed on behalf of the Company by its Chairman of the Board, Chief Executive Officer, President or Vice President and Secretary or an Assistant Secretary under its corporate seal. Each such signature upon the Warrant certificates may be in the form of a facsimile signature of the present or any future Chairman of the Board, Chief Executive Officer, President or Vice President and Secretary or Assistant Secretary and may be imprinted or otherwise reproduced on the Warrant certificates and for that purpose the Company may adopt and use the facsimile signature of any person who shall have been Chairman of the Board, Chief Executive Officer, President or Vice President and Secretary or Assistant Secretary, notwithstanding the fact that at the time the Warrant certificates shall be countersigned and delivered or disposed of he or she shall have ceased to hold such office, so long as, and the Company hereby represents that, under the Company's charter and by-laws, any Warrants or Warrant Shares so issued would be validly issued. The seal of the Company may be in the form of a facsimile thereof and may be impressed, affixed, imprinted or otherwise reproduced on the Warrant certificates. 2 6 In case any officer of the Company who shall have signed any of the Warrant certificates shall cease to be such officer before the Warrant certificates so signed shall have been countersigned by the Warrant Agent, or disposed of by the Company, such Warrant certificates nevertheless may be countersigned and delivered or disposed of as though such person had not ceased to be such officer of the Company; so long as, and the Company hereby represents that, under the Company's charter and by-laws, any Warrants or Warrant Shares so issued would be validly issued; and any Warrant certificate may be signed on behalf of the Company by any person who, at the actual date of the execution of such Warrant certificate, shall be a proper officer of the Company to sign such Warrant certificate, although at the date of the execution of this Warrant Agreement any such person was not such officer, so long as, and the Company hereby represents that, under the Company's charter and by-laws, any Warrants or Warrant Shares so issued would be validly issued. Warrant certificates shall be dated the date of countersignature by the Warrant Agent and shall represent one or more whole Warrants. SECTION 5. Registration and Countersignature. The Warrant Agent, on behalf of the Company, shall number and register the Warrant certificates in a register as they are issued by the Company. Warrant certificates shall be manually countersigned by the Warrant Agent and shall not be valid for any purpose unless so countersigned. The Warrant Agent shall, upon written instructions of the Chairman of the Board, Chief Executive Officer, President, Vice President and Secretary or Assistant Secretary of the Company, initially countersign and deliver Warrants entitling the holders thereof to purchase not more, nor less, than the number of Warrant Shares referred to above in the first recital hereof (but subject to adjustment as hereinafter provided) and shall countersign and deliver Warrants as otherwise provided in this Agreement. The Company and the Warrant Agent may deem and treat the registered holder(s) of the Warrant certificates as the absolute owner(s) thereof (notwithstanding any notation of ownership or other writing thereon made by anyone), for all purposes, and neither the Company nor the Warrant Agent shall be affected by any notice to the contrary. SECTION 6. Registration of Transfers and Exchanges. The Warrant Agent shall from time to time register the transfer of any outstanding Warrant certificates upon the records to be maintained by it for that purpose, upon surrender thereof accompanied by a written instrument or instruments of transfer in form satisfactory to the Warrant Agent, duly executed by the registered holder or holders thereof or by the duly appointed legal representative thereof or by a 3 7 duly authorized attorney. Upon any such registration of transfer, a new Warrant certificate shall be issued to the transferee(s) and the surrendered Warrant certificate shall be cancelled by the Warrant Agent. Cancelled Warrant certificates shall thereafter be disposed of by the Company in accordance with applicable law. Warrant certificates may be exchanged at the option of the holder(s) thereof, when surrendered to the Warrant Agent at its office for another Warrant certificate or other Warrant certificates of like tenor and representing in the aggregate a like number of Warrants. Warrant certificates surrendered for exchange shall be cancelled by the Warrant Agent. Such cancelled Warrant certificates shall then be disposed of by the Company in accordance with applicable law. No service charge shall be made for any transfer or exchange of Warrant certificates, but the Company may require payment of a sum sufficient to cover any stamp or other governmental charge or tax that may be imposed in connection with any such transfer or exchange. The Warrant Agent is hereby authorized to countersign, in accordance with the provisions of this Section 6, the new Warrant certificates issued pursuant to the provisions of this Section 6. SECTION 7. Terms of Warrants; Exercise of Warrants. Subject to the terms of this Agreement, each Warrant holder shall have the right, which may be exercised from the date of original issuance of the Warrant certificates pursuant to the terms of this Agreement and prior to 5:00 p.m. New York city time on the tenth anniversary thereof (the "Expiration Date"), to exercise each Warrant and receive from the Company the number of fully paid and nonassessable Warrant Shares which the holder may at the time be entitled to receive on exercise of such Warrants and payment of the Exercise Price (as herein defined) then in effect for such Warrant Shares; provided, however, that no Warrant holder shall be entitled to exercise such holder's Warrants at any time unless at the time of exercise the Registration Statement is effective under the Act, and no stop order suspending the effectiveness of the Registration Statement has been issued by the SEC; and provided, further, that if the Company or a holder of Warrants reasonably believes (as evidenced by notice to the Warrant Agent of such belief) that the exercise of any Warrant requires prior compliance with the Hart-Scott-Rodino Antitrust Improvements Act of 1976 and the rules and regulations thereunder, any such exercise shall be contingent upon such prior compliance as evidenced by notice from the Company to the Warrant Agent of such compliance. Each Warrant, when exercised will entitle the holder thereof to purchase one fully paid and nonassessable share of Common Stock at the Exercise Price. Each Warrant not exercised prior to the Expiration Date shall become void and all rights thereunder and all rights in respect thereof under this Agreement shall cease as of such time. 4 8 Save as expressly provided otherwise in this Agreement, no adjustments as to dividends will be made upon exercise of the Warrants. A Warrant may be exercised upon surrender to the Company at the principal corporate trust office of the Warrant Agent referred to in Section 21 (the "Warrant Agent Office") of the certificate or certificates evidencing the Warrants to be exercised with the form of election to purchase on the reverse thereof duly filled in and signed, which signature shall be guaranteed by an "eligible guarantor" as defined in the regulations promulgated under the Securities and Exchange Act of 1934, as amended (the "Exchange Act"), and upon payment to the Warrant Agent for the account of the Company of the exercise price of $[______](2) (the "Exercise Price"), as adjusted as herein provided, for each Warrant Share then exercised. Payment of the aggregate Exercise Price shall be made (i) in United States dollars or (ii) by certified or official bank check payable to the order of the Company. In lieu of the payment of the Exercise Price as aforesaid, the holder of a Warrant may request the payment of "Spread", which shall be delivered by the Company by delivering Common Stock with an aggregate current market price (as of the date of receipt of the request by the Company) equal to the difference between the current market price of per share of Common Stock less the Exercise Price multiplied by the number of Warrants being exercised. Subject to the provisions of Section 9 hereof, upon such surrender of Warrants and payment of the Exercise Price, the Company shall issue and cause to be delivered with all reasonable dispatch to or upon the written order of the holder and in such name or names, as the Warrant holder may designate, a certificate or certificates for the number of full Warrant Shares issuable upon the exercise of such Warrants together with cash as provided in Section 15 hereof; provided, however, that if any consolidation, merger or lease or sale of assets is proposed to be effected by the Company as described in subsection (l) of Section 13 hereof, or a tender offer or an exchange offer for shares of Common Stock of the Company shall be made, upon such surrender of Warrants and payment of the Exercise Price as aforesaid, the Company shall, as soon as possible, but in any event not later than two business days thereafter, issue and cause to be delivered the full number of Warrant Shares issuable upon the exercise of such Warrants in the manner described in this sentence together with cash as provided in Section 15 hereof. Such certificate or certificates shall be deemed to have been issued and any person so designated to be named therein shall be deemed to have become a holder of record of such Warrant Shares as of the date of the surrender of such Warrants and payment of the Exercise Price. No fractional shares shall be issued upon exercise of any Warrants in accordance with Section 15 hereof. The Warrants shall be exercisable, at the election of the holders thereof, either in full or from time to time in part (in whole shares) and, in the event that a certificate evidencing Warrants is exercised in respect of fewer than all of the Warrant Shares issuable on such exercise at any time prior to the date of - -------- (2) The initial Exercise Price shall be the current market price per share of Common Stock (determined in accordance with Section 13(f)) on the date of original issuance of the Warrants. 