-----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, MZjBtq6kFRbbHOdje1XnYOKKEojXqDnsIIteq0saHETjSv8Y6WCuXAtMBKIuCiYm KizP3bvDlAcv/Dmqzlwokw== 0000950123-99-002811.txt : 19990402 0000950123-99-002811.hdr.sgml : 19990402 ACCESSION NUMBER: 0000950123-99-002811 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 15 CONFORMED PERIOD OF REPORT: 19981231 FILED AS OF DATE: 19990331 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: 10-K SEC ACT: SEC FILE NUMBER: 000-22616 FILM NUMBER: 99580844 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 10-K 1 NTL INCORPORATED 1 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 F O R M 10-K (Mark One) |X| ANNUAL REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the Fiscal Year Ended December 31, 1998 OR |_| TRANSITION REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT of 1934 For the Transition Period From __________ to __________ Commission File No. 0-22616 NTL INCORPORATED - -------------------------------------------------------------------------------- (Exact name of registrant as specified in its charter) Delaware 52-1822078 - ------------------------------- ------------------------------------ (State or other jurisdiction of (I.R.S. Employer Identification No.) incorporation or organization) 110 East 59th Street, New York, New York 10022 - ---------------------------------------- ---------- (Address of principal executive offices) (Zip Code) (212) 906-8440 ---------------------------------------------------- (Registrant's telephone number, including area code) ---------- Securities registered pursuant to Section 12(b) of the Act: NONE Securities registered pursuant to Section 12(g) of the Act: Common Stock, par value $.01 per share -------------------------------------- (Title of Class) 2 Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes |X| No |_| Indicate by check mark whether disclosure by delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.|_| The aggregate market value of the Registrant's voting stock held by non-affiliates at March 23, 1999, valued in all cases in accordance with the NASDAQ/NMS closing sale price for the Registrant's Common Stock was approximately $5,504,096,000 Number of shares of Common Stock outstanding as at March 23, 1999: 73,303,103 DOCUMENTS INCORPORATED BY REFERENCE ----------------------------------- Document Part of 10-K in which Incorporated Definitive proxy statement for the 1999 Annual Part III Meeting of the Stockholders of NTL Incorporated: * * * * * * This Annual Report on Form 10-K for the year ended December 31, 1998, at the time of filing with the Securities and Exchange Commission, modifies and supersedes all prior documents filed pursuant to Section 13, 14 and 15(d) of the Securities Exchange Act of 1934 for purposes of any offers or sales of any securities after the date of such filing pursuant to any Registration Statement or Prospectus filed pursuant to the Securities Act of 1933 which incorporates by reference this Annual Report. "Safe Harbor" Statement under the Private Securities Litigation Reform Act of 1995: Certain statements contained herein constitute "forward-looking statements" as that term is defined under the Private Securities Litigation Reform Act of 1995. When used in this Form 10-K, the words, "believe," "anticipate," "should," "intend," "plan," "will," "expects," "estimates," "projects," "positioned," "strategy," and similar expressions identify such forward-looking statements. Such forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause the actual results, performance or achievements of the Registrant, or industry results, to be materially different from those contemplated or projected, forecast, estimated or budgeted in or expressed or implied by such forward-looking statements. Such factors include, among others: general economic and business conditions, industry trends, the Registrant's ability to continue to design network routes, install facilities, obtain and maintain any required government licenses or 3 approvals and finance construction and development, all in a timely manner, at reasonable costs and on satisfactory terms and conditions, as well as assumptions about customer acceptance, churn rates, overall market penetration and competition from providers of alternative services, and availability, terms and deployment of capital. 4 TABLE OF CONTENTS Page ---- PART I Item 1. Business.............................................................1 Item 2. Properties..........................................................52 Item 3. Legal Proceedings...................................................53 Item 4. Submission of Matters to a Vote of Security Holders.................53 PART II ....................................................................54 Item 5. Market for the Registrant's Common Equity and Related Stockholder Matters...........................................................54 Item 6. Selected Financial Data.............................................55 Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations.......................57 Item 7a. Quantitative and Qualitative Disclosure about Market Risk...........69 Item 8. Financial Statements and Supplementary Data.........................72 Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.................................72 PART III ....................................................................73 Items 10, 11, 12, and 13......................................................73 PART IV ....................................................................73 Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-k....73 Exhibit Index.................................................................74 i 5 PART I ITEM 1. BUSINESS. INTRODUCTION NTL Incorporated, formerly International CableTel Incorporated ("NTL" or the "Company") was incorporated in April 1993 under the laws of the State of Delaware. NTL is a leading communications company in the United Kingdom (the "UK"), providing residential, business and wholesale customers with the following services: (i) Residential Telecoms and Television Services, including residential telephony, cable television ("CATV") and Internet access services; (ii) National Telecoms Services, including national business telecoms, national and international carrier telecommunications, Internet services and satellite and radio communications services; and (iii) Broadcasting Services, including digital and analog television and radio broadcast transmission services. NTL provides its broad range of services over local, national and international network infrastructure. The Company operates: (i) advanced local broadband networks serving entire communities throughout NTL's regional franchise areas; (ii) the UK's first synchronous digital hierarchy ("SDH") backbone telecommunications network, as well as satellite earth stations and radio communications facilities from NTL's tower sites across the UK; and (iii) a broadcast transmission network which provides national, regional and local analog and digital transmission services to customers throughout the UK. Management's objective is to exploit the convergence of the telecommunications, entertainment and information services industries to become a premier new era communications company in the UK, which will offer these services to residential, business and wholesale customers on a national scale. Management believes that the Company will be able to deliver its strategy, based on NTL's entrepreneurial approach, innovative marketing and technical excellence. In March 1997, the Company changed its name from International CableTel Incorporated to NTL Incorporated to reflect the integration of the services provided by the Company following its acquisition of NTL Group Limited in 1996, and to capitalize on NTL Group Limited's 40-year history in the UK as a provider of reliable communications services. In this Report on Form 10-K, references to "pounds sterling," "(pound)," "pence" or "p" are to the lawful currency of the UK and references to "U.S. dollars," "dollars," "$" or "(cent)" are to the lawful currency of the United States. Solely for the convenience of the reader, this Form 10-K contains translations of certain pound sterling amounts into U.S. dollars and certain U.S. dollar amounts into pounds sterling. These translations should not be construed as representations that the pound sterling amounts actually represent such U.S. dollar amounts or vice versa or could have been or could be or will be converted into U.S. dollars or pounds sterling, as the case may be, at the rate indicated or at any other rate. Unless otherwise indicated, the translations of pounds sterling into U.S. dollars and U.S. dollars into pounds sterling have been made at $1.6595 per (pound)1.00, the noon buying rate in the City of New York for cable transfers in pounds sterling as certified for customs purposes by the 1 6 Federal Reserve Bank of New York (the "Noon Buying Rate") on December 31, 1998. On March 23, 1999, the Noon Buying Rate was $1.6372 per (pound)1.00. Principal Businesses Local Telecoms and Television Services The Company is the second largest operator of local broadband communications systems in the UK as measured by the number of customers, and has achieved the highest customer penetration and lowest churn rates of any multi-system operator in the UK. The Company is presently the sole provider of broadband services in its franchise areas, offering residential telephony, CATV and Internet access services to customers connected to its networks. These services are provided over local broadband fiber networks which have both coaxial and copper connections to the home. Based on operating results and experience gained by management in the United States telecommunications market, the Company has developed innovative marketing strategies which have increased customer penetration rates, customer retention and operating profitability. The industry in which the Company participates has demonstrated strong growth over the last several years. Since January 1, 1992, the industry has connected approximately 4.1 million telephone lines. Since January 1, 1994, the industry has more than doubled its market share of multi-channel homes to 45%. The following tables illustrates these statistics: UK TELEPHONY CABLE INDUSTRY STATISTICS
Telephone Lines ------------------------------------------------------------------------------- Residential Total Residential Telephone Line Telephone Lines Telephone Lines Homes Passed Penetration --------------- --------------- ------------ ----------- January 1, 1999 4,070,866 3,567,786 11,904,341 30% January 1, 1998 3,442,196 3,038,809 10,693,809 28% January 1, 1997 2,278,113 2,039,081 8,351,310 24% January 1, 1996 1,419,819 1,287,248 6,042,296 21% January 1, 1995 717,566 649,350 4,116,971 16% January 1, 1994 314,381 279,728 2,786,202 10% January 1, 1993 106,989 92,715 1,954,829 5% January 1, 1992 21,225 N/A 1,343,557 --
- ---------- 2 7
Multi-Channel Homes ----------------------------------------------------------------- Broadband Total Cable Multi-Channel Broadband Cable Subscribers DTH Homes Homes As a % of Total January 1, 1999 2,826,010 3,458,000 6,284,010 45% January 1, 1998 2,373,548 3,583,000 5,956,548 40% January 1, 1997 1,872,962 3,446,000 5,318,962 35% January 1, 1996 1,326,842 3,170,000 4,496,842 30% January 1, 1995 908,018 2,818,000 3,726,018 24% January 1, 1994 611,423 2,438,000 3,049,423 20%
- ---------- Source: ITC; BSkyB As of December 31, 1998, NTL (not including recent acquisitions) had 471,000 residential customers, approximately 92% of which subscribed to both telephone and television services. At the end of 1998, NTL (not including recent acquisitions) had a total of 905,100 RGUs resulting in 44.2% customer penetration, 42.3% telephone penetration, 42.7% cable penetration and 85% RGU penetration of homes marketed. As of December 31, 1998, including the acquisition of the operations of ComTel Limited and Telecential Communications (collectively, "ComTel") and the amalgamation with Comcast UK Cable Partners Limited (but excluding Cable London Plc) ("Partners") and pro forma for the acquisition of Diamond Cable Communications Plc ("Diamond Cable"), the Company had approximately 1.2 million residential customers and over 1.9 million RGUs, resulting in 38.5% customer penetration, 36.3% telephone penetration, 28.9% cable penetration and 63.6% RGU penetration of homes marketed. By comparison, based on published statistics of the Independent Television Commission ("ITC"), as of January 1, 1999, UK cable penetration averaged approximately 30.0% for telephone and approximately 23.7% for cable television. As of January 1, 1999, the UK telephony cable industry had connected approximately 4.1 million telephone lines and approximately 2.8 million broadband cable customers. 3 8 The following table illustrates operating statistics for the Company's newly constructed network:
PRO FORMA NTL Combined NTL ONLY(*) (5) ------------------------------------------------------------------------------------ December 31, ------------------------------------------------------------------------------------ 1998 1997 1996 1995 1998 ------------- ------------- ------------- ------------- -------------- Homes passed (1) 1,247,200 1,007,000 779,100 463,000 3,495,000 Homes marketed (Telephone) 1,064,600 810,000 467,300 176,200 2,907,200 Homes marketed (Cable) 1,064,600 810,000 467,300 176,200 3,046,800 Homes marketed (as % of homes passed 85% 80% 60% 38% 87% Total customers (2) 471,000 321,300 168,200 57,700 1,172,300 Dual 434,000 287,200 133,800 44,630 764,700 Telephone-only 16,100 15,300 15,950 6,620 291,200 CATV-only 20,800 18,800 18,450 6,450 116,400 Total RGUs (3) 905,100 608,500 302,000 102,300 1,937,000 Customer penetration 44.2% 39.7% 36.0% 32.8% 38.5% RGU penetration (4) 85.0% 75.1% 64.6% 58.1% 63.6% Telephone penetration 42.3% 37.3% 32.0% 29.0% 36.3% CATV penetration 42.7% 37.8% 32.6% 29.1% 28.9% Annualized churn 10% 11% 10% NM NA
- ---------- (*) Excludes all recent acquisitions. (1) "Homes passed" is the expression in common usage in the cable industry as the measurement of the size of a cabled area, meaning the total number of residential premises which have the potential to be connected to the Company's network. (2) As of December 31, 1998, the Company also provided service to approximately 19,400 customers connected to acquired cable systems over which it does not offer a full range of services. The Company also has approximately 195,000 Internet customers. (3) An RGU (revenue generating unit) is one telephone account or one CATV account; a dual customer generates two RGUs. (4) RGU penetration is the number of RGUs per 100 homes marketed. (5) Includes Partners, ComTel and Diamond Cable. Excludes 50% ownership of Cable London. NA Not available. NM Not meaningful due to the limited customer base and recent commencement of services. The Company believes that much of its success during this period has been due to its marketing strategies and the introduction of innovative residential services packages which bundle telephone and a small selection of CATV channels within a single product offering. The Company also gives customers the opportunity to purchase additional channel packages and premium channels, as well as additional telephone lines and Internet access services. Consistent with the Company's objectives, the high penetration rates generated by this strategy have led to increased levels of gross profit contribution per home passed. The Company believes it has also maintained high levels of customer satisfaction as indicated by the Company's low rates of churn. As of the end of 1998, the Company had an 4 9 annualized churn rate of less than 10%, a rate which is significantly lower than the published churn rates of the other UK telephone/cable operators. Local Broadband Network Construction The Company is installing a full-service network capable of providing a high speed, high capacity, two-way voice, data and video communications pathway to the customer. This approach allows the Company to pursue four revenue streams (residential telephony, residential cable television, business telecommunications services and Internet access services) on its network without a significant increase in fixed investment. Including recent acquisitions, NTL's local franchise areas cover approximately 5 million homes, spanning a broad geographic area across England, Scotland, Wales and Northern Ireland. As of December 31, 1998, including recent acquisitions, the Company's integrated full-service network (including recent acquisitions) had been constructed past approximately 3.5 million homes (or approximately 70%) of its homes under franchise. NTL's local broadband networks use advanced high capacity SDH fiber rings which serve entire communities, bringing fiber connections directly to businesses and "Siamese" coaxial/copper connections to residences. The Company estimates that, including recent acquisitions, its local franchise networks cover approximately 7,000 route miles of fiber backbone network, with approximately 400,000 fiber miles, and an estimated 75,000,000 route miles of coaxial/copper connections. The Company's licenses require it to roll out its network past a specified number of premises (or homes) each year. The total requirement for all the Company's licenses, including the recent acquisitions, is to pass approximately 4.7 million homes, which is less than the actual total of homes available to the Company should it wish to construct its network past them. The Company believes it will be able to satisfy its milestones, but there can be no assurance that such milestones will be met or that any application to modify those milestones would be accepted. 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. 5 10 National Telecoms Services The Company offers national business telecoms, national and international carrier telecoms services, radio communications, satellite services and national Internet services. The Company's objective in National Telecoms Services is to successfully integrate its strategies for developing, operating and marketing local telephony/cable systems with its national network to provide high quality voice, data and video communications services throughout the UK. The Company has constructed a national SDH fiber telecoms network, which is one of only five independent national telecoms networks in the UK. The Company estimates that the NTL national network currently covers approximately 3,500 route miles and 140,000 fiber miles throughout England, Scotland and Wales. During 1998, the Company extended the network and to include the first resilient fiber connection between Northern Ireland, the Republic of Ireland and England, and, through its acquisition of Eastern Group Telecoms ("EGT"), expanded the network to reach international landing sites in southeast England. 6 11 The Company intends to compete in the major segments of the UK telecoms market. According to published Office of Telecommunications ("OFTEL") statistics, the total annual telecoms market in the UK in 1997/98 was estimated at approximately (pound)24 billion. Of the total telecoms market, the Company estimates that approximately (pound)8 billion represents national business telecoms, (pound)2 billion represents carrier services and (pound)1 billion represents international carrier telecom services. The NTL national network has significantly expanded the Company's telecoms opportunities from the business within its franchise areas to the much greater UK national market. Combining Local and National Networks The integration of its local networks with the national telecoms network creates strategic advantages for the Company's telephony business. The national network allows the Company to carry telecommunications traffic between each of its franchise areas and throughout the UK and, therefore, achieve significant savings on the interconnection fees it pays to other carriers. In addition, using the national telecoms network gives the Company greater pricing flexibility and will enable the Company to design and offer new telephony service packages to its customers, which management believes should have a positive effect on the Company's penetration rates. The integration of its voice and data platforms creates strategic advantages for the Company's Internet business. A key issue facing telecom operators such as BT is how to transition high volume, lower unit value Internet traffic from the traditional voice networks, as early as possible onto the more cost-effective packet-based IP infrastructures. By routing Internet traffic at the edge of our network, via the transit layer, NTL is able to achieve this, and therefore optimizing its investment in switching infrastructure. The Company has made significant progress connecting its local switches to the NTL national network. Nearly all of the Company's local switches are connected either directly or via access hubs to the national network. In 1999, the Company will continue the development and connectivity of its networks, including the introduction of four additional local switches, a further international switch and a new national transit switching layer. The transit switching layer is expected to be comprised of 9 switches, which will be sited in major cities across the UK. It will act as a common interconnect gateway for voice and Internet traffic between NTL and other operators, and during 1999 will have connections to over 80% of the trunk network of British Telecommunications plc ("BT") for least cost routing. The Company has already begun carrying a portion of its own long distance voice and data traffic on the network. This will grow significantly during 1999 with the implementation of the transit network. National Business Telecoms In the business market, NTL emphasizes its regional focus and describes itself as a "nationally competitive but locally accountable" service provider, whose business purpose is to "enable businesses to become more efficient and effective". In addition to its national efforts, NTL continues to focus regionally upon education, healthcare, local government, and media and information technology companies. The NTL communications solution is attractive to these customers because of its reliable, high bandwidth solutions and because of the Company's ability to 7 12 bundle several services together at attractive prices. The Company's program for education has not only provided value-added technology services to universities, but also has accelerated the connection of local secondary and primary schools to the Internet. The Company bases its approach to the large and medium-sized businesses on or close to its network, by grouping its products and services into five groups. The first includes NTL's simple "Access" services. These services connect the customer to the Company for inbound and outbound voice and data calls. These access services include traditional analogue Business Exchange Lines ("BELs") and Digital Business Exchange Lines ("DELs"). DEL services include Basis Rate Access ("BRA"), also known as "ISDN2", and Primary Rate Access ("PRA"), also known as "ISDN30". PRA services deliver DASS2 or Q931 signaling. These and other direct and indirect access services are priced competitively and offered in competition with a number of other direct and indirect suppliers. The other four groups of services and products are described as "Managed Voice", "Managed Data", "Internet" and "Enhanced Services". The Managed Voice service is best illustrated by the Company's Central Exchange "Centrex" service which presents the customer with business exchange lines configured as a "virtual PABX", complete with call-handling facilities normally associated with a traditional PABX (or PBX). The success of this product is best demonstrated in the East Midlands where eight of the 11 local government organizations use NTL Centrex as their main business service, including the Nottingham City Council with more than 3,500 lines. Managed Data services include fixed point-to-point private circuits at speeds from 64Kbit/s, through multiples of that speed (i.e. "n x 64Kbit/s", 2Mbit/s or "Fibrelink2") and multiples of 2Mbit/s, including a 10Mbit/s Local Area Network Extension services ("LANLink") and individually tailored 100Mbit/s and 155Mbit/s Services. Other services in this family include the provision of intersite data services with a particular transmission protocol, for example Internet Protocol ("TCP/IP"), Frame Relay and Asynchronous Transfer Mode ("ATM"). An example of these services would be the provision of a 155Mbit/s ATM network to a group of 16 university and hospital sites in South Wales. The Internet group of products and services ranges from "Dialup" customers to private circuits at speeds of 64Kbit/s and above. The Company expects to launch a range of new services and branded hardware products in the second and third quarters of 1999, which should include both entry level and advanced "firewalls", and a self-provisioning web-hosting service. The Company owns and provides all the support for VirginNet and provides service to BusinessNet and more than 20 other Internet Service Providers. "Enhanced Services" describes a range of Voice, Data and Vision services. The Company has created business solutions from enhanced telephony using Computer Telephony Integration and Interactive Voice Response solutions for Call Center operators (in configurations similar to the Company's own customer call centers). Other enhanced services are Closed Circuit Television and 8 13 Surveillance Systems ("CCTV"), like the installations at the Royal Yacht Britannia, Bristol Prison and many town and city centers across the UK. To date, the Company has been successful in obtaining telecoms contracts from businesses located within its franchise areas. As of December 31, 1998, the Company (excluding recent acquisitions) had over 13,100 business customers and approximately 50,800 business telephony lines installed, which represented nearly 100% increase over year end 1997 for both customers and lines. Including the recent acquisitions of Partners (excluding the 50%-owned Cable London franchise), ComTel and Diamond Cable, the Company had approximately 128,400 business telephony lines installed. Capitalizing on the extended reach of its national network, the Company is competing for a share of the business telecoms market on a national basis. Management believes that it can build on the strengths gained in its local franchise areas to approach targeted business users located in other areas of the UK, initially focusing on users with multiple business locations. NTL launched its national business telecoms service in November 1997 and its strategy is to target medium and large businesses, beginning with those located near the major urban areas currently served by the NTL national network. NTL has a variety of methods to connect the "last mile" to the customers' premise from the national network. First, as a certified national public telecommunications operator ("PTO"), NTL can readily obtain the permits to construct telecoms networks, and can therefore simply build out its network to reach customers. Although this is clearly the most costly, the expense can be justified in the case of large customers or when a significant level of traffic is obtained from several customers. Second, NTL has already been successful in utilizing its significant tower infrastructure to efficiently connect to customers using microwave radio links. As a result of its long history in broadcasting and other communications businesses, NTL owns or has direct access to over 1,300 tower sites in attractive locations all across the UK. Microwave radio represents an efficient and reliable method for connecting customer locations to the national network. Third, NTL can lease circuits on the local networks of other service providers to connect to the customers premises. Although this may reduce the operating margin on a particular account, it requires no capital expense, it can often be installed relatively quickly, and the circuit can be replaced at a later date if a more profitable connection method can be justified. In addition, the Company has been awarded a license to operate radio fixed access services at 10 GHz throughout the UK. The Company is currently undergoing test trials of the service in preparation for operational trials with major business customers. If the test trials are successful, and if the Company determines to seek and deploy the additional capital resources to pursue this opportunity and the networks are developed, the 10 GHz license would further facilitate the development of the Company's local access reach to large businesses. As a complement to its national business telecoms effort, the Company's Vision Services group offers CCTV and remote monitoring services. Current customers include shopping centers, hospitals, railways and prisons. Management believes that CCTV services offer the potential to 9 14 increase network traffic, broaden the Company's product base, enhance relationships with customers and reinforce the NTL image as a leading communications company. Carrier Services and International NTL competes in the growing market for bandwidth, voice and leased line services in the national and international wholesale telecommunications market. The Company provides digital leased lines from 2Mbits/sec to STM-16 on both a national and international basis. This capacity is used for voice, data, video and audio traffic to major regions of the UK, US and Europe. Customers include fixed line and mobile telecommunications operators, cable operators, Internet service providers, and various information technology and facilities management companies. NTL has considerably expanded its 'carriers' customer base over the last year through leveraging its own international, national and local infrastructure. Relationships with a number of major national and international operators have been established, notably: COLT where NTL has won 'preferred supplier' status for the distribution of COLT's traffic outside the London area. This covers bandwidths from 2Mb/s to STM-1. ENERGIS for which NTL provides high speed managed services to enable the operator to more effectively address its 'off-net' customer base. Global One, as part of this international operators' roll-out, NTL is providing managed services between London and Dublin over the recently completed and NTL-owned 'Sirius' sub-sea cable. Additionally, NTL has continued to grow its business within the Mobile Operators market sector. During 1998, both Vodafone and Orange considerably increased their requirements for inter- switch capacity, and as of December 1998, NTL supplied Orange with the majority of its inter-switch capacity. NTL has recently acquired EGT, thus gaining significant fiber assets connecting the east and south coast major submarine cable landing sites to London. This acquisition, in conjunction with the NTL fiber infrastructure to the South West, has enabled NTL to expand geographically providing international cable owners with connectivity to the main telecommunications hub sites in the UK. NTL has correspondingly developed its broadband product portfolio to specifically address the large bandwidth 'backhaul' services required by this customer base. The Company's international facilities license allows it to supply international services to other carriers in conjunction with achieving internal cost savings. NTL has entered into long-term agreements to purchase international telecoms capacity on new transatlantic fiber optic cables connecting the Netherlands, Germany, the UK and the United States. NTL recently completed the 'Sirius' extension of its UK SDH network to Ireland via two submarine cables and the installation of a duct route between Dublin and Belfast. This cable system is the first independent cable system to Ireland and has been reported to be the largest submarine cable system in the world with 48 fibers. 10 15 NTL is also expanding its product portfolio to include virtual private networks, managed data networks, ATM, Frame Relay and multi-media services. NTL recently gained international connectivity to Scandinavia, France and Italy. The Company has extensive satellite coverage from three UK teleports providing voice, bandwidth, data and media services to most of the world. Radio Communications The Company's Radio Communications group ("RadioComms") offers a full range of services, including the operation of radio networks and the provision of support and maintenance services to customers with "Mission Critical" radio communications needs. This Division serves an estimated 70% of the radio installation and maintenance market for Public Safety Services within England and Wales and includes associated customers such as HM Prison Service and HM Coast Guard. These customers provide a steady source of revenues for NTL, and have also proven to be very effective references for other NTL services and products. NTL's track record for reliability and responsive customer care is also clearly demonstrated through these customers. RadioComms is involved in mobile communications maintenance, support and facilities management. This enables RadioComms to offer customers the optimum solution to their requirements, from equipment specific component repair/replacement, to full turnkey site and equipment maintenance. The Company intends to secure further customers and contracts, expanding from facilities and maintenance activities into complete outsource arrangements. The Company has positioned itself to effectively compete in the major growth sector in the radio communications market over the next five years, from both public and private mobile operators. Several large contracts of this type are under bid process this year, with contract awards expected in 1999. Long-term contracts (typically greater than five years) of this nature, if awarded to the Company, are expected to substantially increase the revenue profile of RadioComms and help maintain the revenue stability of the Company overall. There can be no assurances that such contracts will be awarded to the Company. The UK market in radio communications continues to grow strongly. The Company also has concentrated on growing its owned and managed portfolio of radio sites and generating revenue through the provision of site sharing facilities to mobile communication operators. During 1998, the UK site sharing businesses of Simoco and EGT were acquired and further portfolio growth was achieved through site management deals with three additional fire brigades. NTL Internet NTL Internet provides residential, wholesale and business Internet access and support services, consulting and systems integration services, and Intranet design and implementation. In 1995, the Company launched its Internet access service as a national service throughout the UK. This service provides access to the World Wide Web to customers in and outside its Regional Areas. NTL 11 16 Internet provides Internet service on a wholesale basis to other Internet service providers as well as on a retail basis. NTL Internet has become one of the fastest growing Internet carriers in the UK. The Company currently services more than 200,000 Internet users, primarily through its wholesale relationships with Virgin.Net, Which? Online and others. In 1996, the Company established the Virgin.Net joint venture with Virgin Communications Limited ("Virgin"), which began offering service in November 1996 under the name Virgin.Net. The joint venture is owned 49% by a subsidiary of the Company and 51% by Virgin and is intended to offer Internet access and interactive services to UK consumers and small office/home users. In addition, Virgin.Net has contracted NTL Internet to provide the dial-up national network and back office structure necessary for access to Virgin.Net and the Internet. As with the Company's local telephony business, management believes that access to the national telecoms network will have strategic benefits for NTL Internet and the Company's Internet services businesses. Management expects utilization of the Company's national telecoms network to reduce operating costs, increase flexibility and national reach and improve the overall marketing and product opportunities of NTL Internet. National Consumer Services National Consumer Services ("NCS") is NTL's first retail offering to the UK consumer outside its franchise areas. NCS will carry the consumer's telephony traffic via Indirect Access for voice and Internet calls. The bundle of services will provide Internet access via the PC or through NCS's TV-Internet set top box which enables full Internet access without the need to purchase a PC. It is estimated that of the 26.5 million UK homes, over 18 million homes have neither a PC nor Internet service. Through this service, NTL will also offer a per minute national call tariff of 3p/day, 2p/evening and 1p during the weekend. Digital and Interactive Services The Digital Services division includes NTL Interactive, which is developing a range of interactive services for television and other platforms, the Digital Technology group, which is involved in the deployment of NTL's digital cable, and the Digital Media Centre, a digital TV and interactive content playout center. NTL Interactive is responsible for the aggregation of a range of types of interactive content into a seamless service which can be deployed on NTL's interactive television services, such as TV- Internet and digital cable. The division has partnered with Internet, CD-ROM, and TV content owners, among others, to deliver a wide ranging interactive service, including Education, Home Shopping and Banking, Travel, Entertainment, Games, News, Sport and Local content areas. NTL Interactive has positioned itself to be able to gain distribution for its services on other platforms, both inside and outside of NTL. The Digital Technology group provides a resource pool of technological expertise to be applied to individual projects, such as NTL's digital cable project, and investigation 12 17 and trialing of next generation technologies which could be used to deliver NTL's services. The Digital Media Centre is set up to manage the playout of NTL's digital television services, including digital cable, NTL's interactive services, and other digital television channels, such as British Eurosport. The digital and interactive division is also responsible for managing NTL's investments in SDN and Digital One division. NTL has a 33% stake in SDN, the operator of a national Digital Terrestrial television license, which will commence broadcasting commercial services in 1999. In addition, NTL has a 33% stake in Digital One, the operator of the exclusive national commercial Digital Radio license, which will also commence services at the end of 1999. Broadcast Services The Company's Broadcast Services group includes the original core business of NTL Group Limited which has been providing television and radio broadcasters with broadcast transmission services for more than 40 years. This group designs, installs, operates and maintains new transmitter networks and has a spectrum planning service to plan the coverage of television and radio networks. It operates a national infrastructure in the UK of over 1,300 owned and shared transmission sites which deliver broadcast signals for ITV, Channel 4, S4C, Channel 5, Teletext and many of the UK's independent local, regional and national radio broadcasters. In addition to transmission services, the Broadcast Services division markets value added services to its existing television customers including additional monitoring services, reserve system services and contribution/distribution services. NTL has been involved in broadcast television since the 1950s when it designed and built the television transmission system for the UK's first independent commercial television network. The Broadcast Services group provides the Company with a stable contracted revenue stream from a variety of customers through long-term contracts generally with eight to ten-year terms. The projected total value of the Company's currently contracted revenues for national telecoms and broadcast services from January 1, 1999 through December 31, 2007 is more than $2 billion. The foregoing projection of the expected approximate revenues receivable pursuant to existing contracts, which includes Channel 3, Channel 4 and S4C transmission contracts, is based on various factors and was derived utilizing several assumptions. Important assumptions and other important factors that could cause actual revenues to differ include, among other things, general economic conditions, the regulatory regime prevailing from time to time, adherence to the construction, service and other obligations of such contracts, absence of labor or weather difficulties, absence of defaults, particularly payment defaults, by the counter-parties to such contracts or the termination or non-renewal of such contracts. The Company assumes no obligation to update this projection to reflect actual revenues received by the Company, changes in assumptions or changes in other factors affecting the information presented. The contracts with the ITV companies and Channel 4 terminate on December 31, 2012, or at the time of analogue switch-off, whichever occurs first. If analogue switch-off occurs later than December 31, 2012, the contract can be extended on a daily basis. The contract with S4C presently terminates on December 31, 2002. Although historically the ITV companies have renewed their contract, there can be no assurance that they will 13 18 do so upon expiration of the current contract, that they will not seek to obtain more favorable terms or that they would not seek to obtain from third parties all or a portion of the transmission services currently provided by the Company. The loss of this contract could have a material adverse effect on the business of the Company. Television Broadcasting The Company currently provides broadcast transmission services for three of the five national television channels in the UK. Channel 3, Channel 4/S4C and Channel 5 are all currently broadcast from NTL's network of over 1,300 owned and shared transmission sites. In November 1998, NTL made broadcasting history with the launch of the first ever digital terrestrial television network. Two of the four recipients of the Digital Terrestrial Television ("DTT") multiplexes, Digital 3 & 4 and SDN, selected the Company as the supplier of transmission services. The Company has contracted to provide a complete, end-to-end service, including studio compression, transmission and full systems integration. The Company has successfully completed on time the first phase of the build program from play-out centers to transmission. Both of the two new networks were available for services as required in November 1998 and will undergo further expansion in 1999. Radio Broadcasting The Broadcast Services division also offers a range of services to local and national radio broadcasting licensees in the UK including: target service area planning; site location, installation and construction; and equipment selection, procurement, operation, monitoring and maintenance. This division offers total broadcast contract services ("TBCs"), where it designs, builds, owns and maintains the operator's transmission facilities, and facility management contract services ("FMCs"), where it maintains customer-owned equipment and administers the operation of the transmission service. It maintains over 70 TBCs and 60 FMCs. In 1998, NTL was successful in winning 8 year transmission contracts for both of the new regional radio licences advertised in the year, and successfully entered the new small market radio sector, winning a total of eight contracts. NTL also successfully negotiated long term contract extensions, for terms up to 10 years, with two of its major radio customers. In digital radio, the Company believes it is positioned to be a major supplier of transmission and distribution services. In 1998, NTL signed a transmission contract worth (pound)50m over 12 years with Digital One, the successful licence winner for the only national commercial multiplex. The Company is also well positioned to win transmission contracts for the 26 local Digital Radio multiplex licences which will be rolled out in 1999 and 2000. NTL International NTL International, formerly known as Nexus, provides broadcasting systems design, and specializes in services associated with the design and construction of radio and television studio 14 19 centers and technical facilities. These services include installation, commissioning, equipment procurement, training and consultancy for projects ranging from production and post production studio facilities to full turnkey systems involving transmitter network planning and installation. Management believes that the Company is uniquely placed to capitalize on the two major trends that will shape global broadcasting in the coming years; privatization and digitalization. In 1998, there has been focus on creating partnerships with major broadcasters to design, build and operate complex digital broadcast systems. NTL's strategy is to transfer our success in UK to other countries (see also "Recent Developments"). Business Strategies Management's objective is to exploit the convergence of the telecommunications, entertainment and information services industries to become a premier new era communications company in the UK, which will offer these services to residential, business and wholesale customers on a national scale. Management believes that NTL will be able to deliver its strategy based on its entrepreneurial approach, innovative marketing, state-of-the-art network and technical excellence. The Company is currently employing several strategies to achieve its objectives: Installing Flexible Integrated Full-service Networks. This strategy allows the Company to pursue four revenue streams--residential cable television, residential telephony, business telecommunications services and Internet access services--without significant incremental cost in fixed investment. The integrated full-service networks provide a high-speed, high-capacity, two-way communications pathway to the consumer that is capable of delivering new services which may emerge from the convergence of telecommunications, information and entertainment. Such embedded flexibility allows NTL to adapt its national network to offer Frame Relay and Asynchronous Transfer Mode ("ATM") services. Focusing on Target Market Segments. The Company believes that tailoring its services to the needs of its customers will increase the penetration of these services. Examples of tailored services include the development of local television programming and advertising and of private telecommunications networks geared to "captive" local organizations such as governmental and educational institutions. NTL has a track record of differentiating itself by providing flexible and customized solutions to meet its customers' individual requirements. Maximizing Network Capacity Utilization. The fixed cost structure of building communications networks allows the Company to gain significant operating leverage from incremental services provided over its networks. In its local franchises areas, the Company's strategy is to maximize gross profit contribution per home passed, rather than revenue per customer, by increasing overall penetration of the number of services provided over its network. Examples of this strategy are the development of bundled product offerings that encourage subscriptions to multiple services, multiple television pricing plans that appeal to differing and distinct market segments and price points, and more "a la carte" and transaction-oriented services which increase network utilization. This strategy resulted in the design and launch of the Choices marketing packages, which increased the Company's overall penetration rates as well as its percentage of dual subscribers. 15 20 The Company's strategy in national telecoms is to continue to expand both the geographical reach and breadth of services provided, so as to increase the potential market of national business and wholesale customers. In its national business telecoms, management is seeking to increase network utilization by identifying cross-selling opportunities within NTL's existing customer base through new services that capitalize upon the convergence of telecoms, entertainment and information services. Providing Superior Customer Service. The Company believes customer service and attentiveness to the needs of customers are critical to the continued growth of its residential and business services and places great significance on consistently servicing customer requirements. The Company operates multiple customer call centers, including three large centers in Luton, South Wales and Central Scotland, as well as multiple call centers throughout the regions of the recently acquired businesses (see "Recent Developments"). Calls are answered 24 hours a day, 365 days a year. The customer call centers currently employ approximately 500 people, who are specially trained to deal with customers' inquiries and needs with respect to the Company's various products and services. Each customer representative attends a four week in-house specialized training program, which is focused on increasing a representative's knowledge of NTL's corporate culture and products and providing the individual with specific sales skills as well as a better understanding of the level of service expected to be provided to potential and existing customers on an ongoing basis. Finally, as NTL recognizes the importance of the installation in the customer's satisfaction with the services, management has focused on monitoring installers' performance closely to ensure compliance with strict quality standards and scheduling installations to suit customers' requirements. Developing Advanced Management Information Systems. NTL believes that advanced management information systems are critical to effectively, efficiently and accurately serving its customers. The Company uses proprietary software to handle its subscriber management functions from one central location. The system uses Windows-based software and can handle both business and residential customers as well as telephony and CATV on a single platform. It is capable of managing the Company's tariff and discounting structures, and will also allow for the introduction of new telephony and CATV services, such as 0800 numbers. Additionally, the system provides the functionality to support the customer representatives inquiry handling and contributes to NTL's high level of customer service. For example, customer representatives have on-line access to customers' billing, payment and subscription histories. Gaining Cost Efficiencies. The Company gains cost efficiencies by centralizing certain services provided to the franchise areas in the Company's head office in Farnborough. Examples include network planning, marketing, information systems and legal affairs. Alternatively, those cost centers which are critical to penetration, customer service, and retention are located as close to the customer as possible. Examples include construction management, sales, customer service, and network maintenance, which are all located in each of the Regional Areas. Marketing Strategies The Company increases its customer base and improves market penetration for its services by implementing separate marketing strategies tailored to its residential and business customers. The 16 21 Company believes that separately marketing to residential and business customers based on the specific benefits they receive from the Company's services is the most effective means of maximizing the Company's customer base. Residential Marketing The Company markets its local telecoms and television service under the NTL/CableTel name and promotes its image as an integral part of the emerging information super-highway. This marketing strategy includes the following concepts in the Company's advertising, literature and other materials: o positioning NTL as a local telephone company; o introducing alternative telephone service, multi-channel television and Internet access as the first of an expanding array of services which will be carried on the network in the future; o emphasizing that the Company is bringing "more choice" in television viewing, "better value" in telephone service and "state of the art" communications technology in providing access to the Internet; o demonstrating the Company's commitment to quality, value and service in its offerings as evidenced by its Code of Practice approved by OFTEL; o building interest, awareness, and credibility for the Company's services. The Company employs an extensive direct marketing and selling approach to gain customers. The Company begins to build a relationship with our communities before construction commences in a given area by closely coordinating its upcoming activities with local government authorities and community groups and eliciting feedback on ways to minimize disruptions and inconvenience. Information packages and construction notices are delivered to the neighborhood prior to construction. The Company's consumer affairs advisors personally visit affected neighborhoods and households in order to meet the special needs of the residents. All written and telephonic inquiries from residents are input by name into a lead-tracking database, so that when areas are released to marketing, the Company's sales personnel have complete customer profiles of the residents in their selling area. The Company initiates its marketing in an area by direct mail, which is followed by a personal appointment with a Company sales advisor. In some regions, the sales visit is also preceded by the hand delivery to every household of a videotape which describes NTL and its services. All information regarding both current and future sales opportunities is entered into the database, and current sales information is updated in the Company's provisioning, billing and subscriber management system. Unsold household data is maintained for future telemarketing, direct mail, and re-marketing by the sales force. 17 22 As an additional service, the Company launched pay-per-view services to its customers in March 1998. The Company has entered into a joint venture with TeleWest, General Cable and Diamond Cable for the provision of a cable-only movie, sport and event pay-per-view television service called Front Row. The joint venture comprises approximately 60% of the UK cable television industry and represents the alternative to BSkyB's dominant position in movie and sports rights for pay television. The pay-per-view service will be available to other cable operators subject to agreeing terms of carriage. Front Row has signed content output contracts with major Hollywood studios, including Warner Brothers, Sony Pictures Entertainment (Columbia/Tristar) and the Walt Disney Company (Walt Disney Studios, Miramax, Hollywood Pictures and Touchstone). Additionally, as part of NTL's focus in ensuring and maximizing customer retention, the Company usually charges an installation fee (currently (pound)49.99 including VAT), which is often discounted. It also adopts a one year service agreement and encourages direct debit payment as the "standard". The installation fee and one year contract provide qualifying mechanisms to ensure that the customer understands and recognizes the value of the services, while the encouragement of direct debit payment helps to avoid non-payment or non-payment related cancellations. Bundled Product Offerings. The Company's product and pricing strategies emphasize choice, value, and quality and are designed to encourage subscription to multiple services and maximize long-term customer retention. With its integrated dual service network, the Company has the opportunity to offer bundled telephony, Internet and CATV services. Following the success of a trial in certain of the Company's franchises, in November 1996, the Company announced the introduction of a new promotional pricing and packaging structure called "Choices" for its telephony and CATV service. The Choices packaging structure is still in place today and has been extremely successful for the Company. The First Choice entry package offers the customer the Company's telephone service, plus a choice of either (i) a limited selection of television channels which includes all of the terrestrial channels, several popular CATV channels and one NTL exclusive local TV channel, (ii) Internet access service or (iii) a second telephone line. The current price for First Choice is (pound)8.87, which is approximately the same as BT's current line rental charge. This means that NTL's customers can receive their telephone line plus cable television, Internet access or a second telephone line for the price of the monthly telephone line rental alone from BT. Customers can add either or both of the two other choices for (pound)5 each. The customer is also encouraged to choose from several genre-based tiers of mini packages called Choice Collections and the Popular Collection, each of which includes a number of additional cable channels. The Premium Choices packages enable the customer to select from several premium channels each of which can be purchased for an additional charge. The Company believes that this type of bundled and flexible service package is responsive to the desires and tastes of its customers. The packages also give the customer the opportunity to trade up or down rather than churn. NTL seeks to gain incremental revenues by pulling customers through to higher tier packages. The promotional offer of Sample Choice serves as a shop window for other incremental services. In addition, the Company encourages subscription to multiple services by offering a "two for one" discount on installation charges. 18 23 Value for Money. The Company also emphasizes the "value" of its residential telephone service. By bundling its telephone service with a choice of additional services for the price of BT's telephone line rental, the Company believes that it offers its customers greater value for their money. In addition to these savings incentives, using the national telecoms network gives the Company greater pricing flexibility and therefore enables the Company to design and offer new telephony service packages to its customers. By integrating its national telecoms network with its local networks, the Company is able to bypass a portion of the wholesale long distance fees charged by BT and other carriers for carrying calls to and from the Company's local telephone networks. This increased flexibility positions the Company to introduce more volume-oriented and/or geographically based calling plans designed to give the customer even greater choice and value. Management believes that increased ability to design attractive marketing plans and to better package services versus its competitors should have a positive effect on the Company's penetration rates. Internet Access and Other Interactive Services. As part of the Company's multiple services product strategy, NTL Internet offers retail Internet access at speeds of up to 56.6 Kbits/sec. Particular emphasis is being placed on jargon-free customer service and support. The Company is testing the provision of Internet access at substantially higher speed through either Ethernet access (10 Mbits/sec.), cable modems (4 Mbits/sec.) or ISDN access (128 Kbits/sec.). Business Marketing In the business market, NTL is recognized as having the third largest national telecommunications network in the UK. The Company is leveraging this in two ways; firstly through a dedicated team of national account managers dealing with the largest national accounts including many of the other services carriers, and also through the regional sales and marketing structure. NTL's sales strategy within its regional bases employs a mixture of telephone sales and marketing for the single line businesses and a direct and consultative sales approach for the larger businesses. NTL is market-driven and has analyzed the market and segmented it into eight communities of interest - for example, health, education, information technology - and treats its smaller towns as a unique community of interest. The sales and marketing teams are structured to support this approach. NTL offers a choice of voice, data, vision and Internet services as described under 'Business Telecommunications'. Carriers Marketing The liberalization of the Telecoms market in the UK has seen a number of alternative national and regional operators emerge. NTL has and expects to continue to successfully serve this 19 24 marketplace through its strategy of providing high quality and competitively priced services. Additionally, NTL continues to leverage its specialized ability to provide tailored solutions necessary to serve this demanding market. The rapid expansion in voice traffic is expected to continue and NTL has entered into interconnect agreements with national and international operators to both reduce the costs of carriage and termination of NTL originated traffic and for the termination of other carriers' traffic. The expected growth in the number of international operators building and operating submarine cable systems has and continues to materialize with many of these cables transiting the UK. NTL has considerably increased its physical connectivity to UK international cable landing stations and products have been successfully developed to address the needs of these international cable operators for backhaul services between the cable landing sites and the major UK international nodes such as Telehouse, London. NTL believes the UK market for wholesale data services is significant and growing rapidly due to the fast growth in IP, Internet and other data traffic. Utilizing the state of the art NTL ATM network, the Company has developed Frame Relay and ATM wholesale products to address this increasing demand for high speed data connectivity. Additionally, leveraging NTL's core data network, local loop infrastructure and connectivity to the main international UK nodes will allow the Company to address the needs of international operators for the termination/origination of UK bound/generated data traffic. The NTL Networks Local Broadband Networks The Company believes that its advanced network design is sufficiently flexible to permit it to deliver a wide variety of existing entertainment, telecommunications and information services and will enable it to offer anticipated new services in the future without incurring significant additional construction costs to adapt its existing underground network. The Company estimates that, including recent acquisitions, its local franchise networks cover approximately 7,000 route miles of fiber backbone network, with approximately 400,000 fiber miles, and an estimated 75,000,000 route miles of coaxial/copper connections. Network Design and Functionality. The Company is installing its cable/telephone and telecommunications network using established state-of-the-art technology, deploying fiber optics directly to business concentrations and residential nodes typically averaging 600 telephone lines or 500 homes respectively, and installing spare duct and transmission capacity in excess of anticipated needs. In this manner, the Company achieves the cost efficiencies and rapid deployment that using standardized equipment entails, while retaining the flexibility to expand and adapt its network over time with little or no additional underground or construction investment. The design and construction of a new network varies depending upon factors including the number of route miles to be installed, density of homes and businesses, type of surface, and the 20 25 architecture of the network backbone. Each system has been designed with at least one head-end and at least one telephone switching office. Each system's head-end and telephone switching office is directly connected to each node by fiber optic cable. Each node is then connected to a subscriber's premises. Construction of each system has been planned on a neighborhood-by-neighborhood basis to allow revenue generating operations to commence in a neighborhood as construction of the portion of the system serving such neighborhood is completed. Fiber Optics. The evolution of fiber optic technology over the past decade, including increases in the capacity of laser transmitters and decreases in the price of optical receivers, has enabled the economic deployment of fiber optic cable much closer to the customer than in traditional coaxial cable CATV and twisted copper pair telephone networks, thereby improving the quality and capacity of the CATV and telephone service. The main advantages of deploying fiber in place of both coaxial cable or copper wire are its smaller size, greater capacity, freedom from electrical interference, and significant reduction of the requirement for periodic maintenance. The Company is deploying fiber to nodes which are normally less than several hundred meters from the furthest home. Network Architecture. The Company's cable network is being built with four 2-way channels having an initial capacity of 750 MHz, which is sufficient to carry over 60 analog channels of television. With digital compression of the television signal, many more channels can be transmitted. The system is upgradeable to 1 GHz. Generally, a maximum of one amplifier is required between the head-end optical receivers and a home. Traditional cable systems often employ "cascades" of more than 5 amplifiers which degrade signal quality and increase the chances of system failure. NTL's local telecommunications network uses a SDH redundant-ring based architecture, which improves the Company's ability to flexibly deploy capacity and further enhances system resilience. Telephone signals are carried from the node to the home over traditional copper pair, over a shorter distance than in traditional telephone networks, which improves signal quality and allows higher bandwidth services to be more easily deployed. To connect its residential customers, the Company uses a "dual drop" consisting of "Siamese" coaxial cable, capable of transmitting 1 GHz of bandwidth, and two copper twisted pairs capable of providing two telephone connections. Large business customers are connected to the telephone network directly through fiber optic cable or microwave. National Telecoms Network The Company's national network was designed specifically for the high volume telecommunications market in the UK and it incorporates many customer sites directly into the backbone network. Expertise in designing and installing this network was gained through nearly 40 years of managing its television transmission network. The Company estimates that the NTL national network covers approximately 3,500 route miles and 140,000 fiber miles across England, Scotland and Wales. During 1998, the Company extended the network to include the first resilient fiber connection between Northern Ireland, the Republic of Ireland and England. In addition, in 21 26 December 1998, the Company acquired EGT. This acquisition expanded NTL's network to cover southeast England. The national network is a fully redundant, SDH digital fiber network. The major fiber routes are complemented with microwave radio connections which increase the capacity and reach of the network. SDH is an advanced technology which is being increasingly adopted by the telecoms industry for the high speed transmission of voice, data and video. The Company believes that SDH technology improves network reliability and performance and provides greater flexibility than conventional transmission architecture. Provision speeds are also generally higher with SDH because it is remotely driven by software. In addition, network availability, reliability, management, and routing are also superior to conventional transmission architecture because signals are automatically re-routed to the best path available if another is degraded. Management believes that NTL has a competitive advantage over other carriers such as BT and C&WC because SDH technology has been built in its networks from the start, thus avoiding integration problems with older technology. The NTL national network has been designed with significant existing capacity as well as the ability to efficiently increase capacity in the future. The fiber optic backbone network consists of fiber optic cable which generally contains 24 pairs (48 fibers), each pair providing 16 x 155Mbits/sec (STM-16). NTL has also provided for spare fiber optic pairs as well as duct space. For example, the trunk route specification provides for two large ducts, each with capacity for 4 sub-ducts, only one of such sub-ducts is currently used. Therefore, the network capacity can be increased by a further seven times with minimal incremental capital cost. The national network supports voice, data, video, Internet and broadcast services. It provides the backbone for local franchises, carrying national and international destined traffic across the country. All local franchises and main broadcast sites are directly linked into the national network. NTL's local and national networks are not only physically but also operationally integrated. In 1997, the Company created a Network Operations and Management directorate, responsible for the central monitoring, operations and management of both the local and national networks. From one location, NTL operators are able to remotely monitor the networks, identify faults and contact local field operators for repair (if necessary) and maximize network capacity utilization by accessing information about both the local and national networks simultaneously. During 1998, NTL implemented an umbrella management system to enable multiple platforms and equipments from different suppliers to be managed under a single system. This will allow NTL to exploit the synergies between new local franchises and its national network more rapidly. National Broadcast Transmission Network The Company's television transmission network consists of over 1,300 owned and shared transmission sites, with towers ranging from fifteen feet to nearly twelve hundred feet in height. The division's transmission tower at Emley Moor in Yorkshire is the UK's tallest free-standing structure 22 27 at over 1,000 feet. These towers are complemented by other transmission sites and relay stations situated throughout the UK. In addition to the transmission sites owned by this division, this division also shares sites formerly held by the BBC (now held by Castle Transmission), allowing it to complete its nationwide coverage. In all, the Company maintains over 2,000 transmitters, currently monitored from our national control center at Emley Moor and maintained by a field force strategically positioned in 54 locations across the UK. The transmitters of the Broadcast Services division range in size from a 2 watt repeater which serves a small village to 500 kilowatt main stations that cover large metropolitan areas. All of the transmitters which are analog can be divided into two categories, solid state circuitry and klystron tube. The klystron tube transmitters have been manufactured by Pye and Marconi, while the solid state units were manufactured by Harris, NEC, Thomson and CML, all reputable manufacturers of transmission equipment. Klystron tube-type television transmitters have a useful life of 20 to 25 years, while the solid state transmitters can last well beyond this time frame. Solid state transmitters require less maintenance than klystron transmitters. In addition, this division has built and currently operates and maintains radio transmission facilities for a number of independent local radio operators. These facilities share components of the Company's television transmission network infrastructure. Recent Developments Holding Company Structure On or about April 1, 1999, NTL will form a holding company under the Delaware General Corporation Law which will be the new publicly traded company of the NTL group of companies. Each share of NTL will be converted into a share in the new holding company which will continue to trade on NASDAQ and EASDAQ. NTL will become a wholly-owned subsidiary of the new holding company. Through other subsidiaries, the new holding company will pursue opportunities outside the United Kingdom and the Republic of Ireland; the first such investment will be the acquisition of NTN described under "Australian National Transmission Network" below. Australian National Transmission Network In March 1999, the Commonwealth of Australia accepted NTL Australia's bid to own and operate the Australian National Transmission Network ("NTN"). Under the terms of the acquisition agreement, NTL Australia, which will be an indirect wholly-owned subsidiary of the new holding company described above, will purchase all of the shares of National Transmission Company (the entity which will hold all of the NTN assets) for an aggregate purchase price of approximately $650 million Australian ($407 million U.S.). The closing is expected to occur early in the second quarter of 1999. 23 28 NTN operates from over 560 tower sites and provides exclusive television and radio transmission services to Australia's only national TV and radio broadcasters, ABC and SBS. In addition, NTN serves regional and community TV and radio broadcasters, and provides equipment hosting services to telecom operators and emergency service communications provides on its towers. NTN's customers include Telstra, WIN Television, Prime Television, Vodafone and Air Services Australia. NTN holds long term contractual relationships with the majority of its customers. Broadcast and Tower-related Opportunities NTL's board of directors has approved the pursuit of alternative corporate financial strategies with regard to its broadcasting and tower-related opportunities. These strategies are intended to provide the division with more flexibility to pursue future opportunities and to illuminate the value of those assets, while leaving the cash flow from its UK operations within NTL. Diamond Acquisition On March 8, 1999, the Company acquired all of the shares of Diamond Cable Communications Plc ("Diamond Cable") pursuant to an acquisition agreement with the shareholders of Diamond for an aggregate of approximately 13 million shares of Company Common Stock. In connection with the acquisition of Diamond Cable, Diamond Cable expects to make a Change of Control Offer pursuant to the terms of the indentures governing Diamond Cable's indebtedness. The Company has entered into a bridge facility to finance the redemption of Diamond Cable bonds tendered, if any, which is subject to certain funding conditions. Strategic Partnership with Microsoft On January 25, 1999, Microsoft Corporation ("Microsoft") and the Company agreed to jointly develop new broadband services for delivery to customers in the UK and Ireland. In addition, on January 28, 1999, Microsoft purchased $500 million in 5 1/4% Preferred Stock of the Company. Such 5 1/4% Preferred Stock is convertible into the Company's Common Stock at a conversion price of $100 per share, is redeemable in 10 years for cash or Company Common Stock and may be redeemed by the Company on the earlier of 7 years or the date on which the Company's Common Stock has traded above $120 for 25 consecutive days. Microsoft and the Company have agreed to work closely together with respect to the development of new digital services and intend to enter into additional agreements throughout 1999 regarding software and services. In addition, on January 28, 1999, Microsoft received 1.2 million five-year warrants to purchase the Company's Common Stock at an exercise price of $84 per share. 24 29 EGT Acquisition On December 22, 1998, the Company acquired EGT (formerly Eastern Group Telecoms Limited) from Eastern Group Plc for (pound)60 million in cash and (pound)31 million in 9.9% Preferred Stock, Series B of the Company. This Preferred Stock has a pay-in-kind coupon of 9.9%, will mature in 2008 and is redeemable within 18 months from issuance for, at the Company's option, cash or Company Common Stock. EGT is headquartered in Ipswich, England, and is comprised of two business divisions. The telecoms division utilizes a 1,800 km fiber-optic network across the southeast and east of England, and the radio sites division, consisting of 121 radio masts across East Anglia, serves the UK's major mobile phone network operators. Newcastle United Share Acquisition On December 17, 1998, Premium TV Limited ("Premium TV"), a wholly-owned subsidiary of the Company, acquired 9,000,000 shares, or 6.3%, of Newcastle United PLC ("Newcastle United") from Cameron Hall Developments Limited ("CHD"), the majority shareholder of Newcastle United, for approximately (pound)10 million in cash. In conjunction with the sale of such shares, CHD also entered into an irrevocable commitment to Premium TV which provides that if Premium TV makes a general offer for all of the issued share capital of Newcastle United, CHD will accept such offer in respect of the remaining balance of its shares in Newcastle United, representing 50.8% of the issued share capital of Newcastle United. If made, any such offer would be at a price of 111.7p per share in cash and may, if Premium TV so decides, carry a full zero coupon loan note alternative. Premium TV's decision regarding whether to make such an offer may be influenced by, among other things, the substance of the report by the Monopolies and Mergers Commission on the proposed offer for Manchester United Football Club by BSkyB. The irrevocable commitment given by CHD is binding until 12 weeks following the publication of such report, subject to extension in certain circumstances. Partners Acquisition On October 29, 1998, pursuant to an agreement and plan of amalgamation with Comcast UK Cable Partners Limited ("Partners"), a wholly-owned subsidiary of the Company amalgamated (the "Amalgamation") with Partners. Shareholders of Partners received 0.3745 shares of the Company's Common Stock for each common share of Partners, an aggregate of approximately 18,764,000 shares of the Company's Common Stock. Partners was formed to develop, construct, manage and operate businesses in the UK cable and telecommunications industry. As of September 30, 1998, Partners had interests in four operations: Birmingham Cable Corporation Limited ("Birmingham Cable"), in which Partners 25 30 owned a 27.5% interest (the "Birmingham Cable Equity Interest"), Cable London PLC ("Cable London"), in which Partners currently owns a 50% interest (the "Cable London Equity Interest" and, together with the Birmingham Cable Equity Interest, the "Equity Interests"), Cambridge Holding Company Limited in which Partners currently owns a 100% interest, and two companies holding the franchises for Darlington and Teesside, England (collectively, "Teesside"), in which Partners currently owns a 100% interest. As a result of the execution of the Amalgamation, TeleWest Communications Plc ("TeleWest"), which at that time owned a 27.5% interest in Birmingham Cable and a 50% interest in Cable London, had certain rights to acquire the Equity Interests. Pursuant to an Agreement in Respect of the Rights of First Refusal Relating to Birmingham Cable and Cable London, dated August 14, 1998 (the "TeleWest Agreement"), between the Company, Partners, TeleWest and TeleWest Communications Holdings Limited, the Birmingham Cable Equity Interest was sold to TeleWest immediately prior to the consummation of the Amalgamation for approximately (pound)130 million in cash. Pursuant to the TeleWest Agreement, TeleWest and Partners passed a special resolution to Cable London's articles of association which, for purposes of the Amalgamation, effectively eliminated the rights of TeleWest to acquire the Cable London Equity Interest. However, the TeleWest Agreement generally provides that, at any time during the period beginning April 29, 1999 and ending July 29, 1999, NTL will either sell the Cable London Equity Interest to TeleWest or purchase TeleWest's 50% ownership interest in Cable London. ComTel Acquisition On June 16, 1998, the Company entered into an acquisition agreement (the "ComTel Agreement") with Vision Networks III B.V., a wholly-owned subsidiary of Royal PTT Nederland NV (KPN), for the acquisition of ComTel. ComTel operates telephony/cable networks in the UK, and its franchises cover approximately 1.1 million homes and are located in the Midlands and South East England regions, covering areas including Oxford, Swindon, Coventry and Stratford. Pursuant to the ComTel Agreement, the Company acquired ComTel for a total of (pound)550 million in two stages. In the first stage, which was completed on June 16, 1998, the Company acquired certain of the ComTel properties for (pound)275 million in cash. In the second stage, which was completed on September 22, 1998, the Company acquired the remaining ComTel properties for (pound)200 million in cash and (pound)75 million in the Company's 9.9% Preferred Stock, Series A. This Preferred Stock has a pay-in-kind coupon of 9.9%, will mature in 2008 and is redeemable within 15 months from the date of issuance for Company Common Stock valued at market, new Company convertible preferred securities or cash. Competition The Company faces significant competition from established and new competitors in the areas of residential telephony, business telecommunications services, Internet and cable television. The Company believes that competition will intensify in each of these business areas, particularly business telecommunications and Internet. 26 31 Residential Telephony. The Company competes primarily with BT in providing telephone services to residential customers. BT, formerly the only major national PTO in the UK, occupies an established market position and manages fully built networks and resources substantially greater than those of the Company. According to OFTEL, at March 31, 1998, BT serviced nearly 87% of UK residential telephone exchange line customers. The Company's growth in telecommunications services, therefore, depends upon its ability to convince BT's customers to switch to the Company's telecommunications services. The Company believes that 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 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 could prevent the Company from increasing its share of the residential telecommunications market. In particular, BT is under a regulatory obligation to introduce carrier pre-selection CCPS) on its network, which it expects to do in the second half of 2000. CPS may increase the appeal of indirect access operators, whose discounted call charges may undercut the Company's. The Company also competes with mobile networks. This technology may 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 it offers integrated telephone, CATV, telecommunications services (including interactive and on-line services) and multi-product packages designed to encourage customers to subscribe to multiple services. However, there can be no assurance that this competitive advantage will continue. Indeed, BT and all other operators will be permitted to provide and convey CATV services throughout the UK starting January 1, 2001. In addition, all areas currently without franchises will open to general competition in the future, and exclusive franchises will no longer be awarded. British Sky Broadcasting Limited ("BSkyB") currently markets telecommunications services on an indirect access basis (which requires the customer to dial additional digits before entering the primary telephone number, thus diverting calls onto another operator's network). In addition, BSkyB has proposed a joint venture with BT, Midland Bank and Matsushita that is known as Open (formerly British Interactive Broadcasting). If Open's bid to enter the interactive digital services market passes review by the competition directorate of the European Commission, the Company believes that the resulting combination would provide significant competition. Business Telecommunications. BT is also the Company's principal competitor in providing business telecommunications services. In addition, the Company competes with C&WC, Energis 27 32 Communications Limited, Scottish Telecom in Scotland and with other companies that have been granted telecommunications licenses such as MCI-WorldCom and Colt. In the future, the Company may compete with additional entrants to the business telecommunications market. Competition is based on price, range and quality of services, and the Company expects price competition to intensify if existing 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. 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 (i.e., national PTOs). In addition, there will be general licensing to provide CATV services, including in the Company's franchise areas, from January 1, 2001. Should any additional operators, including BT and Mercury (which merged with three cable operators that hold such licenses--NYNEX CableComms, Bell Cablemedia plc and Videotron Holdings plc--to form C&WC) choose to construct or adopt networks to provide CATV in these areas, it could have a material adverse effect on the Company. On September 29, 1993, the ITC issued a statement pursuant to which it took the position (shared by OFTEL and DTI) that BT and the other national PTOs may provide video-on-demand services under their existing licenses. No assurance can be given that video-on-demand will not provide substantial competition to the Company within its markets in the future. The 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 majority of the DTT capacity for pay TV services was licensed to Ondigital, which launched its services in the fourth quarter of 1998. 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 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 BBC's Home Service and World Service transmission businesses to a consortium led by Castle Tower Corporation. There can be no assurance that the Company will not encounter significant competition from this 28 33 consortium for a range of transmission services, such as for local radio stations. However, the Company's current contracts with the ITV contractors and Channel 4/S4C for the provision of transmission services have successfully been extended through to the shut-down of analogue TV broadcasting. 29 34 REGULATION Certain Regulatory Matters General Cable television and cable telephone service industries in the UK are governed by legislation under the Telecommunications Act, the Broadcasting Act 1990, which replaced the CBA, and the Broadcasting Act 1996. The operator of a cable television and cable telephone franchise in the UK covering more than 1,000 homes requires the following two principal licenses for each franchise area: (a) a telecommunications license, granted under the Telecommunications Act by the Secretary of State and supervised by the DTI and OFTEL, which authorizes the installation and operation of the telecommunications network used to provide cable television and cable telephone services, and (b) a cable television license, which authorizes the provision of broadcasting services within a defined geographical area and which may be either: (i) a Prescribed Diffusion Service License ("PDSL"), granted under the CBA prior to 1991, which allows an operator to provide cable television and other entertainment services by means of a cable network, or (ii) an LDL granted since January 1, 1991 under the Broadcasting Act 1990, which allows an operator to deliver television and other programming services by means of a licensed telecommunications network including a cable network. Each type of license described above contains various conditions, and in the event of the breach of such conditions, the Director General or the ITC, as appropriate, could issue an enforcement order and ultimately commence proceedings to require compliance or to revoke such licenses. Under the Broadcasting Act 1990, cable operators may elect to replace certain PDSLs with LDLs with similar terms. The regulatory environment in the UK has generally encouraged the development of the cable telecommunications and the cable television industry by, among other things, licensing only one operator for each cable franchise area and restricting the national PTOs from using existing telecommunications networks to carry broadcast entertainment. On April 23, 1998, the Department of Trade and Industry announced the UK government's intention to progressively end this policy, allowing any operator to seek a license to compete in the provision of broadcast entertainment in those areas outside current cable franchises. From January 1, 2001, competition within current cable franchises will also be permitted. 30 35 Cable Television The Broadcasting Act 1990 The Broadcasting Act 1990 established the ITC to license and regulate commercial television services (terrestrial and satellite) and the Radio Authority to regulate radio services. The ITC's functions are, among other things, to grant licenses for television broadcasting activities and to regulate the commercial television sector by issuing codes on programming, advertising and sponsorship, monitoring programming content and enforcing compliance with the Broadcasting Act and cable television license conditions. The ITC has the power to vary cable television licenses and impose fines and revoke such licenses in the event of a breach of the license conditions. The ITC also enforces ownership restrictions on those who hold or may hold an interest in licenses issued under the Broadcasting Act. See "-- Cable Television Licenses -- Ownership Restrictions". Cable Television Licenses General. As of December 31 , 1998, cable television licenses had been granted for over 160 franchise areas in the UK While the ITC had previously indicated that it will grant only one cable television license for each geographical area, on April 23, 1998, the Department of Trade and Industry announced the UK government's intention to progressively end the policy of granting only one cable television license for a franchise area. As a result, any operator can seek a license to compete in the provision of broadcast entertainment in those areas outside current cable franchises. From January 1, 2001, competition within current cable franchises will also be permitted. The ITC also has indicated that certain areas, for which cable television licenses have yet to be awarded, may be advertised at the request of applicants. In the past, such licenses (LDLs) were awarded after competitive bids. However, it is now the government's policy to grant licenses in new areas to all suitable applicants. Before awarding an LDL, the ITC must be satisfied as to certain matters, including the technical specification of the proposed system; that the applicant has sufficient funding to run the franchise; and that the applicant is a fit and proper person to be awarded a license. Cable operators may carry UK licensed broadcast services, foreign satellite programs or text in their services. Cable television licenses also require cable operators to ensure that advertising and foreign satellite programs carried by them as part of their services conform to the restrictions set forth in the codes on advertising, sponsorship and programming issued by the ITC. Cable television licenses also impose an obligation on licensees to provide any information which the ITC may require for purposes of exercising its statutory functions. Term, Renewal and Revocation of Cable Television Licenses. NTL holds 39 PDSLs and 13 LDLs, all for 15-year terms. An application may be made to the ITC to extend a PDSL for up to an additional eight years if the cable operator holds a 23-year telecommunications license. Fees would continue to be payable on the same basis as for the unextended PDSLs and no PQRs or cash bids would be payable during this 8-year term. If NTL elects to extend the PDSLs, NTL will upon expiration of such PDSLs as so extended, be required to apply for a new LDL under the competitive bid procedures described 31 36 above. If NTL elects not to extend a PDSL, NTL may apply to the ITC (no earlier than five years prior to the expiration of the PDSL) for a replacement 15-year LDL, with respect to which it must agree with the ITC on the amount of the cash bid and PQR payments that will be payable over the term of the LDL (based on what would have been offered if the franchise had been offered for competitive bids). NTL's PDSLs will currently all expire at varying dates from 2000. NTL has not yet applied to extend any of its PDSLs, nor has it applied for any replacement LDLs under the procedure outlined above, but will do so at the appropriate time. The ITC may refuse an application for renewal, but only on limited grounds, including that the ITC proposes to grant a license in an area different from that described under the existing license or that the applicant is not providing services through the whole of its franchise area. The ITC may, after consultation with the DTI and the Director General, revoke a cable television license if an operator fails to comply with its conditions or with any direction of the ITC, and the ITC considers revocation to be in the public interest. The ITC must be notified of changes in control of the licensee, of changes in directors and of certain other changes in shareholdings in the licensee. If there is any change in either the nature or characteristics of an operator that is a corporate entity, or any change in persons controlling or having an interest in it, the ITC can revoke the license if, as a result, it would not have awarded the license had the new ownership or control existed at the time the application for the license originally was considered. The ITC can also revoke any cable television license in order to enforce restrictions on ownership contained in the Broadcasting Act 1990 as amended by the Broadcasting Act 1996 (see below) and can impose fines and shorten the license period of LDLs. NTL also holds a number of licenses to provide local television program services under the Broadcasting Act 1990. All of these licenses are for a period of 10 years. Ownership Restrictions. The ITC has a general duty to ensure that cable television licenses are held by "fit and proper" persons and may exercise control over who may hold a license where financial assistance is provided to, or influence is exercised over, a license holder which may produce results which it considers adverse to the public interest. The Broadcasting Act 1990 also contains specific restrictions on the types of entities which may hold cable television licenses or significant interests therein. Cable television licenses may not be held by a local authority, an advertising agency, a religious or political body (or one of its officers) or any entity controlled by them. Ownership restrictions also apply to ownership of different licensed services (including local delivery services, television, satellite and radio services and newspapers), or associates of entities operating such services. See "-- Media Ownership". While PDSLs in most respects continue to be regulated under the Broadcasting Act 1990 and the Broadcasting Act 1996 as if the CBA remained in force, the ownership restrictions for PDSLs and LDLs are substantially similar. 32 37 There is currently no statutory restriction on the number of cable television licenses which may be held by any person. However, in October 1998, the ITC indicated that where a merger would lead to a concentration of ownership of connected homes exceeding 25% of all pay-TV homes, the ITC would consider possible competition concerns and would consult the OFT. Cable Telecommunications The Telecommunications Act The Telecommunications Act provides a licensing and regulatory framework for telecommunications activities in the UK and established OFTEL under the Director General as an independent regulatory authority. Telecommunications policy is overseen by the DTI. The DTI on behalf of the Secretary of State also has primary licensing authority under the Telecommunications Act, although it may delegate that authority to the Director General. The functions of the Director General are, among other things, to monitor and enforce compliance with telecommunications license conditions, establish and administer standards for telecommunications equipment and contractors, and investigate complaints and exercise certain functions concurrently with other regulators to promote or ensure competition in telecommunications markets. The Director General may modify telecommunications licenses either with the agreement of the licensee following a statutory period of public consultation or following a report by the MMC. The Director General is also empowered to issue enforcement orders requiring compliance with telecommunication license conditions which have been breached (see below). Telecommunications Licenses The Company holds individual franchise telecommunications licenses. A telecommunications license authorizes a cable operator to install and operate the physical network used to provide cable television and cable telecommunications services. It also authorizes the operator to connect its system to other television and telecommunications systems, including those operated by the PTOs, the terrestrial broadcasting authorities and satellite broadcasting systems. Although individual franchise telecommunications licenses granted to a cable operator are for a particular area, they are not exclusive and, as a result, a cable telephone operator is subject to competition with respect to the provision of telephone services from national PTOs such as BT and CWC and other telephone service providers in its franchise area. There are more than 200 telecommunication licensed operators in the UK. See "Competition -- Business Telecommunications" and " -- Competition -- Residential Telephony". Following the Duopoly Review, the Government has granted a telecommunications license to any applicant provided the applicant has satisfied certain requirements, including with respect to financial viability and, in some cases, service commitments. See "-- Duopoly Review". A cable operator's telecommunications license contains conditions regulating the manner in which the licensee operates its telecommunications system, provides telecommunications services, connects its systems to others and generally operates its business. A cable operator's telecommunications license also contains a number of detailed provisions relating to the technical aspects of the licensed system (e.g., numbering, metering and the use of standard technical 33 38 interfaces) and the manner in which the licensee conducts its business (e.g., publication of certain prices, terms and conditions). In addition, a cable operator's telecommunications license contains prohibitions on undue preference and discrimination in providing service. The cable operator's telecommunications license also requires the licensee to provide any information which the Director General may require for the purposes of carrying out his statutory functions. Failure to comply with an enforcement order in respect of a breach of a telecommunications license condition might give rise to revocation, an injunction by the Director General or to a third party's right to damages. In September 1997 OFTEL completed its review of the PTO licenses held by cable operators to convert them to the standard "slimline" format of non-dominant PTOs which Mercury's modified license now follows to a large extent. Modifications to these cable operators licenses have now been issued and have come into effect. This has resulted in the deletion of a number of conditions in the Group's individual franchise telecommunications licenses, for example, those relating to the pre-notification of prices and the prohibition on unfair cross-subsidies although such conduct may fall within the fair trading condition. See below. The telecommunications licenses of BT and CWC now contain a condition, referred to as the fair trading condition, which prohibits any abuse of their dominant position and any agreement or concerted practice between the licensee and other entities restricting or distorting competition in the telecommunications market. This condition has been incorporated into new telecommunications licenses issued since December 31, 1996 including the Company's telecommunications licenses. The fees payable for the telecommunications license consist of an initial fee payable on the grant of the license and annual fees thereafter. The annual fees are based on a proportion of the costs of the Director General in exercising his functions under the Telecommunications Act and in certain cases a proportion of costs of the MMC incurred in relation to license modification references under the Telecommunications Act. A telecommunications license is not transferable. However, certain changes in ownership of an entity holding a license are allowed, subject to compliance with a notification requirement. Network Construction and Service Obligations Where a cable operator holds a PDSL or an LDL replacing a PDSL (see " -- Certain Regulatory Matters -- General"), the milestones are contained in the corresponding telecommunications license and are reviewable by OFTEL. Where, on the other hand, a cable operator holds a new LDL which is not a conversion from a PDSL, the milestones are contained in the LDL and are reviewable by the ITC. Each of the Company's individual franchise telecommunications licenses prescribes milestones which require the Company to construct its network to pass a specified number of premises within prescribed time periods. The milestones may be varied by the Director General if he considers that the variation would enable the licensee to meet the final milestone more easily. The final milestones can be modified only following a public consultation period and with the approval of the Director General. If the milestones prescribed by a telecommunications license are not met, 34 39 the Director General may take enforcement action which, if not complied with, could result in the revocation of such license. Similarly, the LDLs which the Group has acquired contain build milestones which may be varied by the ITC. The Company understands that all milestones from now on will be contained in LDLs. The Company also understands that the ITC will have jurisdiction to enforce these milestones. To date, the ITC has not published any guidelines on enforcement of milestones. Where a cable network has been installed, a licensee must provide a cable television service to anyone who reasonably requests it. A cable operator is not required to provide telephony services, but where it does so, and achieves a 25% or more share of the relevant market for such services (as determined by the Director General) within its licensed area, the licensee may, at the direction of the Director General, be required to ensure that telephone services are available to anyone in the licensed area who reasonably requests them. The Company has not received any such direction from the Director General. Under a telecommunications license, the cable operator is subject to and has the benefit of the Telecommunications Code promulgated under the Telecommunications Act. The Telecommunications Code provides certain rights and obligations with respect to installing and maintaining equipment such as ducts, cables and cabinets on public or private land (including the installation of equipment on public highways). The activities of cable operators under the Telecommunications Code are also subject to planning legislation. Cable operators have the benefit of, and must comply with, the Street Works Act, which provides them with the same rights and responsibilities with respect to construction on public highways as other public utilities. The Street Works Act standardizes fees for inspections of construction works by local governmental authorities and standardizes specifications for reinstatement of property following excavation. As a result, construction delays previously experienced by cable operators because of separate and often lengthy negotiations with local governmental entities have been reduced. Cable operators are required to post bonds for local authorities in respect of their obligation to ensure reinstatement of roads and streets in the event the operators become insolvent, cease to carry on business or have their telecommunications license terminated. In order to install equipment on private property cable operators must obtain legal permission from occupiers, property owners and others. Term, Renewal and Revocation of Telecommunications Licenses To date, telecommunications licenses have generally been granted for periods of 15 or 23 years. All of the Company's individual franchise telecommunications licenses are valid for an initial period of 23 years, commencing on the date specified by the Secretary of State (which, in practice, is the date on which the cable system first becomes operative). Upon expiration, a telecommunications license cannot be extended and application must be made for a new license. 35 40 A telecommunications license may be revoked if the licensee fails to pay the license fees when due, fails to comply with an enforcement order, upon the occurrence of certain insolvency-related events or if the cable television license relating to the licensee's system is revoked. A telecommunications license may also be revoked if, among other things, the licensee fails to give the required notification to the DTI of changes in shareholdings and changes in control and agreements affecting control of the licensee, or if the DTI concludes that any such change would be against the interests of national security or the UK Government's international relations. Licensing Directive implementation On 31 December 1998, the UK Government implemented the EC Licensing Directive (97/13/EC). The Directive requires that all UK licenses conform to a number of key conditions and criteria set out in the Directive. All new licenses would conform to these criteria and the Government announced its intention to amend all existing licenses by the end of 1998 to ensure that they too were in conformity with the Directive. In September 1998, the Government issued a consultation document setting out how it proposed to effect these changes to existing licenses. Broadly, existing license conditions would be amended or supplemented to reflect the precise wording and conditions of the Licensing Directive, the Interconnection Directive, and the Revised Voice Telephony Directive. The Government stated that it did not expect these changes to lead to material changes to the operating circumstances of existing licensees. The final date for completing this process of amendment was subsequently put back to the end of June 1999, and at the time of writing, the Government's specific proposals for regulations are awaited. Duopoly Review In 1991, the UK Government concluded in its Duopoly Review that the termination of the duopoly policy (which permitted only BT and CWC to operate local, national or international fixed-link networks in the UK to provide public telephone services) might increase competition and benefit consumers in the UK telecommunications market. As a result, the UK Government revised its policy and determined that application for licenses would be considered from any person seeking to operate new telecommunications networks over fixed links within the UK. Such licenses normally would be granted subject to the general statutory duties of the DTI and the Director General to ensure the provision of telecommunications services, to satisfy all reasonable demands for them and the ability of a person providing the services to finance their operations. The Duopoly Review also recommended specific amendments to license conditions that are particularly important to cable operators. Until the Duopoly Review, for a cable operator to provide telephone services it had to enter an agreement with BT or CWC with respect to the terms and conditions (including price) under which the operator would provide telephone services, obtain a determination from the Director General that services could be provided and operate its network as agent for either BT or CWC. Since the Duopoly Review, cable operators have been permitted to provide all forms of wired telecommunications services in their own right, including the ability to 36 41 switch their own traffic. The Duopoly Review also recommended changes to and further study of arrangements relating to interconnection, number portability and equal access (discussed below). As a result of the Duopoly Review, the Group applied for and received modified telecommunications licenses to enable the Group to provide wired telecommunications services in its own right. Interconnect Arrangements The ability of cable operators to provide viable voice and other telecommunications services is dependent on their ability to interconnect cost-effectively with other PTO's telecommunications networks in order to complete calls that originate from a customer on their cable network but that terminate off their network or that originate from a customer off their cable network and terminate on their network. Since the Duopoly Review, cable operators with contiguous franchises have been able to connect their networks without regard to whether they are under common ownership without using the services of BT or CWC. The Telecommunications (Interconnection) Regulations came into force on December 31, 1997. These implement the Interconnection Directive (Directive 97/33/EC), which will extend, to a certain extent, the categories of operator in the UK who will have the right to request interconnection and a reciprocal obligation to provide it. These rights and obligations may extend to certain operators who operate under class licenses. It is not currently possible to predict accurately which categories of operator/service provider will fall within the criteria set out in these regulations and therefore to which operators interconnection rights and obligations will be extended. Operators wishing to benefit from such interconnection rights and obligations will be required to apply to OFTEL which will assess whether the relevant criteria have been met. PTOs are required under their telecommunications licenses to enter into interconnection agreements with other PTOs such as NTL (if requested to do so by such a PTO), and NTL has interconnection agreements with BT, CWC, Energis, Global One and ACC. The BT agreements may be terminated by either party upon two years' notice, the CWC agreement may be terminated by either party upon two years' notice, the Energis Agreements may be terminated by either party on six months' notice and the Global One agreement may be terminated by either party upon one month's notice after an initial term of one year. If NTL is unable to negotiate acceptable pricing terms with BT, CWC, Energis or Global One in connection with any continuation or extension of these agreements or scheduled reviews of these agreements, NTL may request that the Director General determine such terms. In 1995 a House of Lords decision established that it is possible for a regulated company to challenge in the UK courts a determination by the Director General of terms of interconnection agreements. The Director General also has the power to make determinations in respect of certain obligations of any party under an interconnection agreement. Until October 1, 1997 OFTEL determined standard interconnect charges. The first interim charge determination covered the period from April 1, 1995 to March 31, 1996. Interim charges were based on BT's forecast financial statements (on a fully allocated costs basis). OFTEL has now assessed final charges based on BT's final financial statements for that period. As a result of these 37 42 revised charges, NTL will receive outgoing interconnect charge rebates, and must pay incoming termination rebates for periods from April 1, 1995. At the end of 1996, OFTEL completed another consultation process and published interim charges for the period from April 1, 1996 to March 31, 1997. OFTEL has issued its determination of final charges for this period. OFTEL has now determined interim charges for the period from April 1, 1997 to September 30, 1997, and is expecting to publish final charges for that period in the near future. As from October 1, 1997 the twice yearly determination by OFTEL of BT's network charges has been replaced by a system of network price controls and the cost base for interconnection charges has been changed from fully allocated costs to long run incremental costs. After a lengthy consultation period begun in December 1995, in July 1997 OFTEL issued its final proposals which have been accepted by BT and the necessary modifications have been incorporated into BT's license. The new system provides for the application of price controls depending on the level of competitiveness of the service. Services which are not competitive are divided into baskets, each basket being subject to a charge cap of RPI minus X. The July 1997 document determined the value of X for each basket at 8%. Charges for those services which are expected to become competitive during the next price control period, i.e., from August 1997 until the middle of 2001, will not be included in the network baskets, but will be governed by safeguard caps of RPI plus 0%. Charges for those services which were expected to become competitive before August 1997 or which are determined by the Director General to be competitive during the control period, will be free of network controls. The July 1997 document also sets out the starting charges for the services in the network baskets which are based on BT's long run incremental costs. The new system which commenced from October 1, 1997 will run for four years. In November 1997 OFTEL published non-legally binding guidelines on the structure and operation of the new network charge control arrangements and on OFTEL's approach to complaints about charges and other interconnect terms and conditions. In respect of complaints that BT's charges are unreasonable, OFTEL will first test whether the charge falls between a cost floor and ceiling determined by BT using a methodology prescribed by OFTEL and designed to indicate whether the charge may be anti-competitive. Floors and ceilings for all non-competitive services will be published each year by BT as part of their long run incremental costs financial statements. Number Translation Services In March 1999, OFTEL issued a statement on the interconnect and retail pricing regime for 'Number Translation Services' - freephone, national rate and local rate numbers, the latter of which are used in the UK by many operators to connect dial-up Internet services. The OFTEL document stated that its existing formula for dividing the revenue generated by such calls between the originating network and the terminating network - which some operators had argued allocated too much revenue to the terminating network - would remain in place until the next retail price control review in 2001. OFTEL would, however, be exploring ways in which greater competition in this market could be encouraged through the creation of additional retail price points for NTS services. The Company believes that the effect on the Company of OFTEL's decision is 38 43 likely to be neutral given that its origination of Internet call traffic is now being balanced by substantial Internet termination revenues. Price Regulation Although to date the Company has for the most part been able to price its cable telephone call charges below those of BT, there can be no assurance that it will be able to continue to do so in the future. BT currently is subject to controls over the prices it may charge customers, including a requirement that the overall basket of charges may not be changed by more than an amount equal to the percentage change in the RPI less X (and BT may, as a result, have to decrease prices). In particular, BT may not increase charges for certain services by more than the amount of the percentage change in the RPI. OFTEL's latest proposals for control of BT's retail prices have been incorporated in BT's license. The retail price controls will continue until 2001 and are stated to be the last such controls. The controls will only be put in place where consumer protection is required, that is, for low to medium-spending residential customers and small businesses. The current price cap is RPI minus 4.5% on the narrower basket of services described above. Safeguard caps of RPI plus 0% have been imposed on certain services. OFTEL has indicated that this is likely to be the last retail price control imposed on BT. See " -- Competition - -- Residential Telephony". BT has limited opportunity for differential pricing to the same class of customer because it is subject to prohibitions on undue preference and undue discrimination across the UK. Following the Duopoly Review, BT's telecommunications license was modified to permit it to offer discounts to high volume users, subject to several conditions. However, BT may not offer discounted services in local markets without offering the discounts nationally if such discounts result in undue discrimination or unfair cross-subsidy. The telephone service prices charged by the Group currently are not regulated by the Director General, although they are subject to the fair trading condition. Indirect and Equal Access ("Carrier Pre-Selection") Indirect access is access to a customer through another operator whereas equal access means preselection by the customer of the indirect access operator or dialing parity, where the number of digits dialed for calls over the first (access) network is the same as for calls over the second (indirect) network. In July 1996, OFTEL released a statement setting out its policy on indirect and equal access, dealing with the continued provision by BT of indirect access to CWC and other operators, the possible extension of the obligation imposed on BT to include equal access, and the possible extension of an indirect access obligation to CWC and other "non-dominant" operators. OFTEL concluded in its statement that indirect access will remain an important route for many customers who are not yet able to take advantage of competition in direct connections to receive the benefits of competitive provision of telecommunication services and that, given BT's continuing dominant position in the direct access network, BT should continue to be obligated to 39 44 provide indirect access to other operators. However, OFTEL also concluded that this obligation on BT should not extend to providing equal access to other operators. OFTEL, having commissioned a cost benefit analysis, concluded that, rather than a cost benefit, there would be a significant net cost in implementing equal access. Further, OFTEL concluded that "non-dominant" operators (such as CWC and the cable operators) should not be required to give indirect access to other operators. Although all PTO licenses include a condition regarding the provision of indirect access, it is subject to a number of tests including the need to ensure that the requirements of fair competition are satisfied and that indirect access, in all the circumstances, is reasonably required. OFTEL considered that these tests were not satisfied. However, OFTEL stated that it considers the "well established" operator threshold of 25% of customer connections in a relevant market to be a useful guide in determining whether a "non-dominant" operator should, in the future, be required to grant indirect access to other operators. OFTEL stated that this threshold would not automatically mean that the operator would be required to grant indirect access, but that OFTEL would investigate the issue further in respect of that operator and market conditions generally once that threshold was reached. On December 1, 1997 the EC Council of Telecommunications Ministers reached political agreement on a draft directive to amend the Interconnection Directive (Directive 97/33/EC) with regard to number portability and carrier pre-selection. This will require member states (except those which have been granted a derogation under the Full Competition Directive (Dir 96/19/EC)) to introduce carrier pre-selection by January 1, 2000, for operators with significant market power. Member states may request a deferment of this obligation if they can show that it would impose "an excessive burden on certain organizations or classes of organization". The UK Government has sought a short deferment until the end of 2000. Number Portability Telephone subscribers changing their telephone service to a cable operator have historically had to change their telephone numbers. As a result certain customers have been reluctant to switch carriers because they would lose their existing telephone numbers. In response to this, NTL has provided its business customers with the opportunity to use the Company's telephone service for their outgoing telephone calls, which generally carry higher revenues than incoming calls, and for their specialized telecommunications needs, while retaining their existing service provider (and their existing telephone number) for incoming telephone calls. In January 1994, the Director General announced that OFTEL was working on directives to require BT to introduce number portability for the cable operators who had provided OFTEL with the necessary information as to where and when they could provide portability to BT. The Director General's statement indicated that number portability may be introduced in the geographic areas where it is technically feasible in the foreseeable future. BT rejected a framework proposed by OFTEL for determining the charges payable for number portability in the event of a dispute between BT and other operators. In April 1995, the Director General referred the matter to the MMC to establish whether the failure of BT to reach agreements with other operators on the commercial terms and conditions for number portability was against the public interest, and if so, whether the adverse effects could be remedied or prevented by modifications to the conditions of BT's telecommunications license. On December 14, 1995, the Director General announced the MMC's conclusions, including that the absence of number portability operated against the public interest, 40 45 that the absence of number portability was an obstacle to operators' (including cable operators) ability to win customers from BT, that the introduction of number portability will strengthen competition, and that BT's telecommunications license should be modified (following a statutory consultation period) to enable the allocation of BT's costs incurred in this regard between BT and other operators (including cable operators), with BT bearing the greater share. The MMC also noted that there is general agreement in the industry that reciprocity should continue to be an essential element in the introduction of number portability, and that the arrangements to be made for allocating portability costs need to take account of the fact that BT will not always be the exporting operator. BT's telecommunications license has been modified accordingly. On April 9, 1997, OFTEL issued a statement which set out OFTEL's proposals to modify the license conditions of CWC and other fixed operators including cable operators to ensure that they too provide number portability for all users of fixed phones including portability of specially tariffed services such as toll-free (0800), premium rate and national rate services. Appropriate license modifications were made on December 17, 1997. These take full account of the MMC report and are based on the current license condition in BT's PTO license. They also apply the MMC's principles on the charges which operators can make to each other for providing portability. In particular, the following principles are applied: (i) the licensee would be required to provide portability on request from another qualifying licensee; (ii) the principle of reciprocity would apply; (iii) each licensee would be required to pay the initial costs of modifying its network; (iv) each licensee would be able to pass on to the other licensee concerned the costs of enabling individual customers to port their numbers; (v) the exporting licensee would not directly charge the importing licensee for any additional conveyance costs associated with routing a call to a ported number; and (vi) if requested, the Director General would determine the reasonableness of the terms and conditions upon which portability was offered. These license modifications came into effect on December 17, 1997. The deadline for all PTO's, including the Company, to introduce geographic number portability is January 1, 2000. Restrictions on National PTOs The Duopoly Review maintained restrictions upon BT and other national PTOs from conveying or providing entertainment services (such as the cable television services currently provided by NTL) over their national telecommunications networks. The new Labour government started reviewing the restrictions upon the conveyance and provision by BT and CWC of broadcast 41 46 entertainment ahead of the schedule set by the former Conservative government, which did not intend to review the restrictions on conveyance and on provision until 2001 although the government was prepared to reconsider the conveying aspect after March 1998 on the advice of the Director General of Telecommunications. In November 1997 the Labour government stated that it expects to publish proposals in the near future. See " -- Certain Regulatory Matters -- General". The Duopoly Review policy did not prevent the national PTOs from providing cable television services of the kind currently provided by the Company, but it did require that such services be provided through separate systems by separate subsidiaries of the national PTOs under separate licenses similar to those held by the Company. The ITC's historical policy of granting one cable television license for each geographic area ensured that no national PTO subsidiaries compete with the Company in the provision of cable television services in the same area. On April 23, 1998, the Department of Trade and Industry announced the UK government's intention to progressively end this policy, allowing any operator to seek a license to compete in the provision of broadcast entertainment in those areas outside current cable franchises. From January 1, 2001, competition within current cable franchises will also be permitted. Since April 1, 1994, cable television services may be provided locally by the national PTOs without requiring separate subsidiaries, although all other licensing requirements, including the need for the national PTO to obtain an LDL to provide cable services within each locality, will remain applicable to both national PTOs and to other cable operators such as the Company. In November 1994, the DTI stated that if national PTOs (including BT and CWC) successfully bid for a new cable television license, the DTI would be prepared to issue a telecommunications license to enable any such national PTO to convey entertainment services over its own systems within the relevant franchise area. Following a consultative document issued in March 1996, the UK Government announced on June 6, 1996, that it was ending the duopoly between BT and CWC as international carriers from the UK. A license holder may now provide international services from the UK on telecommunications facilities owned and controlled by the company providing the service, and will be able to offer services on any route it chooses. A large number of international facilities licenses have been granted. Access to higher bandwidth services In January 1999, OFTEL issued a consultation document on the arrangements for access to so-called 'higher bandwidth' services, including fast Internet access and video on demand. The document envisaged a number of possible arrangements whereby such services could be provided over the BT network, both by BT itself and by third party service providers. The document sought views on whether there was substantial unmet demand for these services, whether this demand could be met by other means, and, if not, what form of regulatory intervention might be appropriate to mandate the development of such services over the BT network. OFTEL emphasized that any such intervention would need to be consistent with OFTEL's wider policy of encouraging the development of alternative infrastructure. At the time of writing, it is not known what conclusions OFTEL has drawn from the responses to the consultation. Digital Broadcasting 42 47 The Broadcasting Act 1996 introduced provisions for the licensing of digital terrestrial broadcasting and introduced a "must carry" requirement on cable companies where both program provider and cable operator use digital technology to ensure the universal availability of designated public service channels. Must carry obligations concerning public service channels already apply to holders of PDSLs. The Broadcasting Act 1996 distinguishes between "multiplex" providers, the providers of the frequency ranges on which the television channels will be carried, and the digital program service providers, who provide the programs to be broadcast on the multiplexes. Each must be licensed by the ITC. Licensed digital multiplex providers will be required to contract with licensed digital program providers to carry their services on the multiplexes on a fair and non-discriminatory basis. Initially six multiplexes are available for digital terrestrial television. Each of the existing terrestrial broadcasters have reserved capacity on these multiplexes, being offered half a multiplex for each existing channel. This means that the BBC has full control of one multiplex, Channel 3 and Channel 4 have joint control of a multiplex and Channel 5 and S4C each have half of a third multiplex. Existing terrestrial broadcasters have obligations to simulcast their existing analog channels and will be able to use their remaining multiplex capacity to provide new free-to-air or pay services. Following a competitive tender, the ITC announced in June 1997 that the remaining three multiplexes would be awarded to British Digital Broadcasting (BDB), a joint venture between Carlton Communications and Granada Group. BSkyB was also originally a member of the joint venture but because of competition concerns the ITC required it to divest itself of the shareholding which was transferred equally to Carlton and Granada. BSkyB however will remain a major supplier of programming to BDB. The joint venture arrangements are currently being investigated by the EC competition authorities. The licenses were formally granted by the ITC on December 19, 1997 following conclusion of the ITC's own discussions with the EC competition authorities regarding their concerns. The licenses contain conditions which are intended to address, among other things, concerns over program service contracts with BSkyB. The conditions include the limitation of program supply agreements to five years, a requirement for the licensee to support open technical standards on integrated TV sets and conditions to ensure that BDB is not prevented from competing with BSkyB. Future Developments Conditional Access Pay television broadcasters need to use conditional access systems to ensure that only subscribers receive their services. Conditional access systems provide two main types of services: encryption services and customer management services. The EC Advanced Television Standards Directive (Directive 95/47/EC) requires, amongst other things, that conditional access services for digital television services should be available to broadcasters on a fair, reasonable and non-discriminatory basis. This Directive was implemented in the UK by the Advanced Television Services Regulations which came into force on January 7, 1997. In addition to the requirement that conditional access services must be offered on a fair, reasonable and non-discriminatory basis, the Regulations provide that broadcasters may obtain information on the conditional access system prior 43 48 to its being put on the market. Further, the Regulations provide that conditional access operators are required to cooperate with cable operators so that cable operators are able to receive and rebroadcast television services using their own conditional access system without incurring unnecessary or unreasonable expense. The Regulations also modify the Telecommunications Act 1984 to provide for conditional access systems which make available conditional access services including encryption, subscriber management or subscriber authorization services to be treated as telecommunications systems. Each such system must be licensed and the UK Secretary of State granted a Class License to authorize the running of these conditional access systems which came into force also on January 7, 1997 and runs until July 31, 2001 unless previously revoked. The license contains similar provisions to those in the Regulations set out above and, in addition, includes the fair trading condition. Under the Class License, the Director General can order a licensee to make available its intellectual property rights if the licensee is using them to prevent or obstruct products from being made available. The Director General can also designate an interface between the licensed system and a broadcaster's conditional access or other transmission system as an "essential interface" and thereafter the licensee must comply with any relevant standard specified by a broadcaster which includes applicable European standards or other standards specified by the Director General. Following public consultation, OFTEL published guidelines on the regulation of conditional access services for digital television. The guidelines set out how OFTEL would propose to deal with anti-competitive behavior in relation to the provision of conditional access services. The guidelines are not legally binding and are expected to be reviewed where market developments so require. In July 1997 the DTI and OFTEL issued a joint consultation proposing the extension of the current conditional access regime for digital television broadcasts to digital non-television broadcasts and non-broadcast services in the light of the convergence of the technologies and markets in broadcasting and telecommunications. The services to be covered include non-broadcast interactive services such as home-shopping and non-broadcast information services. Conditional access systems for analog services are not included. In addition, in October 1997, OFTEL issued a consultative document relating to guidance on the pricing of conditional access systems to ensure that they are offered on a fair, reasonable and non-discriminatory basis. The aim is to ensure that prices are reasonable and that comparable broadcasters receive comparable treatment by not being subject to differential pricing. OFTEL proposes to group together providers of subscription services and to assess whether they are comparable by reference to number of subscribers and number of different services (or combination of services) offered to subscribers. BSkyB has entered into a joint venture, BIB, with BT, Midland Bank and Matsushita (one of the manufacturers of decoders for accessing digital television channels) to create and operate a platform for the provision of digital interactive television services to UK viewers. The interactive services which it hopes to offer include home banking, home shopping and Internet access via TV screens. BIB intends to subsidize the costs of the manufacture and installation of the decoders 44 49 needed to access the services. The joint venture arrangements have been approved by the EC competition authorities, but subject to strict conditions. Media Ownership The Broadcasting Act 1996 amends the media ownership rules contained in the Broadcasting Act 1990. It relaxes the earlier rules limiting ownership between terrestrial television, satellite and cable broadcasters, except for those broadcasters which are already more than 20% owned by a newspaper with more than 20% national newspaper circulation. Qualifying terrestrial broadcasters are now allowed to have controlling interests in cable and satellite companies, provided their total interests do not exceed 15% of the total television market (defined by audience share including public service broadcasters) and qualifying cable companies will be able to control terrestrial television companies, subject to the 15% total television market limit and certain restrictions on the number of terrestrial licenses held. Newspaper groups with less than 20% national newspaper circulation are now able to control television broadcasters constituting up to 15% of the total television market, subject to a limit on the number of terrestrial licenses held, unless the ITC decides that such control would be against the public interest. Newspaper companies, the license holders of Channel 3 and Channel 5 and satellite and cable broadcasters, are to have the ability to control any number of digital terrestrial television licenses, in addition to any analogue licenses. BSM Services In August 1995 OFTEL issued a consultative document which addressed the potential development of broadband switched mass-market ("BSM") services in the UK and related regulatory issues. BSM services involve the delivery of video-quality images over a switched system, at prices intended to encourage the development of a mass market. The consultative document suggested that dominant operators (potentially including cable operators) should be required to provide, on transparent and non-discriminatory terms, broadband conveyance (including switching) as a network business to service providers which could have direct commercial relationships with individual customers. Requirements for accounting separation and the possible need for some form of price control were also considered. OFTEL suggested that BT is likely, at an early stage, to be considered a dominant operator, possibly when it starts to roll out BSM services aimed at covering a significant portion of the UK, either nationally or in a specific regional market. OFTEL suggested that such regulation should only be applied to the cable sector when it becomes dominant, either nationally or in a specific regional market, and is able to compete on equal terms with BT and any other BSM services distributor. In the meantime the document recognized the importance of encouraging continuing local investment in the cable industry's infrastructure. The document also raised the question whether license obligations on cable operators to provide cable television services where their systems have been installed should not apply to BSM services (other than the broadcast entertainment services for which they have exclusive cable distribution rights in their franchise areas) until they become dominant in their relevant markets. The stated purpose of the consultative document was to raise issues in order to stimulate debate to assist in the development of the kind of regulatory regime that will best promote the new services. The August 1995 consultative document was followed by a consultative document in February 1996 and by a statement by the Director 45 50 General in June 1996, both of which were concerned with promoting competition in the current market for services such as on-line information, electronic data interchange and voice messaging. Accounting Separation The EC Interconnection Directive (mentioned above) requires that operators who have special or exclusive rights for the provision of services in sectors other than telecommunications in the same or another member state must keep separate accounts of their telecommunications activities if their turnover from the provision of public telecommunications networks or publicly available telecommunications services is more than 50 million ecus. This requirement has been implemented in the UK by the Telecommunications (Interconnection) Regulations. See "-- Cable Telecommunications -- Interconnect Arrangements". The DTI and OFTEL take the view that cable operators have special or exclusive rights for the provision of entertainment services over their cable systems and therefore fall within this obligation. Several cable operators, including the Company have challenged this interpretation because they are subject to competition in their franchise areas from DTH satellite service operators and will in the near future be subject to competition from digital terrestrial television. The implementing regulations do not set out detailed guidelines for the accounting separation requirements, but it appears that the Company's individual franchises do not cross the revenue threshold necessary for these conditions to become operative. Separation of Cable and Telecommunications Operations The EC Commission is of the view that accounting separation provided for under the existing Cable TV Directive (95/51/EC) is not sufficient to ensure competition and is proposing an amending directive under its powers in Article 90 of the EC Treaty, relating to the structural separation of operators' cable television and telecommunications activities. The draft directive was adopted by the United States Securities and Exchange Commission (the "Commission") on December 16, 1997 and will be subject to a two month period of consultation commencing on the date the draft text is published in the Official Journal. At the end of the consultation period the Commission can then formally adopt the directive with or without taking into account comments of third parties, the European Parliament or the European Council received during that period. The amending directive should enter into force twenty days after its publication. As it is still in draft form, any impact of the amending directive on UK cable operators cannot yet be predicted. However, it would appear that the requirement for legal separation of the provision of public telecommunications and cable TV networks will apply to dominant telecommunications operators which also have special/exclusive rights in respect of the provision of cable TV networks and (if the operator is not state-controlled) in respect of the use of relevant radio frequencies. In a footnote in a relevant Communication, the Commission specifically described the situation in the UK where BT, CWC and Kingston Communications can operate cable TV networks, if they obtain a franchise, but the networks have to be run separately from the main telecommunications activities of those entities. In addition, the Commission takes the view that full divestment could still be required in specific cases. In its current 46 51 form, the directive would not appear to require any structural separation by the Company given the nature and extent of its current authorized activities. Competition Bill The UK Government enacted a new Competition Act (the "Competition Act") which grants concurrent powers to the industry specific regulators and the Director General of Fair Trading for the enforcement of prohibitions modeled on Article 85 and 86 of the European Community Treaty. The Competition Act introduces a prohibition on the abuse of a dominant position and on anti-competitive agreements, and introduces third party rights, stronger investigative powers, interim measures and effective enforcement powers. Under the Competition Act, the Director General of Telecommunications is able, but not required, to exercise concurrent powers with the Director General of Fair Trading in relation to "commercial activities connected with telecommunications". The Competition Act enables third parties to bring enforcement actions directly against telecommunications operators who are in breach of the prohibitions and seek damages, rather than have to wait for the Director General of Telecommunications to make an enforcement order. Broadcast and National Telecoms Services A significant proportion of the Company's total revenues is attributable to the provisions of television and radio transmission and distribution services and the provision of telecommunications services. In the UK, the provision of such services is governed by the Telecommunications Act and The Wireless Telegraphy Act 1949 (the "Wireless Telegraphy Act"). Set forth below is a brief summary of the principal licenses of the Company's National Telecoms and Broadcast Services divisions granted pursuant to these Acts. Telecommunications Act Licenses The Company holds five licenses under the Telecommunications Act (in addition to Telecommunications Act licenses for its cable franchises). License to run telecommunications systems for the provision of television and radio transmission services (the "Transmission License"). The Transmission License enables the Company to run telecommunications systems for the provision of television and radio transmission services. It permits NTL to carry out its core business of providing transmission services to television and radio broadcasters. The Transmission License was granted on December 20, 1990 for a period of 25 years from January 1, 1991. It is subject to revocation thereafter on 10 years' notice in writing. No notice may be given before the end of the fifteenth year. The Company's Transmission License contains conditions and other provisions which, among other things: (i) require the Company to provide specified telecommunications services to specified persons on request; (ii) specify certain criteria to be met by the Company in providing those services; (iii) require the connection of the Company's telecommunications systems with those 47 52 of certain other transmission operators and the transmission over those systems by such operators of messages for general reception; (iv) require the Company to publish its charges and terms and conditions of business and not to show undue preference to or exercise undue discrimination against particular persons in the provision of certain telecommunications services; (v) requires the Company to hold Wireless Telegraphy Act licenses in respect of each item of wireless telegraphy comprised in its system; (vi) impose on the Company an obligation to share its transmission sites with other transmission operators; (vii) restrict the prices which the Company is allowed to charge for the provision of certain services. (see "--Price Cap Review" below); (viii) prohibit the Company from cross-subsidizing the unregulated side of its business, and (ix) impose a requirement for separate accounts to be produced in relation to both the regulated and unregulated parts of the Company's business. However, the Company is not obliged to do anything "not reasonably practicable." The Secretary of State may revoke the Transmission License in the circumstances described under "Telecommunications Licenses--Term, Renewal and Revocation of Licenses" above. License to run telecommunications systems for the provision of outside broadcasting services by means of satellite systems (the "OBS License"). The OBS License, which permits the Company to run telecommunications systems for the provision of outside broadcasting services by means of satellite systems, enables the Company to operate satellite up-links from outside broadcast sites (sites which are not permanently equipped or adapted for television or radio broadcasting). The OBS License was granted on February 6, 1991 for a period of 25 years from February 7, 1991, thereafter revocable on 10 years' notice in writing. No notice may be given before the end of the fifteenth year. The OBS License contains conditions similar to those in the Transmission License. The OBS License specifies the circumstances in which it may be revoked by the Secretary of State which include on revocation of the Transmission License. License to run telecommunications systems ("Telecoms License"). The Telecoms License enables the Company to convey messages (including voice and data) between points on NTL's telecommunications networks. The Telecoms License also contains conditions and revocation provisions similar to those in the Transmission License. The Telecoms License was granted on December 30, 1992 for a period of 10 years from December 30, 1992. Thereafter it is revocable on 5 years' written notice. No notice may be given before the end of the fifth year. License to run telecommunications systems ("PTO License"). The PTO License permits the Company to run telecommunications systems of every description within the UK and to provide telecommunications services both authorizations are subject to certain exceptions. The Company's PTO License was granted on February 14, 1996 for a period of 25 years from that date. Thereafter, it is revocable on 10 years' written notice. No notice may be given before the end of the fifteenth year. The Company's PTO License also includes a condition obliging it, subject to certain exceptions, to enter into an agreement to connect its system to the system of any operator which requires it to do so, provided that operator has been granted a license authorizing it to connect its system to the Company's system. The PTO License details the exceptions and conditions subject to which the Telecommunications Code will apply to the Company. The Telecommunications Code confers certain important rights on PTO's in relation to network construction, buildings and land. 48 53 International Facilities License. The international facilities license permits the Company to provide direct international facilities based services, without being required to do so via BT or Mercury. The license will enable the Company to take advantage of the expanding volumes of international telecommunication traffic, especially data services such as the Internet, and substantially reduce the Company's international call conveyance costs. In this connection, the Company has been awarded telecommunications licenses in the Republic of Ireland and in the United States Wireless Telegraphy Act Licenses The Company holds a number of Wireless Telegraphy Act licenses of which the most important are the following: License for the Transmission of Broadcasting Services. This license was granted on January 1, 1991 and permits the licensee to operate wireless telegraphy stations at those sites set out in a schedule to the License. In respect of each station, site and mast heights, power, polarization and frequency to be used are specified. Microwave Fixed Link License. This license permits the licensee to establish and use fixed stations for sending and receiving wireless telegraphy at those sites as detailed in the schedule to the license. Private Mobile Radio License. This license permits the licensee to establish sending and receiving stations for wireless telegraphy (both base stations and mobile stations) and to use these stations for the purpose of sending and receiving spoken messages concerning the business of the licensee. Earth Station Licenses. The Company holds a number of earth station licenses. These licenses permit the licensee to establish earth stations at specified locations in the UK for the purpose of providing wireless telegraphy up-links between the earth station and specified geo-stationary satellites. Each of the four types of license referred to above continue in force from year to year unless revoked by the Secretary of State or unless any of the license fees are unpaid by the licensee in which case the relevant license expires. Licenses for the Transmission of Broadcasting Services (special status). The Company provides transmission services for a large number of radio stations pursuant to its License for the Transmission of Broadcasting Services dated January 1, 1991 (see above). In respect of two radio stations, Classic FM and Virgin Radio, NTL has been issued licenses which are specific for those radio stations. This has been done for the sake of administrative convenience because, in both cases, the license fees are paid direct to the Radio Communications Agency by the radio station concerned. 49 54 Radio Fixed Access License. A Radio Fixed Access License has been granted for services provided at 10 GHz. This license allows the Company to provide short-range radio-links between business customers and its network. Conditions in the Company's Wireless Telegraphy Act Licenses. The Company's Wireless Telegraphy Act licenses contain conditions relating to revocation of the Licenses and notifications to the Secretary of State. In general, the Secretary of State may revoke a Wireless Telegraphy Act license at any time. There are no notification requirements in respect of a change of control. The license for the transmission of broadcasting services contain provisions which enable the Secretary of State to revoke the license if, among other things, (i) the licensee is, in the opinion of the Secretary of State, not a fit and proper body to hold such a license; (ii) it appears to him requisite or expedient to do so for purposes connected with the EU or any other international organization or obligation or co-operation; (iii) the licensee ceases to hold any contracts for the broadcasting of television or sound broadcasting services or (iv) the licensee's license granted under the Telecommunications Act is for any reason revoked. On June 18, 1998, the new Wireless Telegraphy Act came into force. This allows the UK's Radiocommunications Agency for the first time to charge more for spectrum than the costs they incur in allocating it. The Agency has set out its detailed proposals on how the first wave of 'spectrum pricing' will be applied. This envisages increases in the price which the Group pays for microwave fixed links from July 1999. The Group considers that the increases will not impact significantly on the business. The Agency has indicated that the spectrum pricing approach could be applied in the future (possibly from July 2000 onwards) to other spectrum uses. It has indicated, however, that spectrum pricing is unlikely to broadcast spectrum. Price Cap Review The Company's regulated business may be divided into two categories: Price Regulated Business and Applicable Rate Business. Price Regulated Business comprises those telecommunication services which the Company is obliged to provide pursuant to its Transmission License and in respect of which price controls are imposed. The Company's Applicable Rate Business comprises those telecommunications services which the Company is obliged to provide but which do not fall within the definition of Price Regulated Business. Charges for Applicable Rate Business are agreed between the Company and the relevant customer. If despite all reasonable efforts agreement cannot be reached between the Company and a significant proportion of its customers in respect of any particular telecommunications service, the charge will be determined by the Director General. In respect of any services provided by the Company which are not Price Regulated Business or Applicable Rate Business, the prices charged by the Company are wholly unregulated, except for the overriding duty not to engage in any pricing policy which constitutes undue preference or undue discrimination against any person or class of person in respect of telecommunications services. The 50 55 Company's unregulated income would include, for example, charges for site rentals to PCN operators. The Company's Price Regulated Business is, essentially, the television transmission service provided to the ITV (Channel 3) companies and Channel 4/S4C including the operation and maintenance of transmission equipment and the provision to third party transmission operators of the accommodation, masts and antennae necessary for the operation of broadcast transmission services. On December 24, 1996, the Director General issued the formal modification to the Company's Telecommunications Act Licenses to effect the price controls which are to apply to the Company for the period from January 1, 1997 to December 31, 2002. The Price Cap Review had two purposes: (1) to establish a new "P0" (the Company's allowable revenues for the first year of the next control period, 1997, in respect of the Company's Maximum Price Regulated Business) and (2) to establish a new "X" (the percentage by which such revenues must, after allowing for consumer price inflation, be reduced each year thereafter). The Director General's review concluded that, on present assumptions, the new P0 is (pound)53.15 million and the new X is 4.0%. In addition to price control, the Price Cap Review raised a number of other issues which will impact upon the Company's Price Regulated Business in the future. In particular, the Director General suggested that it would be desirable for the Company to "unbundle" the prices for operational services and required site rentals which it charges to each broadcaster (such as Channel 3 and Channel 4/S4C) in the form of a transmission fee in order to expose those elements of the service which are potentially competitive and allow broadcasters to choose an alternative supplier if they wish. OFTEL has proposed to review whether the Company should publish a ratecard with a menu of prices for unbundled services in 2002 when the Company's regulated business is next due for full review. At present, the system for calculating the proportion of Channel 3's total transmission fee which is charged to each individual franchisee is based on net advertising revenues ("NAR") accruing to each franchisee, rather than the costs of actually providing the transmission service to each of the franchisees. OFTEL proposed that the Company should continue to charge Channel 3 as a group a single price for each component of its transmission service, albeit that each component would be separately distinguished. This arrangement would continue unless and until NAR arrangements no longer applied. This decision could only be taken after agreement with the Department of Culture, Media and Sport and consultation with other interested bodies. European Union Legislation The Company's business is further regulated by the EU under various European Commission Directives. In addition, EU law, in particular Directive 94/46, regulates the provision of satellite services within the EU. In addition, possible future EU legislation (Green Paper on Convergence) the Company may be subject to additional controls as a result of dealing both with broadcasting and telephony services on a single network. 51 56 GENERAL Research and Development The Company's research and development activities involve the analysis of technological developments affecting its cable television, telephone and telecommunications business, the evaluation of existing services and sales and marketing techniques and the development of new services and techniques. Patents, Copyrights and Licenses The Company does not have any material patents or copyrights nor does it believe that patents play a material role in its business. The Company is substantially dependent on the licenses and franchises granted by the legislative agencies which regulate their respective businesses. The loss of any one or more of the licenses and franchises of the Company could have a material adverse effect on the Company's business and financial condition. There are no material intellectual property licenses used by the Company the loss of which would have such an effect. Customers Except for the Company's broadcast services business, no material part of the Company's business is dependent upon a single customer or a few customers, the loss of any one or more of which would have a materially adverse effect on the Company. The broadcast services business is, however, substantially dependent on the revenues it receives pursuant to its contracts with the ITV companies and Channel 4/S4C the loss of one or more of which may have a material adverse effect on the Company. Employees At December 31, 1998, the Company and its subsidiaries had approximately 9,135 employees. Approximately 190 employees are represented by the Broadcasting, Entertainment, Cinematographic and Theatre Union which has entered into a collective bargaining agreement with NTLIH. No other employees of the Company are represented by any labor organization. The Company believes that its relationship with its employees is good. ITEM 2. PROPERTIES. Properties The Company's subsidiaries own, lease or occupy under license 29 business unit and regional head-offices throughout the UK, with its corporate head-office being in Farnborough and 11 retail shops. In addition, the Company's subsidiaries own or lease approximately 135 switching centers/head-ends and operational hub-sites together with warehouses and other non-operational 52 57 properties, as well as various cable television, telephone and telecommunications equipment used in each of its regional systems. The Company also owns, leases or occupies under license approximately 770 properties, of which approximately 700 are used as transmitter sites. In addition, the Company also is the lessee or licensee of approximately 600 transmitter sites which are owned by Castle Transmission and shared between the two organizations pursuant to a site sharing agreement. The Company maintains offices under lease for its corporate staff in New York City. The Company believes that its facilities are presently adequate for their current use. The Company intends to continue to expand its systems in accordance with the requirements of its network build schedules and acquire new sites as part of the ongoing expansion of its transmission networks. ITEM 3. LEGAL PROCEEDINGS. Legal Proceedings A civils main build contractor employed by Diamond, E. H. O'Neill Limited ("O'Neill"), has commenced legal proceedings against Diamond, claiming approximately (pound)7.1 million in respect of estimated anticipated lost profits on future work pursuant to an alleged oral agreement. Diamond denies the existence of any such agreement and intends to defend the proceedings in full. In addition, the Company is involved in, or has been involved in, certain disputes and litigation arising in the ordinary course of its business, including claims involving contractual disputes and claims for damages to property and personal injury resulting from the construction of the Company's networks and the maintenance and servicing of the Company's transmission masts, none of which are expected to have a material adverse effect on the Company's financial position. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS. At a special meeting held on October 29, 1998, the Company's stockholders were asked to consider proposals (1) to approve the issuance of shares of Company Common Stock pursuant to the Amalgamation Agreement and (2) to amend the Restated Certificate of Incorporation of the Company to increase the maximum number of authorized shares of the Company's Common Stock from 100,000,000 to 400,000,000 shares and to increase the maximum number of authorized shares of the Company's Preferred Stock from 2,500,000 to 10,000,000 shares. With respect to the first proposal, 30,522,721 votes were cast for, 35,646 against and there were 21,186 abstentions and broker non-votes. With respect to the second proposal, 26,366,230 votes were cast for, 4,191,521 against and 21,802 were abstentions and broker non-votes. 53 58 PART II ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS. The Company's Common Stock is traded on the Nasdaq Stock Market's National Market under the symbol "NTLI" and on EASDAQ under the symbol "NTLI.ED". From October 14, 1993 through March 26, 1997, the Common Stock traded on Nasdaq Stock Market's National Market under the symbol "ICTL". The following table sets forth, for the periods indicated, the high and low last sale prices as reported on Nasdaq Stock Market's National Market.