5 9 expiration of the Warrants, a new certificate evidencing the remaining Warrant or Warrants will be issued, and the Warrant Agent is hereby irrevocably authorized to countersign and to deliver the required new Warrant certificate or certificates pursuant to the provisions of this Section and of Section 5 hereof, and the Company, whenever required by the Warrant Agent, will supply the Warrant Agent with Warrant certificates duly executed on behalf of the Company for such purpose. All Warrant certificates surrendered upon exercise of Warrants shall be cancelled by the Warrant Agent. Such cancelled Warrant certificates shall then be disposed of by the Company in accordance with applicable law. The Warrant Agent shall account promptly to the Company with respect to Warrants exercised and concurrently pay to the Company all monies received by the Warrant Agent for the purchase of the Warrant Shares through the exercise of such Warrants. The Warrant Agent shall keep copies of this Agreement, the SEC Reports (as defined below) and any notices given or received hereunder available for inspection by the holders of the Warrants during normal business hours at its office. The Company shall supply the Warrant Agent from time to time with such numbers of copies of this Agreement as the Warrant Agent may request. SECTION 8. Reports. So long as any of the Warrants remain outstanding, the Company shall cause copies of all quarterly and annual financial reports and of the information, documents and other reports (or copies of such portions of any of the foregoing as the SEC may by rules and regulations prescribe) that the Company is required to file with the SEC pursuant to Section 13 or 15(d) of the Exchange Act in effect on the date of this Agreement ("SEC Reports") to be filed with the Warrant Agent and mailed to the holders of Warrants who have previously delivered to the Company or the Warrant Agent a written request for SEC Reports, in each case, within 15 days after filing with the SEC. If the Company is not subject to the requirements of Section 13 or 15(d) of the Exchange Act, the Company shall nevertheless continue to cause SEC Reports, in form and substance (including footnotes) substantially the same as those that it would be required to file pursuant to Section 13 or 15(d) of the Exchange Act as in effect on the date of this Agreement if it were then subject to the requirements of either such Section, to be so filed with the SEC for public availability (unless the SEC will not accept such a filing) and with the Warrant Agent and mailed to the holders of Warrants, in each case, within the same time periods as would have applied (including under the preceding sentence) had the Company then been subject to the requirements of Section 13 or 15(d) of the Exchange Act. The Company shall make all such information available to investors, securities analysts and broker dealers who request it in writing. 6 10 SECTION 9. Payment of Taxes. No service charge shall be made to any holder of a Warrant for any exercise, exchange or registration of transfer of Warrant certificates, and the Company will pay all documentary stamp taxes attributable to the initial issuance of Warrant Shares upon the exercise of Warrants; provided, however, that the Company shall not be required to pay any tax or taxes which may be payable in respect of any transfer involved in the issue of any Warrant certificates or any certificates for Warrant Shares in a name other than that of the registered holder of a Warrant certificate surrendered upon the exercise of a Warrant, and the Company shall not be required to issue or deliver such Warrant certificates unless or until the person or persons requesting the issuance thereof shall have paid to the Company the amount of such tax or shall have established to the satisfaction of the Company that such tax has been paid. SECTION 10. Mutilated or Missing Warrant Certificates. If any of the Warrant certificates shall be mutilated, lost, stolen or destroyed, the Company shall issue and the Warrant Agent shall countersign, in exchange and substitution for and upon cancellation of the mutilated Warrant certificate, or in lieu of and substitution for the Warrant certificate lost, stolen or destroyed, a new Warrant certificate of like tenor and representing an equivalent number of Warrants, but only upon receipt of evidence reasonably satisfactory to the Company and the Warrant Agent of such loss, theft or destruction of such Warrant certificate and such indemnity and security therefor as is customary and reasonably satisfactory to them, if requested. Applicants for such substitute Warrant shall also comply with such other reasonable regulations and pay such other reasonable charges as the Company or the Warrant Agent may prescribe. SECTION 11. Reservation of Warrant Shares. The Company will at all times reserve and keep available, free from preemptive rights, out of the aggregate of its authorized but unissued Common Stock, for the purpose of enabling it to satisfy any obligation to issue Warrant Shares upon exercise of Warrants, the maximum number of shares of Common Stock which may then be deliverable upon the exercise of all outstanding Warrants. The Company or the transfer agent for the Common Stock and every subsequent transfer agent for any shares of the Company's capital stock issuable upon the exercise of any of the rights of purchase represented by the Warrants as aforesaid (the "Transfer Agent") will be irrevocably authorized and directed at all times to reserve such number of authorized shares as shall be required for such purpose. The Company will keep a copy of this Agreement on file with the Transfer Agent for any shares of the Company's capital stock issuable upon the exercise of the rights of purchase represented by the Warrants. The Warrant Agent is hereby irrevocably authorized to requisition from time to time from such Transfer Agent the stock certificates required to honor outstanding Warrants upon exercise thereof in accordance with the terms of this Agreement. 7 11 The Company will supply such Transfer Agent with duly executed certificates for such purposes and will provide or otherwise make available any cash which may be payable as provided in Section 15 hereof. The Company will furnish such Transfer Agent a copy of all notices of adjustments and certificates related thereto, transmitted to each holder pursuant to Section 16 hereof. Before taking any action which would cause an adjustment pursuant to Section 13 hereof to reduce the Exercise Price below the then par value (if any) of the Warrant Shares, the Company will take all corporate action necessary, in the opinion of its counsel (which may be counsel employed by the Company), in order that the Company may validly and legally issue fully paid and nonassessable Warrant Shares at the Exercise Price as so adjusted. The Company covenants that all Warrant Shares which may be issued upon exercise of Warrants will be, upon payment of the Exercise Price and issuance thereof, fully paid, nonassessable, free of preemptive rights and free from all taxes, liens, charges and security interests with respect to the issue thereof. SECTION 12. Obtaining Stock Exchange Listings. The Company shall also from time to time take all action necessary so that the Warrant Shares, immediately upon their issuance upon the exercise of Warrants, will be listed on the Nasdaq Stock Market National Market or such other principal securities exchanges, interdealer quotation systems and markets within the United States of America, if any, on which other shares of Common Stock are then listed or quoted. SECTION 13. Adjustment of Exercise Price and Number of Warrant Shares Issuable. The Exercise Price and the number of Warrant Shares issuable upon the exercise of each Warrant are subject to adjustment from time to time upon the occurrence of the events enumerated in this Section 13. For purposes of this Section 13, "Common Stock" means the Common Stock and any other stock of the Company, however designated, for which the Warrants may be exercisable. (a) Adjustment for Change in Capital Stock. If, after the date of this Agreement, the Company: (1) pays a dividend or makes a distribution on its Common Stock in shares of its Common Stock; (2) subdivides its outstanding shares of Common Stock into a greater number of shares; 8 12 (3) combines its outstanding shares of Common Stock into a smaller number of shares; (4) makes a distribution on its Common Stock in shares of its capital stock other than Common Stock; or (5) issues by reclassification of its Common Stock any shares of its capital stock, then the Exercise Price and the number and kind of shares of capital stock of the Company issuable upon the exercise of a Warrant shall be proportionately adjusted so that the holder of any Warrant thereafter exercised may receive the aggregate number and kind of shares of capital stock of the Company which he would have owned immediately following such action if such Warrant had been exercised immediately prior to such action. The adjustment shall become effective immediately after the record date in the case of a dividend or distribution and immediately after the effective date in the case of a subdivision, combination or reclassification. If after an adjustment a holder of a Warrant upon exercise may receive shares of two or more classes or series of capital stock of the Company, the Company shall determine the allocation of the adjusted Exercise Price between the classes or series of capital stock based on the relative fair market values (determined in good faith by the Board of Directors of the Company) of such class or classes of capital stock. After such allocation, the exercise privilege and the Exercise Price of each class or series of capital stock shall thereafter again be subject to adjustment on the terms applicable to Common Stock in this Section 13. Such adjustment shall be made successively whenever any event listed above shall occur. (b) Adjustment for Rights Issue. If, after the date of this Agreement, the Company distributes any options, warrants or other rights (however classified) to all holders of its Common Stock entitling them for a period expiring within 60 days after the record date mentioned below to purchase shares of Common Stock or securities convertible into, or exchangeable or exercisable for, Common Stock at a price per share (or with an initial conversion, exchange or exercise price) less than the current market price per share on that record date, the Exercise Price shall be adjusted in accordance with the following formula: 9 13 N x P O + ----- M E' = E x ----------- O + N where: E' = the adjusted Exercise Price. E = the current Exercise Price. O = the number of shares of Common Stock outstanding on the record date. N = the number of additional shares of Common Stock offered. P = the offering price per share of the additional shares. M = the current market price per share of Common Stock on the record date. The adjustment shall be made successively whenever any such options, warrants or other rights (however classified) are issued and shall become effective immediately after the record date for the determination of stockholders entitled to receive the options, warrants or other rights (however classified). If at the end of the period during which such rights, options or warrants are exercisable, not all options, warrants or other rights (however classified) shall have been exercised, the Exercise Price shall be immediately readjusted to what it would have been if "N" in the above formula had been the number of shares actually issued. (c) Adjustment for Other Distributions. If, after the date of this Agreement, the Company distributes to all holders of its Common Stock, or securities convertible into, or exchangeable for, Common Stock (other than, in the case of such securities, pursuant to the stated terms of such securities) any of its assets (including cash), debt securities, preferred stock or any options, warrants or other rights to purchase debt securities, assets or other securities of the Company, the Exercise Price shall be adjusted in accordance with the following formula: 10 14 M - F E' = E x ------- M where: E' = the adjusted Exercise Price. E = the current Exercise Price. M = the current market price per share of Common Stock on the record date mentioned below. F = the fair market value on the record date of the assets, securities, rights or warrants applicable to one share of Common Stock. The Board of Directors shall determine the fair market value. The adjustment shall be made successively whenever any such distribution is made and shall become effective immediately after the record date for the determination of stockholders entitled to receive the distribution. This subsection (c) does not apply to: (i) options, warrants or other rights referred to in subsection (b) of this Section 13; (ii) securities convertible into or exchangeable for shares of Common Stock referred to in sub-section (e) of this Section 13; (iii) a dividend payable in shares of Common Stock, or (iv) any cash dividend that, when added to all other cash dividends paid in the 12 months prior to the declaration date of such dividend (excluding any such other dividend included in a previous adjustment of the Exercise Price pursuant to this sub-section (c)), does not exceed 5% of the current market price of such Common Stock. (d) Adjustment for Common Stock Issue. If, after the date of this Agreement, the Company issues shares of Common Stock for a consideration per share less than the current market price per share of Common Stock on the date the Company fixes the offering price of such additional shares, the Exercise Price shall be adjusted in accordance with the formula: P O + ----- M E' = E x ----------- A 11 15 E' = the adjusted Exercise Price. E = the then current Exercise Price. O = the number of shares of Common Stock outstanding immediately prior to the issuance of such additional shares. P = the aggregate consideration received for the issuance of such additional shares. M = the current market price per share of Common Stock on the date of issuance of such additional shares. A = the number of shares of Common Stock outstanding immediately after the issuance of such additional shares. The adjustment shall be made successively whenever any such issuance is made, and shall become effective immediately after such issuance. This subsection (d) does not apply to: (1) any of the transactions described in subsections (a), (b) and (c) of this Section 13, (2) the exercise of Warrants or other warrants outstanding on the date of this Agreement, or the conversion or exchange of other securities outstanding on the date of this Agreement which are convertible into or exchangeable for Common Stock, (3) Common Stock issued to the Company's employees, consultants or directors under bona fide stock option or purchase plans or benefit plans adopted or assumed by the Board of Directors or the Company's Compensation Committee, (4) Common Stock issuable upon the exercise of rights or warrants issued to the holders of Common Stock for which adjustment was made previously pursuant to subsections (b) or (c) of this Section 13, (5) Common Stock issued to shareholders of any person which merges into the Company in proportion to their stock holdings of such person immediately prior to such merger, upon such merger, 12 16 (6) Common Stock issued in a bona fide public offering pursuant to a firm commitment underwriting, (7) Common Stock issued in a bona fide private placement through a placement agent or a bona fide private offering through initial purchasers pursuant to an exemption from, or in transactions not subject to, the registration requirements of the Act and applicable state securities laws, where the placement agent or, as the case may be, each of the initial purchasers is a member firm of the National Association of Securities Dealers, Inc. to persons that are not Affiliates (as defined in the Indentures) of the Company (except to the extent that any discount from the current market price attributable to restrictions on transferability of the Common Stock, as determined in good faith by the Board of Directors and described in a Board resolution which shall be filed with the Warrant Agent, shall exceed 15%), (8) Common Stock issued to Affiliates of the Company simultaneous with, and resulting in at least the same net proceeds per share of Common Stock to the Company as, an issuance referred to in paragraphs (6) or (7) of this Section 13(d), provided that Affiliates of the Company do not purchase in the aggregate more than 15% of the shares of Common Stock issued pursuant to paragraph (7) of this Section 13(d), (9) Such shares of Common Stock as may become issuable upon the exercise of any of the securities referred to in the paragraphs (1) through (4) of this Section 13(d) by reason of adjustments required pursuant to anti-dilution provisions applicable to such securities as in effect on the date hereof, but only if and to the extent that such adjustments are required as the result of the original issuance of the Warrants, or (10) Such shares of Common Stock as may become issuable upon the exercise of any of the securities referred to in the paragraphs (2) through (4) of this Section 13(d) by reason of adjustments required pursuant to anti-dilution provisions applicable to such securities as in effect on the date hereof, in order to reflect any subdivision or combination of Common Stock, by reclassification or otherwise, or any dividend on Common Stock payable in Common Stock. (e) Adjustment for Convertible Securities Issue. If, after the date of this Agreement, the Company issues any securities convertible into or exchangeable for Common Stock (other than securities issued in transactions described in subsections (a), (b) and (c) of this 13 17 Section 13) for a consideration per share of Common Stock initially deliverable upon conversion or exchange of such securities less than the current market price per share of Common Stock on the date of issuance of such securities, the Exercise Price shall be adjusted in accordance with this formula: where: P O + ----- M E(1) = E x ----------- O + D E(1) = the adjusted Exercise Price. E = the then current Exercise Price. O = the number of shares of Common Stock outstanding immediately prior to the issuance of such securities. P = the aggregate consideration received for the issuance of such securities. M = the current market price per share on the date of issuance of such securities. D = the maximum number of shares of Common Stock deliverable upon conversion of or in exchange for such securities at the initial conversion or exchange rate. The adjustment shall be made successively whenever any such issuance is made, and shall become effective immediately after such issuance, provided that (a) no further adjustment of the Exercise Price shall be made upon the subsequent issue or sale of shares of Common Stock upon the conversion or exchange of such convertible securities, except in the case of any such convertible securities which contain provisions requiring an adjustment, subsequent to the date of the issue or sale thereof, of the number of shares of Common Stock issuable upon the conversion or exchange of such convertible securities by reason of (x) a change of control of the Company, (y) the acquisition by any Person or group of Persons of any specified number or percentage of the voting securities of the Company or (z) any similar event or occurrence, each such case to be deemed hereunder to involve a separate issuance of shares of Common Stock, or convertible securities, as the case may be; and (b) if such convertible securities by 14 18 their terms provide, with the passage of time or otherwise, for any increase in the consideration payable to the Company, or decrease in the number of shares of common stock issuable, upon the exercise, conversion or exchange thereof (by change of rate or otherwise), the Exercise Price computed upon the original issue, sale, grant or assumption thereof, and any subsequent adjustments based thereon, shall, upon any such increase or decrease becoming effective, be recomputed to reflect such increase or decrease insofar as it affects the rights of conversion or exchange under such convertible securities, which are outstanding at such time. If all of the Common Stock deliverable upon conversion or exchange of such securities has not been issued when such securities are no longer outstanding, then the Exercise Price shall promptly be readjusted to the Exercise Price that would then be in effect had the adjustment upon the issuance of such securities been made on the basis of the actual number of shares of Common Stock issued upon conversion or exchange of such securities. This subsection (e) does not apply to: (1) convertible securities issued to shareholders of any person which merges into the Company, or with a subsidiary of the Company, in proportion to their stock holdings of such person immediately prior to such merger, upon such merger, (2) convertible securities issued in a bona fide public offering pursuant to a firm commitment underwriting; (3) convertible securities issued in a bona fide private placement through a placement agent or a bona fide private offering through initial purchasers pursuant to an exemption from, or in transactions not subject to, the registration requirements of the Act and applicable state securities laws, where the placement agent or, as the case may be, each of the initial purchasers is a member firm of the National Association of Securities Dealers, Inc. (except to extent that any discount from the current market price attributable to restrictions on transferability of Common Stock issuable upon conversion, as determined in good faith by the Board of Directors and described in a resolution of the Board of Directors which shall be filed with the Warrant Agent, shall exceed 15%) or (4) stock options issued to the Company's employees, consultants or directors under bona fide stock option or purchase plans or benefit plans adopted or assumed by the Board of Directors or the Company's Compensation Committee. 