Last Sale Price High Low --------------------------- 1997 First Quarter $26.75 $18.25 Second Quarter 27.00 19.25 Third Quarter 27.63 20.75 Fourth Quarter 29.13 25.25 1998 First Quarter 45.75 26.75 Second Quarter 54.00 35.75 Third Quarter 65.00 35.50 Fourth Quarter 59.50 32.00 1999 First Quarter (through 83.13 53.75 March 29, 1999)
On March 29, 1999, the closing sale price for the Company's Common Stock, as reported on the Nasdaq Stock Market's National Market was $81.44. As of March 29, 1999, there were approximately 583 record holders of the Common Stock. This figure does not reflect beneficial ownership of shares held in nominee name. The Company has never paid cash dividends on its Common Stock. Pursuant to the indentures governing the Company's Senior Notes and the Certificates of Designation governing the Company's Preferred Stock, certain provisions currently materially limit the Company's ability to pay dividends on the Company's equity securities. In addition, there are legal and contractual restrictions on the ability of the Company's subsidiaries to transfer funds to the Company in the form of cash dividends, loans or advances. See "Management's Discussion and Analysis of Financial Condition and Results of Operations - Liquidity and Capital Resources". The Company does not currently intend to pay cash dividends in the foreseeable future on shares of its capital stock. The Company anticipates that for the foreseeable future any cash flow generated from subsidiaries' 54 59 operations will be used to develop and expand the Company's business and for debt service. Any future determination as to the payment of dividends will be at the discretion of the Company's Board of Directors and will depend upon the Company's operating results, financial condition and capital requirements, indenture and other contractual restrictions, general business conditions and such other factors as the Company's Board of Directors deems relevant. There can be no assurance that the Company will pay dividends at any time in the future. ITEM 6. SELECTED FINANCIAL DATA. The following table sets forth certain financial data for the years ended December 31, 1998, 1997, 1996, 1995 and 1994. This information should be read in conjunction with the consolidated financial statements and notes thereto appearing elsewhere in this Form 10-K.
(In thousands, except per share data) Year ended December 31, -------------------------------------------------------------- 1998 1997 1996 1995 1994 -------------------------------------------------------------- (1) (2) Income statement data: Operating revenues $ 747,015 $ 491,755 $ 228,343 $ 33,741 $ 13,745 (Loss) before extraordinary item (503,927) (328,557) (254,454) (90,785) (29,573) Net (loss) (534,616) (333,057) (254,454) (90,785) (29,573) Basic and diluted net (loss) per common share: (Loss) before extraordinary item (3) (12.69) (10.60) (8.20) (3.01) (.98) Net (loss) per common share (3) (13.43) (10.74) (8.20) (3.01) (.98) Weighted average number of common shares used in the computation of basic and diluted net loss per common share (3) 41,202 32,117 31,041 30,190 30,175 As of December 31, -------------------------------------------------------------- 1998 1997 1996 1995 1994 -------------------------------------------------------------- (1) (2) Working capital (deficiency) $ 600,549 $ (52,344) $ 242,102 $ 76,128 $ 251,544 Fixed assets, net 3,854,430 1,756,985 1,459,528 639,674 191,725 Total assets 6,194,097 2,421,639 2,454,611 1,010,669 664,366 Long-term debt 5,043,803 2,015,057 1,732,168 513,026 143,488 Senior Redeemable Exchangeable Preferred Stock 124,127 108,534 -- -- -- Shareholders' equity (deficiency) 355,154 (61,668) 328,114 339,257 436,534
55 60 (1) In June and September 1998, the Company purchased ComTel for an aggregate purchase price of $969 million, including intangibles aggregating $224 million. In October 1998, the Company purchased Partners for an aggregate purchase price of $600.4 million, including intangibles of $129.8 million. In December 1998, the Company purchased EGT for an aggregate purchase price of $151 million, including intangibles of $45 million. The net assets and results of operations of ComTel, Partners and EGT are included in the consolidated financial statements from their respective dates of acquisition. (2) In May 1996, the Company purchased NTL Group Limited for an aggregate purchase price of approximately $439,000,000, including goodwill of approximately $263,000,000. The net assets and results of operations of NTL Group Limited are included in the consolidated financial statements from the date of the acquisition. (3) After giving retroactive effect to the four-for-three stock split by way of stock dividend paid in August 1995. The Company did not declare or pay any cash dividends during the years indicated. 56 61 ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS. RESULTS OF OPERATIONS As a result of the completion of the acquisitions of ComTel Limited and Telecential Communications (collectively, "ComTel"), Comcast UK Cable Partners Limited ("NTL Bermuda") and Eastern Group Telecoms ("EGT") in 1998, the Company consolidated the results of operations of these businesses from the date of acquisition. The results of these businesses are not included in the 1997 results. Years Ended December 31, 1998 and 1997 NTL's revenues increased from 1997 to 1998 by approximately 52% to $747,015,000. This $255,240,000 increase in revenues was accompanied by only a $70,490,000 increase in operating expenses, representing a 73% incremental margin. Local telecommunications and television revenues increased to $355,589,000 from $166,951,000 primarily as a result of customer growth that increased the Company's current revenue stream. The 1998 revenue includes $52,772,000 and $21,441,000 from ComTel and NTL Bermuda, respectively. The Company expects its customer base to continue to increase which will drive further revenue growth as the Company completes the construction of its dual service network past the remaining homes in its franchise areas. National and international telecommunications revenues increased to $248,895,000 from $185,194,000 primarily as a result of increases in business telecommunications revenues, Internet services revenues and carrier services revenues. Business telecommunications and Internet services revenues increased primarily as a result of customer growth. The Company expects its business telecommunications and Internet services customer bases to continue to increase which will drive further revenue growth. The Company is expanding its sales and marketing effort to business customers and for Internet services in its completed network. Carrier services revenues increased due to growth in satellite services and telephone services provided by the Company's wholesale operation to broadcasters and telephone companies, respectively. Revenue growth in carrier services is primarily dependent upon the Company's ability to continue to attract new customers and expand services to existing customers. Recent new contracts should contribute to revenue growth in the near term. Broadcast transmission and other revenues increased to $140,156,000 from $130,799,000 primarily due to increases in broadcast television and FM radio customers and accounts, which exceeded price cap reductions in the Company's regulated services. Broadcast television revenues are expected to increase in the future as digital television broadcasting commences. 57 62 Other telecommunications revenues decreased to $2,375,000 from $8,831,000 primarily due to the sales of the assets of the Company's wholly-owned subsidiary, OCOM Corporation, to AirTouch Communications, Inc. and to Cellular Communications of Puerto Rico, Inc. during 1998. Operating expenses increased to $372,134,000 from $301,644,000 primarily as a result of increases in interconnection costs and programming costs due to customer growth. The 1998 expenses include $26,745,000 and $8,453,000 related to ComTel and NTL Bermuda, respectively. Selling, general and administrative expenses increased to $299,494,000 from $169,133,000 as a result of increases in telecommunications and CATV sales and marketing costs and increases in additional personnel and overhead to service the increasing customer base. The 1998 expense includes $31,212,000 and $9,502,000 related to ComTel and NTL Bermuda, respectively. Franchise fees increased to $25,036,000 from $23,587,000 primarily as a result of the inflation adjustment to the Northern Ireland license payment. Corporate expenses decreased to $17,048,000 from $18,324,000 primarily due to the sale of OCOM's assets in 1998. Certain OCOM personnel were included in corporate expenses in 1997. Nonrecurring charges of $20,642,000 in 1997 were comprised of restructuring costs of $15,629,000 and deferred costs written-off of $5,013,000. The deferred costs written off arose in connection with the Company's unsuccessful bid for Digital Terrestrial Television multiplex licenses. Restructuring costs relate to the Company's announcement in September 1997 of a reorganization of certain of its operations. The Company consolidated the Customer Operations departments that serve three franchise areas in England (excluding the ComTel and NTL Bermuda franchises) into one department and consolidated certain operations and management groups within the Broadcast Services division, as well as certain other consolidations or cessation of activities. This charge consisted of employee severance and related benefit costs of $6,726,000 for approximately 280 employees to be terminated, lease exit costs of $6,539,000 and penalties of $2,364,000 associated with the cancellation of contractual obligations. The consolidations have been completed, the lease exit costs are for leases that extend over a number of years and the contract cancellations have been completed. As of December 31, 1998, $9,172,000 of the provision has been used, including $5,558,000 for severance and related costs, $1,450,000 for lease exit costs and $2,164,000 for penalties associated with the cancellation of contractual obligations. As of December 31, 1998, 177 employees had been terminated. The $4,194,000 reversed in 1998 from changes in estimates of costs to be incurred includes $1,168,000 for severance and related costs, $2,826,000 for lease exit costs and $200,000 for penalties associated with the cancellation of contractual obligations. This reversal was necessary because employees whose positions were eliminated chose to remain with the Company in other positions rather than leave the Company and receive severance pay; and the real estate markets in which the Company sublet space improved increasing the sublet rentals and shortening the period of time required to find subtenants. The remaining restructuring reserve of $2,263,000 is for lease costs net of sublease revenue. Depreciation and amortization expense increased to $266,112,000 from $150,509,000 58 63 primarily due to an increase in depreciation of telecommunications and CATV equipment. The 1998 expense includes $31,091,000 and $14,702,000 from ComTel and NTL Bermuda, respectively, including amortization of acquisition related intangibles. Interest expense increased to $328,815,000 from $202,570,000 due to the issuance of additional debt in 1998 and the increase in the accretion of original issue discount on the deferred coupon notes. Interest of $118,273,000 and $78,817,000 was paid in the years ended December 31, 1998 and 1997, respectively. Other gains of $21,497,000 in 1997 include a gain on sale of fixed assets of $11,497,000 and a $10,000,000 payment from LeGroupe Videotron Ltee pursuant to the settlement of a lawsuit. Foreign currency transaction gains increased to $4,152,000 from $574,000 due to favorable changes in the exchange rate subsequent to the issuance in March 1998 of new debt denominated in British pounds sterling. The Company recorded an extraordinary loss from the early extinguishment of debt of $30,689,000 in 1998 as a result of the redemption of the 10-7/8% Notes and the repayment of the bank loan. In connection with the repayment of debt, a subsidiary recorded an extraordinary loss of $4,500,000 in 1997 from the write-off of unamortized deferred financing costs. Years Ended December 31, 1997 and 1996 Local telecommunications and television revenues increased to $166,951,000 from $89,209,000 as a result of customer growth that increased the Company's current revenue stream. National and international telecommunications revenues increased to $185,194,000 from $45,430,000 as a result of the acquisition of NTL Group Limited in May 1996, plus the new site acquisition, installation, design and construction projects and additional site sharing revenue in 1997. Broadcast transmission and other revenues increased to $130,799,000 from $83,618,000 as a result of the acquisition of NTL Group Limited in May 1996, plus the revenues from NTL Group Limited's ten-year contract to broadcast Channel 5 in the United Kingdom which commenced in 1997. Operating expenses increased to $301,644,000 from $144,315,000. NTL Group Limited operating expenses in the year ended December 31, 1997 and in the period from May 9, 1996, the date of acquisition, to December 31, 1996 were $185,995,000 and $71,871,000, respectively. The remainder of the increase was primarily the result of increases in programming and interconnection costs. Selling, general and administrative expenses increased to $169,133,000 from $114,992,000. NTL Group Limited selling, general and administrative expenses in the year ended December 31, 59 64 1997 and in the period from May 9, 1996, the date of acquisition, to December 31, 1996 were $18,799,000 and $9,384,000, respectively. The remainder of the increase was the result of increases in telecommunications and CATV sales and marketing costs and in additional personnel and overhead to service the increasing customer base. Franchise fees of $23,587,000 and $13,117,000 in 1997 and 1996, respectively, are for the Northern Ireland license. Franchise fee expense was incurred upon the start of operations in Northern Ireland in June 1996. Corporate expenses increased to $18,324,000 from $14,899,000 primarily due to an increase in personnel and related costs. The 1997 and 1996 amounts include $1,852,000 and $2,906,000, respectively, of non-cash expense related to non-compete agreements. Nonrecurring charges of $20,642,000 in 1997 include restructuring costs of $15,629,000 and deferred costs written-off of $5,013,000. Restructuring costs include costs of employee severance and related costs, lease exit costs and penalties associated with the cancellation of contractual obligations. The deferred costs of $5,013,000 written-off arose in connection with the Company's unsuccessful bid for DTT multiplex licenses. Depreciation and amortization expense increased to $150,509,000 from $98,653,000. The increase was primarily due to an increase in depreciation of telecommunications and CATV equipment. Depreciation and amortization expense of NTL Group Limited and amortization of goodwill as a result of the acquisition was $37,724,000 and $20,339,000 in the year ended December 31, 1997 and in the period from May 9, 1996, the date of acquisition, to December 31, 1996, respectively. Interest expense increased to $202,570,000 from $137,032,000 due to the issuance of the 10% Senior Notes in February 1997, the issuance of the 7% Convertible Subordinated Notes in June 1996 and the increase in accretion of the original issue discount on the deferred coupon notes. Interest of $78,817,000 and $37,889,000 was paid in the years ended December 31, 1997 and 1996, respectively. Other gains of $21,497,000 in 1997 include a gain on sale of fixed assets of $11,497,000 and a $10,000,000 payment from LeGroupe Videotron Ltee pursuant to the settlement of a lawsuit. In connection with the repayment of debt, a subsidiary of NTL Group Limited recorded an extraordinary loss in 1997 of $4,500,000 from the write-off of unamortized deferred financing costs. LIQUIDITY AND CAPITAL RESOURCES The Company will continue to require significant amounts of capital to finance construction of its local and national networks, for connection of telephone, telecommunications and CATV customers to the networks, for other capital expenditures and for debt service. The Company 60 65 estimates that these requirements will aggregate approximately $1.6 billion in 1999. This amount includes the requirements of ComTel, NTL Bermuda and EGT acquired in 1998, as well as the requirements of Diamond Cable Communications plc ("Diamond") which was acquired in March 1999. The Company intends to fund these requirements from cash, cash equivalents and marketable securities on hand of $1.8 billion as of December 31, 1998 (including Diamond's cash and cash equivalents as of December 31, 1998 and the cash received from Microsoft Corp. in January 1999 (see below), and funds internally generated by the operations of the Company's subsidiaries. The Company's commitments for equipment and services at December 31, 1998 of approximately $264 million are included in the anticipated requirements. In January 1999, the Company sold $500 million of 5.25% convertible preferred stock to Microsoft Corp. The preferred stock is convertible into the Company's common stock at a conversion price of $100 per share. Dividends are payable quarterly, at the Company's option, in cash, shares of common stock or additional shares of convertible preferred stock. The Company also issued a warrant to Microsoft Corp. to purchase 1.2 million shares at an exercise price of $84 per share which expires in January 2004. The Company is highly leveraged. The accreted value at December 31, 1998 of the Company's consolidated long-term indebtedness, including the Redeemable Preferred Stock, and adjusted for the Diamond acquisition and the Microsoft transaction is approximately $6.4 billion, representing approximately 82% of total capitalization. The following table summarizes the terms of those notes and Redeemable Preferred Stock issued by the Company. 61 66
10-3/4% 11-1/2% 12-3/4% Senior 9-3/4% 12-3/8% Series B Senior Series A Senior Sterling Senior Senior Deferred Coupon Deferred Coupon Deferred Coupon Deferred Coupon Deferred Coupon Notes Notes Notes Notes Notes Denomination $ $ (pound) $ $ Net Proceeds (in 000's) 582,000 145,125 170,584 778,340 241,967 Issue Date January 30, 1996 April 20, 1995 March 13, 1998 March 13, 1998 November 6, 1998 Issue Price (1) 57.155% 53.995% 58.62% 61.724% 55.505% Aggregate Principal Amount at Maturity (in 000's) 1,050,000 277,803 300,000 1,300,000 450,000 Maturity Date February 1, 2006 April 15, 2005 April 1, 2008 April 1, 2008 October 1, 2008 Yield or Interest Rate (2) 11-1/2% 12-3/4% 10-3/4% 9-3/4% 12-3/8% Interest or Dividend February 1 and April 15 and April 1 and April 1 and April 1 and Payment August 1 October 15 October 1 October 1 October 1 Dates from 8-1-01 from 10-15-00 from 10-1-2003 from 10-1-2003 from 4-1-2004 Earliest Optional Redemption Date (4) February 1, 2001 April 15, 2000 April 1, 2003 April 1, 2003 October 1, 2003 Redemption 105.75 (2001) to 103.64 (2000) to 105.375 (2003) to 104.875 (2003) to 106.188 (2003) to 100 Price (%)(5) 100 (2003) 100 (2002) 100 (2006) 100 (2006) (2006) Conversion Price (6) N/A N/A N/A N/A N/A Senior/ Subordinated Senior Senior Senior Senior Senior (Table continues on the following page)
62 67
7% 7% 11-1/2% Convertible Convertible 9-1/2% 10% Redeemable Senior Subordinated Subordinated Senior Sterling Series B Preferred Notes Notes Notes Notes Senior Notes Stock Denomination $ $ $ (pound) $ $ Net Proceeds (in 000's) 607,031 583,500 267,437 121,161 389,000 96,625 Issue Date Nov 2, 1998 Dec 16, 1998 June 12, 1996 March 13, 1998 February 14, 1997 February 14, 1997 Issue Price (1) 100% 100% 100% 99.670% 100% 100% Aggregate Principal Amount at Maturity (in 000's) 625,000 600,000 275,000 125,000 400,000 100,000 Maturity Date October 1, 2008 Dec 15, 2008 June 15, 2008 April 1, 2008 February 15, 2007 February 15, 2009 Yield or Interest Rate (2) 11-1/2% 7% 7% 9-1/2% 10% 13% Interest or Dividend April l and June 15 and June 15 and April 1 and February 15 and May 15, August 15, Payment October 1 from December 15 December 15 October 1 August 15 November 15 and Dates 4-1-99 from 6-15-99 from 12-15-96 from 10-1-98 from 8-15-97 February 15 from 5-15-97 (3) Earliest Optional Redemption Date (4) October 1, 2003 Dec 15, 2001 June 15, 1999 April 1, 2003 February 15, 2002 February 15, 2002 Redemption 105.75 (2003) to 104.4 (2001) to 104.9 (1999) to 104.75 (2003) to 105 (2002) to 106.5 (2002) to Price (%) (5) 100 (2006) 100 (2006) 100 (2006) 100 (2006) 100 (2005) 100 (2005) Conversion Price (6) N/A 61.25 37.875 N/A N/A N/A Senior/ Subordinated Senior Subordinated Subordinated Senior Senior N/A
(1) Percent of aggregate principal amount at maturity (or aggregate liquidation preference in the case of the Redeemable Preferred Stock). (2) Percent per annum. (3) Dividend payments on the Redeemable Preferred Stock are payable in cash or additional shares of Redeemable Preferred Stock, at the Company's option. From May 15, 2004, dividend payments are payable in cash. (4) This is the first date when redeemable at the Company's option. The Redeemable Preferred Stock is mandatorily redeemable for cash on February 15, 2009. (5) Expressed as a percentage of principal amount or liquidation preference, as applicable, plus, in each case, accrued and unpaid interest or dividends thereon to the applicable redemption date. (6) This is the conversion price per share of the Company's common stock, adjusted for the four-for-three stock split in August 1995 and subject to further adjustments in certain events. 63 68 In addition to the notes issued by the Company summarized above, NTL Bermuda and Diamond have issued the following notes. NTL Bermuda has $517.3 million principal at maturity Discount Debentures which are due on November 15, 2007. Interest accretes at 11.2% per annum compounded semi-annually until November 15, 2000, after which date interest will be paid in cash beginning on May 15, 2001. NTL Bermuda also has a (pound)8,456,000 note payable to Comcast U.K. Holdings, Inc. that incurs interest at 9% per annum, compounded semi-annually. The note plus accrued interest is due in September 1999. Accrued interest was (pound)3,854,000 as of December 31, 1998. Diamond was acquired in March 1999 when the Company issued an aggregate of approximately 13 million shares in exchange for each ordinary share and deferred share of Diamond at a ratio of approximately .85 shares of the Company's common stock for four Diamond ordinary shares or one deferred share. Diamond had the following notes outstanding as of December 31, 1998: (i) 13 1/4% Senior Discount Notes due September 30, 2004, principal amount at maturity of $285 million, interest payable semi-annually beginning on March 31, 2000, redeemable at Diamond's option after September 30, 1999, (ii) 11 3/4% Senior Discount Notes due December 15, 2005, principal amount at maturity of $531 million, interest payable semi-annually beginning on June 15, 2001, redeemable at Diamond's option on or after December 15, 2000, (iii) 10 3/4% Senior Discount Notes due February 15, 2007, principal amount at maturity of $421 million, interest payable semi-annually beginning on August 15, 2002, (iv) 10% Senior Notes due February 1, 2008, issued by Diamond Holdings plc, a wholly-owned subsidiary of Diamond, principal amount of (pound)135 million ($224 million), interest payable semi-annually as of August 1, 1998, (v) 9 1/8% Senior Notes due February 1, 2008, issued by Diamond Holdings plc, principal amount of $110 million, interest payable semi-annually as of August 1, 1998, and (vi) mortgage of (pound)2.5 million ($3.7) million to fund the construction of an office building, repayable over 20 years as of July 31, 1995, interest at LIBOR plus 1 1/2%. The Company intends to commence an offer to repurchase its outstanding notes at 101% of their accreted value or principal amount on or about April 1, 1999 pursuant to the "change of control" provisions of the indentures. The offer will expire 30 days thereafter. NTL has entered into a bridge facility to finance the redemption of Diamond bonds tendered, if any, which is subject to certain funding conditions. The Company has other significant commitments or potential commitments in addition to those described above. These are as follows: (i) Pursuant to the terms of the Northern Ireland LDL, a subsidiary of the Company is required to make annual cash payments to the ITC for 15 years in the amount of approximately (pound)14.4 million (subject to adjustment for inflation) in addition to the percentages of qualifying revenue payments of 0% for the first ten years and 2% for the last five years of the LDL. (ii) Pursuant to an agreement with TeleWest Communications plc relating to NTL Bermuda's and TeleWest's respective 50% ownership interests in Cable London PLC, between April 29 and 64 69 July 29, 1999, NTL Bermuda can notify TeleWest of the price at which it is willing to sell its 50% ownership in Cable London to TeleWest. Following such notification, TeleWest at its option is required at that price to either purchase NTL Bermuda's 50% interest or sell its 50% interest to NTL Bermuda. If NTL Bermuda fails to give notice to TeleWest by July 29, 1999, it will be deemed to have delivered an offer notice for (pound)100 million ($166 million). (iii) In December 1998, a wholly-owned subsidiary of the Company acquired 9 million shares, representing 6.3% of the issued share capital, of Newcastle United PLC (the Newcastle United football club) for cash of approximately $17 million. In conjunction with the sale of shares, the seller entered into an irrevocable commitment to the Company that if the Company makes an offer for all of the issued share capital of Newcastle United, it will accept that offer in respect of the remaining balance of its shares representing 50.8% of the issued share capital at a price of 111.7 pence per share in cash, or at the Company's option, in a zero coupon note aggregating approximately $135 million. (iv) In March 1999, the Commonwealth of Australia accepted the Company's bid to own and operate the Australian National Transmission Network ("NTN"). NTN operates from over 560 tower sites and provides exclusive television and radio transmission services to Australia's only national TV and radio broadcasters, serves regional and community TV and radio broadcasters, and provides equipment hosting services to telecom operators and emergency service communications providers on its towers. A subsidiary of the Company will purchase the company that will hold the NTN assets for an aggregate purchase price of approximately $407 million. The development, construction and operations of the Company's combined telecommunications networks will require substantial capital. In addition, the Company will require significant amounts of capital to finance the other capital expenditures and other obligations of its subsidiaries. The Company intends to fund a portion of these requirements from cash and securities on hand and cash from operations. However, under certain circumstances, additional funding will be necessary to meet these requirements. There can be no assurance that: (i) actual construction costs will not exceed the amounts estimated or that additional funding substantially in excess of the amounts estimated will not be required, (ii) additional financing will be obtained or will be available on acceptable terms, (iii) conditions precedent to advances under future credit facilities will be satisfied when funds are required, (iv) 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, (v) the Company will be able to access such cash flow or (vi) the Company will not incur losses from its exposure to exchange rate fluctuations or be adversely affected by interest rate fluctuations. 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 may be required to consider a number of measures, including: (i) refinancing all or a portion of such indebtedness, (ii) seeking modifications to the terms of such indebtedness, (iii) seeking additional debt financing, which may be subject to obtaining necessary lender consents, (iv) seeking additional equity financing, or (v) 65 70 a combination of the foregoing. The Company's operations are conducted through its direct and indirect wholly-owned subsidiaries. As a holding company, the Company holds no significant assets other than its investments in and advances to its subsidiaries. The Company is therefore dependent upon the receipt of sufficient funds from its subsidiaries to meet its own obligations. Accordingly, the Company's ability to make scheduled interest and principal payments when due to holders of indebtedness of the Company and the Company's ability to pay cash dividends to its stockholders is dependent upon the receipt of sufficient funds from its subsidiaries. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS Cash used in operating activities was $18,943,000 and $17,271,000 in the years ended December 31, 1998 and 1997, respectively. The change is primarily due to an increase in the operating loss and changes in operating assets and liabilities. Purchases of fixed assets were $772,144,000 in 1998 and $503,656,000 in 1997 as a result of the continuing fixed asset purchases and construction in 1998. Proceeds from borrowings, net of financing costs, of $3,525,588,000 in 1998 is comprised of the proceeds from the various notes issued during the year plus proceeds from borrowings under the bank loan. Principal payments of $845,018,000 represent the repayment of borrowings under the bank loan. Cash placed in escrow of $217,622,000 was used to redeem the Company's 10-7/8% Senior Deferred Coupon Notes which was completed in October 1998. 66 71 Year 2000 The Company has a comprehensive Year 2000 project designed to identify and assess the risks associated with its information systems, products, operations and infrastructure, suppliers, and customers that are not Year 2000 compliant, and to develop, implement and test remediation and contingency plans to mitigate these risks. The project comprises four phases: (1) identification of risks, (2) assessment of risks, (3) development of remediation and contingency plans and (4) implementation and testing. The Company has completed its compilation of equipment and systems that might be affected by Year 2000 noncompliance. An impact and risk assessment is underway on all items to determine whether items are business critical, high priority or low priority. This assessment will include all information systems ("IS") and non-IS equipment with embedded technology such as air conditioning, generators and power supplies. All business critical and high priority items have been identified. The Company's billing, provisioning and customer service systems are being reviewed and modified for Year 2000 readiness. Although this was expected to be completed by the end of 1998, it is now expected to be completed in March 1999. Integration testing of the complete system will begin in the second quarter of 1999 and is expected to require three months. Testing of other business critical and high priority items is in various stages with some areas 100% complete. The target for the completion of this testing is the end of June 1999, although a small portion of such testing is scheduled to extend into the third quarter of 1999. Where appropriate, remedial work has been minimized by bringing forward planned system revisions and retiring old equipment. The Company is also communicating with its suppliers with respect to the high priority and business critical items. A central database has been established to insure all issues are resolved. This communication is virtually complete. A Millennium Operations Plan is being created that details the key resources needed for problems that may arise over the Year 2000 weekend. All Business Continuity Plans are being reviewed and are being revised to account for special circumstances related to the Year 2000. These plans are expected to be finalized in the third quarter of 1999. The Company expects to incur $13 million primarily in labor costs to compile inventories, assess risks, prioritize remediation projects, communicate with suppliers, maintain the supplier communications database, test remediations and implement remediations. The Company incurred approximately $3.2 million of this amount in 1998. The expected cost includes enhancements and upgrades that are part of the normal upgrades and system revisions. The Company currently believes that the most reasonably likely worst case scenario with respect to the Year 2000 is the failure of public electricity supplies during the millennium period. A number of critical sites have permanent automatic standby generators and uninterruptible power supplies. Where critical sites do not have permanent standby power, the Company intends to deploy its mobile generators. In addition, other telephone operators have suggested that the telephone network may overload due to excessive traffic. The Company is reviewing its "cold start" scenarios and alternative interconnection routes in the event of interruptions in the service of other telephone companies. The Company expects the UK Telecoms Regulator to require evidence of contingency plans from all the major operators and the results will be shared through the Inter-Operator Forum. Either or both of the above mentioned scenarios could have a material 67 72 adverse effect on operations, although it is not possible at this time to quantify the amount of revenues and gross profit that might be lost, or the costs that could be incurred. As the Year 2000 project continues, the Company may discover additional problems, may not be able to develop, implement or test remediation or contingency plans, or may find that the costs of these activities exceed current expectations. In many cases, the Company is relying on assurances from suppliers that new and upgraded information systems and other products will be Year 2000 ready. The Company plans to test such third-party products, but cannot be sure that its tests will be adequate or that, if problems are identified, they will be addressed by the supplier in a timely and satisfactory way. Because the Company uses a variety of information systems and has additional systems embedded in its operations and infrastructure, the Company cannot be sure that all of its systems will work together in a Year 2000-ready fashion. Furthermore, the Company cannot be sure that it will not suffer business interruptions, either because of its own Year 2000 problems or those of third-parties upon whom the Company is reliant for services. The Company is continuing to evaluate its Year 2000-related risks and corrective actions. However, the risks associated with the Year 2000 problem are pervasive and complex; they can be difficult to identify and address, and can result in material adverse consequences to the Company. Even if the Company, in a timely manner, completes all of its assessments, identifies and tests remediation plans believed to be adequate, and develops contingency plans believed to be adequate, some problems may not be identified or corrected in time to prevent material adverse consequences to the Company. Safe Harbor Statement Under the Private Securities Litigation Reform Act of 1995 Certain statements contained herein constitute "forward-looking statements" as that term is defined under the Private Securities Litigation Reform Act of 1995. When used herein, the words, "believe," "anticipate," "should," "intend," "plan," "will," "expects," "estimates," "projects," "positioned," "strategy," and similar expressions identify such forward-looking statements. Such forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause the actual results, performance or achievements of the Company, or industry results, to be materially different from those contemplated, projected, forecasted, estimated or budgeted, whether expressed or implied, by such forward-looking statements. Such factors include the following: general economic and business conditions in the United Kingdom, the Company's ability to continue to design networks, install facilities, obtain and maintain any required governmental licenses or approvals and finance construction and development, all in a timely manner at reasonable costs and on satisfactory terms and conditions, as well as assumptions about customer acceptance, churn rates, overall market penetration and competition from providers of alternative services, the impact of new business opportunities requiring significant up-front investment, Year 2000 readiness, and availability, terms and deployment of capital. 68 73 ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK. Market Risk The Company is exposed to various market risks, including changes in foreign currency exchange rates and interest rates. Market risk is the potential loss arising from adverse changes in market rates and prices, such as foreign currency exchange and interest rates. The Company does not enter into derivatives or other financial instruments for trading or speculative purposes. The Company enters into financial instruments to manage and reduce the impact of changes in foreign currency exchange rates, primarily US dollar/UK Pound Sterling. The counterparties are major financial institutions. The Company does not enter into derivatives or financial instruments to manage or reduce the impact of changes in interest rates. Foreign Exchange Contracts To the extent that the Company obtains financing in United States dollars and incurs costs in the construction and operation of its networks in the United Kingdom in British pounds sterling, it will encounter currency exchange rate risks. At December 31, 1998, the Company had approximately $195 million in pounds sterling cash and cash equivalents to reduce this risk. In addition, the Company's pounds sterling denominated Notes issued in March 1998 will also reduce this risk. Furthermore, 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 U.S. dollars. The Company has entered into an option agreement to hedge some of the risk of exchange rate fluctuations related to interest and principal payments on U.S. dollar denominated debt and for parent company expenses up to an annual limit of approximately $13 million. The Company may purchase U.S. dollars at a fixed rate of (pound)1 to $1.40 on specified dates through June 2001 for specified amounts of U.S. dollars. The dates and U.S. dollar amounts correspond to the Company's interest and principal payment dates and amounts for its U.S. dollar denominated debt and anticipated amounts of parent company expenses. In addition, NTL Bermuda has option agreements of (pound)250 million notional amount to purchase U.S. dollars at a fixed rate of (pound)1 to $1.35 in November 2000. This option provides a hedge against an adverse change in exchange rates when interest payments commence on NTL Bermuda's U.S. dollar denominated Discount Debentures. The estimated fair value of foreign currency contracts represents the amount required to enter into offsetting contracts with similar remaining maturities based on quoted market prices. At December 31, 1998, the difference between the fair value of the outstanding contracts and the contract amounts was immaterial. Interest Rates The fair market value of long-term fixed interest rate debt is subject to interest rate risk. Generally, the fair market value of fixed interest rate debt will increase as interest rates fall and decrease as interest rates rise. Fair values were determined from quoted market prices. 69 74 Interest Rate Sensitivity Principal Amount by Expected Maturity Average Interest Rate
- ------------------------------------------------------------------------------------------------------------------------------------ Fair Value (dollars in thousands) 1999 2000 2001 2002 2003 Thereafter Total 12/31/98 - ------------------------------------------------------------------------------------------------------------------------------------ Long-term Debt, including Current Portion 12.75% Series A Senior Deferred Coupon Notes due 2005 Fixed Rate - - - - - $277,804 $277,804 $252,801 Average Interest Rate 12.75% 11.50% Series B Senior Deferred Coupon Notes due 2006 Fixed Rate - - - - - $1,050,000 $1,050,000 $882,000 Average Interest Rate 11.50% 7% Covertible Subordinated Notes due 2008 (1996 issue) Fixed Rate - - - - - $275,000 $275,000 $411,125 Average Interest Rate 7% 7% Convertible Subordinated Notes due 2008 (1998 issue) Fixed Rate - - - - - $600,000 $600,000 $656,340 Average Interest Rate 7% 10% Series B Senior Notes due 2007 Fixed Rate - - - - - $400,000 $400,000 $408,000 Average Interest Rate 10% 9.75% Senior Deferred Coupon Notes due 2008 Fixed Rate - - - - - $1,300,000 $1,300,000 $835,250 Average Interest Rate 9.75% 11.5% Senior Notes due 2008 Fixed Rate - - - - - $625,000 $625,000 $681,250 Average Interest Rate 11.5% 12.375% Senior Deferred Coupon Notes due 2008 Fixed Rate - - - - - $450,000 $450,000 $274,500 Average Interest Rate 12.375% - ------------------------------------------------------------------------------------------------------------------------------------
70 75 Interest Rate Sensitivity Principal Amount by Expected Maturity Average Interest Rate and Average Forward Foreign Exchange Rate (USD/British Sterling)
- ------------------------------------------------------------------------------------------------------------------------------------ Fair Value (pounds in thousands) 1999 2000 2001 2002 2003 Thereafter Total 12/31/98 - ------------------------------------------------------------------------------------------------------------------------------------ Long-term Debt (including Current Portion) Denominated in Foreign Currency 9.5% Senior Notes (Sterling) due 2008 Fixed Rate - - - - - (pound)125,000 (pound)125,000 (pound)116,250 Average Interest Rate Average Forward 9.5% Exchange Rate 1.6506 10.75% Senior Deferred Coupon Notes (Sterling) due 2008 Fixed Rate - - - - - (pound)300,000 (pound)300,000 (pound)177,000 Average Interest Rate Average Forward 10.75% Exchange Rate 1.6506 - ------------------------------------------------------------------------------------------------------------------------------------
Interest Rate Sensitivity Principal Amount by Expected Maturity Average Interest Rate and Average Forward Foreign Exchange Rate (USD/British Sterling)
- ------------------------------------------------------------------------------------------------------------------------------------ Fair Value (dollars in thousands) 1999 2000 2001 2002 2003 Thereafter Total 12/31/98 - ------------------------------------------------------------------------------------------------------------------------------------ Long-term Debt, including Current Portion 11.20% Senior Discount Debentures due 2007 Fixed Rate - - - - - $517,300 $517,300 $437,119 Average Interest Rate Average Forward Exchange 11.20% Rate 1.6506 - ------------------------------------------------------------------------------------------------------------------------------------
71 76 ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA. The consolidated financial statements of the Company are filed under this Item commencing on page F-1 of this Report. The following is a summary of the quarterly results of operations for the years ended December 31, 1998 and 1997.
(In thousands, except per share data) 1998 Three Months Ended --------------------------------------------------- March 31 June 30 September 30 December 31 --------------------------------------------------- Revenues $ 147,792 $ 154,314 $ 182,484 $ 262,425 Operating loss (41,962) (40,665) (55,640) (90,348) (93,672) (104,302) (133,892) (172,061) Loss before extraordinary item (93,672) (104,302) (138,131) (198,511) Net loss Basic and diluted loss per common share (3.02) (2.80) (3.34) (3.29) before extraordinary item Basic and diluted net loss per common share (3.02) (2.80) (3.44) (3.79) 1997 Three Months Ended --------------------------------------------------- March 31 June 30 September 30 December 31 --------------------------------------------------- Revenues $ 106,817 $ 114,822 $ 126,734 $ 143,402 Operating loss (45,231) (51,772) (54,438) (40,623) Loss before extraordinary item (85,761) (87,674) (83,357) (71,765) Net loss (85,761) (87,674) (83,357) (76,265) Basic and diluted loss per common share before extraordinary item (2.73) (2.84) (2.70) (2.34) Basic and diluted net loss per common share (2.73) (2.84) (2.70) (2.48)
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE. Not applicable. 72 77 PART III ITEMS 10, 11, 12, and 13. The information required by PART III (Items 10, 11, 12 and 13) is incorporated by reference from the Company's definitive proxy statement involving the election of directors which the Company expects to file, pursuant to Regulation 14A, within 120 days following the end of its fiscal year. PART IV ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K. (a) (1) Financial Statements - See list of Financial Statements on page F-1. (2) Financial statement schedules - see list of Financial Statement Schedules on page F-1. (3) Exhibits - See Exhibit Index on page 74. (b) During the fourth quarter of 1998, the Company filed Current Reports on Form 8-K dated October 5, 1998, October 27, 1998, October 29, 1998, December 16, 1998, December 21, 1998 and December 22, 1998 (reporting matters under Item 5 - Other Events). No financial statements were filed with this report. (c) Exhibits - The response to this portion of Item 14 is submitted as a separate section of this report. (d) Financial Statement Schedules - See list of Financial Statement Schedules on page F-1. 73 78 EXHIBIT INDEX Exhibit No. - ----------- 2.1 Amended and Restated Agreement of Reorganization and Plan of Merger, dated as of May 28, 1993, among the Company, OCOM and CableTel Merger Inc. (Incorporated by reference to Exhibit 2, Registration File No. 33-63570) 2.2 Deed of Irrevocable undertaking dated March 28, 1996 by and among Addroute Limited, certain shareholders in the NTL Group Limited, NTL Group Limited and the Company (Incorporated by reference to the Company's Registration Statement on Form S-4, File No. 333-1010) 2.3 Form of Offer Document dated March 28, 1996 of Addroute Limited for NTL Group Limited (Incorporated by reference to the Company's Registration Statement on Form S-4, File No. 333-1010) 2.4 Deed of Adjustment dated March 28, 1996 by and among Addroute Limited and Mercury Asset Management plc. (Incorporated by reference to the Company's Registration Statement on Form S-4, File No. 333-1010) 2.5 Share Exchange Agreement, dated as of August 30, 1996, by and among the Company, B/G Co., Booth American Company, Columbia Management, Inc. and Robert T. Goad (Incorporated by reference to the Company's Registration Statement on Form S-3, File No. 333-16751) 2.6 Share Purchase Agreement, dated October 7, 1996, by and among the Company, South Wales Electricity plc and Swalec Telco Investment Limited (Incorporated by reference to the Company's Registration Statement on Form S-3, File No. 333- 16751) 2.7 Agreement and Plan of Amalgamation, dated as of February 4, 1998, as amended, among the Company, NTL (Bermuda) Limited, and Comcast UK Cable Partners Limited (Incorporated by reference to the Company's Registration Statement on Form S-4, File No. 333-64727) 2.8 Amendment No. 1 to Agreement and Plan of Amalgamation, dated as of May 28, 1998, among the Company, NTL (Bermuda) Limited and Comcast UK Cable Partners Limited (Incorporated by reference to the Company's Registration Statement on Form S-4, File No. 333-64727) 2.9 Agreement for the Sale and Purchase of the Vision Networks UK Group, dated June 16, 1998, by and between Vision Networks III B.V., ComTel UK Finance B.V., Vision Networks (UK) I Limited, Telecential Communications (Canada) Ltd., Vision Networks (UK) II Limited, Telecential Communications (UK) Limited, Vision Networks (UK) Holding B.V., NTL Group Limited and the Company (Incorporated by reference to the Company's Form 8-K, filed with the Commission on October 5, 1998) 74 79 2.10 Supplemental Agreement, dated September 22, 1998, to a Sale and Purchase Agreement, dated June 16, 1998, entered into between inter alia Vision Networks III B.V., ComTel UK Finance B.V. and NTL Group Limited in respect of the sale and purchase of Vision Networks UK Group (Incorporated by reference to the Company's Form 8-K, filed with the Commission on October 5, 1998) 2.11 Share Exchange Agreement, dated as of June 16, 1998, as amended, among the Company and the shareholders of Diamond Cable Communications Plc (Incorporated by reference to the Company's Proxy Statement, dated January 29, 1999) 2.12 Amendment No. 1 to Share Exchange Agreement, dated as of December 21, 1998, among the Company and the shareholders of Diamond Cable Communications plc (Incorporated by reference to the Company's Form 8-K, filed with the Commission on December 23, 1998) 3.1 Restated Certificate of Incorporation of the Company 3.1(a) Certificate of Ownership and Merger, dated as of March 26, 1997 (Incorporated by reference to Company's Form 8-K, dated and filed with the Commission on March 26, 1997) 3.2 Rights Agreement entered into by the Company and Continental Stock Transfer & Trust Company (Incorporated by Reference to Exhibit 4.2, Registration No. 33- 63570) 3.3 Restated By-Laws (Incorporated by reference to Exhibit 3.2, Registration No. 33- 63570) 4.1 Specimen of Common Stock Certificate (Incorporated by reference to Exhibit 4.1, Registration File No. 33-63570) 4.2 Warrant Agreement, dated February 14, 1996 between the Company and Chemical Bank as Warrant Agent (Incorporated by reference to the Company's Registration Statement on Form S-4, File No. 333-00118) 4.3 Form of Warrant to Purchase Common Stock (included in Exhibit 4.2) 4.4 Indenture, dated as of October 1, 1993, by and between the Company and Chemical Bank with respect to the 10% Senior Notes (Incorporated by reference to Exhibit 4.1, Registration File No. 33-63572) 4.5 Indenture, dated as of April 20, 1995, by and between the Company and Chemical Bank as Trustee, with respect to the 12 3/4% Senior Notes (Incorporated by reference from the Company's Registration Statement on Form S-4, File No. 33-92794) 4.6 Indenture, dated as of January 30, 1996, by and between the Company and Chemical Bank as Trustee, with respect to the 11 1/2% Senior Notes (Incorporated by reference from the Company's Registration Statement on Form S-4, File No. 333-00118) 75 80 4.7 First Supplemental Indenture, dated as of January 22, 1996, by and among the Company and Chemical Bank, as Trustee, with respect to the 12 3/4% Senior Notes (Incorporated by reference from the Company's Registration Statement on Form S-4, File No. 333-00118) 4.8 First Supplemental Indenture, dated as of January 23, 1996, by and among the Company and Chemical Bank, as Trustee, with respect to the 10% Notes (Incorporated by reference from the Company's Registration Statement on Form S-4, File No. 333-00118) 4.9 Indenture, dated as of February 12, 1997, by and between the Company and The Chase Manhattan Bank, as Trustee, with respect to the 10% Senior Notes (Incorporated by reference from the Company's 1996 Form 10-K) 4.10 Indenture, dated as of March 13, 1998, by and between the Company and The Chase Manhattan Bank, as Trustee, with respect to the 9 1/2% Senior Notes (Incorporated by reference from the Company's 1997 Form 10-K) 4.11 Indenture, dated as of March 13, 1998, by and between the Company and The Chase Manhattan Bank, as Trustee, with respect to the 9 3/4% Senior Deferred Coupon Notes (Incorporated by reference from the Company's 1997 Form 10-K) 4.12 Indenture, dated as of March 13, 1998, by and between the Company and The Chase Manhattan Bank, as Trustee, with respect to the 10 3/4% Senior Deferred Coupon Notes (Incorporated by reference from the Company's 1997 Form 10-K) 4.13 Indenture, dated as of November 2, 1998, by and among the Company and The Chase Manhattan Bank, as Trustee, with respect to the 11 1/2% Senior Notes due 2008 4.14 Registration Rights Agreement, dated as of November 2, 1998 by and among the Company and Morgan Stanley & Co. Incorporated, Chase Securities Inc., Donaldson, Lufkin & Jenrette Securities Corporation and Goldman, Sachs & Co., with respect to the 11 1/2% Senior Notes due 2008 4.15 Indenture, dated as of November 6, 1998, by and among the Company and The Chase Manhattan Bank, as Trustee, with respect to the 12 3/8% Senior Deferred Coupon Notes due 2008 4.16 Registration Rights Agreement, dated as of November 6, 1998 by and among the Company and Morgan Stanley & Co. Incorporated, Chase Securities Inc., Donaldson, Lufkin & Jenrette Securities Corporation and Goldman, Sachs & Co., with respect to the 12 3/8% Senior Deferred Coupon Notes due 2008 4.17 Indenture, dated as of December 16, 1998, by and among the Company and The Chase Manhattan Bank, as Trustee, with respect to the 7% Convertible Subordinated Notes due 2008 76 81 4.18 Registration Rights Agreement, dated as of December 16, 1998 by and among the Company and Donaldson, Lufkin & Jenrette Securities Corporation, Morgan Stanley & Co. Incorporated, Goldman, Sachs & Co., Chase Securities Inc., Salomon Smith Barney Inc, BT Alex. Brown Incorporated and Warburg Dillon Read LLC with respect to the 7% Convertible Subordinated Notes due 2008 4.19 Certificate of Designation, dated February 12, 1997, with respect to the 13% Redeemable Preferred Stock (Incorporated by reference from the Company's 1996 Form 10-K) 4.20 Certificate of Designation, dated October 7, 1996, in respect of the Company's Series A Preferred Stock (Incorporated by reference to the Company's Current Report on Form 8-K, filed on October 9, 1996) 4.21 Registration Rights Agreement, dated February 12, 1997, by and among the Company and Donaldson, Lufkin & Jenrette Securities Corporation, Chase Securities, Inc. and Merrill Lynch, Pierce, Fenner & Smith Incorporated with respect to the 10% Senior Notes (Incorporated by reference from the Company's 1996 Form 10-K) 4.22 Registration Rights Agreement, dated February 12, 1997, by and among the Company and Donaldson, Lufkin & Jenrette Securities Corporation, Chase Securities, Inc. and Merrill Lynch, Pierce, Fenner & Smith Incorporated with respect to the 13% Senior Notes (Incorporated by reference from the Company's 1996 Form 10-K) 4.23 Registration Rights Agreement, dated as of March 13, 1998, by and among the Company and Donaldson, Lufkin & Jenrette International, Morgan Stanley & Co. International Limited, BT Alex. Brown International, Chase Securities Inc. and Salomon Brothers International Limited with respect to the 9 1/2% Senior Notes (Incorporated by reference from the Company's 1997 Form 10-K) 4.24 Registration Rights Agreement, dated as of March 13, 1998, by and among the Company and Donaldson, Lufkin & Jenrette Securities Corporation, Morgan Stanley & Co. Incorporated, BT Alex. Brown Incorporated, Chase Securities Inc. and Salomon Brothers Inc. with respect to the 9 3/4% Senior Deferred Coupon Notes (Incorporated by reference from the Company's 1997 Form 10-K) 4.25 Registration Rights Agreement, dated as of March 13, 1998, by and among the Company and Donaldson, Lufkin & Jenrette International, Morgan Stanley & Co. International Limited, BT Alex. Brown International, Chase Securities Inc. and Salomon Brothers International Limited with respect to the 10 3/4% Senior Deferred Coupon Notes (Incorporated by reference from the Company's 1997 Form 10-K) 4.26 Form of Preferred Stock (Incorporated by reference from the Company's 1996 Form 10-K) 4.27 Indenture, dated as of June 12, 1996, by and between the Company and Chemical Bank, as Trustee, with respect to the 7% Convertible Notes (Incorporated by 77 82 reference from the Company's Registration Statement on Form S-3, File No. 333- 07879) 4.28 Registration Rights Agreement, dated June 12, 1996, by and among the Company and Donaldson, Lufkin & Jenrette Securities Corporation and Salomon Brothers Inc, with respect to the 7% Convertible Notes (Incorporated by reference from the Company's Registration Statement on Form S-3, File No. 33-07879) 4.29 Indenture, dated as of April 20, 1995, by and among the Company and Chemical Bank, as Trustee, with respect to the 7 1/4% Convertible Notes (Incorporated by reference from the Company's Registration Statement on Form S-3, File No. 333- 92792) 4.30 Registration Agreement, dated April 12, 1995, by and among the Company and Salomon Brothers Inc, Donaldson, Lufkin & Jenrette Securities Corporation and Goldman Sachs & Co., with respect to the 7 1/4% Convertible Notes (Incorporated by reference from the Company's Registration Statement on Form S-3, File No. 333- 92792) 4.31 Rights Agreement entered into by the Company and Continental Stock Transfer & Trust Company (Incorporated by reference to Exhibit 4.2, Registration No. 33- 63570) 10.1 Compensation Plan and Agreements, as amended and restated effective June 3, 1997 (Incorporated by reference from the Company's 1997 Form 10-K) 10.2 Rules of the NTL Sharesave Plan, adopted by the Company on October 28, 1997 10.3 Form of Director and Officer Indemnity Agreement (together with a schedule of executed Indemnity Agreements) (Incorporated by reference from the Company's Registration Statement on Form S-4, File No. 33-92794) 10.4 1998 Non-Qualified Stock Option Plan, as Amended and Restated October 1998 10.5 Bridge Loan Agreement, dated as of March 17, 1999, among the Company, the Lenders named therein and Goldman Sachs Credit Partners L.P. 10.6 Agreement, dated August 14, 1998, among TeleWest Communications PLC, TeleWest Communications Holdings Limited, NTL (Bermuda) Limited, and the Company (Incorporated by reference to the Company's Current Report on Form 8-K, dated August 18, 1998) 11 Statement re: computation of per share earnings 21 Subsidiaries of the Registrant 23.1 Consent of Ernst & Young LLP 27.1 Financial Data Schedule, for the year ended December 31, 1998 78 83 99.1 Prescribed Diffusion Service License, dated July 21, 1987, issued to British Cable Services Limited (now held by CableTel Surrey and Hampshire Limited) for the area of West Surrey and East Hampshire, England (Incorporated by reference to the Company's Form 8-K, filed with the Commission on March 19, 1996) 99.2 Prescribed Diffusion Service License, dated December 3, 1990, issued to Clyde Cablevision (renamed CableTel Glasgow) for the area of Inverclyde, Scotland (Incorporated by reference to the Company's Form 8-K, filed with the Commission on March 19, 1996) 99.3 Prescribed Diffusion Service License, dated December 3, 1990, issued to Clyde Cablevision (renamed CableTel Glasgow) for the area of Bearsden and Milngavie, Scotland (Incorporated by reference to the Company's Form 8-K, filed with the Commission on March 19, 1996) 99.4 Prescribed Diffusion Service License, dated December 3, 1990, issued to Clyde Cablevision (renamed CableTel Glasgow) for the area of Paisley and Renfrew, Scotland (Incorporated by reference to the Company's Form 8-K, filed with the Commission on March 19, 1996) 99.5 Prescribed Diffusion Service License, dated July 10, 1984, issued to Clyde Cablevision (renamed CableTel Glasgow) for the area of North Glasgow and Clydebank, Strathclyde, Scotland (Incorporated by reference to the Company's Form 8-K, filed with the Commission on March 19, 1996) 99.6 Prescribed Diffusion Service License, dated December 3, 1990, issued to Clyde Cablevision (renamed CableTel Glasgow) for the area of Greater Glasgow, Scotland (Incorporated by reference to the Company's Form 8-K, filed with the Commission on March 19, 1996) 99.7 Prescribed Diffusion Service License, dated December 3, 1990, issued to Newport Cablevision Limited (renamed CableTel Newport) for the area of Newport, Wales (Incorporated by reference to the Company's Form 8-K, filed with the Commission on March 19, 1996) 99.8 Prescribed Diffusion Service License, dated December 3, 1990, issued to Cable and Satellite Television Holdings Ltd (renamed CableTel West Glamorgan Limited) for the area of West Glamorgan, Wales (Incorporated by reference to the Company's Form 8-K, filed with the Commission on March 19, 1996) 99.9 Prescribed Diffusion Service License, dated December 3, 1990, issued to British Cable Services Limited for the area of Cardiff and Penarth, Wales (now held by CableTel Cardiff Limited) (Incorporated by reference to the Company's Form 8-K, filed with the Commission on March 19, 1996) 99.10 Prescribed Diffusion Service License, dated December 3, 1990, issued to Kirklees Cable (renamed CableTel Kirklees) for the area of Huddersfield and Dewsbury, West Yorkshire, England (Incorporated by reference to the Company's Form 8-K, filed with the Commission on March 19, 1996) 79 84 99.11 Prescribed Diffusion Service License, dated December 3, 1990, issued to CableVision Communications Company of Hertfordshire Ltd (renamed CableTel Hertfordshire Limited) for the area of Broxbourne and East Hertfordshire, England (Incorporated by reference to the Company's Form 8-K, filed with the Commission on March 19, 1996) 99.12 Prescribed Diffusion Service License, dated December 3, 1990, issued to CableVision Communications Company Ltd (renamed CableTel Central Hertfordshire Limited) for the area of Central Hertfordshire, England (Incorporated by reference to the Company's Form 8-K, filed with the Commission on March 19, 1996) 99.13 Prescribed Diffusion Service License, dated March 26, 1990, issued to CableVision Bedfordshire Limited (renamed CableTel Bedfordshire Ltd.) for the area of Luton and South Bedfordshire (Incorporated by reference to the Company's Form 8-K, filed with the Commission on March 19, 1996) 99.14 Prescribed Diffusion Service License, dated December 3, 1990, issued to CableVision North Bedfordshire Ltd (renamed CableTel North Bedfordshire Ltd.) for the area of North Bedfordshire, England (Incorporated by reference to the Company's Form 8-K, filed with the Commission on March 19, 1996) 99.15 Local Delivery Service License, dated October 2, 1995, issued to CableTel Northern Ireland Limited for Northern Ireland (Incorporated by reference to the Company's Form 8-K, filed with the Commission on March 19, 1996) 99.16 Local Delivery Service License, dated December 6, 1995, issued to CableTel South Wales Limited for Glamorgan and Gwent, Wales (Incorporated by reference to the Company's Form 8-K, filed with the Commission on March 19, 1996) 99.17 Local Delivery Service License, dated March 15, 1991, issued to Maxwell Cable TV Limited for Camarthen, Wales (now held by Metro South Wales Limited) (Incorporated by reference to the Company's Form 8-K, filed with the Commission on March 19, 1996) 99.18 Local Delivery Service License, dated March 15, 1991, issued to Maxwell Cable TV Limited for Milford Haven, Wales (now held by Metro South Wales Limited) (Incorporated by reference to the Company's Form 8-K, filed with the Commission on March 19, 1996) 99.19 Local Delivery Service License, dated March 15, 1991, issued to Maxwell Cable TV Limited for Cwmgors (Amman Valley), West Glamorgan, Wales (Incorporated by reference to the Company's Form 8-K, filed with the Commission on March 19, 1996) 99.20 Local Delivery Service License, dated March 15, 1991, issued to Maxwell Cable TV Limited for Ammanford, West Glamorgan, Wales (Incorporated by reference to the Company's Form 8-K, filed with the Commission on March 19, 1996) 80 85 99.21 Local Delivery Service License, dated March 15, 1991, issued to Maxwell Cable TV Limited for Brecon, Gwent, Wales (Incorporated by reference to the Company's Form 8-K, filed with the Commission on March 19, 1996) 99.22 Local Delivery Service License, dated March 15, 1991, issued to Maxwell Cable TV Limited for Haverfordwest, Preseli, Wales (Incorporated by reference to the Company's Form 8-K, filed with the Commission on March 19, 1996) 99.23 Local Delivery Service License, dated March 15, 1991, issued to Maxwell Cable TV Limited for Neyland, Preseli, Wales (now held by Metro South Wales Limited) (Incorporated by reference to the Company's Form 8-K, filed with the Commission on March 19, 1996) 99.24 License, dated January 11, 1991, issued to Cablevision Communications the Company of Hertfordshire Ltd (renamed CableTel Hertfordshire Limited) for the Hertford, Cheshunt and Ware (Lea Valley) cable franchise, England (Incorporated by reference to the Company's Form 8-K, filed with the Commission on March 19, 1996) 99.25 License, dated December 8, 1990, issued to Cablevision Communications the Company Limited for Central Hertfordshire (renamed CableTel Central Hertfordshire Limited), England (Incorporated by reference to the Company's Form 8-K, filed with the Commission on March 19, 1996) 99.26 License, dated August 23, 1989, issued to Cablevision Bedfordshire Limited for Bedford and surrounding areas, England (Incorporated by reference to the Company's Form 8-K, filed with the Commission on March 19, 1996) 99.27 License, dated January 9, 1991, issued to Cablevision North Bedfordshire Ltd for North Bedfordshire, England (Incorporated by reference to the Company's Form 8-K, filed with the Commission on March 19, 1996) 99.28 License, dated January 29, 1991, issued to Clyde Cablevision (renamed CableTel Glasgow) for the Inverclyde Cable Franchise, Scotland (Incorporated by reference to the Company's Form 8-K, filed with the Commission on March 19, 1996) 99.29 License, dated January 29, 1991, issued to Clyde Cablevision (renamed CableTel Glasgow) for the Bearsden and Milngavie Cable Franchise, Scotland (Incorporated by reference to the Company's Form 8-K, filed with the Commission on March 19, 1996) 99.30 License, dated January 29, 1991, issued to Clyde Cablevision (renamed CableTel Glasgow) for the Paisley and Renfrew Cable Franchise, Scotland (Incorporated by reference to the Company's Form 8-K, filed with the Commission on March 19, 1996) 99.31 License, dated June 7, 1985, issued to Clyde Cablevision Ltd (renamed CableTel Glasgow) for North West Glasgow and Clydebank, Scotland (Incorporated by 81 86 reference to the Company's Form 8-K, filed with the Commission on March 19, 1996) 99.32 License, dated January 29, 1991, issued to Clyde Cablevision (renamed CableTel Glasgow) for the Greater Glasgow cable franchise, Scotland (Incorporated by reference to the Company's Form 8-K, filed with the Commission on March 19, 1996) 99.33 License, dated October 13, 1993, issued to Insight Communications Cardiff Limited (renamed CableTel Cardiff Limited) for Cardiff, Wales (Incorporated by reference to the Company's Form 8-K, filed with the Commission on March 19, 1996) 99.34 License, dated January 22, 1991, issued to Newport Cablevision Limited (renamed CableTel Newport), for Newport Cable franchise Wales (Incorporated by reference to the Company's Form 8-K, filed with the Commission on March 19, 1996) 99.35 License, dated May 18, 1990, issued to Cable and Satellite Television Holdings Limited (renamed CableTel West Glamorgan Limited) for West Glamorgan, Wales (Incorporated by reference to the Company's Form 8-K, filed with the Commission on March 19, 1996) 99.36 License, dated December 20, 1990, issued to Kirklees Cable (renamed CableTel Kirklees) for the Huddersfield and Dewsbury cable franchise, England (Incorporated by reference to the Company's Form 8-K, filed with the Commission on March 19, 1996) 99.37 License, dated October 13, 1993, issued to Insight Communications Guildford Limited (renamed CableTel Surrey and Hampshire Limited) for the West Surrey/East Hampshire (Guildford) Cable Franchise, England (Incorporated by reference to the Company's Form 8-K, filed with the Commission on March 19, 1996) 99.38 License, dated January 20, 1995, issued to CableTel Bedfordshire Ltd. for the area of South Bedfordshire, England (Incorporated by reference to the Company's Form 8-K, filed with the Commission on March 19, 1996) 99.39 License, dated January 20, 1995, issued to CableTel North Bedfordshire Ltd. for the area of Bedford, England (Incorporated by reference to the Company's Form 8-K, filed with the Commission on March 19, 1996) 99.40 License, dated January 20, 1992, issued to Cable and Satellite Television Holdings Limited (renamed CableTel West Glamorgan Limited) for the area of Swansea, Neath and Port Talbot, Wales (Incorporated by reference to the Company's Form 8-K, filed with the Commission on March 19, 1996) 99.41 License, dated January 20, 1995, issued to Cabletel Hertfordshire Ltd. for the area of Hertford, Cheshunt and Ware (Lea Valley), England (Incorporated by reference to the Company's Form 8-K, filed with the Commission on March 19, 1996) 82 87 99.42 License, dated January 20, 1995, issued to Cabletel Central Hertfordshire Ltd. for the area of Central Hertfordshire, England (Incorporated by reference to the Company's Form 8-K, filed with the Commission on March 19, 1996) 99.43 License, dated July 21, 1995, issued to CableTel Kirklees (Incorporated by reference to the Company's Form 8-K, filed with the Commission on March 19, 1996) 99.44 License, dated June 8, 1995, issued to CableTel Bedfordshire Ltd. (Incorporated by reference to the Company's Form 8-K, filed with the Commission on March 19, 1996) 99.45 License, dated October 27, 1995, issued to Metro South Wales Limited for the area of Neyland, Wales (Incorporated by reference to the Company's Form 8-K, filed with the Commission on March 19, 1996) 99.46 License, dated October 27, 1995, issued to Metro South Wales Limited for the area of Cwmgors, Wales (Incorporated by reference to the Company's Form 8-K, filed with the Commission on March 19, 1996) 99.47 License, dated October 27, 1995, issued to Metro South Wales Limited for the area of Ammanford, Wales (Incorporated by reference to the Company's Form 8-K, filed with the Commission on March 19, 1996) 99.48 License, dated October 27, 1995, issued to Metro South Wales Limited for the area of Carmarthen, Wales (Incorporated by reference to the Company's Form 8-K, filed with the Commission on March 19, 1996) 99.49 License, dated October 27, 1995, issued to Metro South Wales Limited for the area of Haverfordwest, Wales (Incorporated by reference to the Company's Form 8-K, filed with the Commission on March 19, 1996) 99.50 License, dated October 27, 1995, issued to Metro South Wales Limited for the area of Pembroke Dock, Wales (Incorporated by reference to the Company's Form 8-K, filed with the Commission on March 19, 1996) 99.51 License, dated October 27, 1995, issued to Metro South Wales Limited for the area of Milford Haven, Wales (Incorporated by reference to the Company's Form 8-K, filed with the Commission on March 19, 1996) 99.52 License, dated October 27, 1995, issued to CableTel South Wales Limited for the area of Glamorgan and Gwent, Wales (Incorporated by reference to the Company's Form 8-K, filed with the Commission on March 19, 1996) 99.53 License, dated January 26, 1996, issued to Cabletel South Wales Limited, for part of the Glamorgan area (Incorporated by reference to the Company's Form 8-K, filed with the Commission on March 19, 1996) 83 88 98.54 License, dated November 3, 1997, issued to NTL (UK) Group, Inc. for the Provision of Radio Fixed Access Operator Services (Incorporated by reference to the Company's 1997 Form 10-K) Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. Dated: March 31, 1999 NTL INCORPORATED By: /s/ J. Barclay Knapp - ------------------------------------- J. Barclay Knapp President, Chief Executive Officer and Chief Financial Officer (Principal Executive and Principal Financial Officer) Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant in the capacities and on the date indicated. Signature Title Date /s/ J. Barclay Knapp President, Chief March 31, 1999 - ------------------------ Executive Officer and J. Barclay Knapp Chief Financial Officer (Principal Executive and Principal Financial Officer) /s/ George S. Blumenthal Chairman of the Board March 31, 1999 - ------------------------ and Treasurer George S. Blumenthal /s/ Gregg Gorelick Vice President- March 31, 1999 - ------------------------ Controller (Principal Gregg Gorelick Accounting Officer) 84 89 /s/ Sidney R. Knafel Director March 31, 1999 - ------------------------ R. Knafel /s/ Ted H. McCourtney Director March 31, 1999 - ------------------------ Ted H. McCourtney /s/ Del Mintz Director March 31, 1999 - ------------------------ Del Mintz /s/ Alan J. Patricof Director March 31, 1999 - ------------------------ Alan J. Patricof /s/ Warren Potash Director March 31, 1999 - ------------------------ Warren Potash /s/ Michael S. Willner Director March 31, 1999 - ------------------------ Michael S. Willner /s/ Robert T. Goad Director March 31, 1999 - ------------------------ Robert T. Goad 85 90 Form 10-K--Item 14(a)(1) and (2) NTL Incorporated and Subsidiaries Index of Consolidated Financial Statements and Financial Statement Schedules The following consolidated financial statements of NTL Incorporated and Subsidiaries are included in Item 8: Report of Independent Auditors ....................................................... F-2 Consolidated Balance Sheets - December 31, 1998 and 1997 ............................. F-3 Consolidated Statements of Operations - Years ended December 31, 1998, 1997 and 1996 ...................................... F-5 Consolidated Statement of Shareholders' Equity (Deficiency) - Years ended December 31, 1998, 1997 and 1996 ...................................... F-6 Consolidated Statements of Cash Flows - Years ended December 31, 1998, 1997 and 1996 ...................................... F-8 Notes to Consolidated Financial Statements .......................................... F-10 The following consolidated financial statement schedules of NTL Incorporated and Subsidiaries are included in Item 14(d): Schedule I - Condensed Financial Information of Registrant .......................... F-41 Schedule II - Valuation and Qualifying Accounts ..................................... F-48
All other schedules for which provision is made in the applicable accounting regulation of the Securities and Exchange Commission are not required under the related instructions or are inapplicable and, therefore have been omitted. F-1 91 Report of Independent Auditors The Board of Directors and Shareholders NTL Incorporated We have audited the consolidated balance sheets of NTL Incorporated and Subsidiaries as of December 31, 1998 and 1997, and the related consolidated statements of operations, shareholders' equity (deficiency) and cash flows for each of the three years in the period ended December 31, 1998. Our audits also included the financial statement schedules listed in the Index at Item 14(a). These financial statements and schedules are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements and schedules based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of NTL Incorporated and Subsidiaries at December 31, 1998 and 1997, and the consolidated results of their operations and their cash flows for each of the three years in the period ended December 31, 1998, in conformity with generally accepted accounting principles. Also, in our opinion, the related financial statement schedules, when considered in relation to the basic financial statements taken as a whole, present fairly in all material respects the information set forth therein. ERNST & YOUNG LLP New York, New York March 26, 1999 F-2 92 NTL Incorporated and Subsidiaries Consolidated Balance Sheets
December 31 1998 1997 ----------------------------------------------- Assets Current assets: Cash and cash equivalents $ 736,265,000 $ 98,902,000 Marketable securities 260,631,000 4,998,000 Accounts receivable--trade, less allowance for doubtful accounts of $38,475,000 (1998) and $8,056,000 (1997) 152,356,000 66,022,000 Other 55,248,000 67,232,000 ----------------------------------------------- Total current assets 1,204,500,000 237,154,000 Fixed assets, net 3,854,430,000 1,756,985,000 Intangible assets, net 725,028,000 364,479,000 Investment in Cable London PLC, net of accumulated amortization of $3,093,000 229,093,000 - Other assets, net of accumulated amortization of $56,264,000 (1998) and $25,889,000 (1997) 181,046,000 63,021,000 ----------------------------------------------- Total assets $6,194,097,000 $2,421,639,000 ===============================================
F-3 93 NTL Incorporated and Subsidiaries Consolidated Balance Sheets (continued)
December 31 1998 1997 ------------------------------------------------ Liabilities and shareholders' equity (deficiency) Current liabilities: Accounts payable $ 167,079,000 $ 45,475,000 Accrued expenses and other 221,070,000 163,158,000 Accrued construction costs 88,033,000 26,930,000 Interest payable 34,258,000 18,875,000 Deferred revenue 69,820,000 35,060,000 Current portion of long-term debt 23,691,000 - ------------------------------------------------ Total current liabilities 603,951,000 289,498,000 Long-term debt 5,043,803,000 2,015,057,000 Commitments and contingent liabilities Deferred income taxes 67,062,000 70,218,000 Senior redeemable exchangeable preferred stock - $.01 par value, plus accreted dividends; liquidation preference $125,000,000; less unamortized discount of $3,133,000 (1998) and $3,444,000 (1997); issued and outstanding 125,000 (1998) and 110,000 (1997) shares 124,127,000 108,534,000 Shareholders' equity (deficiency): Series preferred stock--$.01 par value; authorized 10,000,000 shares: Series A - liquidation preference $128,760,000; issued and outstanding 125,000 (1998) and none (1997) 2,000 - shares; Series B - liquidation preference $52,517,000; issued and outstanding 52,000 (1998) and none (1997) shares; - - Series A - issued and outstanding none (1998) and 780 (1997) shares - - Common stock--$.01 par value; authorized 400,000,000 shares; issued and outstanding 60,249,000 (1998) and 32,210,000 (1997) shares 602,000 322,000 Additional paid-in capital 1,501,561,000 538,054,000 Accumulated other comprehensive income 104,657,000 117,008,000 (Deficit) (1,251,668,000) (717,052,000) ------------------------------------------------ 355,154,000 (61,668,000) ------------------------------------------------ Total liabilities and shareholders' equity (deficiency) $6,194,097,000 $2,421,639,000 ================================================
See accompanying notes. F-4 94 NTL Incorporated and Subsidiaries Consolidated Statements of Operations
Year ended December 31 1998 1997 1996 ------------------------------------------------------------- Revenues Local telecommunications and television $355,589,000 $ 166,951,000 $ 89,209,000 National and international telecommunications 248,895,000 185,194,000 45,430,000 Broadcast transmission and other 140,156,000 130,799,000 83,618,000 Other telecommunications 2,375,000 8,831,000 10,086,000 ------------------------------------------------------------- 747,015,000 491,775,000 228,343,000 Costs and expenses Operating expenses 372,134,000 301,644,000 144,315,000 Selling, general and administrative expenses 299,494,000 169,133,000 114,992,000 Franchise fees 25,036,000 23,587,000 13,117,000 Corporate expenses 17,048,000 18,324,000 14,899,000 Nonrecurring charges (4,194,000) 20,642,000 - Depreciation and amortization 266,112,000 150,509,000 98,653,000 ------------------------------------------------------------- 975,630,000 683,839,000 385,976,000 ------------------------------------------------------------- Operating (loss) (228,615,000) (192,064,000) (157,633,000) Other income (expense) Interest and other income 46,024,000 28,415,000 33,634,000 Interest expense (328,815,000) (202,570,000) (137,032,000) Other gains - 21,497,000 - Foreign currency transaction gains 4,152,000 574,000 2,408,000 ------------------------------------------------------------- (Loss) before income taxes, minority interests and extraordinary item (507,254,000) (344,148,000) (258,623,000) Income tax benefit (provision) 3,327,000 15,591,000 (7,653,000) ------------------------------------------------------------- (Loss) before minority interests and extraordinary item (503,927,000) (328,557,000) (266,276,000) Minority interests - - 11,822,000 ------------------------------------------------------------- (Loss) before extraordinary item (503,927,000) (328,557,000) (254,454,000) Loss from early extinguishment of debt (30,689,000) (4,500,000) - ------------------------------------------------------------- Net (loss) $ (534,616,000) $(333,057,000) $(254,454,000) ============================================================= Basic and diluted net (loss) per common share: (Loss) before extraordinary item $(12.69) $(10.60) $(8.20) Extraordinary item (.74) (.14) - ------------------------------------------------------------- Net (loss) per common share $(13.43) $(10.74) $(8.20) =============================================================
See accompanying notes. F-5 95 NTL Incorporated and Subsidiaries Consolidated Statement of Shareholders' Equity (Deficiency)
Series A Series A Series B Preferred Preferred Preferred Common Stock-- Stock Stock Stock $.01 Par Value Shares Par Shares Par Shares Par Shares Par ------------------------------------------------------------------------------------------ Balance, December 31, 1995 30,202,000 $302,000 Exercise of stock options 396,000 4,000 Exercise of warrants 53,000 1,000 Issuance of warrants in connection with consent solicitations Shares issued for acquisitions 780 $ - 1,415,000 14,000 Comprehensive income: Net loss for the year ended December 31, 1996 Currency translation adjustment Total ------------------------------------------------------------------------------------------ Balance, December 31, 1996 780 - 32,066,000 321,000 Exercise of stock options 119,000 1,000 Exercise of warrants 25,000 Accreted dividends on senior redeemable exchangeable preferred stock Accretion of discount on senior redeemable exchangeable preferred stock Comprehensive income: Net loss for the year ended December 31, 1997 Currency translation adjustment Total ------------------------------------------------------------------------------------------ Balance, December 31, 1997 780 - 32,210,000 322,000 Exercise of stock options 298,000 3,000 Exercise of warrants 70,000 Accreted dividends on preferred stock Accretion of discount on preferred stock Conversion of 7-1/4% Convertible Subordinated Notes 6,958,000 70,000 Conversion of Series Preferred Stock (780) 1,950,000 20,000 Preferred stock issued for acquisition 125,000 $2,000 52,000 - Common stock issued for acquisition 18,763,000 187,000 Issuance of warrants in connection with consent solicitations Comprehensive income: Net loss for the year ended December 31, 1998 Currency translation adjustment Total ------------------------------------------------------------------------------------------ Balance, December 31, 1998 - $ - 125,000 $2,000 52,000 $ - 60,249,000 $602,000 ==========================================================================================
See accompanying notes. F-6 96 NTL Incorporated and Subsidiaries Consolidated Statement of Shareholders' Equity (Deficiency) (continued)
Accumulated Additional Other Paid-In Comprehensive Comprehensive Capital loss Income (Deficit) ------------------------------------------------------------------------------------- Balance, December 31, 1995 $ 462,223,000 $6,273,000 $(129,541,000) Exercise of stock options 1,362,000 Exercise of warrants 298,000 Issuance of warrants in connection with consent solicitations 1,641,000 Shares issued for acquisitions 83,123,000 Comprehensive income: Net loss for the year ended December 31, 1996 $(254,454,000) (254,454,000) Currency translation adjustment 156,868,000 156,868,000 --------------------- Total $ (97,586,000) ------------------------------------------------------------------------------------- Balance, December 31, 1996 548,647,000 163,141,000 (383,995,000) Exercise of stock options 1,532,000 Exercise of warrants 138,000 Accreted dividends on senior redeemable exchangeable preferred stock (11,978,000) Accretion of discount on senior redeemable exchangeable preferred stock (285,000) Comprehensive income: Net loss for the year ended December 31, 1997 $(333,057,000) (333,057,000) Currency translation adjustment (46,133,000) (46,133,000) --------------------- Total $(379,190,000) ------------------------------------------------------------------------------------- Balance, December 31, 1997 538,054,000 117,008,000 (717,052,000) Exercise of stock options 6,331,000 Exercise of warrants 508,000 Accreted dividends on preferred stock (18,761,000) Accretion of discount on preferred stock (311,000) Conversion of 7-1/4% Convertible Subordinated Notes 186,942,000 Conversion of Series Preferred Stock (20,000) Preferred stock issued for acquisition 178,493,000 Common stock issued for acquisition 600,245,000 Issuance of warrants in connection with consent solicitations 10,080,000 Comprehensive income: Net loss for the year ended December 31, 1998 $(534,616,000) (534,616,000) Currency translation adjustment (12,351,000) (12,351,000) --------------------- Total $(546,967,000) ------------------------------------------------------------------------------------- Balance, December 31, 1998 $1,501,561,000 $104,657,000 $(1,251,668,000) =====================================================================================
See accompanying notes. F-7 97 NTL Incorporated and Subsidiaries Consolidated Statements of Cash Flows
Year ended December 31 1998 1997 1996 ------------------------------------------------------------- Operating activities Net loss $ (534,616,000) $ (333,057,000) $ (254,454,000) Adjustment to reconcile net loss to net cash (used in) operating activities: Depreciation and amortization 266,112,000 150,509,000 98,653,000 Loss from early extinguishment of debt 30,689,000 4,500,000 - Amortization of non competition agreements 1,389,000 1,852,000 2,906,000 Provision for losses on accounts receivable 27,282,000 6,891,000 2,597,000 Minority interests - - (11,822,000) Deferred income taxes (3,327,000) (16,852,000) 5,063,000 Amortization of original issue discount 232,691,000 122,639,000 104,264,000 Other (30,916,000) (8,148,000) 8,578,000 Changes in operating assets and liabilities, net of effect from business acquisitions: Accounts receivable (70,364,000) (30,430,000) 10,050,000 Other current assets 22,631,000 (6,563,000) (20,316,000) Other assets 6,000 2,303,000 (24,000) Accounts payable (2,564,000) (4,615,000) (2,869,000) Accrued expenses and other 15,272,000 74,706,000 35,691,000 Deferred revenue 26,772,000 18,994,000 278,000 ------------------------------------------------------------- Net cash (used in) operating activities (18,943,000) (17,271,000) (21,405,000) Investing activities Purchase of fixed assets (772,144,000) (503,656,000) (505,664,000) Payment of deferred purchase price - (57,330,000) - Increase in other assets (35,595,000) (4,322,000) (6,013,000) Acquisitions of subsidiaries and minority interests, net of cash acquired (746,817,000) - (332,693,000) Proceeds from sales of assets 1,312,000 - - Purchase of marketable securities (540,639,000) (145,939,000) - Proceeds from sales of marketable securities 291,276,000 142,596,000 - ------------------------------------------------------------- Net cash (used in) investing activities (1,802,607,000) (568,651,000) (844,370,000)
F-8 98 NTL Incorporated and Subsidiaries Consolidated Statements of Cash Flows (continued)
Year ended December 31 1998 1997 1996 ------------------------------------------------------------- Financing activities Proceeds from borrowings and sale of preferred stock, net of financing costs $ 3,525,588,000 $ 490,302,000 $1,146,190,000 Principal payments (845,018,000) (242,424,000) (95,283,000) Cash placed in escrow (217,622,000) - - Cash released from escrow - - 1,600,000 Proceeds from borrowings from minority partner - - 31,232,000 Consent solicitation payments (11,333,000) - - Proceeds from exercise of stock options and warrants 6,842,000 1,671,000 1,665,000 ------------------------------------------------------------- Net cash provided by financing activities 2,458,457,000 249,549,000 1,085,404,000 Effect of exchange rate changes on cash 456,000 (10,609,000) 50,972,000 ------------------------------------------------------------- Increase (decrease) in cash and cash equivalents 637,363,000 (346,982,000) 270,601,000 Cash and cash equivalents at beginning of year 98,902,000 445,884,000 175,283,000 ------------------------------------------------------------- Cash and cash equivalents at end of year $ 736,265,000 $ 98,902,000 $ 445,884,000 ============================================================= Supplemental disclosure of cash flow information Cash paid during the period for interest exclusive of amounts capitalized $ 90,513,000 $ 72,047,000 $ 27,595,000 Income taxes paid 336,000 1,107,000 367,000 Supplemental schedule of noncash financing activities Accretion of dividends and discount on preferred stock $ 19,072,000 $ 12,263,000 $ - Conversion of Convertible Notes, net of unamortized deferred financing costs of $ 4,738,000 187,012,000 - - Preferred stock issued for acquisitions 178,495,000 - - Common stock issued for acquisitions 600,432,000 - 34,137,000 Warrants issued in connection with consent solicitations 10,080,000 - 1,641,000 Preferred stock issued for acquisition of minority interest, including notes payable to minority partner - - 49,000,000 Liabilities incurred in connection with acquisitions - - 81,906,000
See accompanying notes. F-9 99 NTL Incorporated and Subsidiaries Notes to Consolidated Financial Statements 1. Business NTL Incorporated (the "Company"), through its subsidiaries and joint ventures, owns and operates television and radio broadcasting, cable television, telephone and telecommunications systems in the United Kingdom. Based on revenues and identifiable assets, the Company's predominant lines of business are television and radio broadcasting, cable television, telephone and telecommunications services in the United Kingdom. 2. Significant Accounting Policies Use of Estimates The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates. Principles of Consolidation The consolidated financial statements include the accounts of the Company, its wholly-owned subsidiaries and entities where the Company's interest is greater than 50%. Significant intercompany accounts and transactions have been eliminated in consolidation. Foreign Currency Translation The financial statements of the Company's foreign subsidiaries have been translated into U.S. dollars in accordance with Statement of Financial Accounting Standards ("SFAS") No. 52, "Foreign Currency Translation." All balance sheet accounts have been translated using the current exchange rates at the respective balance sheet dates. Statement of operations amounts have been translated using the average exchange rates for the respective years. The gains or losses resulting from the change in exchange rates have been reported as a component of accumulated other comprehensive income. Cash Equivalents Cash equivalents are short-term highly liquid investments purchased with a maturity of three months or less. Cash equivalents were $651,242,000 and $55,894,000 at December 31, 1998 and 1997, respectively, which consisted primarily of corporate commercial paper. At December 31, 1998 and 1997, $120,734,000 and none, respectively, of the cash equivalents were denominated in British pounds sterling. F-10 100 NTL Incorporated and Subsidiaries Notes to Consolidated Financial Statements (continued) 2. Significant Accounting Policies (continued) Marketable Securities Marketable securities are classified as available-for-sale, which are carried at fair value. Unrealized holding gains and losses on securities, net of tax, are carried as a component of accumulated other comprehensive income. The amortized cost of debt securities is adjusted for amortization of premiums and accretion of discounts to maturity. Such amortization is included in interest income. Realized gains and losses and declines in value judged to be other than temporary are included in interest income. The cost of securities sold or matured is based on the specific identification method. Interest on securities is included in interest income. Marketable securities at December 31, 1998 consisted principally of corporate commercial paper. Marketable securities at December 31, 1997 consisted of federal agency notes. During the years ended December 31, 1998, 1997 and 1996, there were no realized gains or losses on sales of securities. All of the marketable securities as of December 31, 1998 and 1997 had a contractual maturity of less than one year. Fixed Assets Fixed assets are stated at cost, which includes amounts capitalized for labor and overhead expended in connection with the design and installation of operating equipment. Depreciation is computed by the straight-line method over the estimated useful lives of the assets. Estimated useful lives are as follows: operating equipment - 5 to 40 years and other equipment - 3 to 40 years. Long-lived assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. If the sum of the expected future undiscounted cash flows is less than the carrying amount of the asset, a loss is recognized for the difference between the fair value and the carrying value of the asset. Investments Investments in entities in which the Company has the ability to exercise significant influence over the operating and financial policies of the investee are accounted for under the equity method. Equity method investments are recorded at original cost and adjusted periodocially to recognize the Company's proportionate share of the investees' net income or losses after the date of investment, additional contributions made and dividends received. The difference between the Company's recorded investment and its proportionate interest in the book value of the investees' net assets are being amortized on a straight-line basis over 10 years. F-11 101 NTL Incorporated and Subsidiaries Notes to Consolidated Financial Statements (continued) 2. Significant Accounting Policies (continued) Intangible Assets Intangible assets include goodwill, license acquisition costs and customer lists. Goodwill is the excess of the purchase price over the fair value of net assets acquired in business combinations accounted for as purchases. Goodwill is amortized on a straight-line basis over the periods benefited of 15 or 30 years. License acquisition costs represent the portion of purchase price allocated to the licenses acquired in business combinations. License acquisition costs are amortized on a straight-line basis over the remaining lives of the licenses at acquisition, which vary from approximately two years to 23 years. Customer lists represent the portion of the purchase price allocated to the value of the customer base. Customer lists are amortized on a straight-line basis over 5 years. The Company continually reviews the recoverability of the carrying value of these assets using the same methodology that it uses for the evaluation of its other long-lived assets. Deferred Financing Costs Deferred financing costs were incurred in connection with the issuance of debt and are amortized over the term of the related debt. Capitalized Interest Interest is capitalized as a component of the cost of fixed assets constructed. In 1998, 1997 and 1996, interest of $27,760,000, $6,770,000 and $10,294,000, respectively, was capitalized. Revenue Recognition Revenues are recognized at the time the service is provided to the customer. Cable Television System Costs, Expenses and Revenues The Company accounts for costs, expenses and revenues applicable to the construction and operation of its cable television, telephone and telecommunications systems in accordance with SFAS No. 51, "Financial Reporting by Cable Television Companies." F-12 102 NTL Incorporated and Subsidiaries Notes to Consolidated Financial Statements (continued) 2. Significant Accounting Policies (continued) Advertising Expense The Company charges the cost of advertising to expense as incurred. Advertising costs were $33,951,000, $31,003,000 and $22,727,000 in 1998, 1997 and 1996, respectively. Net (Loss) Per Share The Company reports its basic and diluted net (loss) per share in accordance with Financial Accounting Standards Board ("FASB") SFAS No. 128, "Earnings Per Share". Stock-Based Compensation The Company has adopted the disclosure-only provisions of SFAS No. 123, "Accounting for Stock-Based Compensation." The Company applies APB Opinion No. 25, "Accounting for Stock Issued to Employees" and related interpretations in accounting for its stock option plans. Reclassifications Certain prior year amounts have been reclassified to conform to the 1998 presentation. 3. Recent Accounting Pronouncements In 1998, the Company adopted the following Statements of Financial Accounting Standards: o SFAS 130, "Reporting Comprehensive Income", which requires the components of comprehensive income to be disclosed in the financial statements. o SFAS 131, "Disclosures about Segments of an Enterprise and Related Information", which requires disclosures of certain information about the Company's operating segments on a basis consistent with the way in which the Company is managed and operated. o SFAS 132, "Employer's Disclosures about Pensions and Other Postretirement Benefits", which revises disclosures about pensions and other postretirement benefits and requires presentation of information about such plans in a standardized format. Adoption of these new standards required that the Company make certain new disclosures in the consolidated financial statements or in the notes to the consolidated financial statements. In June 1998, the FASB issued SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities," which is required to be adopted by the Company effective January 1, 2000. The Company is currently evaluating the impact the adoption of SFAS No. 133 will have on its earnings and financial position. F-13 103 NTL Incorporated and Subsidiaries Notes to Consolidated Financial Statements (continued) 4. Certain Significant Risks and Uncertainties Need for Additional Financing The Company will require additional financing in the future. There can be no assurance that the required financing will be obtainable on acceptable terms. Concentrations The Company's television and radio broadcasting business is substantially dependent upon contracts with a small group of companies for the right to broadcast their programming, and upon a site sharing agreement for a large number of its transmission sites. The loss of any one of these contracts or the site sharing agreement could have a material adverse effect on the business of the Company. Currency Risk To the extent that the Company obtains financing in United States dollars and incurs construction and operating costs in British pounds sterling, it will encounter currency exchange rate risks. In addition, the Company's revenues are generated primarily in British pounds sterling while its interest and principal obligations with respect to most of the Company's existing indebtedness are payable in United States dollars. 5. Fixed Assets Fixed assets consist of:
December 31 1998 1997 ------------------------------------------- Operating equipment $3,528,973,000 $1,612,440,000 Other equipment 376,518,000 225,514,000 Construction-in-progress 369,923,000 134,795,000 ------------------------------------------- 4,275,414,000 1,972,749,000 Accumulated depreciation (420,984,000) (215,764,000) ------------------------------------------- $3,854,430,000 $1,756,985,000 ===========================================
F-14 104 NTL Incorporated and Subsidiaries Notes to Consolidated Financial Statements (continued) 6. Intangible Assets Intangible assets consist of:
December 31 1998 1997 -------------------------------------------- License acquisition costs, net of accumulated amortization of $69,202,000 (1998) and $46,620,000 (1997) $153,007,000 $123,116,000 Goodwill, net of accumulated amortization of $32,358,000 (1998) and $13,449,000 (1997) 514,529,000 241,363,000 Customer lists, net of accumulated amortization of $3,375,000 57,492,000 - -------------------------------------------- $725,028,000 $364,479,000 ============================================
The Company made the following acquisitions in 1998: (i) The Company acquired ComTel Limited and Telecential Communications (collectively, "ComTel") for a total of (pound)550 million comprised of (pound)475 million in cash and 125,000 shares of 9.9% Non-voting Mandatorily Redeemable Preferred Stock, Series A in two stages completed in June and September 1998. The Company financed the cash portion of the transaction through a bank loan, completed through an amendment to the Company's then existing bank facility with The Chase Manhattan Bank. The preferred stock was valued at (pound)75 million, based on an appraisal as of the date of issuance. ComTel is a provider of cable television and telecommunications services in England. (ii) In October 1998, a wholly-owned subsidiary of the Company, NTL (Bermuda) Limited ("NTL Bermuda") acquired all of the outstanding common stock of Comcast UK Cable Partners Limited ("Partners") in exchange for 18,763,000 shares of the Company's common stock. The Company's common stock was valued at $600,432,000, the fair value on the date prior to the announcement. Partners provides cable television and telecommunications services in England. (iii) In December 1998, the Company acquired Eastern Group Telecoms ("EGT") for (pound)60 million in cash and 52,000 shares of 9.9% Non-voting Mandatorily Redeemable Preferred Stock, Series B. The preferred stock was valued at $52,217,000, based on an appraisal as of the date of issuance. EGT's telecoms division has a fibre-optic network across portions of England, and its radio sites division serves mobile phone operators in portions of England. These acquisitions have been accounted for as purchases, and accordingly, the net assets and results of operations of the acquired businesses have been included in the consolidated financial statements from the dates of acquisition. The aggregate purchase price of $1.7 billion, which includes the related acquisition costs and the return of cash acquired in the ComTel transaction of (pound)31 million, exceeded the fair value of the net tangible assets acquired by $591 million, which has been allocated as follows: $185.6 million to the investment in Cable London PLC, $52.4 million to license acquisition costs, $60.9 million to customer lists and $292.1 million to goodwill. F-15 105 NTL Incorporated and Subsidiaries Notes to Consolidated Financial Statements (continued) 6. Intangible Assets (continued) The pro forma unaudited consolidated results of operations for the years ended December 31, 1998 and 1997 assuming consummation of the above mentioned transactions as of January 1, 1997 is as follows:
December 31 1998 1997 -------------------------------------------- Total revenue $966,694,000 $667,534,000 (Loss) before extraordinary item (627,249,000) (618,510,000) Net loss (657,938,000) (623,010,000) Basic and diluted net loss per share: (Loss) before extraordinary item (11.54) (12.64) Net (loss) (12.08) (12.73)
In 1996, the Company acquired (i) the remaining 40% interest it did not already own in CableTel Newport, which owns and operates cable television and telecommunications franchises in South Wales, (ii) the remaining 30% interest it did not already own in English Cable Enterprises, Inc., which owns and operates cable television and telecommunications franchises in the northern suburbs of London and (iii) all of the outstanding shares of NTL Group Limited, which provides television and radio transmission services and a range of other services in the broadcasting and telecommunications industries. The NTL Group Limited acquisition was accounted for as a purchase, and accordingly, the net assets and results of operations of NTL Group Limited was included in the consolidated financial statements from the date of acquisition. The aggregate purchase price for these acquisitions including the costs incurred was $526 million, consisting of 780 shares of Series A Preferred Stock, 1,415,000 shares of common stock and cash of (pound)256.1 million (of which (pound)35 million was paid in 1997). The 780 shares of Series A Preferred Stock were valued at $49 million, based on an appraisal as of the date of issuance. The 1,415,000 shares of common stock were valued at $34 million, based on the market price on the date of issuance. The aggregate purchase price exceeded the aggregate fair value of the net tangible assets acquired by $273 million, which was allocated $10 million to license acquisition costs and $263 million to goodwill. 7. Investment in Cable London PLC NTL Bermuda has a 50% ownership interest in Cable London PLC ("Cable London"). Cable London operates integrated cable television and telecommunications systems in the London metropolitan area. Included in the investment in Cable London as of December 31, 1998 are loans to Cable London of (pound)28.5 million ($47.3 million) and accrued interest of (pound)8.6 million ($14.3 million). The loans accrue interest at a rate of 2% above the published base lending rate of Barclays Bank PLC (8.25% effective rate as of December 31, 1998) and are subordinate to Cable London's revolving bank credit facility. Of these loans, (pound)21.0 million ($34.8 million) are convertible into ordinary shares of Cable London at a conversion price of (pound)2.00 ($3.32) per share. F-16 106 NTL Incorporated and Subsidiaries Notes to Consolidated Financial Statements (continued) 7. Investment in Cable London PLC (continued) In August 1998, Partners and Telewest Communications plc ("Telewest') entered into an agreement to rationalize their joint ownership of Cable London pursuant to an agreed procedure (the "Shoot-out"). Between April 29 and July 29, 1999, NTL Bermuda can notify Telewest of the price at which it is willing to sell its 50% ownership interest in Cable London to Telewest. Following such notification, Telewest at its option will be required at that price to either purchase NTL Bermuda's 50% ownership interest in Cable London or sell its 50% ownership interest in Cable London to NTL Bermuda. If NTL Bermuda fails to give notice to Telewest by July 29, 1999, it will be deemed to have delivered an offer notice for (pound)100 million ($166 million). 8. Diamond Acquisition The Company acquired Diamond Cable Communications plc ("Diamond") in March 1999. The Company issued an aggregate of approximately 13 million shares in exchange for each ordinary share and deferred share of Diamond at a ratio of .85 shares of the Company's common stock for four Diamond ordinary shares or one deferred share. Diamond had five different notes outstanding at December 31, 1998 for an aggregate principal amount at maturity of $1.6 billion. Diamond intends to commence an offer to repurchase its outstanding notes at 101% of their accreted value or principal amount on or about April 1, 1999 pursuant to the "change of control" provisions of the indentures. The offer will expire 30 days thereafter. The Company has entered into a bridge facility to finance the redemption of Diamond bonds tendered, if any, which is subject to certain funding conditions. F-17 107 NTL Incorporated and Subsidiaries Notes to Consolidated Financial Statements (continued) 9. Long-Term Debt Long-term debt consists of:
December 31 1998 1997 ---------------------------------------------- 10-7/8% Senior Deferred Coupon Notes ("10-7/8% Notes") (a) $ - $ 194,959,000 12-3/4% Series A Senior Deferred Coupon Notes ("12-3/4% Notes") (b) 236,935,000 209,387,000 11-1/2% Series B Senior Deferred Coupon Notes ("11-1/2% Series B Notes") (c) 831,976,000 743,961,000 10% Series B Senior Notes ("10% Notes") (d) 400,000,000 400,000,000 9-1/2% Senior Sterling Notes, less unamortized discount of $639,000 ("Sterling Senior Notes") (e) 206,800,000 - 10-3/4% Senior Deferred Coupon Sterling Notes ("Sterling Deferred Coupon Notes") (f) 317,511,000 - 9-3/4% Senior Deferred Coupon Notes ("9-3/4% Notes") (g) 865,880,000 - 11-1/2% Senior Notes ("11-1/2% Notes") (h) 625,000,000 - 12-3/8% Senior Deferred Coupon Notes ("12-3/8 Notes") (i) 254,718,000 - 7-1/4% Convertible Subordinated Notes ("7-1/4 Convertible Notes") (j) - 191,750,000 7% Convertible Subordinated Notes ("7% Convertible Notes") (k) 275,000,000 275,000,000 7% Convertible Subordinated Notes ("New Convertible Notes") (l) 600,000,000 - 11.2% Senior Discount Debentures ("11.2% Debentures") (m) 421,835,000 - Other (n) 31,839,000 - ---------------------------------------------- 5,067,494,000 2,015,057,000 Less current portion 23,691,000 - ---------------------------------------------- $5,043,803,000 $2,015,057,000 ==============================================
F-18 108 NTL Incorporated and Subsidiaries Notes to Consolidated Financial Statements (continued) 9. Long-Term Debt (continued) (a) In October 1998, the Company redeemed the 10-7/8% Notes with an accreted value of $211 million for cash of $218 million. The Company recorded an extraordinary loss from the early extinguishment of the 10-7/8% Notes of approximately $12.1 million in 1998, which includes $4.8 million of unamortized deferred financing costs. In October 1993, the Company issued $212,000,000 aggregate principal amount of 10-7/8% Notes due 2003 at a price to the public of 58.873% or $124,811,000. During 1998, 1997 and 1996, the Company recognized $15,344,000, $19,591,000 and $17,620,000, respectively, of the original issue discount as interest expense. (b) In April 1995, the Company issued $277,803,500 aggregate principal amount of 12-3/4% Senior Deferred Coupon Notes due 2005. The 12-3/4% Notes were issued at a price to the public of 53.995% or $150,000,000. The Company incurred $6,192,000 in fees and expenses in connection with the issuance of 12-3/4% Notes which is included in deferred financing costs. The original issue discount accretes at a rate of 12-3/4%, compounded semiannually, to an aggregate principal amount of $277,803,500 by April 15, 2000. Interest will thereafter accrue at 12-3/4% per annum, payable semiannually beginning on October 15, 2000. During 1998, 1997 and 1996, the Company recognized $27,548,000, $24,344,000 and $21,515,000, respectively, of original issue discount as interest expense. The 12-3/4% Notes may be redeemed at the Company's option, in whole or in part, at any time on or after April 15, 2000 at 103.64% the first year, 101.82% the second year and 100% thereafter, plus accrued and unpaid interest to the date of redemption. (c) In January 1996, the Company issued $1,050,000,000 aggregate principal amount of 11-1/2% Series B Senior Deferred Coupon Notes due 2006. The 11-1/2% Series B Notes were issued at a price of 57.155% of the aggregate principal amount at maturity or $600,127,500. The Company incurred $19,273,000 in fees and expenses in connection with the issuance of the 11-1/2% Series B Notes which is included in deferred financing costs. The original issue discount accretes at a rate of 11-1/2%, compounded semiannually, to an aggregate principal amount of $1,050,000,000 by February 1, 2001. Interest will thereafter accrue at 11-1/2% per annum, payable semiannually beginning on August 1, 2001. During 1998, 1997 and 1996, the Company recognized $88,015,000, $78,704,000 and $65,129,000 of original issue discount as interest expense. The 11-1/2% Series B Notes may be redeemed at the Company's option, in whole or in part, at any time on or after February 1, 2001 at 105.75% the first year, 102.875% the second year and 100% thereafter, plus accrued and unpaid interest to the date of redemption. (d) In February 1997, the Company issued $400,000,000 aggregate principal amount of 10% Series B Senior Notes due 2007. The Company received net proceeds of $389,000,000 after discounts and commissions from the issuance of the 10% Notes. Discounts, commissions and other fees incurred of $11,885,000 are included in deferred financing costs. The 10% Notes accrue interest at 10% per annum, payable semiannually as of August 15, 1997. The 10% Notes may be redeemed at the Company's option, in whole or in part, at any time on or after February 15, 2002 at a redemption price of 105% that declines annually to 100% in 2005, in each case together with accrued and unpaid interest to the date of redemption. F-19 109 NTL Incorporated and Subsidiaries Notes to Consolidated Financial Statements (continued) 9. Long-Term Debt (continued) (e) In March 1998, the Company issued (pound)125,000,000 aggregate principal amount of 9-1/2% Senior Notes due 2008. The Sterling Senior Notes were issued at 99.67% or (pound)124.6 million. The aggregate of the discounts, commisions and other fees incurred of $5,981,000 is included in deferred financing costs. The Sterling Senior Notes accrue interest at 9-1/2% per annum, payable semiannually, which commenced on October 1, 1998. The Sterling Senior Notes may be redeemed at the Company's option, in whole or in part, at any time on or after April 1, 2003, at a redemption price of 104-3/4% to 105-3/8% that declines annually to 100% in 2006, in each case together with accrued and unpaid interest to the date of redemption. (f) In March 1998, the Company issued(pound)300,000,000 aggregate principal amount at maturity of 10-3/4% Senior Deferred Coupon Sterling Notes due 2008. The Sterling Deferred Coupon Notes were issued at 58.62% or (pound)175.9 million. The aggregate of the discounts, commissions and other fees incurred of $9,181,000 is included in deferred financing costs. The original issue discount of the Sterling Deferred Coupon Notes accretes at a rate of 10-3/4%, compounded semiannually, to an aggregate principal amount of (pound)300,000,000 by April 1, 2003. Interest on the Sterling Deferred Coupon Notes will thereafter accrue at 10-3/4% per annum payable semiannually beginning on October 1, 2003. In 1998, the Company recognized $25,697,000 of the original issued discount as interest expense. The Sterling Deferred Coupon Notes may be redeemed at the Company's option, in whole or in part, at any time on or after April 1, 2003, at a redemption price of 105-3/8% that declines annually to 100% in 2006, together with accrued and unpaid interest to the date of redemption. (g) In March 1998, the Company issued $1.3 billion aggregate principal amount at maturity of 9-3/4% Senior Deferred Coupon Notes due 2008. The 9-3/4% Notes were issued at 61.724% or $802.4 million. The aggregate of the discounts, commissions and other fees incurred of $24,931,000 is included in deferred financing costs. The original issue discount of the 9-3/4% Notes accretes at a rate of 9-3/4%, compounded semiannually, to an aggregate principal amount of $1.3 billion by April 1, 2003. Interest on the 9-3/4% Notes will thereafter accrue at 9-3/4% per annum payable semiannually beginning on October 1, 2003. In 1998, the Company recognized $63,468,000 of the original issued discount as interest expense. The Sterling Deferred Coupon Notes may be redeemed at the Company's option, in whole or in part, at any time on or after April 1, 2003, at a redemption price of 105-3/8% that declines annually to 100% in 2006, together with accrued and unpaid interest to the date of redemption. (h) In November 1998, the Company issued $625,000,000 aggregate principal amount of 11-1/2% Senior Notes due 2008. The aggregate of the discounts, commissions and other fees incurred of $18,253,000 is included in deferred financing costs. The 11-1/2% Notes accrue interest at 11-1/2% per annum, payable semiannually beginning on April 1, 1999. The 11-1/2% Notes may be redeemed, at the Company's option, in whole or in part, at any time on or after October 1, 2003 at a redemption price of 105.75% that declines annually to 100% in 2006, in each case together with accrued and unpaid interest to the date of redemption. F-20 110 NTL Incorporated and Subsidiaries Notes to Consolidated Financial Statements (continued) 9. Long-Term Debt (continued) (i) In November 1998, the Company issued $450,000,000 aggregate principal amount at maturity of 12-3/8% Senior Deferred Coupon Notes due 2008. The 12-3/8% Notes were issued at 55.505% or $249,773,000. The aggregate of the discounts, commissions and other fees incurred of $8,040,000 is included in deferred financing costs. The original issue discount on the 12-3/8% Notes accretes at a rate of 12-3/8%, compounded semiannually, to an aggregate principal amount of $450,000,000 by October 1, 2003. Interest will thereafter accrue at 12-3/8% per annum, payable semiannually beginning on April 1, 2004. In 1998, the Company recognized $4,945,000 of the original issue discount as interest expense. The 12-3/8% Notes may be redeemed, at the Company's option, in whole or in part, at any time on or after October 1, 2003 at a redemption price of 106.188% that declines annually to 100% in 2006, in each case together with accrued and unpaid interest to the date of redemption. (j) In April and May 1995, the Company issued $191,750,000 principal amount of 7-1/4% Convertible Subordinated Notes due 2005. In March 1998, the Company called for redemption all of the 7-1/4% Convertible Notes. The redemption date was April 20, 1998, at a redemption price of 105.08% of the principal amount plus accrued and unpaid interest through the date of redemption. The 7-1/4% Convertible Notes were convertible into common stock at a conversion price of $27.56 per share. In April 1998, all of the 7-1/4% Convertible Notes were converted into approximately 6,958,000 shares of the Company's common stock. (k) In June 1996, the Company issued $275,000,000 aggregate principal amount of 7% Convertible Subordinated Notes due 2008. Interest payments began on December 15, 1996 and interest is payable every six months thereafter. The 7% Convertible Notes mature on June 15, 2008. The 7% Convertible Notes are unsecured obligations convertible into shares of common stock prior to maturity at a conversion price of $37.875 per share, subject to adjustment. There are approximately 7,261,000 shares of common stock reserved for issuance upon conversion of the 7% Convertible Notes. The 7% Convertible Notes are redeemable, in whole or in part, at the option of the Company at any time on or after June 15, 1999, at a redemption price of 104.9% that declines annually to 100% in 2006, in each case together with accrued and unpaid interest to the redemption date. The Company incurred $8,616,000 in fees and expenses in connection with the issuance of the 7% Convertible Notes, which is included in deferred financing costs. F-21 111 NTL Incorporated and Subsidiaries Notes to Consolidated Financial Statements (continued) 9. Long-Term Debt (continued) (l) In December 1998, the Company issued $600,000,000 aggregate principal amount of 7% Convertible Subordinated Notes due 2008. Interest is payable semiannually on June 15 and December 15 of each year, commencing June 15, 1999. The New Convertible Notes mature on December 15, 2008. The New Convertible Notes are unsecured obligations convertible into shares of common stock prior to maturity at a conversion price of $61.25 per share, subject to adjustment. There are approximately 9,796,000 shares of common stock reserved for issuance upon conversion of the New Convertible Notes. The New Convertible Notes are redeemable, in whole or in part, at the option of the Company, at any time on or after December 15, 2001, at a redemption price of 104.375% that declines annually to 100% in 2006, in each case together with accrued and unpaid interest to the redemption date. The Company incurred $16,729,000 in fees and expenses in connection with the issuance of the New Convertible Notes which is included in deferred financing costs. (m) NTL Bermuda has assumed the obligations of Partners' $517.3 million principal amount at maturity, 11.2% Debentures. Interest accretes on the 11.2% Debentures at 11.2% per annum compounded semi-annually from November 15, 1995 to November 15, 2000, after which date interest will be paid in cash on each May 15 and November 15 through November 15, 2007. In 1998, the Company recognized $7,674,000 of the original issue discount as interest expense. (n) Other includes notes payable by NTL Bermuda to Comcast U.K. Holdings, Inc. (an affiliate of a shareholder of the Company) of $20,428,000 and other obligations of subsidiaries of NTL Bermuda of $11,411,000. The notes payable accrue interest at 9% and are due in September 1999. The indentures governing the notes issued by the Company and the 11.2% Debentures contain restrictions relating to, among other things: (i) incurrence of additional indebtedness and issuance of preferred stock, (ii) dividend and other payment restrictions and (iii) mergers, consolidations and sales of assets. In connection with the ComTel acquisition, the Company borrowed an aggregate of (pound)475 million under its credit facility from The Chase Manhattan Bank. In November 1998, the Company received net proceeds of $849 million from the issuance of the 11-1/2% Notes and the 12-3/8% Notes, a substantial portion of which was used to repay the $799 million outstanding under the bank loan. The Company recorded an extraordinary loss from the early extinguishment of the bank loan of $18,579,000 in 1998. F-22 112 NTL Incorporated and Subsidiaries Notes to Consolidated Financial Statements (continued) 9. Long-Term Debt (continued) The Company required consents from the holders of some of its notes to modify certain indenture provisions in order to proceed with the Partners acquisition. In October 1998, the Company paid $11,333,000 in consent payments and issued warrants to purchase 766,000 shares of common stock in lieu of additional consent payments of $10,080,000. In 1996, pursuant to the terms of the consent solicitations to the holders of the 10-7/8% Notes and to the holders of the 12-3/4% Notes to gain consent to modify certain indenture provisions, the Company paid an aggregate of $3,592,000 in consent payments and issued warrants to purchase 164,000 shares of common stock in lieu of additional consent payments of $1,641,000. The 11.2% Debentures restrict the payment of cash dividends and loans from NTL Bermuda to the Company. At December 31, 1998, restricted net assets of NTL Bermuda were approximately $587 million. Long-term debt repayments are due as follows: Year ended December 31: 1999 $ 23,691,000 2000 1,539,000 2001 1,261,000 2002 1,090,000 2003 999,000 Thereafter 5,038,914,000 -------------- $5,067,494,000 ==============
10. Redeemable Preferred Stock In February 1997, the Company issued $100,000,000 of its 13% Senior Redeemable Exchangeable Preferred Stock (the "Redeemable Preferred Stock"). The Company received net proceeds of $96,625,000 after discounts and commissions from the issuance of the Redeemable Preferred Stock. Discounts, commissions and other fees incurred of $3,729,000 were recorded as unamortized discount at issuance. Of the 2,500,000 authorized shares of Series Preferred Stock, 100,000 shares of Redeemable Preferred Stock were issued. Dividends accrue at 13% per annum ($130 per share) and are payable quarterly in arrears as of May 15, 1997. Dividends, whether or not earned or declared, will accrue without interest until declared and paid, which declaration may be for all or part of the accrued dividends. Dividends accruing on or prior to February 15, 2004 may, at the option of the Company, be paid in cash, by the issuance of additional Redeemable Preferred Stock or in any combination of the foregoing. As of December 31, 1998, the Company has accrued $27,260,000 for dividends and has issued approximately 25,000 shares for $25,225,000 of such accrued dividends. The Redeemable Preferred Stock may be redeemed, at the Company's option, in whole or in part, at any time on or after February 15, 2002 at a redemption price of 106.5% of the liquidation preference of $1,000 per share that declines annually to 100% in 2005, in each case together with accrued and unpaid dividends to the redemption date. The F-23 113 NTL Incorporated and Subsidiaries Notes to Consolidated Financial Statements (continued) 10. Redeemable Preferred Stock (continued) Redeemable Preferred Stock is subject to mandatory redemption on February 15, 2009. On any scheduled dividend payment date, the Company may, at its option, exchange all of the shares of Redeemable Preferred Stock then outstanding for the Company's 13% Subordinated Exchange Debentures due 2009 (the "Subordinated Debentures"). The Subordinated Debentures, if issued, will bear interest at a rate of 13% per annum, payable semiannually in arrears on February 15 and August 15 of each year commencing with the first such date to occur after the date of exchange. Interest accruing on or prior to February 15, 2004 may, at the option of the Company, be paid in cash, by the issuance of additional Subordinated Debentures or in any combination of the foregoing. The Subordinated Debentures will be redeemable, at the Company's option, in whole or in part, on or after February 15, 2002 at a redemption price of 106.5% that declines annually to 100% in 2005, in each case together with accrued and unpaid interest to the redemption date. 11. Nonrecurring Charges Including Restructuring Charges Nonrecurring charges of $20,642,000 in 1997 include deferred costs written-off of $5,013,000 and restructuring costs of $15,629,000. The deferred costs written-off arose in connection with the Company's unsuccessful bid for United Kingdom digital terrestrial television multiplex licenses. Restructuring costs relate to the Company's announcement in September 1997 of a reorganization of certain of its operations. This charge consisted of employee severance and related costs of $6,726,000 for approximately 280 employees to be terminated, lease exit costs of $6,539,000 and penalties of $2,364,000 associated with the cancellation of contractual obligations. As of December 31, 1998, $9,172,000 of the provision has been used, including $5,558,000 for severance and related costs, $1,450,000 for lease exit costs and $2,164,000 for penalties associated with the cancellation of contractual obligations. As of December 31, 1998, 177 employees had been terminated. The $4,194,000 reversed in 1998 from changes in estimates of costs to be incurred includes $1,168,000 for severance and related costs, $2,826,000 for lease exit costs and $200,000 for penalties associated with the cancellation of contractual obligations. This reversal was necessary because employees whose positions were eliminated chose to remain with the Company in other positions rather than leave the Company and receive severence pay; and the real estate markets in which the Company sublet space improved increasing the sublet rentals and shortening the period of time required to find sub tenants. The remaining restructuring reserve of $2,263,000 is for lease costs net of sublease revenue. 12. Other Gains Other gains of $21,497,000 in 1997 include a legal settlement of $10,000,000 and a gain on the sale of fixed assets of $11,497,000. In October 1997, following the U.S. District Court's decision to dismiss the Company's complaint against LeGroupe Videotron Ltee and its subsidiary, the Company entered into a Settlement Agreement dismissing the Company's complaint in exchange for a payment of $10,000,000. In December 1997, a U.S. subsidiary of the Company sold its fixed and other assets utilized in its microwave transmission service business and recognized a gain of $11,497,000. F-24 114 NTL Incorporated and Subsidiaries Notes to Consolidated Financial Statements (continued) 13. Income Taxes The provision (benefit) for income taxes consists of the following:
Year ended December 31 1998 1997 1996 --------------------------------------------------------- Current: Federal $ - $ - $ - State and local - 1,261,000 344,000 Foreign - - 2,246,000 --------------------------------------------------------- Total current - 1,261,000 2,590,000 --------------------------------------------------------- Deferred: Federal - - - State and local - - - Foreign (3,327,000) (16,852,000) 5,063,000 --------------------------------------------------------- Total deferred (3,327,000) (16,852,000) 5,063,000 --------------------------------------------------------- $(3,327,000) $(15,591,000) $ 7,653,000 =========================================================
Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. Significant components of the deferred tax liabilities and assets are as follows:
December 31 1998 1997 ------------------------------------------- Deferred tax liabilities: Fixed assets $ 68,766,000 $ 68,380,000 Other 6,598,000 4,894,000 ------------------------------------------- Total deferred tax liabilities 75,364,000 73,274,000 Deferred tax assets: Net operating losses 244,394,000 107,208,000 Net deferred interest expense 113,993,000 94,689,000 Depreciation and amortization 107,378,000 16,935,000 Other 19,975,000 18,164,000 ------------------------------------------- Total deferred tax assets 485,740,000 236,996,000 Valuation allowance for deferred tax assets (477,438,000) (233,940,000) ------------------------------------------- Net deferred tax assets 8,302,000 3,056,000 ------------------------------------------- Net deferred tax liabilities $67,062,000 $ 70,218,000 ===========================================
F-25 115 NTL Incorporated and Subsidiaries Notes to Consolidated Financial Statements (continued) 13. Income Taxes (continued) At December 31, 1998, the Company had net operating loss carryforwards of approximately $280,000,000 for U.S. federal income tax purposes that expire in varying amounts commencing in 2009. The Company also has United Kingdom net operating loss carryforwards of approximately $470,000,000 which have no expiration date. Pursuant to United Kingdom law, these losses are only available to offset income of the separate entity that generated the loss. The Company is currently undergoing a U.S. federal income tax audit. The Internal Revenue Service has issued notices of proposed adjustment. The Company does not expect that the audit adjustments, if any, will have a material adverse effect on its financial position, results of operations or cash flows. The reconciliation of income taxes computed at U.S. federal statutory rates to income tax expense is as follows:
Year ended December 31 1998 1997 1996 -------------------------------------------------------------- Provision (benefit) at federal statutory rate (35%) $(188,309,000) $(120,452,000) $(90,518,000) Add (deduct): State and local income tax, net of federal benefit - 820,000 224,000 Foreign losses with no benefit 83,500,000 59,804,000 44,610,000 Amortization of goodwill and license acquisition costs 4,366,000 3,925,000 4,031,000 U.S. losses with no benefit 97,116,000 40,312,000 49,184,000 Other - - 122,000 -------------------------------------------------------------- $(3,327,000) $(15,591,000) $7,653,000 ==============================================================
14. Fair Values of Financial Instruments The following methods and assumptions were used by the Company in estimating its fair value disclosures for financial instruments: Cash and cash equivalents: The carrying amounts reported in the consolidated balance sheets approximate fair value. Long-term debt: The fair values of the Company's debt are based on the quoted market prices. Redeemable Preferred Stock: The fair value is based on the quoted market price. F-26 116 NTL Incorporated and Subsidiaries Notes to Consolidated Financial Statements (continued) 14. Fair Value of Financial Instruments (continued) The carrying amounts and fair values of the Company's financial instruments are as follows:
December 31, 1998 December 31, 1997 ------------------------------------- ------------------------------------- Carrying Carrying Amount Fair Value Amount Fair Value ------------------------------------------------------------------------------ Cash and cash equivalents $ 736,265,000 $ 736,265,000 $ 98,902,000 $ 98,902,000 Long-term debt: 10-7/8% Notes - - 194,959,000 199,810,000 12-3/4% Notes 236,935,000 252,801,000 209,387,000 230,577,000 11-1/2% Series B Notes 831,976,000 882,000,000 743,961,000 819,000,000 10% Notes 400,000,000 408,000,000 400,000,000 422,000,000 Sterling Senior Notes 206,800,000 192,917,000 - - Sterling Deferred Coupon Notes 317,511,000 293,732,000 - - 9-3/4% Notes 865,880,000 835,250,000 - - 11-1/2% Notes 625,000,000 681,250,000 - - 12-3/8% Notes 254,718,000 274,500,000 - - 7-1/4% Convertible Notes - - 191,750,000 212,843,000 7% Convertible Notes 275,000,000 411,125,000 275,000,000 264,688,000 New Convertible Notes 600,000,000 656,340,000 - - 11.2% Debentures 421,835,000 437,119,000 - - Redeemable Preferred Stock 124,127,000 124,127,000 108,534,000 121,846,000
15. Related Party Transactions On July 25, 1990, Cellular Communications, Inc. ("CCI") and AirTouch Communications, Inc. ("AirTouch") entered into a Merger and Joint Venture Agreement, as amended as of December 14, 1990. In connection with this agreement, on July 31, 1991, CCI distributed to its shareholders the stock of the Company. Through August 1996, CCI provided management, financial and legal services to the Company. Amounts charged to the Company included direct costs where identifiable, and indirect costs allocated utilizing direct labor hours as reported by the common officers and employees of CCI and the Company. For the year ended December 31, 1996, CCI charged $1,194,000 which is included in corporate expenses. In August 1996, upon the merger of CCI with AirTouch, the Company commenced providing management, financial, legal and technical services to Cellular Communications International, Inc. ("CCII") and Cellular Communications of Puerto Rico, Inc. (formerly CoreComm Incorporated) ("CCPR"). In 1996, the Company charged CCII and CCPR $351,000 and $200,000, respectively, which included direct costs where identifiable and allocated corporate overhead based upon the amount of time incurred on CCII and CCPR business by the common officers and employees of the Company, CCII and CCPR. These charges reduced corporate expenses in 1996. F-27 117 NTL Incorporated and Subsidiaries Notes to Consolidated Financial Statements (continued) 15. Related Party Transactions (continued) In January 1997, the Company, CCPR and CCII agreed to a change in the Company's fee for the provision of services. In 1997, the Company charged CCPR and CCII $1,492,000 and $871,000, respectively, for direct costs where identifiable and a fixed percentage of its corporate overhead. In 1998, the Company charged CCPR, CCII and CoreComm Limited (which was formed in 1998 and has certain common officers and directors with the Company) $1,148,000, $982,000 and $313,000, respectively, for direct costs where identifiable and a fixed percentage of its corporate overhead. These charges reduced corporate expenses. In the opinion of management of the Company, the allocation methods are reasonable. As of December 31, 1998 and 1997, the Company had receivables of none and $69,000 from CCII, $588,000 and $71,000 from CCPR and $1,038,000 and none from CoreComm Limited, respectively. F-28 118 NTL Incorporated and Subsidiaries Notes to Consolidated Financial Statements (continued) 16. Net Loss Per Common Share The following table sets forth the computation of basic and diluted net loss per share:
Year ended December 31 1998 1997 1996 -------------------------------------------------------------- Numerator: Loss before extraordinary item $(503,927,000) $(328,557,000) $(254,454,000) Preferred stock dividend (18,761,000) (11,978,000) - -------------------------------------------------------------- (522,688,000) (340,535,000) (254,454,000) Extraordinary item (30,689,000) (4,500,000) - -------------------------------------------------------------- Loss available to common shareholders $(553,377,000) $(345,035,000) $(254,454,000) -------------------------------------------------------------- Denominator for basic net loss per common share 41,202,000 32,117,000 31,041,000 Effect of dilutive securities - - - -------------------------------------------------------------- Denominator for diluted net loss per common share 41,202,000 32,117,000 31,041,000 -------------------------------------------------------------- Basic and diluted net loss per common share: Loss before extraordinary item $(12.69) $(10.60) $(8.20) Extraordinary item (.74) (.14) - -------------------------------------------------------------- Net loss $(13.43) $(10.74) $(8.20) ==============================================================
Stock options, warrants and convertible securities are excluded from the calculation of net loss per common share as their effect would be antidilutive. 17. Shareholders' Equity (Deficiency) Series Preferred Stock In September 1998, the Company issued 125,000 shares of 9.9% Non-voting Mandatorily Redeemable Preferred Stock, Series A (the "Series A Preferred Stock") in connection with the ComTel acquisition. Each share of Series A Preferred Stock has a stated value of $1,000. Cumulative dividends accrue at 9.9% of the stated value per share. Dividends are payable when and if declared by the Board of Directors and may be paid, in the sole discretion of the Board, in cash, in shares of common stock, in shares of Convertible Preferred Stock or through any combination of the foregoing. As of December 31, 1998, accrued and unpaid dividends were $3,480,000. On December 22, 1999, all outstanding shares of the Series A Preferred F-29 119 NTL Incorporated and Subsidiaries Notes to Consolidated Financial Statements (continued) 17. Shareholders' Equity (Deficiency) (continued) Stock shall be redeemed for $1,000 per share together with accrued and unpaid dividends, at the Company's option, in cash, in shares of common stock, in shares of Convertible Preferred Stock or through any combination of the foregoing. In December 1998, the Company issued 52,000 shares of 9.9% Non-voting Mandatorily Redeemable Preferred Stock, Series B (the "Series B Preferred Stock") in connection with the EGT acquisition. Each share of Series B Preferred Stock has a stated value of $1,000. Cumulative dividends accrue at 9.9% of the stated value per share. Dividends are payable when and if declared by the Board of Directors and may be paid, in the sole discretion of the Board, in cash, in shares of common stock, or through a combination of the foregoing. The Series B Preferred Stock may be redeemed, at the Company's option, any time at a price equal to $1,000 per share, together with accrued and unpaid dividends to the redemption date. On July 1, 2000 all outstanding shares of Series B Preferred Stock shall be redeemed for $1,000 per share together with accrued and unpaid dividends, at the Company's option, in cash, in shares of common stock, or through a combination of the foregoing. As of December 31, 1998, the Series A Preferred Stock and the Series B Preferred Stock would have been redeemable into an aggregate of 3,140,000 shares of the Company's common stock. In October 1996, 780 shares of Non-Voting Convertible Preferred Stock, Series A ("Convertible Preferred Stock") were issued in connection with the CableTel Newport acquisition. In May 1998, the 780 outstanding shares of Convertible Preferred Stock were converted into 1,950,000 shares of Common Stock. Warrants The Company has the following warrants outstanding as of December 31, 1998: (i) warrants to purchase an aggregate of 756,000 shares of common stock at $5.57 per share issued in 1993 that expire in 2000 (899,000 were originally issued), (ii) warrants to purchase an aggregate of 158,000 shares of common stock at $23.78 per share issued in 1996 that expire in 2006 (164,000 were originally issued) and (iii) warrants to purchase an aggregate of 766,000 shares of common stock at $43.39 per share issued in 1998 that expire in 2008 (766,000 were originally issued). F-30 120 NTL Incorporated and Subsidiaries Notes to Consolidated Financial Statements (continued) 17. Shareholders' Equity (Deficiency) (continued) Shareholder Rights Plan The Rights Agreement provides that one Right will be issued with each share of common stock issued on or after October 13, 1993. The Rights are exercisable upon the occurrence of certain potential takeover events and will expire in October 2003 unless previously redeemed by the Company. When exercisable, each Right entitles the owner to purchase from the Company one one-hundredth of a share of Series A Junior Participating Preferred Stock ("Rights Preferred Stock") at a purchase price of $100. The Rights Preferred Stock will be entitled to a minimum preferential quarterly dividend payment of $.01 per share and will be entitled to an aggregate dividend of 100 times the dividend, if any, declared per share of common stock. In the event of liquidation, the holders of Rights Preferred Stock will be entitled to a minimum preferential liquidation payment of $1 per share and will be entitled to an aggregate payment of 100 times the payment made per share of common stock. Each share of Rights Preferred Stock will have 100 votes and will vote together with the common stock. In the event of any merger, consolidation or other transaction in which shares of common stock are changed or exchanged, each share of Rights Preferred Stock will be entitled to receive 100 times the amount received per share of common stock. The Rights are protected by customary antidilution provisions. There are 2,500,000 authorized shares of Series Preferred Stock of which 1,000,000 shares are designated Rights Preferred Stock. Stock Options There are 2,164,000 shares of common stock reserved for issuance under the OCOM Corporation (a wholly-owned subsidiary of the Company) 1991 Stock Option Plan. The plan provides that incentive stock options ("ISOs") be granted at the fair market value of OCOM's common stock on the date of grant, and nonqualified stock options ("NQSOs") be granted at not less than 85% of the fair market value of OCOM's common stock on the date of grant. Options are exercisable as to 20% of the shares subject thereto on the date of grant and become exercisable as to an additional 20% of the shares subject thereto on each January 1 thereafter, while the optionee remains an employee of the Company. Options will expire ten years after the date of the grant. There are 6,653,000 shares of common stock reserved for issuance under the NTL Incorporated 1993 Stock Option Plan. The exercise price of an ISO may not be less than 100% of the fair market value of the Company's common stock on the date of grant, and the exercise price of a NQSO may not be less than 85% of the fair market value of the Company's common stock on the date of grant. Options are exercisable as to 20% of the shares subject thereto on the date of grant and become exercisable as to an additional 20% of the shares subject thereto on each January 1 thereafter, while the optionee remains an employee of the Company. Options will expire ten years after the date of the grant. F-31 121 NTL Incorporated and Subsidiaries Notes to Consolidated Financial Statements (continued) 17. Shareholders' Equity (Deficiency) (continued) Stock Options (continued) There are 100,000 shares of common stock reserved for issuance under the OCOM Corporation Non-Employee Director Stock Option Plan. The plan provides that all options be granted at the fair market value of OCOM's common stock on the date of grant, and options will expire ten years after the date of the grant. Options are exercisable as to 20% of the shares subject thereto on the date of grant and become exercisable as to an additional 20% of the shares subject thereto on each subsequent anniversary of the grant date, while the optionee remains a director of the Company. Options will expire ten years after the date of the grant. There are 320,000 shares of common stock reserved for issuance under the NTL Incorporated 1993 Non-Employee Director Stock Option Plan. Under the terms of this plan, options will be granted to members of the Board of Directors who are not employees of the Company or any of its affiliates. The plan provides that all options be granted at the fair market value of the Company's common stock on the date of grant, and options will expire ten years after the date of the grant. Options are exercisable as to 20% of the shares subject thereto on the date of grant and become exercisable as to an additional 20% of the shares subject thereto on each subsequent anniversary of the grant date while the optionee remains a director of the Company. Options will expire ten years after the date of the grant. There are 15,000,000 shares of common stock reserved for issuance under the 1998 Non-Qualified Stock Option Plan. The exercise price of a NQSO shall be determined by the Compensation and Option Committee. Options are exercisable as to 20% of the shares subject thereto on the date of grant and become exercisable as to an additional 20% of the shares subject thereto on each January 1 thereafter, while the optionee remains an employee of the Company. Options will expire ten years after the date of the grant. Pro forma information regarding net loss and net loss per share is required by SFAS No. 123, and has been determined as if the Company had accounted for its employee stock options under the fair value method of that Statement. The fair value for these options was estimated at the date of grant using the Black-Scholes option pricing model with the following weighted-average assumptions for 1998, 1997 and 1996: risk-free interest rates of 5.02%, 5.89% and 6.56%, respectively, dividend yield of 0%, volatility factor of the expected market price of the Company's common stock of .331, .276 and .255, respectively, and a weighted-average expected life of the option of 10 years. The Black-Scholes option valuation model was developed for use in estimating the fair value of traded options which have no vesting restrictions and are fully transferable. In addition, option valuation models require the input of highly subjective assumptions including the expected stock price volatility. Because the Company's stock options have characteristics significantly different F-32 122 NTL Incorporated and Subsidiaries Notes to Consolidated Financial Statements (continued) 17. Shareholders' Equity (Deficiency) (continued) Stock Options (continued) from those of traded options and because changes in the subjective input assumptions can materially affect the fair value estimate, in management's opinion, the existing models do not necessarily provide a reliable single measure of the fair value of its stock options. For purposes of pro forma disclosures, the estimated fair value of the options is amortized to expense over the options' vesting period. Following is the Company's pro forma information:
Year Ended December 31 1998 1997 1996 -------------------- ------------------- ------------------- Pro forma net (loss) $(580,747,000) $(343,850,000) $(261,245,000) Basic and diluted pro forma net (loss) per share $(14.55) $(11.08) $(8.42)
A summary of the Company's stock option activity and related information for the years ended December 31 follows:
1998 1997 1996 -------------------------------------------------------------------------------------------------- Number of Weighted-Average Number of Weighted-Average Number of Weighted-Average Options Exercise Price Options Exercise Price Options Exercise Price -------------------------------------------------------------------------------------------------- Outstanding-beginning of year 8,157,000 $15.98 6,738,000 $ 14.10 5,934,000 $11.04 Granted 8,864,000 37.59 1,571,000 23.97 1,390,000 25.94 Exercised (298,000) 21.24 (119,000) 12.85 (396,000) 3.44 Forfeited (275,000) 46.47 (33,000) 23.78 (190,000) 27.39 ---------------- --------------- --------------- Outstanding-end of year 16,448,000 $27.02 8,157,000 $15.98 6,738,000 $14.10 ================ =============== =============== Exercisable at end of year 7,046,000 $16.55 5,663,000 $12.39 4,258,000 $10.71 ================ =============== ===============
Weighted-average fair value of options, calculated using the Black-Scholes option pricing model, granted during 1998, 1997 and 1996 is $20.54, $12.74 and $13.98, respectively. F-33 123 NTL Incorporated and Subsidiaries Notes to Consolidated Financial Statements (continued) 17. Shareholders' Equity (Deficiency) (continued) The following table summarizes the status of the stock options outstanding and exercisable at December 31, 1998:
Stock Options Outstanding Stock Options Exercisable - --------------------------------------------------------------------------------------------------------------------- Range of Exercise Number of Weighted-Remaining Weighted-Average Weighted-Average Prices Options Contractual Life Exercise Price Number of Options Exercise Price - --------------------------------------------------------------------------------------------------------------------- $0.18 to $0.56 77,000 2.6 Years $0.245 77,000 $0.245 $0.70 to $1.12 150,000 2.6 Years $0.745 150,000 $0.745 $1.53 to $2.69 355,000 2.5 Years $2.157 355,000 $2.157 $3.00 to $4.50 47,000 3.5 Years $3.230 47,000 $3.230 $8.00 to $14.70 3,289,000 4.4 Years $8.833 3,289,000 $8.833 $15.00 to $22.88 1,390,000 6.4 Years $21.704 1,087,000 $21.671 $23.00 to $33.25 2,676,000 8.0 Years $25.581 1,399,000 $26.088 $36.50 to $45.00 8,192,000 9.2 Years $36.912 591,000 $40.485 $46.00 to $55.69 272,000 9.9 Years $49.014 51,000 $49.202 - --------------------------------------------------------------------------------------------------------------------- Total 16,448,000 7,046,000 =====================================================================================================================
As of December 31,1998, the Company has 38,325,000 shares of its common stock reserved for issuance upon the exercise of warrants and stock options and the conversion of debt and preferred stock. F-34 124 NTL Incorporated and Subsidiaries Notes to Consolidated Financial Statements (continued) 18. Employee Benefit Plans Certain subsidiaries of NTL Group Limited operate a defined benefit pension plan in the United Kingdom. The assets of the Plan are held separately from those of NTL Group Limited and are invested in specialized portfolios under the management of an investment group. The pension cost is calculated using the attained age method. The Company's policy is to fund amounts to the defined benefit plan necessary to comply with the funding requirements as prescribed by the laws and regulations in the United Kingdom.
Year Ended December 31 1998 1997 ---------------------------------------------- (In thousands) Change in benefit obligation Benefit obligation at beginning of year $202,645 $157,002 Service cost 13,365 10,693 Interest cost 14,684 12,765 Actuarial losses/(gains) (14,640) 26,732 Foreign currency exchange rate changes 2,363 - Benefits paid (4,968) (4,547) ---------------------------------------------- Benefit obligation at end of year $213,449 $202,645 ============================================== Change in plan assets Fair value of plan assets at beginning of year $193,607 $158,965 Actual return on plan assets 24,144 30,852 Foreign currency exchange rate changes 2,257 - Company contributions 10,233 8,905 Benefits paid (4,968) (4,547) Other - (568) ---------------------------------------------- Fair value of plan assets at end of year $225,273 $193,607 ============================================== Funded status of the plan (underfunded) $ 11,824 $(9,038) Unrecognized net actuarial losses/(gains) (23,060) (1,057) Unrecognized transition obligation 9,306 10,118 ---------------------------------------------- Prepaid/(accrued)benefit cost $ (1,930) $ 23 ============================================== Actuarial assumptions: Weighted average discount rate 5.75% 7.25% Weighted average rate of compensation increase 5.50% 8.00% Expected long-term rate of return on plan assets 8.00% 9.00%
F-35 125 NTL Incorporated and Subsidiaries Notes to Consolidated Financial Statements (continued) 18. Employee Benefit Plans (continued) The components of net pension costs are as follows:
Year Ended December 31 1998 1997 1996 ----------------------------------------------------------------------- Service cost $ 13,365,000 $ 10,693,000 $ 7,997,000 Interest cost 14,684,000 12,765,000 11,679,000 Actual return on plan assets (24,144,000) (30,852,000) (16,103,000) Net amortization and deferral 8,282,000 17,327,000 4,241,000 ----------------------------------------------------------------------- $ 12,187,000 $ 9,933,000 $ 7,814,000 =======================================================================
19. Leases Leases for buildings, office space and equipment extend through 2031. Total rental expense for the years ended December 31, 1998, 1997 and 1996 under operating leases was $29,356,000, $20,674,000 and $14,886,000, respectively. Future minimum lease payments under noncancellable operating leases as of December 31, 1998 are as follows:
Operating Leases ----------------------- Year ended December 31: 1999 $ 33,730,000 2000 35,499,000 2001 36,658,000 2002 33,231,000 2003 22,048,000 Thereafter 287,797,000 ----------------------- $448,963,000 =======================
F-36 126 NTL Incorporated and Subsidiaries Notes to Consolidated Financial Statements (continued) 20. Commitments and Contingent Liabilities As of December 31, 1998, the Company was committed to pay approximately $264,000,000 for equipment and services. The Company has various licenses for its cable television, telephone and telecommunications business, and for its transmission and distribution services. The Company's license fees in 1998 were $5,924,000. Pursuant to the terms of the Company's local delivery operator license ("LDL") for Northern Ireland, a subsidiary of the Company is required to make annual cash payments to the ITC for 15 years in the amount of approximately (pound)15.4 million (subject to adjustment for inflation). This is in addition to the percentages of qualifying revenue payments of 0% for the first ten years and 2% for the last five years of the LDL. In December 1998, a wholly-owned subsidiary of the Company acquired 9 million shares, representing 6.3% of the issued share capital, of Newcastle United PLC (the Newcastle United football club) for cash of approximately $17 million. In conjunction with the sale of shares, the seller entered into an irrevocable commitment to the Company that if the Company makes an offer for all of the issued share capital of Newcastle United, it will accept that offer in respect of the remaining balance of its shares. The seller would sell Newcastle United shares representing 50.8% of the issued share capital at a price of 111.7 pence per share in cash, or at the Company's option, in a zero coupon note. The Company is involved in, or has been involved in, certain disputes and litigation arising in the ordinary course of its business. None of these matters are expected to have a material adverse effect on the Company's financial position, results of operations or cash flows. 21. Industry Segments The Company has four reportable segments: Local Telecoms and Television, National Telecoms, Broadcast and Corporate and Other. The Local Telecoms and Television segment delivers residential telephony and cable television services in regional franchise areas in the United Kingdom. The National Telecoms segment includes the Company's national business telecoms, national and international carrier telecoms, radio communications, satellite services and national Internet services business units. The Broadcast segment provides television and radio broadcasters with broadcast transmission services from owned and shared tower sites throughout the United Kingdom. Corporate and other includes the Company's shared services departments in the United Kingdom and OCOM, a subsidiary that operated long distance and microwave transmission businesses in the United States until June 1998. F-37 127 NTL Incorporated and Subsidiaries Notes to Consolidated Financial Statements (continued) 21. Industry Segments (continued) The accounting policies of the segments are the same as those described in the Summary of Significant Accounting Policies. The Company's management evaluates segment performance based on various financial and non-financial measurements. The results of operations data utlized in financial measurements are revenues and EBITDA, which is revenues less operating and selling, general and administrative expenses. Certain selling, general and administrative expenses are allocated to segments based on revenues. Segment assets include only those assets that are specific to the segment. Management does not allocate shared services departments and jointly used assets for purposes of measuring segment performance. The reportable segments are strategic business units that offer different services. They are managed separately because each business requires different technology and marketing strategies.
Local Telecoms Corporate and National and Broadcast Television Telecoms Other Total --------------------------------------------------------------------------------- (In thousands) Year ended December 31, 1998 Revenues $140,156 $ 355,589 $248,895 $ 2,375 $ 747,015 Depreciation and amortization 29,974 143,479 29,476 63,183 266,112 EBITDA (1) 91,687 67,587 35,848 (119,735) 75,387 Expenditures for long-lived assets 88,476 413,917 297,745 67,141 867,279 Total assets 289,068 3,100,492 761,097 2,043,440 6,194,097 Year ended December 31, 1997 Revenues $130,799 $ 166,951 $185,194 $ 8,831 $ 491,775 Depreciation and amortization 13,584 78,730 9,666 48,529 150,509 EBITDA (1) 73,636 18,693 13,522 (84,853) 20,998 Expenditures for long-lived assets 36,142 304,656 105,076 20,519 466,393 Total assets 230,920 1,323,808 220,318 646,593 2,421,639 Year ended December 31, 1996 Revenues $ 83,618 $ 89,209 $ 45,430 $ 10,086 $ 228,343 Depreciation and amortization 6,752 51,014 3,704 37,183 98,653 EBITDA (1) 49,684 (52,215) 10,800 (39,233) (30,964) Expenditures for long-lived assets 29,195 505,345 29,224 24,311 588,075 Total assets 220,077 1,184,156 98,912 951,466 2,454,611
(1) Represents earnings before interest, taxes, depreciation and amortization, corporate expenses, franchise fees, nonrecurring charges, other gains, minority interest and extraordinary items. F-38 128 NTL Incorporated and Subsidiaries Notes to Consolidated Financial Statements (continued) 21. Industry Segments (continued) The reconciliation of segment combined EBITDA to loss before income taxes, minority interest and extraordinary item is as follows:
Year ended December 31 1998 1997 1996 -------------------------------------------------------- (In thousands) Segment Combined EBITDA $ 75,387 $ 20,998 $ (30,964) (Add) Deduct: Franchise fees 25,036 23,587 13,117 Corporate expenses 17,048 18,324 14,899 Nonrecurring charges (4,194) 20,642 - Depreciation and amortization 266,112 150,509 98,653 Interest and other income (46,024) (49,912) (33,634) Interest expense 328,815 202,570 137,032 Foreign currency transaction gains (4,152) (574) (2,408) -------------------------------------------------------- 582,641 365,146 227,659 -------------------------------------------------------- Loss before income taxes, minority interest and extraordinary item $(507,254) $(344,148) $(258,623) ========================================================
22. Geographic Information
United States United Kingdom ----------------------------------------------- (In thousands) 1998 Revenues $ 2,375 $ 744,640 Long-lived assets 137,223 4,852,374 1997 Revenues 8,831 482,944 Long-lived assets 55,173 2,129,312 1996 Revenues 10,086 218,257 Long-lived assets 56,881 1,856,689
F-39 129 NTL Incorporated and Subsidiaries Notes to Consolidated Financial Statements (continued) 23. Subsequent Events In January 1999, the Company received $500 million in cash from Microsoft Corp. in exchange for 500,000 shares of the Company's 5.25% Convertible Preferred Stock, Series A and warrants to purchase 1,200,000 shares of the Company's common stock at an exercise price of $84 per share. The preferred stock is convertible into common stock at a conversion price of $100 per share. The preferred stock is redeemable 10 years from the date of issuance in cash or shares of common stock. The preferred stock may be redeemed by the Company on the earlier of seven years or the date on which the Company's common stock has traded above $120 per share for 25 consecutive trading days. Dividends are payable at the Company's option in cash, common stock or additional shares of preferred stock. The warrants expire in 2004. In March 1999, the Commonwealth of Australia accepted the Company's bid to own and operate the Australian National Transmission Network ("NTN"). NTN operates from over 560 tower sites and provides exclusive television and radio transmission services to Australia's only national TV and radio broadcasters, serves regional and community TV and radio broadcasters, and provides equipment hosting services to telecom operators and emergency service communications providers on its towers. A subsidiary of the Company will purchase the company that will hold the NTN assets for an aggregate purchase price of approximately $407 million. F-40 130 NTL Incorporated Schedule I--Condensed Financial Information of Registrant Condensed Balance Sheets
December 31 1998 1997 ---------------------------------------------- Assets Current assets: Cash and cash equivalents $ 514,865,000 $ 46,421,000 Marketable securities 260,631,000 4,998,000 Other 13,070,000 8,804,000 ---------------------------------------------- Total current assets 788,566,000 60,223,000 Office improvements and equipment, net of accumulated depreciation of $890,000 (1998) and $555,000 (1997) 1,198,000 1,551,000 Investments in and loans to subsidiaries 4,211,862,000 1,970,114,000 Deferred financing costs, net of accumulated amortization of $17,486,000 (1998) and $13,141,000 (1997) 136,025,000 50,771,000 Other assets, net of accumulated amortization of $13,192,000 (1998) and $11,803,000 (1997) 161,000 1,540,000 ---------------------------------------------- Total assets $5,137,812,000 $2,084,199,000 ============================================== Liabilities and shareholders' equity (deficiency) Current liabilities $ 44,711,000 $ 22,276,000 Long-term debt 4,613,820,000 2,015,057,000 Senior redeemable exchangeable preferred stock 124,127,000 108,534,000 Shareholders' (deficiency): Series preferred stock 2,000 - Common stock 602,000 322,000 Additional paid-in capital 1,501,561,000 538,054,000 Accumulated other comprehensive income 104,657,000 117,008,000 (Deficit) (1,251,668,000) (717,052,000) ---------------------------------------------- 355,154,000 (61,668,000) ---------------------------------------------- Total liabilities and shareholders' equity (deficiency) $5,137,812,000 $2,084,199,000 ==============================================
See accompanying notes. F-41 131 NTL Incorporated Schedule I--Condensed Financial Information of Registrant (continued) Condensed Statements of Operations
Year ended December 31 1998 1997 1996 ----------------------------------------------------------------- Costs and expenses Corporate expenses $ 14,718,000 $ 12,811,000 $ 14,144,000 Depreciation and amortization 10,576,000 6,655,000 4,954,000 ----------------------------------------------------------------- Operating (loss) (25,294,000) (19,466,000) (19,098,000) Other income (expense) Interest and other income 128,457,000 4,490,000 5,017,000 Interest expense (317,677,000) (191,124,000) (128,755,000) Other gain - 10,000,000 - Foreign currency transaction gains (losses) 3,673,000 (2,221,000) 1,376,000 ----------------------------------------------------------------- (Loss) before income taxes, extraordinary item and equity in net (loss) of subsidiaries (210,841,000) (198,321,000) (141,460,000) Income tax (provision) - (1,083,000) (193,000) ----------------------------------------------------------------- (Loss) before extraordinary item and equity in net (loss) of subsidiaries (210,841,000) (199,404,000) (141,653,000) Loss from early extinguishment of debt (12,110,000) - - ----------------------------------------------------------------- (Loss) before equity in net (loss) of subsidiaries (222,951,000) (199,404,000) (141,653,000) Equity in net (loss) of subsidiaries (311,665,000) (133,653,000) (112,801,000) ----------------------------------------------------------------- Net (loss) $ (534,616,000) $ (333,057,000) $(254,454,000) =================================================================
See accompanying notes. F-42 132 NTL Incorporated Schedule I--Condensed Financial Information of Registrant (continued) Condensed Statements of Cash Flows
Year ended December 31 1998 1997 1996 ------------------------------------------------------------- Net cash (used in) operating activities $ (291,427,000) $ (55,467,000) $ (28,152,000) Investing activities Purchase of office improvements and equipment (96,000) (156,000) (1,891,000) Purchase of marketable securities (540,639,000) (145,939,000) - Proceeds from sales of marketable securities 291,276,000 142,596,000 - Increase in investments in and loans to subsidiaries (1,466,334,000) (482,179,000) (798,784,000) ------------------------------------------------------------- Net cash (used in) investing activities (1,715,793,000) (485,678,000) (800,675,000) Financing activities Proceeds from borrowings and sale of preferred stock, net of financing costs 2,697,777,000 484,340,000 842,820,000 Proceeds from exercise of stock options and warrants 6,842,000 1,671,000 1,665,000 Consent solicitation payments (11,333,000) - - Cash placed in escrow (217,622,000) - - ------------------------------------------------------------- Net cash provided by financing activities 2,475,664,000 486,011,000 844,485,000 ------------------------------------------------------------- Increase (decrease) in cash and cash equivalents 468,444,000 (55,134,000) 15,658,000 Cash and cash equivalents at beginning of year 46,421,000 101,555,000 85,897,000 ------------------------------------------------------------- Cash and cash equivalents at end of year $ 514,865,000 $ 46,421,000 $101,555,000 ============================================================= Supplemental disclosure of cash flow information Cash paid during the period for interest $77,295,000 $53,485,000 $ 23,687,000 Income taxes paid - - 193,000 Supplemental schedule of noncash financing activities Accretion of dividends and discount on preferred stock $19,072,000 $12,263,000 $ - Conversion of convertible Notes, net of unamortized deferred financing costs of $4,738,000 187,012,000 - - Warrants issued in connection with consent solicitations 10,080,000 - 1,641,000 Preferred stock issued for acquisitions 178,495,000 Common stock issued for acquisition 600,432,000 - 34,137,000 Preferred stock issued for acquisition of minority interest, including notes payable to minority partner - - 49,000,000 Liabilities incurred in connection with acquisitions - - 81,906,000
See accompanying notes. F-43 133 NTL Incorporated Schedule I-Condensed Financial Information of Registrant Notes to Condensed Financial Statements (continued) 1. Basis of Presentation In the NTL Incorporated (the "Company") condensed financial statements, the Company's investment in subsidiaries is stated at cost plus equity in the undistributed earnings of the subsidiaries since the date of acquisition. The Company's share of net loss of its unconsolidated subsidiaries is included in consolidated net loss using the equity method of accounting. The condensed financial statements should be read in conjunction with the Company's consolidated financial statements. 2. Long-Term Debt Long-term debt consists of:
December 31 1998 1997 ---------------------------------------------- 10-7/8% Senior Deferred Coupon Notes ("10-7/8% Notes") (a) $ - $ 194,959,000 12-3/4% Series A Senior Deferred Coupon Notes ("12-3/4% Notes") (b) 236,935,000 209,387,000 11-1/2% Series B Senior Deferred Coupon Notes ("11-1/2% Notes") (c) 831,976,000 743,961,000 10% Series B Senior Notes ("10% Notes") (d) 400,000,000 400,000,000 9-1/2% Senior Sterling Notes, less unamortized discount of $639,000 ("Sterling Senior Notes") (e) 206,800,000 - 10-3/4% Senior Deferred Coupon Sterling Notes ("Sterling Deferred Coupon Notes") (e) 317,511,000 - 9-3/4% Senior Deferred Coupon Notes ("9-3/4% Notes") (e) 865,880,000 - 11-1/2% Senior Notes ("11-1/2% Notes") (f) 625,000,000 - 12-3/8% Senior Deferred Coupon Notes ("12-3/8 Notes") (f) 254,718,000 - 7-1/4% Convertible Subordinated Notes ("7-1/4 Convertible Notes") (g) - 191,750,000 7% Convertible Subordinated Notes ("7% Convertible Notes") (h) 275,000,000 275,000,000 7% Convertible Subordinated Notes ("New Convertible Notes")(i) 600,000,000 - ---------------------------------------------- $4,613,820,000 $2,015,057,000 ==============================================
F-44 134 NTL Incorporated Schedule I-Condensed Financial Information of Registrant Notes to Condensed Financial Statements (continued) 2. Long-Term Debt (continued) (a) In October 1998, the Company redeemed the 10-7/8% Notes with an accreted value of $211 million for cash of $218 million. The Company recorded an extraordinary loss from the early extinguishment of the 10-7/8% Notes of approximately $12.1 million in 1998. (b) In April 1995, the Company issued $277,803,500 aggregate principal amount of 12-3/4% Senior Deferred Coupon Notes due 2005. The 12-3/4% Notes were issued at a price to the public of 53.995% or $150,000,000. (c) In January 1996, the Company issued $1,050,000,000 aggregate principal amount of 11-1/2% Series B Senior Deferred Coupon Notes due 2006. The 11-1/2% Notes were issued at a price of 57.155% of the aggregate principal amount at maturity or $600,127,500. (d) In February 1997, the Company issued $400,000,000 aggregate principal amount of 10% Series B Senior Notes due 2007. Interest in payable semiannually. (e) In March 1998, the Company issued (pound)125,000,000 aggregate principal amount of 9-1/2% Senior Notes due 2008 (the "Sterling Senior Notes"), (pound)300,000,000 aggregate principal amount of 10-3/4% Senior Deferred Coupon Notes due 2008 (the "Sterling Deferred Coupon Notes") and $1,300,000,000 aggregate principal amount of 9-3/4% Senior Deferred Coupon Notes due 2008 (the "9-3/4% Notes"). The Sterling Senior Notes, Sterling Deferred Coupon Notes and the 9-3/4% Notes were issued at 99.67% or (pound)124,588,000, 58.62% or (pound)175,860,000 and 61.724% or $802,412,000, respectively. The Sterling Senior Notes pay interest semiannually. (f) In November 1998, the Company issued $625,000,000 aggregate principal amount of 11-1/2% Senior Notes due 2008 (the "11-1/2% Notes") and $450,000,000 aggregate principal amount at maturity of 12-3/8% Senior Deferred Coupon Notes due 2008 (the "12-3/8% Notes"). The 11-1/2% Notes and the 12-3/8% Notes were issued at 100% or $625,000,000 and 55.505% or $249,773,000, respectively. Interest on the 11-1/2% Notes is payable semiannually. F-45 135 NTL Incorporated Schedule I-Condensed Financial Information of Registrant Notes to Condensed Financial Statements (continued) 2. Long-Term Debt (continued) (g) In March 1998, the Company called for redemption all of the 7-1/4% Convertible Subordinated Notes. The redemption date was April 20, 1998, at a redemption price of 105.08% of the principal amount plus accrued and unpaid interest through the date of redemption. The 7-1/4% Convertible Notes were convertible into common stock at a conversion price of $27.56 per share. In April 1998, all of the 7-1/4% Convertible Notes were converted into approximately 6,958,000 shares of the Company's common stock. (h) In June 1996, the Company issued $275,000,000 aggregate principal amount of 7% Convertible Subordinated Notes due 2008. Interest payments began on December 15, 1996 and interest is payable every six months thereafter. The 7% Convertible Notes mature on June 15, 2008. (i) In December 1998, the Company issued $600,000,000 aggregate principal amount of 7% Convertible Subordinated Notes due 2008. Interest is payable semiannually on June 15 and December 15 of each year, commencing June 15, 1999. The New Convertible Notes are convertible into shares of common stock prior to maturity at a conversion price of $61.25 per share, subject to adjustment. 3. Redeemable Preferred Stock In February 1997, the Company issued $100,000,000 of its 13% Senior Redeemable Exchangeable Preferred Stock (the "Redeemable Preferred Stock"). Dividends accrue at 13% per annum ($130 per share) and are payable quarterly in arrears as of May 15, 1997. Dividends, whether or not earned or declared, will accrue without interest until declared and paid, which declaration may be for all or part of the accrued dividends. Dividends accruing on or prior to February 15, 2004 may, at the option of the Company, be paid in cash, by the issuance of additional Redeemable Preferred Stock or in any combination of the foregoing. As of December 31, 1998, the Company has accrued $27,260,000 for dividends and has issued approximately 25,000 shares for $25,225,000 of such accrued dividends. The Redeemable Preferred Stock is subject to mandatory redemption on February 15, 2009. On any scheduled dividend payment date, the Company may, at its option, exchange all of the shares of Redeemable Preferred Stock then outstanding for the Company's 13% Subordinated Exchange Debentures due 2009. 4. Leases Leases for office space extend through 2004. Total rental expense for the years ended December 31, 1998, 1997 and 1996 under operating leases was $573,000, $503,000 and $220,000, respectively. F-46 136 NTL Incorporated Schedule I-Condensed Financial Information of Registrant Notes to Condensed Financial Statements (continued) Future minimum lease payments under noncancellable operating leases as of December 31, 1998 are as follows:
Year ended December 31: 1999 $724,000 2000 922,000 2001 922,000 2002 982,000 2003 982,000 Thereafter 655,000 ----------------------- $5,187,000 =======================
5. Other Gain In October 1997, following the U.S. District Court's decision to dismiss the Company's complaint against LeGroupe Videotron Ltee and its subsidiary, the Company entered into a Settlement Agreement dismissing the Company's complaint in exchange for a payment of $10,000,000. 6. Other No cash dividends were paid to the registrant by subsidiaries in any of the last three years. F-47 137 NTL Incorporated and Subsidiaries Schedule II--Valuation and Qualifying Accounts
Col. A Col. B Col. C Col. D Col. E - ----------------------------------------------------------------------------------------------------------------------- Additions (2) (1) Charged to Balance at Charged to Other Balance Beginning of Costs and Accounts-- Deductions at End Description Period Expenses Describe Describe of Period - ----------------------------------------------------------------------------------------------------------------------- Year ended December 31, 1998 Allowance for doubtful accounts $8,056,000 $27,282,000 $ - $3,137,000 (a) $38,475,000 ================================================================================== Year ended December 31, 1997 Allowance for doubtful accounts $3,870,000 $ 6,891,000 $ - $(2,705,000) (b) $8,056,000 ================================================================================== Year ended December 31, 1996: Allowance for doubtful accounts $767,000 $ 2,597,000 $ - $506,000 (c) $3,870,000 ==================================================================================
(a) Uncolletible accounts written-off, net of recoveries of $9,158,000, offset by $12,214,000 allowance for doubtful accounts as of acquisition dates of purchased subsidiaries and $81,000 foreign currency translation adjustments. (b) Uncollectible accounts written-off, net of recoveries of $2,604,000 and $101,000 foreign currency translation adjustments. (c) Uncollectible accounts written-off, net of recoveries of $645,000, offset by $804,000 allowance for doubtful accounts as of acquisition date of purchased subsidiary and $347,000 foreign currency translation adjustments. F-48 138 EX-3.1 2 RESTATED CERTIFICATE OF INCORPORATION 1 RESTATED CERTIFICATE OF INCORPORATION OF NTL INCORPORATED The undersigned, Richard J. Lubasch, certifies that he is the Senior Vice President, General Counsel and Secretary of NTL Incorporated, a corporation organized and existing under the laws of the State of Delaware (the "Corporation"), and does hereby further certify as follows: (1) The name of the Corporation is NTL Incorporated. (2) The name under which the Corporation was originally incorporated was "CCI/Insight CableTel, Inc.," and the original Certificate of Incorporation was filed with the Secretary of State of the State of Delaware on April 2, 1993. (3) This Restated Certificate of Incorporation was duly adopted in accordance with the provisions of Section 245 of the General Corporation Law of the State of Delaware (the "GCL"). (4) This Restated Certificate of Incorporation only restates and integrates and does not further amend the provisions of the Corporation's Certificate of Incorporation as heretofore amended, restated or supplemented, and there is no discrepancy between those provisions and the provisions of this Restated Certificate of Incorporation. (5) The text of the Restated Certificate of Incorporation of the Corporation is restated to read in its entirety as follows: FIRST: The name of the Corporation is NTL Incorporated (hereinafter the "Corporation"). SECOND: The address of the registered office of the Corporation in the State of Delaware is 9 Loockerman Street, City of Dover 19901, County of Kent. The name of its registered agent at that address is National Registered Agents, Inc. THIRD: The purpose of the Corporation is to engage in any lawful act or activity for which a corporation may be organized under the General Corporation Law of the State of Delaware as set forth in Title 8 of the Delaware Code (the "GCL"). FOURTH: A. Authorized Capital. The total number of shares of stock which the Corporation shall have the authority to issue is 410,000,000 shares, consisting of 400,000,000 shares of common stock, par value $0.01 per share (the "Common Stock"), and 10,000,000 shares of preferred stock, par value $0.01 per share (the "Preferred Stock"). B. Designation of Series. Shares of the Preferred Stock of the Corporation may be issued from time to time in one or more classes or series, each of which class or series shall have such distinctive designation or title as shall be fixed by the Board of Directors of the Corporation (the "Board of Directors") prior to the issuance of any shares thereof. Each such class or series of Preferred Stock shall have such voting powers, full or limited, or no voting powers, and such preferences and relative, participating, optional or other special rights and such qualifications, limitations or restrictions thereof, as shall be stated in such resolution or resolutions providing for the issue of such class or series of Preferred Stock as may be adopted from time to time by the Board of Directors prior to the issuance of any shares thereof pursuant to the authority hereby expressly vested in it, all in accordance with the laws of the State of Delaware. C. Series A Junior Participating Preferred Stock. Section 1. Designation and Amount. The shares of this series shall be designated as "Series A Junior Participating Preferred Stock" and the number of shares constituting such series shall be 1,000,000. Section 2. Dividends and Distributions. (1) Subject to the prior and superior rights of the holders of any shares of any series of Preferred Stock ranking prior and superior to the shares of Series A Junior Participating Preferred Stock with respect to dividends, the holders of shares of Series A Junior Participating Preferred Stock shall be entitled to receive, when, as and if declared by the Board of Directors out of funds legally available for the purpose, quarterly dividends payable in cash on the fifteenth day of March, June, September and December in each year (each such date being referred to herein as a "Quarterly Dividend Payment Date"), commencing on the first Quarterly Dividend Payment Date after the first issuance of a share or fraction of a share of Series A Junior Participating Preferred Stock, in an amount per share (rounded to the nearest cent) equal to the greater of (a) $.01 or (b) subject to the provision for adjustment hereinafter set forth, 100 times the aggregate per share amount of all cash dividends, and 100 times the aggregate per share amount (payable in kind) of all non-cash dividends or other distributions other than a dividend payable in shares of Common Stock or a subdivision of the outstanding shares of Common Stock (by reclassification or otherwise), declared on the Common Stock since the immediately preceding Quarterly Dividend Payment Date, or, with respect to the first Quarterly Dividend Payment Date, since the first issuance of any share or fraction of a share of Series A Junior Participating Preferred Stock. In the event the Corporation shall at any time after September 1, 1993 (the "Rights Declaration Date") (i) declare any dividend on Common Stock payable in shares of Common Stock, (ii) subdivide the outstanding Common Stock, or (iii) combine the outstanding Common Stock into a smaller number of shares, then in each such case, the amount to which holders of shares of Series A Junior Participating Preferred Stock were entitled immediately prior to such event under clause (b) of the preceding sentence shall be adjusted by multiplying such amount by a fraction the numerator of which is the number of shares of Common Stock outstanding immediately after such event and the denominator of which is the number of shares of Common Stock that were outstanding immediately prior to such event. (2) The Corporation shall declare a dividend or distribution on the Series A Junior Participating Preferred Stock as provided in paragraph (A) above immediately after it declares a dividend or distribution on the Common Stock (other than a dividend payable in shares of Common Stock); provided that, in the event no dividend or distribution shall have been declared on the Common Stock during the period between any Quarterly Dividend Payment Date and the next subsequent Quarterly Dividend Payment Date, a dividend of $.01 per share on the Series A Junior Participating Preferred Stock shall nevertheless be payable on such subsequent Quarterly Dividend Payment Date. (3) Dividends shall begin to accrue and be cumulative on outstanding shares of Series A Junior Participating Preferred Stock from the Quarterly Dividend Payment Date next preceding the date of issue of such shares of Series A Junior Participating Preferred Stock, unless the date of issue of such shares is prior to the record date for the first Quarterly Dividend Payment Date, in which case dividends on such shares shall begin to accrue from the date of issue of such shares, or unless the date of issue is a Quarterly Dividend Payment Date or is a date after the record date for the determination of holders of shares of Series A Junior Participating Preferred Stock entitled to receive a quarterly dividend and before such Quarterly Dividend Payment Date, in either of which events such dividends shall begin to accrue and be cumulative from such Quarterly Dividend Payment Date. Accrued but unpaid dividends shall not bear interest. Dividends paid on the shares of Series A Junior Participating Preferred Stock in an amount less than the total amount of such dividends at the time accrued and payable on such shares shall be allocated pro rata on a share-by-share basis among all such shares at the time outstanding. The Board of Directors may fix a record date for the determination of holders of shares of Series A Junior Participating Preferred Stock entitled to receive payment of a dividend or distribution declared thereon, which record date shall be no more than 30 days prior to the date fixed for the payment thereof. Section 3. Voting Rights. The holders of shares of Series A Junior Participating Preferred Stock shall have the following voting rights: (1) Subject to the provisions for adjustment hereinafter set forth, each share of Series A Junior Participating Preferred Stock shall entitle the holder thereof to 100 votes on all matters submitted to a vote of the stockholders of the Corporation. In the event the Corporation shall at any time after the Rights Declaration Date (i) declare any dividend on Common Stock payable in shares of Common Stock, (ii) subdivide the outstanding Common Stock, or (iii) combine the outstanding Common Stock into a smaller number of shares, then in each such case the number of votes per share to which holders of shares of Series A Junior Participating Preferred Stock were entitled immediately prior to such event shall be adjusted by multiplying such number by a fraction the numerator of which is the number of shares of Common Stock outstanding immediately after such event and the denominator of which is the number of shares of Common Stock that were outstanding immediately prior to such event. (2) Except as otherwise provided herein or by law, the holders of shares of Series A Junior Participating Preferred Stock and the holders of shares of Common Stock shall vote together as one class on all matters submitted to a vote of stockholders of the Corporation. (3) (i) If at any time dividends on any Series A Junior Participating Preferred Stock shall be in arrears in an amount equal to six (6) quarterly dividends thereon, the occurrence of such contingency shall mark the beginning of a period (herein called a "default period") which shall extend until such time when all accrued and unpaid dividends for all previous quarterly dividend periods and for the current quarterly dividend period on all shares of Series A Junior Participating Preferred Stock then outstanding shall have been declared and paid or set apart for payment. During each default period, all holders of Preferred Stock (including holders of the Series A Junior Participating Preferred Stock) with dividends in arrears in an amount equal to six (6) quarterly dividends thereon, voting as a class, irrespective of series, shall have the right to elect two (2) Directors. (1) During any default period, such voting right of the holders of Series A Junior Participating Preferred Stock may be exercised initially at a special meeting called pursuant to subparagraph (iii) of this Section 3(C) or at any annual meeting of stockholders, and thereafter at annual meetings of stockholders, provided that neither such voting right nor the right of the holders of any other series of Preferred Stock, if any, to increase, in certain cases, the authorized number of Directors shall be exercised unless the holders of ten percent (10%) in number of shares of Preferred Stock outstanding shall be present in person or by proxy. The absence of a quorum of the holders of Common Stock shall not affect the exercise by the holders of Preferred Stock of such voting right. At any meeting at which the holders of Preferred Stock shall exercise such voting right initially during an existing default period, they shall have the right, voting as a class, to elect Directors to fill such vacancies, if any, in the Board of Directors as may then exist up to two (2) Directors or, if such right is exercised at an annual meeting, to elect two (2) Directors. If the number which may be so elected at any special meeting does not amount to the required number, the holders of the Preferred Stock shall have the right to make such increase in the number of Directors as shall be necessary to permit the election by them of the required number. After the holders of the Preferred Stock shall have exercised their right to elect Directors in any default period and during the continuance of such period, the number of Directors shall not be increased or decreased except by vote of the holders of Preferred Stock as herein provided or pursuant to the rights of any equity securities ranking senior to or pari passu with the Series A Junior Participating Preferred Stock. (2) Unless the holders of Preferred Stock shall, during an existing default period, have previously exercised their right to elect Directors, the Board of Directors may order, or any stockholder or stockholders owning in the aggregate not less than ten percent (10%) of the total number of shares of Preferred Stock outstanding, irrespective of series, may request, the calling of special meeting of the holders of Preferred Stock, which meeting shall thereupon be called by the President, a Vice-President or the Secretary of the Corporation. Notice of such meeting and of any annual meeting at which holders of Preferred Stock are entitled to vote pursuant to this paragraph (C) (iii) shall be given to each holder of record of Preferred Stock by mailing a copy of such notice to him at his last address as the same appears on the books of the Corporation. Such meeting shall be called for a time not earlier than 20 days and not later than 60 days after such order or request or in default of the calling of such meeting within 60 days after such order or request, such meeting may be called on similar notice by any stockholder or stockholders owning in the aggregate not less than ten percent (10%) of the total number of shares of Preferred Stock outstanding. Notwithstanding the provisions of this paragraph (C) (iii), no such special meeting shall be called during the period within 60 days immediately preceding the date fixed for the next annual meeting of the stockholders. (3) In any default period, the holders of Common Stock, and other classes of stock of the Corporation if applicable, shall continue to be entitled to elect the whole number of Directors until the holders of Preferred Stock shall have exercised their right to elect two (2) Directors voting as a class, after the exercise of which right (x) the Directors so elected by the holders of Preferred Stock shall continue in office until their successors shall have been elected by such holders or until the expiration of the default period, and (y) any vacancy in the Board of Directors may (except as provided in paragraph (C)(ii) of this Section 3) be filled by vote of a majority of the remaining Directors theretofore elected by the holders of the class of stock which elected the Director whose office shall have become vacant. References in this paragraph (C) to Directors elected by the holders of a particular class of stock shall include Directors elected by such Directors to fill vacancies as provided in clause (y) of the foregoing sentence. (4) Immediately upon the expiration of a default period, (x) the right of the holders of Preferred Stock as a class to elect Directors shall cease, (y) the term of any Directors elected by the holders of Preferred Stock as a class shall terminate, and (z) the number of Directors shall be such number as may be provided for in the certificate of incorporation or by-laws irrespective of any increase made pursuant to the provisions of paragraph (C)(ii) of this Section 3 (such number being subject, however, to change thereafter in any manner provided by law or in the certificate of incorporation or bylaws). Any vacancies in the Board of Directors effected by the provisions of clauses (y) and (z) in the preceding sentence may be filled by a majority of the remaining Directors. (4) Except as set forth herein, holders of Series A Junior Participating Preferred Stock shall have no special voting rights and their consent shall not be required (except to the extent they are entitled to vote with holders of Common Stock as set forth herein) for taking any corporate action. 2 Section 4. Certain Restrictions. (1) Whenever quarterly dividends or other dividends or distributions payable on the Series A Junior Participating Preferred Stock as provided in Section 2 are in arrears, thereafter and until all accrued and unpaid dividends and distributions, whether or not declared, on shares of Series A Junior Participating Preferred Stock outstanding shall have been paid in full, the Corporation shall not (i) declare or pay dividends on, make any other distributions on, or redeem or purchase or otherwise acquire for consideration any shares of stock ranking junior (either as to dividends or upon liquidation, dissolution or winding up) to the Series A Junior Participating Preferred Stock; (ii) declare or pay dividends on or make any other distributions on any shares of stock ranking on a parity (either as to dividends or upon liquidation, dissolution or winding up) with the Series A Junior Participating Preferred Stock, except dividends paid ratably on the Series A Junior Participating Preferred Stock and all such parity stock on which dividends are payable or in arrears in proportion to the total amounts to which the holders of all such shares are then entitled; (iii) redeem or purchase or otherwise acquire for consideration shares of any stock ranking on a parity (either as to dividends or upon liquidation, dissolution or winding up) with the Series A Junior Participating Preferred Stock, provided that the Corporation may at any time redeem, purchase or otherwise acquire shares of any such parity stock in exchange for shares of any stock of the Corporation ranking junior (either as to dividends or upon dissolution, liquidation or winding up) to the Series A Junior Participating Preferred Stock; (iv) purchase or otherwise acquire for consideration any shares of Series A Junior Participating Preferred Stock, or any shares of stock ranking on a parity with the Series A Junior Participating Preferred Stock, except in accordance with a purchase offer made in writing or by publication (as determined by the Board of Directors) to all holders of such shares upon such terms as the Board of Directors, after consideration of the respective annual dividend rates and other relative rights and preferences of the respective series and classes, shall determine in good faith will result in fair and equitable treatment among the respective series or classes. (2) The Corporation shall not permit any subsidiary of the Corporation to purchase or otherwise acquire for consideration any shares of stock of the Corporation unless the Corporation could, under paragraph (A) of this Section 4, purchase or otherwise acquire such shares at such time and in such manner. Section 5. Reacquired Shares. Any shares of Series A Junior Participating Preferred Stock purchased or otherwise acquired by the Corporation in any manner whatsoever shall be retired and cancelled promptly after the acquisition thereof. All such shares shall upon their cancellation become authorized but unissued shares of Preferred Stock and may be reissued as part of a new series of Preferred Stock to be created by resolution or resolutions of the Board of Directors, subject to the conditions and restrictions on issuance set forth herein. Section 6. Liquidation, Dissolution or Winding Up. (1) Upon any liquidation (voluntary or otherwise), dissolution or winding up of the Corporation, no distribution shall be made to the holders of shares of stock ranking junior (either as to dividends or upon liquidation, dissolution or winding up) to the Series A Junior Participating Preferred Stock unless, prior thereto, the holders of shares of Series A Junior Participating Preferred Stock shall have received $1 per share, plus an amount equal to accrued and unpaid dividends and distributions thereon, whether or not declared, to the date of such payment (the "Series A Liquidation Preference"). Following the payment of the full amount of the Series A Liquidation Preference, no additional distributions shall be made to the holders of shares of Series A Junior Participating Preferred Stock unless, prior thereto, the holders of shares of Common Stock shall have received an amount per share (the "Common Adjustment") equal to the quotient obtained by dividing (i) the Series A Liquidation Preference by (ii) 100 (as appropriately adjusted as set forth in subparagraph C below to reflect such event as stock splits, stock dividends and recapitalizations with respect to the Common Stock) (such number in clause (ii), the "Adjustment Number"). Following the payment of the full amount of the Series A Liquidation Preference and the Common Adjustment in respect of all outstanding shares of Series A Junior Participating Preferred Stock and Common Stock, respectively, holders of Series A Junior Participating Preferred Stock and holders of shares of Common Stock shall receive their ratable and proportionate share of the remaining assets to be distributed in the ratio of the Adjustment Number to 1 with respect to such Preferred Stock and Common Stock, on a per share basis, respectively. (2) In the event, however, that there are not sufficient assets available to permit payment in full of the Series A Liquidation Preference and the liquidation preferences of all other series of preferred stock, if any, which rank on a parity with the Series A Junior Participating Preferred Stock, then such remaining assets shall be distributed ratably to the holders of such parity shares in proportion to their respective liquidation preferences. In the event, however, that there are not sufficient assets available to permit payment in full of the Common Adjustment, then such remaining assets shall be distributed ratably to the holders of Common Stock. (3) In the event the Corporation shall at any time after the Rights Declaration Date (i) declare any dividend on Common Stock payable in shares of Common Stock, (ii) subdivide the outstanding Common Stock, or (iii) combine the outstanding Common Stock into a smaller number of shares, then in each such case the Adjustment Number in effect immediately prior to such event shall be adjusted by multiplying such Adjustment Number by a fraction the numerator of which is the number of shares of Common Stock outstanding immediately after such event and the denominator of which is the number of shares of Common Stock that were outstanding immediately prior to such event. Section 7. Consolidation, Merger, etc. In case the Corporation shall enter into any consolidation, merger, combination or other transaction in which the shares of Common Stock are exchanged for or changed into other stock or securities, cash/or any other property, then in any such case the shares of Series A Junior Participating Preferred Stock shall at the same time be similarly exchanged or changed in an amount per share (subject to the provision for adjustment hereinafter set forth) equal to 100 times the aggregate amount of stock, securities, cash and/or any other property (payable in kind) as the case may be, into which or for which each share of Common Stock is changed or exchanged. In the event the Corporation shall at any time after the Rights Declaration Date (i) declare any dividend on Common Stock payable in shares of Common Stock, (ii) subdivide the outstanding Common Stock, or (iii) combine the outstanding Common Stock into a smaller number of shares, then in each such case the amount set forth in the preceding sentence with respect to the exchange or change of shares of Series A Junior Participating Preferred Stock shall be adjusted by multiplying such amount by a fraction the numerator of which is the number of shares of Common Stock outstanding immediately after such event and the denominator of which is the number of shares of Common Stock that were outstanding immediately prior to such event. Section 8. No Redemption. The shares of Series A Junior Participating Preferred Stock shall not be redeemable. Section 9. Ranking. The Series A Junior Participating Preferred Stock shall rank junior to all other series of the Corporation's Preferred Stock as to the payment of dividends and the distribution of assets, unless the terms of any such series shall provide otherwise. Section 10. Amendment. The Restated Certificate of Incorporation of the Corporation shall not be further amended in any manner which would materially alter or change the powers, preferences or special rights of the Series A Junior Participating Preferred Stock so as to affect them adversely without the affirmative vote of the holders of a majority or more of the outstanding shares of Series A Junior Participating Preferred Stock, voting separately as a class. Section 11. Fractional Shares. Series A Junior Participating Preferred Stock may be issued in fractions of a share which shall entitle the holder, in proportion to such holder's fractional shares, to exercise voting rights, receive dividends, participate in distributions and to have the benefit of all other rights of holders of Series A Junior Participating Preferred Stock. D. 13% Senior Redeemable Exchangeable Preferred Stock and 13% Series B Senior Redeemable Exchangeable Preferred Stock. The powers, preferences and relative, participating, optional and other special rights, and the qualifications, limitations and restrictions, of the shares of preferred stock consisting of the series designated the "13% Senior Redeemable Exchangeable Preferred Stock" and the series designated the "13% Series B Senior Redeemable Exchangeable Preferred Stock" are as set forth in this Article FOURTH and in Exhibit A to this Restated Certificate of Incorporation. E. 9.90% Non-voting Mandatorily Redeemable Preferred Stock, Series A. The powers, preferences and relative, participating, optional and other special rights, and the qualifications, limitations and restrictions, of the shares of preferred stock designated the "9.90% Non-voting Mandatorily Redeemable Preferred Stock, Series A" are as set forth in this Article FOURTH and in Exhibit B to this Restated Certificate of Incorporation. F. 9.90% Non-voting Mandatorily Redeemable Preferred Stock, Series B. The powers, preferences and relative, participating, optional and other special rights, and the qualifications, limitations and restrictions, of the shares of preferred stock designated the "9.90% Non-voting Mandatorily Redeemable Preferred Stock, Series B" are as set forth in this Article FOURTH and in Exhibit C to this Restated Certificate of Incorporation. G. 5 1/4 Convertible Preferred Stock, Series A. The powers, preferences and relative, participating, optional and other special rights, and the qualifications, limitations and restrictions, of the shares of preferred stock designated the "5 1/4% Convertible Preferred Stock, Series A" are as set forth in this Article FOURTH and in Exhibit D to this Restated Certificate of Incorporation. H. 5 1/4% Convertible Preferred Stock, Series B. The powers, preferences and relative, participating, optional and other special rights, and the qualifications, limitations and restrictions, of the shares of preferred stock designated to the "5 1/4% Convertible Preferred Stock, Series B" are as set forth in this Article FOURTH and in Exhibit E to this Restated Certificate of Incorporation. FIFTH: The business and affairs of the Corporation shall be managed by or under the direction of the Board of Directors. The number of directors of the Corporation shall be as from time to time fixed by, or in the manner provided in, the By-laws of the Corporation. The directors shall be divided into three classes, designated Class I, Class II and Class III. Each class shall consist, as nearly as may be possible, of one-third of the total number of directors constituting the entire Board of Directors. The term of the initial Class I directors shall terminate on the date of the 1994 annual meeting of stockholders; the term of the initial Class II directors shall terminate on the date of the 1995 annual meeting of stockholders and the term of the initial Class III directors shall terminate on the date of the 1996 annual meeting of stockholders. At each annual meeting of stockholders beginning in 1994, successors to the class of directors whose term expires at that annual meeting shall be elected for a three-year term. If the number of directors is changed, any increase or decrease shall be apportioned among the classes so as to maintain the number of directors in each class as nearly equal as possible, and any additional directors of any class elected to fill a vacancy resulting from an increase in such class shall hold office for a term that shall coincide with the remaining term of that class, but in no case will a decrease in the number of directors shorten the term of any incumbent director. A director shall hold office until the annual meeting for the year in which his term expires and until his successor shall be elected and shall qualify, subject, however, to prior death, resignation, retirement, disqualification or removal from office. Any vacancy on the Board of Directors, howsoever resulting, may be filled by a majority of the directors then in office, even if less than a quorum, or by a sole remaining director. Any director elected to fill a vacancy shall hold office for a term that shall coincide with the term of the class to which such director shall have been elected. Notwithstanding the foregoing, whenever the holders of any one or more classes or series of Preferred Stock issued by the Corporation shall have the right, voting separately by class or series, to elect directors at an annual or special meeting of stockholders, the election, term of office, filling of vacancies and other features of such directorships shall be governed by the terms of this Certificate of Incorporation or the resolution or resolutions adopted by the Board of Directors pursuant to Article FOURTH applicable thereto, and such directors so elected shall not be divided into classes pursuant to this Article FIFTH unless expressly provided by such terms. SIXTH: Subject to the rights, if any, of the holders of shares of Preferred Stock then outstanding, any or all of the directors of the Corporation may be removed from office at any time, but only for cause and only by the affirmative vote of the holders of two-thirds (66 2/3%) of the outstanding shares of the Corporation then entitled to vote generally in the election of directors, considered for purposes of this Article SIXTH as one class. SEVENTH: Any action required or permitted to be taken at any annual or special meeting of stockholders may be taken only upon the vote of the stockholders at an annual or special meeting duly noticed and called, as provided in the By-laws of the Corporation, and may not be taken by a written consent of the stockholders pursuant to the GCL. EIGHTH: Special meetings of the stockholders of the Corporation for any purpose or purposes may be called at any time by the Board of Directors, the Chairman of the Board of Directors or the President. Special meetings of the stockholders of the Corporation may not be called by any other person or persons. NINTH: A. In addition to any affirmative vote required by law or this Certificate of Incorporation or the By-laws of the Corporation, and except as otherwise expressly provided in Section B of this Article NINTH, a Business Combination (as hereinafter defined) with, or proposed by or on behalf of, any Interested Stockholder (as hereinafter defined) or any Affiliate or Associate (as hereinafter defined) of any Interested Stockholder or any person who thereafter would be an Affiliate or Associate of such Interested Stockholder shall require the affirmative vote of not less than sixty-six and two-thirds percent (66-2/3%) of the votes entitled to be cast by the holders of all the then outstanding shares of Voting Stock (as hereinafter defined), voting together as a single class, excluding Voting Stock beneficially owned by any Interested Stockholder or any Affiliate or Associate of such Interested Stockholder. Such affirmative vote shall be required notwithstanding the fact that no vote may be required, or that a lesser percentage or separate class vote may be specified, by law or in any agreement with any national securities exchange or otherwise. B. The provisions of Section A of this Article NINTH shall not be applicable to any particular Business Combination, and such Business Combination shall require only such affirmative vote, if any, as is required by law or any other provision of this Certificate of Incorporation or the By-laws of the Corporation, if all of the conditions specified in either of the following Paragraphs 1 or 2 are met: 1. The Business Combination shall have been approved by a majority of the Continuing Directors (as hereinafter defined). 2. All of the following conditions shall have been met: a. the aggregate amount of the cash and the Fair Market Value (as hereinafter defined) as of the date of the consummation of the Business Combination of consideration other than cash to be received per share by holders of Common Stock in such Business Combination shall be at least equal to the highest amount determined under clauses (i) and (ii) below: (i) (if applicable) the highest per share price (including any brokerage commissions, transfer taxes and soliciting dealers' fees) paid by or on behalf of the Interested Stockholder for any share of Common Stock in connection with the acquisition by the Interested Stockholder of beneficial ownership of shares of Common Stock acquired by it (x) within the two-year period immediately prior to the first public announcement of the proposed Business Combination (the "Announcement Date") or (y) in the transaction in which it became an Interested Stockholder, whichever is higher, in either case as adjusted for any subsequent stock split, stock dividend, subdivision or reclassification with respect to the Common Stock; and (ii) the Fair Market Value per share of Common Stock on the Announcement Date or on the date on which the Interested Stockholder became an Interested Stockholder (the "Determination Date"), whichever is higher, as adjusted for any subsequent stock split, stock dividend, subdivision or reclassification with respect to the Common Stock. b. The aggregate amount of the cash and the Fair Market Value as of the date of the consummation of the Business Combination, of consideration other than cash to be received per share by holders of shares of any class or series of outstanding Capital Stock (as hereinafter defined), other than Common Stock, shall be at least equal to the highest amount determined under clauses (i), (ii) and (iii) below: (i) (if applicable) the highest per share price (including any brokerage commissions, transfer taxes and soliciting dealers' fees) paid by or on behalf of the Interested Stockholder for any share of such class or series of Capital Stock in connection with the acquisition by the Interested Stockholder of beneficial ownership of shares of such class or series of Capital Stock (x) within the two-year period immediately prior to the Announcement Date or (y) in the transaction in which it became an Interested Stockholder, whichever is higher, in either case as adjusted for any subsequent stock split, stock dividend, subdivision or reclassification with respect to such class or series of Capital Stock; (ii) the Fair Market Value per share of such class or series of Capital Stock on the Announcement Date or on the Determination Date, whichever is higher, as adjusted for any subsequent stock split, stock dividend, subdivision or reclassification with respect to such class or series of Capital Stock; and (iii) (if applicable) the highest preferential amount per share to which the holders of shares of such class or series of Capital Stock would be entitled in the event of any voluntary or involuntary liquidation, dissolution or winding up of the affairs of the Corporation regardless of whether the Business Combination to be consummated constitutes such an event. The provisions of this Paragraph 2 shall be required to be met with respect to every class or series of outstanding Capital Stock, whether or not the Interested Stockholder has previously acquired beneficial ownership of any shares of a particular class or series of Capital Stock. c. The consideration to be received by holders of a particular class or series of outstanding Capital Stock shall be in cash or in the same form as previously has been paid by or on behalf of the Interested Stockholder in connection with its direct or indirect acquisition of beneficial ownership of shares of such class or series of Capital Stock. If the consideration so paid for shares of any class or series of Capital Stock varied as to form, the form of consideration for such class or series of Capital Stock shall be either cash or the form used to acquire beneficial ownership of the largest number of shares of such class or series of Capital Stock previously acquired by the Interested Stockholder. d. After the Determination Date and prior to the consummation of such Business Combination: (i) except as approved by a majority of the Continuing Directors, there shall have been no failure to declare and pay at the regular date therefor any full quarterly dividends (whether or not cumulative) payable in accordance with the terms of any outstanding Capital Stock; (ii) there shall have been no reduction in the annual rate of dividends paid on the Common Stock (except as necessary to reflect any stock split, stock dividend or subdivision of the Common Stock), except as approved by a majority of the Continuing Directors; (iii) there shall have been an increase in the annual rate of dividends paid on the Common Stock as necessary to reflect any reclassification (including any reverse stock split), recapitalization, reorganization or any similar transaction that has the effect of reducing the number of outstanding shares of Common Stock, unless the failure so to increase such annual rate is approved by a majority of the Continuing Directors; and (iv) such Interested Stockholder shall not have become the beneficial owner of any additional shares of Capital Stock except as part of the transaction that result in such Interested Stockholder becoming an Interested Stockholder and except in a transaction that, after giving effect thereto, would not result in any increase in the Interested Stockholder's percentage beneficial ownership of any class or series of Capital Stock. e. A proxy or information statement describing the proposed Business Combination and complying with the requirements of the Securities Exchange Act of 1934, as amended, and the rules and regulations thereunder (the "Act") (or any subsequent provisions replacing such Act, rules or regulations) shall be mailed to all stockholders of the Corporation at least 30 days prior to the consummation of such Business Combination (whether or not such proxy or information statement is required to be mailed pursuant to such Act or subsequent provisions). The proxy or information statement shall contain on the first page thereof, in a prominent place, any statement as to the advisability (or inadvisability) of the Business Combination that the Continuing Directors, or any of them, may choose to make and, if deemed advisable by a majority of the Continuing Directors, an opinion of an investment banking firm selected by a majority of the Continuing Directors as to the fairness (or unfairness) of the terms of the Business Combination from a financial point of view to the holders of the outstanding shares of Capital Stock other than the Interested Stockholder and its Affiliates or Associates, such investment banking firm to be paid a reasonable fee for its services by the Corporation. f. Such Interested Stockholder shall not have made any major change in the Corporation's business or equity capital structure without the approval of a majority of the Continuing Directors. C. The following definitions shall apply with respect to this Article NINTH: 1. The term "Business Combination" shall mean: a. any merger or consolidation of the Corporation or any Subsidiary (as hereinafter defined) with (i) any Interested Stockholder or (ii) any other company (whether or not itself an Interested Stockholder) which is or after such merger or consolidation would be an Affiliate or Associate of an Interested Stockholder; or b. any sale, lease, exchange, mortgage, pledge, transfer or other disposition or security arrangement, investment, loan, advance, guarantee, agreement to purchase, agreement to pay, extension of credit, joint venture participation or other arrangement (in one transaction or a series of transactions) with or for the benefit of any Interested Stockholder or any Affiliate or Associate of any Interested Stockholder involving any assets, securities or commitments of the Corporation, any Subsidiary or any Interested Stockholder or any Affiliate or Associate of any Interested Stockholder (except for any arrangement, whether as employee, consultant or otherwise, other than as a director, pursuant to which any Interested Stockholder or any Affiliate or Associate thereof shall, directly or indirectly, have any control over or responsibility for the management of any aspect of the business or affairs of the Corporation, with respect to which arrangements the value tests set forth below shall not apply), together with all other such arrangements (including all contemplated future events), has an aggregate Fair Market Value and/or involves aggregate commitments of $5,000,000 or more or constitutes more than 5 percent of the book value of the total assets (in the case of transactions involving assets or commitments other than capital stock) or 5 percent of the stockholders' equity (in the case of transactions in capital stock) of the entity in question (the "Substantial Part"), as reflected in the most recent fiscal year-end consolidated balance sheet of such entity existing at the time the stockholders of the Corporation would be required to approve or authorize the Business Combination involving the assets, securities and/or commitments constituting any Substantial Part; or c. the adoption of any plan or proposal for the liquidation or dissolution of the Corporation or for any amendment to the Corporation's By-laws; or d. any reclassification of securities (including any reverse stock split), or recapitalization of the Corporation, or any merger or consolidation of the Corporation with any of its Subsidiaries or any other transaction (whether or not with or into or otherwise involving an Interested Stockholder) that has the effect, directly or indirectly, of increasing the proportionate share of any class or series of Capital Stock, or any securities convertible into Capital Stock or into equity securities of any Subsidiary, that is beneficially owned by any Interested Stockholder or any Affiliate or Associate of any Interested Stockholder; or e. any agreement, contract or other arrangement providing for any one or more of the actions specified in the foregoing clauses (a) to (d). 2. The term "Capital Stock" shall mean all capital stock of the Corporation authorized to be issued from time to time under Article FOURTH of this Certificate of Incorporation, and the term "Voting Stock" shall mean all Capital Stock which by its terms may be voted on all matters submitted to stockholders of the Corporation generally. 3. The term "person" shall mean any individual, firm, company or other entity and shall include any group comprised of any person and any other person with whom such person or any Affiliate or Associate of such person has any agreement, arrangement or understanding, directly or indirectly, for the purpose of acquiring, holding, voting or disposing of Capital Stock. 4. The term "Interested Stockholder" shall mean any person (other than the Corporation or any Subsidiary and other than any profit-sharing, employee stock ownership or other employee benefit plan of the Corporation or any Subsidiary or any trustee of or fiduciary with respect to any such plan when acting in such capacity who (a) is or has announced or publicly disclosed a plan or intention to become the beneficial owner of Voting Stock representing fifteen percent (15%) or more of the votes entitled to be cast by the holders of all then outstanding shares of Voting Stock; or (b) is an Affiliate or Associate of the Corporation and at any time within the two-year period immediately prior to the date in question was the beneficial owner of Voting Stock representing fifteen percent (15%) or more of the votes entitled to be cast by the holders of all then outstanding shares of Voting Stock. 5. A person shall be a "beneficial owner" of any Voting Stock: (a) which such person or any of its Affiliates or Associates beneficially owns, directly or indirectly; (b) which such person or any of its Affiliates or Associates has, directly or indirectly, (i) the right to acquire (whether such right is exercisable immediately or subject only to the passage of time), pursuant to any agreement, arrangement or understanding or upon the exercise of conversion rights, exchange rights, warrants or options, or otherwise, or (ii) the right to vote pursuant to any agreement, arrangement or understanding; or (c) which is beneficially owned, directly or indirectly, by any other person with which such person or any of its Affiliates or Associates has any agreement, arrangement or understanding for the purpose of acquiring, holding, voting or disposing of any shares of Capital Stock. For the purposes of determining whether a person is an Interested Stockholder pursuant to Paragraph 4 of this Section C, the number of shares of Capital Stock deemed to be outstanding shall include shares deemed beneficially owned by such person through applications of this Paragraph 5 of Section C, but shall not include any other shares of Capital Stock that may be issuable pursuant to an agreement, arrangement or understanding, or upon exercise of conversion rights, warrants or options, or otherwise. 6. The terms "Affiliate" or "Associate" shall have the respective meanings ascribed to such terms in Rule 12b-2 of the General Rules and Regulations under the Act, as in effect on April 2, 1993 (the term "registrant" in said Rule 12b-2 meaning in this case the Corporation). 7. "Subsidiary" means any company of which a majority of any class of equity security is beneficially owned by the Corporation; provided, however, that for the purposes of the definition of Interested Stockholder set forth in Paragraph 4 of this Section C, the term "Subsidiary" shall mean only a company of which a majority of each class of equity security is beneficially owned by the Corporation. 8. The term "Continuing Director" means any member of the Board of Directors of the Corporation, while such person is a member of the Board of Directors, who is not an Affiliate or Associate or representative of the Interested Stockholder and was a member of the Board of Directors prior to the time that the Interested Stockholder became an Interested Stockholder, and any successor of a Continuing Director while such successor is a member of the Board of Directors, who is not an Affiliate or Associate or representative of the Interested Stockholder and is recommended or elected to succeed the Continuing Director by a majority of Continuing Directors. 9. The term "Fair Market Value" means: (a) in the case of cash, the amount of such cash; (b) in the case of stock, the highest closing sale price during the 30-day period immediately preceding the date in question of a share of such stock on the Composite Tape for New York Stock Exchange-Listed Stocks, or, if such stock is not quoted on the Composite Tape, on the New York Stock Exchange, or, if such stock is not listed on such Exchange, on the principal United States securities exchange registered under the Act on which such stock is listed or, if such stock is not listed on any such exchange, the highest closing bid quotation with respect to a share of such stock during the 30-day period preceding the date in question on the National Association of Securities Dealers, Inc. Automated Quotations System, in the pink sheets of the National Quotation Bureau or any similar system then in use, or if no such quotations are available, the fair market value on the date in question of a share of such stock as determined by a majority of the Continuing Directors in good faith; and (c) in the case of property other than cash or stock, the fair market value of such property on the date in question as determined in good faith by a majority of the Continuing Directors. 