15 19 (f) Current Market Price. All references in subsections (b), (c), (d) and (e) of this Section 13 and in Section 7 and Section 15 to "the current market price per share of Common Stock" on any date mean the average of the Quoted Prices of the Common Stock for 30 consecutive trading days commencing 45 trading days before the date in question. The "Quoted Price" of the Common Stock is the last reported sales price of the Common Stock as reported by the Nasdaq Stock Market's National Market ("Nasdaq") or if the Common Stock is listed on a securities exchange, the last reported sales price of the Common Stock on such exchange which shall be for consolidated trading if applicable to such exchange, or if not so reported or listed, the last reported bid price of the Common Stock. If prices of the Common Stock are not so reported or the Common Stock is not quoted on Nasdaq or listed on a securities exchange, then the references in those subsections to "the current market price per share of Common Stock" shall mean the fair market value of a share of Common Stock as determined by the Board of Directors of the Company on such basis as it in good faith considers appropriate (without regard to any illiquidity or minority discounts). (g) Consideration Received. For purposes of any computation respecting consideration received pursuant to subsections (d) and (e) of this Section 13, the following shall apply: (1) in the case of the issuance of shares of Common Stock for cash, the consideration shall be the amount of such cash, provided that in no case shall any deduction be made for any commissions, discounts or other expenses incurred by the Company for any underwriting of the issue or otherwise in connection therewith; (2) in the case of the issuance of shares of Common Stock for a consideration in whole or in part other than cash, the consideration other than cash shall be deemed to be the fair market value thereof as determined in good faith by the disinterested members of the Board of Directors (irrespective of the accounting treatment thereof), whose determination shall be conclusive (absent manifest error), and described in a resolution of the Board of Directors which shall be filed with the Warrant Agent; and (3) in the case of the issuance of securities convertible into or exchangeable for shares, the aggregate consideration received therefor shall be deemed to be the consideration received by the Company for the issuance of such securities plus the additional minimum consideration, if any, to be received by the Company upon the conversion 16 20 or exchange thereof (the consideration in each case to be determined in the same manner as provided in clauses (1) and (2) of this subsection). (h) When De Minimis Adjustment May Be Deferred. No adjustment in the Exercise Price need be made unless the adjustment would require an increase or decrease of at least l% in the Exercise Price. Any adjustments that are not made shall be carried forward and taken into account in any subsequent adjustment. All calculations under this Section 13 shall be made to the nearest cent or to the nearest 1/100th of a share, as the case may be. (i) When No Adjustment Required. No adjustment need be made for a transaction referred to in subsections (a), (b), (c), (d) or (e) of this Section 13 if Warrant holders are to participate in the transaction on a basis and with notice that the Board of Directors determines to be fair and appropriate in light of the basis and notice on which holders of Common Stock participate in the transaction. No adjustment need be made for rights to purchase Common Stock purchased at the fair market value thereof (determined in good faith by the Board of Directors of the Company) pursuant to any of the Company's plans for reinvestment of dividends or interest. No adjustment need be made for a change in the par value, or from par value to no par value, or from no par value to par value, of the Common Stock. To the extent the Warrants become convertible into cash, no adjustment need be made thereafter as to the cash. Interest will not accrue on the cash. (j) Notice of Adjustment. Whenever the Exercise Price is adjusted, the Company shall provide the notices required by Section 16 hereof. (k) Voluntary Reduction. The Company from time to time may, as the Board of Directors deems appropriate, reduce the Exercise Price by any amount for any period of time if the period is at least 20 days and if the reduction is irrevocable during the 17 21 period; provided, however, that in no event may the Exercise Price be less than the par value of a share of Common Stock. Whenever the Exercise Price is reduced, the Company shall mail to Warrant holders a notice of the reduction. The Company shall mail the notice at least 15 days before the date the reduced Exercise Price takes effect. The notice shall state the reduced Exercise Price and the period it will be in effect. A reduction of the Exercise Price pursuant to this Section 13(k), other than a reduction which the Company has irrevocably committed will be in effect for so long as any Warrants are outstanding, does not change or adjust the Exercise Price otherwise in effect for purposes of subsections (a), (b), (c), (d) and (e) of this Section 13. (l) Reorganization of the Company. (1) If the Company consolidates or merges with or into, or transfers or leases all or substantially all of its assets to, any person, upon consummation of such transaction the Warrants shall automatically become exercisable for the kind and amount of securities, cash or other assets which the holder of a Warrant would have owned immediately after the consolidation, merger, transfer or lease if the holder had exercised the Warrant immediately before the effective date of the transaction. Concurrently with the consummation of such transaction, the corporation formed by or surviving any such consolidation or merger if other than the Company, or the person to which such sale or conveyance shall have been made (any such person, the "Successor Guarantor"), shall enter into a supplemental Warrant Agreement so providing and further providing for adjustment which shall be as nearly equivalent as may be practical to the adjustments provided for in this Section 13. The Successor Guarantor shall mail to Warrant holders a notice describing the supplemental Warrant Agreement. If the issuer of securities deliverable upon exercise of Warrants under the supplemental Warrant Agreement is an affiliate of the formed, surviving, transferee or lessee corporation, that issuer shall join in the supplemental Warrant Agreement . (2) Notwithstanding paragraph (1) of this Section 13(l), in the case of any merger, reverse stock split, or other transaction in which the publicly held Common Stock shall be converted into the right to receive a consideration consisting solely of cash, (A) this Warrant Agreement and each Warrant shall terminate and (B) each holder of a Warrant, without having to take any other action than the surrendering of such Warrant to the Company, shall receive an amount equal to the amount (if any) by which the price per share payable to, or which would be received by, any public 18 22 holder of Common Stock in connection with such transaction exceeds the Exercise Price effective at that time. (3) If this subsection (l) applies, subsections (a), (b), (c), (d) and (e) of this Section 13 do not apply. (m) The Company Determination Final. Any determination that the Company or the Board of Directors must make pursuant to subsection (c), (d), (e), (f), (g) or (i) of this Section 13 is (absent manifest error) conclusive if such determination is made in good faith. (n) Warrant Agent's Disclaimer. The Warrant Agent has no duty to determine when an adjustment under this Section 13 or Section 14 should be made, how it should be made or what it should be. The Warrant Agent has no duty to determine whether any provisions of a supplemental Warrant Agreement under subsection (l) of this Section 13 are correct. The Warrant Agent makes no representation as to the validity or value of any securities or assets issued upon exercise of Warrants. The Warrant Agent shall not be responsible for the Company's failure to comply with this Section 13 or Section 14. (o) When Issuance or Payment May Be Deferred. In any case in which this Section 13 shall require that an adjustment in the Exercise Price be made effective as of a record date for a specified event, the Company may elect to defer until the occurrence of such event (i) issuing to the holder of any Warrant exercised after such record date the Warrant Shares and other capital stock of the Company, if any, issuable upon such exercise over and above the Warrant Shares and other capital stock of the Company, if any, issuable upon such, exercise on the basis of the Exercise Price and (ii) paying to such holder any amount in cash in lieu of a fractional share pursuant to Section 15 hereof; provided, however, that the Company shall deliver to such holder a due bill or other appropriate instrument evidencing such holder's right to receive such additional Warrant Shares, other capital stock and cash upon the occurrence of the event requiring such adjustment. (p) Adjustment in Number of Shares. Upon each adjustment of the Exercise Price pursuant to this Section 13, each Warrant outstanding prior to the making of the adjustment in the Exercise Price shall thereafter evidence the right to receive upon payment of the adjusted 19 23 Exercise Price that number of shares of Common Stock (calculated to the nearest hundredth) obtained from the following formula: E N' = N x ---- E' where: N' = the adjusted number of Warrant Shares issuable upon exercise of a Warrant by payment of the adjusted Exercise Price. N = the number of Warrant Shares previously issuable upon exercise of a Warrant by payment of the Exercise Price prior to adjustment. E' = the adjusted Exercise Price. E = the Exercise Price prior to adjustment. (q) Form of Warrants. Irrespective of any adjustments in the Exercise Price or the number or kind of shares purchasable upon the exercise of the Warrants, Warrants theretofore or thereafter issued may continue to express the same price and number and kind of shares as are stated in the Warrants initially issuable pursuant to this Agreement. SECTION 14. No Dilution or Impairment. (a) If any event shall occur as to which the provisions of Section 13 are not strictly applicable but the failure to make any adjustment would adversely affect the purchase rights represented by the Warrants in accordance with the essential intent and principles of such Section, then, in each such case, the Company shall appoint a firm of independent certified public accountants of recognized national standing (which may be the regular auditors of the Company), which shall give their opinion upon the adjustment, if any, on a basis consistent with the essential intent and principles established in Section 13, necessary to preserve, without dilution or impairment, the purchase rights, represented by this Warrant. Upon receipt of such opinion, the Company will promptly mail a copy thereof to the Warrant Agent and the holders of the Warrants and shall make the adjustments described therein. (b) The Company will not, by amendment of its certificate of incorporation or through any consolidation, merger, reorganization, transfer of assets, dissolution, issue or sale of securities or any other voluntary action, avoid 20 24 or seek to avoid the observance or performance of any of the terms of the Warrants, but will at all times in good faith assist in the carrying out of all such terms and in the taking of all such action as may be necessary or appropriate in order to protect the rights of the holder of the Warrants against dilution or other impairment. Without limiting the generality of the foregoing, the Company (i) will take all such action as may be necessary or appropriate in order that the Company may validly and legally issue fully paid and nonassessable shares of Common Stock on the exercise of the Warrants from time to time outstanding and (ii) will not take any action which results in any adjustment of the Exercise Price if the total number of Warrant Shares issuable after the action upon the exercise of all of the Warrants would exceed the total number of shares of Common Stock then authorized by the Company's certificate of incorporation and available for the purposes of issue upon such exercise. A consolidation, merger, reorganization or transfer of assets involving the Company covered by Section 13(l) shall not be prohibited by or require any adjustment under this Section 14. SECTION 15. Fractional Interests. The Company shall not be required to issue fractional Warrant Shares on the exercise of Warrants. If more than one Warrant shall be presented for exercise in full at the same time by the same holder, the number of full Warrant Shares which shall be issuable upon the exercise thereof shall be computed on the basis of the aggregate number of Warrant Shares purchasable on exercise of the Warrants so presented. If any fraction of a Warrant Share would, except for the provisions of this Section 15, be issuable on the exercise of any Warrants (or specified portion thereof), the Company shall notify the Warrant Agent in writing of the Amount to be paid in lieu of the fraction of a Warrant Share and concurrently pay or provide to the Warrant Agent for repayment to the Warrant holder an amount in cash equal to the product of (i) such fraction of a Warrant Share and (ii) the difference of the current market price of a share of Common Stock over the Exercise Price. SECTION 16. Notices to Warrant Holders. Upon any adjustment of the Exercise Price pursuant to Section 13 hereof, the Company shall within 15 days thereafter (i) cause to be filed with the Warrant Agent a certificate of a firm of independent public accountants of recognized national standing selected by the Board of Directors of the Company (which may be the regular auditors of the Company) setting forth the Exercise Price after such adjustment and setting forth in reasonable detail the method of calculation and the facts upon which such calculations are based and setting forth the number of Warrant Shares (or portion thereof) issuable after such adjustment in the Exercise Price, upon exercise of a Warrant and payment of the adjusted Exercise Price, which certificate shall be conclusive evidence of the correctness of the matters set forth therein, and (ii) cause to be given to each of the registered holders of the Warrant certificates at such registered holder's address appearing on the Warrant register written notice of such adjustments by first-class mail, postage prepaid. Where appropriate, such 21 25 notice may be given in advance and included as a part of the notice required to be mailed under the other provisions of this Section 16. In case: (a) The Company shall authorize the issuance to all holders of shares of Common Stock of options, warrants or other rights (howsoever classified) to subscribe for or purchase shares of Common Stock or of any other subscription rights or warrants; or (b) The Company shall authorize the distribution to all holders of shares of Common Stock of evidences of its indebtedness or assets (other than cash dividends or cash distributions payable out of consolidated earnings or earned surplus or dividends payable in shares of Common Stock or distributions referred to in subsection (a) of Section 13 hereof); or (c) of any consolidation or merger to which the Company is a party and for which approval of any shareholders of the Company is required, or of the conveyance or transfer of the properties and assets of the Company substantially as an entirety, or of any reclassification or change of Common Stock issuable upon exercise of the Warrants (other than a change in par value, or from par value to no par value, or from no par value to par value, or as a result of a subdivision or combination), or a tender offer or exchange offer for shares of Common Stock; or (d) of the voluntary or involuntary dissolution, liquidation or winding up of the Company; or (e) The Company proposes to take any action (other than actions of the character described in Section 13(a)) which would require an adjustment of the Exercise Price pursuant to Section 13; then, in each case, the Company shall cause to be filed with the Warrant Agent and shall cause to be given to each of the registered holders of the Warrant certificates at his address appearing on the Warrant register, at least 20 days (or 10 days in any case specified in clauses (a) or (b) above) prior to the applicable record date hereinafter specified, or promptly in the case of events for which there is no record date, by first-class mail, postage prepaid, a written notice stating (i) the date as of which the holders of record of shares of Common Stock to be entitled to receive any such rights, options, warrants or distribution are to be determined, or (ii) the initial expiration date set forth in any tender offer or exchange offer for shares of Common Stock, or (iii) the date on which any such consolidation, merger, conveyance, transfer, dissolution, liquidation or winding up is expected to become effective or consummated, and the date as of which it is expected that holders of record of shares of Common Stock shall be entitled to exchange such shares for 22 26 securities or other property, if any, deliverable upon such reclassification, consolidation, merger, conveyance, transfer, dissolution, liquidation or winding up. The failure to give the notice required by this Section 16 or any defect therein shall not affect the legality or validity of any distribution, right, option, warrant, consolidation, merger, conveyance, transfer, lease, dissolution, liquidation or winding up, or the vote upon any action. Nothing contained in this Agreement or in any of the Warrant Certificates shall be construed as conferring upon the holders thereof the right to vote or to consent or to receive notice as shareholders in respect of the meetings of shareholders or the election of Directors of the Company or any other matter, or any rights whatsoever as shareholders of the Company. SECTION 17. Merger, Consolidation or Change of Name of Warrant Agent. Any corporation into which the Warrant Agent may be merged or converted or with which it may be consolidated, or any corporation resulting from any merger, conversion or consolidation to which the Warrant Agent shall be a party, or any corporation succeeding to all or substantially all of the corporate trust or agency business of the Warrant Agent, shall be the successor to the Warrant Agent hereunder without the execution or filing of any paper or any further act on the part of any of the parties hereto. If, at the time such successor to the Warrant Agent by merger or consolidation succeeds to the agency created by this Agreement, any of the Warrant certificates shall have been countersigned but not delivered, any such successor to the Warrant Agent may adopt the countersignature of the original Warrant Agent; and if, at that time any of the Warrant certificates shall not have been countersigned, any such successor to the Warrant Agent may countersign such Warrant certificates either in the name of the predecessor Warrant Agent or in the name of the successor to the Warrant Agent; and in all such cases such Warrant certificates shall have the full force and effect provided in the Warrant certificates in this Agreement. SECTION 18. Warrant Agent. The Warrant Agent undertakes the duties and obligations imposed by this Agreement upon the following terms and conditions, by all of which the Company and the holders of Warrants, by their acceptance thereof, shall be bound: (a) The statements contained herein and in the Warrant Certificates shall be taken as statements of the Company. The Warrant Agent assumes no responsibility for the correctness of any of the same except such as describe the Warrant Agent or action taken or to be taken by it. The Warrant Agent assumes no responsibility with respect to the distribution of the Warrant certificates except as herein otherwise provided. 23 27 (b) The Warrant Agent shall not be responsible for any failure of the Company to comply with any of the covenants contained in this Agreement or in the Warrant certificates to be complied with by the Company. (c) The Warrant Agent may consult at any time with counsel satisfactory to it (who may be counsel for the Company) and the Warrant Agent shall incur no liability or responsibility to the Company or to any holder of any Warrant certificate in respect of any action taken, suffered or omitted by it hereunder in good faith and in accordance with the opinion or the advice of such counsel. (d) The Warrant Agent shall incur no liability or responsibility to the Company or to any holder of any Warrant certificate for any action taken in reliance on any Warrant certificate, certificate of shares, notice, resolution, waiver, consent, order, certificate, or other paper, document or instrument believed by it to be genuine and to have been signed, sent or presented by the proper party or parties. The Warrant Agent shall not be bound by any notice or demand, or any waiver, modification, termination or revision of this Agreement or any of the terms hereof, unless evidenced by a writing between the Company and the Warrant Agent. (e) The Company agrees to pay to the Warrant Agent reasonable compensation for all services rendered by the Warrant Agent in the execution of this Agreement, to reimburse the Warrant Agent for all expenses (including reasonable counsel fees), taxes (including withholding taxes) and governmental charges and other charges of any kind and nature incurred by the Warrant Agent in the execution, delivery and performance of its responsibilities under this Agreement and to indemnify the Warrant Agent and save it harmless against any and all liabilities, including judgments, costs