10. In the event of any Business Combination in which the Corporation survives, the phrase "consideration other than cash to be received" as used in Paragraphs 2.a. and 2.b. of Section B of this Article NINTH shall include the shares of Common Stock and/or the shares of any other class or series of Capital Stock retained by the holders of such shares. D. A majority of the Continuing Directors shall have the power and duty to determine for the purpose of this Article NINTH, on the basis of information known to them after reasonable inquiry, all questions arising under this Article NINTH, including, without limitation, (a) whether a person is an Interested Stockholder, (b) the number of shares of Capital Stock or other securities beneficially owned by any person, (c) whether a person is an Affiliate or Associate of another, (d) whether a Proposed Action (as hereinafter defined) is with, or proposed by, or on behalf of an Interested Stockholder or an Affiliate or Associate of an Interested Stockholder, (e) whether the assets that are the subject of any Business Combination have, or the consideration to be received for the issuance or transfer of securities by the Corporation or any Subsidiary in any Business Combination has, an aggregate Fair Market Value of $5,000,000 or more, and (f) whether the assets or securities that are the subject of any Business Combination constitute a Substantial Part. Any such determination made in good faith shall be binding and conclusive on all parties. The good faith determination of a majority of the Continuing Directors on such matters shall be conclusive and binding for all purposes of this Article NINTH. E0 Nothing contained in this Article NINTH shall be construed to relieve any Interested Stockholder from any fiduciary obligation imposed by law. F0 The fact that any Business Combination complies with the provisions of Section B of this Article NINTH shall not be construed to impose any fiduciary duty, obligation or responsibility on the Board of Directors, or any member thereof, to approve such Business Combination or recommend its adoption or approval to the stockholders of the Corporation, nor shall such compliance limit, prohibit or otherwise restrict in any manner the Board of Directors, or any member thereof, with respect to evaluations of or actions and responses taken with respect to such Business Combination. G0 For the purposes of this Article NINTH, a Business Combination or any proposal to amend, repeal or adopt any provision of this Certificate of Incorporation inconsistent with this Article NINTH (collectively, "Proposed Action") is presumed to have been proposed by, or on behalf of, an Interested Stockholder or an Affiliate or Associate of an Interested Stockholder or a person who thereafter would become such if (1) after the Interested Stockholder became such, the Proposed Action is proposed following the election of any director of the Corporation who with respect to such Interested Stockholder, would not qualify to serve as a Continuing Director or (2) such Interested Stockholder, Affiliate, Associate or person votes for or consents to the adoption of any such Proposed Action, unless as to such Interested Stockholder, Affiliate, Associate or person a majority of the Continuing Directors makes a good faith determination that such Proposed Action is not proposed by or on behalf of such Interested Stockholder, Affiliate, Associate or person, based on information known to them after reasonable inquiry. H0 Notwithstanding any other provisions of this Certificate of Incorporation or the By-laws of the Corporation (and notwithstanding the fact that a lesser percentage or separate class vote may be specified by law, this Certificate of Incorporation or the By-laws of the Corporation), any proposal to amend, repeal or adopt any provision of this Certificate of Incorporation inconsistent with this Article NINTH which is proposed by or on behalf of an Interested Stockholder or an Affiliate or Associate of an Interested Stockholder shall require the affirmative vote of the holders of not less than sixty-six and two-thirds percent (66-2/3%) of the votes entitled to be cast by the holders of all the then outstanding shares of Voting Stock, voting together as a single class, excluding Voting Stock beneficially owned by such Interested Stockholder; provided, however, that this Section H shall not apply to, and such sixty-six and two-thirds percent (66-2/3%) vote shall not be required for, any amendment, repeal or adoption unanimously recommended by the Board of Directors if all of such directors are persons who would be eligible to serve as Continuing Directors within the meaning of Section C, Paragraph 8 of this Article NINTH. TENTH: No director of the Corporation shall be personally liable to the Corporation or its stockholders for monetary damages for any breach of fiduciary duty by such a director as a director. Notwithstanding the foregoing sentence, a director shall be liable to the extent provided by applicable law (i) for any breach of the director's duty of loyalty to the Corporation or its stockholders, (ii) for acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law, (iii) pursuant to Section 174 of the GCL or (iv) for any transaction from which the director derived an improper personal benefit. No amendment to or repeal to this Article TENTH shall apply to or have any effect on the liability or alleged liability of any director of the Corporation for or with respect to any acts or omissions of such director occurring prior to such amendment or repeal. ELEVENTH: In furtherance and not in limitation of the powers conferred by statute, the Board of Directors is expressly authorized to adopt, repeal, alter, amend or rescind the By-laws of the Corporation. In addition, the By-laws of the Corporation may be adopted, repealed, altered, amended, or rescinded by the affirmative vote of sixty-six and two-thirds percent (66-2/3%) of the outstanding stock of the Corporation entitled to vote thereon. TWELFTH: Notwithstanding anything contained in this Certificate of Incorporation to the contrary, the affirmative vote of the holders of at least sixty-six and two-thirds percent (66-2/3%) of the Voting Stock, voting together as a single class, shall be required to amend, repeal or adopt any provision inconsistent with Articles FIFTH, SEVENTH, EIGHTH, NINTH, TENTH, and ELEVENTH of this Certificate of Incorporation. THIRTEENTH: The Corporation reserves the right to repeal, alter, amend, or rescind any provision contained in this Restated Certificate of Incorporation, in the manner now or hereafter prescribed by statute, and all rights conferred on stockholders herein are granted subject to this reservation. IN WITNESS WHEREOF, NTL Incorporated has caused this Restated Certificate of Incorporation to be signed by Richard J. Lubasch, its Senior Vice President, General Counsel and Secretary, this 29th day of March, 1999. ___ NTL INCORPORATED /S/ Richard J. Lubasch By:___________________________________ Richard J. Lubasch Senior Vice President, General Counsel and Secretary 3 Exhibit A 13% SENIOR REDEEMABLE EXCHANGEABLE PREFERRED STOCK AND 13% SERIES B SENIOR REDEEMABLE EXCHANGEABLE PREFERRED STOCK a) Designation. There is hereby created out of the authorized and unissued shares of preferred stock of the Corporation a class of preferred stock consisting of two series, one designated as the "13% Senior Redeemable Exchangeable Preferred Stock" (the "Series A Preferred") and the other designated as the "13% Series B Senior Redeemable Exchangeable Preferred Stock" (the "Series B Pre ferred"). The number of shares constituting such class shall be 100,000 plus up to 150,000 shares issued in lieu of cash dividends, and are referred to as the "Preferred Stock." The liquidation preference of the Preferred Stock shall be $1,000.00 per share. b) Rank. The Preferred Stock shall, with respect to dividends and distributions upon liquidation, winding-up and dissolution of the Corporation, rank (i) senior to (a) all classes of Common Stock, (b) the Junior Preferred Stock, (c) the 5% Preferred Stock and (d) each other class of Capital Stock or series of preferred stock issued by the Corporation after the Issue Date the terms of which specifically provide that such class or series will rank junior to the Preferred Stock as to dividend distributions and distributions upon liquidation, winding-up and dissolution of the Corporation or junior to or on a parity with any class of common stock of the Corporation or which do not specify their rank (the securities described in this clause (i), collectively, "Junior Securities"); (ii) on a parity with each class of Capital Stock or series of preferred stock issued by the Corporation after the Issue Date the terms of which specifically provide that such class or series will rank on a parity with the Preferred Stock as to dividend distributions and distributions upon liquidation, winding-up and dissolution of the Corporation (the securities described in this clause (ii), collectively, "Parity Securities"); and (iii) junior to each other class of Capital Stock or other series of preferred stock issued by the Corporation after the Issue Date the terms of which specifically provide that such series will rank senior to the Preferred Stock as to dividend distributions and distributions upon liquidation, winding-up and dissolution of the Corporation (the securities described in this clause (iii), collectively, "Senior Securities"). c) Dividends. d) Beginning on the Issue Date, the Holders of the outstanding shares of Preferred Stock shall be entitled to receive, when, as and if declared by the Board of Directors, out of funds legally available therefor, dividends on the Preferred Stock at a rate equal to 13% per annum ($130 per share). Dividends will accrue from 4 the Issue Date and will be payable quarterly in arrears on February 15, May 15, August 15 and November 15 of each year (each, a "Dividend Payment Date"), commencing on May 15, 1997. Dividends, whether or not earned or declared, will accrue without interest until declared and paid, which declaration may be for all or part of the accrued dividends. Dividends accruing on or prior to February 15, 2004 may, at the option of the Corporation, be paid (i) in cash, (ii) by the issuance of such number of additional fully paid and nonassessable shares (including fractional shares) of Preferred Stock equal to the amount of such dividends then payable divided by $1,000 or (iii) in any combination of the foregoing. Each dividend shall be payable to the Holders of record as they appear on the stock books of the Corporation on such record date as may be fixed by the Board of Directors, which record date will not be less than 10 nor more than 60 days prior to the applicable Dividend Payment Date. Dividends shall cease to accrue in respect of the Preferred Stock on the Exchange Date or on the date of their earlier redemption or repurchase by the Corporation, unless the Corporation shall have failed to issue the appropriate aggregate principal amount of Subordinated Debentures in respect of the Preferred Stock on such Exchange Date or shall have failed to pay the relevant redemption or repurchase price on the date fixed for redemption or repurchase. All dividends paid with respect to shares of the Preferred Stock shall be paid pro rata to the Holders entitled thereto. e) No full dividends may be declared or paid or funds set apart for the payment of dividends on any Parity Securities for any period unless all accrued dividends have been or contemporaneously are declared and paid in full or declared and, if payable in cash, a sum in cash is set apart sufficient for such payment on the Preferred Stock. If all accrued dividends have not been so paid, the Preferred Stock shall share dividends pro rata with the Parity Securities based upon the relative liquidation preferences of the outstanding shares of the Preferred Stock and such Parity Securities. No dividends may be declared or paid, nor may funds be set aside for such payment, on Junior Securities, except dividends on Junior Securities which are paid in additional Junior Securities (other than Disqualified Capital Stock), and no Parity Securities or Junior Securities may be repurchased, redeemed or otherwise retired, nor may funds be set apart for such payment, if all accrued dividends have not been paid (or deemed to have been paid) on the Preferred Stock. f) In the event that (a) the Exchange Offer Registration State ment is not filed with the Commission on or prior to the 75th day following the Issue Date, (b) the Exchange Offer Registration Statement is not declared effective prior to the 120th day following the Issue Date, (c) the Registered Exchange Offer is not consummated on or prior to the 160th day following the Issue Date or (d) if the Corporation is obligated to file the Shelf Registration Statement under the Registration Rights Agreement and the Shelf Registration Statement is not declared effective on or prior to 160 days after the Issue Date (in each of cases (b), (c) and (d), as such period may be extended in accordance with the proviso of Section 2(a) of the Registration Rights Agreement) (each such event referred to in clauses (a) through (d) above, a "Registration Default"), dividends will accrue on the Preferred Stock (in addition to the stated dividends on the Preferred Stock) from and including the next day following each of (i) such 75-day period in the case of clause (a) above, (ii) such 120-day period in the case of clause (b) above, (iii) such 160-day period in the case of clause (c) above and (iv) such 160-day period in the case of clause (d) above (in each of cases (b), (c) and (d) as such period is extended, if applicable, in the manner aforesaid) (each such period referred to in clauses (i) through (iv) above, an "Accrual Period"), at a rate per annum equal to 0.50% of the liquidation preference of the Preferred Stock (determined daily). The amount of such additional dividends (the "Special Dividends") will increase by an additional 0.50% per annum with respect to each subsequent applicable Accrual Period until all Registration Defaults have been cured, up to a maximum of Special Dividends of 1.50% per annum of the liquidation preference (determined daily). In each case, such additional dividends (the "Special Dividends") will be payable quarterly in arrears each May 15, August 15, November 15 and February 15, commencing May 15, 1997, to Holders of record on the immediately preceding May 1, August 1, November 1 and February 1, respectively. In the event that a Shelf Registration Statement is declared effective pursuant to the Registration Rights Agreement, if the Corporation fails to keep the Shelf Registration Statement continuously effective for the period required by the Registration Rights Agreement, then from such time as the Shelf Registration is no longer effective until the earliest of (i) the date that the Shelf Registration Statement is again deemed effective, (ii) the date that is the third anniversary of the Issue Date or (iii) the date as of which all of the Transfer Restricted Securities are sold pursuant to the Shelf Registration Statement, Special Dividends shall accrue at a rate per annum equal to 0.50% of the liquidation preference of the Preferred Stock (1.00% thereof if the Shelf Registration Statement is no longer effective for 30 days or more) and shall be payable quarterly in arrears each May 15, August 15, November 15 and February 15, commencing May 15, 1997, to Holders of record on the immediately preceding May 1, August 1, November 1 and February 1, respectively. g) Nothing herein contained shall in any way or under any circumstances be construed or deemed to require the Board of Directors to declare, or the Corporation to pay or set apart for payment, any dividends on shares of the Preferred Stock at any time. In the event that the Corporation fails to pay dividends, the sole remedy available to Holders will be the election of directors as set forth in paragraph (f)(ii). h) Accrued dividends may be declared and paid at any time, without reference to any regular Dividend Payment Date, to Holders of record, not more than sixty (60) days prior to payment thereof, as may be fixed by the Board of Directors of the Corporation. i) Dividends payable on the Preferred Stock for any period less than a year shall be computed on the basis of a 360-day year of twelve 30-day months and the actual number of days elapsed in the period for which such dividends are payable. j) References in this Resolution to "dividends" include Special Dividends unless the context requires otherwise. k) Liquidation Preference. l) In the event of any voluntary or involuntary liquidation, dissolution or winding up of the affairs of the Corporation, the Holders of shares of Preferred Stock then outstanding shall be entitled to be paid out of the assets of the Corporation available for distribution to its stockholders, an amount in cash equal to the liquidation preference for each share outstanding, plus an amount in cash equal to accrued and unpaid dividends thereon, if any, to the date fixed for liquidation, dissolution or winding up (including an amount in cash equal to a prorated dividend for the period from the last Dividend Payment Date to the date fixed for liquidation, dissolution or winding up), before any distribution shall be made or any assets distributed to the holders of any of the Junior Securities including, without limitation, any Common Stock. Except as provided in the preceding sentence, Holders shall not be entitled to any distribution in the event of any liquidation, dissolution or winding up of the affairs of the Corporation. If the assets of the Corporation are not sufficient to pay in full the liquidation payments payable to the holders of outstanding shares of the Preferred Stock and all Parity Securities, then the holders of all such shares shall share equally and ratably in such distribution of assets of the Corporation in proportion to the full liquidation preference to which each is entitled. After payment in full of the liquidation preference to which Holders are entitled, such Holders will not be entitled to any further participation in any distribution of assets of the Corporation. m) For the purposes of this paragraph (d), neither the sale, conveyance, exchange or transfer (for cash, shares of stock, securities or other consideration) of all or substantially all of the property or assets of the Corporation nor the consolidation or merger of the Corporation with or into one or more entities shall be deemed to be a liquidation, dissolution or winding up of the affairs of the Corporation. n) Redemption. o) Optional Redemption. () The Corporation may, at the option of the Board of Directors, redeem in whole at any time or in part from time to time, in the manner provided for in paragraph (e)(iii) hereof, any or all of the shares of Preferred Stock, at the redemption prices (expressed as percentages of the liquidation preference thereof) set forth below plus all accrued and unpaid dividends (including an amount in cash equal to a prorated dividend for the period from the Dividend Payment Date immediately prior to the Redemption Date to the Redemption Date) (the "Optional Redemption Price") if redeemed during the 12-month period beginning February 15 of each of the years set forth below: 2002 106.500% - --------------------------------------------------------- - --------------------------------------------------------- 2003 104.333% - --------------------------------------------------------- - --------------------------------------------------------- 2004 102.167% - --------------------------------------------------------- - --------------------------------------------------------- 2005 and thereafter 100.000% p) Upon a Change of Control Call Event, the Corporation will have the option to redeem all (but not less than all) of the outstanding shares of Preferred Stock at a redemption price (the "Change of Control Call Price") equal to 100% of the liquidation preference thereof, plus the Applicable Premium, plus accrued and unpaid dividends to the date of repurchase; provided, however, no such redemption shall be consummated except contemporaneously with or after the merger, consolidation or business combination referred to in the definition of Change of Control Call Event. Notwithstanding anything to the contrary in paragraph (e)(iii), notice of any such redemption pursuant to this paragraph must be given no later than 90 days following the date upon which the Change of Control Call Event occurred (or no later than 10 days after the date on which a notice of a Change of Control Offer must be mailed pursuant to paragraph (h) if the events giving rise to the Change of Control Call Event also give rise to a Change of Control Triggering Event), and the purchase date must be within 30 days of the date of notice. q) In the event of a redemption pursuant to paragraph (e)(i)(A) or (B) hereof of only a portion of the then outstanding shares of the Preferred Stock, the Corporation shall effect such redemption on a pro rata basis according to the number of shares held by each Holder of the Preferred Stock, except that the Corporation may redeem such shares held by Holders of fewer than 10 shares (or all shares held by Holders who would hold less than 10 shares as a result of such redemption), as may be determined by the Corporation. No partial redemption of the Preferred Stock may be authorized or made unless prior thereto all accrued dividends thereon shall have been paid in cash or declared and a sum set apart for such payment. r) Mandatory Redemption. On February 15, 2009, the Corpora tion shall redeem, to the extent of funds legally available therefor, in the manner provided for in paragraph (e)(iii) hereof, all of the shares of the Preferred Stock then outstanding at a redemption price equal to 100% of the liquidation preference per share, plus an amount in cash equal to all accrued and unpaid dividends per share (including an amount equal to a prorated dividend for the period from the Dividend Payment Date immediately prior to the Redemption Date to the Redemption Date) (the "Mandatory Redemption Price"). s) Procedures for Redemption. () At least fifteen (15) days and not more than sixty (60) days prior to the date fixed for any redemption of the Preferred Stock, written notice (the "Redemption Notice") shall be given by first class mail, postage prepaid, to each Holder of record on the record date fixed for such redemption of the Preferred Stock at such Holder's address as it appears on the stock books of the Corporation; provided, however, that no failure to give such notice nor any deficiency therein shall affect the validity of the procedure for the redemption of any shares of Preferred Stock to be redeemed except as to the Holder or Holders to whom the Corporation has failed to give said notice or to whom such notice was defective. If any Preferred Stock is to be redeemed in part only, the Redemption Notice that relates to such Preferred Stock will state the number of shares thereof to be redeemed. Shares of Preferred Stock that have been issued and reacquired in any manner, including shares purchased or redeemed or exchanged, will (upon compliance with any applicable provisions of Delaware law) have the status of authorized but unissued shares of preferred stock of the Corporation undesignated as to series and may, with any and all other authorized but unissued shares of preferred stock of the Corporation, be designated or redesignated and issued or reissued, as the case may be, as part of any series of preferred stock of the Corporation, except that such shares may not be reissued or sold as shares of the Preferred Stock (other than in payment of dividends on the Preferred Stock). The Redemption Notice shall state: t) whether the redemption is pursuant to paragraph (e)(i)(A), (e)(i)(B) or (e)(ii) hereof; u) the Optional Redemption Price, the Change of Control Call Price or the Mandatory Redemption Price, as the case may be; v) whether all or less than all the outstanding shares of the Preferred Stock are to be redeemed and the total number of shares of the Preferred Stock being redeemed; w) the date fixed for redemption; x) that the Holder is to surrender to the Corporation, in the manner, at the place or places and at the price designated, such Holder's certificate or certificates representing the shares of Preferred Stock to be redeemed; and y) that dividends on the shares of the Preferred Stock to be redeemed shall cease to accrue on such Redemption Date unless the Corporation defaults in the payment of the Optional Redemption Price, the Change of Control Call Price or the Mandatory Redemption Price, as the case may be. z) Each Holder of shares of Preferred Stock shall surrender the certifi cate or certificates representing such shares to the Corporation, duly endorsed (or otherwise in proper form for transfer, as determined by the Corporation), in the manner and at the place designated in the Redemption Notice, and on the Redemption Date the full Optional Redemption Price, the Change of Control Call Price or the Mandatory Redemption Price, as the case may be, for such shares shall be payable in cash to the Person whose name appears on such certificate or certificates as the owner thereof, and each surrendered certificate shall be canceled and retired. In the event that less than all of the shares represented by any such certificate are redeemed, a new certificate shall be issued representing the unredeemed shares. aa) On the Redemption Date, unless the Corporation defaults in the payment in full of the applicable redemption price, dividends on the Preferred Stock called for redemption shall cease to accrue, and all rights of the Holders of redeemed shares shall terminate with respect thereto, other than the right to receive the Optional Redemption Price, the Change of Control Call Price or the Mandatory Redemption Price, as the case may be, without interest; provided, however, that if a notice of redemption shall have been given as provided in paragraph (iii)(A) above and the funds necessary for redemption (including an amount in respect of all dividends that will accrue to the Redemption Date) shall have been irrevocably deposited in trust for the equal and ratable benefit for the Holders of the shares to be redeemed, then, at the close of business on the day on which such funds are segregated and set aside, the Holders of the shares to be redeemed shall cease to be stockholders of the Corporation and shall be entitled only to receive the Optional Redemption Price, the Change of Control Call Price or the Mandatory Redemption Price, as the case may be, without interest. ab) Voting Rights. ac) The Holders of Preferred Stock, except as otherwise required under Delaware law or as set forth in this paragraph (f), shall not be entitled or permitted to vote on any matter required or permitted to be voted upon by the stockholders of the Corporation. ad) If (a) dividends on the Preferred Stock are in arrears and unpaid (after February 15, 2004, in cash) for six quarterly periods (whether or not consecutive), (b) the Corporation fails to effect a redemption of the Preferred Stock when required by, and in accordance with, paragraph (e)(ii) or (c) the Corporation fails to make an offer to purchase all of the outstanding shares of Preferred Stock following a Change of Control Triggering Event, if such offer to purchase is required by paragraph (h), or fails to purchase all of the shares of Preferred Stock validly tendered pursuant thereto (each such event described in clauses (a) through (c) above being referred to herein as a "Voting Rights Triggering Event"), then the number of directors constituting the Board of Directors of the Corporation will be increased by two and the holders of the majority of the then outstanding shares of Preferred Stock, voting separately as a class, will be entitled to elect the two additional directors. Such voting rights will continue until such time as, in the case of a default under clause (a), all accrued dividends on the Preferred Stock are paid in full and, in all other cases, any failure, breach or default referred to in clause (b) or (c) is remedied, at which time the term of any directors elected pursuant to the provisions of this paragraph shall immediately terminate. Any vacancy occurring in the office of a director elected by the Holders may be filled by the remaining director elected by such holders unless and until such vacancy shall be filled by such holders. Regardless of the number of Voting Rights Triggering Events, in no event shall the Holders have the right to elect and have serve more than two members of the Board of Directors of the Corporation at any one time. At any time after voting power to elect directors shall have become vested and be continuing in the Holders of shares of the Preferred Stock pursuant to this paragraph (f)(ii), or if vacancies shall exist in the offices of directors elected by the Holders of shares of the Preferred Stock, a proper officer of the Corporation may, and upon the written request of the Holders of record of at least 10% of the shares of Preferred Stock then outstanding addressed to the Secretary of the Corporation shall, call a special meeting of the Holders of Preferred Stock, for the purpose of electing the directors which such Holders are entitled to elect. If such meeting shall not be called by the proper officer of the Corporation within 20 days after personal service of said written request upon the Secretary of the Corporation, or within 20 days after mailing the same within the United States by certified mail, addressed to the Secretary of the Corporation at its principal executive offices, then the Holders of record of at least 20% of the outstanding shares of the Preferred Stock may designate in writing one of their number to call such meeting at the expense of the Corporation, and such meeting may be called by the Person so designated upon the notice required for the annual meetings of stockholders of the Corporation and shall be held at the place for holding the annual meetings of stockholders or such other place in the United States as shall be designated in such notice. Notwithstanding the foregoing, no such special meeting shall be called if any such request is received less than 30 days before the date fixed for the next ensuing annual or special meeting of stockholders of the Corporation. Any Holder of shares of the Preferred Stock so designated shall have, and the Corporation shall provide, access to the lists of Holders of shares of the Preferred Stock for purposes of calling a meeting pursuant to the provisions of this paragraph (f)(ii). ae) The Corporation shall not, without the affirmative vote or consent of Holders of a majority of the shares of Preferred Stock then outstanding, voting or consenting, as the case may be, separately as one class, given in person or by proxy, either in writing or by resolution adopted at an annual or special meeting, (x) create, authorize or issue any class of Senior Securities or Parity Securities or (y) amend the Certificate of Designation so as to affect adversely the specified rights, preferences, privileges or voting rights of holders of Preferred Stock or authorize the issuance of any additional shares of Preferred Stock (other than in payment of dividends on the Preferred Stock); provided, however, that the Corporation may, without the approval of any Holders, issue or have outstanding shares of Parity Securities (other than Disqualified Capital Stock) issued from time to time in exchange for, or all of the proceeds of which are used to redeem or repurchase, any or all of the shares of Preferred Stock. The Holders of a majority of the outstanding shares of Preferred Stock, voting or consenting, as the case may be, separately as one class, may waive compliance with any provision of the Certificate of Designation. Except as set forth in this paragraph (f)(iii), neither (a) the creation, authorization or issuance of any shares of Junior Securities, Parity Securities or Senior Securities, including the designation of a series thereof within the existing class of Preferred Stock, nor (b) the increase or decrease in the amount of authorized capital stock of any class, including any preferred stock, shall require the consent of any Holders or shall be deemed to affect adversely the rights, preferences, privileges or voting rights of shares of Preferred Stock. 5 af) Without the affirmative vote or consent of Holders of a majority of the issued and outstanding shares of Preferred Stock, voting or consenting, as the case may be, as one class, given in person or by proxy, either in writing or by resolution adopted at an annual or special meeting, the Corporation shall not, in a single transaction or series of related transactions, consolidate or merge with or into, or sell, assign, transfer, lease, convey or otherwise dispose of all or substantially all of its assets to, another Person or adopt a plan of liquidation unless: (A) either (1) the Corporation is the surviving or continuing Person or (2) the Person (if other than the Corporation) formed by such consolidation or into which the Corporation is merged or the Person that acquires by conveyance, transfer or lease the properties and assets of the Corporation as an entirety or substantially as an entirety or in the case of a plan of liquidation, the Person to which assets of the Corporation have been transferred, shall be a corporation, partnership or trust organized and existing under the laws of the United States or any State thereof or the District of Columbia; (B) the Preferred Stock shall be converted into or exchanged for and shall become shares of such successor, transferee or resulting Person, having in respect of such successor, transferee or resulting Person the same powers, preferences and relative, participating, optional or other special rights and the qualifications, limitations or restrictions thereon that the Preferred Stock had immediately prior to such transaction, and (C) the Corporation has delivered to the transfer agent for the Preferred Stock prior to the consummation of the proposed transaction an Officers' Certificate and an Opinion of Counsel, each stating that such consolidation, merger or transfer complies with the terms hereof and that all conditions precedent herein relating to such transaction have been satisfied. For purposes of the foregoing, the transfer (by lease, assignment, sale or otherwise, in a single transaction or series of related transactions) of all or substantially all of the properties or assets of one or more subsidiaries of the Corporation, the Capital Stock of which constitutes all or substantially all of the properties and assets of the Corporation shall be deemed to be the transfer of all or substantially all of the properties and assets of the Corporation. ag) On or prior to the Exchange Date, the Corporation shall not amend or modify the form of Indenture (except as expressly provided therein in respects of amendments without the consent of holders of Subordinated Debentures) without the affirmative vote or consent of Holders of at least a majority of the shares of Preferred Stock then outstanding, voting or consenting, as the case may be, as one class, given in person or by proxy, either in writing or by resolution adopted at an annual or special meeting. ah) In any case in which the Holders shall be entitled to vote as described herein or pursuant to Delaware law, each Holder shall be entitled to one vote for each share of Preferred Stock held by such Holder. ai) Exchange. aj) Requirements. On any Dividend Payment Date, the Corpora tion may, at its option, exchange the Preferred Stock, in whole but not in part, for the Subordinated Debentures; provided, however, that any such exchange may only be made if on or prior to the date of such exchange (i) the Corporation has paid all accrued dividends on the Preferred Stock (including the dividends payable on the Exchange Date) and there shall be no contractual impediment to such exchange; (ii) there shall be funds legally available sufficient therefor; (iii) the Indenture has been qualified under the Trust Indenture Act of 1939, as amended, if required at the time of such exchange for public indentures; and (iv) the Corporation shall have delivered an Officers' Certificate and an Opinion of Counsel to the effect that all conditions to be satisfied prior to such exchange have been satisfied. Holders of Preferred Stock so exchanged will be entitled to receive $1.00 in principal amount of Subordinated Debentures for each $1.00 of liquidation preference of Preferred Stock held by such holder at the time of exchange. In connection with any such exchange, dividends on shares of Preferred Stock exchanged which have accrued on or prior to February 15, 2004 which have not been paid as of the Exchange Date shall be paid, at the Corporation's option, in cash, in additional Subordinated Debentures in an equivalent principal amount of such accrued and unpaid dividends or in a combination of the foregoing. Dividends on any shares of Preferred Stock accruing after February 15, 2004 which have not been paid as of the Exchange Date must be paid in cash on the Exchange Date. On the Exchange Date, all dividends on the Preferred Stock will cease to accrue. Subordinated Debentures issued in exchange for Preferred Stock will be issued in principal amounts of $1,000 and integral multiples thereof to the extent possible, and will also be issued in principal amounts of less than $1,000 so that each holder of Preferred Stock will receive certificates representing the entire amount of Subordinated Debentures to which its shares of Preferred Stock entitle it; provided, however, that the Corporation may, at its option, pay cash in lieu of issuing a Subordinated Debenture in a principal amount less than $1,000. 6 ak) Procedures. The Corporation shall send by first-class mail, postage prepaid, to each Holder of record on the record date fixed for such exchange of Preferred Stock, at such Holder's address as the same appears on the stock books of the Corporation, written notice (the "Exchange Notice") of its intention to ex change the Preferred Stock for Subordinated Debentures at least 30 and not more than 60 days prior to the Exchange Date; provided, however, that no failure to give such notice nor any deficiency therein shall affect the validity of the procedure for the exchange of any shares of Preferred Stock to be exchanged except as to the Holder or Holders to whom the Corporation has failed to give said notice or to whom such notice was defective. Each Exchange Notice must state (i) the Exchange Date, (ii) the place or places where certificates for shares of Preferred Stock are to be surrendered for exchange into Subordinated Debentures, (iii) that dividends on the shares of Preferred Stock to be exchanged will cease to accrue on the Exchange Date whether or not certificates for shares of Preferred Stock are surrendered for exchange on such Exchange Date unless the Corporation shall default in the delivery of Subordinated Debentures and (iv) that interest on the Subordinated Debentures shall accrue from the Exchange Date whether or not certificates for shares of Preferred Stock are surrendered for exchange on such Exchange Date. al) On or before the Exchange Date, each Holder shall surrender the certificate or certificates representing such shares of Preferred Stock, in the manner and at the place designated in the Exchange Notice. The Corporation shall cause the Subordinated Debentures to be executed on the Exchange Date and, upon surrender in accordance with the Exchange Notice of the certificates for any shares of Preferred Stock so exchanged, duly endorsed (or otherwise in proper form for transfer, as determined by the Corporation), such shares shall be exchanged by the Corporation for Subordinated Debentures. The Series A Preferred shall be exchanged for Series A Debentures and the Series B Preferred shall be exchanged for Series B Debentures. The Corporation shall pay interest on the Subordinated Debentures at the rate and on the dates specified therein from the Exchange Date. am) If notice has been mailed as aforesaid, and if before the Exchange Date specified in such notice (1) the Indenture shall have been duly executed and delivered by the Corporation and the trustee thereunder and (2) all Subordinated Debentures necessary for such exchange shall have been duly executed by the Corporation and delivered to the trustee under the Indenture with irrevocable instructions to authenticate the Subordinated Debentures necessary for such exchange, then the rights of the Holders of Preferred Stock so exchanged as stockholders of the Corporation shall cease (except the right to receive Subordinated Debentures, an amount in cash equal to the amount of accrued and unpaid dividends to the Exchange Date and, if the Corporation so elects, cash in lieu of any Subordinated Debenture with a principal amount not an integral multiple of $1,000), and the Person or Persons entitled to receive the Subordinated Debentures issuable upon exchange shall be treated for all purposes as the registered holder or holders of such Subordinated Debentures as of the Exchange Date. an) No Exchange in Certain Cases. Notwithstanding the forego ing provisions of this paragraph (g), the Corporation shall not be entitled to exchange the Preferred Stock for Subordinated Debentures if such exchange, or any term or provision of the Indenture or the Subordinated Debentures, or the performance of the Corporation's obligations under the Indenture or the Subordinated Debentures, shall violate any applicable law or if, at the time of such exchange, the Corporation is insolvent or if it would be rendered insolvent by such exchange. ao) Change of Control Put. ap) In the event of a Change of Control Triggering Event, the Corporation shall notify each Holder in writing of such occurrence and shall make an offer to purchase (the "Change of Control Offer") such Holder's shares of Preferred Stock at a purchase price in cash equal to 101% of the liquidation preference thereof plus accrued and unpaid dividends per share (including an amount in cash equal to a prorated dividend for the period from the Dividend Payment Date immediately prior to the Change of Control Payment Date to the Change of Control Payment Date (as defined herein)). aq) Not later than 90 days following the date upon which the Change of Control Triggering Event occurred, the Corporation shall send, by first class mail, postage prepaid, a notice to each Holder of Preferred Stock at such Holder's last registered address with a copy to the Registrar, which notice shall govern the terms of the Change of Control Offer. The notice to the Holders shall contain all instructions and materials necessary to enable such Holders to tender Preferred Stock pursuant to the Change of Control Offer. Such notice shall state: ar) that a Change of Control has occurred, that the Change of Control Offer is being made pursuant to this paragraph (h) and that all Preferred Stock validly tendered and not withdrawn will be accepted for payment; as) the purchase price (including the amount of accumulated and unpaid dividends, if any) and the purchase date (which shall be no earlier than 30 days nor later than 60 days from the date such notice if mailed, other than as may be required by law) (the "Change of Control Payment Date"); provided, however, that there shall be no right of any Holder to require the Corporation to purchase such Holder's shares of Preferred Stock until the earlier of the date on which all of the Deferred Coupon Notes have been repaid or have matured; at) that any shares of Preferred Stock not tendered will continue to accrue dividends; au) that, unless the Corporation defaults in making payment therefor, any share of Preferred Stock accepted for payment pursuant to the Change of Control Offer shall cease to accrue dividends after the Change of Control Payment Date; av) that Holders electing to have any shares of Preferred Stock purchased pursuant to a Change of Control Offer will be required to surrender the certificate or certificates representing such shares, properly endorsed for transfer together with such customary documents as the Corporation and the transfer agent may reasonably require, in the manner and at the place specified in the notice prior to the close of business on the Business Day prior to the Change of Control Payment Date; aw) that Holders will be entitled to withdraw their election if the Corporation receives, not later than five Business Days prior to the Change of Control Payment Date, a telegram, telex, facsimile transmission or letter setting forth the name of the Holder, the number of shares of Preferred Stock the Holder delivered for purchase and a statement that such Holder is withdrawing his election to have such shares of Preferred Stock purchased; ax) that Holders whose shares of Preferred Stock are purchased only in part will be issued a new certificate representing the unpurchased shares of Preferred Stock; and ay) the circumstances and relevant facts regarding such Change of Control Triggering Event. az) Each Change of Control Offer shall remain open for at least 20 Business Days or such longer period as may be required by law. The Corporation shall comply with Rules 13e-4 and 14e-4 and 14e-1 under the Exchange Act and other provisions of state and federal securities laws and regulations, to the extent such laws and regulations are applicable to the repurchase of the Preferred Stock in connection with a Change of Control Offer. ba) On the Change of Control Payment Date the Corporation shall (A) accept for payment the shares of Preferred Stock validly tendered pursuant to the Change of Control Offer, (B) pay to the Holders of shares so accepted the purchase price therefor in cash and (C) cancel and retire each surrendered certificate. Unless the Corporation defaults in the payment for the shares of Preferred Stock tendered pursuant to the Change of Control Offer, dividends will cease to accrue with respect to the shares of Preferred Stock tendered and all rights of Holders of such tendered shares will terminate, except for the right to receive payment therefor, on the Change of Control Payment Date. bb) Notwithstanding the foregoing, prior to the mailing of the notice of a Change of Control Offer referred to above, the Corporation shall (i) within 60 days following a Change of Control Triggering Event, either (a) repay in full all indebtedness for borrowed money of the Corporation, and terminate all commitments, under the Potential Credit Facilities, in each case, to the extent required upon a change of control pursuant to the terms thereof (or offer to repay in full all such indebtedness and terminate all such commitments and repay all such indebtedness owed to each lender which has accepted such offer and terminate all such commitments of each such lender), or (b) obtain the requisite consents under the Potential Credit Facilities to permit the repurchase of the Preferred Stock as provided above and (ii) within 90 days following a Change of Control Triggering Event, purchase all Senior Notes (or permitted refinancings thereof) which it is required to purchase by reason of such change of control pursuant to the provisions of the indenture therefor. The Corporation shall first comply with the covenant described in the immediately preceding sentence before it shall be required to repurchase Preferred Stock pursuant to the provisions described above. bc) Conversion or Exchange. The Holders of shares of Preferred Stock shall not have any rights hereunder to convert such shares into or exchange such shares for shares of any other class or classes or of any other series of any class or classes of Capital Stock of the Corporation. bd) Preemptive Rights. No shares of Preferred Stock shall have any rights of preemption whatsoever as to any securities of the Corporation, or any warrants, rights or options issued or granted with respect thereto, regardless of how such securities or such warrants, rights or options may be designated, issued or granted. be) Reissuance of Preferred Stock. Shares of Preferred Stock that have been issued and reacquired in any manner, including shares purchased or redeemed or exchanged, shall (upon compliance with any applicable provisions of the laws of Delaware) have the status of authorized and unissued shares of Preferred Stock undesignated as to series and may be redesignated and reissued as part of any series of Preferred Stock, provided that any issuance of such shares as Preferred Stock must be in compliance with the terms hereof. bf) Business Day. If any payment, redemption, purchase or exchange shall be required by the terms hereof to be made on a day that is not a Business Day, such payment, redemption, purchase or exchange shall be made on the immediately succeeding Business Day. bg) Reports. Whether or not required by the rules and regulations of the Commission, so long as any Preferred Stock is outstanding, the Corporation will file with the Commission and furnish to the Holders of Preferred Stock all quarterly and annual financial information required to be contained in a filing with the Commission on Forms 10-Q and 10-K (or the equivalent thereof in the event the Corporation becomes a corporation organized under the laws of England and Wales), including a "Management's Discussion and Analysis of Results of Operations and Financial Condition" and, with respect to the annual information only, a report thereon by the Corporation's certified independent accountants, in each case, as required by the rules and regulations of the Commission as in effect on the Issue Date. bh) Definitions. As used in this Certificate of Designation, the following terms shall have the following meanings (with terms defined in the singular having comparable meanings when used in the plural and vice versa), unless the context otherwise requires: "Accrual Period" shall have the meaning ascribed to it in paragraph (c)(iii). "Applicable Premium" means, with respect to any share of Preferred Stock, the greater of (x) 1.0% of the liquidation preference thereof and (y) the excess, if any, of (a) the present value of dividends accruing until and including February 15, 2002 (assuming payment thereof in cash on the applicable Dividend Payment Date) and the liquidation preference and any applicable optional redemption premium therefor payable on such date for such share (in each case assuming payment thereof on February 15, 2002), computed using a discount rate equal to the Treasury Rate plus 100 basis points over (b) the sum of the liquidation preference of such share plus accrued and unpaid dividends to the redemption date. "Board of Directors" shall have the meaning ascribed to it in the first paragraph of this Resolution. "Board Resolution" means a copy of a resolution certified pursuant to an Officers' Certificate to have been duly adopted by the Board of Directors of the Corporation and to be in full force and effect, and delivered to the Holders. "Business Day" means any day except a Saturday, a Sunday, or any day on which banking institutions in New York, New York are required or authorized by law or other governmental action to be closed. "Capital Stock" means any and all shares, interests, participations or other equivalents (however designated) of capital stock of the Corporation. "Certificate of Incorporation" shall have the meaning ascribed to it in the first paragraph of this Resolution. "Change of Control" means (i) the sale, lease or transfer of all or substantially all of the assets of the Corporation to any "person" or "group" (within the meaning of Sections 13(d)(3) and 14(d)(2) of the Exchange Act or any successor provision to either of the foregoing, including any group acting for the purpose of acquiring, holding or disposing of securities within the meaning of Rule 13d-5(b)(1) under the Exchange Act) (other than any Permitted Holder), (ii) the approval by the requisite stockholders of the Corporation of a plan of liquidation or dissolution of the Corporation, (iii) any "person" or "group" (within the meaning of Sections 13(d) and 14(d)(2) of the Exchange Act or any successor provision to either of the foregoing, including any group acting for the purpose of acquiring, holding or disposing of securities within the meaning of Rule 13d-5(b)(1) under the Exchange Act), other than any Permitted Holder, becomes the "beneficial owner" (as defined in Rule 13d-3 under the Exchange Act) of more than 50% of the total voting power of all classes of the voting stock of the Corporation and/or warrants or options to acquire such voting stock, calculated on a fully diluted basis, unless, as a result of such transaction, the ultimate direct or indirect ownership of the Corporation is substantially the same immediately after such transaction as it was immediately prior to such transaction, or (iv) during any period of two consecutive years, individuals who at the beginning of such period constituted the Corporation's Board of Directors (together with any new directors whose election or appointment by such board or whose nomination for election by the shareholders of the Corporation was approved by a vote of a majority of the directors then still in office who were either directors at the beginning of such period or whose election or nomination for election was previously so approved) cease for any reason to constitute a majority of the Corporation's Board of Directors then in office. "Change of Control Call Event" means the entering by the Corpora tion into a binding agreement providing for a merger, consolidation or business combination of the Corporation with another corporation, association or other entity, which agreement provides that upon consummation thereof that the holders of the Common Stock will own less than 80% of the voting and economic power of the entity, if any, in which holders of the Common Stock will hold equity interests immediately following consummation of any such transaction. "Change of Control Call Price" shall have the meaning ascribed to it in paragraph (e)(ii)(B). "Change of Control Offer" shall have the meaning ascribed to it in paragraph (h)(i). "Change of Control Payment Date" shall have the meaning ascribed to it in paragraph (h)(ii)(B). "Change of Control Triggering Event" means the occurrence of both a Change of Control and a Ratings Decline. "Commission" means the Securities and Exchange Commission. "Common Stock" means any and all shares, interests or other participations in, and other equivalents (however designated and whether voting or non-voting) of, the Corporation's common stock, whether outstanding on the Issue Date or issued after the Issue Date, and includes, without limitation, all series and classes of such common stock. "Corporation" shall have the meaning ascribed to it in the first para graph of this Resolution. "Deferred Coupon Notes" means (i) the Corporation's 10_% Senior Deferred Coupon Notes Due 2003, (ii) the Corporation's 12 3/4% Senior Deferred Coupon Notes Due 2005 and (iii) the Corporation's 11 1/2% Senior Deferred Coupon Notes Due 2006. "Disqualified Capital Stock" means any Capital Stock which, by its terms (or by the terms of any security into which it is convertible or for which it is exchangeable), or upon the happening of any event, matures or is mandatorily redeemable, pursuant to a sinking fund obligation or otherwise, or redeemable at the option of the holder thereof, in whole or in part, on or prior to February 15, 2009. "Dividend Payment Date" shall have the meaning ascribed to it in paragraph (c)(i). "Exchange Act" means the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder. "Exchange Date" means the date of issuance of the Subordinated Debentures in accordance with paragraph (g) hereof. "Exchange Notice" shall have the meaning ascribed to it in paragraph (g)(ii) hereof. "Exchange Offer Registration Statement" shall have the meaning ascribed to it in the Registration Rights Agreement. "5% Preferred Stock" means the 5% Non-voting Convertible Pre ferred Stock, Series A, of the Corporation. "GAAP" means generally accepted accounting principles as in effect in the United States from time to time. "Holder" means a holder of shares of Preferred Stock as reflected in the stock books of the Corporation. "Indenture" means the indenture governing the Subordinated Deben tures to be entered into between the Corporation and The Chase Manhattan Bank, as trustee, on the Exchange Date, substantially in the form on file with the secretary of the Corporation, which form is available to each Holder without charge upon request. "Investment Grade" means BBB- or higher by S&P or Baa3 or higher by Moody's. In the event that the Corporation shall be permitted to select any other Rating Agency, the equivalent of such ratings of S&P and Moody's used by such other Rating Agency shall be used. 7 "Issue Date" means February 12, 1997, the date of original issuance of the Preferred Stock. "Junior Preferred Stock" means the 1,000,000 shares of Series A Junior Participating Preferred Stock designated and reserved for issuance in the Corporation's Certificate of Incorporation. "Junior Securities" shall have the meaning ascribed to it in paragraph (b) hereof. "Mandatory Redemption Price" shall have the meaning ascribed to it in paragraph (e)(ii) hereof. "Moody's" means Moody's Investors Service, Inc. and its successors. "Officers' Certificate" means a certificate signed by two officers or by an officer and either an Assistant Treasurer or an Assistant Secretary of the Corporation which certificate shall include a statement that, in the opinion of such signers all conditions precedent to be performed by the Corporation prior to the taking of any proposed action have been taken. In addition, such certificate shall include (i) a statement that the signatories have read the relevant covenant or condition, (ii) a brief statement of the nature and scope of such examination or investigation upon which the statements are based, (iii) a statement that, in the opinion of such signatories, they have made such examination or investigation as is reasonably necessary to express an informed opinion and (iv) a statement as to whether or not, in the opinion of the signatories, such relevant conditions or covenants have been complied with. "Opinion of Counsel" means an opinion of counsel that, in such counsel's opinion, all conditions precedent to be performed by the Corporation prior to the taking of any proposed action have been taken. Such opinion shall also include the statements called for in the second sentence under the definition of "Officers' Certificate." "Optional Redemption Price" shall have the meaning ascribed to it in paragraph (e)(i)(A) hereof. 8 "Parity Securities" shall have the meaning ascribed to it in paragraph (b) hereof. "Permitted Designee" means (i) a spouse or a child of a Permitted Holder, (ii) trusts for the benefit of a Permitted Holder or a spouse or child of a Permitted Holder, (iii) in the event of the death or incompetence of a Permitted Holder, his estate, heirs, executor, administrator, committee or other personal representative or (iv) any Person so long as a Permitted Holder owns at least 50% of the voting power of all classes of the voting stock of such Person. "Permitted Holders" means George S. Blumenthal, J. Barclay Knapp and their Permitted Designees. "Person" means an individual, partnership, corporation, unincorpo rated organization, trust or joint venture, or a governmental agency or political subdivision thereof. "Potential Credit Facilities" has the meaning ascribed to such term in Corporation's Offering Memorandum dated February 7, 1997 relating to the offering of the Senior Notes and the Preferred Stock. "Preferred Stock" shall have the meaning ascribed to it in paragraph (a) hereof. "Rating Agencies" means (i) S&P, (ii) Moody's and (iii) if S&P or Moody's or both shall not make a rating of the Securities publicly available, a nationally recognized securities rating agency or agencies, as the case may be, selected by the Corporation, which shall be substituted for S&P or Moody's or both, as the case may be. "Rating Category" means (i) with respect to S&P, any of the follow ing categories: BB, B, CCC, CC, C and D (or equivalent successor categories), (ii) with respect to Moody's, and of the following categories: Ba, B, Caa, Ca, C and D (or equivalent successor categories) and (iii) the equivalent of any such category of S&P or Moody's used by another Rating Agency. In determining whether the rating of the Securities has decreased by one or more gradations, gradations within Rating Categories (+ and - for S&P; 1, 2 and 3 for Moody's; or the equivalent gradations for another Rating Agency) shall be taken into account (e.g., with respect to S&P, a decline in a rating from BB to BB-, as well as from BB- to B+, will constitute a decrease of one gradation). "Rating Date" means that date which is 90 days prior to the earlier of (x) a Change of Control and (y) public notice of the occurrence of a Change of Control or of the intention by the Corporation or any Permitted Holder to effect a Change of Control. "Ratings Decline" means the occurrence of any of the following events on, or within six months after, the date of public notice of the occurrence of a Change of Control or of the intention of the Corporation or any person to effect a Change of Control (which period shall be extended so long as the rating of any of the Corporation's debt securities is under publicly announced consideration for possible downgrade by any of the Rating Agencies): (a) in the event that any of the Corporation's debt securities are rated by both of the Rating Agencies on the Rating Date as Investment Grade, the rating of such debt securities by either of the Rating Agencies shall be below Investment Grade, (b) in the event that any of the Corporation's debt securities are rated by either, but not both, of the Rating Agencies on the Rating Date as Investment Grade, the rating of such debt securities by both of the Rating Agencies shall be below Investment Grade, or (c) in the event any of the Corporation's debt securities are rated below Investment Grade by both of the Rating Agencies on the Rating Date, the rating of such debt securities by either Rating Agency shall be decreased by one or more gradations (including gradations within Rating Categories as well as between Rating Categories). "Redemption Date," with respect to any shares of Preferred Stock, means the date on which such shares of Preferred Stock are redeemed by the Corporation. "Redemption Notice" shall have the meaning ascribed to it in para graph (e)(iii) hereof. "Registered Exchange Offer" shall have the meaning ascribed to such term in the Registration Rights Agreement. "Registrar" means Continental Stock Transfer & Trust Company, as transfer agent and Registrar for the Preferred Stock. "Registration Defaults" shall have the meaning ascribed to it in paragraph (c)(iii). "Registration Rights Agreement" means the Registration Rights Agreement relating to the Preferred Stock and the Subordinated Debentures dated as of February 12, 1997 between the Corporation and Donaldson, Lufkin & Jenrette Securities Corporation, Chase Securities Inc. and Merrill Lynch, Pierce, Fenner & Smith Incorporated, a copy of which is available to each Holder without charge upon request from the secretary of the Corporation. "S&P" means Standard & Poor's Ratings Group and its successors. "Securities Act" means the Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder. "Senior Notes" means the 10% Senior Notes Due 2007 of the Corpo ration. "Senior Securities" shall have the meaning ascribed to it in paragraph (b) hereof. "Series A Debentures" means the 13% Subordinated Exchange Debentures Due 2009 issuable under the Indenture. "Series B Debentures" means the 13% Series B Subordinated Ex change Debentures Due 2009 issuable under the Indenture. "Series A Preferred" shall have the meaning ascribed to it in para graph (a) hereof. "Series B Preferred" shall have the meaning ascribed to it in para graph (a) hereof. 9 "Shelf Registration Statement" shall have the meaning ascribed to such term in the Registration Rights Agreement. "Special Dividends" shall have the meaning ascribed to it in para graph (c)(iii). "Subordinated Debentures" means the Series A Debentures and the Series B Debentures. "Transfer Agent" means Continental Stock Transfer & Trust Com pany, as Transfer Agent for the Preferred Stock. "Transfer Restricted Securities" shall have the meaning ascribed to it in the Registration Rights Agreement. "Treasury Rate" means the yield to maturity at the time of computa tion of United States Treasury securities with a constant maturity (as compiled and published in the most recent Federal Reserve Statistical Release H.15 (519) which has become publicly available at least two business days prior to the date fixed for redemption of the Preferred Stock (or, if such Statistical Release is no longer published, any publicly available source of similar data)) most nearly equal to the then remaining period to the date scheduled for the mandatory redemption of the Preferred Stock; provided, however, that if such period is not equal to the constant maturity of a United States Treasury security for which a weekly average yield is given, the Treasury Rate shall be obtained by linear interpolation (calculated to the nearest one-twelfth of a year) from the weekly average yields of United States Treasury securities for which such yields are given, except that if the period to the date scheduled for the mandatory redemption of the Preferred Stock is less than one year, the weekly average yield on actually traded United States Treasury securities adjusted to a constant maturity of one year shall be used. "Voting Rights Triggering Event" shall have the meaning ascribed to it in paragraph (f)(i) hereof. 0228255.01-New YorkS5A 10 11 Exhibit B 9.90% NON-VOTING MANDATORILY REDEEMABLE PREFERRED STOCK, SERIES A (1) Designation; Number of Shares. The designation of the series of Preferred Stock, par value $.01 per share, of the Company created hereby shall be "9.90% Non-voting Mandatorily Redeemable Preferred Stock, Series A" (including, in the case of any reclassification, recapitalization, or other change to such Preferred Stock or, in the case of a consolidation or merger of the Company with or into another Person affecting such Preferred Stock, such capital stock to which a holder of such Preferred Stock shall be entitled upon the occurrence of such event, the "Mandatorily Redeemable Preferred Stock"). The authorized number of shares of Mandatorily Redeemable Preferred Stock shall be 125,280, which number may from time to time be increased or decreased (but not below the number then outstanding). Each share of Mandatorily Redeemable Preferred Stock shall have a stated value of $1,000 (the "Stated Value"). Any shares of Mandatorily Redeemable Preferred Stock redeemed or otherwise acquired by the Company shall be retired and shall resume the status of authorized and unissued shares of Preferred Stock, without designation as to series, until such shares are once more designated as part of a particular series of Preferred Stock by the Board of Directors. (2) Certain Definitions. Unless the context otherwise requires, the terms defined in this paragraph (2) shall have, for all purposes of this Certificate of Designations, the meanings herein specified: "Applicable Price" shall mean the aggregate of (A) in the event of a Reorganization in which the holders of Common Stock receive cash, the amount of such cash receivable by the holder of one share of Common Stock (as such share is in effect immediately prior to the consummation of such Reorganization); and (B) in the event of a Reorganization in which the holders of Common Stock receive securities or other property which are traded on an established market (within the meaning of Treasury Regulation 1.1273-2(f)(1) of the Internal Revenue Code of 1986, as in effect on September 30, 1990), the average (or if there be more than one security or item of property the sum of the averages) of the daily Trading Prices of such securities and/or property receivable by the holder of one share of Common Stock (as such share is in effect immediately prior to such consummation) for the period of ten consecutive Trading Days ending on the Trading Day immediately preceding date of occurrence of the Reorganization, appropriately adjusted to take into account any stock dividend on such security or property, or any subdivision, split, combination, reclassification of such security or property that occurs or the "ex" date for which occurs on or prior to such date. B-1 12 "Average Market Price" on any Determination Date, shall mean the average of the daily Closing Prices for the period of 10 consecutive Trading Days, ending on the Trading Day immediately preceding such Determination Date, appropriately adjusted to take into account any stock dividend on the Common Stock or any subdivision, split, combination or reclassification of the Common Stock that occurs, or the date on which "ex-dividend" trading commences, during the period following the first Trading Day in such ten-Trading Day period to and including the Determination Date. "Board" shall mean the Board of Directors of the Company, and, unless the context indicates otherwise, shall also mean, to the extent permitted by law, any committee thereof authorized, with respect to any particular matter, to exercise the power of the Board of Directors of the Company with respect to such matter. "Business Day" shall mean any day other than a Saturday, Sunday or a day on which banking institutions in New York, New York and London, England are authorized to close or not obligated by law or executive order to open. "Closing Price" shall mean, on any day: (i) the average between the high and low reported sale price of a share of Common Stock on and as reported by the Nasdaq Stock Market's National Market on such day; (ii) if the primary trading market for the Common Stock on such day is not the Nasdaq Stock Market's National Market, then the closing sale price regular way on such day, or, in case no such sale takes place on such day, the average of the reported closing bid and asked prices regular way on such day, in either case as reported by the Nasdaq System, the National Quotations Bureau, Inc. or a compara ble service; (iii) if the Closing Price on such day is not available pursuant to one of the methods specified above, then the average of the bid and asked prices for the Common Stock on such day as furnished by any New York Stock Exchange member firm selected from time to time by the Board for that purpose; or (iv) if the Closing Price on such day is not available pursuant to the method specified in (iii) above, the determination of Closing Price shall be deter mined in good faith by the Board exercising its reasonable discretion. B-2 13 "Common Stock" shall mean the shares of common stock, par value $0.01 per share, of the Company, which term shall include, where appropriate, in the case of any reclassification, recapitalization or other change in the Common Stock, or in the case of a consolidation or merger of the Company with or into another Person affecting the Common Stock, such capital stock to which a holder of Com mon Stock shall be entitled upon the occurrence of such event. "Common Stock Dividend Amount" shall have the meaning set forth in paragraph (3) (c). "Convertible Preferred Stock" shall mean the series of Preferred Stock of the Company having the terms set forth in the draft of Convertible Preferred Stock terms attached hereto, as completed pursuant to paragraph (5) hereof. "Convertible Preferred Stock Issue Price" shall have the meaning set forth in paragraph (3)(d) and shall be computed pursuant to paragraph (5). "Convertible Securities" shall mean evidences of indebtedness or shares of stock which are, at the option of the holder hereof, convertible into or exchangeable for shares of Common Stock. "Current Market Price" on the Determination Date for any issuance of Options or Convertible Securities or any distribution in respect of which the Current Market Price is being calculated, shall mean the average of the daily Closing Prices of the Common Stock for the period of 10 consecutive Trading Days ending on the last full Trading Day before such Determination Date. "Determination Date" shall mean: (i) in the case of a dividend payment, the record date for such dividend payment, (ii) in the case of a redemption payment, the date of the notice of the Redemption Date and (iii) in the case of a Reorganization, the date the Reorganization occurs. "Exchange Act" shall mean the Securities Exchange Act of 1934, as amended from time to time, or any successor statute, and the rules and regulations promulgated thereunder. "Fixed Price", on any Determination Date with respect to the Convert ible Preferred Stock, shall have the meaning assigned to such term in the Certificate B-3 14 of Designations relating to, and setting forth the terms of, the Convertible Preferred Stock. "Issue Date" shall mean September 22, 1998. "JPPF" shall mean the Series A Junior Participating Preferred Stock of the Company issuable upon exercise of the Rights pursuant to the Rights Agree ment. "Junior Stock" shall mean: (i) each class or series of common stock of the Company, including, without limitation, the Common Stock; (ii) the JPPF issuable upon exercise of the Rights; (iii) any other class or series of capital stock of the Company hereafter created, other than (a) any class or series of Parity Stock (except to the extent provided under clause (iv) hereof) and (b) any class or series of Senior Stock, and (iv) any class or series of Senior Stock or Parity Stock to the extent that it ranks junior to the Mandatorily Redeemable Preferred Stock as to dividend rights, rights of redemption or rights on liquidation, as the case may be. For pur poses of clause (iii) above, a class or series of Senior Stock or Parity Stock shall rank junior to the Mandatorily Redeemable Preferred Stock as to dividend rights, rights of redemption or rights on liquidation if the holders of shares of Mandatorily Redeem able Preferred Stock shall be entitled to dividend payments, payments on redemption or payments of amounts distributable upon dissolution, liquidation or winding up of the Company, as the case may be, in preference or priority to the holders of shares of such class or series of Senior Stock or Parity Stock. "Liquidating Payment" shall mean an amount equal to the Liquidation Preference of a share of Mandatorily Redeemable Preferred Stock or, if less, the amount payable in respect of one share of Mandatorily Redeemable Preferred Stock pursuant to paragraph (8)(a) upon the voluntary or involuntary liquidation, dissolu tion or winding up of the affairs of the Company. B-4 15 "Liquidating Payment Date" shall mean the date on which the Company makes the aggregate Liquidating Payment to all holders of outstanding shares of Mandatorily Redeemable Preferred Stock. "Liquidation Preference" measured per share of the Mandatorily Redeemable Preferred Stock, shall mean an amount equal to (a) the Stated Value per share of Mandatorily Redeemable Preferred Stock, plus (b) for purposes of determin ing the amount payable pursuant to paragraph (8) only, an amount equal to all dividends accrued but unpaid on such share, whether or not such unpaid dividends have been declared or there are funds of the Company legally available for the payment of dividends, to the Liquidating Payment Date. "Mandatorily Redeemable Preferred Stock" shall have the meaning set forth in paragraph (1). "Mandatory Redemption Price" shall have the meaning set forth in paragraph (4)(b). "Option" shall mean any right, option or warrant entitling the holder thereof to subscribe for, purchase, or otherwise acquire Common Stock in the Company (other than the Rights). "Parity Stock" shall mean the Mandatorily Redeemable Preferred Stock and any class or series of capital stock, whether now existing or hereafter created, of the Company to the extent ranking on a parity basis with the Mandatorily Redeemable Preferred Stock as to dividend rights, rights of redemption or rights on liquidation. Capital stock of any class or series, whether now or existing or hereafter created, shall rank on a parity as to dividend, rights of redemption or rights on liquidation with the Mandatorily Redeemable Preferred Stock, whether or not the dividend rates, dividend payment dates, redemption or liquidation prices per share or sinking fund or mandatory redemption provision, if any, are different from those of the Mandatorily Redeemable Preferred Stock, if the holders of shares of such class or series shall be entitled to dividend payments, payments on redemption of payments of amounts distributable upon dissolution, liquidation or winding up of the Com pany, as the case may be, in proportion to their respective accumulated and accrued and unpaid dividends, redemption prices or liquidation prices, respectively, without preference or priority, one over the other, as between the holders of shares of such class or series and the holders of Mandatorily Redeemable Preferred Stock. No class or series of capital stock that ranks junior to the Mandatorily Redeemable Preferred Stock as to rights on liquidation shall rank or be deemed to rank on a parity basis B-5 16 with the Mandatorily Redeemable Preferred Stock as to dividend rights or rights of redemption. "Payment Record Date" shall have the meaning set forth in paragraph (13). "Person" shall mean any individual corporation, partnership, joint venture, association, joint stock company, limited liability company, trust, unincor porated organization, government or agency or political subdivision thereof, or other entity, whether acting in an individual, fiduciary or other capacity. "Preferred Stock Dividend Amount" shall have the meaning set forth in paragraph (3)(d). "Redemption Agent" shall have the meaning set forth under paragraph (4)(h). "Redemption Date" as to any share of Mandatorily Redeemable Preferred Stock, shall mean the date on which such share is redeemed by the Com pany pursuant to paragraph (4). "Redemption Notice" shall have the meaning set forth in paragraph (4)(e). "Redemption Price" shall have the meaning set forth in paragraph (4)(a). "Reorganization" shall mean any of the following events: (i) any consolidation or merger of the Company with another entity (other than a merger or consolidation in which the Company is the surviving or continuing corporation and in which the Common Stock outstanding immediately prior to the merger or consolidation remains unchanged), (ii) the sale or other transfer of all or substantially all of its assets to another entity. (iii) any reorganization or reclassification of the Common Stock or other equity securities of the Company, and B-6 17 (iv) any statutory exchange of any shares of capital stock of the Company with another corporation (other than a merger or consolidation in which the Company is the surviving or continuing corporation and in which the Common Stock outstanding immediately prior to the merger or consolidation remains un changed). "Reorganization Unit" means the kind or amount of securities, cash or other property receivable upon consummation of a Reorganization in substitution of or in exchange for a share of Common Stock as such share is in effect immediately prior to such consummation (provided that if the kind or amount of securities, cash or other property receivable upon consummation of such Reorganization is not the same with respect to each such share, then the kind and amount of securities, cash or other property which shall be deemed receivable upon consummation of such Reorganization with respect to each such share for purposes hereof shall be the kind and amount so receivable per share by a plurality of such shares). "Rights" means the rights issuable pursuant to the Rights Agreement. "Rights Agreement" means the rights agreement, dated as of October 13, 1993, between the Company and Continental Transfer and Trust Company, as rights agent. "Securities Act" shall mean the Securities Act of 1933, as amended from time to time, or any successor statute, and the rules and regulations promul gated thereunder. "Senior Stock" shall mean any class or series of capital stock of the Company hereafter created to the extent ranking prior to the Mandatorily Redeem able Preferred Stock as to dividend rights, rights of redemption or rights on liquida tion. Capital stock of any class or series shall rank prior to the Mandatorily Redeem able Preferred Stock as to dividend rights, rights of redemption or rights on liquida tion if the holders of shares of such class or series shall be entitled to dividend payments, payments on redemption or payments of amounts distributable upon dissolution, liquidation or winding up of the Company, as the case may be, in preference or priority to the holders of shares of Mandatorily Redeemable Preferred Stock. No class or series of capital stock than ranks on a parity basis with or junior to the Mandatorily Redeemable Preferred Stock as to rights on liquidation shall rank or be deemed to rank prior to the Mandatorily Redeemable Preferred Stock as to dividend rights or rights of redemption, notwithstanding that the dividend rate, dividend payment dates, sinking fund provisions, if any, or mandatory redemption B-7 18 provisions thereof are different from those of the Mandatorily Redeemable Preferred Stock. "Stated Value" shall have the meaning set forth in paragraph (1). "Trading Day" shall mean a day on which the Nasdaq Stock Market's National Market or, if different, the principal exchange on which the Common Stock is quoted or traded is each open for the transaction of business. "Trading Price" of a security or property for any day means the closing sale price regular way on such day, or, in case no such sale takes place on such day, the average of the reported closing bid and asked prices of such security or property on such day on the applicable established market on which such security or property is traded. (3) DIVIDENDS. (a) Payment. The holders of outstanding shares of Mandatorily Redeemable Preferred Stock shall be entitled to receive, when, as and if declared by the Board out of funds legally available therefor (without prejudice to paragraph (3)(b)), cumulative dividends, in preference to dividends on any Junior Stock, at the rate per annum of 9.90% of the Stated Value per share, rounded to the nearest cent. Such dividends shall accrue from the Issue Date and shall be payable on the date the Mandatorily Redeemable Preferred Stock is redeemed pursuant to paragraph (4). Dividends on the outstanding shares of Mandatorily Redeemable Preferred Stock will accrue on a daily basis (without interest or compounding) whether or not there are funds legally available for the payment of such dividends and whether or not such dividends are declared. Dividends will cease to accrue in respect of shares of Mandatorily Redeemable Preferred Stock on the date of their redemption. No interest, or sum of money in lieu of interest, shall be payable in respect of any accrued dividend payment. (b) Declaration and Manner of Payment of Dividends. Any divi dends may be paid, in the sole discretion of the Board: (i) in cash out of funds legally available therefor; (ii) through the delivery of shares of Common Stock; (iii) through the delivery of shares of Convertible Preferred Stock, or (iv) through any combination of the foregoing forms of consideration elected by the Board in its sole discretion. If any dividend declared by the Board is to be paid, in whole or in part, through the delivery of shares of Common Stock or Convertible Preferred Stock, B-8 19 each holder of Mandatorily Redeemable Preferred Stock shall receive the same proportion of cash and/or shares of Common Stock or Convertible Preferred Stock (except for cash paid in lieu of fractional shares) delivered in payment of such dividend to other holders of shares of Mandatorily Redeemable Preferred Stock. (c) Payment of Dividends by Delivery of Common Stock. If the Company elects to pay any dividend payment, in whole or in part, by delivery of shares of Common Stock, the amount of such dividend payment to be paid per share of Mandatorily Redeemable Preferred Stock in shares of Common Stock (the "Common Stock Dividend Amount") shall be paid through the delivery to the holders of record for such shares of Mandatorily Redeemable Preferred Stock on the record date for such dividend payment (which shall be not more than 10 days prior to the payment date) of a number of shares of Common Stock determined by dividing the Common Stock Dividend Amount by the Average Market Price. No fractional shares of Common Stock shall be delivered to a holder of shares of Mandatorily Redeemable Preferred Stock, but the Company shall instead pay a cash adjustment determined as provided in paragraph (9). (d) Payment of Dividends by Delivery of Convertible Preferred Stock. Subject to compliance with paragraph (5), if the Company elects to pay any dividend payment, in whole or in part, by delivery of shares of Convertible Preferred Stock, the amount of such dividend payment to be paid per share of Mandatorily Redeemable Preferred Stock in shares of Convertible Preferred Stock (the "Preferred Stock Dividend Amount") shall be paid through the delivery to the holders of record for such shares of Mandatorily Redeemable Preferred Stock on the record date for such dividend payment (which shall be not more than 10 days prior to the payment date) of a number of shares of Convertible Preferred Stock determined by dividing the Preferred Stock Dividend Amount by the issue price of the Convertible Preferred Stock as determined in accordance with paragraph (5) (the "Convertible Preferred Stock Issue Price"). No fractional shares of Convertible Preferred Stock shall be delivered to a holder of shares of Mandatorily Redeemable Preferred Stock, but the Company shall instead pay a cash adjustment determined as provided in paragraph (9). (e) Prohibitions on Cash Dividends. Notwithstanding anything contained in this Certificate to the contrary, but without effect on the accrual thereof, no cash dividends on shares of Mandatorily Redeemable Preferred Stock shall be declared by the Board or paid or set apart for payment by the Company at such time as the terms and provisions of any agreement of the Company, including, without limitation, any agreement, contract, indenture, bond, note, debenture, guarantee or B-9 20 other instrument relating to or evidencing its indebtedness, prohibits such declara tion, payment or setting apart for payment or provides that such declaration, payment or setting apart for payment would constitute a breach thereof or a default thereun der; provided, however, that nothing contained in this paragraph (e) shall alter, limit or restrict the Company's obligation to declare and pay accrued dividends, to the extent permitted by applicable law, through the delivery of shares of Common Stock or shares of Convertible Preferred Stock pursuant to paragraph (3)(b), whether permitted by any such agreement or not. (f) Pro Rata. All dividends paid with respect to the shares of Mandatorily Redeemable Preferred Stock shall be paid pro rata (as nearby as may be practicable) to the shareholders entitled thereto. (g) Priority. Payment of dividends to the holders of shares of Mandatorily Redeemable Preferred Stock shall be subject to the prior preferences and other rights of any Senior Stock and to the provisions of paragraph (7). (4) REDEMPTION. (a) Optional Redemption. At any time during the period beginning on the Issue Date until the Redemption Date, the Company shall have the right to redeem the outstanding shares of Mandatorily Redeemable Preferred Stock at a price equal to $1,000 per share, together with an amount equal to all dividends accrued but unpaid thereon to the date fixed for redemption (the "Redemption Price"). (b) Mandatory Redemption. All outstanding shares of Mandatorily Redeemable Preferred Stock shall be mandatorily redeemed by the Company out of funds legally available therefor on the date that is the tenth anniversary of Issue Date at a redemption price equal to $1,000 per share, plus an amount equal to all accrued and unpaid dividends per share (the "Mandatory Redemption Price"). (c) Early Mandatory Redemption. If the Company has not exercised its right to optionally redeem the Mandatorily Redeemable Preferred Stock by December 22, 1999, all outstanding shares of Mandatorily Redeemable Preferred Stock shall be mandatorily redeemed at the Mandatory Redemption Price. (d) Company's Right to Elect Manner of Payment of Redemption Price or Mandatory Redemption Price. The Company may effect the redemption of shares of Mandatorily Redeemable Preferred Stock at the Redemption Price or the Mandatory Redemption Price, in the sole discretion of the Board: (i) in cash out of B-10 21 funds legally available therefor, (ii) in exchange for and through the delivery of shares of Common Stock, (iii) subject to compliance with paragraph (5), in exchange for and through delivery of shares of Convertible Preferred Stock or (iv) through any combination of the foregoing forms of consideration elected by the Board in its sole discretion. (e) Notice of Redemption. In the event of an offer by the Company to redeem any shares of Mandatorily Redeemable Preferred Stock pursuant to paragraph (4)(a) or a redemption of the Mandatorily Redeemable Preferred Stock pursuant to paragraph (4)(b) or (4)(c), the Company shall provide notice of such offer to redeem or such redemption to holders of record of Mandatorily Redeemable Preferred Stock to be redeemed not less than 30 days (not less than 10 days if the Redemption Price or Mandatory Redemption Price is payable in cash or Common Stock) nor more than 60 days prior to the Redemption Date. Such notice (a "Re demption Notice") shall, subject to paragraph (4)(h)(z), be provided in accordance with paragraph (14); provided, however, that neither failure to give such notice nor any defect therein shall affect the validity of the proceedings for the redemption of any shares of Mandatorily Redeemable Preferred Stock to be redeemed. In addition to any information required by law, the Redemption Notice shall state, as appropriate, the following (and may contain such other informa tion as the Company deems advisable): (A) whether the redemption is pursuant to paragraph (4)(a), (4)(b) or (4)(c); (B) the Redemption Date; (C) the number of shares of Mandatorily Redeemable Preferred Stock to be redeemed and, if less than all the shares held by such holder are to be redeemed, the number of shares to be redeemed from such holder; (D) the Redemption Price or Mandatory Redemption Price and the form or forms of consideration that the Company has elected to pay and/or deliver upon such redemption and, if more than one form of consideration has been elected by the Company, the designated portions of the Redemption Price or Mandatory Redemption Price to be paid in each form of consideration so elected; B-11 22 (E) if the Company has elected to exchange and deliver shares of Common Stock in payment of the Redemption Price (or a designated portion thereof), the Company's computation of the number of shares of Common Stock exchangeable and deliver able as provided in paragraph (4)(f); (F) if the Company has elected to exchange and deliver shares of Convertible Preferred Stock in payment of the Redemption Price (or a designated portion thereof), a statement of the Convertible Preferred Stock Issue Price computed pursuant to paragraph (5); (G) the place or places in the United States or England and Wales where certificates for Mandatorily Redeemable Preferred Stock to be redeemed are to be surrendered for redemption; and (H) that dividends on the shares of Mandatorily Redeemable Preferred Stock to be redeemed shall cease to accrue on the Redemption Date (unless the Company defaults in making payment of the Redemption Price). (f) Redemption by Delivery of Common Stock. If the Company elects to pay, in whole or in part, the Redemption Price in respect of shares of Mandatorily Redeemable Preferred Stock in exchange for and through the delivery of shares of Common Stock, then the Company shall deliver to each holder of shares of Mandatorily Redeemable Preferred Stock to be redeemed on the Redemption Date a number of shares of Common Stock equal to the aggregate Redemption Price (or designated portion thereof) of such shares of Mandatorily Redeemable Preferred Stock divided by the Average Market Price. No fractional shares of Common Stock shall be delivered to a holder of shares of Mandatorily Redeemable Preferred Stock in payment of the Redemption Price, but the Company shall instead pay a cash adjustment determined as provided in paragraph (9). (g) Redemption by Delivery of Convertible Preferred Stock. If the Company elects to pay, in whole or in part, the Redemption Price in respect of shares of Mandatorily Redeemable Preferred Stock in exchange for and through the delivery of shares of Convertible Preferred Stock, then the Company shall deliver to each holder of shares of Mandatorily Redeemable Preferred Stock to be redeemed on the Redemption Date a number of shares of Convertible Preferred Stock equal to the B-12 23 aggregate Redemption Price (or designated portion thereof) of such shares of Mandatorily Redeemable Preferred Stock divided by the Convertible Preferred Stock Issue Price. No fractional shares of Convertible Preferred Stock shall be delivered to a holder of shares of Mandatorily Redeemable Preferred Stock in payment of the Redemption Price, but the Company shall instead pay a cash adjustment as deter mined in paragraph (9). (h) Deposit of Funds and/or Shares. If on or before the Redemption Date: (x) the Company shall have deposited with any bank or trust company organized under the laws of the United States of America or any state thereof having capital, undivided profits and surplus aggregating at least $250 million (the "Re demption Agent"), cash (including cash for any adjustment in lieu of delivering fractional shares) and/or shares of Common Stock or Convertible Preferred Stock, as applicable, sufficient to pay in full the aggregate Redemption Price (calculated through the Redemption Date) for such shares of Mandatorily Redeemable Preferred Stock on such Redemption Date, (y) such cash and/or shares of Common Stock or Convertible Preferred Stock, as applicable, are readily available to, but only to, the holders of Mandatorily Redeemable Preferred Stock in satisfaction of the obligations of the Company with respect to the payment of the Redemption Price and (z) the Company shall prior to the Redemption Date have so notified each record holder of Mandatorily Redeemable Preferred Stock, which notice shall be given to each holder of Mandatorily Redeemable Preferred Stock by courier and shall identify the Redemption Agent, its address and telephone and telecopier numbers and the contact person(s) at the Redemption Agent responsible for administration of the deposit then, effective as of the close of business on such Redemption Date (and notwithstanding that any certificate therefor shall not have been surrendered for cancellation): (i) such shares of Mandatorily Redeemable Preferred Stock shall no longer be deemed outstanding but any shares of Common Stock or Convertible Preferred Stock so deposited in accordance with this paragraph (h) for which such Mandatorily Redeem able Preferred Stock was redeemed shall be deemed to be outstanding; (ii) the holders thereof shall cease to be holders of Mandatorily Redeemable Preferred Stock but shall be shown on the records of the Company as holders of the Common Stock or Convertible Preferred Stock so deposited in accordance with this paragraph (h) in redemption of such Mandatorily Redeemable Preferred Stock; (iii) dividends with respect to the shares so called for redemption shall cease to accrue on the Redemp tion Date but, subject to paragraph (4)(f), such holders shall be entitled to any dividends which shall thereafter accrue on, and shall be entitled to exercise all other rights associated with, any shares of Common Stock or Convertible Preferred Stock so deposited in accordance with this paragraph (h) in redemption of such Mandatorily Redeemable Preferred Stock; and (iv) all rights whatsoever with respect B-13 24 to the shares so called for redemption shall forthwith cease and terminate (except the right of such holders, upon the surrender of certificates evidencing the shares of Mandatorily Redeemable Preferred Stock so redeemed, to receive the cash and/or Common Stock or Convertible Preferred Stock, as applicable, payable or deliverable in payment of the Redemption Price therefor, and the applicable cash adjustment, if any, in lieu of fractional shares, without interest). Any cash and/or shares of Com mon Stock or Convertible Preferred Stock so deposited or set apart which shall remain unclaimed at the end of one year after the Redemption Date shall be returned or released to the Company, after which time the holders of shares of Mandatorily Redeemable Preferred Stock called for redemption on such Redemption Date that remain outstanding after such one-year period shall look only to the Company for the payment of the Redemption Price for such shares, without interest. A deposit made in compliance with the immediately preceding sentence shall, except to the extent released or returned to the Company, be deemed to constitute full payment for the shares of Mandatorily Redeemable Preferred Stock to be redeemed. Any interest accrued on funds so deposited shall be paid by the Redemption Agent to the Company from time to time. (i) Surrender of Certificates; Status. Each holder of shares of Mandatorily Redeemable Preferred Stock to be redeemed shall not be entitled to receive payment of the Redemption Price for such shares until such holder shall surrender the certificates evidencing such shares duly endorsed by, or accompanied by, an instrument of transfer (in form reasonably satisfactory to the Company) duly executed by, the holder or such holder's duly authorized attorney-in-fact or, if the shares issuable upon redemption are to be issued in the same name as the name in which such share of the Mandatorily Redeemable Preferred Stock is registered, in blank to the Redemption Agent (or to the Company if there is no Redemption Agent) at the place designated in the Redemption Notice for such redemption and shall thereupon be entitled to receive the consideration for such shares specified in the Redemption Notice in an aggregate amount equal to the Redemption Price for such shares. Holders of shares of Mandatorily Redeemable Preferred Stock that are redeemed on the Redemption Date shall not be entitled to receive dividends declared and paid on any shares of Common Stock or Convertible Preferred Stock exchange able and deliverable in payment of the Redemption Price (or designated portion thereof) for such shares of Mandatorily Redeemable Preferred Stock, and such shares of Common Stock or Convertible Preferred Stock shall not be entitled to vote, until such shares of Common Stock or Convertible Preferred Stock are delivered upon the surrender of the certificates representing such shares of Mandatorily Redeemable Preferred Stock. Upon such surrender, such holders shall be entitled to receive such B-14 25 dividends declared and paid subsequent to such Redemption Date and prior to the delivery. (j) Priority. The right of the Company to redeem shares of Mandatorily Redeemable Preferred Stock pursuant to this paragraph (4) shall be subject to the prior preferences and other rights of any Senior Stock and to the provisions of paragraph (7). (5) DETERMINATION OF CONVERTIBLE PREFERRED STOCK ISSUE PRICE. (a) If the Company elects to deliver Convertible Preferred Stock in payment of the Redemption Price or Mandatory Redemption Price, it must elect (by notice to the holders of the Mandatorily Redeemable Preferred Stock), at its discre tion, either to: (i) deliver to the holder a letter from an independent investment bank (the "Independent Investment Banker") to the holder to the effect that the bank believes on the terms and conditions set out in the letter that the Convertible Pre ferred Stock, when issued, can be distributed at not less than the Redemption Price of the Mandatorily Redeemable Preferred Stock to be redeemed by the delivery of such Convertible Preferred Stock (without giving effect to commissions); such letter shall be based on (A) the marketing efforts that the management of the Company is committed to make (with dates, schedules, locations and team being specified), (B) the documentation which the Company has committed to make available (such documentation to be specified) and (C) the gross spread as reasonably determined by the holder of the Mandatorily Redeemable Preferred Stock in accordance with normal market practice; or (ii) deliver to the holder a "bought" sale relating to the sale of the Convertible Preferred Stock which will entitle the holder to receive an amount equal to not less than the Redemption Price of the Mandatorily Redeemable Preferred Stock to be redeemed by the delivery of the Convertible Preferred Stock. (b) A notice pursuant to paragraph (a)(i) must be sent at least one month prior to the proposed issue date of the Convertible Preferred Stock. A notice pursuant to clause (a)(ii) must be sent at least one week prior to the proposed issue date of the Convertible Preferred Stock. B-15 26 (c) If the Company elects paragraph (a)(i), it must procure (a) that its management team will be available for a period of not less than 3 Business Days to make presentations to potential institutional and other purchasers of the Convertible Preferred Stock, such presentations to take place within 3 weeks of the dates speci fied in the letter from the independent investment bank, and (b) that the documenta tion which it committed to make available pursuant to paragraph (a)(i)(B) is avail able. (d) If the Company elects paragraph (a)(i), the Convertible Preferred Stock Issue Price will be the higher of the Redemption Price of the Mandatorily Redeemable Preferred Stock and the price at which the Convertible Preferred Stock can be placed with institutional investors at the end of the marketing period for such Convertible Preferred Stock (such price to be evidenced by a "bring-down" letter from the Independent Investment Banker), and the principal amount of Convertible Preferred Stock shall be reduced accordingly. The holders will (in case of a distribu tion under paragraph (a)(i)) pay for the gross spread or discount. All other related costs of the distribution will be paid by the Company. (e) If the Company elects clause (a)(ii), the Convertible Preferred Stock Issue Price shall be at the discretion of the Company. If the Company elects clause (a)(ii), the Company may also establish the Fixed Price so that it may be the higher of US$60 per share and 30% above the Average Market Price at the time of setting of the Fixed Price. (6) REORGANIZATIONS. (a) (i) Reorganizations. If there is to occur any Reorganization, and there is determinable for the entirety of each Reorganization Unit to be issued in connection with such Reorganization on an Applicable Price, then as a condition precedent to such Reorganization proper provision shall be made such that each share of Mandatorily Redeemable Preferred Stock, or each share of mandatorily redeem able preferred stock of the Company or its successor by merger or consolidation issuable to each holder of Mandatorily Redeemable Preferred Stock in exchange or substitution therefor (provided, however, that such share of mandatorily redeemable preferred stock has the same Stated Value, subject to the proviso in paragraph (6)(a)(ii), and substantially the same rights, benefits and privileges as a share of Mandatorily Redeemable Preferred Stock), shall be redeemable upon and from and after the occurrence of such Reorganization into, in lieu of Convertible Preferred Stock as provided herein (and without prejudice to the right of the Company or its B-16 27 successor to redeem convertible preferred stock for cash in accordance herewith), a convertible preferred stock of the successor entity convertible into Reorganization Units determined by dividing the Stated Value of such share by the Fixed Price of such successor entity on the date which is 15 months after the Issue Date. If there is to occur any Reorganization, and any Reorganization Unit to be issued in connection with such Reorganization does not have in whole or in part a determina ble Applicable Price, then prior to the occurrence of such Reorganization and on a basis such that the holders of Mandatorily Redeemable Preferred Stock shall be holders of Common Stock for all purposes of such Reorganization, the Company will redeem all Mandatorily Redeemable Preferred Stock in accordance herewith. The Company shall not effect any Reorganization unless prior to or simultaneously with the consummation thereof, the successor entity resulting from such consolidation or merger or the entity purchasing such assets or compelling such exchange, as the case may be, shall make provisions in its certificate or articles of incorporation or other constituent document to establish such right. The provisions of this paragraph (6)(a)(i) shall similarly apply to successive Reorganizations. (ii) Holding Company. Notwithstanding anything herein to the contrary, if the Company is reorganized such that the Common Stock is exchanged for the common stock of a new entity ("Holdco") whose common stock is traded on NASDAQ or another recognized securities exchange, then the Company, by notice to the holders of the Mandatorily Redeemable Preferred Stock but without any required consent on their part, may cause the exchange of this Mandatorily Redeemable Preferred Stock for mandatorily redeemable preferred stock of Holdco having the same terms and conditions as set forth herein, provided that where Holdco is not a Delaware company or where the Holdco share structure is not identical to that of the Company, the rights attaching to the mandatorily redeemable preferred stock of Holdco may be adjusted so as to comply with the local law of the country of incorpo ration of Holdco or the new share structure of Holdco subject to such rights effec tively giving the same economic rights as the Mandatorily Redeemable Preferred Stock (ignoring for these purposes any resultant change in the tax treatment for the holders of such stock). (iii) Other Adjustments. In the event that, as a result of an adjustment made pursuant to paragraph (6)(a), the holder of any Mandatorily Redeemable Preferred Stock thereafter surrendered for redemption shall become entitled to receive any shares of capital stock of the Company other than shares of its Convert ible Preferred Stock, thereafter the number of such shares issuable upon redemption of such security shall be subject to adjustment from time to time in a manner and on B-17 28 terms as nearly equivalent as practicable to the provisions with respect to the Convertible Preferred Stock contained in paragraph (5). (b) Notices of Corporate Action. If: (i) the Company or the Board shall approve any Reorganization to which the Company is a party and for which approval of any stockholders of the Company is required; or (ii) there shall be a voluntary or involuntary dissolution, liquidation or winding up of the Company; then, in each case, the Company shall cause to be given to the holders of shares of the Mandatorily Redeemable Preferred Stock in accordance with paragraph (14), as promptly as possible, but at least 10 days prior to the applicable date hereinafter specified, a notice stating the date on which the event giving rise to an adjustment of the type described in paragraph (6)(a), such a Reorganization, dissolution, liquidation or winding up may occur, as the case may be, is expected to become effective or occur, and, if earlier, the date as of which it is expected that holders of Common Stock of record shall be entitled to exchange their shares of Common Stock for stock of the Company, securities, cash or other property deliverable upon such Reorganiza tion, dissolution, liquidation or winding up. Failure to give or receive such notice or any defect therein shall not affect the legality or validity of the action or transactions described in sub-paragraphs (i) or (ii) above. (c) Listing of Common Stock. The Company will list the shares of Common Stock required to be delivered as payment of dividends or upon redemption or conversion of shares of the Mandatorily Redeemable Preferred Stock, prior to delivery, upon each national securities exchange, the Nasdaq Stock Market's Na tional Market or any similar system of automated dissemination of securities prices, if any, upon which the Common Stock is listed at the time of delivery. (d) Provision of Information. So long as any shares of Mandatorily Redeemable Preferred Stock remain outstanding, the Company undertakes to provide without charge to each record holder of such shares copies of each: (i) annual report of the Company on Form 10-K filed pursuant to Section 13(a) of the Exchange Act concurrently with such filing; (ii) quarterly reports of the Company on Form 10-Q and current report of the Company on Form 8-K filed pursuant to Section 13(a) or 15(d) or the Exchange Act concurrently with such filing; (iii) definitive proxy or information statement, form of proxy or other material of the Company filed pursu ant to Section 14(a) of the Exchange Act concurrently with such filing; and (iv) notice, press release and other information delivered to holders of Common Stock generally concurrently with such delivery. (7) LIMITATIONS ON DIVIDENDS AND REDEMPTIONS IN RESPECT OF COMPANY STOCK. (a) Limitations on Junior Stock Dividends. As long as any shares of Mandatorily Redeemable Preferred Stock are outstanding, no dividends shall be paid or declared in cash on Junior Stock, nor shall any other distributions be made on any Junior Stock, unless: (i) full dividends on all Parity Stock have been paid, or declared and set aside for payment, for all dividend periods terminating on or prior to the date of such Junior Stock dividend or distribution payment, to the extent such dividends are cumulative; (ii) the Company has paid or set aside all amounts, if any, then or therefore required to be paid or set aside for all purchase, retirement, and sinking funds, if any, for any Parity Stock; and (iii) the Company is not in default on any of its obligations to redeem any Parity Stock. (b) Limitations on Purchase of Junior Stock. As long as any shares of Mandatorily Redeemable Preferred Stock are outstanding, no shares of any Junior Stock may be purchased, redeemed, or otherwise acquired by the Company or any of its Subsidiaries (except in connection with a reclassification of any Junior Stock through the issuance of other Junior Stock and/or Convertible Securities for shares of Junior Stock and cash in lieu of fractional shares in connection therewith or the purchase, redemption or other acquisition of any Junior Stock from any wholly-owned subsidiary), nor may any funds be set aside or made available for any sinking fund for the purchase, redemption or other acquisition of any Junior Stock, unless: (i) full dividends on all Parity Stock have been paid, or declared and set aside for payment, for all dividend periods terminating on or prior to the date of such pur chase, redemption or acquisition, to the extent such dividends are cumulative; (ii) the Company has paid or set aside all amounts, if any, then or theretofore required to be paid or set aside for all purchases retirement, and sinking funds, if any, for any Parity Stock; and (iii) the Company is not in default on any, of its obligations to redeem any Parity Stock. (c) Junior Stock Dividends Otherwise Permitted. Subject to the provisions of paragraphs (7)(a) and 8(b), dividends or distributions (payable in cash, property or securities) may be declared and paid on the shares of any Junior Stock from time to time and any Junior Stock may be purchased, redeemed or otherwise acquired by the Company or any of its subsidiaries from time to time. In the event of B-18 29 the declaration and payment of any such dividends or distributions, the holders of such Junior Stock will be entitled, to the exclusion of holders of shares of Convert ible Preferred Stock, to share therein according to their respective interests. (d) Limitations on Parity Stock Dividends and Redemptions. As long as any share of Mandatorily Redeemable Preferred Stock is outstanding, dividends or other distributions may not be declared or paid on any Parity Stock, and the Com pany may not purchase, redeem or otherwise acquire any Parity Stock (except (x) from any wholly owned subsidiaries of the Company or (y) in connection with a mandatory conversion or exchange of such Parity Stock or a conversion or exchange of such Parity Stock at the option of the holder for securities other than Parity Stock or Senior Stock and cash in lieu of fractional shares in connection therewith) unless either: (a)(i) full dividends on all Parity Stock have been paid, or declared and set aside for payment, for all dividend periods terminating on or prior to the date of such Parity Stock dividend, distribution, purchase, re demption or other acquisition payment, to the extent such dividends are cumulative; (ii)the Company has paid or set aside all amounts, if any, then or theretofore required to be paid or act aside for all purchase, retirement, and sinking funds, if any, for any, Parity Stock; and (iii)the Company is not in default on any of its obligations to redeem any Parity Stock, or (b) with respect to the payment of dividends only, any such dividends are declared and paid pro rata so that the amounts of any dividends declared and paid per share on shares of Mandatorily Redeemable Preferred Stock and each other share of such Parity Stock will in all cases bear to each other the same ratio that accrued and unpaid dividends (including any accumulation with respect to unpaid dividends for prior dividend periods, if such dividends are cumulative) per share on shares of Mandatorily Redeemable Preferred Stock and such other share of Parity Stock bear to each other. (e) Certain Permitted Dividends and Redemptions. Nothing contained in this paragraph (7) shall prevent: (i) the payment of dividends or the making of distributions on any Junior Stock solely in shares of Junior Stock and/or Convertible Securities for shares of Junior Stock (together with a cash adjustment for B-19 30 fractional shares, if any) or the redemption, purchase or other acquisition of Junior Stock solely in exchange for (together with a cash adjustment for fractional shares, if any), or through the application of the proceeds from the sale of, shares of Junior Stock and/or Convertible Securities for shares of Junior Stock; (ii) the payment of dividends or the making of distributions on any class or series of Parity Stock solely in (together with a cash adjustment for fractional shares, if any) shares of Junior Stock and/or Convertible Securities for shares of Junior Stock or the redemption, exchange, purchase or other acquisition of say class or series of Parity Stock solely in exchange for (together with a cash adjustment for fractional shares, if any), or through the application of the proceeds from the sale of shares of Junior Stock and/or Convertible Securities for shares of Junior Stock or (iii) the conversion or exchange of Mandatorily Redeemable Preferred Stock into shares of Common Stock (together with a cash adjustment for fractional shares, if any) and other securities, assets or property, if any pursuant to the provisions of paragraphs (4), (5) or (6). (f) Waiver. The provisions of paragraphs (7)(a), (b) and (d) are for the sole benefit of the holders of Mandatorily Redeemable Preferred Stock and any other class or series of Parity Stock having the terms described therein and accord ingly, at any time when (i) there are no shares of any such other class or series of Parity Stock outstanding or if the holders of each such other class or series of Parity Stock have, by such vote or consent of the holders thereof as may be provided for in the instrument creating or evidencing such class or series, waived in whole or in part the benefit of such provisions (either generally or in the specific instance), and (ii) the holders of shares of Mandatorily Redeemable Preferred Stock shall have waived (as provided in paragraph (15)) in whole or in part the benefit of such provision (either generally or in the specific instance), then the provisions of paragraphs (7)(a), (b) and (d) shall not (to the extent waived, in the case of any partial waiver) restrict the payment of dividends or the making of distributions on, or the redemption, purchase or other acquisition of any shares of, Mandatorily Redeemable Preferred Stock, any other class or series of Parity Steel or any Junior Stock. (8) LIQUIDATION RIGHTS. (a) Payment of Liquidation Preference. If there is any liquidation, dissolution, or winding up of the Company, whether voluntary or involuntary, then the holders of shares of Mandatorily Redeemable Preferred Stock then outstanding, after payment, or provision for payment of the debts and other liabilities of the Company and the payment or provision for payment of any distribution on any shares of Senior Stock, and before any distribution to the holders of Junior Stock, shall be entitled to be paid out of the assets of the Company available for distribution B-20 31 to its stockholders an amount per share of Mandatorily Redeemable Preferred Stock in cash equal to the Liquidation Preference. If the assets of the Company available for distribution to the holders of the shares of Mandatorily Redeemable Preferred Stock upon any dissolution, liquidation or winding up of the Company shall be insufficient to pay in full the Liquidation Preference payable to the holders of outstanding shares of Mandatorily Redeemable Preferred Stock and the liquidation preference payable to all other shares of Parity Stock (as set forth in the instrument or instruments creating such Parity Stock), then the holders of shares of Mandatorily Redeemable Preferred Stock and of all other shares of Parity Stock shall share ratably in such distribution of assets in proportion to the amount which would be payable on such distribution if the amounts to which the holders of outstanding shares of Mandatorily Redeemable Preferred Stock and the holders of outstanding shares of such other Parity Stock were paid in full. Except as provided in this paragraph (8)(a), holders of Mandatorily Redeemable Preferred Stock shall not be entitled to any distribution in the event of the liquidation, dissolution or winding up of the affairs of the Company. (b) Certain Events Not Deemed Liquidation, Etc. For the purposes of this paragraph (8) a Reorganization shall not be deemed to be a voluntary of involuntary liquidation, dissolution or winding up of the Company. (9) NO FRACTIONAL SHARES. No fractional shares of Common Stock or Convertible Preferred Stock or scrip shall be issued in connection with the delivery of shares of Common Stock or Convertible Preferred Stock in payment, in whole or in part, of any dividend, Redemption Price or Liquidating Payment. Whether or not a fractional share would be delivered to a holder of Mandatorily Redeemable Preferred Stock shall be based upon, in the case of the payment, in whole or in part, of dividends, a Redemption Price of a Liquidating Payment pursuant to paragraphs (3), (4) or (8) , respectively, on the total number of shares of Mandatorily Redeemable Preferred Stock at the time held by such holder and the total number of shares of Common Stock or Convertible Preferred Stock, otherwise deliverable in respect thereof. Instead of the issuance of a fraction of a share of Common Stock or Convertible Preferred Stock or scrip, the Company shall pay instead an amount in cash (rounded to the nearest whole cent) equal to, in the case of Common Stock, the same fraction of the Closing Price of a share of preceding the Determination Date and, in the case of Convertible Preferred Stock, equal to the same fraction of the Convertible Preferred Stock Issue Price. B-21 32 (10) PAYMENT OF TAXES. The Company shall pay any and all documentary, stamp or similar transfer taxes payable in respect of the delivery of shares of Common Stock or Convertible Preferred Stock, pursuant to paragraphs (3), (4), (5), or (8), as applicable; provided, however, the Company shall not be required to pay any such tax that may be payable because any such shares are issued in a name other than the name of the holder of such Mandatorily Redeemable Preferred Stock. (11) NO PREEMPTIVE RIGHTS. The holders of shares of Mandatorily Redeemable Preferred Stock shall have no preemptive rights, including preemptive rights with respect to any shares of capital stock or other securities of the Company convertible into or carrying rights or options to purchase any such shares. (12) VOTING RIGHTS. (a) The holders of shares of Mandatorily Redeemable Preferred Stock shall have no Voting rights, except as otherwise required by law and except as set forth in this paragraph (12). When and if the holders of Mandatorily Redeemable Preferred Stock are entitled to vote by law or pursuant to this paragraph (12), each holder will be entitled to one vote per share. (b) Certain Changes to Charter. For as long as any shares of Mandatorily Redeemable Preferred Stock remain outstanding, the affirmative vote of the holders of at least a majority of such outstanding shares (voting separately as a class) given in Person or by proxy at an annual meeting or a special meeting called for such purpose, shall be necessary (i) before the Company may amend any of the provisions of this Certificate of Designations or the Restated Certificate of Incorpora tion of the Company which would alter or change the powers, preferences or special rights of the holders of the shares of Mandatorily Redeemable Preferred Stock then outstanding so as to affect them adversely; provided, however, that: (x) any such amendment that would authorize, create or increase the authorized amount of any additional shares of Junior Stock or shares of any other class or series of Parity Stock (whether or not already authorized); and (y) any such amendment that would increase the number of authorized shares of Preferred Stock of the Company (but not the number of authorized shares of Mandatorily Redeemable Preferred Stock) or that would decrease (but not below the number of shares, then outstanding) the number of authorized shares of Preferred Stock B-22 33 (but not the number of authorized shares of Mandatorily Redeemable Preferred Stock); shall be deemed not to adversely affect such powers preferences or rights and shall not be subject to approval by the holders of shares of Mandatorily Redeemable Preferred Stock; and (ii) before the Company may reclassify the outstanding shares of Mandatorily Redeemable Preferred Stock into another class or series of capital stock of the Company; provided further, however, that no consent described in clause (i) of this paragraph of the holders of the shares of Mandatorily Redeemable Pre ferred Stock shall be required if, at or prior to the time when such amendment is to take effect, provision is made for the redemption of all shares of Mandatorily Redeemable Preferred Stock at the time outstanding. (c) Creation of Senior Stock. No consent or vote of the holders of the shares of Mandatorily Redeemable Preferred Stock shall be necessary before the Company or the Board may authorize, create or issue any class or series of Senior Stock. (d) No Other Vote. Except as otherwise set forth in this paragraph (12) or as required by law, the holders of Mandatorily Redeemable Preferred Stock shall not have any relative, participating, optional or other special voting rights and powers and the consent or vote of such holders shall not be required for the taking of any corporate action by the Company or the Board. The provisions of this paragraph (12) are in lieu of, and not in addition to, any voting rights specified in the Restated Certificate of Incorporation as applicable to a series of Preferred Stock. (13) PAYMENTS. Payment of cash amounts due in respect of the Mandatorily Redeemable Preferred Stock will be paid to the holders of shares of Mandatorily Redeemable Preferred Stock (or, in the case of joint holders, the first-named) as appearing in the stock register of the Company for the Mandatorily Redeemable Preferred Stock as at opening of business (New York time) on the date specified in this Certificate for the purpose of determining the holders of Mandatorily Redeemable Preferred Stock entitled to such payments or, if no such date is speci fied, the fifteenth Business Day before the due date for such payment (the "Payment Record Date"). Payments of cash amounts due in respect of the Mandatorily Re deemable Preferred Stock will be made by a check in U.S. dollars drawn on a bank in New York and mailed to the address (as recorded is the stock register of the Com pany for the Mandatorily Redeemable Preferred Stock) of the holder thereof (or, in B-23 34 the case of joint holders, the first-named) not later than the relevant date for payment unless, prior to the relevant Payment Record Date, the Company has received from the holder thereof (or, in the case of joint holders, the first-named) written instruc tions for payment to be made by wire transfer to a specified designated account. If the due date for payment of any cash amount in respect of the Mandatorily Redeem able Preferred Stock is not a Business Day, then the holder thereof will not be entitled to payment thereof until the next following day which is a Business Day and, if such payment is to be made by transfer to a designated account rather than by check, a day on which commercial banks and foreign exchange markets settle, payments in U.S. dollars in the place where the relevant designated account is located. (14) NOTICES. Any notice or communication by a holder of Mandatorily Redeemable Preferred Stock to the Company is duly given if in writing and delivered in person or mailed by first-class mail to the Company at its address as set forth in its then most recently filed Form 10-K or 10-Q as the case may be. Any notice or communications to a holder of Mandatorily Redeem able Preferred Stock shall be mailed by first-class mail to his address shown on the stock register of the Company for the Mandatorily Redeemable Preferred Stock or, if there are more than 20 holders of record of the Mandatorily Redeemable Preferred Stock and the Company in its sole discretion so elects, in a leading daily newspaper having general circulation in New York (which is expected to be the Wall Street Journal) or England and Wales (which is expected to be The Financial Times). Failure to mail a notice or communication to one holder or any defect in it shall not affect its sufficiency with respect to other holders. If a notice or communication is given in the manner provided in this paragraph (14) within the time prescribed by this Certificate, it shall be conclusively presumed to have been duly given, whether or not the person entitled to such notice receives it. (15) WAIVER. Any provision of this Certificate of Designations which, for the benefit of the holders of Mandatorily Redeemable Preferred Stock, prohibits, limits or restricts actions by the Company may be waived in whole