and counsel fees, for anything done or omitted by the Warrant Agent in the execution, delivery and performance of its responsibilities under this Agreement except as a result of its negligence or bad faith. (f) The Warrant Agent, shall be under no obligation to institute any action, suit or legal proceeding or to take any other action likely to involve expense unless the Company or one or more registered holders of Warrant certificates shall furnish the Warrant Agent with reasonable security and indemnity for any costs and expenses which may be incurred, but this provision shall not affect the power of the Warrant Agent to take such action as it may consider proper, whether with or without any such security or indemnity. All rights of action under this Agreement or under any of the Warrants may be enforced by the Warrant Agent without the 24 28 possession of any of the Warrant certificates or the production thereof at any trial or other proceeding relative thereto, and any such action, suit or proceeding instituted by the Warrant Agent shall be brought in its name as Warrant Agent and any recovery of judgment shall be for the ratable benefit of the registered holders of the Warrants, as their respective rights or interests may appear. (g) Except as required by law, the Warrant Agent, and any stockholder, director, officer or employee of the Warrant Agent, may buy, sell or deal in any of the Warrants or other securities of the Company or become pecuniarily interested in any transaction in which the Company may be interested, or contract with or lend money to the Company or otherwise act as fully and freely as though it were not Warrant Agent under this Agreement. Nothing herein shall preclude the Warrant Agent from acting in any other capacity for the Company or for any other legal entity. (h) The Warrant Agent shall act hereunder solely as agent for the Company, and its duties shall be determined solely by the express provisions hereof. The Warrant Agent shall not be liable for anything which it may do or refrain from doing in connection with this Agreement, except for its own negligence or bad faith, provided, that, in no event shall the Warrant Agent be liable for special, indirect or consequential loss or damage of any kind whatsoever (including but not limited to lost profits), even if the Warrant Agent has been advised of the likelihood of such loss or damage and regardless of the form of action. (i) The Warrant Agent shall not at any time be under any duty or responsibility to any holder of any Warrant certificate to make or cause to be made any adjustment of the Exercise Price or number of the Warrant Shares or other securities or property deliverable as provided in this Agreement, or to determine whether any facts exist which may require any of such adjustments, or with respect to the nature or extent of any such adjustments, when made, or with respect to the method employed in making the same. The Warrant Agent shall not be accountable with respect to the validity or value or the kind or amount of any Warrant Shares or of any securities or property which may at any time be issued or delivered upon the exercise of any Warrant or with respect to whether any such Warrant Shares or other securities will when issued be validly issued and fully paid and nonassessable, and makes no representation with respect thereto. 25 29 SECTION 19. Registration Statement. (a) Shelf Registration of Warrant Shares. The Company shall use its best efforts to keep the Registration Statement continuously effective until 30 days after the Expiration Date. (b) Registration Expenses. All expenses incident to the Company's performance of or compliance with this Agreement will be borne by the Company, regardless of whether the Registration Statement becomes effective, including without limitation: (i) all registration and filing fees and expenses; (ii) all fees and expenses in compliance with federal securities and state Blue Sky or securities laws; (iii) all expenses of printing (including printing certificates for the Warrant Shares and printing of Prospectuses), messenger and delivery services and telephone calls; (iv) all fees and disbursements of counsel for the Company; (v) all fees and disbursements of independent certified public accountants of the Company (including the expenses of any special audit and comfort letters required by or incident to such performance); and (vi) the Company's internal expenses (including, without limitation, all salaries and expenses of their officers and employees performing legal or accounting duties), the expenses of any annual audit, rating agency fees and the fees and expenses of any person, including special experts retained by the Company. (c) Notwithstanding the foregoing, during any consecutive 365- day period, the Company shall have the privilege to suspend availability of the Registration Statement for up to two 30 consecutive day periods, except for the consecutive 30-day period immediately prior to the Expiration Date, if the Company's Board of Directors in good faith determines in the exercise of its reasonable judgment that there is a valid business purpose for such suspension. SECTION 20. Change of Warrant Agent. If the Warrant Agent shall become incapable of acting as Warrant Agent or shall resign as provided below, the Company shall appoint a successor to such Warrant Agent. If the Company shall fail to make such appointment within a period of 30 days after it has been notified in writing of such incapacity by the Warrant Agent or by the registered holders of a majority of Warrant certificate, then the registered holder of any Warrant certificates may apply to any court of competent jurisdiction for the appointment of a successor to the Warrant Agent. Pending appointment of a successor to such Warrant Agent, either by the Company or by such a court, the duties of the Warrant Agent shall be carried out by the Company. The registered holders of a majority of the unexercised Warrants shall be entitled at any time to remove the Warrant Agent and appoint a successor to such Warrant Agent. Such 26 30 successor to the Warrant Agent need not be approved by the Company or the former Warrant Agent. After appointment the successor to the Warrant Agent shall be vested with the same powers, rights, duties and responsibilities as if it had been originally named as Warrant Agent without further act or deed; but the former Warrant Agent shall deliver and transfer to the successor to the Warrant Agent any property at the time held by it hereunder and execute and deliver any further assurance, conveyance, act or deed necessary for the purpose. Failure to give any notice provided for in this Section 20, however, or any defect therein, shall not affect the legality or validity of the appointment of a successor to the Warrant Agent. The Warrant Agent may resign at any time and be discharged from the obligations hereby created by so notifying the Company in writing at least 30 days in advance of the proposed effective date of its resignation. If no successor Warrant Agent accepts the engagement hereunder by such time, the Company shall act as Warrant Agent. SECTION 21. Notices to the Company and Warrant Agent. Any notice or demand authorized by this Agreement to be given or made by the Warrant Agent or by the registered holder of any Warrant certificate to or on the Company shall be sufficiently given or made when and if deposited in the mail, first class or registered, postage prepaid, addressed (until another address is filed in writing by the Company with the Warrant Agent), as follows: NTL Incorporated 110 East 59th Street New York, New York 10022 Attention: Richard J. Lubasch, Esq. with a copy to: Skadden, Arps, Slate, Meagher & Flom LLP 919 Third Avenue New York, New York 10022 Attention: Thomas H. Kennedy, Esq. Any notice pursuant to this Agreement to be given by the Company or by the registered holder(s) of any Warrant certificate to the Warrant Agent shall be sufficiently given when and if deposited in the mail, first-class or registered, postage prepaid, addressed (until another address is filed in writing by the Warrant Agent with the Company) to the Warrant Agent at the Warrant Agent Office as follows: 27 31 The Chase Manhattan Bank 450 West 33rd Street 15th Floor New York, New York 10001 Attention: Corporate Trustee Administration Department Notice may also be given by facsimile transmission (effective when receipt is acknowledged) or by overnight delivery service (effective the next business day). SECTION 22. Supplements and Amendments. The Company and the Warrant Agent may from time to time supplement or amend this Agreement without the approval of any holders of Warrant certificates in order to cure any ambiguity or to correct or supplement any provision contained herein which may be defective or inconsistent with any other provision herein, or to make any other provisions in regard to matters or questions arising hereunder which the Company and the Warrant Agent may deem necessary or desirable and which shall not in any way adversely affect the interests of the holders of Warrant certificates. Any amendment or supplement to this Agreement that has a adverse effect on the interests of holders shall require the written consent of registered holders of a majority of the then outstanding Warrants (excluding Warrants held by the Company or any of its affiliates). The consent of each holder of a Warrant affected shall be required for any amendment pursuant to which the Exercise Price would be increased or the number of Warrant Shares purchasable upon exercise of Warrants would be decreased (other than in accordance with Section 13 or 14 hereof). SECTION 23. Successors. All the covenants and provisions of this Agreement by or for the benefit of the Company or the Warrant Agent shall bind and inure to the benefit of their respective successors and assigns hereunder. SECTION 24. Termination. This Agreement shall terminate at 5:00 p.m., New York, New York time on the Expiration Date. Notwithstanding the foregoing, this Agreement will terminate on such earlier date on which all outstanding Warrants have been exercised. The provisions of Section 18 hereof shall survive such termination, and the provisions of Section 19 hereof shall survive for 30 days after such termination. SECTION 25. Governing Law; Jurisdiction. This Agreement and each Warrant certificate issued hereunder shall be deemed to be a contract made under the laws of the State of New York and for all purposes shall be governed by and construed in accordance with the internal laws of said State. The parties hereto irrevocably consent to the jurisdiction of the courts of the State of New 28 32 York and any federal court located in such state in connection with any action, suit or proceeding arising out of or relating to this Agreement. SECTION 26. Benefits of This Agreement. Nothing in this Agreement shall be construed to give to any person or corporation other than the Company, the Warrant Agent and the registered holders of the Warrant certificates any legal or equitable right, remedy or claim under this Agreement; but this Agreement shall be for the sole and exclusive benefit of the Company, the Warrant Agent and the registered holders of the Warrant certificates. SECTION 27. Counterparts. This Agreement may be executed in any number of counterparts and each of such counterparts shall for all purposes be deemed to be an original, and all such counterparts shall together constitute but one and the same instrument. SECTION 28. Further Assurances. From time to time on and after the date hereof, the Company shall deliver or cause to be delivered to the Warrant Agent such further documents and instruments and shall do and cause to be done such further acts as the Warrant Agent shall reasonably request (it being understood that the Warrant Agent shall have no obligation to make such request) to carry out more effectively the provisions and purposes of this Agreement, to evidence compliance herewith or to assure itself that it is protected hereunder. 29 33 IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed, as of the day and year first above written. NTL INCORPORATED By: -------------------------------------- Name: Title: THE CHASE MANHATTAN BANK, as Warrant Agent, By: -------------------------------------- Name: Title: 30 34 Form of Warrant Certificate EXHIBIT A [Face] EXERCISABLE ON OR AFTER THE DATE OF THIS CERTIFICATE (IF A REGISTRATION STATEMENT RELATING TO THE WARRANT SHARES IS IN EFFECT) AND ON OR BEFORE __________, 2008 [THE TENTH ANNIVERSARY OF THE DATE OF ORIGINAL ISSUANCE OF THE WARRANTS] No. _____ CUSIP No. _________ __________ Warrants WARRANT CERTIFICATE NTL INCORPORATED This Warrant Certificate certifies that _________________________________ ______________________________, or registered assigns, is the registered holder of _____________________________________________________________________________ Warrants expiring on __________, 2008, the tenth anniversary of the date of original issuance of the Warrants (the "Warrants"), to purchase shares of the Common Stock, par value $.01 (the "Common Stock"), of NTL Incorporated, a Delaware corporation (the "Company"). Each Warrant entitles the holder upon exercise at any time from 9:00 a.m. on the date of this Warrant certificate to 5:00 p.m. New York, New York time, on __________, 2008 [the tenth anniversary of the date of original issuance of the Warrants] to receive from the Company one fully paid and nonassessable share of Common Stock (each a "Warrant Share") for each Warrant at the initial exercise price (the "Exercise Price") of $[_____] per share payable (i) in United States dollars or (ii) by certified or official bank check to the order of the Company. The Exercise Price and number of Warrant Shares issuable upon exercise of the Warrants are subject to adjustment upon the occurrence of certain events set forth in the Warrant Agreement. All capitalized terms not defined herein shall have the meanings assigned to such terms in the Warrant Agreement. No Warrant may be exercised after 5:00 p.m., New York, New York Time on __________, 2008 [the tenth anniversary of the date of original issuance of the Warrants] , and to the extent not exercised by such time such Warrants shall become void. Reference is hereby made to the further provisions of this Warrant Certificate set forth on the reverse hereof and such further provisions shall for all purposes have the same effect as though fully set forth at this place. This Warrant Certificate shall not be valid unless countersigned by the Warrant Agent, as such term is used in the Warrant Agreement. This Warrant Certificate shall be governed and construed in accordance with the internal laws of the State of New York. IN WITNESS WHEREOF, NTL Incorporated has caused this Warrant Certificate to be signed by the undersigned Chairman of the Board, Chief Executive Officer, President or Vice President and the undersigned Secretary or Assistant Secretary and has caused its corporate seal to be affixed hereunto or imprinted hereon. Dated: ______________________________ NTL INCORPORATED By: _______________________________ Name: Title: By: _______________________________ Name: Title: Countersigned: (seal) THE CHASE MANHATTAN BANK, as Warrant Agent By: ______________________________ Authorized Officer 35 Form of Warrant Certificate [Reverse] THE COMMON STOCK, PAR VALUE $.01, OF THE COMPANY (THE "COMMON STOCK") FOR WHICH THIS WARRANT IS EXERCISABLE MAY NOT BE OFFERED OR SOLD IN THE UNITED STATES ABSENT REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT") AND ANY APPLICABLE STATE SECURITIES LAWS OR AN APPLICABLE EXEMPTION FROM REGISTRATION REQUIREMENTS. ACCORDINGLY, NO WARRANT HOLDER SHALL BE ENTITLED TO EXERCISE SUCH HOLDER'S WARRANTS AT ANY TIME UNLESS, AT THE TIME OF EXERCISE, (i) A REGISTRATION STATEMENT UNDER THE ACT RELATING TO THE SHARES OF COMMON STOCK ISSUABLE UPON THE EXERCISE OF THIS WARRANT (THE "WARRANT SHARES") HAS BEEN FILED WITH, AND DECLARED EFFECTIVE BY, THE SECURITIES AND EXCHANGE COMMISSION (THE "SEC"), AND NO STOP ORDER SUSPENDING THE EFFECTIVENESS OF SUCH REGISTRATION STATEMENT HAS BEEN ISSUED BY THE SEC OR (ii) THE ISSUANCE OF THE WARRANT SHARES IS PERMITTED PURSUANT TO AN EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE ACT. By accepting a Warrant Certificate bearing the legend above, each holder shall be bound by all of the terms and provisions of the Warrant Agreement (a copy of which is available on request to the Company or the Warrant Agent) as fully and effectively as if such holder had signed the same. The Warrants evidenced by this Warrant Certificate are part of a duly authorized issue of Warrants expiring on __________, 2008 [the tenth anniversary of the date of original issuance of the Warrants], entitling the holder upon exercise to receive shares of Common Stock of the Company (the "Common Stock"), and are issued or to be issued pursuant to a Warrant Agreement dated as of _______, 1998 (the "Warrant Agreement"), duly executed and delivered by the Company to The Chase Manhattan Bank, as warrant agent (the "Warrant Agent"), which Warrant Agreement is hereby incorporated by reference in and made a part of this instrument and is hereby referred to for a description of the rights, limitation of rights, obligations, duties and immunities thereunder of the Warrant Agent, the Company and the holders (the words "holders" or "holder" meaning the registered holders or registered holder) of the Warrants. The holder of the Warrants evidenced by this Warrant Certificate may exercise them by surrendering this Warrant Certificate, with the form of election to purchase set forth below on this Warrant Certificate properly completed and executed, A-2 36 together with payment of the Exercise Price in accordance with the provisions set forth on the face of this Warrant Certificate. In the event that upon any exercise of Warrants evidenced hereby the number of Warrants exercised shall be less than the total number of Warrants evidenced hereby, there shall be issued to the holder hereof or his assignee a new Warrant Certificate evidencing the number of Warrants not exercised. No adjustment shall be made for any dividends on any Common Stock issuable upon exercise of this Warrant. The Warrant Agreement provides that upon the occurrence of certain events the Exercise Price and the number of shares of Common Stock issuable upon exercise of this Warrant, in each case, set forth on the face hereof may, subject to certain conditions, be adjusted. If the Exercise Price is adjusted, the Warrant Agreement provides that the number of shares of Common Stock issuable upon the exercise of each Warrant may be adjusted. No fractions of a share of Common Stock will be issued upon the exercise of any Warrant, but the Company will pay the cash value thereof determined as provided in the Warrant Agreement. Warrant Certificates, when surrendered at the principal corporate trust office of the Warrant Agent by the registered holder thereof in person or by legal representative or attorney duly authorized in writing, may be exchanged, in the manner and subject to the limitations provided in the Warrant Agreement, but without payment of any service charge, for another Warrant Certificate or Warrant Certificates of like tenor evidencing in the aggregate a like number of Warrants. Upon due presentation for registration of transfer of this Warrant Certificate at the principal corporate trust office of the Warrant Agent a new Warrant Certificate or Warrant Certificates of like tenor and evidencing in the aggregate a like number of Warrants shall be issued to the transferee(s) in exchange for this Warrant Certificate, subject to the limitations provided in the Warrant Agreement, without charge except for any tax or other governmental charge imposed in connection therewith. The Company and the Warrant Agent may deem and treat the registered holder(s) hereof as the absolute owner(s) of this Warrant Certificate (notwithstanding any notation of ownership or other writing hereon made by anyone), for the purpose of any exercise hereof, of any distribution to the holder(s) hereof, and for all other purposes, and neither the Company nor the Warrant Agent shall be affected by any notice to the contrary. Neither the Warrants nor this Warrant Certificate entitles any holder hereof to any rights of a stockholder of the Company. A-3 37 Form of Election to Purchase (To Be Executed Upon Exercise Of Warrant) The undersigned hereby irrevocably elects to exercise the right, represented by this Warrant Certificate, to receive shares of Common Stock and herewith (check one)______tenders payment for such shares to the order of NTL Incorporated in the amount of $_____ per share of Common Stock in accordance with the terms hereof, in cash or by certified or official bank check to the order of the Company, or _______ elects to receive payment of the applicable Spread (as defined in the Warrant Agreement). The undersigned requests that a certificate for such shares be registered in the name _____________________________, whose address is _______________________________________ and that shares be delivered to ________ ______________________ whose address is _______________________________________. If said number of shares is less than all of the shares of Common Stock purchasable hereunder, the undersigned requests that a new Warrant Certificate representing the remaining balance of such shares be registered in the name of __________________________, whose address is _____________________________, and that such Warrant Certificate be delivered to ______________________, whose address is ________________________. Date: _______________ Your Signature: ______________________________________ (Sign exactly as your name appears on the face of