or in part, or the application of all or any part of such provision in any particular circum stance or generally may be waived, in each case with the consent of the holders of at least a majority of the number of shares of Mandatorily Redeemable Preferred Stock then outstanding, either in writing or by vote at a meeting called for such purpose at B-24 35 which the holders of Mandatorily Redeemable Preferred Stock shall vote as a separate class. (16) REGISTRATION AND NO TRANSFER. The Company will maintain at its principal executive office a register in which the Company will provide for the registration of shares of Mandatorily Redeemable Preferred Stock. The shares of Mandatorily Redeemable Preferred Stock are not transferrable, and any certificate representing shares of Mandatorily Redeemable Preferred Stock will be so legended. (17) EXCLUSION OF OTHER RIGHTS. Except as may otherwise be required by law, the shares of Mandatorily Redeemable Preferred Stock shall not have any designations, preferences, limitations or relative rights other than those specifically set forth in this Certificate of Designations. (18) SEVERABILITY OF PROVISIONS. Whenever possible, each provision of this Certificate of Designations shall be interpreted in a manner as to be effective and valid under applicable law, but if any provision hereof is held to be prohibited by or invalid under applicable law, such provision shall be ineffective only to the extent of such prohibition or invalidity, without invalidating or otherwise adversely affecting the remaining provisions hereof. If a court of competent jurisdic tion should determine that a provision hereof would be valid or enforceable if a period of time were extended or shortened or a particular percentage were increased or decreased, then such court may make such change as shall be necessary to render the provision in question effective and valid under applicable law. B-25 36 Draft of Convertible Preferred Stock CERTIFICATE OF DESIGNATIONS OF PREFERRED STOCK OF NTL INCORPORATED ----------------- PURSUANT TO SECTION 151(G) OF THE GENERAL CORPORATION LAW OF THE STATE OF DELAWARE ----------------- The undersigned, Senior Vice President, General Counsel and Secretary of NTL Incorporated, a Delaware corporation (the "Company"), HEREBY CERTIFIES that the Board of Directors, in accordance with Article IV, Section B of the Company's Restated Certificate of Incorporation and Section 151(g) of the Delaware General Corporation Law (the "DGCL"), has authorized the creation of the series of Preferred Stock hereafter provided for and has established the dividend, redemption, conversion and voting rights thereof and has adopted the following resolution, creating the following new series of the Company's Preferred Stock: "BE IT RESOLVED, that pursuant to authority expressly granted to the Board of Directors by the provisions of Article IV, Section B of the Restated Certificate of Incorporation of the Company and Section 151(g) of the DGCL, there is hereby created and authorized the issuance of a new series of the Company's Preferred Stock, par value $.01 per share ("Preferred Stock"), with the following powers, designations, dividend rights, voting powers, rights on liquidation, conver sion rights, redemption rights and other preferences and relative, participating, optional or other special rights and with the qualifications, limitations or restrictions B-26 37 on the shares of such series (in addition to the powers, designations, preferences and relative, participating, optional or other special rights and the qualifications, limita tions or restrictions thereof set forth in the Restated Certificate of Incorporation that are applicable to each series of Preferred Stock) hereinafter set forth: (19) Designation; Number of Shares. The designation of the series of Preferred Stock, par value $.01 per share, of the Company created hereby shall be " % Non-voting Convertible Preferred Stock, Series A" (including, in the case of any reclassification, recapitalization, or other change to such Preferred Stock or, in the case of a consolidation or merger of the Company with or into another Person affecting such Preferred Stock, such capital stock to which a holder of such Preferred Stock shall be entitled upon the occurrence of such event, the "Convertible Preferred Stock"). The authorized number of shares of Convertible Preferred Stock shall be , which number may from time to time be increased or decreased (but not below the number then outstanding). Each share of Convertible Preferred Stock shall have a stated value of $ (the "Stated Value"). Any shares of Convertible Preferred Stock redeemed or otherwise acquired by the Company shall be retired and shall resume the status of authorized and unissued shares of Preferred Stock, without designation as to series, until such shares are once more designated as part of a particular series of Preferred Stock by the Board of Directors. (20) Certain Definitions. Unless the context otherwise requires, the terms defined in this paragraph (2) shall have, for all purposes of this Certificate of Designations, the meanings herein specified: "Applicable Price" shall mean the aggregate of (A) in the event of a Reorganization in which the holders of Common Stock receive cash, the amount of such cash receivable by the holder of one share of Common Stock (as such share is in effect immediately prior to the consummation of such Reorganization); and (B) in the event of a Reorganization in which the holders of Common Stock receive securities or other property which are traded on an established market (within the meaning of Treasury Regulation 1.1273-2(f)(1) of the Internal Revenue Code of 1986, as in effect on September 30, 1990), the average (or if there be more than one security or item of property the sum of the averages) of the daily Trading Prices of such securities and/or property receivable by the holder of one share of Common Stock (as such share is in effect immediately prior to such consummation) for the period of ten consecutive Trading Days ending on the Trading Day immediately preceding the Conversion Date, date of occurrence of the Reorganization, appropri ately adjusted to take into account any stock dividend on such security or property, or any subdivision, split, combination, reclassification of such security or property that occurs or the "ex" date for which occurs on or prior to such date. "Average Market Price" on any Determination Date, shall mean the average of the daily Closing Prices for the period of 10 consecutive Trading Days, ending on the Trading Day immediately preceding such Determination Date, appropriately adjusted to take into account any stock dividend on the Common Stock or any subdivision, split, combination or reclassification of the Common Stock that occurs, or the Ex-Dividend Date for which occurs, during the period following the first Trading Day in such ten-Trading Day period to and including the Determination Date. "Board" shall mean the Board of Directors of the Company, and, unless the context indicates otherwise, shall also mean, to the extent permitted by law, any committee thereof authorized, with respect to any particular matter, to exercise the power of the Board of Directors of the Company with respect to such matter. "Business Day" shall mean any day other than a Saturday, Sunday or a day on which banking institutions in New York, New York and London, England are authorized to close or not obligated by law or executive order to open. "Closing Price" shall mean, on any day: (i) the average between the high and low reported sale price of a share of Common Stock on and as reported by the Nasdaq Stock Market's National Market on such day; (ii) if the primary trading market for the Common Stock on such day is not the Nasdaq Stock Market's National Market, then the closing sale price regular way on such day, or, in case no such sale takes place on such day, the average of the reported closing bid and asked prices regular way on such day, in either case as reported by the Nasdaq System, the National Quotations Bureau, Inc. or a compara ble service; (iii) if the Closing Price on such day is not available pursuant to one of the methods specified above, then the average of the bid and asked prices for the Common Stock on such day as furnished by any New York Stock Exchange member firm selected from time to time by the Board for that purpose; or B-27 38 (iv) if the Closing Price on such day is not available pursuant to the method specified in (iii) above, the determination of Closing Price shall be deter mined in good faith by the Board exercising its reasonable discretion. "Common Stock" shall mean the shares of common stock, par value $0.01 per share, of the Company, which term shall include, where appropriate, in the case of any reclassification, recapitalization or other change in the Common Stock, or in the case of a consolidation or merger of the Company with or into another Person affecting the Common Stock, such capital stock to which a holder of Com mon Stock shall be entitled upon the occurrence of such event. "Common Stock Dividend Amount" shall have the meaning set forth in paragraph (3) (c). "Computation Date" shall mean the earlier of (a) the date on which the Company shall enter into a firm contract or commitment for the issuance of Options or Convertible Securities or (b) the date of actual issuance of such Options or Convertible Securities. "Conversion Date" shall have the meaning set forth in paragraph (5)(c). "Convertible Preferred Stock" shall have the meaning set forth in paragraph (1). "Convertible Securities" shall mean evidences of indebtedness or shares of stock which are, at the option of the holder hereof, convertible into or exchangeable for shares of Common Stock. "Current Market Price" on the Determination Date for any issuance of Options or Convertible Securities or any distribution in respect of which the Current Market Price is being calculated, shall mean the average of the daily Closing Prices of the Common Stock for the shortest of: (i) the period of 10 consecutive Trading Days ending on the last full Trading Day before such Determination Date, (ii) the period commencing on the date next succeeding the first public announcement of the issuance of Options or Convertible Securities or the B-28 39 distribution in respect of which the Current Market Price is being calculated and ending on the last full Trading Day before such Determination Date, and (iii) the period, if any, commencing on the date next succeeding the Ex-Dividend Date with respect to the relevant issuance of Options or Convertible Securities or the relevant distribution for which an adjustment is required by the provisions of paragraphs (6)(a)(ii) or (iii), and ending on the last full Trading Day before such Determination Date. If multiple events occur which require adjustment pursuant to paragraph (6)(a), the adjustment required by each such event shall be given effect in the order of occurrence but without duplication. "Denominator" shall mean the Fixed Price on the applicable Determi nation Date. "Determination Date" shall mean: (i) in the case of a dividend payment, the date of notice of the Record Date, (ii) in the case of a redemption payment, the Redemption Date, (iii) in the case of a conversion, the date of notice of the Conversion Date, (iv) in the case of a Reorganization, the date the Reorganization occurs and (v) in the case of any issuance of Options or Convertible Securities or any distribution to which paragraphs (6)(a)(ii) or (iii) respectively apply, the earlier of (a) the record date for the determination of stockholders entitled to receive the Options, Convertible Securities, or the distribution to which such paragraphs apply and (b) the Ex-Dividend Date for such Options, Convertible Securities or distribution. "Dividend Non-Payment" shall have the meaning set forth in para graph (12)(b). "Dividend Payment Date" shall have the meaning set forth in para graph (3)(a). "Dividend Period" for any dividend payable on a Dividend Payment Date shall mean the period beginning on the immediately preceding Dividend Payment Date (or on the Issue Date in the case of the first Dividend Period) and ending on the day preceding such later Dividend Payment Date. "Exchange Act" shall mean the Securities Exchange Act of 1934, as amended from time to time, or any successor statute, and the rules and regulations promulgated thereunder. B-29 40 "Ex-Dividend Date" shall mean the date on which "ex-dividend" trading commences for a dividend, an issuance of Options or Convertible Securities or a distribution to which paragraph (6)(a) applies in the Nasdaq Stock Market's National Market or on the principal exchange on which the Common Stock is then quoted or traded. "Fixed Price", on any Determination Date, shall mean $ ,* subject to adjustment as prescribed in paragraph (6)(a). "Issue Date" shall mean the date on which the Convertible Preferred Stock is issued as payment of dividends or upon redemption of shares of the Mandatorily Redeemable Preferred Stock, as set forth in the Certificate of Designa tions relating to such Mandatorily Redeemable Preferred Stock. "JPPF" shall mean the Series A Junior Participating Preferred Stock of the Company issuable upon exercise of the Rights pursuant to the Rights Agree ment. "Junior Stock" shall mean: (i) each class or series of common stock of the Company, including, without limitation, the Common Stock; (ii) the JPPF issuable upon exercise of the Rights; (iii) any other class or series of capital stock of the Company hereafter created, other than (a) any class or series of Parity Stock (except to the extent provided under clause (iv) hereof) and (b) any class or series of Senior Stock, and (iv) any class or series of Senior Stock or Parity Stock to the extent that it ranks junior to the Convertible Preferred Stock as to dividend rights, rights of redemption or rights on liquidation, as the case may be. For purposes of clause (iii) above, a class or series of Senior Stock or Parity Stock shall rank junior to the Convertible Preferred Stock as to dividend rights, rights of redemption or rights on liquidation if the holders of shares of Convertible Preferred Stock shall be entitled to dividend payments, payments on redemption or payments of amounts distributable - -------- * 25% above Average Market Price on Issue Date, subject to adjustment pursuant to paragraph (5)(e) of the 9.90% Preferred Stock. B-30 41 upon dissolution, liquidation or winding up of the Company, as the case may be, in preference or priority to the holders of shares of such class or series of Senior Stock or Parity Stock. "Liquidating Payment" shall mean an amount equal to the Liquidation Preference of a share of Convertible Preferred Stock or, if less, the amount payable in respect of one share of Convertible Preferred Stock pursuant to paragraph (9)(a) upon the voluntary or involuntary liquidation, dissolution or winding up of the affairs of the Company. "Liquidating Payment Date" shall mean the date on which the Company makes the aggregate Liquidating Payment to all holders of outstanding shares of Convertible Preferred Stock. "Liquidation Preference" measured per share of the Convertible Preferred Stock, shall mean an amount equal to (a) the Stated Value per share of Convertible Preferred Stock, plus (b) for purposes of determining the amount payable pursuant to paragraph (8) only, an amount equal to all dividends accrued but unpaid on such share, whether or not such unpaid dividends have been declared or there are funds of the Company legally available for the payment of dividends, to the Liquidating Payment Date. "Mandatory Redemption Price" shall have the meaning set forth in paragraph (4)(b). "Option" shall mean any right, option or warrant entitling the holder thereof to subscribe for, purchase, or otherwise acquire Common Stock in the Company (other than the Rights). "Parity Stock" shall mean the Convertible Preferred Stock and any class or series of capital stock, whether now existing or hereafter created, of the Company to the extent ranking on a parity basis with the Convertible Preferred Stock as to dividend rights, rights of redemption or rights on liquidation. Capital stock of any class or series, whether now or existing or hereafter created, shall rank on a parity as to dividend, rights of redemption or rights on liquidation with the Convert ible Preferred Stock, whether or not the dividend rates, dividend payment dates, redemption or liquidation prices per share or sinking fund or mandatory redemption provision, if any, are different from those of the Convertible Preferred Stock, if the holders of shares of such class or series shall be entitled to dividend payments, payments on redemption of payments of amounts distributable upon dissolution, B-31 42 liquidation or winding up of the Company, as the case may be, in proportion to their respective accumulated and accrued and unpaid dividends, redemption prices or liquidation prices, respectively, without preference or priority, one over the other, as between the holders of shares of such class or series and the holders of Convertible Preferred Stock. No class or series of capital stock that ranks junior to the Convert ible Preferred Stock as to rights on liquidation shall rank or be deemed to rank on a parity basis with the Convertible Preferred Stock as to dividend rights or rights of redemption. "Payment Record Date" shall have the meaning set forth in paragraph (13). "Person" shall mean any individual corporation, partnership, joint venture, association, joint stock company, limited liability company, trust, unincor porated organization, government or agency or political subdivision thereof, or other entity, whether acting in an individual, fiduciary or other capacity. "Preferred Stock Director" shall have the meaning set forth in paragraph (12)(b). "Preferred Stock Dividend Amount" shall have the meaning set forth in paragraph (3)(d). "Record Date" for the dividends payable on the Dividend Payment Date shall mean the date (not exceeding 45 days preceding the Dividend Payment Date) fixed by the Board as the record date for the Dividend Payment Date. "Redemption Agent" shall have the meaning set forth under paragraph (4)(f). "Redemption Date" as to any share of Convertible Preferred Stock, shall mean the date fixed by the Board for the redemption of such share pursuant to paragraph (4). "Redemption Notice" shall have the meaning set forth in paragraph (4)(c). "Redemption Price" shall have the meaning set forth in paragraph (4)(a). B-32 43 "Reorganization" shall mean any of the following events: (i) any consolidation or merger of the Company with another entity (other than a merger or consolidation in which the Company is the surviving or continuing corporation and in which the Common Stock outstanding immediately prior to the merger or consolidation remains unchanged), (ii) the sale or other transfer of all or substantially all of its assets to another entity. (iii) any reorganization or reclassification of the Common Stock or other equity securities of the Company (other than a transaction to which paragraph (6)(a)(i) applies), and (iv) any statutory exchange of any shares of capital stock of the Company with another corporation (other than a merger or consolidation in which the Company is the surviving or continuing corporation and in which the Common Stock outstanding immediately prior to the merger or consolidation remains un changed). "Registration Rights Agreement" means the Registration Rights Agreement, dated as of , 1998, between the Company and Vision Net works III B.V., as the same may be amended, supplemented or otherwise modified. "Reorganization Unit" means the kind or amount of securities, cash or other property receivable upon consummation of a Reorganization in substitution of or in exchange for a share of Common Stock as such share is in effect immediately prior to such consummation (provided that if the kind or amount of securities, cash or other property receivable upon consummation of such Reorganization is not the same with respect to each such share, then the kind and amount of securities, cash or other property which shall be deemed receivable upon consummation of such Reorganization with respect to each such share for purposes hereof shall be the kind and amount so receivable per share by a plurality of such shares). "Rights" means the rights issuable pursuant to the Rights Agreement. "Rights Agreement" means the rights agreement, dated as of October 13, 1993, between the Company and Continental Transfer and Trust Company, as rights agent. B-33 44 "Securities Act" shall mean the Securities Act of 1933, as amended from time to time, or any successor statute, and the rules and regulations promul gated thereunder. "Senior Stock" shall mean any class or series of capital stock of the Company hereafter created to the extent ranking prior to the Convertible Preferred Stock as to dividend rights, rights of redemption or rights on liquidation. Capital stock of any class or series shall rank prior to the Convertible Preferred Stock as to dividend rights, rights of redemption or rights on liquidation if the holders of shares of such class or series shall be entitled to dividend payments, payments on redemp tion or payments of amounts distributable upon dissolution, liquidation or winding up of the Company, as the case may be, in preference or priority to the holders of shares of Convertible Preferred Stock. No class or series of capital stock than ranks on a parity basis with or junior to the Convertible Preferred Stock as to rights on liquidation shall rank or be deemed to rank prior to the Convertible Preferred Stock as to dividend rights or rights of redemption, notwithstanding that the dividend rate, dividend payment dates, sinking fund provisions, if any, or mandatory redemption provisions thereof are different from those of the Convertible Preferred Stock. "Stated Value" shall have the meaning set forth in paragraph (1). "Trading Day" shall mean a day on which the Nasdaq Stock Market's National Market or, if different, the principal exchange on which the Common Stock is quoted or traded is each open for the transaction of business. "Trading Price" of a security or property for any day means the closing sale price regular way on such day, or, in case no such sale takes place on such day, the average of the reported closing bid and asked prices of such security or property on such day on the applicable established market on which such security or property is traded. (21) DIVIDENDS. (a) Payment. The holders of outstanding shares of Convertible Preferred Stock shall be entitled to receive, when, as and if declared by the Board out of funds legally available therefor (without prejudice to paragraph (3)(b)), cumula tive dividends, in preference to dividends on any Junior Stock, at the rate per annum of % of the Stated Value per share, rounded to the nearest cent. Such dividends shall accrue from the Issue Date and shall be payable semi-annually in arrears, in whole or in part, on [ ] and [ ] of each year (each, a "Dividend Payment B-34 45 Date") commencing on the second anniversary of the Issue Date; provided, however, that with respect to any Dividend Period during which a redemption or conversion occurs, the Board shall declare accrued dividends to, and pay such dividends on, the related Redemption Date or Conversion Date, respectively, in which case such dividends shall be payable on such Redemption Date or Conversion Date, respec tively, to the holders of the shares of Convertible Preferred Stock as of a special record date (not to exceed 45 days preceding the payment date) for such dividend payment. Each dividend on the shares of Convertible Preferred Stock shall be payable to holders of record as they appear on the stock register of the Company on the Record Date or, as the case may be, the special record date for such dividend and, for purposes of calculating the accrual of dividends, dividends will accrue to, but not including, the date fixed for payment. Dividends on the outstanding shares of Convertible Preferred Stock will accrue on a daily basis (without interest or compounding) whether or not there are funds legally available for the payment of such dividends and whether or not such dividends are declared. Dividends will cease to accrue in respect of shares of Convertible Preferred Stock on the date of their redemption or conversion. No interest, or sum of money in lieu of interest, shall be payable in respect of any accrued dividend payment. (b) Declaration and Manner of Payment of Dividends. The Board shall declare and cause to be paid accrued but unpaid dividends on the Convertible Preferred Stock at the rates, times and one for the forms described herein to the maximum extent that the Company has funds legally available therefor; provided, however, that without prejudice to the accrual thereof, such dividends need not be declared or paid in cash to the extent the payment thereof is prohibited by the terms and provision of any agreement of the Company referred to in paragraph (3)(e). Any dividends may be paid, in the sole discretion of the Board: (i) in cash out of funds legally available therefor; (ii) through the delivery of shares of Common Stock; (iii) through the delivery of additional shares of Convertible Preferred Stock; or (iv) through any combination of the foregoing forms of consideration elected by the Board in its sole discretion; provided, however, that if the Board shall fail to declare and cause to be paid an accrued dividend payment in cash on any Dividend Payment Date (whether or not there are unrestricted funds legally available for the payment of such dividends in cash), then the Board shall declare and cause to be paid accrued dividends, whether or not cumulated, through the delivery of shares of Common Stock or additional shares of Convertible Preferred Stock to the extent permitted by applicable law, regardless of the terms and provisions of any agreement of the Company of the type referred to in paragraph (3)(e) including any agreement relating B-35 46 to any indebtedness of the Company. If any dividend declared by the Board is to be paid, in whole or in part, through the delivery of shares of Common Stock or additional shares of Convertible Preferred Stock, each holder of Convertible Pre ferred Stock shall receive the same proportion of cash and/or shares of Common Stock and/or additional shares of Convertible Preferred Stock (except for cash paid in lieu of fractional shares) delivered in payment of such dividend to other holders of shares of Convertible Preferred Stock. (c) Payment of Dividends by Delivery of Common Stock. If the Company elects to pay any dividend payment, in whole or in part, by delivery of shares of Common Stock, the amount of such dividend payment to be paid per share of Convertible Preferred Stock in shares of Common Stock (the "Common Stock Dividend Amount") shall be paid through the delivery to the holders of record for such shares of Convertible Preferred Stock on the Record Date for such dividend payment of a number of shares of Common Stock determined by dividing the Common Stock Dividend Amount by the Average Market Price. No fractional shares of Common Stock shall be delivered to a holder of shares of Convertible Preferred Stock, but the Company shall instead pay a cash adjustment determined as provided in paragraph (9). (d) Payment of Dividends by Delivery of Additional Convertible Preferred Stock. If the Company elects to pay any dividend payment, in whole or in part, by delivery of additional shares of Convertible Preferred Stock, the amount of such dividend payment to be paid per share of Convertible Preferred Stock in additional shares of Convertible Preferred Stock (the "Preferred Stock Dividend Amount") shall be paid through the delivery to the holders of record of such shares of Convertible Preferred Stock on the Record Date for such dividend payment of a number of shares of Convertible Preferred Stock determined (i) if on such date the Fixed Price is higher than the Average Market Price, then by dividing (A) the product of multiplying the Fixed Price by the Preferred Stock Dividend Amount by (B) the product of multiplying the Average Market Price of the Common Stock by the Stated Value, or (ii) if on such date the Fixed Price is lower than the Average Market Price, then by dividing the Preferred Stock Dividend Amount by the Stated Value. No fractional shares of Convertible Preferred Stock shall be delivered to a holder of shares of Convertible Preferred Stock, but the Company shall instead pay a cash adjustment determined in accordance with paragraph (9). (e) Prohibitions on Cash Dividends. Notwithstanding anything contained in this Certificate to the contrary, but without effect on the accrual thereof, no cash dividends on shares of Convertible Preferred Stock shall be declared by the B-36 47 Board or paid or set apart for payment by the Company at such time as the terms and provisions of any agreement of the Company, including, without limitation, any agreement, contract, indenture, bond, note, debenture, guarantee or other instrument relating to or evidencing its indebtedness, prohibits such declaration, payment or setting apart for payment or provides that such declaration, payment or setting apart for payment would constitute a breach thereof or a default thereunder; provided, however, that nothing contained in this paragraph (e) shall alter, limit or restrict the Company's obligation to declare and pay accrued dividends, to the extent permitted by applicable law, through the delivery of shares of Common Stock or additional shares of Convertible Preferred Stock pursuant to the proviso contained in the second sentence of paragraph (3)(b), whether permitted by any such agreement or not. (f) Pro Rata. All dividends paid with respect to the shares of Con vertible Preferred Stock shall be paid pro rata (as nearby as may be practicable) to the shareholders entitled thereto. (g) Credit. Any dividend payment made on the shares of Convertible Preferred Stock shall first be credited against the earliest accrued but unpaid dividend due with respect to the shares of Convertible Preferred Stock. (h) Priority. Payment of dividends to the holders of shares of Convertible Preferred Stock shall be subject to the prior preferences and other rights of any Senior Stock and to the provisions of paragraph (7). (22) REDEMPTION. (a) Optional Redemption. At any time during the period beginning on the third anniversary of the Issue Date until the Redemption Date, the Company shall have the right to redeem the outstanding shares of Convertible Preferred Stock at a price equal to $1,000 per share, together with an amount equal to all dividends accrued but unpaid thereon to the date fixed for redemption (the "Redemption Price"). The Company shall not be required to register a transfer of (i) any shares of Convertible Preferred Stock for a period of 5 Business Days next preceding any selection of shares of Convertible Preferred Stock to be redeemed or (ii) any shares of Convertible Preferred Stock called for redemption. (b) Mandatory Redemption. All outstanding shares of Convertible Preferred Stock shall be mandatorily redeemed by the Company out of funds legally B-37 48 available therefor on the date that is the tenth anniversary of Issue Date at a redemp tion price equal to $1,000 per share, plus an amount equal to all accrued and unpaid dividends per share (the "Mandatory Redemption Price"). (c) Company's Right to Elect Manner of Payment of Redemption Price. The Company may effect the redemption of shares of Convertible Preferred Stock at the Redemption Price or the Mandatory Redemption Price, in the sole discretion of the Board: (i) in cash out of funds legally available therefor, (ii) in exchange for and through the delivery of shares of Common Stock or (iii) through any combination of the foregoing forms of consideration elected by the Board in its sole discretion. (d) Notice of Redemption. The Company shall provide notice of any redemption of shares of Convertible Preferred Stock to holders of record of Convert ible Preferred Stock to be called for redemption not less than 30 days nor more than 60 days prior to the Redemption Date. Such notice (a "Redemption Notice") shall, subject to paragraph (4)(e)(z), be provided in accordance with paragraph (14); provided, however, that neither failure to give such notice nor any defect therein shall affect the validity of the proceedings for the redemption of any shares of Convertible Preferred Stock to be redeemed. In addition to any information required by law, the Redemption Notice shall state, as appropriate, the following (and may contain such other informa tion as the Company deems advisable): (A) the Redemption Date; (B) the number of shares of Convertible Preferred Stock to be redeemed and, if less than all the shares held by such holder are to be redeemed, the number of shares to be redeemed from such holder; (C) the then applicable Redemption Price and the form or forms of consideration that the Company has elected to pay and/or deliver upon such redemption and, if more than one form of consideration has been elected by the Company, the desig nated portions of the Redemption Price to be paid in each form of consideration so elected; B-38 49 (D) if the Company has elected to exchange and deliver shares of Common Stock in payment of the Redemption Price (or a designated portion thereof), the Company's computation of the number of shares of Common Stock exchangeable and deliver able as provided in paragraph (4)(e) below; (E) the place or places in the United States or England and Wales where certificates for Convertible Preferred Stock to be re deemed are to be surrendered for redemption; and (F) that dividends on the shares of Convertible Preferred Stock to be redeemed shall cease to accrue on the Redemption Date (unless the Company defaults in making payment of the Re demption Price). (e) Redemption by Delivery of Common Stock. If the Company elects to pay, in whole or in part, the Redemption Price in respect of shares of Convertible Preferred Stock in exchange for and through the delivery of shares of Common Stock, then the Company shall deliver to each holder of shares of Convert ible Preferred Stock to be redeemed on the Redemption Date a number of shares of Common Stock equal to the aggregate Redemption Price or Mandatory Redemption Price (or designated portion thereof) of such shares of Convertible Preferred Stock divided by the Average Market Price. No fractional shares of Common Stock shall be delivered to a holder of shares of Convertible Preferred Stock in payment of the Redemption Price or Mandatory Redemption Price, but the Company shall instead pay a cash adjustment determined as provided in paragraph (9). (f) Deposit of Funds and/or Shares. If on or before the Redemption Date: (x) the Company shall have deposited with any bank or trust company organized under the laws of the United States of America or any state thereof having capital, undivided profits and surplus aggregating at least $250 million (the "Re demption Agent"), cash (including cash for any adjustment in lieu of delivering fractional shares) and/or shares of Common Stock, as applicable, sufficient to pay in full the aggregate Redemption Price or Mandatory Redemption Price (calculated through the Redemption Date) for such shares of Convertible Preferred Stock on such Redemption Date, (y) such cash and/or shares of Common Stock are readily available to, but only to, the holders of Convertible Preferred Stock in satisfaction of the obligations of the Company with respect to the payment of the Redemption Price or the Mandatory Redemption Price and (z) the Company shall prior to the Redemp tion Date have so notified each record holder of Convertible Preferred Stock, which B-39 50 notice shall be given to each holder of Convertible Preferred Stock by courier and shall identify the Redemption Agent, its address and telephone and telecopier numbers and the contact person(s) at the Redemption Agent responsible for adminis tration of the deposit then, effective as of the close of business on such Redemption Date (and notwithstanding that any certificate therefor shall not have been surren dered for cancellation): (i) such shares of Convertible Preferred Stock shall no longer be deemed outstanding but any shares of Common Stock so deposited in accordance with this paragraph (e) for which such Convertible Preferred Stock was redeemed shall be deemed to be outstanding; (ii) the holders thereof shall cease to be holders of Convertible Preferred Stock but shall be shown on the records of the Company as holders of the Common Stock so deposited in accordance with this paragraph (e) in redemption of such Convertible Preferred Stock; (iii) dividends with respect to the shares so called for redemption shall cease to accrue on the Redemp tion Date but, subject to paragraph (4)(f), such holders shall be entitled to any dividends which shall thereafter accrue on, and shall be entitled to exercise all other rights associated with, any shares of Common Stock so deposited in accordance with this paragraph (e) in redemption of such Convertible Preferred Stock; and (iv) all rights whatsoever with respect to the shares so called for redemption shall forthwith cease and terminate (except the right of such holders, upon the surrender of certifi cates evidencing the shares of Convertible Preferred Stock so redeemed, to receive the cash and/or Common Stock, as applicable, payable or deliverable in payment of the Redemption Price therefor, and the applicable cash adjustment, if any, in lieu of fractional shares, without interest). Any cash and/or shares of Common Stock so deposited or set apart which shall remain unclaimed at the end of one year after the Redemption Date shall be returned or released to the Company, after which time the holders of shares of Convertible Preferred Stock called for redemption on such Redemption Date that remain outstanding after such one-year period shall look only to the Company for the payment of the Redemption Price for such shares, without interest. A deposit made in compliance with the immediately preceding sentence shall, except to the extent released or returned to the Company, be deemed to constitute full payment for the shares of Convertible Preferred Stock to be redeemed. Any interest accrued on funds so deposited shall be paid by the Redemp tion Agent to the Company from time to time. If any shares of Convertible Preferred Stock called for redemption on such Redemption Date are converted, in accordance with paragraph (5), between the date such cash and/or shares of Common Stock are so deposited with the Redemption Agent and the close of Business on the Redemp tion Date, then the cash (including cash for any adjustment in lieu of delivering fractional shares) and/or shares of Common Stock, as applicable, so deposited for the B-40 51 redemption of such shares so covered shall be promptly thereafter returned by the Redemption Agent to the Company. (g) Surrender of Certificates; Status. Each holder of shares of Convertible Preferred Stock to be redeemed shall not be entitled to receive payment of the Redemption Price for such shares until such holder shall surrender the certifi cates evidencing such shares duly endorsed by, or accompanied by, an instrument of transfer (in form reasonably satisfactory to the Company) duly executed by, the holder or such holder's duly authorized attorney-in-fact or, if the shares issuable upon redemption are to be issued in the same name as the name in which such share of the Convertible Preferred Stock is registered, in blank to the Redemption Agent (or to the Company if there is no Redemption Agent) at the place designated in the Re demption Notice for such redemption and shall thereupon be entitled to receive the consideration for such shares specified in the Redemption Notice in an aggregate amount equal to the Redemption Price for such shares. Holders of shares of Convert ible Preferred Stock that are redeemed on the Redemption Date shall not be entitled to receive dividends declared and paid on any shares of Common Stock exchange able and deliverable in payment of the Redemption Price (or designated portion thereof) for such shares of Convertible Preferred Stock, and such shares of Common Stock shall not be entitled to vote, until such shares of Common Stock are delivered upon the surrender of the certificates representing such shares of Convertible Preferred Stock. Upon such surrender, such holders shall be entitled to receive such dividends declared and paid subsequent to such Redemption Date and prior to the delivery. (h) If any shares of Convertible Preferred Stock have been surren dered for conversion into Common Stock pursuant to paragraph (5), then (i) the Company shall not be obligated to redeem such shares and (ii) shares of Common Stock and any funds which shall have been deposited for the payment of the Re demption Price for such surrendered shares of Convertible Preferred Stock shall be returned to the Company immediately after such conversion (subject to declared dividends payable to holders of shares of Convertible Preferred Stock on the record date for such dividends being so payable, to the extent set forth in paragraph (5) hereof, regardless of whether such shares are converted subsequent to such record date and prior to the related Dividend Payment Date). (i) Priority. The right of the Company to redeem shares of Convert ible Preferred Stock pursuant to this paragraph (4) shall be subject to the prior preferences and other rights of any Senior Stock and to the provisions of paragraph (7). B-41 52 (23) CONVERSION. (a) Optional Conversion. A holder of one or more shares of the Convertible Preferred Stock shall have the right, exercisable at any time and from time to time after the Issue Date until the Redemption Date with respect to the affected shares, at such holder's option, to convert any or all shares of the Convert ible Preferred Stock into such number of shares of Common Stock as is equal to the aggregate Stated Value of the shares of Convertible Preferred Stock surrendered for conversion divided by the Denominator. In the case of shares of Convertible Preferred Stock called for redemption, conversion rights will expire at 5:00 p.m. New York City time on the Business Day prior to the applicable Redemption Date and if not exercised prior to such time, such conversion right will be lost, unless the Company defaults in making the payment due upon redemption. Holders of record of shares of the Convertible Preferred Stock at the close of business on a record date fixed for the payment of a dividend on such shares shall be entitled to receive the dividend notwithstanding the conversion of the shares prior to the dividend payment date. In addition to the right to receive accrued dividends not in arrears as provided for in paragraph (3)(a), if there is an arrearage of dividends in respect of any of the shares of Convertible Preferred Stock surrendered for conversion, upon such conver sion, the Company shall pay to the holder of the Convertible Preferred Stock so surrendered such arrearage: (i) in cash out of funds legally available therefor; (ii) through the delivery of shares of Common Stock; or (iii) through any combination of the foregoing elected by the Board in its sole discretion, in each case, subject to, and in accordance with, the provisions of paragraph (3). If the Company elects, or is required by the proviso contained in paragraph (3)(b), to pay any dividend arrearage on the Convertible Preferred Stock, in whole or in part, in shares of Common Stock, each holder of the Convertible Preferred Stock entitled to such dividend payment shall be issued that number of shares of Common Stock equal to the aggregate amount of such dividend arrearage to be paid through the delivery of shares of Common Stock divided by the Average Market Price as of the Conversion Date (with a cash payment in lieu of the issuance of fractional shares determined in accordance with paragraph (9)). Except as provided above and in paragraph (3)(a), the Company shall make no other payment of or allowance for unpaid dividends, whether or not in arrears, on such Convertible Preferred Stock or for previously declared dividends or distributions on the shares of Common Stock issued upon such conversion. Each share surrendered for conversion shall, unless the shares issuable on conversion are to be issued in the same name as the name in which such share of the Convertible Preferred Stock is registered, be duly endorsed by, or be accompa nied by an instrument of transfer (in form reasonably satisfactory to the Company), duly executed by the holder or such holder's duly authorized attorney-in-fact. (b) Conversion Procedure. To exercise the conversion right, the holder of each share of the Convertible Preferred Stock to be converted shall surren der the certificate representing such share, duly endorsed or assigned to the Company or in blank, at any office of any transfer agent for the Convertible Preferred Stock in New York, New York previously appointed by the Company and identified in a notice given to the holders of Convertible Preferred Stock in accordance with paragraph (14), or, if no such transfer agent has been so appointed and identified, at the office of the Company and (whether or not a transfer agent has been so appointed and identified) shall give not less than 60 days prior notice to the Company in accordance with paragraph (14) that such holder elects to convert the shares repre sented by such certificate or a portion thereof. Such notice shall also state the name or names (with address(es) in which the certificate or certificates for the shares of Common Stock which shall be issuable upon such conversion shall be issued, and shall be accompanied by funds in an amount sufficient to pay any transfer or similar tax required by the provisions of paragraph (10). Each share surrendered for conver sion shall, unless the shares issuable on conversion are to be issued in the same name as the name in which such share of the Convertible Preferred Stock is registered, be duly endorsed by, or be accompanied by an instrument of transfer (in form reason ably satisfactory to the Company), duly executed by the holder or such holder's duly authorized attorney-in-fact. (c) Issuance of Common Stock. As promptly as practicable after the surrender of certificates for shares of the Convertible Preferred Stock for conversion, the giving of the notice and the delivery of the funds, if any, referred to in paragraph (5)(b) above, the Company shall issue and shall deliver to such holder, or on such holder's written order: (i) a certificate or certificates for the number of whole shares of Common Stock issuable upon the conversion of such shares of Convertible Preferred Stock in accordance with the provisions of this paragraph (5); (ii) a check or cash in respect of any fractional interest in respect of a share of Common Stock arising upon such conversion, as provided in paragraph (9) below; and (iii) in respect of any part of any share of Convertible Preferred Stock that is surrendered for conversion in part, a new certificate for a share of Convertible Preferred Stock having a Stated Value (rounded to the nearest whole cent) equal to the part of the share surrendered that was not converted into shares of Common Stock. Each conversion with respect to any shares of the Convertible Preferred Stock shall be deemed to have been effected (irrespective of whether the Company shall have delivered certificates representing the Common Stock) on the date on which the B-42 53 certificates for shares of the Convertible Preferred Stock shall have been surrendered (accompanied by the funds, if any, required by paragraph (10) below), such notice shall have been given and such instruments of transfer, if any, shall have been delivered to the Company or the transfer agent as aforesaid, and the person or persons entitled to receive the Common Stock issuable upon such conversion shall be deemed for all purposes to be the record holder or holders of such Common Stock upon that date at that time (the "Conversion Date"). (d) No Fractional Shares of Common Stock. No fractional shares of Common Stock or scrip representing fractional shares shall be issued upon conver sion of Shares of the Convertible Preferred Stock. If more than one share of the Convertible Preferred Stock shall be surrendered for conversion at one time by the same holder, the number of full shares of Common Stock issuable upon conversion thereof shall be computed on the basis of the aggregate number of shares of the Convertible Preferred Stock so surrendered. Instead of any fractional share of Common Stock otherwise issuable upon conversion of any shares of the Convertible Preferred Stock, the Company shall pay a cash amount determined in accordance with paragraph (9) below in respect of such fraction. (e) Reservation of Shares of Common Stock. The Company shall reserve out of its authorized but unissued Common Stock or its Common Stock held in treasury sufficient shares of Common Stock to permit the conversion of all of the outstanding shares of the Convertible Preferred Stock. The Company shall at no time permit the authorized but unissued amount of its Common Stock to be insuffi cient to permit the conversion of all shares of the Convertible Preferred Stock at the time outstanding. All shares of Common Stock delivered upon conversion of the shares of the Convertible Preferred Stock will, upon delivery, be duly authorized and validly issued, fully paid and nonassessable, free from any adverse claims and preemptive rights with respect thereto. (6) ADJUSTMENTS. (a) Common Stock Dividends, Splits, Subdivisions and Combina tions. The Fixed Price shall be subject to adjustment from time to time as follows: (i) If, after the Issue Date, the Company shall (A) pay a dividend or make a distribution on its outstanding Common Stock in shares of its Common Stock, (B) split or subdivide its outstanding Common Stock into a greater number of shares or (C) combine its outstanding Common Stock into a smaller number of shares, then, in each case, the Fixed Price in effect immediately prior to such action B-43 54 shall be adjusted concurrently with the occurrence of such event and without any action on the part of the Company or any holder of Convertible Preferred Stock to that price determined by multiplying the Fixed Price in effect immediately prior to such event by a fraction: (1) the numerator of which shall be the total number of shares of Common Stock outstanding immediately prior to such time, and (2) the denominator of which shall be the total number of shares of Common Stock outstanding immediately after such time. An adjustment made pursuant to this paragraph (i) shall become effective immedi ately after the record date, in the case of a dividend or distribution (except as provided in paragraph (6)(e) below), and shall become effective immediately after the effective date in the case of a subdivision, split or combination. (ii) If, after the Issue Date, the Company issues Options or Convert ible Securities to substantially all holders of Common Stock entitling them (for a period commencing no earlier than the record date for the determination of holders of Common Stock entitled to receive such Options or Convertible Securities and expiring not more than within 45 days after such record date) to subscribe for, purchase, otherwise acquire or convert into shares of Common Stock at a price per share less than the Current Market Price per share of such shares of Common Stock on such record date, then the Fixed Price in effect immediately prior to the Computa tion Date shall be adjusted on the Computation Date (without any action on the part of the Company or any holder of Convertible Preferred Stock) so that the same shall equal the price determined by multiplying the Fixed Price in effect immediately prior the such Computation Price by a fraction: (1) the numerator of which shall be the number of shares of Com mon Stock outstanding immediately prior to the Computation Date plus the number of shares of Common Stock which the aggregate offering price of the total number of shares of Com mon Stock issuable pursuant to such Options or pursuant to the terms of such Convertible Securities would purchase at the then Current Market Price on such Computation Date, and (2) the denominator of which shall be the number of shares of Common Stock outstanding on such Computation Date plus B-44 55 the maximum number of additional shares of Common Stock issuable pursuant to all such Options or necessary to effect the conversion or exchange of all such Convertible Securities. To the extent of the expiration unexercised of the right of conversion or exchange of any Convertible Securities, or to the extent of the expiration, unexercised, of any Options, or upon any increase in the minimum consideration receivable by the Company for the issuance of additional shares of Common Stock pursuant to such Convertible Securities or Options, in either case previously adjusted as aforesaid, then the number of shares of Common Stock deemed to be issued and outstanding by reason of the fact that they were issuable upon conversion or exchange of any such Convertible Securities or upon exercise of any such Options shall no longer be computed as set forth above, and the Fixed Price shall forthwith be readjusted and thereafter be the price which it would have been (but reflecting any other adjustments in the Fixed Price made pursuant to the provisions of this paragraph (6)(a) after the Issue Date) had the adjustment of the Fixed Price made upon the issuance or sale of such Convertible Securities or the issuance of such Options not been made or made upon the basis of such increased minimum consideration, as the case may be. Such adjustment shall be made successively wherever any such Options or Convertible Securities are issued at a price below the Current Market Price therefor as in effect on the date of issuance. In determining whether any Options or Convertible Securi ties entitle the holders to subscribe for or purchase shares of Common Stock at less than the Current Market Price therefor, and in determining the aggregate offering price of shares of Common Stock, there shall be taken into account any consideration received by the Company for such Options or Convertible Securities, the value of such consideration, if other than cash, to be determined in good faith by the Board. Notwithstanding the foregoing, if the Options or Convertible Securities are exercis able, convertible or exchangeable only upon the occurrence of certain triggering events or the arrival of a specified date, then the Fixed Price will not be adjusted until such triggering events or specified dates occur. (iii) If, after the Issue Date, the Company shall distribute, by way of dividend or otherwise, to all holders of Common Stock shares of any class of stock other than Common Stock, evidences of indebtedness or other assets (other than cash dividends out of current or retained earnings), or shall distribute to substantially all holders of Common Stock, Options (other than those referred to in paragraph (6)(a)(ii) above, then, in each such case, the Fixed Price shall be adjusted on the record date (without any action on the part of the Company or any holder of Convert ible Preferred Stock) so that the same shall equal the price determined by multiplying B-45 56 the Fixed Price in effect immediately prior to the date of such distribution by a fraction: (1) the numerator of which shall be the Current Market Price of the Common Stock on the record date mentioned below less the then fair market value (as reasonably determined in good faith by the Board) of the portion of the assets so distributed or of such subscription Options applicable to one share of Com mon Stock, and (2) the denominator of which shall be such Current Market Price of the Common Stock. Such adjustment shall become effec tive immediately after the record date for the determination of the holders of Common Stock entitled to receive such distribu tion. In addition to the foregoing, if, upon the occurrence of the Distribution Date (as defined in the Rights Agreement), the Company shall distribute the Rights: (x) the record holders of Convertible Preferred Stock on the Distribution Date (as so defined) shall be deemed to have been holders of Common Stock issued on or after the Merger (as defined in the Rights Agreement) and prior to the Distribution Date (as so defined) for purposes of the Rights Agreement; and (y) the Company shall make lawful and proper provisions so that each such record holder shall receive, in addition to the shares of Common Stock which may then be issuable upon conver sion pursuant to the provisions of this Certificate, the same number of Rights to which a holder of the number of shares of Common Stock into which the shares of Convertible Preferred Stock held by such record holder was convertible immediately prior to the Distribution Date (as so defined) would have been entitled on such Distribution Date pursuant to the Rights Agreement if all the shares of Convertible Preferred Stock held by such record holder had been converted pursuant to the provisions of paragraph (5)(a). (iv) Without prejudice to paragraph (7)(a) of this Certificate, if after the Issue Date, the Company shall, by dividend or otherwise, at any time distribute to all holders of its Common Stock cash (including any distributions of cash out of current or retained earnings of the Company but excluding any cash that is distrib uted as part of a distribution requiring an adjustment pursuant to paragraph (iii) of this paragraph) in an aggregate amount that, together with the aggregate amount of any other distributions to all holders of its Common Stock made in cash within the 12 months preceding the date fixed for determining the stockholders entitled to such B-46 57 distribution (the "Distribution Record Date") and in respect of which no adjustment pursuant to paragraph (iii) of this paragraph (6) or this paragraph (iv) has made, exceeds 10% of the product of (A) the Current Market Price per share of the Com mon stock on the Distribution Record Date times (B) the number of shares of Common Stock outstanding on the Distribution Record Date (excluding shares held in the treasury of the Company), the Fixed Price shall be reduced on the Distribution Record Date (without any action on the part of the Company or any holder of Convertible Preferred Stock) so that the same shall equal the price determined by multiplying such Fixed Price in effect immediately prior to the effectiveness of the Fixed Price reduction contemplated by this paragraph (iv) by a fraction: (1) the numerator of which shall be the Current Market Price per share of the Common Stock on the Distribution Record Date less the amount of such cash and other consideration so dis tributed applicable to one share (based on the pro rata portion of the aggregate amount of such cash and other consideration, divided by the shares of Common Stock outstanding on the Distribution Record Date) of Common Stock; and (2) the denominator of which shall be such Current Market Price per share of the Common Stock on the Distribution Record Date, such reduction to become effective immediately prior to the opening of business on the day following the Distribution Record Date. Such adjustment shall become effective immediately after the record date for the determination of stockholders entitled to receive such distribution, except as pro vided in paragraph (6)(e) below. Such adjustment shall be made successively whenever any such dividend or distribution shall be made. (v) All calculations under this paragraph (6)(a) shall be made to the nearest cent or nearest 1/1000th of a share of Common Stock. (vi) Notwithstanding anything to the contrary set forth in this paragraph (6), no adjustment shall be made to the Fixed Price (A) upon the issuance or distribution of Options or Convertible Securities (or upon the exercise of such Options or the conversion of such Convertible Securities) pursuant to any stock option, restricted stock or other incentive or benefit plan or stock ownership or purchase plan for the benefit of employees, directors or officers of the Company and its subsidiaries or any dividend reinvestment plan of the Company in effect or B-47 58 adopted on or before the Issue Date or approved by the stockholders or compensation committee of the Company after the Issue Date or (B) upon the deemed issuance of Common Stock (provided, that such issuance does not involve an actual issuance of Common Stock) by reason of adjustments required pursuant to anti-dilution provi sions applicable to securities of the Company as in effect on the Issue Date. (vii) The Company shall also be entitled to make such deductions, in addition to those required by paragraph (6)(a)(i), (ii) and (iii), to the Fixed Price as it considers to be advisable in order to avoid or diminish any tax to holders of Common Stock, Options or Convertible Securities resulting from any stock dividends, subdivi sions of shares, distributions of Options or Convertible Securities (or any transac tions which would be treated as any of the foregoing transactions pursuant to Section 305 of the Internal Revenue Code of 1986, as amended) made by the Company. In addition, the Company from time to time may decrease the Fixed Price by any amount for any period of time if the period is at least 20 days and if the decrease is irrevocable during the period. Whenever the Fixed Price is so decreased, the Company shall give holders of record of shares of Convertible Preferred Stock a notice of the decrease in accordance with paragraph (14) at least 15 days before the date the decreased Fixed Price takes effect, and such notice shall state the decreased Fixed Price and the period it will be in effect. A voluntary adjustment of the Fixed Price shall not change or adjust the Fixed Price otherwise in effect for purposes of this paragraph (6). (viii) If, at any time as a result of an adjustment made pursuant to paragraph (6)(a)(i), (ii) or (iii), the holder of any share of the Convertible Preferred Stock thereafter surrendered for conversion or redemption shall become entitled to receive any securities of the Company other than shares of the Common Stock, thereafter the number of such other securities so receivable upon conversion of any share of the Convertible Preferred Stock shall be subject to adjustment from time to time in a manner and on terms as nearly equivalent as practicable to the provisions with respect to the Common Stock contained in paragraphs (6)(a)(i) through (6)(a)(vii) above, and the other provisions of this paragraph (6)(a)(viii) with respect to the Common Stock shall apply on like terms to any such other shares. (b) (i) Reorganizations. If there is to occur any Reorganization, and there is determinable for the entirety of each Reorganization Unit to be issued in connection with such Reorganization on an Applicable Price, then as a condition precedent to such Reorganization proper provision shall be made such that each share of Convertible Preferred Stock, or each share of convertible preferred stock of the Company or its successor by merger or consolidation issuable to each holder of B-48 59 Convertible Preferred Stock in exchange or substitution therefor (provided that such share of convertible preferred stock has the same Stated Value and, subject to the proviso in paragraph (6)(b)(ii), substantially the same rights, benefits and privileges as a share of Convertible Preferred Stock), shall be convertible or redeemable upon and from and after the occurrence of such Reorganization into, in lieu of Common Stock as provided herein (and without prejudice to the right of the Company or its successor to redeem convertible preferred stock for cash in accordance herewith), a number of Reorganization Units determined by dividing the Stated Value of such share by the higher of (x) the Fixed Price on the Conversion Date and (y) the Applicable Price of a Reorganization Unit on the Conversion Date. If there is to occur any Reorganization, and any Reorganization Unit to be issued in connection with such Reorganization does not have in whole or in part a determina ble Applicable Price, then prior to the occurrence of such Reorganization and on a basis such that the holders of Convertible Preferred Stock shall be holders of Common Stock for all purposes of such Reorganization, the Company will redeem all Convertible Preferred Stock in accordance herewith. The Company shall not effect any Reorganization unless prior to or simultaneously with the consummation thereof, the successor entity resulting from such consolidation or merger or the entity purchasing such assets or compelling such exchange, as the case may be, shall make provisions in its certificate or articles of incorporation or other constituent document to establish such right. The provisions of this paragraph (6)(b) shall similarly apply to successive Reorganizations. (ii) Holding Company. Notwithstanding anything herein to the contrary, if the Company is reorganized such that the Common Stock is exchanged for the common stock of a new entity ("Holdco") whose common stock is traded on NASDAQ or another recognized securities exchange, then the Company, by notice to the holders of the Convertible Preferred Stock but without any required consent on their part, may cause the exchange of this Convertible Preferred Stock for convertible preferred stock of Holdco having the same terms and conditions as set forth herein, provided that where Holdco is not a Delaware company or where the Holdco share structure is not identical to that of the Company, the rights attaching to the mandatorily redeemable preferred stock of Holdco may be adjusted so as to comply with the local law of the country of incorporation of Holdco or the new share structure of Holdco subject to such rights effectively giving the same economic rights as the Mandatorily Redeemable Preferred Stock (ignoring for these purposes any resultant change in the tax treatment for the holders of such stock). B-49 60 (iii) Other Adjustments. In the event that, as a result of an adjustment made pursuant to paragraphs (6)(a) or (b), the holder of any Convertible Preferred Stock thereafter surrendered for conversion or redemption shall become entitled to receive any shares of capital stock of the Company other than shares of its Common Stock, thereafter the number of such shares issuable upon conversion or redemption of such security shall be subject to adjustment from time to time in a manner and on terms as nearly equivalent as practicable to the provisions with respect to Common Stock contained in such paragraphs this Article V. (c) Notices of Corporate Action. If: (i) the Company shall take any action which would require an adjustment of the Fixed Price pursuant to paragraph (6)(a); or (ii) the Company or the Board shall approve any Reorganization to which the Company is a party and for which approval of any Stockholders of the Company is required; or (iii) there shall be a voluntary or involuntary dissolution, liquidation or winding up of the Company; then, in each case, the Company shall cause to be filed with the transfer agent for the Convertible Preferred Stock, if any, and shall cause to be given to the holders of shares of the Convertible Preferred Stock in accordance with paragraph (15), as promptly as possible, but at least 10 days prior to the applicable date hereinafter specified, a notice stating (A) the date on which a record is to be taken for the purposes of such dividend or distribution, or, if a record is not to be taken, the date as of which the holders of Common Stock of record to be entitled to such dividend or distribution are to be determined or (B) the date on which the event giving rise to an adjustment of the type described in paragraph (6)(a), such a Reorganization, dissolu tion, liquidation or winding up may occur, as the case may be, is expected to become effective or occur, and, if earlier, the date as of which it is expected that holders of Common Stock of record shall be entitled to exchange their shares of Common Stock for stock of the Company, securities, cash or other property deliverable upon such Reorganization, dissolution, liquidation or winding up. Failure to give or receive such notice or any defect therein shall not affect the legality or validity of the action or transactions described in sub-paragraphs (i) through (iii) above. (d) Notice of Adjustments. Whenever any adjustment is required by the terms of paragraph (6)(a), the Company shall promptly cause a notice of such B-50 61 adjustment and a computation thereof to be mailed to each registered holder of shares of the Convertible Preferred Stock. (e) Deferral of Issuance and Payment. In any case in which para graph (6) shall require an adjustment be made immediately following a record date, the Company may elect to defer (but only 5 Business Days following the mailing of the notice referred to in paragraph (6)(d)) issuing to the holder of any shares of the Convertible Preferred Stock converted after such record date the additional shares of Common Stock and other capital stock of the Company issuable upon such conver sion over and above the Common Stock and other capital stock of the Company issuable upon such conversion only on the basis of the conversion rate prior to adjustment; provided, however, that in lieu of the shares the issuance of which is so deferred, the Company shall issue or cause its transfer agent to issue due bills or other appropriate evidence of the right to receive such shares and (ii) paying to such holder any amount in cash in lieu of any fraction pursuant to paragraphs (5)(d) and (9) hereof. (f) Listing of Common Stock. The Company will list the shares of Common Stock required to be delivered as any dividend payment or as payment upon redemption or conversion of shares of the Convertible Preferred Stock, prior to delivery, upon each national securities exchange, the Nasdaq Stock Market's Na tional Market or any similar system of automated dissemination of securities prices, if any, upon which the Common Stock is listed at the time of delivery. (g) Provision of Information. So long as any shares of Convertible Preferred Stock remain outstanding, the Company undertakes to provide without charge to each record holder of such shares copies of each: (i) annual report of the Company on Form 10-K filed pursuant to Section 13(a) of the Exchange Act concurrently with such filing; (ii) quarterly reports of the Company on Form 10-Q and current report of the Company on Form 8-K filed pursuant to Section 13(a) or 15(d) or the Exchange Act concurrently with such filing; (iii) definitive proxy or information statement, form of proxy or other material of the Company filed pursu ant to Section 14(a) of the Exchange Act concurrently with such filing; and (iv) notice, press release and other information delivered to holders of Common Stock generally concurrently with such delivery. (7) LIMITATIONS ON DIVIDENDS AND REDEMPTIONS IN RESPECT OF COMPANY STOCK. B-51 62 (a) Limitations on Junior Stock Dividends. As long as any shares Convertible Preferred Stock are outstanding, no dividends shall be paid or declared in cash on Junior Stock, nor shall any other distributions be made on any Junior Stock, unless: (i) full dividends on all Parity Stock have been paid, or declared and set aside for payment, for all dividend periods terminating on or prior to the date of such Junior Stock dividend or distribution payment, to the extent such dividends are cumulative and have fallen due; (ii) the Company has paid or set aside all amounts, if any, then or therefore required to be paid or set aside for all purchase, retirement, and sinking funds, if any, for any Parity Stock; and (iii) the Company is not in default on any of its obligations to redeem any Parity Stock. (b) Limitations on Purchase of Junior Stock. As long as any shares of Convertible Preferred Stock are outstanding, no shares of any Junior Stock may be purchased, redeemed, or otherwise acquired by the Company or any of its Subsidiar ies (except in connection with a reclassification of any Junior Stock through the issuance of other Junior Stock and/or Convertible Securities for shares of Junior Stock and cash in lieu of fractional shares in connection therewith or the purchase, redemption or other acquisition of any Junior Stock from any wholly-owned subsid iary), nor may any funds be set aside or made available for any sinking fund for the purchase, redemption or other acquisition of any Junior Stock, unless: (i) full dividends on all Parity Stock have been paid, or declared and set aside for payment, for all dividend periods terminating on or prior to the date of such purchase, redemp tion or acquisition, to the extent such dividends are cumulative and have fallen due; (ii) the Company has paid or set aside all amounts, if any, then or theretofore required to be paid or set aside for all purchases retirement, and sinking funds, if any, for any Parity Stock; and (iii) the Company is not in default on any of its obligations to redeem any Parity Stock. (c) Junior Stock Dividends Otherwise Permitted. Subject to the provisions of paragraphs (7)(a) and 8(b), dividends or distributions (payable in cash, property or securities) may be declared and paid on the shares of any Junior Stock from time to time and any Junior Stock may be purchased, redeemed or otherwise acquired by the Company or any of its subsidiaries from time to time. In the event of the declaration and payment of any such dividends or distributions, the holders of such Junior Stock will be entitled, to the exclusion of holders of shares of Convert ible Preferred Stock, to share therein according to their respective interests. (d) Limitations on Parity Stock Dividends and Redemptions. As long as any shares of Convertible Preferred Stock are outstanding, dividends or other distributions may not be declared or paid on any Parity Stock, and the Company may B-52 63 not purchase, redeem or otherwise acquire any Parity Stock (except (x) from any wholly owned subsidiaries of the Company or (y) in connection with a mandatory conversion or exchange of such Parity Stock or a conversion or exchange of such Parity Stock at the option of the holder for securities other than Parity Stock or Senior Stock and cash in lieu of fractional shares in connection therewith) unless either: (a)(i) full dividends on all Parity Stock have been paid, or declared and set aside for payment, for all dividend periods terminating on or prior to the date of such Parity Stock dividend, distribution, purchase, re demption or other acquisition payment, to the extent such dividends are cumulative and have fallen due; (ii)the Company has paid or set aside all amounts, if any, then or theretofore required to be paid or act aside for all purchase, retirement, and sinking funds, if any, for any, Parity Stock; and (iii)the Company is not in default on any of its obligations to redeem any Parity Stock, or (b) with respect to the payment of dividends only, any such dividends are declared and paid pro rata so that the amounts of any dividends declared and paid per share on shares of Convertible Preferred Stock and each other share of such Parity Stock will in all cases bear to each other the same ratio that accrued and unpaid dividends (including any accumulation with respect to unpaid dividends for prior dividend periods, if such dividends are cumula tive) per share on shares of Convertible Preferred Stock and such other share of Parity Stock bear to each other. (e) Certain Permitted Dividends and Redemptions. Nothing contained in this paragraph (7) shall prevent: (i) the payment of dividends or the making of distributions on any Junior Stock solely in shares of Junior Stock and/or Convertible Securities for shares of Junior Stock (together with a cash adjustment for fractional shares, if any) or the redemption, purchase or other acquisition of Junior Stock solely in exchange for (together with a cash adjustment for fractional shares, if any), or through the application of the proceeds from the sale of, shares of Junior Stock and/or Convertible Securities for shares of Junior Stock; (ii) the payment of dividends or the making of distributions on any class or series of Parity Stock solely in (together with a cash adjustment for fractional shares, if any) shares of Junior Stock and/or Convertible Securities for shares of Junior Stock or the redemption, B-53 64 exchange, purchase or other acquisition of say class or series of Parity Stock solely in exchange for (together with a cash adjustment for fractional shares, if any), or through the application of the proceeds from the sale of shares of Junior Stock and/or Convertible Securities for shares of Junior Stock or (iii) the conversion or exchange of Convertible Preferred Stock into shares of Common Stock (together with a cash adjustment for fractional shares, if any) and other securities, assets or property, if any pursuant to the provisions of paragraphs (4), (5) or (6). (f) Waiver. The provisions of paragraphs (7)(a), (b) and (d) are for the sole benefit of the holders of Convertible Preferred Stock and any other class or series of Parity Stock having the terms described therein and accordingly, at any time when (i) there are no shares of any such other class or series of Parity Stock outstand ing or if the holders of each such other class or series of Parity Stock have, by such vote or consent of the holders thereof as may be provided for in the instrument creating or evidencing such class or series, waived in whole or in part the benefit of such provisions (either generally or in the specific instance), and (ii) the holders of shares of Convertible Preferred Stock shall have waived (as provided in paragraph (15)) in whole or in part the benefit of such provision (either generally or in the specific instance), then the provisions of paragraphs (7)(a), (b) and (d) shall not (to the extent waived, in the case of any partial waiver) restrict the payment of dividends or the making of distributions on, or the redemption, purchase or other acquisition of any shares of, Convertible Preferred Stock, any other class or series of Parity Steel or any Junior Stock. (8) LIQUIDATION RIGHTS. (a) Payment of Liquidation Preference. If there is any liquidation, dissolution, or winding up of the Company, whether voluntary or involuntary, then the holders of shares of Convertible Preferred Stock then outstanding, after payment, or provision for payment of the debts and other liabilities of the Company and the payment or provision for payment of any distribution on any shares of Senior Stock, and before any distribution to the holders of Junior Stock, shall be entitled to be paid out of the assets of the Company available for distribution to its stockholders an amount per share of Convertible Preferred Stock in cash equal to the Liquidation Preference. If the assets of the Company available for distribution to the holders of the shares of Convertible Preferred Stock upon any dissolution, liquidation or winding up of the Company shall be insufficient to pay in full the Liquidation Preference payable to the holders of outstanding shares of Convertible Preferred Stock and the liquidation preference payable to all other shares of Parity Stock (as set forth in the instrument or instruments creating such Parity Stock), then the B-54 65 holders of shares of Convertible Preferred Stock and of all other shares of Parity Stock shall share ratably in such distribution of assets in proportion to the amount which would be payable on such distribution if the amounts to which the holders of outstanding shares of Convertible Preferred Stock and the holders of outstanding shares of such other Parity Stock were paid in full. Except as provided in this paragraph (9)(a) holders is of Convertible Preferred Stock shall not be entitled to any distribution in the event of the liquidation, dissolution or winding up of the affairs of the Company. (b) Certain Events Not Deemed Liquidation, Etc. For the purposes of this paragraph (8) a Reorganization shall not be deemed to be a voluntary of involuntary liquidation, dissolution or winding up of the Company. (9) NO FRACTIONAL SHARES. No fractional shares of Common Stock or Convertible Preferred Stock or scrip shall be issued in connection with the delivery of shares of Common Stock or Convertible Preferred Stock upon conversion of shares of Convertible Preferred Stock or in payment, in whole or in part, of any dividend, Redemption Price or Liquidating Payment. Whether or not a fractional share would be delivered to a holder of Convertible Preferred Stock shall be based upon, in the case of the payment, in whole or in part, of dividends, a Redemption Price of a Liquidating Payment pursuant to paragraphs (3), (4) or (8) , respectively, and, in the case of conversion pursuant to paragraph (5), through the delivery of shares of Common Stock or Convertible Preferred Stock, on the total number of shares of Convertible Preferred Stock at the time held by such holder and the total number of shares of Common Stock or Convertible Preferred Stock, otherwise deliverable in respect thereof. Instead of the issuance of a fraction of a share of Common Stock or Convertible Preferred Stock or scrip, the Company shall pay instead an amount in cash (rounded to the nearest whole cent) equal to, in the case of Common Stock, the same fraction of the Closing Price of a share of preceding the Determination Date. (10) PAYMENT OF TAXES. The Company shall pay any and all documentary, stamp or similar transfer taxes payable in respect of the delivery of shares of Common Stock and Convertible Preferred Stock, pursuant to paragraphs (3), (4), (5), or (8), as applica ble; provided, however, the Company shall not be required to pay any such tax that may be payable because any such shares are issued in a name other than the name of the holder of such Convertible Preferred Stock. B-55 66 (11) NO PREEMPTIVE RIGHTS. The holders of shares of Convert ible Preferred Stock shall have no preemptive rights, including preemptive rights with respect to any shares of capital stock or other securities of the Company convertible into or carrying rights or options to purchase any such shares. (12) VOTING RIGHTS. (a) The holders of shares of Convertible Preferred Stock shall have no Voting rights, except as otherwise required by law and except as set forth in this paragraph (12). When and if the holders of Convertible Preferred Stock are entitled to vote by law or pursuant to this paragraph (12), each holder will be entitled to one vote per share. (b) Dividend Non-Payment. In the event that the Company shall have failed to pay dividends on the Convertible Preferred Stock for three semi-annual periods (whether or not consecutive) (such failure, a "Dividend Non-Pay ment"), the number of directors constituting the Board, without further action, shall be increased by two and the holders of the majority of the then outstanding shares of Convertible Preferred Stock shall have the right, voting separately as a class, to elect such two additional members of the Board, at any annual meeting of stockholders of the Company or by written consent pursuant to Section 228 of the DGCL, in each case, who shall continue to serve so long as such dividends on the Convertible Preferred Stock have not been paid. If and when all such accrued and unpaid dividends on the Convertible Preferred Stock have been paid or declared and set apart for payment, the holders of shares of Convertible Preferred Stock shall be divested of the special voting rights provided for by this paragraph (12), subject to revesting in the event of every subsequent Dividend Non-Payment. Upon termina tion of such special voting rights, the term of office of each director elected pursuant to this paragraph (12) by the holders of shares of Convertible Preferred Stock (a "Preferred Stock Director") shall terminate immediately and the number of directors constituting the Board shall, without further action, be reduced by two, subject always to the increase of the number of directors pursuant to this paragraph (12) in the case of the future right of the holders of Convertible Preferred Stock to elect Preferred Stock Directors. Any Preferred Stock Director may be removed by, and shall not be removed otherwise than by, the vote of the holders of record of a majority of the outstanding shares of the Convertible Preferred Stock entitled to vote thereon present at a meeting called for such purpose at which a quorum is present or by written consent pursuant to Section 228 of the DGCL. So long as a Dividend Non-Payment shall continue, any vacancy in the office of a Preferred Stock Director may be filled by vote of the holders of record of a majority of the outstanding shares of Convertible Preferred Stock entitled to vote thereon present at a meeting called for such purpose at which a quorum is present or by written consent pursuant to Section B-56 67 228 of the DGCL. As long as a Dividend Non-Payment shall continue, holders of shares of Convertible Preferred Stock shall not, as such stockholders, be entitled to vote on the election or removal of directors other than Preferred Stock Directors, but shall not be divested of any other voting rights provided to such stockholders by law or this Certificate of Designations with respect to any other matter to be acted upon by the stockholders of the Company. At any meeting held for the purpose of electing directors at which the holders of outstanding shares of Convertible Preferred Stock shall have the right to elect directors as provided in this paragraph (12), the presence, in person or by proxy, of the holders of at least a majority of the then outstanding shares of Convertible Preferred Stock on which like voting rights have been conferred and are exercisable shall be required and be sufficient to constitute a quorum of such class for the election of directors by such class. At any such meeting or adjournment thereof (i) the absence of a quorum of the holders of the Convertible Preferred Stock present in person or by proxy shall not prevent the election of directors other than those to be elected by the holders of the Convertible Preferred Stock, and the absence of a quorum or quorums of the holders of any class or classes of any stock or other securities of the Company other than the Convertible Preferred Stock shall not prevent the election of directors to be elected by the holders of the Convertible Preferred Stock and (ii) in the absence of a quorum of the holders of any class of stock entitled to vote for the election of directors, a majority of the holders present in person or by proxy of such class shall have the power to adjourn the meeting for the election of directors which the holders of such class are entitled to elect, from time to time, without notice (except as required by law) other than announcement at the meeting, until a quorum shall be present. (c) Certain Changes to Charter. For as long as any shares of Con vertible Preferred Stock remain outstanding, the affirmative vote of the holders of at least a majority of such outstanding shares (voting separately as a class) given in Person or by proxy at an annual meeting or a special meeting called for such pur pose, shall be necessary (i) before the Company may amend any of the provisions of this Certificate of Designations or the Restated Certificate of Incorporation of the Company which would alter or change the powers, preferences or special rights of the holders of the shares of Convertible Preferred Stock then outstanding so as to affect them adversely; provided, however, that: (x) any such amendment that would authorize, create or increase the authorized amount of any additional shares of Junior Stock or B-57 68 shares of any other class or series of Parity Stock (whether or not already authorized); and (y) any such amendment that would increase the number of authorized shares of Preferred Stock of the Company (but not the number of authorized shares of Convertible Preferred Stock) or that would decrease (but not below the number of shares, then outstand ing) the number of authorized shares of Preferred Stock (but not the number of authorized shares of Convertible Preferred Stock); shall be deemed not to adversely affect such powers preferences or rights and shall not be subject to approval by the holders of shares of Convertible Preferred Stock; and (ii) before the Company may reclassify the outstanding shares of Convertible Preferred Stock into another class or series of capital stock of the Company; provided further, however, that no consent described in clause (i) of this paragraph of the holders of the shares of Convertible Preferred Stock shall be required if, at or prior to the time when such amendment is to take effect, provision is made for the redemp tion of all shares of Convertible Preferred Stock at the time outstanding. (d) Creation of Senior Stock. No consent or vote of the holders of the shares of Convertible Preferred Stock shall be necessary before the Company or the Board may authorize, create or issue any class or series of Senior Stock. (e) No Other Vote. Except as otherwise set forth in this paragraph (12) or as required by law, the holders of Convertible Preferred Stock shall not have any relative, participating, optional or other special voting rights and powers and the consent or vote of such holders shall not be required for the taking of any corporate action by the Company or the Board. The provisions of this paragraph (12) are in lieu of, and not in addition to, any voting rights specified in the Restated Certificate of Incorporation as applicable to a series of Preferred Stock. (13) PAYMENTS. Payment of cash amounts due in respect of the Convertible Preferred Stock will be paid to the holders of shares of Convertible Preferred Stock (or, in the case of joint holders, the first-named) as appearing in the stock register of the Company for the Convertible Preferred Stock as at opening of business (New York time) on the date specified in this Certificate for the purpose of determining the holders of Convertible Preferred Stock entitled to such payments or, it no such date B-58 69 is specified, the fifteenth Business Day before the due date for such payment (the "Payment Record Date"). Payments of cash amounts due in respect of the Convertible Preferred Stock will be made by a check in U.S. dollars drawn on a bank in New York and mailed to the address (as recorded is the stock register of the Company for the Convertible Preferred Stock) of the holder thereof (or, in the case of joint holders, the first-named) not later than the relevant date for payment unless, prior to the relevant Payment Record Date, the Company has received from the holder thereof (or, in the case of joint holders, the first-named) written instructions for payment to be made by wire transfer to a specified designated account. If the due date for payment of any cash amount in respect of the Convertible Preferred Stock is not a Business Day, then the holder thereof will not be entitled to payment thereof until the next following day which is a Business Day and, if such payment is to be made by transfer to a desig nated account rather than by check, a day on which commercial banks and foreign exchange markets settle, payments in U.S. dollars in the place where the relevant designated account is located. (14) NOTICES. Any notice or communication by a holder of Convertible Preferred Stock to the Company is duly given if in writing and delivered in person or mailed by first-class mail to the Company at its address as set forth in its then most recently filed Form 10-K or 10-Q as the case may be. Any notice or communications to a holder of Convertible Preferred Stock shall be mailed by first-class mail to his address shown on the stock register of the Company for the Convertible Preferred Stock or, if there are more than 20 holders of record of the Convertible Preferred Stock and the Company in its sole discretion so elects, in a leading daily newspaper having general circulation in New York (which is expected to be the Wall Street Journal) or England and Wales (which is expected to be The Financial Times). Failure to mail a notice or communication to one holder or any defect in it shall not affect its sufficiency with respect to other holders. If a notice or communication is given in the manner provided in this paragraph (14) within the time prescribed by this Certificate, it shall be conclusively presumed to have been duly given, whether or not the person entitled to such notice receives it. B-59 70 (15) WAIVER. Any provision of this Certificate of Designations which, for the benefit of the holders of Convertible Preferred Stock, prohibits, limits or restricts actions by the Company may be waived in whole or in part, or the application of all or any part of such provision in any particular circumstance or generally may be waived, in each case with the consent of the holders of at least a majority of the number of shares of Convertible Preferred Stock then outstanding, either in writing or by vote at a meeting called for such purpose at which the holders of Convertible Preferred Stock shall vote as a separate class. (16) REGISTRATION, TRANSFER AND EXCHANGES. (a) The Company will keep with , the registrar and transfer agent, a register in which the Company will provide for the registration and transfer of shares of Convertible Preferred Stock. Any holder of shares of Convertible Preferred Stock may, at its option, in person or by duly authorized attorney, surrender the certificate representing the same for exchange at (duly endorsed or accompanied, if so required by the Company, by a written instrument of transfer duly executed by such holder or his or her duly authorized attorney), and, within a reasonable time thereafter and without expense (other than transfer taxes, if any), receive in exchange therefor one or more duly executed certificate or certificates dated as of the date to which dividends have been paid on the shares of Convertible Preferred Stock so surrendered, or if no dividend has yet been so paid, then dated the date hereof, and registered in such name or names, all as may be designated by such holder, for the same aggregate number of shares of Convertible Preferred Stock as represented by the certificate or certificates so surrendered. The Company covenants and agrees to take and cause to be taken all action reasonably necessary to effect such registrations, transfers and exchanges. Each share of Convertible Preferred Stock issued in exchange for any share shall carry the same rights to unpaid dividends and redemption payments which were carried by the share so exchanged, so that neither gain nor loss of any such right shall result from any such transfer or exchange. (b) The Company and any agent of the Company may treat the person in whose name any share of Convertible Preferred Stock is registered as the owner of such share for the purpose of receiving payment of dividends, and amounts payable on redemption and liquidation in respect of such share and for all other purposes. (c) The holders of Convertible Preferred Stock are entitled to certain rights under the Registration Rights Agreement. The certificates representing shares B-60 71 of Convertible Preferred Stock will bear a legend indicating that they have been issued in a transaction exempt from the Securities Act and may only be transferred in accordance therewith or pursuant to an exemption therefrom. (17) EXCLUSION OF OTHER RIGHTS. Except as may otherwise be required by law, the shares of Convertible Preferred Stock shall not have any designations, preferences, limitations or relative rights other than those specifically set forth in this Certificate of Designations other than the rights set forth in the Registration Rights Agreement, the terms of which are incorporated herein by reference. (18) SEVERABILITY OF PROVISIONS. Whenever possible, each provision of this Certificate of Designations shall be interpreted in a manner as to be effective and valid under applicable law, but if any provision hereof is held to be prohibited by or invalid under applicable law, such provision shall be ineffective only to the extent of such prohibition or invalidity, without invalidating or otherwise adversely affecting the remaining provisions hereof. If a court of competent jurisdic tion should determine that a provision hereof would be valid or enforceable if a period of time were extended or shortened or a particular percentage were increased or decreased, then such court may make such change as shall be necessary to render the provision in question effective and valid under applicable law. 0229901.02-New YorkS5A B-61 72 73 Exhibit C 9.9% NON-VOTING MANDATORILY REDEEMABLE PREFERRED STOCK, SERIES B (1) Designation; Number of Shares. The designation of the series of Preferred Stock, par value $.01 per share, of the Company created hereby shall be "9.90% Non-voting Mandatorily Redeemable Preferred Stock, Series B" (including, in the case of any reclassification, recapitalization, or other change to such Preferred Stock or, in the case of a consolidation or merger of the Company with or into another Person affecting such Preferred Stock, such capital stock to which a holder of such Preferred Stock shall be entitled upon the occurrence of such event, the "Mandatorily Redeemable Preferred Stock"). The authorized number of shares of Mandatorily Redeemable Preferred Stock shall be 52,217, which number may from time to time be increased or decreased (but not below the number then outstanding). Each share of Mandatorily Redeemable Preferred Stock shall have a stated value of $1,000 (the "Stated Value"). Any shares of Mandatorily Redeemable Preferred Stock redeemed or otherwise acquired by the Company shall be retired and shall resume the status of authorized and unissued shares of Preferred Stock, without designation as to series, until such shares are once more designated as part of a particular series of Preferred Stock by the Board of Directors. (2) Certain Definitions. Unless the context otherwise requires, the terms defined in this paragraph (2) shall have, for all purposes of this Certificate of Designations, the meanings herein specified: "Adjustment Date" shall have the meaning set forth in paragraph (4)(k). "Affiliate" of any Person shall mean another Person that directly or indirectly, through one or more intermediaries, controls, is controlled by, or is under common control with, such first person, where "control" shall mean the possession, directly or indirectly, of the power to direct or cause the direction of the management policies of a person, whether through the ownership of voting securities, by contract, as trustee or executor, or otherwise. "Applicable Price" shall mean the aggregate of (A) in the event of a Reorganization in which the holders of Common Stock receive cash, the amount of such cash receivable by the holder of one share of Common Stock (as such share is in effect immediately prior to the consummation of such Reorganization); and (B) in the event of a Reorganization in which the holders of Common Stock receive securities or other property which are traded on an established market (within the C-1 74 meaning of Treasury Regulation 1.1273-2(f)(1) of the Internal Revenue Code of 1986, as in effect on September 30, 1990), the average (or if there be more than one security or item of property the sum of the averages) of the daily Trading Prices of such securities and/or property receivable by the holder of one share of Common Stock (as such share is in effect immediately prior to such consummation) for the period of ten consecutive Trading Days ending on the Trading Day immediately preceding date of occurrence of the Reorganization, appropriately adjusted to take into account any stock dividend on such security or property, or any subdivision, split, combination, reclassification of such security or property that occurs or the "ex" date for which occurs on or prior to such date. "Average Market Price" on any Determination Date or Adjustment Date, as applicable, shall mean the average of the daily Closing Prices for the period of 10 consecutive Trading Days, ending on the Trading Day immediately preceding such Determination Date or Adjustment Date, as applicable, appropriately adjusted to take into account any stock dividend on the Common Stock or any subdivision, split, combination or reclassification of the Common Stock that occurs, or the date on which "ex-dividend" trading commences, during the period following the first Trading Day in such ten-Trading Day period to and including the Determination Date or Adjustment Date, as applicable. "Board" shall mean the Board of Directors of the Company, and, unless the context indicates otherwise, shall also mean, to the extent permitted by law, any committee thereof authorized, with respect to any particular matter, to exercise the power of the Board of Directors of the Company with respect to such matter. "Business Day" shall mean any day other than a Saturday, Sunday or a day on which banking institutions in New York, New York and London, England are authorized to close or not obligated by law or executive order to open. "Closing Price" shall mean, on any day: (i) the average between the high and low reported sale price of a share of Common Stock on and as reported by the Nasdaq Stock Market's National Market on such day; (ii) if the primary trading market for the Common Stock on such day is not the Nasdaq Stock Market's National Market, then the closing sale price regular C-2 75 way on such day, or, in case no such sale takes place on such day, the average of the reported closing bid and asked prices regular way on such day, in either case as reported by the Nasdaq System, the National Quotations Bureau, Inc. or a compara ble service; (iii) if the Closing Price on such day is not available pursuant to one of the methods specified above, then the average of the bid and asked prices for the Common Stock on such day as furnished by any New York Stock Exchange member firm selected from time to time by the Board for that purpose; or (iv) if the Closing Price on such day is not available pursuant to the method specified in (iii) above, the determination of Closing Price shall be deter mined in good faith by the Board exercising its reasonable discretion. "Commission" shall have the meaning set forth in paragraph (4)(k). "Common Stock" shall mean the shares of common stock, par value $0.01 per share, of the Company, which term shall include, where appropriate, in the case of any reclassification, recapitalization or other change in the Common Stock, or in the case of a consolidation or merger of the Company with or into another Person affecting the Common Stock, such capital stock to which a holder of Com mon Stock shall be entitled upon the occurrence of such event. "Common Stock Dividend Amount" shall have the meaning set forth in paragraph (3) (c). "Convertible Securities" shall mean securities, including evidences of indebtedness or shares of stock, which are, at the option of the holder thereof, convertible into or exchangeable, directly or indirectly, for shares of Common Stock. "Determination Date" shall mean: (i) in the case of a dividend payment, the record date for such dividend payment, (ii) in the case of a redemption payment pursuant to paragraph (4)(a), the Redemption Date, (iii) in the case of a redemption payment pursuant to paragraph (4)(b), the tenth anniversary of the Issue Date, (iv) in the case of a redemption payment pursuant to paragraph (4)(d), the Adjustment Date, and (v) in the case of a Reorganization, the date the Reorganization occurs. C-3 76 "Effectiveness Date" shall have the meaning set forth in paragraph (4)(k). "Exchange Act" shall mean the Securities Exchange Act of 1934, as amended from time to time, or any successor statute, and the rules and regulations promulgated thereunder. "Extended Sale Date" shall have the meaning set forth in paragraph (4)(k). "Fixed Price", on any Determination Date with respect to any Other Equity Security, shall have the meaning assigned to such term in the certificate of designations relating to, and setting forth the terms of, such Other Equity Security. "Full Consideration Amount" shall have the meaning set forth in paragraph (4)(k). "Issue Date" shall mean December 21, 1998. "JPPF" shall mean the Series A Junior Participating Preferred Stock of the Company issuable upon exercise of the Rights pursuant to the Rights Agree ment. "Junior Stock" shall mean: (i) each class or series of common stock of the Company, including, without limitation, the Common Stock; (ii) the JPPF issuable upon exercise of the Rights; (iii) any other class or series of capital stock of the Company hereafter created, other than (a) any class or series of Parity Stock (except to the extent provided under clause (iv) hereof) and (b) any class or series of Senior Stock, and (iv) any class or series of Senior Stock or Parity Stock to the extent that it ranks junior to the Mandatorily Redeemable Preferred Stock as to dividend rights, rights of redemption or rights on liquidation, as the case may be. For pur poses of clause (iii) above, a class or series of Senior Stock or Parity Stock shall rank C-4 77 junior to the Mandatorily Redeemable Preferred Stock as to dividend rights, rights of redemption or rights on liquidation if the holders of shares of Mandatorily Redeem able Preferred Stock shall be entitled to dividend payments, payments on redemption or payments of amounts distributable upon dissolution, liquidation or winding up of the Company, as the case may be, in preference or priority to the holders of shares of such class or series of Senior Stock or Parity Stock. "Liquidating Payment" shall mean an amount equal to the Liquidation Preference of a share of Mandatorily Redeemable Preferred Stock or, if less, the amount payable in respect of one share of Mandatorily Redeemable Preferred Stock pursuant to paragraph (7)(a) upon the voluntary or involuntary liquidation, dissolu tion or winding up of the affairs of the Company. "Liquidating Payment Date" shall mean the date on which the Company makes the aggregate Liquidating Payment to all holders of outstanding shares of Mandatorily Redeemable Preferred Stock. "Liquidation Preference" measured per share of the Mandatorily Redeemable Preferred Stock, shall mean an amount equal to (a) the Stated Value per share of Mandatorily Redeemable Preferred Stock, plus (b) for purposes of determin ing the amount payable pursuant to paragraph (7) only, an amount equal to all dividends accrued but unpaid on such share, whether or not such unpaid dividends have been declared or there are funds of the Company legally available for the payment of dividends, to the Liquidating Payment Date. "Mandatorily Redeemable Preferred Stock" shall have the meaning set forth in paragraph (1). "Mandatory Redemption Price" shall have the meaning set forth in paragraph (4)(b). "Option" shall mean any right, option or warrant entitling the holder thereof to subscribe for, purchase, or otherwise acquire Convertible Securities or Common Stock in the Company (other than the Rights). "Other Equity Security" shall mean any equity security of the Com pany, other than Common Stock, issued by the Company to provide funds for the payment in cash of the Redemption Price or Mandatory Redemption Price in C-5 78 accordance herewith, with the rights to be determined in the sole discretion of the Company. "Parity Stock" shall mean the Mandatorily Redeemable Preferred Stock and any class or series of capital stock, whether now existing or hereafter created, of the Company to the extent ranking on a parity basis with the Mandatorily Redeemable Preferred Stock as to dividend rights, rights of redemption or rights on liquidation. Capital stock of any class or series, whether now or existing or hereafter created, shall rank on a parity as to dividend, rights of redemption or rights on liquidation with the Mandatorily Redeemable Preferred Stock, whether or not the dividend rates, dividend payment dates, redemption or liquidation prices per share or sinking fund or mandatory redemption provision, if any, are different from those of the Mandatorily Redeemable Preferred Stock, if the holders of shares of such class or series shall be entitled to dividend payments, payments on redemption or payments of amounts distributable upon dissolution, liquidation or winding up of the Com pany, as the case may be, in proportion to their respective accumulated and accrued and unpaid dividends, redemption prices or liquidation prices, respectively, without preference or priority, one over the other, as between the holders of shares of such class or series and the holders of Mandatorily Redeemable Preferred Stock. No class or series of capital stock that ranks junior to the Mandatorily Redeemable Preferred Stock as to rights on liquidation shall rank or be deemed to rank on a parity basis with the Mandatorily Redeemable Preferred Stock as to dividend rights or rights of redemption. "Payment Record Date" shall have the meaning set forth in paragraph (12). "Permitted Cost" shall mean underwriting costs, brokerage fees and related costs and expenses not exceeding 3% for Common Stock or 5% for any Other Equity Security of either the applicable amount of the Redemption Price or Mandatorily Redemption Price (in the event that any Other Equity Security is issued in order to provide cash for the redemption), or of gross proceeds (in any other case). "Person" shall mean any individual corporation, partnership, joint venture, association, joint stock company, limited liability company, trust, unincor porated organization, government or agency or political subdivision thereof, or other entity, whether acting in an individual, fiduciary or other capacity. C-6 79 "Redemption Agent" shall have the meaning set forth under paragraph (4)(h). "Redemption Date" as to any share of Mandatorily Redeemable Preferred Stock, shall mean the date on which such share is redeemed by the Com pany pursuant to paragraph (4). "Redemption Notice" shall have the meaning set forth in paragraph (4)(f). "Redemption Price" shall have the meaning set forth in paragraph (4)(a). "Registration Statement" shall have the meaning set forth in paragraph (4)(k). "Reorganization" shall mean any of the following events: (i) any consolidation or merger of the Company with another entity (other than a merger or consolidation in which the Company is the surviving or continuing corporation and in which the Common Stock outstanding immediately prior to the merger or consolidation remains unchanged), (ii) the sale or other transfer of all or substantially all of its assets to another entity, (iii) any reorganization or reclassification of the Common Stock or other equity securities of the Company, and (iv) any statutory exchange of any shares of capital stock of the Company for shares of capital stock of another corporation (other than a merger or consolidation in which the Company is the surviving or continuing corporation and in which the Common Stock outstanding immediately prior to the merger or consoli dation remains unchanged). "Reorganization Unit" means the kind or amount of securities, cash or other property receivable upon consummation of a Reorganization in substitution of or in exchange for a share of Common Stock as such share is in effect immediately C-7 80 prior to such consummation (provided that if the kind or amount of securities, cash or other property receivable upon consummation of such Reorganization is not the same with respect to each such share, then the kind and amount of securities, cash or other property which shall be deemed receivable upon consummation of such Reorganization with respect to each such share for purposes hereof shall be the kind and amount so receivable per share by a plurality of such shares). "Rights" means the rights issuable pursuant to the Rights Agreement. "Rights Agreement" means the rights agreement, dated as of October 13, 1993, between the Company and Continental Transfer and Trust Company, as rights agent. "Securities Act" shall mean the Securities Act of 1933, as amended from time to time, or any successor statute, and the rules and regulations promul gated thereunder. "Senior Stock" shall mean any class or series of capital stock of the Company hereafter created to the extent ranking prior to the Mandatorily Redeem able Preferred Stock as to dividend rights, rights of redemption or rights on liquida tion. Capital stock of any class or series shall rank prior to the Mandatorily Redeem able Preferred Stock as to dividend rights, rights of redemption or rights on liquida tion if the holders of shares of such class or series shall be entitled to dividend payments, payments on redemption or payments of amounts distributable upon dissolution, liquidation or winding up of the Company, as the case may be, in preference or priority to the holders of shares of Mandatorily Redeemable Preferred Stock. No class or series of capital stock that ranks on a parity basis with or junior to the Mandatorily Redeemable Preferred Stock as to rights on liquidation shall rank or be deemed to rank prior to the Mandatorily Redeemable Preferred Stock as to dividend rights or rights of redemption, notwithstanding that the dividend rate, dividend payment dates, sinking fund provisions, if any, or mandatory redemption provisions thereof are different from those of the Mandatorily Redeemable Preferred Stock. "Stated Value" shall have the meaning set forth in paragraph (1). "Trading Day" shall mean a day on which the Nasdaq Stock Market's National Market or, if different, the principal exchange on which the Common Stock is quoted or traded is each open for the transaction of business. C-8 81 "Trading Price" of a security or property for any day means the closing sale price regular way on such day, or, in case no such sale takes place on such day, the average of the reported closing bid and asked prices of such security or property on such day on the applicable established market on which such security or property is traded. (3) DIVIDENDS. (a) Payment. The holders of outstanding shares of Mandatorily Redeemable Preferred Stock shall be entitled to receive, when, as and if declared by the Board out of funds legally available therefor (without prejudice to paragraph (3)(b)), dividends, in preference to dividends on any Junior Stock, at the rate per annum of 9.90% of the Stated Value per share, rounded to the nearest cent. Such dividends shall accrue from the Issue Date and shall be payable on the date the Mandatorily Redeemable Preferred Stock is redeemed pursuant to paragraph (4). Dividends on the outstanding shares of Mandatorily Redeemable Preferred Stock will accrue on a daily basis (without interest or compounding) whether or not there are funds legally available for the payment of such dividends and whether or not such dividends are declared. Dividends will cease to accrue in respect of shares of Mandatorily Redeemable Preferred Stock on the date of their redemption. No interest, or sum of money in lieu of interest, shall be payable in respect of any accrued dividend payment. (b) Declaration and Manner of Payment of Dividends. Any divi dends may be paid, in the sole discretion of the Board: (i) in cash out of funds legally available therefor; (ii) through the delivery of shares of Common Stock; or (iii) through any combination of the foregoing forms of consideration elected by the Board in its sole discretion. If any dividend declared by the Board is to be paid, in whole or in part, through the delivery of shares of Common Stock, each holder of Mandatorily Redeemable Preferred Stock shall receive the same proportion of cash and/or shares of Common Stock (except for cash paid in lieu of fractional shares) delivered in payment of such dividend to other holders of shares of Mandatorily Redeemable Preferred Stock. (c) Payment of Dividends by Delivery of Common Stock. If the Company elects to pay any dividend payment, in whole or in part, by delivery of shares of Common Stock, the amount of such dividend payment to be paid per share of Mandatorily Redeemable Preferred Stock in shares of Common Stock (the C-9 82 "Common Stock Dividend Amount") shall be paid through the delivery to the holders of record for such shares of Mandatorily Redeemable Preferred Stock on the record date for such dividend payment (which shall be not more than 10 days prior to the payment date) of a number of shares of Common Stock determined by dividing the Common Stock Dividend Amount by the Average Market Price. No fractional shares of Common Stock shall be delivered to a holder of shares of Mandatorily Redeemable Preferred Stock, but the Company shall instead pay a cash adjustment determined as provided in paragraph (8). Common Stock so payable shall receive the benefit of customary resale registration rights. (d) Prohibitions on Cash Dividends. Notwithstanding anything contained in this Certificate to the contrary, but without effect on the accrual thereof, no cash dividends on shares of Mandatorily Redeemable Preferred Stock shall be declared by the Board or paid or set apart for payment by the Company at such time as the terms and provisions of any agreement of the Company, including, without limitation, any agreement, contract, indenture, bond, note, debenture, guarantee or other instrument relating to or evidencing its indebtedness, prohibits such declara tion, payment or setting apart for payment or provides that such declaration, payment or setting apart for payment would constitute a breach thereof or a default thereun der; provided, however, that nothing contained in this paragraph (d) shall alter, limit or restrict the Company's obligation to declare and pay accrued dividends, to the extent permitted by applicable law, through the delivery of shares of Common Stock, whether permitted by any such agreement or not. (e) Pro Rata. All dividends paid with respect to the shares of Mandatorily Redeemable Preferred Stock shall be paid pro rata (as nearly as may be practicable) to the shareholders entitled thereto. (f) Priority. Payment of dividends to the holders of shares of Mandatorily Redeemable Preferred Stock shall be subject to the prior preferences and other rights of any Senior Stock and to the provisions of paragraph (6). (4) REDEMPTION. (a) Optional Redemption. At any time during the period beginning on the Issue Date until the Redemption Date, the Company shall have the right to redeem the outstanding shares of Mandatorily Redeemable Preferred Stock at a price equal to $1,000 per share, together with an amount equal to all dividends accrued but unpaid thereon to the Redemption Date (the "Redemption Price"). C-10 83 (b) Mandatory Redemption. All outstanding shares of Mandatorily Redeemable Preferred Stock shall be mandatorily redeemed by the Company out of funds legally available therefor on the date that is the tenth anniversary of the Issue Date at a redemption price equal to $1,000 per share, plus an amount equal to all accrued and unpaid dividends per share to the Redemption Date (the "Mandatory Redemption Price"). (c) Event of Reorganization. All outstanding shares of Mandatorily Redeemable Preferred Stock shall be mandatorily redeemed by the Company at the Mandatory Redemption Price in the event of a Reorganization, other than a Reorga nization as set forth in paragraph (5)(a) or any other transaction undertaken for the bona fide purpose of causing the Common Stock of the Company to be convertible into or exchangeable for, immediately or over time, equity securities of a public limited company incorporated in England and/or Wales for the purpose of listing on the London Stock Exchange. (d) Early Mandatory Redemption. If by June 15, 2000, the Company has neither exercised its right to optionally redeem the Mandatorily Redeemable Preferred Stock pursuant to paragraph (4)(a) nor redeemed the Mandatorily Redeem able Preferred Stock pursuant to paragraph (4)(c), all outstanding shares of Mandatorily Redeemable Preferred Stock shall be mandatorily redeemed by the Company at the Mandatory Redemption Price, less any Permitted Cost. The Redemption Date for such redemption shall be July 1, 2000. (e) Company's Right to Elect Manner of Payment of Redemption Price or Mandatory Redemption Price. The Company may effect the redemption of shares of Mandatorily Redeemable Preferred Stock at the Redemption Price or the Mandatory Redemption Price, in the sole discretion of the Board: (i) in cash out of funds legally available therefor, (ii) subject to compliance with paragraph (g), in exchange for and through the delivery of shares of Common Stock, or (iii) through any combination of the foregoing forms of consideration elected by the Board in its sole discretion. (f) Notice of Redemption. In the event of an offer by the Company to redeem any shares of Mandatorily Redeemable Preferred Stock pursuant to para graph (4)(a) or a redemption of the Mandatorily Redeemable Preferred Stock pursuant to paragraph (4)(b), (4)(c) or (4)(d), the Company shall provide notice of such offer to redeem or such redemption to holders of record of Mandatorily Re deemable Preferred Stock to be redeemed not less than 30 days (not less than 10 days if the Redemption Price or Mandatory Redemption Price is payable in cash or Common Stock) nor more than 60 days prior to the Redemption Date. Such notice (a "Redemption Notice") shall, subject to paragraph (4)(h)(z), be provided in accor dance with paragraph (13); provided, however, that neither failure to give such notice nor any defect therein shall affect the validity of the proceedings for the redemption of any shares of Mandatorily Redeemable Preferred Stock to be redeemed. In addition to any information required by law, the Redemption Notice shall state, as appropriate, the following (and may contain such other informa tion as the Company deems advisable): (A) whether the redemption is pursuant to paragraph (4)(a), (4)(b), (4)(c) or (4)(d); (B) the Redemption Date; (C) the number of shares of Mandatorily Redeemable Preferred Stock to be redeemed and, if less than all the shares held by such holder are to be redeemed, the number of shares to be redeemed from such holder; (D) the Redemption Price or Mandatory Redemption Price and the form or forms of consideration that the Company has elected to pay and/or deliver upon such redemption and, if more than one form of consideration has been elected by the Company, the designated portions of the Redemption Price or Mandatory Redemption Price to be paid in each form of consideration so elected; (E) the place or places in the United States or England and Wales where certificates for Mandatorily Redeemable Preferred Stock to be redeemed are to be surrendered for redemption; and (F) that dividends on the shares of Mandatorily Redeemable Preferred Stock to be redeemed shall cease to accrue on the Redemption Date (unless the Company defaults in making payment of the Redemption Price). C-11 84 (g) Redemption by Delivery of Common Stock. If the Company elects to pay, in whole or in part, the Redemption Price in respect of shares of Mandatorily Redeemable Preferred Stock in exchange for and through the delivery of shares of Common Stock, then the Company shall deliver to each holder of shares of Mandatorily Redeemable Preferred Stock to be redeemed on the Redemption Date a number of shares of Common Stock equal to the aggregate Redemption Price (or designated portion thereof) of such shares of Mandatorily Redeemable Preferred Stock divided by the Average Market Price. No fractional shares of Common Stock shall be delivered to a holder of shares of Mandatorily Redeemable Preferred Stock in payment of the Redemption Price, but the Company shall instead pay a cash adjustment determined as provided in paragraph (8). (h) Deposit of Funds and/or Shares. If on or before the Redemption Date: (x) the Company shall have deposited with any bank or trust company organized under the laws of the United States of America or any state thereof having capital, undivided profits and surplus aggregating at least $250 million (the "Re demption Agent"), cash (including cash for any adjustment in lieu of delivering fractional shares) and/or shares of Common Stock sufficient to pay in full the aggregate Redemption Price (calculated through the Redemption Date) for such shares of Mandatorily Redeemable Preferred Stock on such Redemption Date, (y) such cash and/or shares of Common Stock are readily available to, but only to, the holders of Mandatorily Redeemable Preferred Stock in satisfaction of the obligations of the Company with respect to the payment of the Redemption Price and (z) the Company shall prior to the Redemption Date have so notified each record holder of Mandatorily Redeemable Preferred Stock, which notice shall be given to each holder of Mandatorily Redeemable Preferred Stock by courier and shall identify the Redemption Agent, its address and telephone and telecopier numbers and the contact person(s) at the Redemption Agent responsible for administration of the deposit then, effective as of the close of business on such Redemption Date (and notwithstanding that any certificate therefor shall not have been surrendered for cancellation): (i) such shares of Mandatorily Redeemable Preferred Stock shall no longer be deemed outstanding but any shares of Common Stock so deposited in accordance with this paragraph (h) for which such Mandatorily Redeemable Preferred Stock was re deemed shall be deemed to be outstanding; (ii) the holders thereof shall cease to be holders of Mandatorily Redeemable Preferred Stock but shall be shown on the records of the Company as holders of the Common Stock so deposited in accordance with this paragraph (h) in redemption of such Mandatorily Redeemable Preferred Stock; (iii) dividends with respect to the shares so called for redemption shall cease to accrue on the Redemption Date but, subject to paragraph (4)(g), such holders shall C-12 85 be entitled to any dividends which shall thereafter accrue on, and shall be entitled to exercise all other rights associated with, any shares of Common Stock so deposited in accordance with this paragraph (h) in redemption of such Mandatorily Redeem able Preferred Stock; and (iv) all rights whatsoever with respect to the shares so called for redemption shall forthwith cease and terminate (except the right of such holders, upon the surrender of certificates evidencing the shares of Mandatorily Redeemable Preferred Stock so redeemed, to receive the cash and/or Common Stock payable or deliverable in payment of the Redemption Price therefor, and the applica ble cash adjustment, if any, in lieu of fractional shares, without interest). Any cash and/or shares of Common Stock so deposited or set apart which shall remain unclaimed at the end of one year after the Redemption Date shall be returned or released to the Company, after which time the holders of shares of Mandatorily Redeemable Preferred Stock called for redemption on such Redemption Date that remain outstanding after such one-year period shall look only to the Company for the payment of the Redemption Price for such shares, without interest. Subject to compliance with paragraph (4)(k), a deposit made in compliance with the immediately preceding sentence shall, except to the extent released or returned to the Company, be deemed to constitute full payment for the shares of Mandatorily Redeemable Preferred Stock to be redeemed. Any interest accrued on funds so deposited shall be paid by the Redemption Agent to the Com pany from time to time. (i) Surrender of Certificates; Status. Each holder of shares of Mandatorily Redeemable Preferred Stock to be redeemed shall not be entitled to receive payment of the Redemption Price or Mandatory Redemption Price for such shares until such holder shall surrender the certificates evidencing such shares duly endorsed by, or accompanied by, an instrument of transfer (in form reasonably satisfactory to the Company) duly executed by, the holder or such holder's duly authorized attorney-in-fact or, if the shares issuable upon redemption are to be issued in the same name as the name in which such share of the Mandatorily Redeemable Preferred Stock is registered, in blank to the Redemption Agent (or to the Company if there is no Redemption Agent) at the place designated in the Redemption Notice for such redemption and shall thereupon be entitled to receive the consideration for such shares specified in the Redemption Notice in an aggregate amount equal to the Redemption Price or Mandatory Redemption Price for such shares. Holders of shares of Mandatorily Redeemable Preferred Stock that are redeemed on the Re demption Date shall not be entitled to receive dividends declared and paid on any shares of Common Stock exchangeable and deliverable in payment of the Redemp tion Price or Mandatory Redemption Price (or designated portion thereof) for such shares of Mandatorily Redeemable Preferred Stock, and such shares of Common Stock shall not be entitled to vote, until such shares of Common Stock are delivered upon the surrender of the certificates representing such shares of Mandatorily Redeemable Preferred Stock. Upon such surrender, such holders shall be entitled to receive such dividends declared and paid subsequent to such Redemption Date and prior to the delivery. (j) Priority. The right of the Company to redeem shares of Mandatorily Redeemable Preferred Stock pursuant to this paragraph (4) shall be subject to the prior preferences and other rights of any Senior Stock and to the provisions of paragraph (7). (k) Full Consideration Amount. If the Company elects to exchange and deliver shares of Common Stock in payment of the Mandatory Redemption Price (or a designated portion thereof) pursuant to paragraph (e), the Company shall be obligated to file (on or prior to April 1, 2000) and cause to be declared effective by the Securities and Exchange Commission (the "Commission") a resale "shelf" registration statement (the "Registration Statement"), or such other successor form of registration statement that may be adopted by the Commission from time to time, on behalf of the holders of such Common Stock. The Company may deliver shares of Common Stock having a value (equal to the Average Market Price as of April 1, 2000) to the holders. When the Registration Statement is declared effective (the "Effectiveness Date"), the holders shall sell at the time (but no later than the later to occur of June 15, 2000 and ten Business Days after the Effectiveness Date (the "Extended Sale Date")) and in a bona fide manner designated by the Company (but shall not sell or transfer in any other manner until after June 15, 2000 (if the Effec tiveness Date has not theretofore occurred) and prior to the Effectiveness Date), the shares of Common Stock received in redemption of the Mandatorily Redeemable Preferred Stock and the holders shall be required to cooperate fully (including by executing customarily required documentation) in such process and the holders shall retain the proceeds of such sale. On or prior to the later to occur of July 1, 2000 and two Business Days after the Extended Sale Date (either, the "Adjustment Date"), the Company shall deliver to such holders, on a pro rata per share basis, consideration (payable as set forth in paragraph (l)) equal to (a) (pound)31 million, together with accrued and unpaid dividends, calculated to the date of such delivery, as if the Mandatorily Redeemable Preferred Stock had remained outstanding until the Adjustment Date (the "Full Consideration Amount"), minus the aggregate of (b) (i) in the event that any such holders have previously sold all or a portion of their shares of Common C-13 86 Stock pursuant to such Registration Statement or otherwise by such date, the aggregate amount of proceeds from any such sale (without deduction of any custom ary underwriting costs, brokerage fees and other related costs and expenses not exceeding the Permitted Cost), plus (ii) in the event that any such holders still retain (by agreement of the holders and the Company) all or a portion of their shares of Common Stock on such date, the amount which is equal to the current market value of such shares of Common Stock, as determined using the Average Market Price, as of the Adjustment Date, plus (iii) the aggregate amount of any cash previously delivered in payment of the Redemption Price; provided, however, that (i) in no event shall any payment be made pursuant to this paragraph if the amount deter mined pursuant to subparagraph (b) above exceeds the Full Consideration Amount and (ii) if for any reason (other than agreement of the holders and the Company) shares of Common Stock are not sold by the Adjustment Date, the Full Consider ation Amount shall be adjusted to and calculated as of the date the shares are actually sold. (l) Payments with Respect to Full Consideration Amount. Any payment required to be made by the Company pursuant to the preceding paragraph may be paid, in the sole discretion of the Company, (i) in cash out of funds legally available therefor, (ii) in exchange for and through the delivery of shares of Common Stock, valued as of the Adjustment Date, or (iii) through any combination of the foregoing forms of consideration elected by Company in its sole discretion. Com mon Stock so payable shall be valued at the Average Market Price as of the Adjust ment Date and shall promptly receive the benefit of customary resale registration rights. (m) Other Equity Security. If the Company elects to sell any Other Equity Security at any time prior to June 15, 2000 in order to fund the redemption of the Mandatorily Redeemable Preferred Stock and/or Common Stock issued in redemption thereof, the holders will deliver such securities to the Company in exchange for the proceeds of the sale of such Other Equity Security (less any Permitted Cost). (5) REORGANIZATIONS. (a) Holding Company. Notwithstanding anything herein to the contrary, if the Company is reorganized such that the Common Stock is exchanged for the common stock of a new entity ("Holdco") whose common stock is traded on NASDAQ or another recognized securities exchange, then the Company, by notice to C-14 87 the holders of the Mandatorily Redeemable Preferred Stock but without any required consent on their part, may cause the exchange of this Mandatorily Redeemable Preferred Stock for mandatorily redeemable preferred stock of Holdco having the same terms and conditions as set forth herein, provided that where Holdco is not solely incorporated as a Delaware company or where the Holdco share structure is not identical to that of the Company, the rights attaching to the mandatorily redeem able preferred stock of Holdco may be adjusted so as to comply with the local law of the country of incorporation of Holdco or the new share structure of Holdco subject to such rights effectively giving the same economic rights as the Mandatorily Redeemable Preferred Stock (ignoring for these purposes any resultant change in the tax treatment for the holders of such stock). (b) Notices of Corporate Action. If: (i) the Company or the Board shall approve any Reorganization to which the Company is a party and for which approval of any stockholders of the Company is required; or (ii) there shall be a voluntary or involuntary dissolution, liquidation or winding up of the Company; then, in each case, the Company shall cause to be given to the holders of shares of the Mandatorily Redeemable Preferred Stock in accordance with paragraph (13), as promptly as possible, but at least 10 days prior to the applicable date hereinafter specified, a notice stating the date on which the event giving rise to an adjustment of the type described in paragraph (6)(a), such a Reorganization, dissolution, liquidation or winding up may occur, as the case may be, is expected to become effective or occur, and, if earlier, the date as of which it is expected that holders of Common Stock of record shall be entitled to exchange their shares of Common Stock for stock of the Company, securities, cash or other property deliverable upon such Reorganiza tion, dissolution, liquidation or winding up. Failure to give or receive such notice or any defect therein shall not affect the legality or validity of the action or transactions described in sub-paragraphs (i) or (ii) above. (c) Listing of Common Stock. The Company will list the shares of Common Stock required to be delivered as payment of dividends or upon redemption or conversion of shares of the Mandatorily Redeemable Preferred Stock, prior to delivery, upon each national securities exchange, the Nasdaq Stock Market's Na tional Market or any similar system of automated dissemination of securities prices, if any, upon which the Common Stock is listed at the time of delivery. (d) Provision of Information. So long as any shares of Mandatorily Redeemable Preferred Stock remain outstanding, the Company undertakes to provide without charge to each record holder of such shares copies of each: (i) annual report of the Company on Form 10-K filed pursuant to Section 13(a) of the Exchange Act concurrently with such filing; (ii) quarterly reports of the Company on Form 10-Q and current report of the Company on Form 8-K filed pursuant to Section 13(a) or 15(d) or the Exchange Act concurrently with such filing; (iii) definitive proxy or information statement, form of proxy or other material of the Company filed pursu ant to Section 14(a) of the Exchange Act concurrently with such filing; and (iv) notice, press release and other information delivered to holders of Common Stock generally concurrently with such delivery. (6) LIMITATIONS ON DIVIDENDS AND REDEMPTIONS IN RESPECT OF COMPANY STOCK. (a) Limitations on Junior Stock Dividends. As long as any shares of Mandatorily Redeemable Preferred Stock are outstanding, no dividends shall be paid or declared in cash on Junior Stock, nor shall any other distributions be made on any Junior Stock. (b) Limitations on Purchase of Junior Stock. As long as any shares of Mandatorily Redeemable Preferred Stock are outstanding, no shares of any Junior Stock may be purchased, redeemed, or otherwise acquired by the Company or any of its subsidiaries (except in connection with a reclassification of any Junior Stock through the issuance of other Junior Stock and/or Convertible Securities for shares of Junior Stock and cash in lieu of fractional shares in connection therewith, or the purchase, redemption or other acquisition of any Junior Stock from any wholly-owned subsidiary), nor may any funds be set aside or made available for any sinking fund for the purchase, redemption or other acquisition of any Junior Stock. (c) Limitations on Parity Stock Dividends and Redemptions. As long as any share of Mandatorily Redeemable Preferred Stock is outstanding, dividends or other distributions may not be declared or paid on any Parity Stock, and the Com pany may not purchase, redeem or otherwise acquire any Parity Stock (other than any outstanding shares of 9.90% Non-Voting Mandatorily Redeemable Preferred Stock, Series A, issued pursuant to the Certificate of Designations of the Company, dated C-15 88 September 21, 1998, or outstanding shares of 13% Series B Senior Redeemable Exchangeable Preferred Stock, issued pursuant to the Certificate of Designations of the Company, dated February 12, 1997) (except (x) from any wholly-owned subsid iaries of the Company or (y) in connection with a mandatory conversion or exchange of such Parity Stock or a conversion or exchange of such Parity Stock at the option of the holder for securities other than Parity Stock or Senior Stock and cash in lieu of fractional shares in connection therewith), unless with respect to the payment of dividends only, any such dividends are declared and paid pro rata so that the amounts of any dividends declared and paid per share on shares of Mandatorily Redeemable Preferred Stock and each other share of such Parity Stock will in all cases bear to each other the same ratio that accrued and unpaid dividends (including any accumu lation with respect to unpaid dividends for prior dividend periods, if such dividends are cumulative) per share on shares of Mandatorily Redeemable Preferred Stock and such other share of Parity Stock bear to each other. (d) Certain Permitted Dividends and Redemptions. Nothing contained in this paragraph (6) shall prevent: (i) the payment of dividends or the making of distributions on any Junior Stock solely in shares of Junior Stock and/or Convertible Securities for shares of Junior Stock (together with a cash adjustment for fractional shares, if any) or the redemption, purchase or other acquisition of Junior Stock solely in exchange for (together with a cash adjustment for fractional shares, if any), or through the application of the proceeds from the sale of, shares of Junior Stock and/or Convertible Securities for shares of Junior Stock; (ii) the payment of dividends or the making of distributions on any class or series of Parity Stock solely in (together with a cash adjustment for fractional shares, if any) shares of Junior Stock and/or Convertible Securities for shares of Junior Stock or the redemption, exchange, purchase or other acquisition of any class or series of Parity Stock solely in exchange for (together with a cash adjustment for fractional shares, if any), or through the application of the proceeds from the sale of shares of Junior Stock and/or Convertible Securities for shares of Junior Stock or (iii) the conversion or exchange of Mandatorily Redeemable Preferred Stock into or for shares of Common Stock (together with a cash adjustment for fractional shares, if any) and other securities, assets or property, if any pursuant to the provisions of paragraphs (3), (4) or (5). (f) Waiver. The provisions of paragraphs (6)(a), (b) and (d) are for the sole benefit of the holders of Mandatorily Redeemable Preferred Stock and any other class or series of Parity Stock having the terms described therein and accord ingly, at any time when (i) there are no shares of any such other class or series of Parity Stock outstanding or if the holders of each such other class or series of Parity C-16 89 Stock have, by such vote or consent of the holders thereof as may be provided for in the instrument creating or evidencing such class or series, waived in whole or in part the benefit of such provisions (either generally or in the specific instance), and (ii) the holders of shares of Mandatorily Redeemable Preferred Stock shall have waived (as provided in paragraph (14)) in whole or in part the benefit of such provision (either generally or in the specific instance), then the provisions of paragraphs (6)(a), (b) and (d) shall not (to the extent waived, in the case of any partial waiver) restrict the payment of dividends or the making of distributions on, or the redemption, purchase or other acquisition of any shares of, Mandatorily Redeemable Preferred Stock, any other class or series of Parity Stock or any Junior Stock. (7) LIQUIDATION RIGHTS. (a) Payment of Liquidation Preference. If there is any liquidation, dissolution, or winding up of the Company, whether voluntary or involuntary, then the holders of shares of Mandatorily Redeemable Preferred Stock then outstanding, after payment, or provision for payment of the debts and other liabilities of the Company and the payment or provision for payment of any distribution on any shares of Senior Stock, and before any distribution to the holders of Junior Stock, shall be entitled to be paid out of the assets of the Company available for distribution to its stockholders an amount per share of Mandatorily Redeemable Preferred Stock in cash equal to the Liquidation Preference. If the assets of the Company available for distribution to the holders of the shares of Mandatorily Redeemable Preferred Stock upon any dissolution, liquidation or winding up of the Company shall be insufficient to pay in full the Liquidation Preference payable to the holders of outstanding shares of Mandatorily Redeemable Preferred Stock and the liquidation preference payable to all other shares of Parity Stock (as set forth in the instrument or instruments creating such Parity Stock), then the holders of shares of Mandatorily Redeemable Preferred Stock and of all other shares of Parity Stock shall share ratably in such distribution of assets in proportion to the amount which would be payable on such distribution if the amounts to which the holders of outstanding shares of Mandatorily Redeemable Preferred Stock and the holders of outstanding shares of such other Parity Stock were paid in full. Except as provided in this paragraph (7)(a), holders of Mandatorily Redeemable Preferred Stock shall not be entitled to any distribution in the event of the liquidation, dissolution or winding up of the affairs of the Company. C-17 90 (b) Certain Events Not Deemed Liquidation, Etc. For the purposes of this paragraph (7) a Reorganization shall not be deemed to be a voluntary of involuntary liquidation, dissolution or winding up of the Company. (8) NO FRACTIONAL SHARES. No fractional shares of Common Stock or scrip shall be issued in connection with the delivery of shares of Common Stock in payment, in whole or in part, of any dividend, Redemption Price or Liqui dating Payment. Whether or not a fractional share would be delivered to a holder of Mandatorily Redeemable Preferred Stock shall be based upon, in the case of the payment, in whole or in part, of dividends, a Redemption Price or a Liquidating Payment pursuant to paragraphs (3), (4) or (7) , respectively, on the total number of shares of Mandatorily Redeemable Preferred Stock at the time held by such holder and the total number of shares of Common Stock, otherwise deliverable in respect thereof. Instead of the issuance of a fraction of a share of Common Stock or scrip, the Company shall pay instead an amount in cash (rounded to the nearest whole cent) equal to, in the case of Common Stock, the same fraction of the Closing Price of a share of preceding the Determination Date. (9) PAYMENT OF TAXES. The Company shall pay any and all documentary, stamp or similar transfer taxes payable in respect of the delivery of shares of Common Stock, pursuant to paragraphs (3), (4) or (7), as applicable; provided, however, the Company shall not be required to pay any such tax that may be payable because any such shares are issued in a name other than the name of the holder of such Mandatorily Redeemable Preferred Stock. (10) NO PREEMPTIVE RIGHTS. The holders of shares of Mandatorily Redeemable Preferred Stock shall have no preemptive rights, including preemptive rights with respect to any shares of capital stock or other securities of the Company convertible into or carrying rights or options to purchase any such shares. (11) VOTING RIGHTS. (a) The holders of shares of Mandatorily Redeemable Preferred Stock shall have no Voting rights, except as otherwise required by law and except as set forth in this paragraph (11). When and if the holders of Mandatorily Redeemable Preferred Stock are entitled to vote by law or pursuant to this paragraph (11), each holder will be entitled to one vote per share. (b) Certain Changes to Charter. For as long as any shares of Mandatorily Redeemable Preferred Stock remain outstanding, the affirmative vote of the holders of at least a majority of such outstanding shares (voting separately as a C-18 91 class) given in Person or by proxy at an annual meeting or a special meeting called for such purpose, shall be necessary (i) before the Company may amend any of the provisions of this Certificate of Designations or the Restated Certificate of Incorpora tion of the Company which would alter or change the powers, preferences or special rights of the holders of the shares of Mandatorily Redeemable Preferred Stock then outstanding so as to affect them adversely; provided, however, that: (x) any such amendment that would authorize, create or increase the authorized amount of any additional shares of Junior Stock or shares of any other class or series of Parity Stock (whether or not already authorized); and (y) any such amendment that would increase the number of authorized shares of Preferred Stock of the Company (but not the number of authorized shares of Mandatorily Redeemable Preferred Stock) or that would decrease (but not below the number of shares, then outstanding) the number of authorized shares of Preferred Stock (but not the number of authorized shares of Mandatorily Redeemable Preferred Stock); shall be deemed not to adversely affect such powers preferences or rights and shall not be subject to approval by the holders of shares of Mandatorily Redeemable Preferred Stock; and (ii) before the Company may reclassify the outstanding shares of Mandatorily Redeemable Preferred Stock into another class or series of capital stock of the Company; provided further, however, that no consent described in clause (i) of this paragraph of the holders of the shares of Mandatorily Redeemable Pre ferred Stock shall be required if, at or prior to the time when such amendment is to take effect, provision is made for the redemption of all shares of Mandatorily Redeemable Preferred Stock at the time outstanding. (c) Creation of Senior Stock. No consent or vote of the holders of the shares of Mandatorily Redeemable Preferred Stock shall be necessary before the Company or the Board may authorize, create or issue any class or series of Senior Stock. (d) No Other Vote. Except as otherwise set forth in this paragraph (11) or as required by law, the holders of Mandatorily Redeemable Preferred Stock shall not have any relative, participating, optional or other special voting rights and powers and the consent or vote of such holders shall not be required for the taking of C-19 92 any corporate action by the Company or the Board. The provisions of this paragraph (11) are in lieu of, and not in addition to, any voting rights specified in the Restated Certificate of Incorporation as applicable to a series of Preferred Stock. (12) PAYMENTS. Payment of cash amounts due in respect of the Mandatorily Redeemable Preferred Stock will be paid to the holders of shares of Mandatorily Redeemable Preferred Stock (or, in the case of joint holders, the first-named) as appearing in the stock register of the Company for the Mandatorily Redeemable Preferred Stock as at opening of business (New York time) on the date specified in this Certificate for the purpose of determining the holders of Mandatorily Redeemable Preferred Stock entitled to such payments or, if no such date is speci fied, the fifteenth Business Day before the due date for such payment (the "Payment Record Date"). Payments of cash amounts due in respect of the Mandatorily Re deemable Preferred Stock will be made by a check in U.S. dollars drawn on a bank in New York and mailed to the address (as recorded in the stock register of the Com pany for the Mandatorily Redeemable Preferred Stock) of the holder thereof (or, in the case of joint holders, the first-named) not later than the relevant date for payment unless, prior to the relevant Payment Record Date, the Company has received from the holder thereof (or, in the case of joint holders, the first-named) written instruc tions for payment to be made by wire transfer to a specified designated account. If the due date for payment of any cash amount in respect of the Mandatorily Redeem able Preferred Stock is not a Business Day, then the holder thereof will not be entitled to payment thereof until the next following day which is a Business Day and, if such payment is to be made by transfer to a designated account rather than by check, a day on which commercial banks and foreign exchange markets settle, payments in U.S. dollars in the place where the relevant designated account is located. (13) NOTICES. Any notice or communication by a holder of Mandatorily Redeemable Preferred Stock to the Company is duly given if in writing and delivered in person or mailed by first-class mail to the Company at its address as set forth in its then most recently filed Form 10-K or 10-Q as the case may be. Any notice or communications to a holder of Mandatorily Redeem able Preferred Stock shall be mailed by first-class mail to his address shown on the stock register of the Company for the Mandatorily Redeemable Preferred Stock or, if there are more than 200 holders of record of the Mandatorily Redeemable Preferred C-20 93 Stock and the Company in its sole discretion so elects, in a leading daily newspaper having general circulation in New York (which is expected to be the Wall Street Journal) or England and Wales (which is expected to be The Financial Times). Failure to mail a notice or communication to one holder or any defect in it shall not affect its sufficiency with respect to other holders. If a notice or communication is given in the manner provided in this paragraph (13) within the time prescribed by this Certificate, it shall be conclusively presumed to have been duly given, whether or not the person entitled to such notice receives it. (14) WAIVER. Any provision of this Certificate of Designations which, for the benefit of the holders of Mandatorily Redeemable Preferred Stock, prohibits, limits or restricts actions by the Company may be waived in whole or in part, or the application of all or any part of such provision in any particular circum stance or generally may be waived, in each case with the consent of the holders of at least a majority of the number of shares of Mandatorily Redeemable Preferred Stock then outstanding, either in writing or by vote at a meeting called for such purpose at which the holders of Mandatorily Redeemable Preferred Stock shall vote as a separate class. (15) REGISTRATION AND NO TRANSFER. The Company will maintain at its principal executive office a register in which the Company will provide for the registration of shares of Mandatorily Redeemable Preferred Stock. The shares of Mandatorily Redeemable Preferred Stock are not transferrable, except to any Affiliate of any holder thereof, provided, that such shares shall be reconveyed to any such holder who transfers to an Affiliate in the event that such Affiliate ceases to be an Affiliate of such transferring holder, and any certificate representing shares of Mandatorily Redeemable Preferred Stock will be so legended. (16) EXCLUSION OF OTHER RIGHTS. Except as may otherwise be required by law, the shares of Mandatorily Redeemable Preferred Stock shall not have any designations, preferences, limitations or relative rights other than those specifically set forth in this Certificate of Designations. (17) SEVERABILITY OF PROVISIONS. Whenever possible, each provision of this Certificate of Designations shall be interpreted in a manner as to be effective and valid under applicable law, but if any provision hereof is held to be prohibited by or invalid under applicable law, such provision shall be ineffective C-21 94 only to the extent of such prohibition or invalidity, without invalidating or otherwise adversely affecting the remaining provisions hereof. If a court of competent jurisdic tion should determine that a provision hereof would be valid or enforceable if a period of time were extended or shortened or a particular percentage were increased or decreased, then such court may make such change as shall be necessary to render the provision in question effective and valid under applicable law. 0234756.02-New YorkS5A C-22 95 96 Exhibit D 5-1/4% CONVERTIBLE PREFERRED STOCK, SERIES A (1) Number and Designation. 500,000 shares of the Preferred Stock of the Corporation shall be designated as 5-1/4% Convertible Preferred Stock, Series A (the "5-1/4% Preferred Stock") and no other shares of Preferred Stock shall be designated as 5-1/4% Preferred Stock. (2) Definitions. For purposes of the 5-1/4% Preferred Stock, the following terms shall have the meanings indicated: "Board of Directors" shall mean the board of directors of the Corporation or the Executive Committee, if any, of such board of directors or any other committee duly authorized by such board of directors to perform any of its responsibilities with respect to the 5-1/4% Preferred Stock. "Business Day" shall mean any day other than a Saturday, Sunday or a day on which state or federally chartered banking institutions in New York, New York are not required to be open. "Common Stock" shall mean the Corporation's Common Stock, par value $.01 per share. "Constituent Person" shall have the meaning set forth in paragraph (8)(e) hereof. "Conversion Rate" shall have the meaning set forth in paragraph (8)(a) hereof. "Current Market Price" of publicly traded shares of Common Stock or any other class of capital stock or other security of the Corporation or any other issuer for any day shall mean (i) if the security is then listed or admitted to trading on a national securities exchange in the United States, the last reported sale price, regular way, for the security as reported in the consolidated transaction or other reporting system for securities listed or traded on such exchange, or (ii) if the security is quoted on the Nasdaq National Market, the last reported sale price, regular way, for the security as reported on such list, or (iii) if the security is not so admitted for trading on any national securities exchange or the Nasdaq National Market, the average of the last reported closing bid and asked prices reported by the Nasdaq as furnished by any member in good standing of the National Association of Securities Dealers, Inc., selected from time to time by the Company for that D-1 97 purpose or as quoted by the National Quotation Bureau Incorporated. In the event that no such quotation is available for such day, the Current Market Price shall be the average of the quotations for the last five Trading Days for which a quotation is available within the last 30 Trading Days prior to such day. In the event that five such quotations are not available within such 30-Trading Day period, the Board of Directors shall be entitled to determine the Current Market Price on the basis of such quotations as it reasonably considers appropriate. "Determination Date" shall have the meaning set forth in paragraph (8)(d) hereof. "Dividend Payment Date" shall mean September 30, December 30, March 30 and June 30 of each year, commencing on March 30, 1999; provided, however, that if any Dividend Payment Date falls on any day other than a Business Day, the dividend payment due on such Dividend Payment Date shall be paid on the Business Day immediately following such Dividend Payment Date. "Dividend Periods" shall mean quarterly dividend periods commencing on September 30, December 30, March 30 and June 30 of each year and ending on and including the day preceding the first day of the next succeeding Dividend Period (other than the initial Dividend Period which shall commence on the Issue Date and end on and include March 30, 1999). "Fair Market Value" shall mean the average of the daily Current Market Prices of a share of Common Stock for the 25 Trading Days immediately prior to the date for which such value is to be computed. "5-1/4% Preferred Stock" shall have the meaning set forth in paragraph (1) hereof. "Issue Date" shall mean the first date on which shares of 5-1/4% Preferred Stock are issued. "Junior Securities" shall have the meaning set forth in paragraph (3) hereof. "Junior Securities Distribution" shall have the meaning set forth in paragraph (4)(e) hereof. D-2 98 "Mandatory Redemption Date" shall have the meaning set forth in paragraph (6)(c) hereof. "Mandatory Redemption Obligation" shall have the meaning set forth in paragraph (6)(d) hereof. "Nasdaq" means the National Association of Securities Dealers, Inc. Automated Quotations System. "non-electing share" shall have the meaning set forth in paragraph (8)(e) hereof. "NYSE" means the New York Stock Exchange. "outstanding", when used with reference to shares of stock, shall mean issued shares, excluding shares held by the Corporation or a subsidiary. "Parity Securities" shall have the meaning set forth in paragraph (3) hereof. "Person" shall mean any individual, a corporation, a partnership, an association, a joint-stock company, a limited liability company, a trust, any unincorporated organization, or a government or political subdivision thereof. "Preferred Stock" shall have the meaning set forth in the first resolution above. "Preferred Shares" has the meaning set forth in paragraph (9)(b). "Relevant Compounding Factor" shall mean, with respect to each share of 5-1/4% Preferred Stock, upon initial issuance 1.00, and shall on each Dividend Payment Date be increased to equal the product of the Relevant Compounding Factor in effect immediately prior to such Dividend Payment Date and 1.013125. "Securities" shall have the meaning set forth in paragraph (8)(d) hereof. D-3 99 "Senior Securities" shall have the meaning set forth in paragraph (3) hereof. "set apart for payment" shall be deemed to include, without any action other than the following, the recording by the Corporation in its accounting ledgers of any accounting or bookkeeping entry which indicates, pursuant to a declaration of dividends or other distribution by the Board of Directors, the allocation of funds to be so paid on any series or class of capital stock of the Corporation; provided, however, that if any funds for any class or series of Junior Securities or any class or series of Parity Securities are placed in a separate account of the Corporation or delivered to a disbursing, paying or other similar agent, then "set apart for payment" with respect to the 5-1/4% Preferred Stock shall mean placing such funds in a separate account or delivering such funds to a disbursing, paying or other similar agent. "Trading Day" shall mean any day on which the securities in question are traded on the NYSE, or if such securities are not listed or admitted for trading on the NYSE, on the principal national securities exchange on which such securities are listed or admitted, or if not listed or admitted for trading on any national securities exchange, on the Nasdaq National Market, or if such securities are not quoted thereon, in the applicable securities market in which the securities are traded. "Transaction" shall have the meaning set forth in paragraph (8)(e) hereof. (3) Rank. Any class or series of stock of the Corporation shall be deemed to rank: (1) prior to the 5-1/4% Preferred Stock, either as to the payment of dividends or as to distribution of assets upon liquidation, dissolution or winding up, or both, if the holders of such class or series shall be entitled by the terms thereof to the receipt of dividends and of amounts distributable upon liquidation, dissolution or winding up, in preference or priority to the holders of 5-1/4% Preferred Stock ("Senior Securities"); D-4 100 (2) on a parity with the 5-1/4% Preferred Stock, either as to the payment of dividends or as to distribution of assets upon liquidation, dissolution or winding up, or both, whether or not the dividend rates, dividend payment dates or redemption or liquidation prices per share thereof be different from those of the 5-1/4% Preferred Stock, if the holders of the 5-1/4% Preferred Stock and of such class of stock or series shall be entitled by the terms thereof to the receipt of dividends or of amounts distributable upon liquidation, dissolution or winding up, or both, in proportion to their respective amounts of accrued and unpaid dividends per share or liquidation preferences, without preference or priority one over the other and such class of stock or series is not a class of Senior Securities (Parity Securities); and (3) junior to the 5-1/4% Preferred Stock, either as to the payment of dividends or as to the distribution of assets upon liquidation, dissolution or winding up, or both, if such stock or series shall be Common Stock or if the holders of the 5-1/4% Preferred Stock shall be entitled to receipt of dividends, and of amounts distributable upon liquidation, dissolution or winding up, in preference or priority to the holders of shares of such stock or series ("Junior Securities"). The 13% Series B Senior Redeemable Exchangeable Preferred Stock (the "13% Preferred") is a Senior Security. Each of the 9.9% Non-Voting Mandatory Redeemable Preferred Stock, Series A ("Series A Preferred"), and 9.9% Non-Voting Mandatory Redeemable Preferred Stock, Series B ("Series B Preferred"), is a Junior Security. One or more classes of Additional Preferred (as defined below) shall be Parity Securities provided, however, that there shall be no issue of other Parity Securities except as approved by the holders of the 5-1/4% Preferred Stock pursuant to paragraph 9(d). The respective definitions of Senior Securities, Junior Securities and Parity Securities shall also include any rights or options exercisable for or convertible into any of the Senior Securities, Junior Securities and Parity Securities, as the case may be. The 5-1/4% Preferred Stock shall be subject to the creation of Junior Securities, Parity Securities and Senior Securities as set forth herein. D-5 101 (4) Dividends. (a) Subject to paragraph (8)(b)(ii), the holders of shares of 5-1/4% Preferred Stock shall be entitled to receive, when, as and if declared by the Board of Directors, out of funds legally available for the payment of dividends, dividends at the quarterly rate of $13.125 per share (assuming a $1,000.00 face amount) payable in cash, shares of Common Stock equal to $13.125 per share of 5-1/4% Preferred Stock (having a value equal to the Current Market Price as of the record date for such Dividend Payment Date) or additional shares of Preferred Stock of a class to be designated by the Board of Directors having terms substantially identical to the 5-1/4% Preferred Stock except that: (i) the Conversion Rate (as set forth in Section 8(a)) shall be the product of the Conversion Rate (as then in effect) and the Relevant Compounding Factor and (ii) the number of the shares of such Preferred Stock payable as a dividend on any Dividend Payment Date shall increase for each Dividend Payment Date from the first Dividend Payment Date by the Relevant Compounding Factor (such classes of Preferred Stock singularly and collectively, the "Additional Preferred"). Such dividends shall be payable in arrears quarterly on each Dividend Payment Date. Dividends on the 5-1/4% Preferred Stock shall be cumulative from the Issue Date (except that dividends on Additional Shares shall accrue from the date such Additional Shares are issued or would have been issued in accordance with this Certificate of Designation if such dividends had been declared), whether or not in any Dividend Period or Periods there shall be funds of the Corporation legally available for the payment of such dividends. Each such dividend shall be payable to the holders of record of shares of the 5-1/4% Preferred Stock, as they appear on the stock records of the Corporation at the close of business on the record date for such dividend. Upon the declaration of any such dividend, the Board of Directors shall fix as such record date on the fifth Business Day preceding the relevant Dividend Payment Date and shall give notice on or prior to the record date of the form of payment of such dividend. Accrued and unpaid dividends for any past Dividend Payment Date may be declared and paid at any time, without reference to any Dividend Payment Date, to holders of record on such record date, not more than 45 days nor less than five Business Days preceding the payment date thereof, as may be fixed by the Board of Directors. (1) For the purpose of determining the number of Additional Preferred to be issued pursuant to paragraph (4)(a), each such Additional Preferred shall be valued at $1,000.00. Holders of such Additional Preferred shall be entitled to receive dividends payable at the rates specified in paragraph (4)(a). (1) D-6 102 (2) The dividends payable for the initial Dividend Period, or any other period shorter than a full Dividend Period, on the 5-1/4% Preferred Stock shall accrue daily and be computed on the basis of a 360-day year and the actual number of days in such period. Holders of shares of 5-1/4% Preferred Stock shall not be entitled to any dividends, whether payable in cash, property or stock, in excess of cumulative dividends, as herein provided, on the 5-1/4% Preferred Stock except as otherwise provided herein. No interest, or sum of money in lieu of interest, shall be payable in respect of any dividend payment or payments on the 5-1/4% Preferred Stock that may be in arrears except as otherwise provided herein. (3) So long as any shares of the 5-1/4% Preferred Stock are outstanding, no dividends, except as described in the next succeeding sentence, shall be declared or paid or set apart for payment on Parity Securities, for any period, nor shall any Parity Securities be redeemed, purchased or otherwise acquired for any consideration (or any moneys be paid to or made available for a sinking fund for the redemption of any such Parity Securities) by the Corporation (except for conversion into or exchange into other Parity Securities) unless, in each case, (i) full cumulative dividends on all outstanding shares of the 5-1/4% Preferred Stock for all Dividend Periods terminating on or prior to the date of such redemption, repurchase or other acquisition shall have been paid or set apart for payment, (ii) sufficient funds shall have been paid or set apart for the payment of the dividend for the current Dividend Period with respect to the 5-1/4% Preferred Stock and (iii) the Corporation is not in default with respect to any redemption of shares of 5-1/4% Preferred Stock by the Corporation pursuant to paragraph (6) below. When dividends are not fully paid in Common Stock or Additional Preferred or are not paid in full in cash or a sum sufficient for such payment is not set apart, as aforesaid, all dividends declared upon shares of the 5-1/4% Preferred Stock and all dividends declared upon Parity Securities shall be declared ratably in proportion to the respective amounts of dividends accumulated and unpaid on the 5-1/4% Preferred Stock and accumulated and unpaid on such Parity Securities. D-7 103 (4) So long as any shares of the 5-1/4% Preferred Stock are outstanding, no dividends (other than (i) any rights issued pursuant to a shareholder rights plan as provided in paragraph 11 and (ii) dividends or distributions paid in shares of, or options, warrants or rights to subscribe for or purchase shares of, Junior Securities) shall be declared or paid or set apart for payment or other distribution declared or made upon Junior Securities, nor shall any Junior Securities be redeemed, purchased or otherwise acquired (other than a redemption, purchase or other acquisition of shares of Common Stock made for purposes of an employee incentive or benefit plan of the Corporation or any subsidiary) (all such dividends, distributions, redemptions or purchases being hereinafter referred to as "Junior Securities Distributions") for any consideration (or any moneys be paid to or made available for a sinking fund for the redemption of any shares of any such stock) by the Corporation, directly or indirectly (except by conversion into or exchange for Junior Securities, including pursuant to paragraph 4(c) of the Series A Preferred and paragraph 4(d) of the Series B Preferred), unless in each case (i) the full cumulative dividends on all outstanding shares of the 5-1/4% Preferred Stock and any other Parity Securities shall have been paid or set apart for payment for all past Dividend Periods with respect to the 5-1/4% Preferred Stock and all past dividend periods with respect to such Parity Securities and (ii) sufficient funds shall have been paid or set apart for the payment of the dividend for the current Dividend Period with respect to the 5-1/4% Preferred Stock and the current dividend period with respect to such Parity Securities. D-8 104 (5) Liquidation Preference. (a) In the event of any liquidation, dissolution or winding up of the Corporation, whether voluntary or involuntary, before any payment or distribution of the assets of the Corporation (whether capital or surplus) shall be made to or set apart for the holders of Junior Securities, the holders of the shares of 5-1/4% Preferred Stock shall be entitled to receive $1,000.00 per share of 5-1/4% Preferred Stock plus an amount equal to all dividends (whether or not earned or declared) accrued and unpaid thereon to the date of final distribution to such holders; but such holders shall not be entitled to any further payment. If, upon any liquidation, dissolution or winding up of the Corporation, the assets of the Corporation, or proceeds thereof, distributable among the holders of the shares of 5-1/4% Preferred Stock shall be insufficient to pay in full the preferential amount aforesaid and liquidating payments on any Parity Securities, then such assets, or the proceeds thereof, shall be distributed among the holders of shares of 5-1/4% Preferred Stock and any such other Parity Securities ratably in accordance with the respective amounts that would be payable on such shares of 5-1/4% Preferred Stock and any such other stock if all amounts payable thereon were paid in full. For the purposes of this paragraph (5), (i) a consolidation or merger of the Corporation with one or more corporations, or (ii) a sale or transfer of all or substantially all of the Corporation's assets, shall not be deemed to be a liquidation, dissolution or winding up, voluntary or involuntary, of the Corporation. (1) Subject to the rights of the holders of any Parity Securities, upon any liquidation, dissolution or winding up of the Corporation, after payment shall have been made in full to the holders of the 5-1/4% Preferred Stock, as provided in this paragraph (5), any other series or class or classes of Junior Securities shall, subject to the respective terms and provisions (if any) applying thereto, be entitled to receive any and all assets remaining to be paid or distributed, and the holders of the 5-1/4% Preferred Stock shall not be entitled to share therein. (6) Redemption. (a) On and after the earlier to occur of (i) the seventh anniversary of the Issue Date or (ii) the date on which the Current Market Price of the Common Stock shall have exceeded $120.00 for twenty-five (25) consecutive Trading Days, to the extent the Corporation shall have funds legally available for such payment, the Corporation may redeem at its option shares of 5-1/4% Preferred Stock, in whole or from time to time in part, payable at the option of the Corporation in (A) cash, at a redemption price of $1,000.00 per share, or (B) in shares of Common Stock, at a redemption price of $1,025.00 per share in the case of a redemption permitted by clause (i) or $1,000.00 per share in the case of a redemption permitted by clause (ii), or (C) in a combination of cash and Common Stock at a redemption price based on the respective combination of consideration, together in each case with accrued and unpaid dividends thereon, whether or not declared, to, but excluding, the date fixed for redemption, without interest. For purposes of determining the number of shares of the Common Stock to be issued pursuant to this paragraph (6)(a), the price per share of Common Stock valued at the Fair Market Value. D-9 105 (1) On and after January 28, 2009, each holder of shares of 5-1/4% Preferred Stock shall have the right to require the Corporation, to the extent the Corporation shall have funds legally available therefor, to redeem such holder's shares of 5-1/4% Preferred Stock in whole or from time to time in part at a redemption price of $1,000.00 per share, payable at the option of the Corporation in cash, shares of Common Stock or a combination thereof, together with accrued and unpaid dividends thereon to, but excluding, the date fixed for redemption, without interest. For purposes of determining the number of shares of the Common Stock to be issued pursuant to this paragraph (6)(b), the price per share of Common Stock shall equal the Fair Market Value. Any holder of shares of 5-1/4% Preferred Stock who elects to exercise its rights pursuant to this paragraph (6)(b) shall deliver to the Corporation a written notice of election not less than 20 days prior to January 28, 2009, as the case may be, which notice shall set forth the name of the Holder, the number of shares of 5-1/4% Preferred Stock to be redeemed and a statement that the election to exercise a redemption right is being made thereby; and shall deliver to the Corporation on or before the date of redemption certificates evidencing the shares of 5-1/4% Preferred Stock to be redeemed, duly endorsed for transfer to the Corporation. (2) If the Corporation shall not have redeemed all outstanding shares of 5-1/4% Preferred Stock pursuant to paragraphs (6)(a) and (6)(b), on the twentieth anniversary of the Issue Date (the "Mandatory Redemption Date"), to the extent the Corporation shall have funds legally available for such payment, the Corporation shall redeem all outstanding shares of 5-1/4% Preferred Stock, at a redemption price of $1,000.00 per share, payable at the option of the Corporation in cash, shares of Common Stock or a combination thereof, together with accrued and unpaid dividends thereon to, but excluding, the Mandatory Redemption Date, without interest. For purposes of determining the number of shares of the Common Stock to be issued pursuant to this paragraph (6)(c), the price per share of Common Stock shall be valued at the Fair Market Value. D-10 106 (3) If the Corporation is unable or shall fail to discharge its obligation to redeem all outstanding shares of 5-1/4% Preferred Stock pursuant to paragraph (6)(c) (the "Mandatory Redemption Obligation"), the Mandatory Redemption Obligation shall be discharged as soon as the Corporation is able to discharge such Mandatory Redemption Obligation. If and so long as any Mandatory Redemption Obligation with respect to the 5-1/4% Preferred Stock shall not be fully discharged, the Corporation shall not (i) directly or indirectly, redeem, purchase, or otherwise acquire any Parity Security or discharge any mandatory or optional redemption, sinking fund or other similar obligation in respect of any Parity Securities (except in connection with a redemption, sinking fund or other similar obligation to be satisfied pro rata with the 5-1/4% Preferred Stock) or (ii) declare or make any Junior Securities Distribution (other than dividends or distributions paid in shares of, or options, warrants or rights to subscribe for or purchase shares of, Junior Securities), or, directly or indirectly, discharge any mandatory or optional redemption, sinking fund or other similar obligation in respect of the Junior Securities. (4) Upon any redemption of 5-1/4% Preferred Stock, the Corporation shall pay the redemption price and any accrued and unpaid dividends in arrears to, but excluding, the applicable redemption date. (5) For purposes of paragraph (6)(a) only, unless full cumulative dividends (whether or not declared) on all outstanding shares of 5-1/4% Preferred Stock and any Parity Securities shall have been paid or contemporaneously are declared and paid or set apart for payment for all Dividend Periods terminating on or prior to the applicable redemption date, none of the shares of 5-1/4% Preferred Stock shall be redeemed, and no sum shall be set aside for such redemption, unless shares of 5-1/4% Preferred Stock are redeemed pro rata. D-11 107 (7) Procedure for Redemption. (a) If the Corporation shall redeem shares of 5-1/4% Preferred Stock pursuant to paragraph 6(a), notice of such redemption shall be given by certified mail, return receipt requested, postage prepaid, mailed not less than 30 days nor more than 60 days prior to the redemption date, to each holder of record of the shares to be redeemed at such holder's address as the same appears on the stock register of the Corporation and confirmed by facsimile transmission to each holder of record if the Corporation has been furnished with such facsimile address by the holder(s); provided that neither the failure to give such notice nor confirmation nor any defect therein or in the mailing thereof, to any particular holder, shall affect the sufficiency of the notice or the validity of the proceedings for redemption with respect to the other holders. Any notice that was mailed in the manner herein provided shall be conclusively presumed to have been duly given on the date mailed whether or not the holder receives the notice. Each such notice shall state: (i) the redemption date; (ii) the number of shares of 5-1/4% Preferred Stock to be redeemed and, if fewer than all the shares held by such holder are to be redeemed, the number of shares to be redeemed from such holder; (iii) the amount payable, whether in Common Stock or cash and if the payment is in Common Stock an explanation of the determination of the amount to be paid; (iv) the place or places where certificates for such shares are to be surrendered for payment of the redemption price; and (v) that dividends on the shares to be redeemed will cease to accrue on such redemption date, except as otherwise provided herein. (1) If notice has been mailed as aforesaid, from and after the redemption date (unless default shall be made by the Corporation in providing for the payment of the redemption price of the shares called for redemption and dividends accrued and unpaid thereon, if any), (i) except as otherwise provided herein, dividends on the shares of 5-1/4% Preferred Stock so called for redemption shall cease to accrue, (ii) said shares shall no longer be deemed to be outstanding, and (iii) all rights of the holders thereof as holders of the 5-1/4% Preferred Stock shall cease (except the right to receive from the Corporation the redemption price without interest thereon, upon surrender and endorsement of their certificates if so required, and to receive any dividends payable thereon). (2) Upon surrender in accordance with notice given pursuant to this paragraph (7) of the certificates for any shares so redeemed (properly endorsed or assigned for transfer, if the Board of Directors of the Corporation shall so require and the notice shall so state), such shares shall be redeemed by the Corporation at the redemption price aforesaid, plus any dividends payable thereon. If fewer than all the outstanding shares of 5-1/4% Preferred Stock are to be redeemed, the number of shares to be redeemed shall be determined by the Board of Directors and the shares to be redeemed shall be selected pro rata (with any fractional shares being rounded to the nearest whole share). In case fewer than all the shares represented by any such certificate are redeemed, a new certificate shall be issued representing the unredeemed shares without cost to the holder thereof. D-12 108 (8) Conversion. (a) Subject to and upon compliance with the provisions of this paragraph (8), a holder of shares of 5-1/4% Preferred Stock shall have the right, at any time and from time to time, at such holder's option, to convert any or all outstanding shares of 5-1/4% Preferred Stock held by such holder, but not fractions of shares, into fully paid and non-assessable shares of Common Stock by surrendering such shares to be converted, such surrender to be made in the manner provided in paragraph (8)(b) hereof. The number of shares of Common Stock deliverable upon conversion of each share of 5-1/4% Preferred Stock shall be equal to $1,000.00 divided by 10.00 (as adjusted as provided herein, the "Conversion Rate"); provided that the aggregate number of shares of Common Stock deliverable upon conversion of the 5-1/4% Preferred Stock (together with the conversion of any Additional Preferred) shall not be greater than 7,590,994 subject to adjustment as provided herein. The Conversion Rate is subject to adjustment from time to time pursuant to paragraph (8)(d) hereof. The right to convert shares called for redemption pursuant to paragraph (7) shall terminate at the close of business on the date immediately preceding the date fixed for such redemption unless the Corporation shall default in making payment of the amount payable upon such redemption. Upon conversion of any share of 5-1/4% Preferred Stock the holder thereof shall continue to be entitled to receive from the Corporation any accrued but unpaid dividends thereon. (1) (i) In order to exercise the conversion privilege, the holder of each share of 5-1/4% Preferred Stock to be converted shall surrender the certificate representing such share, duly endorsed or assigned to the Corporation or in blank, at the office of the Corporation, or to any transfer agent of the Corporation previously designated by the Corporation to the holders of the 5-1/4% Preferred Stock for such purposes, with a written notice of election to convert completed and signed, specifying the number of shares to be converted. Such notice shall state that the holder has satisfied any legal or regulatory requirement for conversion, including compliance with the Hart-Scott-Rodino Antitrust Improvements Act of 1976. Such notice shall also state the name or names (with address and social security or other taxpayer identification number) in which the certificate or certificates for Common Stock are to be issued. Unless the shares issuable on conversion are to be issued in the same name as the name in which such share of 5-1/4% Preferred Stock is registered, each share surrendered for conversion shall be accompanied by instruments of transfer, in form satisfactory to the Corporation, duly executed by the holder or the holder's duly authorized attorney and an amount sufficient to pay any transfer or similar tax (or evidence reasonably satisfactory to the Corporation demonstrating that such taxes have been paid). All certificates representing shares of 5-1/4% Preferred Stock surrendered for conversion shall be canceled by the Corporation or the transfer agent. (1) D-13 109 (1) Holders of shares of 5-1/4% Preferred Stock at the close of business on a dividend payment record date shall not be entitled to receive the dividend payable on such shares on the corresponding Dividend Payment Date if such holder shall have surrendered for conversion such shares at any time following the preceding Dividend Payment Date and prior to such Dividend Payment Date. (2) As promptly as practicable after the surrender by a holder of the certificates for shares of 5-1/4% Preferred Stock as aforesaid, the Corporation shall issue and shall deliver to such holder, or on the holder's written order, a certificate or certificates (which certificate or certificates shall have the legend set forth in paragraph 10(c)) for the whole number of duly authorized, validly issued, fully paid and non-assessable shares of Common Stock issuable upon the conversion of such shares in accordance with the provisions of this paragraph (8), and any fractional interest in respect of a share of Common Stock arising on such conversion shall be settled as provided in paragraph (8)(c). Upon conversion of only a portion of the shares of 5-1/4% Preferred Stock represented by any certificate, a new certificate shall be issued representing the unconverted portion of the certificate so surrendered without cost to the holder thereof. Upon the surrender of certificates representing shares of 5-1/4% Preferred Stock to be converted, such shares shall no longer be deemed to be outstanding and all rights of a holder with respect to such shares surrendered for conversion shall immediately terminate except the right to receive the Common Stock and other amounts payable pursuant to this paragraph (8). D-14 110 (3) Each conversion shall be deemed to have been effected immediately prior to the close of business on the date on which the certificates for shares of 5-1/4% Preferred Stock shall have been surrendered and such notice received by the Corporation as aforesaid, and the Person or Persons in whose name or names any certificate or certificates for shares of Common Stock shall be issuable upon such conversion shall be deemed to have become the holder or holders of record of the shares of Common Stock represented thereby at such time on such date and such conversion shall be into a number of shares of Common Stock equal to the product of the number of shares of 5-1/4% Preferred Stock surrendered times the Conversion Rate in effect at such time on such date, unless the stock transfer books of the Corporation shall be closed on that date, in which event such Person or Persons shall be deemed to have become such holder or holders of record at the close of business on the next succeeding day on which such stock transfer books are open, but such conversion shall be based upon the Conversion Rate in effect on the date upon which such shares shall have been surrendered and such notice received by the Corporation. (2) No fractional shares or scrip representing fractions of shares of Common Stock shall be issued upon conversion of the 5-1/4% Preferred Stock. Instead of any fractional interest in a share of Common Stock that would otherwise be deliverable upon the conversion of a share of 5-1/4% Preferred Stock, the Corporation shall pay to the holder of such share an amount in cash based upon the Current Market Price of Common Stock on the Trading Day immediately preceding the date of conversion. If more than one share shall be surrendered for conversion at one time by the same holder, the number of full shares of Common Stock issuable upon conversion thereof shall be computed on the basis of the aggregate number of shares of 5-1/4% Preferred Stock surrendered for conversion by such holder. (3) The Conversion Rate shall be adjusted from time to time as follows: D-15 111 (1) If the Corporation shall after the Issue Date (A) declare a dividend or make a distribution on its Common Stock in shares of its Common Stock, (B) subdivide its outstanding Common Stock into a greater number of shares or (C) combine its outstanding Common Stock into a smaller number of shares, the Conversion Rate in effect on the record date for such dividend or distribution, or the effective date of such subdivision or combination, as the case may be, shall be proportionately adjusted so that the holder of any share of 5-1/4% Preferred Stock thereafter surrendered for conversion shall be entitled to receive the number and kind of shares of Common Stock that such holder would have owned or have been entitled to receive after the happening of any of the events described above had such share been converted immediately prior to the record date in the case of a dividend or distribution or the effective date in the case of a subdivision or combination. An adjustment made pursuant to this subparagraph (i) shall become effective immediately after the opening of business on the Business Day next following the record date (except as provided in paragraph (8)(h)) in the case of a dividend or distribution and shall become effective immediately after the opening of business on the Business Day next following the effective date in the case of a subdivision, combination or reclassification. Adjustments in accordance with this paragraph (8)(d)(i) shall be made whenever any event listed above shall occur. D-16 112 (2) If the Corporation shall after the Issue Date fix a record date for the issuance of rights or warrants (in each case, other than any rights issued pursuant to a shareholder rights plan) to all holders of Common Stock entitling them (for a period expiring within 45 days after such record date) to subscribe for or purchase Common Stock (or securities convertible into Common Stock) at a price per share (or, in the case of a right or warrant to purchase securities convertible into Common Stock, having an effective exercise price per share of Common Stock, computed on the basis of the maximum number of shares of Common Stock issuable upon conversion of such convertible securities, plus the amount of additional consideration payable, if any, to receive one share of Common Stock upon conversion of such securities) less than the Fair Market Value per share of Common Stock on the date on which such issuance was declared or otherwise announced by the Corporation (the "Determination Date"), then the Conversion Rate in effect at the opening of business on the Business Day next following such record date shall be adjusted so that the holder of each share of 5-1/4% Preferred Stock shall be entitled to receive, upon the conversion thereof, the number of shares of Common Stock determined by multiplying (I) the Conversion Rate in effect immediately prior to such record date by (II) a fraction, the numerator of which shall be the sum of (A) the number of shares of Common Stock outstanding on the close of business on the Determination Date and (B) the number of additional shares of Common Stock offered for subscription or purchase pursuant to such rights or warrants (or in the case of a right or warrant to purchase securities convertible into Common Stock, the aggregate number of additional shares of Common Stock into which the convertible securities so offered are initially convertible), and the denominator of which shall be the sum of (A) the number of shares of Common Stock outstanding on the close of business on the Determination Date and (B) the number of shares that the aggregate proceeds to the Corporation from the exercise of such rights or warrants for Common Stock would purchase at such Fair Market Value on such date (or, in the case of a right or warrant to purchase securities convertible into Common Stock, the number of shares of Common Stock obtained by dividing the aggregate exercise price of such rights or warrants for the maximum number of shares of Common Stock issuable upon conversion of such convertible securities, plus the aggregate amount of additional consideration payable, if any, to convert such securities into Common Stock, by such Fair Market Value). Such adjustment shall become effective immediately after the opening of business on the Business Day next following such record date (except as provided in paragraph (8)(h)). Such adjustment shall be made successively whenever such a record date is fixed. In the event that after fixing a record date such rights or warrants are not so issued, the Conversion Rate shall be readjusted to the Conversion Rate which would then be in effect if such record date had not been fixed. In determining whether any rights or warrants entitle the holders of Common Stock to subscribe for or purchase shares of Common Stock at less than such Fair Market Value, there shall be taken into account any consideration received by the Corporation upon issuance and upon exercise of such rights or warrants, the value of such consideration, if other than cash, to be determined by the Board of Directors in good faith. In case any rights or warrants referred to in this subparagraph (ii) shall expire unexercised after the same shall have been distributed or issued by the Corporation (or, in the case of rights or warrants to purchase securities convertible into Common Stock once exercised, the conversion right of such securities shall expire), the Conversion Rate shall be readjusted at the time of such expiration to the Conversion Rate that would have been in effect if no adjustment had been made on account of the distribution or issuance of such expired rights or warrants. D-17 113 (3) If the Corporation shall fix a record date for the making of a distribution to all holders of its Common Stock of evidences of its indebtedness, shares of its capital stock or assets (excluding regular cash dividends or distributions declared in the ordinary course by the Board of Directors and dividends payable in Common Stock for which an adjustment is made pursuant to paragraph (8)(d)(i)) or rights or warrants (in each case, other than any rights issued pursuant to a shareholder rights plan) to subscribe for or purchase any of its securities (excluding those rights and warrants issued to all holders of Common Stock entitling them for a period expiring within 45 days after the record date referred to in subparagraph (ii) above to subscribe for or purchase Common Stock or securities convertible into shares of Common Stock, which rights and warrants are referred to in and treated under subparagraph (ii) above) (any of the foregoing being hereinafter in this subparagraph (iii) called the "Securities"), then in each such case the Conversion Rate shall be adjusted so that the holder of each share of 5-1/4% Preferred Stock shall be entitled to receive, upon the conversion thereof, the number of shares of Common Stock determined by multiplying (I) the Conversion Rate in effect immediately prior to the close of business on such record date by (II) a fraction, the numerator of which shall be the Fair Market Value per share of the Common Stock on such record date, and the denominator of which shall be the Fair Market Value per share of the Common Stock on such record date less the then-fair market value (as determined by the Board of Directors in good faith, whose determination shall be conclusive) of the portion of the assets, shares of its capital stock or evidences of indebtedness so distributed or of such rights or warrants applicable to one share of Common Stock. Such adjustment shall be made successively whenever such a record date is fixed; and in the event that after fixing a record date such distribution is not so made, the Conversion Rate shall be readjusted to the Conversion Rate which would then be in effect if such record date had not been fixed. Such adjustment shall become effective immediately at the opening of business on the Business Day next following (except as provided in paragraph (8)(h)) the record date for the determination of shareholders entitled to receive such distribution. For the purposes of this subparagraph (iii), the distribution of a Security, which is distributed not only to the holders of the Common Stock on the date fixed for the determination of shareholders entitled to such distribution of such Security, but also is distributed with each share of Common Stock delivered to a Person converting a share of 5-1/4% Preferred Stock after such determination date, shall not require an adjustment of the Conversion Rate pursuant to this subparagraph (iii); provided that on the date, if any, on which a Person converting a share of 5-1/4% Preferred Stock would no longer be entitled to receive such Security with a share of Common Stock (other than as a result of the termination of all such Securities), a distribution of such Securities shall be deemed to have occurred and the Conversion Rate shall be adjusted as provided in this subparagraph (iii) (and such day shall be deemed to be "the date fixed for the determination of shareholders entitled to receive such distribution" and "the record date" within the meaning of the three preceding sentences). If any rights or warrants referred to in this subparagraph (iii) shall expire unexercised after the same shall have been distributed or issued by the Corporation, the Conversion Rate shall be readjusted at the time of such expiration to the Conversion Rate that would have been in effect if no adjustment had been made on account of the distribution or issuance of such expired rights or warrants. D-18 114 (4) In case the Corporation shall, by dividend or otherwise, distribute to all holders of its Common Stock cash in an amount per share that, together with the aggregate of the per share amounts of any other cash distributions to all holders of its Common Stock made within the 12 months preceding the date of payment of such distribution and in respect of which no adjustment pursuant to this paragraph (iv) has been made exceeds 5.0% of the Fair Market Value immediately prior to the date of declaration of such dividend or distribution (excluding any dividend or distribution in connection with the liquidation, dissolution or winding up of the Corporation, whether voluntary or involuntary, and any cash that is distributed upon a merger, consolidation or other transaction for which an adjustment pursuant to paragraph 8(e) is made), then, in such case, the Conversion Rate shall be adjusted so that the same shall equal the rate determined by multiplying the Conversion Rate in effect immediately prior to the close of business on the Record Date for the cash dividend or distribution by a fraction the numerator of which shall be the Current Market Price of a share of the Common Stock on the Record Date and the denominator shall be such Current Market Price less the per share amount of cash so distributed during the 12-month period applicable to one share of Common Stock, such adjustment to be effective immediately prior to the opening of business on the Business Day following the Record Date; provided, however, that in the event the denominator of the foregoing fraction is zero or negative, in lieu of the foregoing adjustment, adequate provision shall be made so that each holder of 5-1/4% Preferred Stock shall have the right to receive upon conversion, in addition to the shares of Common Stock to which the holder is entitled, the amount of cash such holder would have received had such holder converted each share of 5-1/4% Preferred Stock at the beginning of the 12-month period. In the event that such dividend or distribution is not so paid or made, the Conversion Rate shall again be adjusted to be the Conversion Rate which would then be in effect if such dividend or distribution had not been declared. Notwithstanding the foregoing, if any adjustment is required to be made as set forth in this paragraph (8)(d)(iv), the calculation of any such adjustment shall include the amount of the quarterly cash dividends paid during the 12-month reference period only to the extent such dividends exceed the regular quarterly cash dividends paid during the 12 months preceding the 12-month reference period. For purposes of this paragraph (8)(d)(iv), "Record Date" shall mean, with respect to any dividend or distribution in which the holders of Common Stock have the right to receive cash, the date fixed for determination of shareholders entitled to receive such cash. In the event that at any time cash distributions to holders of Common Stock are not paid equally on all series of Common Stock, the provisions of this paragraph 8(d)(iv) will apply to any cash dividend or cash distribution on any series of Common Stock otherwise meeting the requirements of this paragraph, and shall be deemed amended to the extent necessary so that any adjustment required will be made on the basis of the cash dividend or cash distribution made on any such series. D-19 115 (5) In case of the consummation of a tender or exchange offer (other than an odd-lot tender offer) made by the Corporation or any subsidiary of the Corporation for all or any portion of the outstanding shares of Common Stock to the extent that the cash and fair market value (as determined in good faith by the Board of Directors of the Corporation, whose determination shall be conclusive and shall be described in a resolution of such Board) of any other consideration included in such payment per share of Common Stock at the last time (the "Expiration Time") tenders or exchanges may be made pursuant to such tender or exchange offer (as amended) exceed by more than 5.0%, with any smaller excess being disregarded in computing the adjustment to the Conversion Rate provided in this paragraph (8)(d)(v), the first reported sale price per share of Common Stock on the Trading Day next succeeding the Expiration Time, then the Conversion Rate shall be adjusted so that the same shall equal the rate determined by multiplying the Conversion Rate in effect immediately prior to the Expiration Time by a fraction the numerator of which shall be the sum of (x) the fair market value (determined as aforesaid) of the aggregate consideration payable to shareholders based on the acceptance (up to any maximum specified in the terms of the tender or exchange offer) of all shares validly tendered or exchanged and not withdrawn as of the Expiration Time (the shares deemed so accepted, up to any such maximum, being referred to as the "Purchased Shares") and (y) the product of the number of shares of Common Stock outstanding (less any Purchased Shares) on the Expiration Time and the first reported sale price of the Common Stock on the Trading Day next succeeding the Expiration Time, and the denominator of which shall be the number of shares of Common Stock outstanding (including any tendered or exchanged shares) on the Expiration Time multiplied by the first reported sale price of the Common Stock on the Trading Day next succeeding the Expiration Time, such adjustment to become effective immediately prior to the opening of business on the day following the Expiration Time. D-20 116 (6) No adjustment in the Conversion Rate shall be required unless such adjustment would require a cumulative increase or decrease of at least 1% in the Conversion Rate; provided, however, that any adjustments that by reason of this subparagraph (vi) are not required to be made shall be carried forward and taken into account in any subsequent adjustment until made; and provided, further, that any adjustment shall be required and made in accordance with the provisions of this paragraph (8) (other than this subparagraph (vi)) not later than such time as may be required in order to preserve the tax-free nature of a distribution for United States income tax purposes to the holders of shares of 5-1/4% Preferred Stock or Common Stock. Notwithstanding any other provisions of this paragraph (8), the Corporation shall not be required to make any adjustment of the Conversion Rate for the issuance of any shares of Common Stock pursuant to any plan providing for the reinvestment of dividends or interest payable on securities of the Corporation and the investment of additional optional amounts in shares of Common Stock under such plan. All calculations under this paragraph (8) shall be made to the nearest dollar or to the nearest 1/1,000 of a share, as the case may be. Anything in this paragraph (8)(d) to the contrary notwithstanding, the Corporation shall be entitled, to the extent permitted by law, to make such adjustments in the Conversion Rate, in addition to those required by this paragraph (8)(d), as it in its discretion shall determine to be advisable in order that any stock dividends, subdivision of shares, reclassification or combination of shares, distribution of rights or warrants to purchase stock or securities, or a distribution of other assets (other than cash dividends) hereafter made by the Corporation to its shareholders shall not be taxable. (7) In the event that, at any time as a result of shares of any other class of capital stock becoming issuable in exchange or substitution for or in lieu of shares of Common Stock or as a result of an adjustment made pursuant to the provisions of this paragraph (8)(d), the holder of 5-1/4% Preferred Stock upon subsequent conversion shall become entitled to receive any shares of capital stock of the Corporation other than Common Stock, the number of such other shares so receivable upon conversion of any shares of 5-1/4% Preferred Stock shall thereafter be subject to adjustment from time to time in a manner and on terms as nearly equivalent as practicable to the provisions contained herein. D-21 117 (4) (i) If the Corporation shall be a party to any transaction (including, without limitation, a merger, consolidation, sale of all or substantially all of the Corporation's assets or recapitalization of the Common Stock and excluding any transaction as to which paragraph (8)(d)(i) applies) (each of the foregoing being referred to herein as a "Transaction"), in each case as a result of which shares of Common Stock shall be converted into the right to receive stock, securities or other property (including cash or any combination thereof), there shall be no adjustment to the Conversion Rate but each share of 5-1/4% Preferred Stock which is not converted into the right to receive stock, securities or other property in connection with such Transaction shall thereafter be convertible into the kind and amount of shares of stock, securities and other property (including cash or any combination thereof) receivable upon the consummation of such Transaction by a holder of that number of shares or fraction thereof of Common Stock into which one share of 5-1/4% Preferred Stock was convertible immediately prior to such Transaction, assuming such holder of Common Stock (i) is not a Person with which the Corporation consolidated or into which the Corporation merged or which merged into the Corporation or to which such sale or transfer was made, as the case may be ("Constituent Person"), or an affiliate of a Constituent Person and (ii) failed to exercise his rights of election, if any, as to the kind or amount of stock, securities and other property (including cash) receivable upon such Transaction (provided that if the kind or amount of stock, securities and other property (including cash) receivable upon such Transaction is not the same for each share of Common Stock of the Corporation held immediately prior to such Transaction by other than a Constituent Person or an affiliate thereof and in respect of which such rights of election shall not have been exercised ("non-electing share"), then for the purpose of this paragraph (8)(e) the kind and amount of stock, securities and other property (including cash) receivable upon such Transaction by each non-electing share shall be deemed to be the kind and amount so receivable per share by a plurality of the non-electing shares). The provisions of this paragraph (8)(e) shall similarly apply to successive Transactions. (1) Notwithstanding anything herein to the contrary, if the Company is reorganized such that the Common Stock is exchanged for the common stock of a new entity ("Holdco") whose common stock is traded on NASDAQ or another recognized securities exchange, then the Company, by notice to the holders of the 5-1/4% Preferred Stock but without any required consent on their part, may cause the exchange of this 5-1/4% Preferred Stock for preferred stock of Holdco having the same terms and conditions as set forth herein, provided that where Holdco is not solely incorporated as a Delaware company or where the Holdco share structure is not identical to that of the Company, the rights attaching to the preferred stock of Holdco may be adjusted so as to comply with the local law of the country of incorporation of Holdco or the new share structure of Holdco subject to such rights effectively giving the same economic rights as the 5-1/4% Preferred Stock (ignoring for these purposes any resultant change in the tax treatment for the holders of such stock). (5) If: (1) the Corporation shall declare a dividend (or any other distribution) on the Common Stock; or (2) the Corporation shall authorize the granting to the holders of the Common Stock of rights or warrants to subscribe for or purchase any shares of any class or any other rights or warrants; or D-22 118 (3) there shall be any subdivision, combination or reclassification of the Common Stock or any consolidation or merger to which the Corporation is a party and for which approval of any shareholders of the Corporation is required, or the sale or transfer of all or substantially all of the assets of the Corporation as an entirety; or (4) there shall occur the voluntary or involuntary liquidation, dissolution or winding up of the Corporation; then the Corporation shall cause to be filed with any transfer agent designated by the Corporation pursuant to paragraph (8)(b) and shall cause to be mailed to the holders of shares of the 5-1/4% Preferred Stock at their addresses as shown on the stock records of the Corporation, as promptly as possible, but at least ten days prior to the applicable date hereinafter specified, a notice stating (A) the date on which a record is to be taken for the purpose of such dividend (or such other distribution) or rights or warrants, or, if a record is not to be taken, the date as of which the holders of Common Stock of record to be entitled to such dividend, distribution or rights or warrants are to be determined or (B) the date on which such subdivision, combination, reclassification, consolidation, merger, sale, transfer, liquidation, dissolution or winding up or other action is expected to become effective, and the date as of which it is expected that holders of Common Stock of record shall be entitled to exchange their shares of Common Stock for securities or other property, if any, deliverable upon such subdivision, combination, reclassification, consolidation, merger, sale, transfer, liquidation, dissolution or winding up. Failure to give or receive such notice or any defect therein shall not affect the legality or validity of any distribution, right, warrant, subdivision, combination, reclassification, consolidation, merger, sale, transfer, liquidation, dissolution, winding up or other action, or the vote upon any of the foregoing. D-23 119 (6) Whenever the Conversion Rate is adjusted as herein provided, the Corporation shall prepare an officer's certificate with respect to such adjustment of the Conversion Rate setting forth the adjusted Conversion Rate and the effective date of such adjustment and shall mail a copy of such officer's certificate to the holder of each share of 5-1/4% Preferred Stock at such holder's last address as shown on the stock records of the Corporation. If the Corporation shall have designated a transfer agent pursuant to paragraph (8)(b), it shall also promptly file with such transfer agent an officer's certificate setting forth the Conversion Rate after such adjustment and setting forth a brief statement of the facts requiring such adjustment which certificate shall be conclusive evidence of the correctness of such adjustment. (7) In any case in which paragraph (8)(d) provides that an adjustment shall become effective on the day next following a record date for an event, the Corporation may defer until the occurrence of such event (i) issuing to the holder of any share of 5-1/4% Preferred Stock converted after such record date and before the occurrence of such event the additional shares of Common Stock issuable upon such conversion by reason of the adjustment required by such event over and above the Common Stock issuable upon such conversion before giving effect to such adjustment and (ii) paying to such holder any amount in cash in lieu of any fraction pursuant to paragraph (8)(c). (8) For purposes of this paragraph (8), the number of shares of Common Stock at any time outstanding shall not include any shares of Common Stock then owned or held by or for the account of the Corporation. The Corporation shall not pay a dividend or make any distribution on shares of Common Stock held in the treasury of the Corporation. (9) There shall be no adjustment of the Conversion Rate in case of the issuance of any stock of the Corporation in a reorganization, acquisition or other similar transaction except as specifically set forth in this paragraph (8). If any single action would require adjustment of the Conversion Rate pursuant to more than one subparagraph of this paragraph (8), only one adjustment shall be made and such adjustment shall be the amount of adjustment that has the highest absolute value. D-24 120 (10) If the Corporation shall take any action affecting the Common Stock, other than action described in this paragraph (8), that in the opinion of the Board of Directors materially adversely affects the conversion rights of the holders of the shares of 5-1/4% Preferred Stock, the Conversion Rate may be adjusted, to the extent permitted by law, in such manner, if any, and at such time, as the Board of Directors may determine to be equitable in the circumstances; provided that the provisions of this paragraph (8)(k) shall not affect any rights the holders of 5-1/4% Preferred Stock may have at law or in equity. (11) (i) The Corporation covenants that it will at all times reserve and keep available, free from preemptive rights, out of the aggregate of its authorized but unissued shares of Common Stock or its issued shares of Common Stock held in its treasury, or both, for the purpose of effecting conversion of the 5-1/4% Preferred Stock, the full number of shares of Common Stock deliverable upon the conversion of all outstanding shares of 5-1/4% Preferred Stock not theretofore converted. For purposes of this paragraph (8)(1) the number of shares of Common Stock that shall be deliverable upon the conversion of all outstanding shares of 5-1/4% Preferred Stock shall be computed as if at the time of computation all such outstanding shares were held by a single holder. (1) The Corporation covenants that any shares of Common Stock issued upon conversion of the 5-1/4% Preferred Stock shall be duly authorized, validly issued, fully paid and non-assessable. Before taking any action that would cause an adjustment increasing the Conversion Rate such that the quotient of $1,000.00 and the Conversion Rate (which initially shall be $100.00) would be reduced below the then-par value of the shares of Common Stock deliverable upon conversion of the 5-1/4% Preferred Stock, the Corporation will take any corporate action that, in the opinion of its counsel, may be necessary in order that the Corporation may validly and legally issue fully paid and non-assessable shares of Common Stock based upon such adjusted Conversion Rate. (2) Prior to the delivery of any securities that the Corporation shall be obligated to deliver upon conversion of the 5-1/4% Preferred Stock, the Corporation shall comply with all applicable federal and state laws and regulations which require action to be taken by the Corporation. D-25 121 (12) The Corporation will pay any and all documentary stamp or similar issue or transfer taxes payable in respect of the issue or delivery of shares of Common Stock or other securities or property on conversion of the 5-1/4% Preferred Stock pursuant hereto; provided, however, that the Corporation shall not be required to pay any tax that may be payable in respect of any transfer involved in the issue or delivery of shares of Common Stock or other securities or property in a name other than that of the holder of the 5-1/4% Preferred Stock to be converted and no such issue or delivery shall be made unless and until the Person requesting such issue or delivery has paid to the Corporation the amount of any such tax or established, to the satisfaction of the Corporation, that such tax has been paid. (9) Voting Rights. (a) The holders of record of shares of 5-1/4% Preferred Stock shall not be entitled to any voting rights except as hereinafter provided in paragraph (b) or as otherwise provided by law. D-26 122 (1) If and whenever six quarterly dividends (whether or not consecutive) payable on the 5-1/4% Preferred Stock have not been paid in full or if the Corporation shall have failed to discharge its Mandatory Redemption Obligation, the number of directors then constituting the Board of Directors shall be increased by two and the holders of shares of 5-1/4% Preferred Stock, together with the holders of shares of every other series of preferred stock (including, without limitation, Additional Preferred) upon which like rights to vote for the election of two additional directors have been conferred and are exercisable (resulting from either the failure to pay dividends or the failure to redeem) (any such other series is referred to as the "Preferred Shares"), voting as a single class regardless of series, shall be entitled to elect the two additional directors to serve on the Board of Directors at any annual meeting of stockholders or special meeting held in place thereof, or at a special meeting of the holders of the 5-1/4% Preferred Stock and the Preferred Shares called as hereinafter provided. Whenever all arrears in dividends on the 5-1/4% Preferred Stock and the Preferred Shares then outstanding shall have been paid and dividends thereon for the current quarterly dividend period shall have been paid or declared and set apart for payment, or the Corporation shall have fulfilled its Mandatory Redemption Obligation and any redemption obligation in respect of the Preferred Shares, as the case may be, then the right of the holders of the 5-1/4% Preferred Stock and the Preferred Shares to elect such additional two directors shall cease (but subject always to the same provisions for the vesting of such voting rights in the case of any similar future arrearages in six quarterly dividends or failure to fulfill any Mandatory Redemption Obligation), and the terms of office of all persons elected as directors by the holders of the 5-1/4% Preferred Stock and the Preferred Shares shall forthwith terminate and the number of the Board of Directors shall be reduced accordingly. At any time after such voting power shall have been so vested in the holders of shares of 5-1/4% Preferred Stock and the Preferred Shares, the secretary of the Corporation may, and upon the written request of any holder of 5-1/4% Preferred Stock (addressed to the secretary at the principal office of the Corporation) shall, call a special meeting of the holders of the 5-1/4% Preferred Stock and of the Preferred Shares for the election of the two directors to be elected by them as herein provided, such call to be made by notice similar to that provided in the Bylaws of the Corporation for a special meeting of the stockholders or as required by law. If any such special meeting required to be called as above provided shall not be called by the secretary within 20 days after receipt of any such request, then any holder of shares of 5-1/4% Preferred Stock may call such meeting, upon the notice above provided, and for that purpose shall have access to the stock books of the Corporation. The directors elected at any such special meeting shall hold office until the next annual meeting of the stockholders or special meeting held in lieu thereof if such office shall not have previously terminated as above provided. If any vacancy shall occur among the directors elected by the holders of the 5-1/4% Preferred Stock and the Preferred Shares, a successor shall be elected by the Board of Directors, upon the nomination of the then-remaining director elected by the holders of the 5-1/4% Preferred Stock and the Preferred Shares or the successor of such remaining director, to serve until the next annual meeting of the stockholders or special meeting held in place thereof if such office shall not have previously terminated as provided above. D-27 123 (2) Without the written consent of the holders of at least 66-2/3% in liquidation preference of the outstanding shares of 5-1/4% Preferred Stock or the vote of holders of at least 66-2/3% in liquidation preference of the outstanding shares of 5-1/4% Preferred Stock at a meeting of the holders of 5-1/4% Preferred Stock called for such purpose, the Corporation will not amend, alter or repeal any provision of the Certificate of Incorporation (by merger or otherwise) so as to adversely affect the preferences, rights or powers of the 5-1/4% Preferred Stock; provided that any such amendment that changes the dividend payable on, the conversion rate with respect to, or the liquidation preference of the 5-1/4% Preferred Stock shall require the affirmative vote at a meeting of holders of 5-1/4% Preferred Stock called for such purpose or written consent of the holder of each share of 5-1/4% Preferred Stock. (3) Without the written consent of the holders of at least 66-2/3% in liquidation preference of the outstanding shares of 5-1/4% Preferred Stock or the vote of holders of at least 66-2/3% in liquidation preference of the outstanding shares of 5-1/4% Preferred Stock at a meeting of such holders called for such purpose, the Corporation will not issue any additional 5-1/4% Preferred Stock or create, authorize or issue any Parity Securities or Senior Securities or increase the authorized amount of any such other class or series; provided that paragraph 9(d) shall not limit the right of the Corporation to (i) issue Additional Preferred as dividends pursuant to paragraph 4 or (ii) to issue Parity Securities or Senior Securities in order to refinance, redeem or refund the 13% Preferred, provided that the maximum accrual value (i.e., the sum of stated value and maximum amount payable in kind over the term from issuance to first date of mandatory redemption or redemption at the option of the holder) of such Parity Securities may not exceed the maximum accrual value of the 13% Preferred. (4) In exercising the voting rights set forth in this paragraph 9, each share of 5-1/4% Preferred Stock shall have one vote per share, except that when any other series of preferred stock shall have the right to vote with the 5-1/4% Preferred Stock as a single class on any matter, then the 5-1/4% Preferred Stock and such other series shall have with respect to such matters one vote per $1,000 of stated liquidation preference. Except as otherwise required by applicable law or as set forth herein, the shares of 5-1/4% Preferred Stock shall not have any relative, participating, optional or other special voting rights and powers and the consent of the holders thereof shall not be required for the taking of any corporate action. (10) General Provisions. (a) The headings of the paragraphs, subparagraphs, clauses and subclauses of this Statement of Designations are for convenience of reference only and shall not define, limit or affect any of the provisions hereof. D-28 124 (1) If the Corporation shall have failed to declare or pay dividends as required pursuant to paragraph (4) hereof or shall have failed to discharge any obligation to redeem shares of 5-1/4% Preferred Stock pursuant to paragraph (6) hereof, the holders of shares of 5-1/4% Preferred Stock shall be entitled to receive, in addition to all other amounts required to be paid hereunder, when, as and if declared by the Board of Directors, out of funds legally available for the payment of dividends, cash dividends on the aggregate dividends which the Corporation shall have failed to declare or pay or the redemption price, together with accrued and unpaid dividends thereon, as the case may be, at a rate of 2% per quarter, compounded quarterly, for the period during which the failure to pay dividends or failure to discharge an obligation to redeem shares of 5-1/4% Preferred Stock shall continue. (2) The shares of 5-1/4% Preferred Stock shall bear the following legend: THE SHARES OF PREFERRED STOCK REPRESENTED BY THIS CERTIFICATE MAY NOT BE TRANSFERRED OTHER THAN TO AN AFFILIATE OF THE HOLDER. The shares of Common Stock issuable upon conversion of the 5-1/4% Preferred Stock shall bear the following legend: THE SHARES OF COMMON STOCK, PAR VALUE $.01, OF THE COMPANY (THE "COMMON STOCK") REPRESENTED BY THIS CERTIFICATE 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. THE SHARES REPRESENTED BY THIS CERTIFICATE MAY NOT BE TRANSFERRED PRIOR TO JANUARY 28, 2001 (OTHER THAN TO AN AFFILIATE OF THE HOLDER) AND THEREAFTER MAY ONLY BE SOLD IN BROKERS TRANSACTIONS (AS DEFINED IN RULE 144 UNDER THE ACT) OR TO PERSONS WHO, GIVING EFFECT TO THE SALE OF THE SHARES REPRESENTED HEREBY, WILL NOT BE THE BENEFICIAL OWNER OF 5% OR MORE OF THE COMMON STOCK. D-29 125 (11) Shareholder Rights Plan. The shares of 5-1/4% Preferred Stock shall be entitled to the benefits of a number of rights issuable under the Rights Agreement, dated as of October 13, 1993, between the Company and Continental Stock Transfer & Trust Company or any successor plan of similar purpose and effect ("Rights") equal to the number of shares of Common Stock then issuable upon conversion of the 5-1/4% Preferred Stock at the prevailing Conversion Rate. Any shares of Common Stock deliverable upon conversion of a share of 5-1/4% Preferred Stock or upon payment of a dividend shall be accomplished by a Right. D-30 126 Exhibit E 5-1/4% CONVERTIBLE PREFERRED STOCK, SERIES B (1) Number and Designation. 