this Warrant) Signature Guarantee: A-4 38 ASSIGNMENT FORM To assign this Warrant, fill in the form below: (I) or (we) assign and transfer this Warrant to _____________________________________________________________ (Insert assignee's soc. sec. or tax I.D. no.) _____________________________________________________________ _____________________________________________________________ _____________________________________________________________ _____________________________________________________________ (Print or type assignee's name, address and zip code) and irrevocably appoint ___________________________ to transfer this Warrant on the books of the Company. The agent may substitute another to act for him. _____________________________________________________________ Date: __________________ Your Signature: _______________________________________________ (Sign exactly as your name appears on the face of this Warrant) Signature Guarantee: A-5 EX-5.1 3 OPINION RE LEGALITY 1 EXHIBIT 5.1 SKADDEN, ARPS, SLATE, MEAGHER & FLOM LLP 919 THIRD AVENUE NEW YORK, NEW YORK 10022 TELEPHONE (212) 735-3000 FACSIMILE (212) 735-2000 October 14, 1998 NTL Incorporated 110 East 59th Street New York, New York 10022 Ladies and Gentlemen: We have acted as special counsel to NTL Incorporated, a Delaware corporation ("NTL"), in connection with the preparation of a Registration Statement on Form S-3 (File No. 333-63615) which was filed with the Securities and Exchange Commission (the "Commission") by NTL on September 18, 1998 pursuant to the Securities Act of 1933, as amended (the "Securities Act"), Amendment No. 1 thereto, which was filed with the Commission on October 5, 1998, and Amendment No. 2 thereto, to be filed with the Commission on October 14, 1998 (such Registration Statement, as so amended, being herein after referred to as the "Registration Statement"). The Registration Statement relates to the registration under the Act of a maximum of 1,641,414 warrants (the "Warrants") each to purchase one share (each, a "Share") of its common stock, par value $.01 per share (including in each such Share the associated Right to purchase Series A Junior Participating Preferred Stock) (the "Common Stock"), and the shares of Common Stock issuable upon exercise of the Warrants. This opinion is being furnished in accordance with the requirements of Item 601(b)(5) of Regulation S-K under the Securities Act. In connection with rendering this opinion, we have examined and are familiar with originals or copies, certified or otherwise identified to our satisfaction, of such documents as we have deemed necessary or appropriate as a basis for the opinion set forth herein, including: (i) the Registration Statement; (ii) the form of warrant agreement (the "Warrant Agreement") pursuant to which the Warrants are to be 2 NTL Incorporated October 14, 1998 Page 2 issued, to be entered into between NTL and The Chase Manhattan Bank, as Warrant Agent (the "Warrant Agent"), filed as an exhibit to the Registration Statement; (iii) the form of the initial warrant certificate (the "Warrant Certificate") attached to the Warrant Agreement; (iv) certain resolutions of the Board of Directors of NTL relating to the issuance of the Warrants and related matters; (v) the Restated Certificate of Incorporation of NTL, as currently in effect; (vi) the By-laws of NTL, as currently in effect; (vii) the Rights Agreement, dated as of October 13, 1993, between NTL and Continental Stock Transfer & Trust Company, as Rights Agent; (viii) a specimen certificate evidencing the Common Stock; and (xi) such other certificates, instruments and documents as we considered necessary or appropriate for the purposes of this opinion. In our examination, we have assumed the genuineness of all signatures, the legal capacity of natural persons, the authenticity of all documents submitted to us as originals, the conformity to original documents of all documents submitted to us as certified, conformed or photostatic copies and the authenticity of the originals of such copies. In making our examination of documents executed by parties other than NTL, we have assumed that such parties had the power, corporate or other, to enter into and perform all obligations thereunder and also have assumed the due authorization by all requisite action, corporate or other, and execution and delivery by such parties of such documents and the validity and binding effect thereof. As to any facts material to the opinion expressed herein which we have not independently established or verified, we have relied upon statements and representations of officers and other representatives of NTL and others. Members of our firm are admitted to the bar in the States of Delaware and New York and we express no opinion as to the laws of any other jurisdiction. Based upon and subject to the foregoing, we are of the opinion that, when (i) the Registration Statement becomes effective; (ii) the Warrant Agreement has been duly executed and delivered; and (iii) the Warrants Certificates have been duly executed by NTL, countersigned by the Warrant Agent and paid for by the initial purchasers of the Warrants in accordance with the terms of the Warrant Agreement: (1) the Warrants will be valid and binding obligations of NTL and enforceable against NTL in accordance with their terms, except to the extent that enforcement 2 3 NTL Incorporated October 14, 1998 Page 3 thereof may be limited by (a) bankruptcy, insolvency, reorganization, moratorium or other similar laws now or hereafter in effect relating to creditors' rights generally and (b) general principles of equity (regardless of whether enforceability is considered in a proceeding at law or in equity), and (2) the shares of Common Stock initially issuable upon exercise of the Warrants, upon full payment of the exercise price therefor in accordance with the terms of the Warrant Agreement, will be validly issued, fully paid and nonassessable. We hereby consent to the filing of this opinion as an exhibit to the Registration Statement and the references to us under the caption "Legal Matters" in the Prospectus forming a part of the Registration Statement. In giving this consent, however, we do not hereby admit that we are within the category of persons whose consent is required under Section 7 of the Securities Act and the rules and regulations of the Commission thereunder. Very truly yours, /s/ Skadden, Arps, Slate, Meagher & Flom LLP -------------------------------------------- Skadden, Arps, Slate, Meagher & Flom LLP 3 EX-23.1 4 CONSENT OF INDEPENDENT AUDITORS 1 EXHIBIT 23.1 CONSENT OF INDEPENDENT AUDITORS We consent to the reference to our firm under the caption "Experts" in Amendment No. 2 to the Registration Statement (Form S-3) and related Prospectus of NTL Incorporated for the registration of 1,641,414 common stock purchase warrants and 1,641,414 shares of its common stock and to the incorporation by reference therein of our report dated March 20, 1998, with respect to the consolidated financial statements and schedules of NTL Incorporated included in its Annual Report (Form 10-K) for the year ended December 31, 1997, filed with the Securities and Exchange Commission. /s/ Ernst & Young LLP ERNST & YOUNG LLP New York, New York October 12, 1998 EX-23.2 5 CONSENT OF INDEPENDENT AUDITORS 1 Exhibit 23.2 INDEPENDENT AUDITORS' CONSENT We consent to the incorporation by reference in this Amendment No. 2 to Registration Statement No. 333-63615 of NTL Incorporated on Form S-3 of our report dated February 27, 1998, appearing in Registration Statement No. 333-64727 of NTL Incorporated on Form S-4, on the consolidated financial statements as of December 31, 1997 and 1996 and for each of the three years in the period ended December 31, 1997 of Comcast UK Cable Partners and subsidiaries, and to the reference to us under the heading "Experts" in the Prospectus, which is part of such Registration Statement on Form S-3. /s/ Deloitte & Touche LLP Philadelphia, Pennsylvania October 12, 1998 EX-23.3 6 CONSENT OF INDEPENDENT AUDITORS 1 Exhibit 23.3 INDEPENDENT AUDITORS' CONSENT We consent to the incorporation by reference in this Amendment No. 2 to Registration Statement No. 333-63615 of NTL Incorporated on Form S-3 of our report dated February 27, 1998 (March 16, 1998 as to Note 3), appearing in Registration Statement No. 333-64727 of NTL Incorporated on Form S-4, on the consolidated financial statements as of December 31, 1997 and 1996 and for each of the three years in the period ended December 31, 1997 of Birmingham Cable Corporation Limited and subsidiaries, and to the reference to us under the heading "Experts" in the Prospectus, which is part of such Registration Statement on Form S-3. /s/ Deloitte & Touche - --------------------- Birmingham, England October 12, 1998 EX-23.4 7 CONSENT OF INDEPENDENT AUDITORS 1 Exhibit 23.4 INDEPENDENT AUDITORS' CONSENT We consent to the incorporation by reference in this Amendment No. 2 to Registration Statement No. 333-63615 of NTL Incorporated on Form S-3 of our report dated February 27, 1998, appearing in Registration Statement No. 333-64727 of NTL Incorporated on Form S-4, on the consolidated financial statements as of December 31, 1997 and 1996 and for each of the three years in the period ended December 31, 1997 of Cable London PLC and subsidiaries, and to the reference to us under the heading "Experts" in the Prospectus, which is part of such Registration Statement on Form S-3. /s/ Deloitte & Touche - --------------------- London, England October 12, 1998 EX-23.5 8 CONSENT OF INDEPENDENT AUDITORS 1 Exhibit 23.5 CONSENT OF INDEPENDENT AUDITORS We consent to the reference to our firm under the caption "Experts" and to the use of our report dated June 5, 1998 (except note 10 as to which the date is July 16, 1998) with respect to the financial statements of ComTel UK Finance B.V., included in the Form S-3 to be filed by NTL Incorporated, by reference to the Proxy statement that was made as part of the Registration Statement (Form S-4) and Prospectus of NTL Incorporated filed at the end of September 1998, for the issuance of warrants. /s/ Deloitte & Touche - ----------------------------------- Deloitte & Touche Chartered Accountants Bracknell, England October 12, 1998 EX-23.6 9 CONSENT OF INDEPENDENT AUDITORS 1 Exhibit 23.6 [COOPERS & LYBRAND LETTERHEAD] 12 October 1998 We hereby consent to the incorporation by reference in the Registration Statement of NTL Incorporated on Form S-3 (File No. 333-63615), of our report, dated 5 June 1998, except for Note 10 as to which the date is 16 July 1998, on our audit of the Combined Financial Information of ComTel UK Finance B.V. as of and for the year ended 31 December 1996. We also consent to the references to our firm under the caption "Experts". /s/ Coopers & Lybrand - ------------------------------------ Coopers & Lybrand Chartered Accountants London, United Kingdom -----END PRIVACY-ENHANCED MESSAGE-----