4,447.92 shares of the Preferred Stock of the Corporation shall be designated as 5-1/4% Convertible Preferred Stock, Series B (the "5-1/4% Preferred Stock") and no other shares of Preferred Stock shall be designated as 5-1/4% Preferred Stock. (2) Definitions. For purposes of the 5-1/4% Preferred Stock, the following terms shall have the meanings indicated: "Board of Directors" shall mean the board of directors of the Corporation or the Executive Committee, if any, of such board of directors or any other committee duly authorized by such board of directors to perform any of its responsibilities with respect to the 5-1/4% Preferred Stock. "Business Day" shall mean any day other than a Saturday, Sunday or a day on which state or federally chartered banking institutions in New York, New York are not required to be open. "Common Stock" shall mean the Corporation's Common Stock, par value $.01 per share. "Constituent Person" shall have the meaning set forth in paragraph (8)(e) hereof. "Conversion Rate" shall have the meaning set forth in paragraph (8)(a) hereof. "Current Market Price" of publicly traded shares of Common Stock or any other class of capital stock or other security of the Corporation or any other issuer for any day shall mean (i) if the security is then listed or admitted to trading on a national securities exchange in the United States, the last reported sale price, regular way, for the security as reported in the consolidated transaction or other reporting system for securities listed or traded on such exchange, or (ii) if the security is quoted on the Nasdaq National Market, the last reported sale price, regular way, for the security as reported on such list, or (iii) if the security is not so admitted for trading on any national securities exchange or the Nasdaq National Market, the average of the last reported closing bid and asked prices reported by the Nasdaq as furnished by any member in good standing of the National Association of Securities Dealers, Inc., selected from time to time by the Company for that purpose or as E-1 127 quoted by the National Quotation Bureau Incorporated. In the event that no such quotation is available for such day, the Current Market Price shall be the average of the quotations for the last five Trading Days for which a quotation is available within the last 30 Trading Days prior to such day. In the event that five such quotations are not available within such 30-Trading Day period, the Board of Directors shall be entitled to determine the Current Market Price on the basis of such quotations as it reasonably considers appropriate. "Determination Date" shall have the meaning set forth in paragraph (8)(d) hereof. "Dividend Payment Date" shall mean September 30, December 30, March 30 and June 30 of each year, commencing on June 30, 1999; provided, however, that if any Dividend Payment Date falls on any day other than a Business Day, the dividend payment due on such Dividend Payment Date shall be paid on the Business Day immediately following such Dividend Payment Date. "Dividend Periods" shall mean quarterly dividend periods commencing on September 30, December 30, March 30 and June 30 of each year and ending on and including the day preceding the first day of the next succeeding Dividend Period. "Fair Market Value" shall mean the average of the daily Current Market Prices of a share of Common Stock for the 25 Trading Days immediately prior to the date for which such value is to be computed. "5-1/4% Preferred Stock" shall have the meaning set forth in paragraph (1) hereof. "Issue Date" shall mean the first date on which shares of 5-1/4% Preferred Stock are issued. "Junior Securities" shall have the meaning set forth in paragraph (3) hereof. "Junior Securities Distribution" shall have the meaning set forth in paragraph (4)(e) hereof. "Mandatory Redemption Date" shall have the meaning set forth in paragraph (6)(c) hereof. "Mandatory Redemption Obligation" shall have the meaning set forth in paragraph (6)(d) hereof. E-2 128 "Nasdaq" means the National Association of Securities Dealers, Inc. Automated Quotations System. "non-electing share" shall have the meaning set forth in paragraph (8)(e) hereof. "NYSE" means the New York Stock Exchange. "outstanding", when used with reference to shares of stock, shall mean issued shares, excluding shares held by the Corporation or a subsidiary. "Parity Securities" shall have the meaning set forth in paragraph (3) hereof. "Person" shall mean any individual, a corporation, a partnership, an association, a joint-stock company, a limited liability company, a trust, any unincorporated organization, or a government or political subdivision thereof. "Preferred Stock" shall have the meaning set forth in the first resolution above. "Preferred Shares" has the meaning set forth in paragraph (9)(b). "Relevant Compounding Factor" shall mean, with respect to each share of 5-1/4% Preferred Stock, upon initial issuance 1.00, and shall on each Dividend Payment Date be increased to equal the product of the Relevant Compounding Factor in effect immediately prior to such Dividend Payment Date and 1.013125. "Securities" shall have the meaning set forth in paragraph (8)(d) hereof. "Senior Securities" shall have the meaning set forth in paragraph (3) hereof. "set apart for payment" shall be deemed to include, without any action other than the following, the recording by the Corporation in its accounting ledgers of any accounting or bookkeeping entry which indicates, pursuant to a declaration of dividends or other distribution by the Board of Directors, the allocation of funds to be so paid on any series or class of capital stock of the Corporation; provided, however, that if any funds for any class or series of Junior Securities or any class or series of Parity Securities are placed in a separate account of the Corporation or delivered to a disbursing, paying or other similar agent, then "set apart for payment" E-3 129 with respect to the 5-1/4% Preferred Stock shall mean placing such funds in a separate account or delivering such funds to a disbursing, paying or other similar agent. "Trading Day" shall mean any day on which the securities in question are traded on the NYSE, or if such securities are not listed or admitted for trading on the NYSE, on the principal national securities exchange on which such securities are listed or admitted, or if not listed or admitted for trading on any national securities exchange, on the Nasdaq National Market, or if such securities are not quoted thereon, in the applicable securities market in which the securities are traded. "Transaction" shall have the meaning set forth in paragraph (8)(e) hereof. (3) Rank. Any class or series of stock of the Corporation shall be deemed to rank: (1) prior to the 5-1/4% Preferred Stock, either as to the payment of dividends or as to distribution of assets upon liquidation, dissolution or winding up, or both, if the holders of such class or series shall be entitled by the terms thereof to the receipt of dividends and of amounts distributable upon liquidation, dissolution or winding up, in preference or priority to the holders of 5-1/4% Preferred Stock ("Senior Securities"); (2) on a parity with the 5-1/4% Preferred Stock and the 5-1/4% Convertible Preferred Stock, Series A, either as to the payment of dividends or as to distribution of assets upon liquidation, dissolution or winding up, or both, whether or not the dividend rates, dividend payment dates or redemption or liquidation prices per share thereof be different from those of the 5-1/4% Preferred Stock, if the holders of the 5-1/4% Preferred Stock and of such class of stock or series shall be entitled by the terms thereof to the receipt of dividends or of amounts distributable upon liquidation, dissolution or winding up, or both, in proportion to their respective amounts of accrued and unpaid dividends per share or liquidation preferences, without preference or priority one over the other and such class of stock or series is not a class of Senior Securities ("Parity Securities"); and (3) junior to the 5-1/4% Preferred Stock, either as to the payment of dividends or as to the distribution of assets upon liquidation, dissolution or winding up, or both, if such stock or series shall be Common Stock or if the holders of the 5-1/4% Preferred Stock shall be entitled to receipt of dividends, and of amounts distributable upon liquidation, dissolution or winding up, in preference or priority to the holders of shares of such stock or series ("Junior Securities"). E-4 130 The 13% Series B Senior Redeemable Exchangeable Preferred Stock (the "13% Preferred") is a Senior Security. Each of the 9.9% Non-Voting Mandatory Redeemable Preferred Stock, Series A ("Series A Preferred"), and 9.9% Non-Voting Mandatory Redeemable Preferred Stock, Series B ("Series B Preferred"), is a Junior Security. One or more classes of Additional Preferred (as defined below) shall be Parity Securities provided, however, that there shall be no issue of other Parity Securities except as approved by the holders of the 5-1/4% Preferred Stock pursuant to paragraph 9(d). The respective definitions of Senior Securities, Junior Securities and Parity Securities shall also include any rights or options exercisable for or convertible into any of the Senior Securities, Junior Securities and Parity Securities, as the case may be. The 5-1/4% Preferred Stock shall be subject to the creation of Junior Securities, Parity Securities and Senior Securities as set forth herein. (4) Dividends. (a) Subject to paragraph (8)(b)(ii), the holders of shares of 5-1/4% Preferred Stock shall be entitled to receive, when, as and if declared by the Board of Directors, out of funds legally available for the payment of dividends, dividends at the quarterly rate of $13.125 per share (assuming a $1,000.00 face amount) payable in cash, shares of Common Stock equal to $13.125 per share of 5-1/4% Preferred Stock (having a value equal to the Current Market Price as of the record date for such Dividend Payment Date) or additional shares of Preferred Stock of a class to be designated by the Board of Directors having terms substantially identical to the 5-1/4% Preferred Stock except that: (i) the Conversion Rate (as set forth in Section 8(a)) shall be the product of the Conversion Rate (as then in effect) and the Relevant Compounding Factor and (ii) the number of the shares of such Preferred Stock payable as a dividend on any Dividend Payment Date shall increase for each Dividend Payment Date from the first Dividend Payment Date by the Relevant Compounding Factor (such classes of Preferred Stock singularly and collectively, the "Additional Preferred"). Such dividends shall be payable in arrears quarterly on each Dividend Payment Date. Dividends on the 5-1/4% Preferred Stock shall be cumulative from the Issue Date (except that dividends on Additional Shares shall accrue from the date such Additional Shares are issued or would have been issued in accordance with this Certificate of Designation if such dividends had been declared), whether or not in any Dividend Period or Periods there shall be funds of the Corporation legally available for the payment of such dividends. Each such dividend shall be payable to the holders of record of shares of the 5-1/4% Preferred Stock, as they appear on the stock records of the Corporation at the close of business on the record date for such dividend. Upon the declaration of any such dividend, the Board of Directors shall fix as such record date on the fifth Business Day preceding the relevant Dividend Payment Date and shall give notice on or prior to the record E-5 131 date of the form of payment of such dividend. Accrued and unpaid dividends for any past Dividend Payment Date may be declared and paid at any time, without reference to any Dividend Payment Date, to holders of record on such record date, not more than 45 days nor less than five Business Days preceding the payment date thereof, as may be fixed by the Board of Directors. (1) For the purpose of determining the number of Additional Preferred to be issued pursuant to paragraph (4)(a), each such Additional Preferred shall be valued at $1,000.00. Holders of such Additional Preferred shall be entitled to receive dividends payable at the rates specified in paragraph (4)(a). (2) The dividends payable for any period shorter than a full Dividend Period, on the 5-1/4% Preferred Stock shall accrue daily and be computed on the basis of a 360-day year and the actual number of days in such period. Holders of shares of 5-1/4% Preferred Stock shall not be entitled to any dividends, whether payable in cash, property or stock, in excess of cumulative dividends, as herein provided, on the 5-1/4% Preferred Stock except as otherwise provided herein. No interest, or sum of money in lieu of interest, shall be payable in respect of any dividend payment or payments on the 5-1/4% Preferred Stock that may be in arrears except as otherwise provided herein. (3) So long as any shares of the 5-1/4% Preferred Stock are outstanding, no dividends, except as described in the next succeeding sentence, shall be declared or paid or set apart for payment on Parity Securities, for any period, nor shall any Parity Securities be redeemed, purchased or otherwise acquired for any consideration (or any moneys be paid to or made available for a sinking fund for the redemption of any such Parity Securities) by the Corporation (except for conversion into or exchange into other Parity Securities) unless, in each case, (i) full cumulative dividends on all outstanding shares of the 5-1/4% Preferred Stock for all Dividend Periods terminating on or prior to the date of such redemption, repurchase or other acquisition shall have been paid or set apart for payment, (ii) sufficient funds shall have been paid or set apart for the payment of the dividend for the current Dividend Period with respect to the 5-1/4% Preferred Stock and (iii) the Corporation is not in default with respect to any redemption of shares of 5-1/4% Preferred Stock by the Corporation pursuant to paragraph (6) below. When dividends are not fully paid in Common Stock or Additional Preferred or are not paid in full in cash or a sum sufficient for such payment is not set apart, as aforesaid, all dividends declared upon shares of the 5-1/4% Preferred Stock and all dividends declared upon Parity Securities shall be declared ratably in proportion to the respective amounts of dividends accumulated and unpaid on E-6 132 the 5-1/4% Preferred Stock and accumulated and unpaid on such Parity Securities. (4) So long as any shares of the 5-1/4% Preferred Stock are outstanding, no dividends (other than (i) any rights issued pursuant to a shareholder rights plan as provided in paragraph 11 and (ii) dividends or distributions paid in shares of, or options, warrants or rights to subscribe for or purchase shares of, Junior Securities) shall be declared or paid or set apart for payment or other distribution declared or made upon Junior Securities, nor shall any Junior Securities be redeemed, purchased or otherwise acquired (other than a redemption, purchase or other acquisition of shares of Common Stock made for purposes of an employee incentive or benefit plan of the Corporation or any subsidiary) (all such dividends, distributions, redemptions or purchases being hereinafter referred to as "Junior Securities Distributions") for any consideration (or any moneys be paid to or made available for a sinking fund for the redemption of any shares of any such stock) by the Corporation, directly or indirectly (except by conversion into or exchange for Junior Securities, including pursuant to paragraph 4(c) of the Series A Preferred and paragraph 4(d) of the Series B Preferred), unless in each case (i) the full cumulative dividends on all outstanding shares of the 5-1/4% Preferred Stock and any other Parity Securities shall have been paid or set apart for payment for all past Dividend Periods with respect to the 5-1/4% Preferred Stock and all past dividend periods with respect to such Parity Securities and (ii) sufficient funds shall have been paid or set apart for the payment of the dividend for the current Dividend Period with respect to the 5-1/4% Preferred Stock and the current dividend period with respect to such Parity Securities. (5) Liquidation Preference. (a) In the event of any liquidation, dissolution or winding up of the Corporation, whether voluntary or involuntary, before any payment or distribution of the assets of the Corporation (whether capital or surplus) shall be made to or set apart for the holders of Junior Securities, the holders of the shares of 5-1/4% Preferred Stock shall be entitled to receive $1,000.00 per share of 5-1/4% Preferred Stock plus an amount equal to all dividends (whether or not earned or declared) accrued and unpaid thereon to the date of final distribution to such holders; but such holders shall not be entitled to any further payment. If, upon any liquidation, dissolution or winding up of the Corporation, the assets of the Corporation, or proceeds thereof, distributable among the holders of the shares of 5-1/4% Preferred Stock shall be insufficient to pay in full the preferential amount aforesaid and liquidating payments on any Parity Securities, then such assets, or the proceeds thereof, shall be distributed among the holders of shares of 5-1/4% Preferred Stock and any such other Parity Securities ratably in accordance with the respective amounts that would be payable on such shares of 5-1/4% Preferred Stock and any such other stock if all amounts payable thereon were paid in full. For the purposes of this E-7 133 paragraph (5), (i) a consolidation or merger of the Corporation with one or more corporations, or (ii) a sale or transfer of all or substantially all of the Corporation's assets, shall not be deemed to be a liquidation, dissolution or winding up, voluntary or involuntary, of the Corporation. (1) Subject to the rights of the holders of any Parity Securities, upon any liquidation, dissolution or winding up of the Corporation, after payment shall have been made in full to the holders of the 5-1/4% Preferred Stock, as provided in this paragraph (5), any other series or class or classes of Junior Securities shall, subject to the respective terms and provisions (if any) applying thereto, be entitled to receive any and all assets remaining to be paid or distributed, and the holders of the 5-1/4% Preferred Stock shall not be entitled to share therein. (6) Redemption. (a) On and after the earlier to occur of (i) January 28, 2006 or (ii) the date on which the Current Market Price of the Common Stock shall have exceeded $120.00 for twenty-five (25) consecutive Trading Days, to the extent the Corporation shall have funds legally available for such payment, the Corporation may redeem at its option shares of 5-1/4% Preferred Stock, in whole or from time to time in part, payable at the option of the Corporation in (A) cash, at a redemption price of $1,000.00 per share, or (B) in shares of Common Stock, at a redemption price of $1,025.00 per share in the case of a redemption permitted by clause (i) or $1,000.00 per share in the case of a redemption permitted by clause (ii), or (C) in a combination of cash and Common Stock at a redemption price based on the respective combination of consideration, together in each case with accrued and unpaid dividends thereon, whether or not declared, to, but excluding, the date fixed for redemption, without interest. For purposes of determining the number of shares of the Common Stock to be issued pursuant to this paragraph (6)(a), the price per share of Common Stock valued at the Fair Market Value. (1) On and after January 28, 2009, each holder of shares of 5-1/4% Preferred Stock shall have the right to require the Corporation, to the extent the Corporation shall have funds legally available therefor, to redeem such holder's shares of 5-1/4% Preferred Stock in whole or from time to time in part at a redemption price of $1,000.00 per share, payable at the option of the Corporation in cash, shares of Common Stock or a combination thereof, together with accrued and unpaid dividends thereon to, but excluding, the date fixed for redemption, without interest. For purposes of determining the number of shares of the Common Stock to be issued pursuant to this paragraph (6)(b), the price per share of Common Stock shall equal the Fair Market Value. Any holder of shares of 5-1/4% Preferred Stock who elects to exercise its rights pursuant to this paragraph (6)(b) shall deliver to the Corporation a written notice of election not less than 20 days prior to January E-8 134 28, 2009, as the case may be, which notice shall set forth the name of the Holder, the number of shares of 5-1/4% Preferred Stock to be redeemed and a statement that the election to exercise a redemption right is being made thereby; and shall deliver to the Corporation on or before the date of redemption certificates evidencing the shares of 5-1/4% Preferred Stock to be redeemed, duly endorsed for transfer to the Corporation. (2) If the Corporation shall not have redeemed all outstanding shares of 5-1/4% Preferred Stock pursuant to paragraphs (6)(a) and (6)(b), on January 28, 2019 (the "Mandatory Redemption Date"), to the extent the Corporation shall have funds legally available for such payment, the Corporation shall redeem all outstanding shares of 5-1/4% Preferred Stock, at a redemption price of $1,000.00 per share, payable at the option of the Corporation in cash, shares of Common Stock or a combination thereof, together with accrued and unpaid dividends thereon to, but excluding, the Mandatory Redemption Date, without interest. For purposes of determining the number of shares of the Common Stock to be issued pursuant to this paragraph (6)(c), the price per share of Common Stock shall be valued at the Fair Market Value. (3) If the Corporation is unable or shall fail to discharge its obligation to redeem all outstanding shares of 5-1/4% Preferred Stock pursuant to paragraph (6)(c) (the "Mandatory Redemption Obligation"), the Mandatory Redemption Obligation shall be discharged as soon as the Corporation is able to discharge such Mandatory Redemption Obligation. If and so long as any Mandatory Redemption Obligation with respect to the 5-1/4% Preferred Stock shall not be fully discharged, the Corporation shall not (i) directly or indirectly, redeem, purchase, or otherwise acquire any Parity Security or discharge any mandatory or optional redemption, sinking fund or other similar obligation in respect of any Parity Securities (except in connection with a redemption, sinking fund or other similar obligation to be satisfied pro rata with the 5-1/4% Preferred Stock) or (ii) declare or make any Junior Securities Distribution (other than dividends or distributions paid in shares of, or options, warrants or rights to subscribe for or purchase shares of, Junior Securities), or, directly or indirectly, discharge any mandatory or optional redemption, sinking fund or other similar obligation in respect of the Junior Securities. (4) Upon any redemption of 5-1/4% Preferred Stock, the Corporation shall pay the redemption price and any accrued and unpaid dividends in arrears to, but excluding, the applicable redemption date. E-9 135 (5) For purposes of paragraph (6)(a) only, unless full cumulative dividends (whether or not declared) on all outstanding shares of 5-1/4% Preferred Stock and any Parity Securities shall have been paid or contemporaneously are declared and paid or set apart for payment for all Dividend Periods terminating on or prior to the applicable redemption date, none of the shares of 5-1/4% Preferred Stock shall be redeemed, and no sum shall be set aside for such redemption, unless shares of 5-1/4% Preferred Stock are redeemed pro rata. (7) Procedure for Redemption. (a) If the Corporation shall redeem shares of 5-1/4% Preferred Stock pursuant to paragraph 6(a), notice of such redemption shall be given by certified mail, return receipt requested, postage prepaid, mailed not less than 30 days nor more than 60 days prior to the redemption date, to each holder of record of the shares to be redeemed at such holder's address as the same appears on the stock register of the Corporation and confirmed by facsimile transmission to each holder of record if the Corporation has been furnished with such facsimile address by the holder(s); provided that neither the failure to give such notice nor confirmation nor any defect therein or in the mailing thereof, to any particular holder, shall affect the sufficiency of the notice or the validity of the proceedings for redemption with respect to the other holders. Any notice that was mailed in the manner herein provided shall be conclusively presumed to have been duly given on the date mailed whether or not the holder receives the notice. Each such notice shall state: (i) the redemption date; (ii) the number of shares of 5-1/4% Preferred Stock to be redeemed and, if fewer than all the shares held by such holder are to be redeemed, the number of shares to be redeemed from such holder; (iii) the amount payable, whether in Common Stock or cash and if the payment is in Common Stock an explanation of the determination of the amount to be paid; (iv) the place or places where certificates for such shares are to be surrendered for payment of the redemption price; and (v) that dividends on the shares to be redeemed will cease to accrue on such redemption date, except as otherwise provided herein. (1) If notice has been mailed as aforesaid, from and after the redemption date (unless default shall be made by the Corporation in providing for the payment of the redemption price of the shares called for redemption and dividends accrued and unpaid thereon, if any), (i) except as otherwise provided herein, dividends on the shares of 5-1/4% Preferred Stock so called for redemption shall cease to accrue, (ii) said shares shall no longer be deemed to be outstanding, and (iii) all rights of the holders thereof as holders of the 5-1/4% Preferred Stock shall cease (except the right to receive from the Corporation the redemption price without interest thereon, upon surrender and endorsement of their certificates if so required, and to receive any dividends payable thereon). E-10 136 (2) Upon surrender in accordance with notice given pursuant to this paragraph (7) of the certificates for any shares so redeemed (properly endorsed or assigned for transfer, if the Board of Directors of the Corporation shall so require and the notice shall so state), such shares shall be redeemed by the Corporation at the redemption price aforesaid, plus any dividends payable thereon. If fewer than all the outstanding shares of 5-1/4% Preferred Stock are to be redeemed, the number of shares to be redeemed shall be determined by the Board of Directors and the shares to be redeemed shall be selected pro rata (with any fractional shares being rounded to the nearest whole share). In case fewer than all the shares represented by any such certificate are redeemed, a new certificate shall be issued representing the unredeemed shares without cost to the holder thereof. (8) Conversion. (a) Subject to and upon compliance with the provisions of this paragraph (8), a holder of shares of 5-1/4% Preferred Stock shall have the right, at any time and from time to time, at such holder's option, to convert any or all outstanding shares of 5-1/4% Preferred Stock held by such holder, but not fractions of shares, into fully paid and non-assessable shares of Common Stock by surrendering such shares to be converted, such surrender to be made in the manner provided in paragraph (8)(b) hereof. The number of shares of Common Stock deliverable upon conversion of each share of 5-1/4% Preferred Stock shall be equal to 101.3125 (as adjusted as provided herein, the "Conversion Rate"); provided that the aggregate number of shares of Common Stock deliverable upon conversion of the 5-1/4% Preferred Stock (together with the conversion of any 5-1/4% Convertible Preferred Stock, Series A or any additional preferred stock issued as payment for dividends with respect thereto and any Additional Preferred) shall not be greater than 7,590,994 subject to adjustment as provided herein. The Conversion Rate is subject to adjustment from time to time pursuant to paragraph (8)(d) hereof. The right to convert shares called for redemption pursuant to paragraph (7) shall terminate at the close of business on the date immediately preceding the date fixed for such redemption unless the Corporation shall default in making payment of the amount payable upon such redemption. Upon conversion of any share of 5-1/4% Preferred Stock the holder thereof shall continue to be entitled to receive from the Corporation any accrued but unpaid dividends thereon. (1) (i) In order to exercise the conversion privilege, the holder of each share of 5-1/4% Preferred Stock to be converted shall surrender the certificate representing such share, duly endorsed or assigned to the Corporation or in blank, at the office of the Corporation, or to any transfer agent of the Corporation previously designated by the Corporation to the holders of the 5-1/4% Preferred Stock for such purposes, with a written notice of election to convert completed and signed, specifying the number of shares to be converted. Such notice shall state that the holder has satisfied any legal E-11 137 or regulatory requirement for conversion, including compliance with the Hart-Scott-Rodino Antitrust Improvements Act of 1976. Such notice shall also state the name or names (with address and social security or other taxpayer identification number) in which the certificate or certificates for Common Stock are to be issued. Unless the shares issuable on conversion are to be issued in the same name as the name in which such share of 5-1/4% Preferred Stock is registered, each share surrendered for conversion shall be accompanied by instruments of transfer, in form satisfactory to the Corporation, duly executed by the holder or the holder's duly authorized attorney and an amount sufficient to pay any transfer or similar tax (or evidence reasonably satisfactory to the Corporation demonstrating that such taxes have been paid). All certificates representing shares of 5-1/4% Preferred Stock surrendered for conversion shall be canceled by the Corporation or the transfer agent. (1) Holders of shares of 5-1/4% Preferred Stock at the close of business on a dividend payment record date shall not be entitled to receive the dividend payable on such shares on the corresponding Dividend Payment Date if such holder shall have surrendered for conversion such shares at any time following the preceding Dividend Payment Date and prior to such Dividend Payment Date. (2) As promptly as practicable after the surrender by a holder of the certificates for shares of 5-1/4% Preferred Stock as aforesaid, the Corporation shall issue and shall deliver to such holder, or on the holder's written order, a certificate or certificates (which certificate or certificates shall have the legend set forth in paragraph 10(c)) for the whole number of duly authorized, validly issued, fully paid and non-assessable shares of Common Stock issuable upon the conversion of such shares in accordance with the provisions of this paragraph (8), and any fractional interest in respect of a share of Common Stock arising on such conversion shall be settled as provided in paragraph (8)(c). Upon conversion of only a portion of the shares of 5-1/4% Preferred Stock represented by any certificate, a new certificate shall be issued representing the unconverted portion of the certificate so surrendered without cost to the holder thereof. Upon the surrender of certificates representing shares of 5-1/4% Preferred Stock to be converted, such shares shall no longer be deemed to be outstanding and all rights of a holder with respect to such shares surrendered for conversion shall immediately terminate except the right to receive the Common Stock and other amounts payable pursuant to this paragraph (8). (3) Each conversion shall be deemed to have been effected immediately prior to the close of business on the date on which the certificates for E-12 138 shares of 5-1/4% Preferred Stock shall have been surrendered and such notice received by the Corporation as aforesaid, and the Person or Persons in whose name or names any certificate or certificates for shares of Common Stock shall be issuable upon such conversion shall be deemed to have become the holder or holders of record of the shares of Common Stock represented thereby at such time on such date and such conversion shall be into a number of shares of Common Stock equal to the product of the number of shares of 5-1/4% Preferred Stock surrendered times the Conversion Rate in effect at such time on such date, unless the stock transfer books of the Corporation shall be closed on that date, in which event such Person or Persons shall be deemed to have become such holder or holders of record at the close of business on the next succeeding day on which such stock transfer books are open, but such conversion shall be based upon the Conversion Rate in effect on the date upon which such shares shall have been surrendered and such notice received by the Corporation. (2) No fractional shares or scrip representing fractions of shares of Common Stock shall be issued upon conversion of the 5-1/4% Preferred Stock. Instead of any fractional interest in a share of Common Stock that would otherwise be deliverable upon the conversion of a share of 5-1/4% Preferred Stock, the Corporation shall pay to the holder of such share an amount in cash based upon the Current Market Price of Common Stock on the Trading Day immediately preceding the date of conversion. If more than one share shall be surrendered for conversion at one time by the same holder, the number of full shares of Common Stock issuable upon conversion thereof shall be computed on the basis of the aggregate number of shares of 5-1/4% Preferred Stock surrendered for conversion by such holder. (3) The Conversion Rate shall be adjusted from time to time as follows: (1) If the Corporation shall after the Issue Date (A) declare a dividend or make a distribution on its Common Stock in shares of its Common Stock, (B) subdivide its outstanding Common Stock into a greater number of shares or (C) combine its outstanding Common Stock into a smaller number of shares, the Conversion Rate in effect on the record date for such dividend or distribution, or the effective date of such subdivision or combination, as the case may be, shall be proportionately adjusted so that the holder of any share of 5-1/4% Preferred Stock thereafter surrendered for conversion shall be entitled to receive the number and kind of shares of Common Stock that such holder would have owned or have been entitled to receive after the happening of any of the events described above had such share been converted immediately prior to the record date in the case of a E-13 139 dividend or distribution or the effective date in the case of a subdivision or combination. An adjustment made pursuant to this subparagraph (i) shall become effective immediately after the opening of business on the Business Day next following the record date (except as provided in paragraph (8)(h)) in the case of a dividend or distribution and shall become effective immediately after the opening of business on the Business Day next following the effective date in the case of a subdivision, combination or reclassification. Adjustments in accordance with this paragraph (8)(d)(i) shall be made whenever any event listed above shall occur. (2) If the Corporation shall after the Issue Date fix a record date for the issuance of rights or warrants (in each case, other than any rights issued pursuant to a shareholder rights plan) to all holders of Common Stock entitling them (for a period expiring within 45 days after such record date) to subscribe for or purchase Common Stock (or securities convertible into Common Stock) at a price per share (or, in the case of a right or warrant to purchase securities convertible into Common Stock, having an effective exercise price per share of Common Stock, computed on the basis of the maximum number of shares of Common Stock issuable upon conversion of such convertible securities, plus the amount of additional consideration payable, if any, to receive one share of Common Stock upon conversion of such securities) less than the Fair Market Value per share of Common Stock on the date on which such issuance was declared or otherwise announced by the Corporation (the "Determination Date"), then the Conversion Rate in effect at the opening of business on the Business Day next following such record date shall be adjusted so that the holder of each share of 5-1/4% Preferred Stock shall be entitled to receive, upon the conversion thereof, the number of shares of Common Stock determined by multiplying (I) the Conversion Rate in effect immediately prior to such record date by (II) a fraction, the numerator of which shall be the sum of (A) the number of shares of Common Stock outstanding on the close of business on the Determination Date and (B) the number of additional shares of Common Stock offered for subscription or purchase pursuant to such rights or warrants (or in the case of a right or warrant to purchase securities convertible into Common Stock, the aggregate number of additional shares of Common Stock into which the convertible securities so offered are initially convertible), and the denominator of which shall be the sum of (A) the number of shares of Common Stock outstanding on the close of business on the Determination Date and (B) the number of shares that the aggregate proceeds to the Corporation from the exercise of such rights or warrants for Common Stock would purchase at such Fair Market Value on such date (or, in the case of a right or warrant to purchase securities convertible into Common Stock, the number of shares of Common Stock obtained by dividing the aggregate E-14 140 exercise price of such rights or warrants for the maximum number of shares of Common Stock issuable upon conversion of such convertible securities, plus the aggregate amount of additional consideration payable, if any, to convert such securities into Common Stock, by such Fair Market Value). Such adjustment shall become effective immediately after the opening of business on the Business Day next following such record date (except as provided in paragraph (8)(h)). Such adjustment shall be made successively whenever such a record date is fixed. In the event that after fixing a record date such rights or warrants are not so issued, the Conversion Rate shall be readjusted to the Conversion Rate which would then be in effect if such record date had not been fixed. In determining whether any rights or warrants entitle the holders of Common Stock to subscribe for or purchase shares of Common Stock at less than such Fair Market Value, there shall be taken into account any consideration received by the Corporation upon issuance and upon exercise of such rights or warrants, the value of such consideration, if other than cash, to be determined by the Board of Directors in good faith. In case any rights or warrants referred to in this subparagraph (ii) shall expire unexercised after the same shall have been distributed or issued by the Corporation (or, in the case of rights or warrants to purchase securities convertible into Common Stock once exercised, the conversion right of such securities shall expire), the Conversion Rate shall be readjusted at the time of such expiration to the Conversion Rate that would have been in effect if no adjustment had been made on account of the distribution or issuance of such expired rights or warrants. (3) If the Corporation shall fix a record date for the making of a distribution to all holders of its Common Stock of evidences of its indebtedness, shares of its capital stock or assets (excluding regular cash dividends or distributions declared in the ordinary course by the Board of Directors and dividends payable in Common Stock for which an adjustment is made pursuant to paragraph (8)(d)(i)) or rights or warrants (in each case, other than any rights issued pursuant to a shareholder rights plan) to subscribe for or purchase any of its securities (excluding those rights and warrants issued to all holders of Common Stock entitling them for a period expiring within 45 days after the record date referred to in subparagraph (ii) above to subscribe for or purchase Common Stock or securities convertible into shares of Common Stock, which rights and warrants are referred to in and treated under subparagraph (ii) above) (any of the foregoing being hereinafter in this subparagraph (iii) called the "Securities"), then in each such case the Conversion Rate shall be adjusted so that the holder of each share of 5-1/4% Preferred Stock shall be entitled to receive, upon the conversion thereof, the number of shares of Common Stock determined by multiplying (I) the Conversion Rate in effect immediately prior to the close of business on such record date by (II) a E-15 141 fraction, the numerator of which shall be the Fair Market Value per share of the Common Stock on such record date, and the denominator of which shall be the Fair Market Value per share of the Common Stock on such record date less the then-fair market value (as determined by the Board of Directors in good faith, whose determination shall be conclusive) of the portion of the assets, shares of its capital stock or evidences of indebtedness so distributed or of such rights or warrants applicable to one share of Common Stock. Such adjustment shall be made successively whenever such a record date is fixed; and in the event that after fixing a record date such distribution is not so made, the Conversion Rate shall be readjusted to the Conversion Rate which would then be in effect if such record date had not been fixed. Such adjustment shall become effective immediately at the opening of business on the Business Day next following (except as provided in paragraph (8)(h)) the record date for the determination of shareholders entitled to receive such distribution. For the purposes of this subparagraph (iii), the distribution of a Security, which is distributed not only to the holders of the Common Stock on the date fixed for the determination of shareholders entitled to such distribution of such Security, but also is distributed with each share of Common Stock delivered to a Person converting a share of 5-1/4% Preferred Stock after such determination date, shall not require an adjustment of the Conversion Rate pursuant to this subparagraph (iii); provided that on the date, if any, on which a Person converting a share of 5-1/4% Preferred Stock would no longer be entitled to receive such Security with a share of Common Stock (other than as a result of the termination of all such Securities), a distribution of such Securities shall be deemed to have occurred and the Conversion Rate shall be adjusted as provided in this subparagraph (iii) (and such day shall be deemed to be "the date fixed for the determination of shareholders entitled to receive such distribution" and "the record date" within the meaning of the three preceding sentences). If any rights or warrants referred to in this subparagraph (iii) shall expire unexercised after the same shall have been distributed or issued by the Corporation, the Conversion Rate shall be readjusted at the time of such expiration to the Conversion Rate that would have been in effect if no adjustment had been made on account of the distribution or issuance of such expired rights or warrants. (4) In case the Corporation shall, by dividend or otherwise, distribute to all holders of its Common Stock cash in an amount per share that, together with the aggregate of the per share amounts of any other cash distributions to all holders of its Common Stock made within the 12 months preceding the date of payment of such distribution and in respect of which no adjustment pursuant to this paragraph (iv) has been made exceeds 5.0% of the Fair Market Value immediately prior to the date of declaration of such dividend or distribution (excluding any dividend or distribution in connection E-16 142 with the liquidation, dissolution or winding up of the Corporation, whether voluntary or involuntary, and any cash that is distributed upon a merger, consolidation or other transaction for which an adjustment pursuant to paragraph 8(e) is made), then, in such case, the Conversion Rate shall be adjusted so that the same shall equal the rate determined by multiplying the Conversion Rate in effect immediately prior to the close of business on the Record Date for the cash dividend or distribution by a fraction the numerator of which shall be the Current Market Price of a share of the Common Stock on the Record Date and the denominator shall be such Current Market Price less the per share amount of cash so distributed during the 12-month period applicable to one share of Common Stock, such adjustment to be effective immediately prior to the opening of business on the Business Day following the Record Date; provided, however, that in the event the denominator of the foregoing fraction is zero or negative, in lieu of the foregoing adjustment, adequate provision shall be made so that each holder of 5-1/4% Preferred Stock shall have the right to receive upon conversion, in addition to the shares of Common Stock to which the holder is entitled, the amount of cash such holder would have received had such holder converted each share of 5-1/4% Preferred Stock at the beginning of the 12-month period. In the event that such dividend or distribution is not so paid or made, the Conversion Rate shall again be adjusted to be the Conversion Rate which would then be in effect if such dividend or distribution had not been declared. Notwithstanding the foregoing, if any adjustment is required to be made as set forth in this paragraph (8)(d)(iv), the calculation of any such adjustment shall include the amount of the quarterly cash dividends paid during the 12-month reference period only to the extent such dividends exceed the regular quarterly cash dividends paid during the 12 months preceding the 12-month reference period. For purposes of this paragraph (8)(d)(iv), "Record Date" shall mean, with respect to any dividend or distribution in which the holders of Common Stock have the right to receive cash, the date fixed for determination of shareholders entitled to receive such cash. In the event that at any time cash distributions to holders of Common Stock are not paid equally on all series of Common Stock, the provisions of this paragraph 8(d)(iv) will apply to any cash dividend or cash distribution on any series of Common Stock otherwise meeting the requirements of this paragraph, and shall be deemed amended to the extent necessary so that any adjustment required will be made on the basis of the cash dividend or cash distribution made on any such series. (5) In case of the consummation of a tender or exchange offer (other than an odd-lot tender offer) made by the Corporation or any subsidiary of the Corporation for all or any portion of the outstanding shares E-17 143 of Common Stock to the extent that the cash and fair market value (as determined in good faith by the Board of Directors of the Corporation, whose determination shall be conclusive and shall be described in a resolution of such Board) of any other consideration included in such payment per share of Common Stock at the last time (the "Expiration Time") tenders or exchanges may be made pursuant to such tender or exchange offer (as amended) exceed by more than 5.0%, with any smaller excess being disregarded in computing the adjustment to the Conversion Rate provided in this paragraph (8)(d)(v), the first reported sale price per share of Common Stock on the Trading Day next succeeding the Expiration Time, then the Conversion Rate shall be adjusted so that the same shall equal the rate determined by multiplying the Conversion Rate in effect immediately prior to the Expiration Time by a fraction the numerator of which shall be the sum of (x) the fair market value (determined as aforesaid) of the aggregate consideration payable to shareholders based on the acceptance (up to any maximum specified in the terms of the tender or exchange offer) of all shares validly tendered or exchanged and not withdrawn as of the Expiration Time (the shares deemed so accepted, up to any such maximum, being referred to as the "Purchased Shares") and (y) the product of the number of shares of Common Stock outstanding (less any Purchased Shares) on the Expiration Time and the first reported sale price of the Common Stock on the Trading Day next succeeding the Expiration Time, and the denominator of which shall be the number of shares of Common Stock outstanding (including any tendered or exchanged shares) on the Expiration Time multiplied by the first reported sale price of the Common Stock on the Trading Day next succeeding the Expiration Time, such adjustment to become effective immediately prior to the opening of business on the day following the Expiration Time. (6) No adjustment in the Conversion Rate shall be required unless such adjustment would require a cumulative increase or decrease of at least 1% in the Conversion Rate; provided, however, that any adjustments that by reason of this subparagraph (vi) are not required to be made shall be carried forward and taken into account in any subsequent adjustment until made; and provided, further, that any adjustment shall be required and made in accordance with the provisions of this paragraph (8) (other than this subparagraph (vi)) not later than such time as may be required in order to preserve the tax-free nature of a distribution for United States income tax purposes to the holders of shares of 5-1/4% Preferred Stock or Common Stock. Notwithstanding any other provisions of this paragraph (8), the Corporation shall not be required to make any adjustment of the Conversion Rate for the issuance of any shares of Common Stock pursuant to any plan providing for the reinvestment of dividends or interest payable on securities of the Corporation and the investment of additional optional amounts in shares of Common Stock under E-18 144 such plan. All calculations under this paragraph (8) shall be made to the nearest dollar or to the nearest 1/1,000 of a share, as the case may be. Anything in this paragraph (8)(d) to the contrary notwithstanding, the Corporation shall be entitled, to the extent permitted by law, to make such adjustments in the Conversion Rate, in addition to those required by this paragraph (8)(d), as it in its discretion shall determine to be advisable in order that any stock dividends, subdivision of shares, reclassification or combination of shares, distribution of rights or warrants to purchase stock or securities, or a distribution of other assets (other than cash dividends) hereafter made by the Corporation to its shareholders shall not be taxable. (7) In the event that, at any time as a result of shares of any other class of capital stock becoming issuable in exchange or substitution for or in lieu of shares of Common Stock or as a result of an adjustment made pursuant to the provisions of this paragraph (8)(d), the holder of 5-1/4% Preferred Stock upon subsequent conversion shall become entitled to receive any shares of capital stock of the Corporation other than Common Stock, the number of such other shares so receivable upon conversion of any shares of 5-1/4% Preferred Stock shall thereafter be subject to adjustment from time to time in a manner and on terms as nearly equivalent as practicable to the provisions contained herein. (4) (i) If the Corporation shall be a party to any transaction (including, without limitation, a merger, consolidation, sale of all or substantially all of the Corporation's assets or recapitalization of the Common Stock and excluding any transaction as to which paragraph (8)(d)(i) applies) (each of the foregoing being referred to herein as a "Transaction"), in each case as a result of which shares of Common Stock shall be converted into the right to receive stock, securities or other property (including cash or any combination thereof), there shall be no adjustment to the Conversion Rate but each share of 5-1/4% Preferred Stock which is not converted into the right to receive stock, securities or other property in connection with such Transaction shall thereafter be convertible into the kind and amount of shares of stock, securities and other property (including cash or any combination thereof) receivable upon the consummation of such Transaction by a holder of that number of shares or fraction thereof of Common Stock into which one share of 5-1/4% Preferred Stock was convertible immediately prior to such Transaction, assuming such holder of Common Stock (i) is not a Person with which the Corporation consolidated or into which the Corporation merged or which merged into the Corporation or to which such sale or transfer was made, as the case may be ("Constituent Person"), or an affiliate of a Constituent Person and (ii) failed to exercise his rights of election, if any, as to the kind or amount of stock, securities and other property (including cash) E-19 145 receivable upon such Transaction (provided that if the kind or amount of stock, securities and other property (including cash) receivable upon such Transaction is not the same for each share of Common Stock of the Corporation held immediately prior to such Transaction by other than a Constituent Person or an affiliate thereof and in respect of which such rights of election shall not have been exercised ("non-electing share"), then for the purpose of this paragraph (8)(e) the kind and amount of stock, securities and other property (including cash) receivable upon such Transaction by each non-electing share shall be deemed to be the kind and amount so receivable per share by a plurality of the non-electing shares). The provisions of this paragraph (8)(e) shall similarly apply to successive Transactions. (1) Notwithstanding anything herein to the contrary, if the Company is reorganized such that the Common Stock is exchanged for the common stock of a new entity ("Holdco") whose common stock is traded on NASDAQ or another recognized securities exchange, then the Company, by notice to the holders of the 5-1/4% Preferred Stock but without any required consent on their part, may cause the exchange of this 5-1/4% Preferred Stock for preferred stock of Holdco having the same terms and conditions as set forth herein, provided that where Holdco is not solely incorporated as a Delaware company or where the Holdco share structure is not identical to that of the Company, the rights attaching to the preferred stock of Holdco may be adjusted so as to comply with the local law of the country of incorporation of Holdco or the new share structure of Holdco subject to such rights effectively giving the same economic rights as the 5-1/4% Preferred Stock (ignoring for these purposes any resultant change in the tax treatment for the holders of such stock). (5) If: (1) the Corporation shall declare a dividend (or any other distribution) on the Common Stock; or (2) the Corporation shall authorize the granting to the holders of the Common Stock of rights or warrants to subscribe for or purchase any shares of any class or any other rights or warrants; or (3) there shall be any subdivision, combination or reclassification of the Common Stock or any consolidation or merger to which the Corporation is a party and for which approval of any shareholders of the Corporation is required, or the sale or transfer of all or substantially all of the assets of the Corporation as an entirety; or F-20 146 (4) there shall occur the voluntary or involuntary liquidation, dissolution or winding up of the Corporation; then the Corporation shall cause to be filed with any transfer agent designated by the Corporation pursuant to paragraph (8)(b) and shall cause to be mailed to the holders of shares of the 5-1/4% Preferred Stock at their addresses as shown on the stock records of the Corporation, as promptly as possible, but at least ten days prior to the applicable date hereinafter specified, a notice stating (A) the date on which a record is to be taken for the purpose of such dividend (or such other distribution) or rights or warrants, or, if a record is not to be taken, the date as of which the holders of Common Stock of record to be entitled to such dividend, distribution or rights or warrants are to be determined or (B) the date on which such subdivision, combination, reclassification, consolidation, merger, sale, transfer, liquidation, dissolution or winding up or other action is expected to become effective, and the date as of which it is expected that holders of Common Stock of record shall be entitled to exchange their shares of Common Stock for securities or other property, if any, deliverable upon such subdivision, combination, reclassification, consolidation, merger, sale, transfer, liquidation, dissolution or winding up. Failure to give or receive such notice or any defect therein shall not affect the legality or validity of any distribution, right, warrant, subdivision, combination, reclassification, consolidation, merger, sale, transfer, liquidation, dissolution, winding up or other action, or the vote upon any of the foregoing. (6) Whenever the Conversion Rate is adjusted as herein provided, the Corporation shall prepare an officer's certificate with respect to such adjustment of the Conversion Rate setting forth the adjusted Conversion Rate and the effective date of such adjustment and shall mail a copy of such officer's certificate to the holder of each share of 5-1/4% Preferred Stock at such holder's last address as shown on the stock records of the Corporation. If the Corporation shall have designated a transfer agent pursuant to paragraph (8)(b), it shall also promptly file with such transfer agent an officer's certificate setting forth the Conversion Rate after such adjustment and setting forth a brief statement of the facts requiring such adjustment which certificate shall be conclusive evidence of the correctness of such adjustment. (7) In any case in which paragraph (8)(d) provides that an adjustment shall become effective on the day next following a record date for an event, the Corporation may defer until the occurrence of such event (i) issuing to the holder of any share of 5-1/4% Preferred Stock converted after such record date and before the occurrence of such event the additional shares of Common Stock issuable upon such conversion by reason of the adjustment E-21 147 required by such event over and above the Common Stock issuable upon such conversion before giving effect to such adjustment and (ii) paying to such holder any amount in cash in lieu of any fraction pursuant to paragraph (8)(c). (8) For purposes of this paragraph (8), the number of shares of Common Stock at any time outstanding shall not include any shares of Common Stock then owned or held by or for the account of the Corporation. The Corporation shall not pay a dividend or make any distribution on shares of Common Stock held in the treasury of the Corporation. (9) There shall be no adjustment of the Conversion Rate in case of the issuance of any stock of the Corporation in a reorganization, acquisition or other similar transaction except as specifically set forth in this paragraph (8). If any single action would require adjustment of the Conversion Rate pursuant to more than one subparagraph of this paragraph (8), only one adjustment shall be made and such adjustment shall be the amount of adjustment that has the highest absolute value. (10) If the Corporation shall take any action affecting the Common Stock, other than action described in this paragraph (8), that in the opinion of the Board of Directors materially adversely affects the conversion rights of the holders of the shares of 5-1/4% Preferred Stock, the Conversion Rate may be adjusted, to the extent permitted by law, in such manner, if any, and at such time, as the Board of Directors may determine to be equitable in the circumstances; provided that the provisions of this paragraph (8)(k) shall not affect any rights the holders of 5-1/4% Preferred Stock may have at law or in equity. (11) (i) The Corporation covenants that it will at all times reserve and keep available, free from preemptive rights, out of the aggregate of its authorized but unissued shares of Common Stock or its issued shares of Common Stock held in its treasury, or both, for the purpose of effecting conversion of the 5-1/4% Preferred Stock, the full number of shares of Common Stock deliverable upon the conversion of all outstanding shares of 5-1/4% Preferred Stock not theretofore converted. For purposes of this paragraph (8)(1) the number of shares of Common Stock that shall be deliverable upon the conversion of all outstanding shares of 5-1/4% Preferred Stock shall be computed as if at the time of computation all such outstanding shares were held by a single holder. (1) The Corporation covenants that any shares of Common Stock issued upon conversion of the 5-1/4% Preferred Stock shall be duly authorized, validly issued, fully paid and non-assessable. Before taking any action that E-22 148 would cause an adjustment increasing the Conversion Rate such that the quotient of $1,000.00 and the Conversion Rate (which initially shall be $100.00) would be reduced below the then-par value of the shares of Common Stock deliverable upon conversion of the 5-1/4% Preferred Stock, the Corporation will take any corporate action that, in the opinion of its counsel, may be necessary in order that the Corporation may validly and legally issue fully paid and non-assessable shares of Common Stock based upon such adjusted Conversion Rate. (2) Prior to the delivery of any securities that the Corporation shall be obligated to deliver upon conversion of the 5-1/4% Preferred Stock, the Corporation shall comply with all applicable federal and state laws and regulations which require action to be taken by the Corporation. (12) The Corporation will pay any and all documentary stamp or similar issue or transfer taxes payable in respect of the issue or delivery of shares of Common Stock or other securities or property on conversion of the 5-1/4% Preferred Stock pursuant hereto; provided, however, that the Corporation shall not be required to pay any tax that may be payable in respect of any transfer involved in the issue or delivery of shares of Common Stock or other securities or property in a name other than that of the holder of the 5-1/4% Preferred Stock to be converted and no such issue or delivery shall be made unless and until the Person requesting such issue or delivery has paid to the Corporation the amount of any such tax or established, to the satisfaction of the Corporation, that such tax has been paid. (9) Voting Rights. (a) The holders of record of shares of 5-1/4% Preferred Stock shall not be entitled to any voting rights except as hereinafter provided in paragraph (b) or as otherwise provided by law. (1) If and whenever six quarterly dividends (whether or not consecutive) payable on the 5-1/4% Preferred Stock have not been paid in full or if the Corporation shall have failed to discharge its Mandatory Redemption Obligation, the number of directors then constituting the Board of Directors shall be increased by two and the holders of shares of 5-1/4% Preferred Stock, together with the holders of shares of every other series of preferred stock (including, without limitation, Additional Preferred) upon which like rights to vote for the election of two additional directors have been conferred and are exercisable (resulting from either the failure to pay dividends or the failure to redeem) (any such other series is referred to as the "Preferred Shares"), voting as a single class regardless of series, shall be entitled to elect the two additional directors to serve on the Board of Directors at any annual meeting of stockholders or special meeting held in place E-23 149 thereof, or at a special meeting of the holders of the 5-1/4% Preferred Stock and the Preferred Shares called as hereinafter provided. Whenever all arrears in dividends on the 5-1/4% Preferred Stock and the Preferred Shares then outstanding shall have been paid and dividends thereon for the current quarterly dividend period shall have been paid or declared and set apart for payment, or the Corporation shall have fulfilled its Mandatory Redemption Obligation and any redemption obligation in respect of the Preferred Shares, as the case may be, then the right of the holders of the 5-1/4% Preferred Stock and the Preferred Shares to elect such additional two directors shall cease (but subject always to the same provisions for the vesting of such voting rights in the case of any similar future arrearages in six quarterly dividends or failure to fulfill any Mandatory Redemption Obligation), and the terms of office of all persons elected as directors by the holders of the 5-1/4% Preferred Stock and the Preferred Shares shall forthwith terminate and the number of the Board of Directors shall be reduced accordingly. At any time after such voting power shall have been so vested in the holders of shares of 5-1/4% Preferred Stock and the Preferred Shares, the secretary of the Corporation may, and upon the written request of any holder of 5-1/4% Preferred Stock (addressed to the secretary at the principal office of the Corporation) shall, call a special meeting of the holders of the 5-1/4% Preferred Stock and of the Preferred Shares for the election of the two directors to be elected by them as herein provided, such call to be made by notice similar to that provided in the Bylaws of the Corporation for a special meeting of the stockholders or as required by law. If any such special meeting required to be called as above provided shall not be called by the secretary within 20 days after receipt of any such request, then any holder of shares of 5-1/4% Preferred Stock may call such meeting, upon the notice above provided, and for that purpose shall have access to the stock books of the Corporation. The directors elected at any such special meeting shall hold office until the next annual meeting of the stockholders or special meeting held in lieu thereof if such office shall not have previously terminated as above provided. If any vacancy shall occur among the directors elected by the holders of the 5-1/4% Preferred Stock and the Preferred Shares, a successor shall be elected by the Board of Directors, upon the nomination of the then-remaining director elected by the holders of the 5-1/4% Preferred Stock and the Preferred Shares or the successor of such remaining director, to serve until the next annual meeting of the stockholders or special meeting held in place thereof if such office shall not have previously terminated as provided above. (2) Without the written consent of the holders of at least 66-2/3% in liquidation preference of the outstanding shares of 5-1/4% Preferred Stock or the vote of holders of at least 66-2/3% in liquidation preference of the outstanding shares of 5-1/4% Preferred Stock at a meeting of the holders of E-24 150 5-1/4% Preferred Stock called for such purpose, the Corporation will not amend, alter or repeal any provision of the Certificate of Incorporation (by merger or otherwise) so as to adversely affect the preferences, rights or powers of the 5-1/4% Preferred Stock; provided that any such amendment that changes the dividend payable on, the conversion rate with respect to, or the liquidation preference of the 5-1/4% Preferred Stock shall require the affirmative vote at a meeting of holders of 5-1/4% Preferred Stock called for such purpose or written consent of the holder of each share of 5-1/4% Preferred Stock. (3) Without the written consent of the holders of at least 66 2/3% in liquidation preference of the outstanding shares of 5-1/4% Preferred Stock or the vote of holders of at least 66 2/3% in liquidation preference of the outstanding shares of 5-1/4% Preferred Stock at a meeting of such holders called for such purpose, the Corporation will not issue any additional 5-1/4% Preferred Stock or create, authorize or issue any Parity Securities or Senior Securities or increase the authorized amount of any such other class or series; provided that paragraph 9(d) shall not limit the right of the Corporation to (i) issue Additional Preferred as dividends pursuant to paragraph 4 or (ii) to issue Parity Securities or Senior Securities in order to refinance, redeem or refund the 13% Preferred, provided that the maximum accrual value (i.e., the sum of stated value and maximum amount payable in kind over the term from issuance to first date of mandatory redemption or redemption at the option of the holder) of such Parity Securities may not exceed the maximum accrual value of the 13% Preferred. (4) In exercising the voting rights set forth in this paragraph 9, each share of 5-1/4% Preferred Stock shall have one vote per share, except that when any other series of preferred stock shall have the right to vote with the 5-1/4% Preferred Stock as a single class on any matter, then the 5-1/4% Preferred Stock and such other series shall have with respect to such matters one vote per $1,000 of stated liquidation preference. Except as otherwise required by applicable law or as set forth herein, the shares of 5-1/4% Preferred Stock shall not have any relative, participating, optional or other special voting rights and powers and the consent of the holders thereof shall not be required for the taking of any corporate action. (10) General Provisions. (a) The headings of the paragraphs, subparagraphs, clauses and subclauses of this Statement of Designations are for convenience of reference only and shall not define, limit or affect any of the provisions hereof. E-25 151 (1) If the Corporation shall have failed to declare or pay dividends as required pursuant to paragraph (4) hereof or shall have failed to discharge any obligation to redeem shares of 5-1/4% Preferred Stock pursuant to paragraph (6) hereof, the holders of shares of 5-1/4% Preferred Stock shall be entitled to receive, in addition to all other amounts required to be paid hereunder, when, as and if declared by the Board of Directors, out of funds legally available for the payment of dividends, cash dividends on the aggregate dividends which the Corporation shall have failed to declare or pay or the redemption price, together with accrued and unpaid dividends thereon, as the case may be, at a rate of 2% per quarter, compounded quarterly, for the period during which the failure to pay dividends or failure to discharge an obligation to redeem shares of 5-1/4% Preferred Stock shall continue. (2) The shares of 5-1/4% Preferred Stock shall bear the following legend: THE SHARES OF PREFERRED STOCK REPRESENTED BY THIS CERTIFICATE MAY NOT BE TRANSFERRED OTHER THAN TO AN AFFILIATE OF THE HOLDER. The shares of Common Stock issuable upon conversion of the 5-1/4% Preferred Stock shall bear the following legend: THE SHARES OF COMMON STOCK, PAR VALUE $.01, OF THE COMPANY (THE "COMMON STOCK") REPRESENTED BY THIS CERTIFICATE 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. THE SHARES REPRESENTED BY THIS CERTIFICATE MAY NOT BE TRANSFERRED PRIOR TO JANUARY 28, 2001 (OTHER THAN TO AN AFFILIATE OF THE HOLDER) AND THEREAFTER MAY ONLY BE SOLD IN BROKERS TRANSACTIONS (AS DEFINED IN RULE 144 UNDER THE ACT) OR TO PERSONS WHO, GIVING EFFECT TO THE SALE OF THE SHARES REPRESENTED HEREBY, WILL NOT BE THE BENEFICIAL OWNER OF 5% OR MORE OF THE COMMON STOCK. (11) Shareholder Rights Plan. The shares of 5-1/4% Preferred Stock shall be entitled to the benefits of a number of rights issuable under the Rights Agreement, dated as of October 13, 1993, between the Company and Continental Stock Transfer & Trust Company or any successor plan of similar purpose and effect E-26 152 ("Rights") equal to the number of shares of Common Stock then issuable upon conversion of the 5-1/4% Preferred Stock at the prevailing Conversion Rate. Any shares of Common Stock deliverable upon conversion of a share of 5-1/4% Preferred Stock or upon payment of a dividend shall be accomplished by a Right. E-27 EX-4.13 3 INDENTURE, DATED AS OF NOVEMBER 2, 1998 1 Exhibit 4.13 NTL INCORPORATED $625,000,000 11 1/2% SENIOR NOTES DUE 2008 INDENTURE Dated as of November 2, 1998 ---------------------------- The Chase Manhattan Bank Trustee ---------------------------- 2 TABLE OF CONTENTS ARTICLE I.....................................................................7 Section 1.01. Definitions..................................................7 Section 1.02. Other Definitions...........................................19 Section 1.03. Incorporation by Reference of Trust Indenture Act...........20 Section 1.04. Rules of Construction.......................................20 ARTICLE II. THE NOTES........................................................20 Section 2.01. Form and Dating.............................................21 Section 2.02. Execution and Authentication................................22 Section 2.03. Registrar and Paying Agent..................................23 Section 2.04. Paying Agent to Hold Money in Trust.........................23 Section 2.05. Holder Lists................................................24 Section 2.06. Transfer and Exchange.......................................24 Section 2.07. Replacement Notes...........................................28 Section 2.08. Outstanding Notes...........................................28 Section 2.09. Treasury Notes..............................................28 Section 2.10. Temporary Notes; Global Notes...............................28 Section 2.11. Cancellation................................................29 Section 2.12. Defaulted Interest..........................................29 ARTICLE III. REDEMPTION......................................................30 Section 3.01. Notices to Trustee..........................................30 Section 3.02. Selection of Notes to Be Redeemed...........................30 Section 3.03. Notice of Redemption........................................30 Section 3.04. Effect of Notice of Redemption..............................31 Section 3.05. Deposit of Redemption Price.................................31 Section 3.06. Notes Redeemed in Part......................................31 Section 3.07. Optional Redemption and Optional Tax Redemption.............31 Section 3.08. Mandatory Redemption........................................31 Section 3.09. Asset Sale Offer and Purchase Offer.........................31 ARTICLE IV. COVENANTS........................................................34 Section 4.01. Payment of Notes............................................34 Section 4.02. Reports.....................................................34 Section 4.03. Compliance Certificate......................................35 Section 4.04. Stay, Extension and Usury Laws..............................35 Section 4.05. Corporate Existence.........................................35 Section 4.06. Taxes.......................................................36 Section 4.07. Limitations on Liens........................................36 Section 4.08. Incurrence Of Indebtedness And Issuance Of Preferred Stock..36 Section 4.09. Restricted Payments.........................................38 Section 4.10. Asset Sales.................................................41 Section 4.11. Transactions with Affiliates................................43 Section 4.12. Dividends and Other Payment Restrictions Affecting Restricted Subsidiaries.....................................44 Section 4.13. Change of Control...........................................45 Section 4.14. Payment of Additional Amounts...............................46 ARTICLE V. SUCCESSORS........................................................46 Section 5.01. Merger, Consolidation or Sale of Assets.....................46 3 Section 5.02. Successor Corporation Substituted...........................47 ARTICLE VI. DEFAULTS AND REMEDIES............................................47 Section 6.01. Events of Default...........................................47 Section 6.02. Acceleration................................................49 Section 6.03. Other Remedies..............................................50 Section 6.04. Waiver of Past Defaults.....................................50 Section 6.05. Control by majority.........................................50 Section 6.06. Limitation on Suits.........................................50 Section 6.07. Rights of Holders to Receive Payment........................51 Section 6.08. Collection Suit by Trustee..................................51 Section 6.09. Trustee May File Proofs of Claim............................51 Section 6.10. Priorities..................................................51 Section 6.11. Undertaking for Costs.......................................52 ARTICLE VII. TRUSTEE.........................................................52 Section 7.01. Duties of Trustee...........................................52 Section 7.02. Rights of Trustee...........................................52 Section 7.03. Individual Rights of Trustee................................53 Section 7.04. Trustee's Disclaimer........................................53 Section 7.05. Notice of Defaults..........................................53 Section 7.06. Reports by Trustee to Holders...............................53 Section 7.07. Compensation and Indemnity..................................54 Section 7.08. Replacement of Trustee......................................54 Section 7.09. Successor Trustee by Merger, Etc............................55 Section 7.10. Eligibility; Disqualification...............................55 Section 7.11. Preferential Collection of Claims Against Company...........56 ARTICLE VIII. DISCHARGE OF INDENTURE.........................................56 Section 8.01. Termination of Company's Obligations........................56 Section 8.02. Option to Effect Defeasance.................................56 Section 8.03. Application of Trust Money..................................58 Section 8.04. Repayment to Company........................................58 Section 8.05. Reinstatement...............................................58 ARTICLE IX. AMENDMENTS, SUPPLEMENTS AND WAIVERS..............................58 Section 9.01. Without Consent of Holders..................................58 Section 9.02. With Consent of Holders.....................................59 Section 9.03. Compliance with Trust Indenture Act.........................60 Section 9.04. Revocation and Effect of Consents...........................60 Section 9.05. Notation on or Exchange of Notes............................60 Section 9.06. Trustee Protected...........................................60 ARTICLE X. MISCELLANEOUS.....................................................60 Section 10.01. Trust Indenture Act Controls..............................61 Section 10.02. Notices...................................................61 Section 10.03. Communication by Holders with Other Holders...............61 Section 10.04. Certificate and Opinion as to Conditions Precedent........61 Section 10.05. Statements Required in Certificate or Opinion.............62 Section 10.06. Rules by Trustee and Agents...............................62 Section 10.07. Legal Holidays............................................62 Section 10.08. No Recourse Against Others................................62 Section 10.09. Counterparts and Facsimile Signatures.....................62 3 4 Section 10.10. Variable Provisions.......................................62 Section 10.11. Governing Law.............................................63 Section 10.12. No Adverse Interpretation of Other Agreements.............63 Section 10.13. Successors................................................63 Section 10.14. Severability..............................................63 Section 10.15. Table of Contents, Headings, Etc..........................64 4 5 CROSS-REFERENCE TABLE* Trust Indenture Act Section Indenture Section 310 (a)(1) 7.10 (a)(2) 7.10 (a)(3) N.A. (a)(4) N.A. (a)(5) 7.10 (b) 7.08, 7.10 (c) N.A. 311(a) 7.11 (b) 7.11 (c) N.A. 312 (a) 2.05 (b) 10.03 (c) 10.03 313(a) 7.06 (b)(1) N.A. (b)(2) 7.06 (c) 7.06 (d) 7.06 314(a) 4.02 4.03, (b) N.A. (c)(1) 10.04 (c)(2) 10.04 (c)(3) N.A. (d) N.A. (e) N.A. (f) N.A. 315 (a) 7.01(b) (b) 7.05 5 6 (c) 7.01(a) (d) 7.01(c) (e) 6.11 316 (a)(last sentence) 2.09 (a)(1)(A) 6.05 (a)(1)(B) 6.04 (a)(2) N.A. (b) 6.07 (c) 9.04 317 (a)(1) 6.08 (a)(2) 6.09 (b) 2.04 318 (a) N.A. N.A. means not applicable. *This Cross-Reference Table is not part of the Indenture. 6 7 INDENTURE, dated as of November 2, 1998, between NTL Incorporated, a Delaware corporation (the "Company"), and The Chase Manhattan Bank, a New York corporation, as trustee (the "Trustee"). Each party agrees as follows for the benefit of the other party and for the equal and ratable benefit of the Holders (as defined in Section 1.01) of the Company's 11 1/2% Senior Notes due 2008 (the "Initial Notes") and, if and when issued in exchange for Initial Notes, the Company's 11 1/2% Series B Senior Notes due 2008 (the "Exchange Notes" and, together with the Initial Notes, the "Notes"): ARTICLE I. Section 1.01. Definitions. "9 1/2% Notes" means the Company's 9 1/2% Senior Notes due 2008 and the Company's 9 1/2% Series B Senior Notes due 2008. "9 3/4% Notes" means the Company's 9 3/4% Senior Deferred Coupon Notes due 2008 and the Company's 9 3/4% Series B Senior Deferred Coupon Notes due 2008. "10% Notes" means the Company's 10% Series B Senior Notes due 2007. "10 3/4% Notes" means the Company's 10 3/4% Senior Deferred Coupon Notes due 2008 and the Company's 10 3/4% Series B Senior Deferred Coupon Notes due 2008. "11 1/2% Deferred Coupon Notes" means the Company's 11 1/2% Series B Senior Deferred Coupon Notes due 2006. "12 3/4% Notes" means the Company's 12 3/4% Series A Senior Deferred Coupon Notes due 2005. "Acquired Debt" means, with respect to any specified Person, Indebtedness of any other Person (the "Acquired Person") existing at the time such Acquired Person merged with or into or became a Subsidiary of such specified Person, including Indebtedness incurred in connection with, or in contemplation of, such Acquired Person merging with or into or becoming a Subsidiary of such specified Person. "Acquired Person" has the meaning specified in the definition of Acquired Debt. "Adjusted Total Assets" means the total amount of assets of the Company and its Restricted Subsidiaries (including the amount of any Investment in any Non-Restricted Subsidiary), except to the extent resulting from write-ups of assets (other than write-ups in connection with accounting for acquisitions in conformity with GAAP), after deducting therefrom (i) all current liabilities of the Company and its Restricted Subsidiaries, and (ii) all goodwill, trade names, trademarks, patents, unamortized debt discount and expense and other like intangibles, all as calculated in conformity with GAAP. For purposes of this Adjusted Total Assets definition, (a) assets shall be calculated less applicable accumulated depreciation, accumulated amortization and other valuation reserves, and (b) all calculations shall exclude all intercompany items. "Adjusted Total Controlled Assets" means the total amount of assets of the Company and its -7- 8 Cable Controlled Subsidiaries, except to the extent resulting from write-ups of assets (other than write-ups in connection with accounting for acquisitions in conformity with GAAP), after deducting therefrom (i) all current liabilities of the Company and such Cable Controlled Subsidiaries; and (ii) all goodwill, trade names, trademarks, patents, unamortized debt discount and expense and other like intangibles of the Company and such Restricted Subsidiaries, all as calculated in conformity with GAAP; provided that Adjusted Total Controlled Assets shall be reduced (to the extent not otherwise reduced in accordance with GAAP) by an amount equal to the aggregate amount of all Investments of the Company or any such Cable Controlled Subsidiaries in any Person other than a Cable Controlled Subsidiary, except Cash Equivalents. For purposes of this Adjusted Total Controlled Assets definition, (a) assets shall be calculated less applicable accumulated depreciation, accumulated amortization and other valuation reserves, and (b) all calculations shall exclude all intercompany items. "Affiliate" of any specified Person means any other Person directly indirectly controlling or controlled by or under direct or indirect common control with such specified Person. For purposes of this definition, "control" (including, with correlative meanings, the terms "controlling," "controlled by" and "under common control with"), as used with respect to any Person, shall mean the possession, directly or indirectly, of the power to direct or cause the direction of the management or policies of such Person, whether through the ownership of voting securities, by agreement or otherwise; provided, however, that beneficial ownership of 10% or more of the voting securities of a Person shall be deemed to be control. "Agent" means any Registrar or Paying Agent. "Annualized Pro Forma EBITDA" means, with respect to any Person, such Person's Pro Forma EBITDA for the latest fiscal quarter multiplied by four. "Asset Sale" means (i) any sale, lease, transfer, conveyance or other disposition of any assets (including by way of a sale-and-leaseback) other than the sale or transfer of inventory or goods held for sale in the ordinary course of business (provided that the sale, lease, transfer, conveyance or other disposition of all or substantially all of the assets of the Company shall be governed by Section 4.13 or 5.01 hereof) or (ii) any issuance, sale, lease, transfer, conveyance or other disposition of any Equity Interests of any of the Company's Restricted Subsidiaries to any Person; in either case other than (A) to (w) the Company, (x) any Wholly Owned Subsidiary, or (y) any Subsidiary which is a Subsidiary of the Company on the Issuance Date provided that at the time of and after giving effect to such issuance, sale, lease, transfer, conveyance or other disposition to such Subsidiary, the Company's ownership percentage in such Subsidiary is equal to or greater than such percentage on the Issuance Date or (B) the issuance, sale, transfer, conveyance or other disposition of Equity Interests of a Subsidiary in exchange for capital contributions made on a pro rata basis by the holders of the Equity Interests of such Subsidiary. "Board of Directors" means the Board of Directors of the Company or any authorized committee of the Board. "Business Day" means any day that is not a Legal Holiday. "Cable Assets" means tangible or intangible assets, licenses (including, without limitation, Licenses) and computer software used in connection with a Cable Business. "Cable Business" means (i) any Person directly or indirectly operating, or owning a license to operate, a cable and/or television and/or telephone and/or telecommunications system or service -8- 9 principally within the United Kingdom and/or the Republic of Ireland and (ii) any Cable Related Business. "Cable Controlled Property" means a Cable Controlled Subsidiary or a Cable Asset held by a Cable Controlled Subsidiary. "Cable Controlled Subsidiary" means any Restricted Subsidiary that is primarily engaged, directly or indirectly, in one or more Cable Businesses. "Cable Related Business" means a Person which directly or indirectly owns or provides a service or product used in a Cable Business, including, without limitation, any television programming, production and/or licensing business or any programming guide or telephone directory business or content or software related thereto. "Capital Stock" means any and all shares, interests, participations, rights or other equivalents (however designated) of corporate stock, including, without limitation, partnership interests. "Capital Stock Sale Proceeds" means the aggregate net sale proceeds (including from the sale of any property received for the Capital Stock or the fair market value of such property, as determined by an independent appraisal firm) received by the Company or any Subsidiary of the Company from the issue or sale (other than to a Subsidiary) by the Company of any class of its Capital Stock after October 14, 1993 (including Capital Stock of the Company issued after October 14, 1993 upon conversion of or in exchange for other securities of the Company). "Cash Equivalents" means (i) Permitted Currency, (ii) securities issued or directly and fully guaranteed or insured by the United States government, a European Union member government or any agency or instrumentality thereof having maturities of not more than six months and two days from the date of acquisition, (iii) certificates of deposit and eurodollar time deposits with maturities of six months or less from the date of acquisition, bankers' acceptances with maturities not exceeding six months and overnight bank deposits, in each case with any commercial bank(s) domiciled in the United States, the United Kingdom, the Republic of Ireland or any other European Union member having capital and surplus in excess of $500 million, (iv) repurchase obligations with a term of not more than seven days for underlying securities of the types described in clauses (ii) and (iii) entered into with any financial institution meeting the qualifications specified in clause (iii) above, (v) commercial paper rated P-1 or the equivalent thereof by Moody's or A-1 or the equivalent thereof by S & P and in each case maturing within six months and two days after the date of acquisition and (vi) money market funds at least 95% of the assets of which constitute Cash Equivalents of the kinds described in clauses (i)-(v) of this definition. "Change of Control" means (i) the sale, lease or transfer of all or substantially all of the assets of the Company to any "Person" or "group" (within the meaning of Sections 13(d)(3) and 14(d)(2) of the Exchange Act or any successor provision to either of the foregoing, including any group acting for the purpose of acquiring, holding or disposing of securities within the meaning of Rule 13d-5(b)(1) under the Exchange Act) (other than any Permitted Holder), (ii) the approval by the requisite stockholders of the Company of a plan of liquidation or dissolution of the Company, (iii) any "Person" or "group" (within the meaning of Sections 13(d) and 14(d)(2) of the Exchange Act or any successor provision to either of the foregoing, including any group acting for the purpose of acquiring, holding or disposing of securities within the meaning of Rule 13d- 5(b)(1) under the Exchange Act), other than any Permitted Holder, becomes the "beneficial owner" (as defined in Rule 13d-3 under the Exchange Act) of more than 50% of -9- 10 the total voting power of all classes of the voting stock of the Company and/or warrants or options to acquire such voting stock, calculated on a fully diluted basis, unless, as a result of such transaction, the ultimate direct or indirect ownership of the Company is substantially the same immediately after such transaction as it was immediately prior to such transaction, or (iv) during any period of two consecutive years, individuals who at the beginning of such period constituted the Company's Board of Directors (together with any new directors whose election or appointment by such board or whose nomination for election by the shareholders of the Company was approved by a vote of a majority of the directors then still in office who were either directors at the beginning of such period or whose election or nomination for election was previously so approved) cease for any reason to constitute a majority of the Company's Board of Directors then in office. "Change of Control Triggering Event" means the occurrence of both a Change of Control and a Ratings Decline. "Company" means the party named as such above until a successor replaces it in accordance with Article V and thereafter means the successor. "Consolidated Interest Expense" means, for any Person, for any period, the amount of interest in respect of Indebtedness (including amortization of original issue discount, amortization of debt issuance costs, and non-cash interest payments on any Indebtedness and the interest portion of any deferred payment obligation and after taking into account the effect of elections made under any Interest Rate Agreement, however denominated, with respect to such Indebtedness), the amount of Redeemable Dividends, Restricted Subsidiary Preferred Stock Dividends and the interest component of rentals in respect of any capital lease obligation paid, in each case whether accrued or scheduled to be paid or accrued by such Person and its Subsidiaries (other than Non-Restricted Subsidiaries) during such period to the extent such amounts were deducted in computing Consolidated Net Income, determined on a consolidated basis in accordance with GAAP. For purposes of this definition, interest on a capital lease obligation shall be deemed to accrue at an interest rate reasonably determined by such Person to be the rate of interest implicit in such capital lease obligation in accordance with GAAP consistently applied. "Consolidated Net Income" means, with respect to any Person, for any period, the aggregate of the Net Income of such Person and its Subsidiaries (other than Non-Restricted Subsidiaries) for such period, on a consolidated basis, determined in accordance with GAAP; provided that (i) the Net Income of any Person that is not a Subsidiary or that is accounted for by the equity method of accounting shall be included only to the extent of the amount of dividends or distributions paid to the referent Person or a Wholly Owned Subsidiary, (ii) the Net Income of any Person that is a Subsidiary (other than a Subsidiary of which at least 80% of the Capital Stock having ordinary voting power for the election of directors or other governing body of such Subsidiary is owned by the referent Person directly or indirectly through one or more Subsidiaries) shall be included only to the extent of the amount of dividends or distributions paid to the referent Person or a Wholly Owned Subsidiary, (iii) the Net Income of any Person acquired in a pooling of interests transaction for any period prior to the date of such acquisition shall be excluded and (iv) the cumulative effect of a change in accounting principles shall be excluded. "Convertible Subordinated Notes" means the Company's 7% Convertible Subordinated Notes issued pursuant to an indenture dated as of June 12, 1996, between the Company and The Chase Manhattan Bank (formerly known as Chemical Bank), as trustee. "Credit Facility" means the Facilities Agreement, dated October 17, 1997, between NTL (UK) -10- 11 Group Inc., as principal guarantor, Chase Manhattan plc, as arranger, Chase Manhattan International Limited, as agent and security trustee and the Chase Manhattan Bank as issuer, as such Facilities Agreement may be supplemented, amended, restated, modified, renewed, refunded, replaced or refinanced, in whole or in part, from time to time in an aggregate outstanding principal amount not to exceed the greater of (i) (pound)555 million and (ii) the amount of the aggregate commitments thereunder as the same may be increased after March 13, 1998 as contemplated by the Facilities Agreement as amended or supplemented to March 13, 1998, but in no event greater than (pound)875 million, less in each case, the aggregate amount of all Net Proceeds of Asset Sales that have been applied to permanently reduce Indebtedness under the Credit Facility pursuant Section 4.10 hereof. Indebtedness that may otherwise be incurred under this Indenture may, but need not, be incurred under the Credit Facility without regard to the limit set forth in the preceding sentence. Indebtedness outstanding under the Credit Facility on the date hereof shall be deemed to have been incurred on such date in reliance on the exception provided by Section 4.08(b)(i). "Cumulative EBITDA" means the cumulative EBITDA of the Company from and after the Issuance Date to the end of the fiscal quarter immediately preceding the date of a proposed Restricted Payment, or, if such cumulative EBITDA for such period is negative, minus the amount by which such cumulative EBITDA is less than zero; provided, however, that EBITDA of Non-Restricted Subsidiaries shall not be included. "Cumulative Interest Expense" means the aggregate amount of Consolidated Interest Expense paid, accrued or scheduled to be paid or accrued by the Company from the Issuance Date to the end of the fiscal quarter immediately preceding a proposed Restricted Payment, determined on a consolidated basis in accordance with GAAP. "Default" means any event that is, or with the passage of time or the giving of notice or both would be, an Event of Default. "Depositary" shall mean The Depository Trust Company, its nominees and their respective successors. "Disqualified Stock" means any Capital Stock which, by its terms (or by the terms of any security into which it is convertible or for which it is exchangeable), or upon the happening of any event, matures or is mandatorily redeemable, pursuant to a sinking fund obligation or otherwise, or redeemable at the option of the holder thereof, in whole or in part, on or prior to the date on which the Notes mature. "EBITDA" means, for any Person, for any period, an amount equal to (A) the sum of (i) Consolidated Net Income for such period (exclusive of any gain or loss realized in such period upon an Asset Sale), plus (ii) the provision for taxes for such period based on income or profits to the extent such income or profits were included in computing Consolidated Net Income and any provision for taxes utilized in computing net loss under clause (i) hereof, plus (iii) Consolidated Interest Expense for such period, plus (iv) depreciation for such period on a consolidated basis, plus (v) amortization of intangibles for such period on a consolidated basis, plus (vi) any other non-cash item reducing Consolidated Net Income for such period (excluding any such non-cash item to the extent that it represents an accrual of or reserve for cash expenses in any future period or amortization of a prepaid cash expense that was paid in a prior period), minus (B) all non-cash items increasing Consolidated Net Income for such period, all for such Person and its Subsidiaries determined in accordance with GAAP consistently applied. -11- 12 "Equity Interests" means Capital Stock and all warrants, options or other rights to acquire Capital Stock (but excluding any Indebtedness that is convertible into, or exchangeable for Capital Stock). "European Union member" means any country that is or becomes a member of the European Union or any successor organization thereto. "Exchange Act" means the Securities Exchange Act of 1934, as amended. "Exchange Rate Contract" means, with respect to any Person, any currency swap agreements, forward exchange rate agreements, foreign currency futures or options, exchange rate collar agreements, exchange rate insurance and other agreements or arrangements, or combination thereof, the principal purpose of which is to provide protection against fluctuations in currency exchange rates. An Exchange Rate Contract may also include an Interest Rate Agreement. "Existing Indebtedness" means Indebtedness of the Company and its Subsidiaries in existence on the Issuance Date, until such amounts are repaid, including, without limitation, the Existing Notes. "Existing Notes" means the Old Notes and the Convertible Subordinated Notes. "GAAP" means generally accepted accounting principles set forth in the opinions and pronouncements of the Accounting Principles Board of the American Institute of Certified Public Accountants and statements and pronouncements of the Financial Accounting Standards Board or in such other statements by such other entity as approved by a significant segment of the accounting profession, which are in effect on the Issuance Date and are applied on a consistent basis. "Guarantee" means a guarantee (other than by endorsement of negotiable instruments for collection in the ordinary course of business), direct or indirect, in any manner (including, without limitation, letters of credit and reimbursement agreements in respect thereof), of all or any part of any Indebtedness. "Holder" means a Person in whose name a Note is registered in the register referred to in Section 2.03. "Indebtedness" means, with respect to any Person, any indebtedness of such Person, whether or not contingent, in respect of borrowed money or evidenced by bonds, notes, debentures or similar instruments or letters of credit (or reimbursement agreements in respect thereof) or representing the balance deferred and unpaid of the purchase price of any property (including pursuant to capital leases and sale-and-leaseback transactions) or representing any hedging obligations under an Exchange Rate Contract or an Interest Rate Agreement, except any such balance that constitutes an accrued expense or trade payable, if and to the extent any of the foregoing indebtedness (other than obligations under an Exchange Rate Contract or an Interest Rate Agreement) would appear as a liability upon a balance sheet of such Person prepared in accordance with GAAP, and also includes, to the extent not otherwise included, the Guarantee of items which would be included within this definition. The amount of any Indebtedness outstanding as of any date shall be the accreted value thereof, in the case of any Indebtedness issued with original issue discount "Indenture" means this Indenture, as amended from time to time. -12- 13 "Initial Purchasers" means Morgan Stanley & Co. Incorporated, Chase Securities Inc., Donaldson, Lufkin & Jenrette Securities Corporation and Goldman, Sachs & Co. "Interest Rate Agreement" means, for any Person, any interest rate swap agreement, interest rate cap agreement, interest rate collar agreement, or other similar agreement, the principal purpose of which is to protect the party indicated therein against fluctuations in interest rates. "Investment Grade" means BBB- or higher by S&P or Baa3 or higher by Moody's or the equivalent of such ratings by S&P or Moody's. In the event that the Company shall be permitted to select any other Rating Agency, the equivalent of such ratings by such Rating Agency shall be used. "Investments" means, with respect to any Person, all investments by such Person in other Persons (including Affiliates) in the forms of loans (including Guarantees), advances or capital contributions (excluding commission, travel and similar advances and loans, joint property ownership and other arrangements, in each case, made to officers and employees made in the ordinary course of business), purchases or other acquisitions for consideration of Indebtedness, Equity Interests or other securities and all other items that are or would be classified as investments on a balance sheet prepared in accordance with GAAP. "Issuance Date" means the date on which the Notes are first authenticated and issued. "License" means any license issued or awarded pursuant to the Broadcasting Act 1990, the Cable and Broadcasting Act 1984, the Telecommunications Act 1984 or the Wireless Telegraphy Act 1948 (in each case, as such Acts may, from time to time, be amended, modified or re-enacted) (or equivalent statutes of any jurisdiction) to operate or own a Cable Business. "Lien" means, with respect to any asset, any mortgage, lien, pledge, charge, security interest or encumbrance of any kind in respect of such asset, whether or not filed, recorded or otherwise perfected under applicable law (including any conditional sale or other title retention agreement, any lease in the nature thereof, any option or other agreement to sell or give a security interest in and any filing of or agreement to give any financing statement under the Uniform Commercial Code (or equivalent or successor statutes) of any jurisdiction). "Material License" means a License held by the Company or any of its Subsidiaries which License at the time of determination covers a number of Net Households which equals or exceeds 5% of the aggregate number of Net Households covered by all of the Licenses held by the Company and its Subsidiaries at such time. "Material Subsidiary" means (i) NTL UK Group, Inc. (formerly known as OCOM Sub II, Inc.), NTL Investment Holdings Limited, NTL Group Limited, CableTel Surrey Limited, CableTel Cardiff Limited, CableTel Glasgow, CableTel Newport and CableTel Kirklees and (ii) any other Subsidiary of the Company which is a "significant subsidiary" as defined in Rule 1-02(v) of Regulation S-X under the Securities Act and the Exchange Act (as such Regulation is in effect on the date hereof). "Monetize" means a strategy with respect to Equity Interests that generates an amount of cash equal to the fair value of such Equity Interests. "Moody's" means Moody's Investors Service, Inc. and its successors. -13- 14 "Net Households" means the product of (i) the number of households covered by a License in the United Kingdom and (ii) the percentage of the entity holding such License which is owned directly or indirectly by the Company. "Net Income" means, with respect to any Person for a specific period, the net income (loss) of such Person during such period, determined in accordance with GAAP, excluding, however, any gain (but not loss) during such period, together with any related provision for taxes on such gain (but not loss), realized during such period in connection with any Asset Sale (including, without limitation, dispositions pursuant to sale-and-leaseback transactions), and excluding any extraordinary gain (but not loss) during such period, together with any related provision for taxes on such extraordinary gain (but not loss). "Net Proceeds" means the aggregate cash proceeds received by the Company or any of its Subsidiaries in respect of any Asset Sale, net of the direct costs relating to such Asset Sale (including, without limitation, legal, accounting and investment banking fees, and sales commissions) and any relocation expenses incurred as a result thereof, taxes paid or payable as a result thereof (after taking into account any available tax credits or deductions and any tax sharing arrangements), amounts required to be applied to the repayment of Indebtedness secured by a Lien on the asset or assets the subject of such Asset Sale and any reserve for adjustment in respect of the sale price of such asset or assets. "Non-Controlled Subsidiary" means an entity which is not a Cable Controlled Subsidiary. "Non-Recourse Debt" means Indebtedness or that portion of Indebtedness as to which none of the Company, nor any Restricted Subsidiary: (i) provides credit support (including any undertaking, agreement or instrument which would constitute Indebtedness); (ii) is directly or indirectly liable; or (iii) constitutes the lender. "Non-Restricted Subsidiary" means (A) a Subsidiary that (a) at the time of its designation by the Board of Directors as a Non-Restricted Subsidiary has not acquired any assets (other than as specifically permitted by clause (e) of "Permitted Investments" or Section 4.09 hereof), at any previous time, directly or indirectly from the Company or any of its Restricted Subsidiaries, (b) has no Indebtedness other than Non-Recourse Debt and (c) that at the time of such designation, after giving pro forma effect to such designation, the ratio of Indebtedness to Annualized Pro Forma EBITDA of the Company is equal to or less than the ratio of Indebtedness to Annualized Pro Forma EBITDA of the Company immediately preceding such designation, provided, however, that if the ratio of Indebtedness to Annualized Pro Forma EBITDA of the Company immediately preceding such designation is 6:1 or less, then the ratio of Indebtedness to Annualized Pro Forma EBITDA of the Company may be 0.5 greater than such ratio immediately preceding such designation; (B) any Subsidiary which (a) has been acquired or capitalized out of or by Equity Interests (other than Disqualified Stock) of the Company or Capital Stock Sale Proceeds therefrom, (b) has no Indebtedness other than Non-Recourse Debt and (c) is designated as a Non-Restricted Subsidiary by the Board of Directors or is merged, amalgamated or consolidated with or into, or its assets or capital stock is to be transferred to, a Non-Restricted Subsidiary; or (C) any Subsidiary of a Non-Restricted Subsidiary. "Notes" has the meaning set forth in the preamble hereto. "Obligations" means any principal, interest, penalties, fees, indemnifications, reimbursements, damages and other liabilities payable under the documentation governing any Indebtedness. -14- 15 "Officers' Certificate" means a certificate signed by two Officers, one of whom must be the Chairman of the Board, the President, the Treasurer or a Vice President of the Company. See Sections 10.04 and 10.05 hereof. "Old Notes" means the 12 3/4% Notes, the 11 1/2% Deferred Coupon Notes, the 10 3/4% Notes, the 10% Notes, the 9 3/4% Notes and the 9 1/2% Notes. "Opinion of Counsel" means a written opinion from legal counsel who is acceptable to the Trustee. The counsel may be an employee of or counsel to the Company or the Trustee. See Sections 10.04 and 10.05 hereof. "Other Qualified Notes" means any outstanding senior indebtedness of the Company issued pursuant to an indenture having a provision substantially similar to Section 4.10 hereof (including, without limitation, the 12 3/4% Notes, the 11 1/2% Deferred Coupon Notes, the 10 3/4% Notes, the 10% Notes, the 9 3/4% Notes and the 9 1/2% Notes). "Permitted Acquired Debt" means, with respect to any Acquired Person (including, for this purpose, any Non-Restricted Subsidiary at the time such Non-Restricted Subsidiary becomes a Restricted Subsidiary), Acquired Debt of such Acquired Person and its Subsidiaries in an amount (determined on a consolidated basis) not exceeding the sum of (x) amount of the gross book value of property, plant and equipment of the Acquired Person and its Subsidiaries as set forth on the most recent consolidated balance sheet of the Acquired Person (which may be unaudited) prior to the date it becomes an Acquired Person and (y) the aggregate amount of any Cash Equivalents held by such Acquired Person at the time it becomes an Acquired Person. "Permitted Currency" means the lawful currency of the United States or a European Union member. "Permitted Designee" means (i) a spouse or a child of a Permitted Holder, (ii) trusts for the benefit of a Permitted Holder or a spouse or child of a Permitted Holder, (iii) in the event of the death or incompetence of a Permitted Holder, his estate, heirs, executor, administrator, committee or other personal representative or (iv) any Person so long as a Permitted Holder owns at least 50% of the voting power of all classes of the voting stock of such Person. "Permitted Holders" means George S. Blumenthal, J. Barclay Knapp and their Permitted Designees. "Permitted Investments" means (a) any Investments in the Company or in a Cable Controlled Property or in a Qualified Subsidiary (including, without limitation, (i) Guarantees of Indebtedness of the Company, a Cable Controlled Subsidiary or a Qualified Subsidiary, (ii) Liens securing such Indebtedness or Guarantees or (iii) the payment of any balance deferred and unpaid of the purchase price of any Qualified Subsidiary); (b) any Investments in Cash Equivalents; (c) Investments by the Company in Indebtedness of a counter-party to an Exchange Rate Contract for hedging a Permitted Currency exchange risk that are made, for purposes other than speculation, in connection with such contract to hedge not more than the aggregate principal amount of the Indebtedness being hedged (or, in the case of Indebtedness issued with original issue discount, based on the amounts payable after the amortization of such discount); (d) Investments by the Company or any Subsidiary of the Company in a Person, if as a result of such Investment (i) such Person becomes a Cable Controlled Subsidiary or (ii) such Person is -15- 16 merged, consolidated or amalgamated with or into, or transfers or conveys substantially all of its assets to, or is liquidated into, the Company or a Wholly Owned Subsidiary of the Company; and (e) any issuance, transfer or other conveyance of Equity Interests (other than Disqualified Stock) in the Company (or any Capital Stock Sale Proceeds therefrom) to a Subsidiary of the Company. "Permitted Liens" means (a) Liens in favor of the Company; (b) Liens on property of a Person existing at the time such Person is merged into or consolidated with the Company or any Subsidiary of the Company; provided, that such Liens were in existence prior to the contemplation of such merger or consolidation and do not secure any property or assets of the Company or any of its Subsidiaries other than the property or assets subject to the Liens prior to such merger or consolidation; (c) liens imposed by law, such as carriers', warehousemen's and mechanics' liens and other similar liens arising in the ordinary course of business which secure payment of obligations not more than 60 days past due or are being contested in good faith and by appropriate proceedings; (d) Liens existing on the Issuance Date; (e) Liens for taxes, assessments or governmental charges or claims that are not yet delinquent or that are being contested in good faith by appropriate proceedings promptly instituted and diligently concluded; provided, that any reserve or other appropriate provision as shall be required in conformity with GAAP shall have been made therefor and (f) easements, rights of way, restrictions and other similar easements, licenses, restrictions on the use of properties or minor imperfections of title that, in the aggregate, are not material in amount, and do not in any case materially detract from the properties subject thereto or interfere with the ordinary conduct of the business of the Company or its Restricted Subsidiaries. "Permitted Non-Controlled Assets" means Equity Interests in any Person primarily engaged, directly or indirectly, in one or more Cable Businesses if such Equity Interests (x) were acquired by the Company or any of its Restricted Subsidiaries in connection with any Asset Sale or any Investment otherwise permitted under the terms of the Indenture and (y) to the extent that, after giving pro forma effect to the acquisition thereof by the Company or any of its Restricted Subsidiaries, Adjusted Total Controlled Assets is greater than 80% of Adjusted Total Assets based on the most recent consolidated balance sheet of the Company. "Person" means any individual, corporation, partnership, joint venture, association, joint stock company, trust, unincorporated organization or government or any agency or political subdivision thereof. "Preferred Stock" means the 13% Senior Redeemable Exchangeable Preferred Stock of the Company with an original aggregate liquidation preference of $100,000,000. "Pro Forma EBITDA" means for any Person, for any period, the EBITDA of such Person as determined on a consolidated basis for such Person and its Subsidiaries in accordance with GAAP after giving effect to the following: (i) if, during or after such period, such Person or any of its Subsidiaries shall have made any Asset Sale, Pro Forma EBITDA of such Person and its Subsidiaries for such period shall be reduced by an amount equal to the Pro Forma EBITDA (if positive) directly attributable to the assets which are the subject of such Asset Sale for the period or increased by an amount equal to the Pro Forma EBITDA (if negative) directly attributable thereto for such period and (ii) if, during or after such period, such Person or any of its Subsidiaries completes an acquisition of any Person or business which immediately after such acquisition is a Subsidiary of such Person or whose assets are held directly by such Person or a Subsidiary of such Person, Pro Forma EBITDA shall be computed so as to give pro forma effect to the acquisition of such Person or business (without giving effect to clause (iii) of the definition of Consolidated Net Income); and provided further that, with respect to the Company, all of the -16- 17 foregoing references to "Subsidiary" or "Subsidiaries" shall be deemed to refer only to a "Restricted Subsidiary" or "Restricted Subsidiaries" of the Company. "Purchase Agreement" means the Purchase Agreement, dated as of October 26, 1998, between the Company and the Initial Purchasers. "Qualified Subsidiary" means a Wholly Owned Subsidiary, or an entity that will become a Wholly Owned Subsidiary after giving effect to the transaction being considered, that at the time of and after giving effect to the consummation of the transaction under consideration, (i) is a Cable Business or holds only Cable Assets, (ii) has no Indebtedness (other than Indebtedness being incurred to consummate such transaction) and (iii) has no encumbrances or restrictions (other than such encumbrances or restrictions imposed or permitted by this Indenture, the indentures governing the Old Notes or any other instrument governing unsecured indebtedness of the Company which is pari passu with the Notes) on its ability to pay dividends or make any other distributions to the Company or any of its Subsidiaries. "Rating Agencies" means (i) S&P, (ii) Moody's and (iii) if S&P or Moody's or both shall not make a rating of the Notes publicly available, a nationally recognized securities rating agency or agencies, as the case may be, selected by the Company, which shall be substituted for S&P or Moody's or both, as the case may be. "Rating Category" means (i) with respect to S&P, any of the following categories: BB, B, CCC, CC, C and D (or equivalent successor categories), (ii) with respect to Moody's, any of the following categories: Ba, B, Caa, Ca, C and D (or equivalent successor categories) and (iii) the equivalent of any such category of S&P or Moody's used by another Rating Agency. In determining whether the rating of the Notes has decreased by one or more gradations, gradations within Rating Categories (+ and - for S&P; 1, 2 and 3 for Moody's; or the equivalent gradations for another Rating Agency) shall be taken into account (e.g., with respect to S&P, a decline in a rating from BB to BB-, as well as from BB-to B+, will constitute a decrease of one gradation). "Rating Date" means that date which is 90 days prior to the earlier of (x) a Change of Control and (y) public notice of the occurrence of a Change of Control or of the intention by the Company or any Permitted Holder to effect a Change of Control. "Ratings Decline" means the occurrence of any of the following events on, or within six months after, the date of public notice of the occurrence of a Change of Control or of the intention of the Company or any Person to effect a Change of Control (which period shall be extended so long as the rating of any of the Company's debt securities is under publicly announced consideration for possible downgrade by any of the Rating Agencies): (a) in the event that any of the Company's debt securities are rated by both of the Rating Agencies on the Rating Date as Investment Grade, the rating of such securities by either of the Rating Agencies shall be below Investment Grade, (b) in the event that any of the Company's debt securities are rated by either, but not both, of the Rating Agencies on the Rating Date as Investment Grade, the rating of such securities by both of the Rating Agencies shall be below Investment Grade, or (c) in the event any of the Company's debt securities are rated below Investment Grade by both of the Rating Agencies on the Rating Date, the rating of such securities by either Rating Agency shall be decreased by one or more gradations (including gradations within Rating Categories as well as between Rating Categories). "Redeemable Dividend" means, for any dividend with regard to Disqualified Stock, the quotient -17- 18 of the dividend divided by the difference between one and the maximum statutory federal income tax rate (expressed as a decimal number between 1 and 0) then applicable to the issuer of such Disqualified Stock. "Registered Exchange Offer" has the meaning set forth in the Registration Rights Agreement. "Registration Rights Agreement" means the Registration Rights Agreement relating to the Notes, dated November 2, 1998, between the Company and the Initial Purchasers party thereto. "Replacement Assets" means (w) Cable Assets, (x) Equity Interests of any Person engaged, directly or indirectly, primarily in a Cable Business, which Person is or will become on the date of acquisition thereof a Restricted Subsidiary as a result of the Company's acquiring such Equity Interests, (y) Permitted Non-Controlled Assets or (z) any combination of the foregoing. "Restricted Investment" means an Investment other than a Permitted Investment. "Restricted Subsidiary" means any Subsidiary of the Company which is not a Non-Restricted Subsidiary. "Restricted Subsidiary Preferred Stock Dividend" means, for any dividend with regard to preferred stock of a Restricted Subsidiary, the quotient of the dividend divided by the difference between one and the maximum statutory federal income tax rate (expressed as a decimal number between 1 and 0) then applicable to the issuer of such preferred stock. "S&P" means Standard & Poor's Ratings Group and its successors. "SEC" means the Securities and Exchange Commission. "Securities Act" means the Securities Act of 1933, as amended. "Subordinated Debentures" means the debentures exchangeable by the Company for the Preferred Stock in accordance with the Certificate of Designations therefor. "Subsidiary" means any corporation, association or other business entity of which more than 50% of the total voting power of shares of Capital Stock entitled (without regard to the occurrence of any contingency) to vote in the election of directors, managers or trustees thereof is at the time owned or controlled, directly or indirectly, by any Person or one or more of the other Subsidiaries of that Person or a combination thereof. "TIA" means the Trust Indenture Act of 1939 (15 U.S. Code (ss.)(ss.) 77aaa-77bbbb) as in effect on the date of execution of this Indenture. "Trustee" means the party named as such above until a successor replaces it in accordance with the applicable provisions of this Indenture and thereafter means the successor. "Trust Officer" means the Chairman of the Board, the President or any other officer or assistant officer of the Trustee assigned by the Trustee to administer its corporate trust matters. "Weighted Average Life to Maturity" means, when applied to any Indebtedness at any date, the -18- 19 number of years obtained by dividing (a) the sum of the products obtained by multiplying (x) the amount of each then remaining installment, sinking fund, serial maturity or other required payments of principal, including payment at final maturity, in respect thereof, by (y) the number of years (calculated to the nearest one-twelfth) that will elapse between such date and the making of such payment, by (b) the then outstanding principal amount of such Indebtedness. "Wholly Owned Subsidiary" means, at any time, a Restricted Subsidiary all of the Capital Stock of which (except directors' qualifying shares) is at the time owned directly or indirectly by the Company. Section 1.02. Other Definitions.
Defined Term in Section - ---- ---------- "Additional Amounts" 4.14 "Affiliate Transaction" 4.11 "Agent Member" 2.01 "Asset Sale Offer" 4.10 "Bankruptcy Law" 6.01 "Cedel" 2.01 "Change of Control Payment" 4.13 "Commencement Date" 3.09 "Custodian" 6.01 "Defeasance" 8.02 "Euroclear" 2.01 "Event of Default" 6.01 "Excess Proceeds" 4.10 "Global Note" 2.01 "incur" 4.08 "Legal Holiday" 10.08 "Offer Amount" 3.09 "Officer" 10.11 "Paying Agent" 2.03 "Payment Default" 6.01 "Purchase Date" 3.09 "Purchase Offer" 4.13 "QIBs" 2.01 "Refinancing Indebtedness" 4.08 "Regulation S" 2.01 "Regulation S Global Note" 2.01 "Registrar" 2.03 "Restricted Notes" 2.01 "Restricted Payments" 4.09 "Rule 144A" 2.01 "Rule 144A Global Note" 2.01 "Tender Period" 3.09
-19- 20 "U.S. Government Obligations" 8.02
Section 1.03. Incorporation By Reference Of Trust Indenture Act. Whenever this Indenture refers to a provision of the TIA, the provision is incorporated by reference in and made a part of this Indenture. The following TIA terms used in this Indenture have the following meanings: "indenture securities" means the Notes; "indenture security Holder" means a Holder of a Note; "indenture to be qualified" means this Indenture; "indenture trustee" or "institutional trustee" means the Trustee; and "obligor" on the Notes means the Company or any other obligor on the Notes. All other terms used in this Indenture that are defined by the TIA, defined by TIA reference to another statute or defined by SEC rule under the TIA have the meanings so assigned to them. Section 1.04. Rules Of Construction. Unless the context otherwise requires: (a) a term has the meaning assigned to it; (b) an accounting term not otherwise defined has the meaning assigned to it in accordance with GAAP consistently applied; (c) references to "GAAP" shall mean GAAP in effect as of the time when and for the period as to which such accounting principles are to be applied; (d) "or" is not exclusive; (e) words in the singular include the plural, and in the plural include the singular; (f) provisions apply to successive events and transactions; (g) references to sections of or rules under the Securities Act shall be deemed to include substitute, replacement or successor sections or rules adopted by the SEC from time to time; and (h) a reference to "$" or U.S. Dollars is to United States dollars and a reference to "(pound)"is to British pounds sterling. ARTICLE II. -20- 21 THE NOTES Section 2.01. Form And Dating. (a) General. The Initial Notes and the Trustee's certificate of authentication shall be substantially in the form of Exhibit A hereto, which is hereby incorporated by reference and expressly made a part of this Indenture. The Exchange Notes and the Trustee's certificate of authentication shall be substantially in the form of Exhibit B hereto, which is hereby incorporated by reference and expressly made a part of this Indenture. The Notes may have notations, legends or endorsements required by law, stock exchange rule, agreements to which the Company is subject, if any, or usage (provided that any such notation, legend or endorsement is in a form acceptable to the Company). The Company shall furnish any such legend not contained in Exhibit A or Exhibit B to the Trustee in writing. Each Note shall be dated the date of its authentication. The Notes shall be in denominations of $1,000 and integral multiples thereof. The terms and provisions of the Notes set forth in Exhibit A and Exhibit B are part of this Indenture and to the extent applicable, the Company and the Trustee, by their execution and delivery of this Indenture, expressly agree to such terms and provisions and to be bound thereby. However, to the extent any provision of any Note conflicts with the express provisions of this Indenture, the provisions of this Indenture shall govern and be controlling. (b) Global Notes. The Initial Notes are being offered and sold by the Company pursuant to the Purchase Agreement. Initial Notes offered and sold in reliance on Regulation S under the Securities Act ("Regulation S"), as provided in the Purchase Agreement, shall be issued initially in the form of one or more permanent Global Notes in definitive, fully registered form without interest coupons with the Global Notes Legend and Restricted Notes Legend set forth in Exhibit A hereto (the "Regulation S Global Note"), which shall be deposited on behalf of the purchasers of the Initial Notes represented thereby with the Trustee, at its New York office, as custodian, for the Depositary, and registered in the name of the Depositary or the nominee of the Depositary for the accounts of designated agents holding on behalf of the Euroclear System ("Euroclear") or Cedel Bank, societe anonyme ("Cedel"), duly executed by the Company and authenticated by the Trustee as hereinafter provided. The aggregate principal amount of the Regulation S Global Note may from time to time be increased or decreased by adjustments made on the records of the Trustee and the Depositary or its nominee as hereinafter provided. Initial Notes offered and sold to Qualified Institutional Buyers ("QIBs") in reliance on Rule 144A under the Securities Act ("Rule 144A"), as provided in the Purchase Agreement, shall be issued initially in the form of one or more permanent Global Notes in definitive, fully registered form without interest coupons with the Global Notes Legend and Restricted Notes Legend set forth in Exhibit A hereto ("Rule 144A Global Note"), which shall be deposited on behalf of the purchasers of the Initial Notes represented thereby with the Trustee, at its New York office, as custodian for the Depositary, and registered in the name of the Depositary or a nominee of the Depositary, duly executed by the Company and authenticated by the Trustee as hereinafter provided. The aggregate principal amount of the Rule 144A Global Note may from time to time be increased or decreased by adjustments made on the records of the Trustee and the Depositary or its nominee as hereinafter provided. -21- 22 Upon consummation of the Registered Exchange Offer, the Exchange Notes may be issued in the form of one or more permanent Global Notes in definitive, fully registered form without interest coupons with the Global Notes Legend but not the Restricted Notes Legend set forth in Exhibit A hereto, registered in the name of the Depositary or a nominee of the Depositary, duly executed by the Company and authenticated by the Trustee as hereinafter provided. The aggregate principal amount of such Global Notes may from time to time be increased or decreased by adjustments made on the records of the Trustee and the Depositary or its nominee as hereinafter provided. (c) Book-Entry Provisions. This Section 2.01(c) shall apply only to the Regulation S Global Note, the Rule 144A Global Note and the Exchange Notes issued in the form of one or more permanent Global Notes (collectively, the "Global Notes") deposited with or on behalf of the Depositary. The Company shall execute and the Trustee shall, in accordance with this Section 2.01(c), authenticate and deliver initially one or more Global Notes that (a) shall be registered in the name of the Depositary for such Global Note or Global Notes or the nominee of such Depositary and (b) shall be delivered by the Trustee to such Depositary or pursuant to such Depositary's instructions or held by the Trustee as custodian for the Depositary. Members of, or participants in, the Depositary ("Agent Members") shall have no rights under this Indenture with respect to any Global Note held on their behalf by the Depositary or by the Trustee as the custodian of the Depositary or under such Global Note, and the Depositary may be treated by the Company, the Trustee and any agent of the Company or the Trustee as the absolute owner of such Global Note for all purposes whatsoever. Notwithstanding the foregoing, nothing herein shall prevent the Company, the Trustee or any agent of the Company or the Trustee from giving effect to any written certification, proxy or other authorization furnished by the Depositary or impair, as between the Depositary and its Agent Members, the operation of customary practices of such Depositary governing the exercise of the rights of an owner of a beneficial interest in any Global Note. (d) Certificated Notes. In addition to the provisions of Section 2.10, owners of beneficial interests in Global Notes may, upon request to the Trustee, receive a certificated Initial Note, which certificated Initial Note shall bear the Restricted Notes Legend set forth in Exhibit A hereto ("Restricted Notes"). After a transfer of any Initial Notes during the period of the effectiveness of a Shelf Registration Statement with respect to the Initial Notes and pursuant thereto, all requirements for Restricted Notes Legends on such Initial Note will cease to apply, and a certificated Initial Note without a Restricted Notes Legend will be available to the Holder of such Initial Notes. Upon the consummation of a Registered Exchange Offer with respect to the Initial Notes pursuant to which Holders of Initial Notes are offered Exchange Notes in exchange for their Initial Notes, certificated Initial Notes with the Restricted Notes Legend set forth in Exhibit A hereto will be available to Holders of such Initial Notes that do not exchange their Initial Notes, and Exchange Notes in certificated form without the Restricted Notes Legend set forth in Exhibit A hereto will be available to Holders that exchange such Initial Notes in such Registered Exchange Offer. Section 2.02. Execution And Authentication. -22- 23 Two Officers shall sign the Notes for the Company by manual or facsimile signature. If an Officer whose signature is on a Note no longer holds that office at the time the Note is authenticated, the Note shall nevertheless be valid. A Note shall not be valid until authenticated by the manual signature of an authorized officer of the Trustee. The signature shall be conclusive evidence that the Note has been authenticated under this Indenture. The Trustee shall, upon a written order of the Company signed by two Officers, authenticate (1) Initial Notes for original issue up to an aggregate principal amount stated in paragraph 6 of the Initial Notes and (2) Exchange Notes for issue only in a Registered Exchange Offer, pursuant to the Registration Rights Agreement, in exchange for Initial Notes for a like principal amount. The aggregate principal amount of Notes outstanding at any time shall not exceed the amount set forth herein, except as provided in Section 2.07. The Trustee may appoint an authenticating agent acceptable to the Company to authenticate Notes. An authenticating agent may authenticate Notes whenever the Trustee may do so. Each reference in this Indenture to authentication by the Trustee includes authentication by such agent. An authenticating agent has the same rights as an Agent to deal with Holders, the Company or an Affiliate. Section 2.03. Registrar And Paying Agent. The Company shall maintain in the Borough of Manhattan, City of New York, State of New York and, if and as long as the Notes are listed on the Luxembourg Stock Exchange, in Luxembourg, (i) offices or agencies where the Notes may be presented for registration of transfer or for exchange ("Registrar") and (ii) offices or agencies where the Notes may be presented for payment ("Paying Agent"). The Company initially designates the Trustee at its corporate trust offices in the Borough of Manhattan, City of New York, State of New York to act as principal Registrar and Paying Agent and Chase Manhattan Bank Luxembourg S.A. to act as a Registrar and Paying Agent. The principal Registrar shall keep a register of the Notes and of their transfer and exchange. The Company may appoint one or more co-registrars and one or more additional paying agents in such other locations as it shall determine. The term "Registrar" includes any co-registrar and the term "Paying Agent" includes any additional paying agent. The Company may change any Paying Agent or Registrar without prior notice to any Holder. The Company shall notify the Trustee of the name and address of any Agent not a party to this Indenture. If the Company fails to appoint or maintain another entity as Registrar or Paying Agent, the Trustee shall act as such. The Company or any of its Affiliates may act as Paying Agent or Registrar. Section 2.04. Paying Agent To Hold Money In Trust. The Company shall require each Paying Agent other than the Trustee to agree in writing that the Paying Agent will hold in trust for the benefit of Holders or the Trustee all money held by the Paying Agent for the payment of principal or interest on the Notes, and will notify the Trustee of any default by the Company in making any such payment. While any such default continues, the Trustee may require a Paying Agent to pay all money held by it to the Trustee and to account for any money disbursed by it. The Company at any time may require a Paying Agent to pay all money held by it to the Trustee. Upon payment over to the Trustee, the Paying Agent (if other than the Company or an Affiliate of the Company) shall have no further liability for the money. If the Company or an Affiliate of the Company -23- 24 acts as Paying Agent, it shall segregate and hold in a separate trust fund for the benefit of the Holders all money held by it as Paying Agent. Section 2.05. Holder Lists. The Trustee shall preserve in as current a form as is reasonably practicable the most recent list available to it of the names and addresses of Holders. If the Trustee is not the Registrar, the Company shall furnish to the Trustee on or before each interest payment date and at such other times as the Trustee may request in writing a list in such form and as of such date as the Trustee may reasonably require of the names and addresses of Holders. Section 2.06. Transfer And Exchange. Where Notes are presented to the Registrar or a co-registrar with a request to register a transfer or to exchange them for an equal principal amount of Notes of other denominations, the Registrar shall register the transfer or make the exchange if its requirements for such transactions are met. To permit registrations of transfers and exchanges, the Company shall issue and the Trustee shall authenticate Notes at the Registrar's request. No service charge shall be made for any registration of transfer or exchange (except as otherwise expressly permitted herein), but the Company may require payment of a sum sufficient to cover any transfer tax or similar governmental charge payable in connection therewith (other than any such transfer tax or similar governmental charge payable upon exchanges pursuant to Sections 2.10, 3.06 or 9.05 hereof). The Company shall not be required (i) to issue, register the transfer of or exchange any Note for a period beginning at the opening of business 15 days before the day of any selection of Notes to be redeemed under Section 3.02 hereof and ending at the close of business on the day of selection, or (ii) to register the transfer, or exchange, of any Note so selected for redemption in whole or in part, except the unredeemed portion of any Note being redeemed in part. (a) Notwithstanding any provision to the contrary herein, so long as a Global Note remains outstanding and is held by or on behalf of the Depositary, transfers of a Global Note, in whole or in part, or of any beneficial interest therein, shall only be made in accordance with Section 2.01(b) and this Section 2.06(a); provided, however, that beneficial interests in a Global Note may be transferred to Persons who take delivery thereof in the form of a beneficial interest in the same Global Note in accordance with the transfer restrictions set forth in the Restricted Notes Legend and under the heading "Transfer Restrictions" in the Company's Offering Memorandum dated October 26, 1998. (i) Except for transfers or exchanges made in accordance with clauses (ii) through (iv) of this Section 2.06(a), transfers of a Global Note shall be limited to transfers of such Global Note in whole, but not in part, to nominees of the Depositary or to a successor of the Depositary or such successor's nominee. (ii) Rule 144A Global Note to Regulation S Global Note. If an owner of a beneficial interest in the Rule 144A Global Note deposited with the Depositary or the Trustee as custodian for the Depositary wishes at any time to transfer its interest in such Rule 144A Global Note to a Person who is required to take delivery thereof in the form of an interest in the Regulation S Global Note, such owner may, subject to the rules and -24- 25 procedures of the Depositary, exchange or cause the exchange of such interest for an equivalent beneficial interest in the Regulation S Global Notes. Upon receipt by the principal Registrar of (1) instructions given in accordance with the Depositary's procedures from an Agent Member directing the principal Registrar to credit or cause to be credited a beneficial interest in the Regulation S Global Note in an amount equal to the beneficial interest in the Rule 144A Global Note to be exchanged, (2) a written order given in accordance with the Depositary's procedures containing information regarding the participant account of the Depositary and the Euroclear or Cedel account to be credited with such increase and (3) a certificate in the form of Exhibit C attached hereto given by the Holder of such beneficial interest, then the principal Registrar shall instruct the Depositary to reduce or cause to be reduced the principal amount of the Rule 144A Global Note and to increase or cause to be increased the principal amount of the Regulation S Global Note by the aggregate principal amount of the beneficial interest in the Rule 144A Global Note equal to the beneficial interest in the Regulation S Global Note to be exchanged or transferred, to credit or cause to be credited to the account of the Person specified in such instructions a beneficial Interest in the Regulation S Global Note equal to the reduction in the principal amount of the Rule 144A Global Note and to debit or cause to be debited from the account of the Person making such exchange or transfer the beneficial interest in the Rule 144A Global Note that is being exchanged or transferred. (iii) Regulation S Global Note to Rule 144A Global Note. If an owner of a beneficial interest in the Regulation S Global Note deposited with the Depositary or with the Trustee as custodian for the Depositary wishes at any time to transfer its interest in such Regulation S Global Note to a Person who is required to take delivery thereof in the form of an interest in the Rule 144A Global Note, such Holder may, subject to the rules and procedures of Euroclear or Cedel, as the case may be, and the Depositary, exchange or cause the exchange of such interest for an equivalent beneficial interest in the Rule 144A Global Note. Upon receipt by the principal Registrar of (1) instructions from Euroclear or Cedel, if applicable, and the Depositary, directing the principal Registrar to credit or cause to be credited a beneficial interest in the Rule 144A Global Note equal to the beneficial interest in the Regulation S Global Note to be exchanged or transferred, such instructions to contain information regarding the participant account with the Depositary to be credited with such increase, (2) a written order given in accordance with the Depositary's procedures containing information regarding the participant account of the Depositary and (3) a certificate in the form of Exhibit D attached hereto given by the owner of such beneficial interest, then Euroclear or Cedel or the principal Registrar, as the case may be, will instruct the Depositary to reduce or cause to be reduced the Regulation S Global Note and to increase or cause to be increased the principal amount of the Rule 144A Global Note by the aggregate principal amount of the beneficial interest in the Regulation S Global Note to be exchanged or transferred, and the principal Registrar shall instruct the Depositary, concurrently with such reduction, to credit or cause to be credited to the account of the Person specified in such instructions a beneficial interest in the Rule 144A Global Note equal to the reduction in the principal amount of the Regulation S Global Note and to debit or cause to be debited from the account of the Person making such exchange or transfer the beneficial interest in the Regulation S Global Note that is being exchanged or transferred. -25- 26 (iv) Global Note to Restricted Note. If an owner of a beneficial interest in a Global Note deposited with the Depositary or with the Trustee as custodian for the Depositary wishes at any time to transfer its interest in such Global Note to a Person who is required to take delivery thereof in the form of a Restricted Note, such owner may, subject to the rules and procedures of Euroclear or Cedel, if applicable, and the Depositary, cause the exchange of such interest for one or more Restricted Notes of any authorized denomination or denominations and of the same aggregate principal amount. Upon receipt by the principal Registrar of (1) instructions from Euroclear or Cedel, if applicable, and the Depositary directing the principal Registrar to authenticate and deliver one or more Restricted Notes of the same aggregate principal amount as the beneficial interest in the Global Note to be exchanged, such instructions to contain the name or names of the designated transferee or transferees, the authorized denomination or denominations of the Restricted Notes to be so issued and appropriate delivery instructions, (2) a certificate in the form of Exhibit E attached hereto given by the owner of such beneficial interest to the effect set forth therein, (3) a certificate in the form of Exhibit F attached hereto given by the Person acquiring the Restricted Notes for which such interest is being exchanged, to the effect set forth therein, and (4) such other certifications, legal opinions or other information as the Company may reasonably require to confirm that such transfer is being made pursuant to an exemption from, or in a transaction not subject to, the registration requirements of the Securities Act, then Euroclear or Cedel, if applicable, or the principal Registrar, as the case may be, will instruct the Depositary to reduce or cause to be reduced such Global Note by the aggregate principal amount of the beneficial interest therein to be exchanged and to debit or cause to be debited from the account of the Person making such transfer the beneficial interest in the Global Note that is being transferred, and concurrently with such reduction and debit the Company shall execute, and the Trustee shall authenticate and deliver, one or more Restricted Notes of the same aggregate principal amount in accordance with the instructions referred to above. (v) Restricted Note to Restricted Note. If a Holder of a Restricted Note wishes at any time to transfer such Restricted Note to a Person who is required to take delivery thereof in the form of a Restricted Note, such Holder may, subject to the restrictions on transfer set forth herein and in such Restricted Note, cause the exchange of such Restricted Note for one or more Restricted Notes of any authorized denomination or denominations and of the same aggregate principal amount. Upon receipt by the principal Registrar of (1) such Restricted Note, duly endorsed as provided herein, (2) instructions from such Holder directing the principal Registrar to authenticate and deliver one or more Restricted Notes of the same aggregate principal amount as the Restricted Note to be exchanged, such instructions to contain the name or authorized denomination or denominations of the Restricted Notes to be so issued and appropriate delivery instructions, (3) a certificate from the Holder of the Restricted Note to be exchanged in the form of Exhibit E attached hereto, (4) a certificate in the form of Exhibit F attached hereto given by the Person acquiring the Restricted Notes for which such interest is being exchanged, to the effect set forth therein, and (5) such other certifications, legal opinions or other information as the Company may reasonably require to confirm that such transfer is being made pursuant to an exemption from, or in a transaction not subject to, the registration requirements of the Securities Act, then the Registrar shall cancel or cause to be canceled such Restricted Note and concurrently therewith, the Company shall -26- 27 execute, and the Trustee shall authenticate and deliver, one or more Restricted Notes of the same aggregate principal amount, in accordance with the instructions referred to above. (vi) Other Exchanges. In the event that a beneficial interest in a Global Note is exchanged for Notes in definitive registered form pursuant to Section 2.10, prior to the effectiveness of a Shelf Registration Statement with respect to such Notes, such Notes may be exchanged only in accordance with such procedures as are substantially consistent with the provisions of clauses (ii) through (v) above (including the certification requirements intended to ensure that such transfers comply with Rule 144A, Rule 144, Regulation S or any other available exemption from registration, as the case may be) and such other procedures as may from time to time be adopted by the Company. (vii) Distribution Compliance Period. Prior to the termination of the "distribution compliance period" (as defined in Regulation S) with respect to the issuance of the Notes, transfers of interests in the Regulation S Global Note to "U.S. Persons" (as defined in Regulation S) shall be limited to transfers to QIBs made pursuant to the provisions of Sections 2.06(a)(iii). The Company shall advise the Trustee as to the termination of the distribution compliance period and the Trustee may rely conclusively thereon. (viii) Regulation S Global Note to Certificated Note. Upon proper presentment to the Trustee of a certificate substantially in the form of Exhibit G hereto and subject to the rules and procedures of the Depositary or its direct or indirect participants, including Euroclear and Cedel, an interest in a Regulation S Global Note may be exchanged for a certificated Restricted Note. At any time following consummation of the Exchange Offer pursuant to the Registration Rights Agreement (provided that such consummation is after the expiration of the 40-day distribution compliance period provided for in Rule 903 of Regulation S), such exchange may be made without presentment of the certificate in substantially the form of Exhibit G by any Holder who certifies to the Trustee that such Holder would have been able to participate in such Exchange Offer and resell Exchange Notes without delivery of a prospectus under applicable rules and interpretations of the Commission, and such certificated Note shall be free from any restriction on transfer (other than such as are solely attributable to any holder's status). (b) Except in connection with a Registered Exchange Offer or a Shelf Registration Statement contemplated by and in accordance with the terms of the Registration Rights Agreement, if Initial Notes are issued upon the transfer, exchange or replacement of Initial Notes bearing the Restricted Securities Legend set forth in Exhibit A hereto, or if a request is made to remove such Restricted Notes Legend on Initial Notes, the Initial Notes so issued shall bear the Restricted Notes Legend, or the Restricted Notes Legend shall not be removed, as the case may be, unless there is delivered to the Company such satisfactory evidence, which may include an opinion of counsel licensed to practice law in the State of New York, as may be reasonably required by the Company, that neither the legend nor the restrictions on transfer set forth therein are required to ensure that transfers thereof comply with the provisions of Rule 144A, Rule 144, Regulation S or any other available exemption from registration under the Securities Act or, with -27- 28 respect to Restricted Notes, that such Notes are not "restricted" within the meaning of Rule 144 under the Securities Act. Upon provision of such satisfactory evidence, the Trustee, at the direction of the Company, shall authenticate and deliver Initial Notes that do not bear the legend. (c) Neither the Company nor the Trustee shall have any responsibility for any actions taken or not taken by the Depositary and the Company shall have no responsibility for any actions taken or not taken by the Trustee as agent or custodian of the Depositary. Section 2.07. Replacement Notes. If the Holder of a Note claims that the Note has been lost, destroyed or wrongfully taken or if such Note is mutilated and is surrendered to the Trustee, the Company shall issue and the Trustee shall authenticate a replacement Note if the Trustee's and the Company's requirements are met. If required by the Trustee or the Company, an indemnity bond must be sufficient in the judgment of both to protect the Company, the Trustee, any Agent or any authenticating agent from any loss which any of them may suffer if a Note is replaced. The Company may charge for its expenses in replacing a Note. In case any such mutilated, destroyed, lost or stolen Note has become or is about to become due and payable, or is about to be purchased by the Company pursuant to Article III hereof, the Company in its discretion may, instead of issuing a new Note, pay or purchase such Note, as the case may be. Every replacement Note is an additional obligation of the Company and shall be entitled to all of the benefits of this Indenture equally and proportionately with all other Notes duly issued hereunder. Section 2.08. Outstanding Notes. The Notes outstanding at any time are all the Notes authenticated by the Trustee except for those canceled by it, those delivered to it for cancellation, and those described in this Section as not outstanding. If a Note is replaced, paid or purchased pursuant to Section 2.07 hereof, it ceases to be outstanding unless the Trustee receives proof satisfactory to it that the replaced, paid or purchased Note is held by a bona fide purchaser. If the principal amount of any Note is considered paid under Section 4.01 hereof, it ceases to be outstanding and interest on it ceases to accrue. Except as set forth in Section 2.09 hereof, a Note does not cease to be outstanding because the Company or an Affiliate of the Company holds the Note. Section 2.09. Treasury Notes. In determining whether the Holders of the required principal amount of Notes have concurred in any direction, waiver or consent, Notes owned by the Company or an Affiliate of the Company shall be considered as though they are not outstanding, except that for the purposes of determining whether the Trustee shall be protected in relying on any such direction, waiver or consent, only Notes that the Trustee knows are so owned shall be so disregarded. Section 2.10. Temporary Notes; Global Notes. -28- 29 (a) Until definitive Notes are ready for delivery, the Company may prepare and the Trustee shall authenticate temporary Notes. Temporary Notes shall be substantially in the form of definitive Notes but may have variations that the Company considers appropriate for temporary Notes. Without unreasonable delay, the Company shall prepare and the Trustee shall authenticate definitive Notes in exchange for temporary Notes. Holders of temporary Notes shall be entitled to all of the benefits of this Indenture. (b) A Global Note deposited with the Depositary or with the Trustee as custodian for the Depositary pursuant to Section 2.01 shall be transferred to the beneficial owners thereof in the form of certificated Notes only in accordance with Section 2.01(d) or if such transfer complies with Section 2.06 and (i) the Depositary notifies the Company that it is unwilling or unable to continue as Depositary for such Global Note or if at any time such Depositary ceases to be a "clearing agency" registered under the Exchange Act and a successor depositary is not appointed by the Company within 90 days of such notice, or (ii) an Event of Default has occurred and is continuing. (c) Any Global Note that is transferable to the beneficial owners thereof in the form of certificated Notes pursuant to Section 2.01(d) or to this Section 2.10 shall be surrendered by the Depositary to the Trustee to be so transferred, in whole or from time to time in part, without charge, and the Trustee shall authenticate and deliver, upon such transfer of each portion of such Global Note, an equal aggregate principal amount of Initial Notes of authorized denominations in the form of certificated Notes. Any portion of a Global Note transferred pursuant to this Section shall be executed, authenticated and delivered only in denominations of $1,000 and any integral multiple thereof and registered in such names as the Depositary shall direct. Any Initial Note in the form of certificated Notes delivered in exchange for an interest in the Global Notes shall, except as otherwise provided by Section 2.06(b) bear the Restricted Notes Legend set forth in Exhibit A hereto. (d) The registered Holder of a Global Note may grant proxies and otherwise authorize any Person, including Agent Members and Persons that may hold interests through Agent Members, to take any action which a Holder is entitled to take under this Indenture or the Notes. (e) In the event of the occurrence of either of the events specified in Section 2.10(b), the Company will promptly make available to the Trustee a reasonable supply of certificated Notes in definitive, fully registered form without interest coupons. Section 2.11. Cancellation. The Company at any time may deliver Notes to the Trustee for cancellation. The Registrar and Paying Agent shall forward to the Trustee any Notes surrendered to them for registration of transfer, exchange or payment. The Trustee shall promptly cancel all Notes surrendered for registration of transfer, exchange, payment, replacement or cancellation and shall dispose of canceled Notes as the Company directs. The Company may not issue new Notes to replace Notes that it has paid or that have been delivered to the Trustee for cancellation. Section 2.12. Defaulted Interest. If the Company fails to make a payment of interest on the Notes, it shall pay such defaulted -29- 30 interest plus any interest payable on the defaulted interest, in any lawful manner. It may pay such defaulted interest, plus any such interest payable on it, to the Persons who are Holders on a subsequent special record date. The Company shall fix any such record date and payment date, provided that no such record date shall be less than 10 days prior to the related payment date for such defaulted interest. At least 15 days before any such record date, the Company shall mail to Holders a notice that states the special record date, the related payment date and amount of such interest to be paid. ARTICLE III. Redemption Section 3.01. Notices To Trustee. If the Company elects to redeem Notes pursuant to the optional redemption provisions of the Notes and Section 3.07 hereof or pursuant to the Optional Tax Redemption provision of the Notes (Section 8 of the Initial Notes and Section 7 of the Exchange Notes), it shall notify the Trustee of the redemption date and the principal amount of Notes to be redeemed, and in connection with an Optional Tax Redemption as provided in the Notes, such notice shall be accompanied by an Officers' Certificate to the effect that the conditions to such redemption contained herein have been complied with. The Company shall give each notice provided for in this Section 3.01 at least 50 days before the redemption date (unless a shorter notice period shall be satisfactory to the Trustee). Section 3.02. Selection Of Notes To Be Redeemed. If less than all of the Notes are to be redeemed at any time, selection of Notes shall be made by the Trustee on a pro rata basis or by lot or by method that complies with the requirements of any exchange on which the Notes are listed and that the Trustee considers fair and appropriate, provided that no Notes of $1,000 or less shall be redeemed in part. The Trustee shall make the selection not more than 60 days and not less than 30 days before the redemption date from Notes outstanding not previously called for redemption. Notes and portions of Notes selected shall be in amounts of $1,000 or integral multiples of $1,000. Provisions of this Indenture that apply to Notes called for redemption also apply to portions of Notes called for redemption. The Trustee shall notify the Company promptly of the Notes or portions of Notes to be called for redemption. Section 3.03. Notice Of Redemption. At least 30 days but not more than 60 days before a redemption date, the Company shall mail, by first class mail, a notice of redemption to each Holder whose Notes are to be redeemed at its registered address. The notice shall identify the Notes to be redeemed and shall state: (a) the redemption date; (b) the redemption price; (c) if any Note is to be redeemed in part only, the portion of the principal amount thereof redeemed, and that, after the redemption date, upon surrender of such Note, a new Note in principal amount equal to the unredeemed portion thereof shall be issued in the name of the Holder thereof upon cancellation of the original Note; -30- 31 (d) the name and address of the Paying Agent; (e) that Notes called for redemption must be surrendered to the Paying Agent to collect the redemption price plus accrued interest; (f) that interest on Notes called for redemption ceases to accrue on and after the redemption date; and (g) the paragraph of the Notes pursuant to which the Notes called for redemption are being redeemed. At the Company's request, the Trustee shall give notice of redemption in the Company's name and at its expense; provided that the Company shall have delivered to the Trustee, at least 45 days prior to the redemption date, an Officers' Certificate requesting that the Trustee give such notice and setting forth the information to be stated in such notice, as provided in the preceding paragraph. Section 3.04. Effect Of Notice Of Redemption. Once notice of redemption is mailed in accordance with Section 3.03 hereof, Notes called for redemption become due and payable on the redemption date at the price set forth in the Note. A notice of redemption may not be conditional. Section 3.05. Deposit Of Redemption Price. On or before the redemption date, the Company shall deposit with the Trustee or with the Paying Agent money sufficient to pay the redemption price of and accrued interest on all Notes to be redeemed on that date. The Trustee or the Paying Agent shall return to the Company any money not required for that purpose. Section 3.06. Notes Redeemed In Part. Upon surrender of a Note that is redeemed in part, the Company shall issue and the Trustee shall authenticate for the Holder at the expense of the Company a new Note equal in principal amount to the unredeemed portion of the Note surrendered. Section 3.07. Optional Redemption And Optional Tax Redemption. The Company may redeem all or any portion of the Notes, upon the terms and at the redemption prices set forth in each of the Notes. The Company may also redeem all of the Notes in accordance with the Optional Tax Redemption provision of the Notes (Section 8 of the Initial Notes and Section 7 of the Exchange Notes). Any redemption pursuant to this Section 3.07 shall be made pursuant to the provisions of Section 3.01 through 3.06 hereof. Section 3.08. Mandatory Redemption The Company shall not be required to make mandatory redemption payments with respect to the Notes. Section 3.09. Asset Sale Offer And Purchase Offer. -31- 32 (a) In the event that, pursuant to Sections 4.10 or 4.13 hereof, the Company shall commence an offer to all Holders of the Notes to purchase Notes (the "Asset Sale Offer" or "Purchase Offer"), the Company shall follow the procedures in this Section 3.09. (b) The Asset Sale Offer or the Purchase Offer, as the case may be, shall remain open for a period specified by the Company which shall be no less than 30 calendar days and no more than 40 calendar days following its commencement (the "Commencement Date") (as determined in accordance with Section 4.10 or 4.13 hereof, as the case may be), except to the extent that a longer period is required by applicable law (the "Tender Period"). Upon the expiration of the Tender Period (the "Purchase Date"), the Company shall purchase the principal amount of Notes required to be purchased pursuant to Section 4.10 or 4.13 hereof (the "Offer Amount") or, if less than the Offer Amount has been tendered, all Notes tendered in response to the Asset Sale Offer or the Purchase Offer, as the case may be. (c) If the Purchase Date is on or after an interest payment record date and on or before the related interest payment date, any accrued interest shall be paid to the Person in whose name a Note is registered at the close of business on such record date, and no additional interest will be payable to Holders who tender Notes pursuant to the Asset Sale Offer or the Purchase Offer, as the case may be. (d) The Company shall provide the Trustee with notice of the Asset Sale Offer or the Purchase Offer, as the case may be, at least 10 days before the Commencement Date. (e) On or before the Commencement Date, the Company or the Trustee (at the expense of the Company) shall send, by first class mail, a notice to each of the Holders, which shall govern the terms of the Asset Sale Offer or the Purchase Offer and shall state: (i) that the Asset Sale Offer or the Purchase Offer is being made pursuant to this Section 3.09 and, as applicable, Section 4.10 or 4.13 hereof and the length of time the Asset Sale Offer or the Purchase Offer will remain open; (ii) the Offer Amount, the purchase price (as determined in accordance with Section 4.10 or 4.13 hereof) and the Purchase Date, and in the case of a Purchase Offer made pursuant to Section 4.13 hereof, that all Notes tendered will be accepted for payment; (iii) that any Note or portion thereof not tendered or accepted for payment will continue to accrue interest; (iv) that, unless the Company defaults in the payment of the purchase price, any Note or portion thereof accepted for payment pursuant to the Asset Sale Offer or the Purchase Offer will cease to accrue interest after the Purchase Date; (v) that Holders electing to have a Note or portion thereof purchased pursuant to any Asset Sale Offer or Purchase Offer will be required to surrender the Note, with the form entitled "Option of Holder to Elect Purchase" on the reverse of the Note completed, to the Company, a depositary, if appointed by the Company, or a Paying Agent at the address specified in the notice prior to the close of business on the third -32- 33 Business Day preceding the Purchase Date; (vi) that Holders will be entitled to withdraw their election if the Company, depositary or Paying Agent, as the case may be, receives, not later than the close of business on the second Business Day preceding the Purchase Date, or such longer period as may be required by law, a letter or a telegram, telex or facsimile transmission (receipt of which is confirmed and promptly followed by a letter) setting forth the name of the Holder, the principal amount of the Note or portion thereof the Holder delivered for purchase and a statement that such Holder is withdrawing his election to have the Note or portion thereof purchased; (vii) that, if the aggregate principal amount of Notes surrendered by Holders exceeds the Offer Amount (as defined in Section 4.10 hereof), the Trustee will select the Notes to be purchased pro rata or by a method that complies with the requirements of any exchange on which the Notes are listed and that the Trustee considers fair and appropriate with such adjustments as may be deemed appropriate by the Company so that only Notes in denominations of $1,000, or integral multiples thereof, shall be purchased; and (viii) that Holders whose Notes were purchased only in part will be issued new Notes equal in principal amount to the unpurchased portion of the Notes surrendered. In addition, the notice shall, to the extent permitted by applicable law, be accompanied by a copy of the information regarding the Company and its Subsidiaries which is required to be contained in the most recent Quarterly Report on Form 10-Q or Annual Report on Form 10-K (including any financial statements or other information required to be included or incorporated by reference therein) and any Reports on Form 8-K filed since the date of such Quarterly Report or Annual Report (or would have been required to file if the Company remained a company incorporated in the United States), as the case may be, which the Company has filed (or would have been required to file if it remained a company incorporated in the United States) with the SEC on or prior to the date of the notice. The notice shall contain all instructions and materials necessary to enable such Holders to tender Notes pursuant to the Asset Sale Offer or the Purchase Offer, as the case may be. (f) At least one Business Day prior to the Purchase Date, the Company shall irrevocably deposit with the Trustee or a Paying Agent in immediately available funds an amount equal to the Offer Amount to be held for payment in accordance with the terms of this Section. On the Purchase Date, the Company shall, to the extent lawful, (i) accept for payment the Notes or portions thereof tendered pursuant to the Asset Sale Offer or the Purchase Offer, (ii) deliver or cause the depositary or Paying Agent to deliver to the Trustee Notes so accepted and (iii) deliver to the Trustee an Officers' Certificate stating such Notes or portions thereof have been accepted for payment by the Company in accordance with the terms of this Section 3.09. The depositary, the Paying Agent or the Company, as the case may be, shall promptly (but in any case not later than ten (10) calendar days after the Purchase Date) mail or deliver to each tendering Holder an amount equal to the purchase price of the Notes tendered by such Holder and accepted by the Company for purchase, and the Trustee shall promptly authenticate and mail or deliver to such Holders a new Note equal in principal amount to any unpurchased portion of the Note surrendered. Any Notes not so accepted shall be promptly mailed or delivered by or on behalf of the Company to the Holder thereof. The Company will publicly announce in a newspaper of -33- 34 general circulation the results of the Asset Sale Offer or the Purchase Offer on the Purchase Date. (g) For the purposes of calculating the allocation of available Excess Proceeds to the Notes and each issue of Other Qualified Notes on a pro rata basis according to accreted value or principal amount, as the case may be, the relevant principal amount of the Notes and the relevant principal amount or the accreted value, as the case may be, of any Other Qualified Notes denominated in a currency other than United States dollars will be notionally converted into United States dollars from the currency such Other Qualified Notes are denominated in (the "Base Currency"); (i) in the case of determining the maximum principal amount of Notes and Other Qualified Notes that may be purchased out of the Excess Proceeds at the noon buying rate in the City of New York as certified for customs purposes by the Federal Reserve Bank of New York for cable transfers in the Base Currency (the "Noon Buying Rate") on the Business Day which is 10 Business Days prior to the Commencement Date; and (ii) in the case of determining the allocation of the remaining Excess Proceeds if the aggregate principal amount or accreted value, as the case may be, of Notes and Other Qualified Notes surrendered by holders in the Asset Sale Offer exceeds the remaining amount of Excess Proceeds, at the Noon Buying Rate on the second Business Day preceding the Purchase Date. (h) The Asset Sale Offer or the Purchase Offer shall be made by the Company in compliance with all applicable provisions of the Exchange Act, and all applicable tender offer rules promulgated thereunder, and shall include all instructions and materials necessary to enable such Holders to tender their Notes. ARTICLE IV. Covenants Section 4.01. Payment Of Notes. The Company shall pay the principal of, premium, if any, and interest on, the Notes on the dates and in the manner provided in the Notes. Principal, premium, if any, and interest shall be considered paid on the date due if the Paying Agent (other than the Company or an Affiliate of the Company) holds on that date money designated for and sufficient to pay all principal and interest then due. To the extent lawful, the Company shall pay interest (including post-petition interest in any proceeding under any Bankruptcy Law) on (i) overdue principal and premium, if any, at the rate borne by the Notes, compounded semiannually; and (ii) overdue installments of interest (without regard to any applicable grace period) at the same rate, compounded semiannually. Section 4.02. Reports. Whether or not required by the rules and regulations of the SEC, so long as any Notes are outstanding, the Company shall file with the SEC and furnish to the Trustee and to the Holders of Notes, all quarterly and annual financial information required to be contained in a filing with the SEC on Forms -34- 35 10-Q and 10-K (or the equivalent thereof under the Exchange Act for foreign private issuers in the event the Company becomes a corporation organized under the laws of the United Kingdom, the Netherlands, the Netherlands Antilles, Bermuda or the Cayman Islands), including a "Management's Discussion and Analysis of Results of Operations and Financial Condition" and, with respect to the annual information only, a report thereon by the Company's certified independent accountants, in each case, in the form required by the rules and regulations of the SEC as in effect on the Issuance Date. This Section 4.02 will apply notwithstanding that the Company becomes a corporation organized under the laws of the United Kingdom, the Netherlands, the Netherlands Antilles, Bermuda or the Cayman Islands. Section 4.03. Compliance Certificate. The Company shall deliver to the Trustee, within 90 days after the end of each fiscal year of the Company, an Officers' Certificate stating that a review of the activities of the Company and its subsidiaries during the preceding fiscal year has been made under the supervision of the signing Officers with a view to determining whether the Company has kept, observed, performed and fulfilled its obligations under, and complied with the covenants and conditions contained in, this Indenture, and further stating, as to each such Officer signing such certificate, that to the best of his knowledge the Company has kept, observed, performed and fulfilled each and every covenant, and complied with the covenants and conditions contained in this Indenture and is not in default in the performance or observance of any of the terms, provisions and conditions hereof (or, if a Default or Event of Default shall have occurred, describing all such Defaults or Events of Default of which he may have knowledge) and that to the best of his knowledge no event has occurred and remains in existence by reason of which payments on account of the principal or of interest, if any, on the Notes are prohibited. One of the Officers signing such Officers' Certificate shall be either the Company's principal executive officer, principal financial officer or principal accounting officer. The Company will so long as any of the Notes are outstanding, deliver to the Trustee, forthwith upon becoming aware of any Default or Event of Default an Officers' Certificate specifying such Default or Event of Default. Immediately upon the occurrence of any event giving rise to the accrual of Special Interest (as such term is defined in Exhibit A hereto) or the cessation of such accrual, the Company shall give the Trustee notice thereof and of the event giving rise to such accrual or cessation (such notice to be contained in an Officers' Certificate) and prior to receipt of such Officers' Certificate the Trustee shall be entitled to assume that no such accrual has commenced or ceased, as the case may be. Section 4.04. Stay, Extension And Usury Laws. The Company covenants (to the extent that it may lawfully do so) that it will not at any time insist upon, plead, or in any manner whatsoever claim or take the benefit or advantage of, any stay, extension or usury law wherever enacted, now or at any time hereafter in force, which may affect the covenants or the performance of this Indenture; and the Company (to the extent it may lawfully do so) hereby expressly waives all benefit or advantage of any such law, and covenants that it will not, by resort to any such law, hinder, delay or impede the execution of any power herein granted to the Trustee, but will suffer and permit the execution of every such power as though no such law had been enacted. Section 4.05. Corporate Existence. -35- 36 Subject to Article V hereof, the Company will do or cause to be done all things necessary to preserve and keep in full force and effect its corporate existence and the corporate, partnership or other existence of each subsidiary of the Company in accordance with the respective organizational documents of each subsidiary and the rights (charter and statutory), licenses and franchises of the Company and its subsidiaries; provided, however, that the Company shall not be required to preserve any such right, license or franchise, or the corporate, partnership or other existence of any subsidiary, if the Board of Directors shall determine that the preservation thereof is no longer desirable in the conduct of the business of the Company and its subsidiaries taken as a whole and that the loss thereof is not adverse in any material respect to the Holders. The Company shall notify the Trustee in writing of any subsidiary which qualifies as a Material Subsidiary and is not specified in clause (i) of the definition thereof. Section 4.06. Taxes. The Company shall, and shall cause each of its subsidiaries to, pay prior to delinquency all taxes, assessments and governmental levies, except as contested in good faith and by appropriate proceedings. Section 4.07. Limitations On Liens. Neither the Company nor any of its Restricted Subsidiaries may, directly or indirectly create, incur, assume or suffer to exist any Lien on any asset now owned or hereafter acquired, or any income or profits therefrom or assign or convey any right to receive income therefrom, except: (a) Permitted Liens; (b) Liens securing Indebtedness and related obligations to the extent such Indebtedness and related obligations are permitted under Sections 4.08(b)(i), (iii), (iv), (v), (viii), (ix) and (xi) hereof; (c) Liens on the assets acquired or leased with the proceeds of Indebtedness permitted to be incurred under Section 4.08 hereof; and (d) Liens securing Refinancing Indebtedness permitted to be incurred under Section 4.08 hereof; provided that the Refinancing Indebtedness so issued and secured by such Lien shall not be secured by any property or assets of the Company or any of its Restricted Subsidiaries other than the property or assets subject to the Liens securing such Indebtedness being refinanced. Section 4.08. Incurrence Of Indebtedness And Issuance Of Preferred Stock. (a) The Company shall not, and shall not permit any of its Restricted Subsidiaries to, directly or indirectly, create, incur, issue, assume, guaranty or otherwise become directly or indirectly liable with respect to (collectively, "incur") any Indebtedness (including Acquired Debt) and the Company shall not issue any Disqualified Stock and shall not permit any of its Restricted Subsidiaries to issue any shares of preferred stock that is Disqualified Stock; provided, however, that the Company may incur Indebtedness or issue shares of Disqualified Stock and any of its Restricted Subsidiaries may issue shares of preferred stock that is Disqualified Stock if after giving effect to such issuance or incurrence on a pro forma basis, the sum of (x) Indebtedness of the Company and its Restricted Subsidiaries, on a consolidated basis, (y) the liquidation value of outstanding preferred stock of Restricted Subsidiaries and (z) the aggregate amount payable by -36- 37 the Company and its Restricted Subsidiaries, on a consolidated basis, upon redemption of Disqualified Stock to the extent such amount is not included in the preceding clause (y) shall be less than the product of Annualized Pro Forma EBITDA for the latest fiscal quarter for which internal financial statements are available immediately preceding the date on which such additional Indebtedness is incurred or such Disqualified Stock or preferred stock is issued multiplied by 7.0, determined on a pro forma basis (including a pro forma application of the net proceeds therefrom), as if the additional Indebtedness had been incurred, or the Disqualified Stock or preferred stock had been issued, as the case may be, at the beginning of such quarter. (b) The foregoing limitations in Section 4.08(a) shall not apply to: (i) the incurrence by the Company or any Restricted Subsidiary of Indebtedness pursuant to the Credit Facility; (ii) the issuance by any Restricted Subsidiary of preferred stock (other than Disqualified Stock) to the Company, any Restricted Subsidiary of the Company or the holders of Equity Interests in any Restricted Subsidiary on a pro rata basis to such holders; (iii) the incurrence of Indebtedness or the issuance of preferred stock by the Company or any of its Restricted Subsidiaries the proceeds of which are (or the credit support provided by any such Indebtedness is), in each case, used to finance the construction, capital expenditure and working capital needs of a Cable Business (including, without limitation, payments made pursuant to any License), the acquisition of Cable Assets or the Capital Stock of a Qualified Subsidiary; (iv) the incurrence by the Company or any of its Restricted Subsidiaries of additional Indebtedness in an aggregate principal amount not to exceed $50 million; (v) the incurrence by the Company or any Restricted Subsidiary of any Permitted Acquired Debt; (vi) the incurrence by the Company or any Subsidiary of Indebtedness issued in exchange for, or the proceeds of which are used to extend, refinance, renew, replace, or refund the Notes, Existing Indebtedness or Indebtedness referred to in clauses (i), (ii), (iii), (iv) or (v) above or Indebtedness incurred pursuant to Section 4.08(a) hereof (the "Refinancing Indebtedness"); provided, however, that (1) the principal amount of, and any premium payable in respect of, such Refinancing Indebtedness shall not exceed the principal amount of Indebtedness so extended, refinanced, renewed, replaced or refunded (plus the amount of reasonable expenses incurred in connection therewith); (2) the Refinancing Indebtedness shall have (A) a Weighted Average Life to Maturity equal to or greater than the Weighted Average Life to Maturity of, and (B) a stated maturity no earlier than the stated maturity of, the Indebtedness being extended, refinanced, renewed, replaced or refunded; and (3) the Refinancing Indebtedness shall be subordinated in right of payment to the Notes as and to the extent of the Indebtedness being extended, refinanced, renewed, replaced or refunded; (vii) the issuance of the Preferred Stock in lieu of payment of cash interest on -37- 38 the Subordinated Debentures or the incurrence by the Company of Indebtedness represented by the Subordinated Debentures upon the exchange of the Preferred Stock in accordance with the Certificate of Designations therefor; (viii) Indebtedness under Exchange Rate Contracts, provided that such Exchange Rate Contracts are related to payment obligations under Existing Indebtedness or Indebtedness incurred under Section 4.08(a) or (b) hereof that are being hedged thereby, and not for speculation and that the aggregate notional amount under each such Exchange Rate Contract does not exceed the aggregate payment obligations under such Indebtedness; (ix) Indebtedness under Interest Rate Agreements, provided that the obligations under such agreements are related to payment obligations on Existing Indebtedness or Indebtedness otherwise incurred pursuant to Section 4.08(a) or (b) hereof, and not for speculation; (x) the incurrence of Indebtedness between the Company and any Restricted Subsidiary, between or among Restricted Subsidiaries and between any Restricted Subsidiary and other holders of Equity Interests of such Restricted Subsidiary (or other Persons providing funding on their behalf) on a pro rata basis and on substantially identical principal financial terms; provided, however, that if any such Restricted Subsidiary that is the payee of any such Indebtedness ceases to be a Restricted Subsidiary or transfers such Indebtedness (other than to the Company or a Restricted Subsidiary of the Company), such events shall be deemed, in each case, to constitute the incurrence of such Indebtedness by the Company or by a Restricted Subsidiary, as the case may be, at the time of such event; and (xi) Indebtedness of the Company and/or any Restricted Subsidiary in respect of performance bonds of the Company or any Subsidiary or surety bonds provided by the Company or any Restricted Subsidiary received in the ordinary course of business in connection with the construction or operation of a Cable Business. (c) Any redesignation of a Non-Restricted Subsidiary as a Restricted Subsidiary shall be deemed for purposes of this Section 4.08 to be an incurrence of Indebtedness by the Company and its Restricted Subsidiaries of the Indebtedness of such Non-Restricted Subsidiary as of the time of such redesignation to the extent such Indebtedness does not already constitute Indebtedness of the Company or one of its Restricted Subsidiaries. Section 4.09. Restricted Payments. (a) The Company shall not, and shall not permit any of its Restricted Subsidiaries to, directly or indirectly: (i) declare or pay any dividend or make any distribution on account of the Company's or any of its Restricted Subsidiaries' Equity Interests (other than (x) dividends or distributions payable in Equity Interests (other than Disqualified Stock) of the Company or such Restricted Subsidiary or (y) dividends or distributions payable to the Company or any Wholly Owned Subsidiary of the Company, or (z) pro rata -38- 39 dividends or pro rata distributions payable by a Restricted Subsidiary); (ii) purchase, redeem or otherwise acquire or retire for value any Equity Interests of the Company (other than any such Equity Interests owned by the Company or any Wholly Owned Subsidiary of the Company); (iii) voluntarily purchase, redeem or otherwise acquire or retire for value any Indebtedness that is subordinated to the Notes; or (iv) make any Restricted Investment (all such payments and other actions set forth in clauses (i) through (iv) above being collectively referred to as "Restricted Payments"), unless, at the time of such Restricted Payment: (1) no Default or Event of Default shall have occurred and be continuing or would occur as a consequence thereof; and (2) such Restricted Payment, together with the aggregate of all other Restricted Payments made by the Company and its Restricted Subsidiaries after the Issuance Date (including Restricted Payments permitted by clauses (ii) through (ix) of Section 4.09(b)), is less than the sum of (x) the difference between Cumulative EBITDA and 1.5 times Cumulative Interest Expense plus (y) Capital Stock Sale Proceeds plus (z) cash received by the Company or a Restricted Subsidiary from a Non-Restricted Subsidiary (other than cash which is or is required to be repaid or returned to such Non-Restricted Subsidiary); provided, however, that to the extent that any Restricted Investment that was made after the date of this Indenture is sold for cash or otherwise liquidated or repaid for cash, the amount credited pursuant to this clause (z) shall be the lesser of (A) the cash received with respect to such sale, liquidation or repayment of such Restricted Investment (less the cost of such sale, liquidation or repayment, if any) and (B) the initial amount of such Restricted Investment, in each case as determined in good faith by the Company's Board of Directors. (b) The foregoing provisions in Section 4.09(a) shall not prohibit: (i) the payment of any dividend within 60 days after the date of declaration thereof, if at said date of declaration such payment would have complied with the provisions of this Indenture; (ii) (x) the redemption, repurchase, retirement or other acquisition of any Equity Interests of the Company or any Restricted Subsidiary or (y) an Investment in any Person, in each case, in exchange for, or out of the proceeds of, the substantially concurrent sale (other than to a Restricted Subsidiary of the Company) of other Equity Interests (other than any Disqualified Stock) of the Company, provided that the Company delivers to the Trustee: (1) with respect to any transaction involving in excess of $1 million, a resolution of the Board of Directors set forth in an Officers' Certificate certifying that such transaction is approved by a majority of the directors on the Board of Directors; and (2) with respect to any transaction involving in excess of $25 million, an -39- 40 opinion as to the fairness to the Company or such Subsidiary from a financial point of view issued by an investment banking firm of national standing with high yield experience, together with an Officers' Certificate to the effect that such opinion complies with this clause (2), provided that the amount of such proceeds from the sale of such Equity Interests shall be excluded in each case from Capital Stock Sale Proceeds for purposes of clause (a)(iv)(2)(y), above; (iii) Investments by the Company or any Restricted Subsidiary in a Non-Controlled Subsidiary which (A) has no Indebtedness on a consolidated basis other than Indebtedness incurred to finance the purchase of equipment used in a Cable Business, (B) has no restrictions (other than restrictions imposed or permitted by this Indenture or the indentures governing the Other Qualified Notes or any other instrument governing unsecured indebtedness of the Company which is pari passu with the Notes) on its ability to pay dividends or make any other distributions to the Company or any of its Restricted Subsidiaries, (C) is or will be a Cable Business and (D) uses the proceeds of such Investment for constructing a Cable Business or the working capital needs of a Cable Business; (iv) the redemption, purchase, defeasance, acquisition or retirement of Indebtedness that is subordinated to the Notes (including premium, if any, and accrued and unpaid interest) made by exchange for, or out of the proceeds of the substantially concurrent sale (other than to a Restricted Subsidiary of the Company) of (A) Equity Interests of the Company, provided that the amount of such proceeds from the sale of such Equity Interests shall be excluded in each case from Capital Stock Sale Proceeds for purposes of clause (a)(iv)(2)(y) above or (B) Refinancing Indebtedness permitted to be incurred under Section 4.08 hereof; (v) Investments by the Company or any Restricted Subsidiary in a Non-Controlled Subsidiary which is or will be a Cable Business in an amount not to exceed $80 million in the aggregate plus the sum of (x) cash received by the Company or a Restricted Subsidiary from a Non-Restricted Subsidiary (other than cash which is or is required to be repaid or returned to such Non-Restricted Subsidiary) and (y) Capital Stock Sale Proceeds (excluding the aggregate net sale proceeds to be received upon conversion of the Convertible Subordinated Notes), provided that the amount of such proceeds from the sale of such Equity Interests shall be excluded in each case from Capital Stock Sale Proceeds for purposes of clause (a)(iv)(2)(y) above; (vi) Investments by the Company or any Restricted Subsidiary in Permitted Non-Controlled Assets; (vii) the extension by the Company or any Restricted Subsidiary of trade credit to a Non-Restricted Subsidiary extended on usual and customary terms in the ordinary course of business, provided that the aggregate amount of such trade credit shall not exceed $25 million at any one time; (viii) the payment of cash dividends on the Preferred Stock accruing on or after February 15, 2004 or any mandatory redemption or repurchase of the Preferred Stock, in each case, in accordance with the Certificate of Designations therefor; and -40- 41 (ix) the exchange of all of the outstanding shares of Preferred Stock for Subordinated Debentures in accordance with the Certificate of Designations for the Preferred Stock. (c) Any Investment in a Subsidiary (other than the issuance, transfer or other conveyance of Equity Interests of the Company (or any Capital Stock Sale Proceeds therefrom)) that is designated by the Board of Directors as a Non-Restricted Subsidiary shall become a Restricted Payment made on the date of such designation in the amount of the greater of (x) the book value of such Subsidiary on the date such Subsidiary becomes a Non-Restricted Subsidiary and (y) the fair market value of such Subsidiary on such date as determined (A) in good faith by the Board of Directors of such Subsidiary if such fair market value is determined to be less than $25 million and (B) by an investment banking firm of national standing with high yield underwriting expertise if such fair market value is determined to be in excess of $25 million. (d) Not later than the fifth Business Day after making any Restricted Payment (other than those referred to in sub-clause (vii) of Section 4.09(b)), the Company shall deliver to the Trustee an Officers' Certificate stating that such Restricted Payment is permitted and setting forth the basis upon which the calculations required by this Section 4.09 were computed, which calculations may be based upon the Company's latest available financial statements. Section 4.10. Asset Sales. (a) The Company will not, and will not permit any of its Restricted Subsidiaries to cause, make or suffer to exist any Asset Sale, unless: (i) no Default exists or is continuing immediately prior to and after giving effect to such Asset Sale; (ii) the Company (or the Restricted Subsidiary, as the case may be) receives consideration at the time of such Asset Sale at least equal to the fair market value (evidenced for purposes of this Section 4.10 by a resolution of the Board of Directors set forth in an Officers' Certificate delivered to the Trustee) of the assets sold or otherwise disposed of; and (iii) at least 80% of the consideration therefor received by the Company or such Restricted Subsidiary is in the form of (w) Cash Equivalents, (x) Replacement Assets, (y) publicly traded Equity Interests of a Person who is, directly or indirectly, engaged primarily in one or more Cable Businesses; provided, however, that the Company or such Restricted Subsidiary shall Monetize such Equity Interests by sale to one or more Persons (other than to the Company or a Subsidiary thereof) at a price not less than the fair market value thereof within 180 days of the consummation of such Asset Sale, or (z) any combination of the foregoing clauses (w) through (y); provided, however, that the amount of (x) any liabilities (as shown on the Company's or such Restricted Subsidiary's most recent balance sheet or in the notes thereto) of the Company or any Restricted Subsidiary (other than liabilities that are by their terms subordinated to the Notes) that are assumed by the transferee of any such assets and (y) any notes or other obligations received by the Company or any such Restricted Subsidiary from such transferee that are within five Business Days converted by the Company or such -41- 42 Restricted Subsidiary into cash, shall be deemed to be Cash Equivalents (to the extent of the Cash Equivalents received in such conversion) for purposes of this clause (iii). (b) Within 360 days after any Asset Sale, the Company (or the Restricted Subsidiary, as the case may be) shall cause the Net Proceeds from such Asset Sale: (i) to be used to permanently reduce Indebtedness of a Restricted Subsidiary; or (ii) to be invested or reinvested in Replacement Assets. Pending final application of any such Net Proceeds, the Company may temporarily reduce revolving credit borrowings or otherwise invest such Net Proceeds in any manner that is not prohibited by this Indenture or the indentures for the Other Qualified Notes. Any Net Proceeds from any Asset Sale that are not used or reinvested as provided in the preceding sentence constitute "Excess Proceeds." When the aggregate amount of Excess Proceeds exceeds $15 million, the Company shall make an offer (an "Asset Sale Offer") to all holders of Notes and Other Qualified Notes to purchase the maximum principal amount of Notes and Other Qualified Notes (determined on a pro rata basis according to the accreted value or principal amount, as the case may be, of the Notes and the Other Qualified Notes and in accordance with Section 3.09(g)(i)) that may be purchased out of the Excess Proceeds (x) with respect to the Other Qualified Notes, based on the terms set forth in the indenture related to each issue of the Other Qualified Notes and (y) with respect to the Notes, at an offer price in cash in an amount equal to 100% of the outstanding principal amount thereof plus accrued and unpaid interest, if any, to the date fixed for the closing of such offer, in accordance with the procedures set forth in Section 3.09 hereof. To the extent that the aggregate principal amount or accreted value, as the case may be, of Notes and Other Qualified Notes tendered pursuant to an Asset Sale Offer is less than the Excess Proceeds, the Company may use such deficiency for general corporate purposes. If the aggregate principal amount or accreted value, as the case may be, of Notes and Other Qualified Notes surrendered by holders thereof exceeds the amount of Excess Proceeds, then such remaining Excess Proceeds shall be allocated pro rata according to accreted value or principal amount, as the case may be, to the Notes and each issue of the Other Qualified Notes and in accordance with Section 3.09(g)(ii), and the Trustee shall select the Notes to be purchased from the amount allocated to the Notes on the basis set forth in Section 3.09(e) hereof. Upon completion of such offers to purchase each of the Notes and the Other Qualified Notes, the amount of Excess Proceeds will be reset at zero. (c) Notwithstanding the provisions of Sections 4.10(a) and (b): the Company and its Subsidiaries may: (i) sell, lease, transfer, convey or otherwise dispose of assets or property acquired after October 14, 1993, by the Company or any Subsidiary in a sale-and-leaseback transaction so long as the proceeds of such sale are applied within five Business Days to permanently reduce Indebtedness of a Restricted Subsidiary or if there is no such Indebtedness or such proceeds exceed the amount of such Indebtedness then such proceeds or excess proceeds are reinvested in a Replacement Assets within 360 days after such sale, lease, transfer, conveyance or disposition; (ii) (x) swap or exchange assets or property with a Cable Controlled -42- 43 Subsidiary or (y) issue, sell, lease, transfer, convey or otherwise dispose of equity securities of any of the Company's Subsidiaries to a Cable Controlled Subsidiary, in each of cases (x) and (y) so long as (A) the ratio of Indebtedness to Annualized Pro Forma EBITDA of the Company after such transaction is equal to or less than the ratio of Indebtedness to Annualized Pro Forma EBITDA of the Company immediately preceding such transaction; provided, however, that if the ratio of Indebtedness to Annualized Pro Forma EBITDA of the Company immediately preceding such transaction is 6:1 or less, then the ratio of Indebtedness to Annualized Pro Forma EBITDA of the Company may be 0.5 greater than such ratio immediately preceding such transaction and (B) either (I) the assets so contributed consist solely of a license to operate a Cable Business and the Net Households covered by all of the licenses to operate cable and telephone systems held by the Company and its Restricted Subsidiaries immediately after and giving effect to such transaction equals or exceeds the number of Net Households covered by all of the licenses to operate cable and telephone systems held by the Company and its Restricted Subsidiaries immediately prior to such transaction or (II) the assets so contributed consist solely of Cable Assets and the value of the Capital Stock received, immediately after and giving effect to such transaction, as determined by an investment banking firm of recognized standing with knowledge of the Cable Business, equals or exceeds the value of Cable Assets exchanged for such Capital Stock; or (iii) issue, sell, lease, transfer, convey or otherwise dispose of Equity Interests (other than Disqualified Stock) of the Company (or any Capital Stock Sale Proceeds therefrom) to any Person (including Non-Restricted Subsidiaries). Section 4.11. Transactions With Affiliates. The Company shall not, and shall not permit any of its Restricted Subsidiaries to, sell, lease, transfer or otherwise dispose of any of its properties or assets to, or purchase any property or assets from, or enter into or amend any contract, agreement, understanding, loan, advance or guarantee with, or for the benefit of, any Affiliate (each of the foregoing, an "Affiliate Transaction"), unless: (a) such Affiliate Transaction is on terms that are no less favorable to the Company or the relevant Subsidiary than those that could have been obtained in a comparable transaction by the Company or such Subsidiary with an unrelated Person and (b) the Company delivers to the Trustee: (i) with respect to any Affiliate Transaction involving aggregate payments in excess of $1 million or any series of Affiliate Transactions with an Affiliate involving aggregate payments in excess of $1 million, a resolution of the Board of Directors set forth in an Officers' Certificate certifying that such Affiliate Transaction complies with Section 4.11 (a) and such Affiliate Transaction is approved by a majority of the disinterested directors on the Board of Directors; and (ii) with respect to any Affiliate Transaction involving aggregate payments in excess of $25 million or any series of Affiliate Transactions with an Affiliate involving aggregate payments in excess of $25 million, an opinion as to the fairness to the Company or such Subsidiary from a financial point of view issued by an investment -43- 44 banking firm of national standing with high yield experience together with an Officers' Certificate to the effect that such opinion complies with this clause (ii); provided, however, that notwithstanding the foregoing provisions, the following shall not be deemed to be Affiliate Transactions: (1) any employment agreement entered into by the Company or any of its Subsidiaries in the ordinary course of business and consistent with the past practice of the Company or its predecessor or such Subsidiary; (2) transactions between or among the Company and/or its Restricted Subsidiaries; (3) transactions permitted by the provisions of Section 4.09 hereof; (4) Liens permitted under Section 4.07 hereof which are granted by the Company or any of its Subsidiaries to an unrelated Person for the benefit of the Company or any other Subsidiary of the Company; (5) any transaction pursuant to an agreement in effect on the Issuance Date; (6) the incurrence of Indebtedness by a Restricted Subsidiary where such Indebtedness is owed to the holders of the Equity Interests of such Restricted Subsidiary on a pro rata basis and on substantially identical principal financial terms; (7) management, operating, service or interconnect agreements entered into in the ordinary course of business with any Cable Business in which the Company or any Restricted Subsidiary has an Investment and which is not a Cable Controlled Subsidiary (and of which no Affiliate of the Company is an Affiliate other than as a result of such Investment); and (8) any tax sharing agreement. Section 4.12. Dividends And Other Payment Restrictions Affecting Restricted Subsidiaries. The Company shall not, and shall not permit any of its Restricted Subsidiaries to, directly or indirectly, create or otherwise cause or suffer to exist or become effective any encumbrance or restriction on the ability of any Restricted Subsidiary to: (a) (i) pay dividends or make any other distributions to the Company or any of its Subsidiaries (A) on its Capital Stock or (B) with respect to any other interest or participation in, or measured by, its profits, or (ii) pay any indebtedness owed to the Company or any of its Subsidiaries, or (b) make loans or advances to the Company or any of its Subsidiaries, or (c) transfer any of its properties or assets to the Company or any of its Subsidiaries, except for such encumbrances or restrictions existing under or by reason of: -44- 45 (i) Existing Indebtedness as in effect on the Issuance Date; (ii) this Indenture and the Notes; (iii) any agreement covering or relating to Indebtedness permitted to be incurred under Section 4.08(b)(i), (ii), (iii), (iv), (v), (viii) or (ix) hereof (but only, in the case of Section 4.08(b)(viii) or (ix), to the extent contemplated by the then-existing Credit Facility), provided that the provisions of such agreement permit any action referred to in clause (a) above in aggregate amounts sufficient to enable the payment of interest and principal and mandatory repurchases pursuant to the terms of this Indenture and the Notes, but provided further that: (x) any such agreement may nevertheless encumber, prohibit or restrict any action referred to in clause (a) above if an event of default under such agreement has occurred and is continuing or would occur as a result of any such action; and (y) any such agreement may nevertheless contain (I) restrictions limiting the payment of dividends or the making of any other distributions to all or a portion of excess cash-flow (or any similar formulation thereof) and (II) subordination provisions governing Indebtedness owed to the Company or any Restricted Subsidiary; (iv) applicable law; (v) any instrument governing Indebtedness or Capital Stock of a Person acquired by the Company or any of its Subsidiaries as in effect at the time of such acquisition (except to the extent such Indebtedness was incurred in connection with such acquisition), which encumbrance or restriction is not applicable to any Person, or the properties or assets of any Person, other than the Person, or the property or assets of the Person, so acquired; provided that the EBITDA of such Person is not taken into account in determining whether such acquisition was permitted by the terms of this Indenture; (vi) customary nonassignment provisions in leases entered into in the ordinary course of business and consistent with past practices; (vii) provisions of joint venture or stockholder agreements, so long as such provisions are determined by a resolution of the Board of Directors to be, at the time of such determination, customary for such agreements; (viii) with respect to clause (c) above, purchase money obligations for property acquired in the ordinary course of business or the provisions of any agreement with respect to any Asset Sale (or transaction which, but for its size, would be an Asset Sale), solely with respect to the assets being sold; or (ix) permitted Refinancing Indebtedness, provided that the restrictions contained in the agreements governing such Refinancing Indebtedness are determined by a resolution of the Board of Directors to be no more restrictive than those contained in the agreements governing the Indebtedness being refinanced. Section 4.13. Change of Control. (a) Upon the occurrence of a Change of Control Triggering Event, each Holder of Notes shall have the right to require the Company to repurchase all or any part (equal to $1,000 -45- 46 or an integral multiple thereof) of such Holder's Notes pursuant to the offer described in Section 3.09 hereof (the "Purchase Offer") at a purchase price equal to 101% of the principal amount thereof plus accrued and unpaid interest thereon, if any, to the date of purchase (the "Change of Control Payment"). (b) Within 40 days following any Change of Control Triggering Event, the Company shall mail to each Holder the notice provided by Section 3.09(e). Section 4.14. Payment Of Additional Amounts. At least 10 days prior to the first date on which payment of principal and any premium or interest on the Notes is to be made, and at least 10 days prior to any subsequent such date if there has been any change with respect to the matters set forth in the Officers' Certificate described in this Section 4.14, the Company shall furnish the Trustee and the Paying Agent, if other than the Trustee, with an Officers' Certificate instructing the Trustee and the Paying Agent whether the Company is obligated to pay Additional Amounts (as defined in Section 3 of the Initial Notes or Section 2 of the Exchange Notes) with respect to such payment of principal, or of any premium or interest on the Notes. If the Company will be obligated to pay Additional Amounts with respect to such payment, then such Officers' Certificate shall specify by country the amount, if any, required to be withheld on such payments to such Holders and the Company will pay to the Trustee or the Paying Agent such Additional Amounts. The Company shall indemnify the Trustee and the Paying Agent for, and hold them harmless against, any loss, liability or expense reasonably incurred without negligence or bad faith on their part arising out of or in connection with actions taken or omitted by any of them in reliance on any Officers' Certificate furnished to them pursuant to this Section 4.14. Whenever in this Indenture there is mentioned, in any context, the payment of principal (and premium, if any), Offer Amount, interest or any other amount payable under or with respect to any Note such mention shall be deemed to include mention of the payment of Additional Amounts provided for in this Section 4.14 and Section 3 of the Initial Notes (or Section 2 of the Exchange Notes) to the extent that, in such context, Additional Amounts are, were or would be payable in respect thereof pursuant to the provisions of this Section 4.14 and Section 3 of the Initial Notes (or Section 2 of the Exchange Notes) and express mention of the payment of Additional Amounts (if applicable) in any provisions hereof shall not be construed as excluding Additional Amounts in those provisions hereof where such express mention is not made (if applicable). ARTICLE V. Successors Section 5.01. Merger, Consolidation Or Sale Of Assets. The Company may not consolidate or merge with or into (whether or not the Company is the surviving corporation), or sell, assign, transfer, lease, convey or otherwise dispose of all or substantially all of its properties or assets in one or more related transactions to, another corporation, Person or entity unless: (a) the Company is the surviving corporation or the entity or the Person formed by or surviving any such consolidation or merger (if other than the Company) or to which such sale, assignment, transfer, lease, conveyance or other disposition shall have been made is a corporation -46- 47 organized or existing under the laws of the United Kingdom, the Netherlands, the Netherlands Antilles, Bermuda or the Cayman Islands or of the United States, any state thereof or the District of Columbia; (b) the entity or Person formed by or surviving any such consolidation or merger (if other than the Company) or the entity or Person to which such sale, assignment, transfer, lease, conveyance or other disposition will have been made assumes all the Obligations (including the due and punctual payment of Additional Amounts if the surviving corporation is a corporation organized or existing under the laws of the United Kingdom, the Netherlands, the Netherlands Antilles, Bermuda or the Cayman Islands) of the Company, pursuant to a supplemental indenture in a form reasonably satisfactory to the Trustee, under the Notes and this Indenture; (c) immediately after such transaction no Default or Event of Default exists; (d) the Company or any entity or Person formed by or surviving any such consolidation or merger, or to which such sale, assignment, transfer, lease, conveyance or other disposition will have been made will have a ratio of Indebtedness to Annualized Pro Forma EBITDA equal to or less than the ratio of Indebtedness to Annualized Pro Forma EBITDA of the Company immediately preceding the transaction; provided, however, that if the ratio of Indebtedness to Annualized Pro Forma EBITDA of the Company immediately preceding such transaction is 6:1 or less, then the ratio of Indebtedness to Annualized Pro Forma EBITDA of the Company may be 0.5 greater than such ratio immediately preceding such transaction; and (e) such transaction would not result in the loss of any material authorization or Material License of the Company or its Subsidiaries. Section 5.02. Successor Corporation Substituted. Upon any consolidation or merger, or any sale, assignment, transfer, lease, conveyance or other disposition of all or substantially all of the assets of the Company in accordance with Section 5.01 hereof, the successor corporation formed by such consolidation or into or with which the Company is merged or to which such sale, assignment, transfer, lease, conveyance or other disposition is made shall succeed to, and be substituted for and may exercise every right and power of, the Company under this Indenture with the same effect as if such successor Person has been named as the Company herein; provided, however, that the predecessor Company in the case of a sale, assignment, transfer, lease, conveyance or other disposition shall not be released from the obligation to pay the principal of and interest on the Notes. ARTICLE VI. Defaults And Remedies Section 6.01. Events Of Default. An "Event of Default" occurs if: (a) the Company defaults in the payment of interest (and Additional Amounts, if applicable) on any Note when the same becomes due and payable and the Default continues for a period of 30 days after the date due and payable; -47- 48 (b) the Company defaults in the payment of the principal of any Note when the same becomes due and payable at maturity, upon redemption or otherwise; (c) the Company fails to observe or perform any covenant or agreement contained in Section 4.08, 4.09, or 4.13 hereof; (d) the Company fails to observe or perform any other covenant or agreement contained in this Indenture or the Notes, required by any of them to be performed and the Default continues for a period of 60 days after notice from the Trustee to the Company or from the Holders of 25% in aggregate principal amount of the then outstanding Notes to the Company and the Trustee stating that such notice is a "Notice of Default"; (e) default under any mortgage, indenture or instrument under which there may be issued or by which there may be secured or evidenced any Indebtedness for money borrowed by the Company or any Restricted Subsidiary (or the payment of which is guaranteed by the Company or any Restricted Subsidiary), whether such Indebtedness or guarantee now exists or is created after the Issuance Date, which default: (i) is caused by a failure to pay when due principal of or interest on such Indebtedness within the grace period provided for in such Indebtedness (which failure continues beyond any applicable grace period) (a "Payment Default"); or (ii) results in the acceleration of such Indebtedness prior to its express maturity and, in each case, the principal amount of any such Indebtedness, together with the principal amount of any other such Indebtedness under which there is a Payment Default or the maturity of which has been so accelerated, aggregates $10 million or more; (f) a final judgment or final judgments (other than any judgment as to which a reputable insurance company has accepted full liability) for the payment of money are entered by a court or courts of competent jurisdiction against the Company or any Restricted Subsidiary of the Company which remains undischarged for a period (during which execution shall not be effectively stayed) of 60 days, provided that the aggregate of all such judgments exceeds $5 million; (g) the Company or any Material Subsidiary pursuant to or within the meaning of any Bankruptcy Law: (i) commences a voluntary case; (ii) consents to the entry of an order for relief against it in an involuntary case in which it is the debtor; (iii) consents to the appointment of a Custodian of it or for all or substantially all of its property; (iv) makes a general assignment for the benefit of its creditors; or -48- 49 (v) generally is unable to pay its debts as the same become due; (h) a court of competent jurisdiction enters an order or decree under any Bankruptcy Law that: (i) is for relief against the Company or any Material Subsidiary in an involuntary case; (ii) appoints a Custodian of the Company or any Material Subsidiary or for all or substantially all of its property; or (iii) orders the liquidation of the Company or any Material Subsidiary, and the order or decree remains unstayed and in effect for 60 days; and (i) the revocation of a Material License. The term "Bankruptcy Law" means Title 11, U.S. Code or any similar Federal, state or foreign law for the relief of debtors or the protection of creditors. The term "Custodian" means any receiver, trustee, assignee, liquidator or similar official under any Bankruptcy Law. Section 6.02. Acceleration. If an Event of Default (other than an Event of Default specified in clauses (g) and (h) of Section 6.01 hereof) occurs and is continuing, the Trustee by notice to the Company, or the Holders of at least 25% in principal amount of the then outstanding Notes by notice to the Company and the Trustee, may declare all the Notes to be due and payable. Upon such declaration, the principal of, premium, if any, and interest on, the Notes shall be due and payable immediately. If an Event of Default specified in clause (g) or (h) of Section 6.01 hereof occurs, such an amount shall ipso facto become and be immediately due and payable without any declaration or other act on the part of the Trustee or any Holder. The Holders of a majority in principal amount of the then outstanding Notes by notice to the Trustee may rescind an acceleration and its consequences if the rescission would not conflict with any judgment or decree and if all existing Events of Default have been cured or waived except nonpayment of principal or interest that has become due solely because of the acceleration. In the case of any Event of Default pursuant to the provisions of Section 6.01 occurring by reason of any willful action (or inaction) taken (or not taken) by or on behalf of the Company with the intention of avoiding payment of the premium that the Company would have had to pay if the Company then had elected to redeem the Notes pursuant to Section 7 of the Initial Notes (Section 6 in the case of the Exchange Notes), an equivalent premium shall, upon demand of the Holders of at least 25% in principal amount of the then outstanding Notes delivered to the Company and the Trustee, also become and be immediately due and payable to the extent permitted by law, anything in this Indenture or in the Notes contained to the contrary notwithstanding. If an Event of Default occurs prior to October 1, 2003, by reason of any willful action (or inaction) taken (or not taken) by or on behalf of the Company with the intention of avoiding the prohibition on redemption of the Notes prior to October 1, 2003, pursuant to Section 7 of the Initial Notes (Section 6 in the case of the Exchange Notes), then the premium payable for purposes of this paragraph for each of the years beginning on October 1 of the years (November 2 in the case of 1998) set forth below shall, subject to the foregoing demand, be as set forth in the following table expressed as a percentage of the amount that would otherwise be due pursuant to this Section 6.02 hereof but for the provisions of this sentence. -49- 50
Year Percentage 1998 115.333% 1999 113.416% 2000 111.500% 2001 109.583% 2002 107.667%
Section 6.03. Other Remedies. If an Event of Default occurs and is continuing, the Trustee may pursue any available remedy to collect the payment of principal or interest on the Notes or to enforce the performance of any provision of the Notes or this Indenture. The Trustee may maintain a proceeding even if it does not possess any of the Notes or does not produce any of them in the proceeding. A delay or omission by the Trustee or any Holder in exercising any right or remedy accruing upon an Event of Default shall not impair the right or remedy or constitute a waiver of or acquiescence in the Event of Default. All remedies are cumulative to the extent permitted by law. Section 6.04. Waiver Of Past Defaults. The Holders of a majority in principal amount of the then outstanding Notes by notice to the Trustee may waive an existing Default or Event of Default and its consequences except a continuing Default or Event of Default in the payment of the principal of or interest on any Note. When a Default or Event of Default is waived, it is cured and ceases; but no such waiver shall extend to any subsequent or other Default or impair any right consequent thereon. Section 6.05. Control By Majority. The Holders of a majority in principal amount of the then outstanding Notes may direct the time, method and place of conducting any proceeding for any remedy available to the Trustee or exercising any trust or power conferred on it. However, the Trustee may refuse to follow any direction that conflicts with law or this Indenture, is unduly prejudicial to the rights of other Holders, or would involve the Trustee in personal liability. Section 6.06. Limitation On Suits. A Holder may pursue a remedy with respect to this Indenture or the Notes only if: (a) the Holder gives to the Trustee notice of a continuing Event of Default; (b) the Holders of at least 25% in principal amount of the then outstanding Notes make a request to the Trustee to pursue the remedy; (c) such Holder or Holders offer to the Trustee indemnity satisfactory to the Trustee against any loss, liability or expense; -50- 51 (d) the Trustee does not comply with the request within 60 days after receipt of the request and the offer of indemnity; and (e) during such 60-day period the Holders of a majority in principal amount of the then outstanding Notes do not give the Trustee a direction inconsistent with the request. A Holder may not use this Indenture to prejudice the rights of another Holder or to obtain a preference or priority over another Holder. Section 6.07. Rights Of Holders To Receive Payment. Notwithstanding any other provision of this Indenture, the right of any Holder of a Note to receive payment of principal and interest on the Note, on or after the respective due dates expressed in the Note, or to bring suit for the enforcement of any such payment on or after such respective dates, shall not be impaired or affected without the consent of the Holder made pursuant to this Section. Section 6.08. Collection Suit By Trustee. If an Event of Default specified in Section 6.01(a) or (b) occurs and is continuing, the Trustee may recover judgment in its own name and as trustee of an express trust against the Company for the whole amount of principal and interest remaining unpaid on the Notes and interest on overdue principal and interest and such further amount as shall be sufficient to cover the costs and, to the extent lawful, expenses of collection, including the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel. Section 6.09. Trustee May File Proofs Of Claim. The Trustee may file such proofs of claim and other papers or documents as may be necessary or advisable in order to have the claims of the Trustee and the Holders allowed in any judicial proceedings relative to the Company, its creditors or its property. Nothing contained herein shall be deemed to authorize the Trustee to authorize or consent to or accept or adopt on behalf of any Holder any plan of reorganization, arrangement, adjustment or composition affecting the Notes or the rights of any Holder thereof, or to authorize the Trustee to vote in respect of the claim of any Holder in any such proceeding. Section 6.10. Priorities. If the Trustee collects any money pursuant to this Article, it shall pay out the money in the following order: First: to the Trustee for amounts due under Section 7.07 hereof; Second: to Holders for amounts due and unpaid on the Notes for principal and interest (and Additional Amounts, if applicable), ratably, without preference or priority of any kind, according to the amounts due and payable on the Notes for principal and interest, respectively; and Third: to the Company. The Trustee may fix a record date and payment date for any payment to Holders made pursuant to this Section. -51- 52 Section 6.11. Undertaking For Costs. In any suit for the enforcement of any right or remedy under this Indenture or in any suit against the Trustee for any action taken or omitted by it as a Trustee, a court in its discretion may require the filing by any party litigant in the suit of an undertaking to pay the costs of the suit, and the court in its discretion may assess reasonable costs, including reasonable attorneys' fees, against any party litigant in the suit, having due regard to the merits and good faith of the claims or defenses made by the party litigant. This Section does not apply to a suit by the Trustee, a suit by a Holder pursuant to Section 6.07 hereof, or a suit by Holders of more than 10% in principal amount of the then outstanding Notes. ARTICLE VII. Trustee Section 7.01. Duties Of Trustee. (a) If an Event of Default has occurred and is continuing, the Trustee shall exercise such of the rights and powers vested in it by this Indenture, and use the same degree of care and skill in their exercise, as a prudent man would exercise or use under the circumstances in the conduct of his own affairs. (b) Except during the continuance of an Event of Default: (i) the Trustee need perform only those duties that are specifically set forth in this Indenture and no others and (ii) in the absence of bad faith on its part, the Trustee may conclusively rely, as to the truth of the statements and the correctness of the opinions expressed therein, upon certificates or opinions furnished to the Trustee and conforming to the requirements of this Indenture. However, the Trustee shall examine the certificates and opinions to determine whether or not they conform to the requirements of this Indenture and to confirm the correctness of all mathematical computations. (c) The Trustee may not be relieved from liability for its own negligent action, its own negligent failure to act, or its own willful misconduct, except that: (i) this paragraph does not limit the effect of paragraph (b) of this Section 7.01; (ii) the Trustee shall not be liable for any error of judgment made in good faith by a Trust Officer, unless it is proved that the Trustee was negligent in ascertaining the pertinent facts and (iii) the Trustee shall not be liable with respect to any action it takes or omits to take in good faith in accordance with a direction received by it pursuant to Section 6.05 hereof. (d) Every provision of this Indenture that in any way relates to the Trustee is subject to paragraphs (a), (b) and (c) of this Section 7.01. (e) The Trustee may refuse to perform any duty or exercise any right or power unless it receives indemnity satisfactory to it against any loss, liability or expense. (f) The Trustee shall not be liable for interest on any money received by it except as the Trustee may agree in writing with the Company. Money held in trust by the Trustee need not be segregated from other funds except to the extent required by law. Section 7.02. Rights Of Trustee. -52- 53 (a) The Trustee may rely on any document believed by it to be genuine and to have been signed or presented by the proper Person. The Trustee need not investigate any fact or matter stated in the document. (b) Before the Trustee acts or refrains from acting, it may require an Officers' Certificate or an Opinion of Counsel, or both. The Trustee shall not be liable for any action it takes or omits to take in good faith in reliance on such Officers' Certificate or Opinion of Counsel. (c) The Trustee may act through agents and shall not be responsible for the misconduct or negligence of any agent appointed with due care. (d) The Trustee shall not be liable for any action it takes or omits to take in good faith which it believes to be authorized or within its rights or powers. (e) The Trustee shall not be charged with knowledge of any Event of Default under subsection (c), (d), (e), (f) or (i) (and subsection (a) or (b) if the Trustee does not act as Paying Agent) of Section 6.01 or of the identity of any Material Subsidiary referred to in clause (ii) of the definition thereof unless either (1) a Trust Officer of the Trustee assigned to its Corporate Trustee Administration Department shall have actual knowledge thereof, or (2) the Trustee shall have received notice thereof in accordance with Section 10.02 hereof from the Company or any Holder. Section 7.03. Individual Rights Of Trustee. The Trustee in its individual or any other capacity may become the owner or pledgee of Notes and may otherwise deal with the Company or an Affiliate with the same rights it would have if it were not Trustee. Any Agent may do the same with like rights. However, the Trustee is subject to Sections 7.10 and 7.11 hereof. Section 7.04. Trustee's Disclaimer. The Trustee makes no representation as to the validity or adequacy of this Indenture or the Notes, it shall not be accountable for the Company's use of the proceeds from the Notes, and it shall not be responsible for any statement of the Company in the Indenture or any statement in the Notes other than its authentication or for compliance by the Company with the Registration Rights Agreement. Section 7.05. Notice Of Defaults. If a Default or Event of Default occurs and is continuing and if it is known to the Trustee, the Trustee shall mail to Holders a notice of the Default or Event of Default within 90 days after it occurs. Except in the case of a Default or Event of Default in payment on any Note, the Trustee may withhold the notice if and so long as a committee of its Trust Officers in good faith determines that withholding the notice is in the interests of Holders. Section 7.06. Reports By Trustee To Holders. Within 60 days after the reporting date stated in Section 10.11, the Trustee shall mail to Holders a brief report dated as of such reporting date that complies with TIA (ss.) 313(a) if and to the extent required -53- 54 by such (ss.) 313(a). The Trustee also shall comply with TIA (ss.) 313(b)(2). The Trustee shall also transmit by mail all reports as required by TIA (ss.) 313(c). A copy of each report at the time of its mailing to Holders shall be filed with the SEC and each stock exchange on which the Notes are listed. The Company shall notify the Trustee when the Notes are listed on any stock exchange. Section 7.07. Compensation And Indemnity. The Company shall pay to the Trustee from time to time reasonable compensation for its services hereunder. The Trustee's compensation shall not be limited by any law on compensation of a trustee of an express trust. The Company shall reimburse the Trustee upon request for all reasonable disbursements, expenses and advances incurred or made by it. Such disbursements and expenses may include the reasonable disbursements, compensation and expenses of the Trustee's agents and counsel. The Company shall indemnify the Trustee against any loss or liability incurred by it except as set forth in the next paragraph. The Trustee shall notify the Company promptly of any claim for which it may seek indemnity. The Company shall defend the claim and the Trustee shall cooperate in the defense. The Trustee may have separate counsel and the Company shall pay the reasonable fees, disbursements and expenses of such counsel. The Company need not pay for any settlement made without its consent, which consent shall not be unreasonably withheld. The Company need not reimburse any expense or indemnify against any loss or liability incurred by the Trustee through negligence or bad faith. To secure the Company's payment obligations in this Section, the Trustee shall have a lien prior to the Notes on all money or property held or collected by the Trustee, except money or property held in trust to pay principal and interest on particular Notes. Without prejudice to any other rights available to the Trustee under applicable law, when the Trustee incurs expenses or renders services after an Event of Default specified in Section 6.01(g) or (h) occurs, the expenses and the compensation for the services are intended to constitute expenses of administration under any Bankruptcy Law. All amounts owing to the Trustee under this Section shall be payable by the Company in United States dollars. Section 7.08. Replacement Of Trustee. A resignation or removal of the Trustee and appointment of a successor Trustee shall become effective only upon the successor Trustee's acceptance of appointment as provided in this Section. The Trustee may resign by so notifying the Company. The Holders of a majority in principal amount of the then outstanding Notes may remove the Trustee by so notifying the Trustee and the Company. The Company may remove the Trustee if: (a) the Trustee fails to comply with Section 7.10 hereof, unless the Trustee's duty to resign is stayed as provided in TIA (ss.) 310(b); -54- 55 (b) the Trustee is adjudged a bankrupt or an insolvent or an order for relief is entered with respect to the Trustee under any Bankruptcy Law; (c) a Custodian or public officer takes charge of the Trustee or its property; or (d) the Trustee becomes incapable of acting. If the Trustee resigns or is removed or if a vacancy exists in the office of Trustee for any reason, the Company shall promptly appoint a successor Trustee. Within one year after the successor Trustee takes office, the Holders of a majority in principal amount of the then outstanding Notes may appoint a successor Trustee to replace the successor Trustee appointed by the Company. If a successor Trustee does not take office within 60 days after the retiring Trustee resigns or is removed, the retiring Trustee, the Company or the Holders of at least 10% in principal amount of the then outstanding Notes may petition any court of competent jurisdiction for the appointment of a successor Trustee. If the Trustee fails to comply with Section 7.10 hereof, unless the Trustee's duty to resign is stayed as provided in TIA (ss.) 310(b), any Holder who has been a bona fide Holder of a Note for at least six months may petition any court of competent jurisdiction for the removal of the Trustee and the appointment of a successor Trustee. A successor Trustee shall deliver a written acceptance of its appointment to the retiring Trustee and to the Company. Thereupon the resignation or removal of the retiring Trustee shall become effective, and the successor Trustee shall have all the rights, powers and duties of the Trustee under this Indenture. The successor Trustee shall mail a notice of its succession to Holders. The retiring Trustee shall promptly transfer all property held by it as Trustee to the successor Trustee, subject to the lien provided for in Section 7.07 hereof. Notwithstanding replacement of the Trustee pursuant to this Section 7.08 hereof, the Company's obligations under Section 7.07 hereof shall continue for the benefit of the retiring trustee with respect to expenses and liabilities incurred by it prior to such replacement. Section 7.09. Successor Trustee By Merger, Etc. If the Trustee consolidates, merges or converts into, or transfers all or substantially all of its corporate trust business to, another corporation, the successor corporation without any further act shall be the successor Trustee. Section 7.10. Eligibility; Disqualification. This Indenture shall always have a Trustee who satisfies the requirements of TIA (ss.) 310(a)(1) and (5). The Trustee shall always have a combined capital and surplus as stated in Section 10.11 hereof. The Trustee is subject to TIA (ss.) 310(b). The following indentures shall be deemed to be specifically described herein for the purposes of clause (i) of the first proviso contained in TIA (ss.) 310(b): (a) indenture, dated as of April 20, 1995, between the Company and The Chase Manhattan Bank, as trustee, relating to the 12 3/4% Notes, as amended, (b) indenture, dated as of January 30, 1996, between the Company and The Chase Manhattan Bank, as trustee, relating to the 11 1/2% Deferred Coupon Notes, as amended, (c) indenture, dated as February 12, 1997, between the Company and The Chase Manhattan Bank, as trustee, relating to the 10% Notes, as amended, (d) indenture dated as of March 13, 1998, between the Company and The Chase Manhattan Bank, as trustee, relating to the Company's 9 1/2% Senior -55- 56 Notes due 2008, (e) indenture, dated as of March 13, 1998, between the Company and The Chase Manhattan Bank, as trustee, relating to the Company's 10 3/4% Senior Deferred Coupon Notes due 2008 and (f) indenture, dated as of March 13, 1998, between the Company and The Chase Manhattan Bank, as trustee, relating to Company's the 9 3/4% Senior Deferred Coupon Notes due 2008. Section 7.11. Preferential Collection Of Claims Against Company. The Trustee is subject to TIA (ss.) 311(a), excluding any creditor relationship listed in TIA (ss.) 311(b). A Trustee who has resigned or been removed shall be subject to TIA (ss.) 311(a) to the extent indicated therein. ARTICLE VIII. Discharge Of Indenture Section 8.01. Termination Of Company's Obligations. This Indenture shall cease to be of further effect (except that the Company's obligations under Sections 7.07 and 8.03 hereof shall survive) when all outstanding Notes theretofore authenticated and issued have been delivered to the Trustee for cancellation and the Company has paid all sums payable hereunder. Section 8.02. Option To Effect Defeasance. The Company may, at the option of its Board of Directors evidenced by a resolution set forth in an Officers' Certificate, at any time, elect to have this Section 8.02 be applied to all outstanding Notes upon compliance with the conditions set forth below in this Section. Upon the Company's election to have this Section 8.02 apply to all the outstanding Notes, the Company shall, subject to the satisfaction of the conditions set forth in the next paragraph, be deemed to have been discharged from its obligations with respect to all outstanding Notes on the date such conditions are satisfied (hereinafter, "Defeasance"). For this purpose, Defeasance means that the Company shall be deemed to have paid and discharged the entire Obligations represented by the outstanding Notes, which shall thereafter be deemed to be "outstanding" only for the purposes of Section 8.03 hereof and the other Sections of this Indenture referred to in clauses (a) and (b) below, and to have satisfied all its other obligations under such Notes and this Indenture (and the Trustee, on demand of and at the expense of the Company, shall execute proper instruments acknowledging the same), except for the following provisions which shall survive until otherwise terminated or discharged hereunder: (i) the rights of Holders of outstanding Notes to receive solely from the trust fund described in the following paragraph, payments in respect of the principal of, premium, if any, and interest on such Notes when such payments are due; (ii) the Company's obligations with respect to such Notes under Article II hereof; (iii) the rights, powers, trusts, duties and immunities of the Trustee hereunder and the Company's obligations in connection therewith; and (iv) this Article VIII. In order to exercise Defeasance: (a) the Company must irrevocably deposit with the Trustee, in trust, for the benefit of the Holders, pursuant to an irrevocable trust and security agreement in form satisfactory to the Trustee, money in U.S. dollars sufficient or U.S. Government Obligations the principal of and interest on which will be sufficient or a combination thereof sufficient in the opinion of a nationally recognized firm of independent public accountants, expressed in a written certification -56- 57 thereof (in form satisfactory to the Trustee) to pay the principal of, premium, if any, and interest on the outstanding Notes on the stated date for payment thereof or on the applicable redemption date, as the case may be, of such principal or installment of principal of, premium, if any, and interest on the outstanding Notes; (b) the Company shall have delivered to the Trustee, an Opinion of Counsel (which counsel may be an employee of the Company) reasonably acceptable to the Trustee confirming that: (A) the Company has received from, or there has been published by, the Internal Revenue Service a ruling or (B) since the Issuance Date, there has been a change in the applicable federal income tax law, in either case to the effect that, and based thereon such Opinion of Counsel shall confirm that, the Holders of the outstanding Notes will not recognize income, gain or loss for federal income tax purposes as a result of such Defeasance and will be subject to federal income tax on the same amounts, in the same manner and at the same times as would have been the case if such Defeasance had not occurred; (c) no Event of Default shall have occurred and be continuing on the date of such Defeasance (other than an Event of Default resulting from or related to the incurrence of Indebtedness, the proceeds of which are to be applied to such deposit) or, insofar as Sections 6.01(g) and (h) hereof are concerned, at any time in the period ending on the 91st day after the date of deposit (or greater period of time in which any such deposit of trust funds may remain subject to the effect of any Bankruptcy Law insofar as those apply to the deposit by the Company); (d) such Defeasance shall not result in a breach or violation of, or constitute a default under, any material agreement or instrument (other than this Indenture) to which the Company or any of its Subsidiaries is a party or by which the Company or any of its Subsidiaries is bound; (e) the Company shall have delivered to the Trustee an Opinion of Counsel to the effect that after the 91st day following the deposit (or such greater period referred to in (c) above), the trust funds will not be subject to the effect of any applicable Bankruptcy Law; (f) the Company shall have delivered to the Trustee an Officers' Certificate stating that the deposit was not made by the Company with the intent of preferring the Holders of Notes over any other creditors of the Company with the intent of defeating, hindering, delaying or defrauding creditors of the Company or others; (g) the deposit shall not result in the Company, the Trustee or the trust fund established pursuant to (a) above being subject to regulation under the Investment Company Act of 1940, as amended; (h) Holders of the Notes will have a valid, perfected and unavoidable (under applicable Bankruptcy Law), subject to the passage of time referred to clause (e) above, first priority security interest in the trust funds; and (i) the Company shall have delivered to the Trustee an Officers' Certificate and an Opinion of Counsel (subject to customary exceptions), each stating that all conditions precedent provided for or relating to the Defeasance have been complied with. -57- 58 "U.S. Government Obligations" means direct obligations of the United States of America for the payment of which the full faith and credit of the United States of America is pledged. In order to have money available on a payment date to pay principal or interest (including Additional Amounts, if applicable) on the Notes, the U.S. Government Obligations shall be payable as to principal or interest on or before such payment date in such amounts as will provide the necessary money. U.S. Government Obligations shall not be callable at the issuer's option. Section 8.03. Application Of Trust Money. The Trustee shall hold in trust money or U.S. Government Obligations deposited with it pursuant to Section 8.02 hereof. It shall apply the deposited money and the money from U.S. Government Obligations through the Paying Agent and in accordance with this Indenture to the payment of principal and interest on the Notes. Section 8.04. Repayment To Company. The Trustee and the Paying Agent shall promptly pay to the Company upon request any excess money or securities held by them at any time. The Trustee and the Paying Agent shall pay to the Company upon request any money held by them for the payment of principal or interest that remains unclaimed for two years after the date upon which such payment shall have become due; provided, however, that the Company shall have first caused notice of such payment to the Company to be mailed to each Holder entitled thereto no less than 30 days prior to such payment. After payment to the Company, the Trustee and the Paying Agent shall have no further liability with respect to such money and Holders entitled to the money must look to the Company for payment as general creditors unless any applicable abandoned property law designates another Person. Section 8.05. Reinstatement. If (i) the Trustee or Paying Agent is unable to apply any money in accordance with Section 8.03 hereof by reason of any order or judgment of any court or governmental authority enjoining, restraining or otherwise prohibiting such application and (ii) the Holders of at least a majority in principal amount of the then outstanding Notes so request by written notice to the Trustee, the Company's obligations under this Indenture and the Notes shall be revived and reinstated as though no deposit had occurred pursuant to Section 8.02 hereof until such time as the Trustee or Paying Agent is permitted to apply all such money in accordance with Section 8.03 hereof or such request is revoked by such Holders; provided, however, that if the Company makes any payment of interest on or principal of any Note following the reinstatement of its obligations, the Company shall be subrogated to the rights of the Holders of such Notes to receive such payment from the money held by the Trustee or Paying Agent. ARTICLE IX. Amendments, Supplements And Waivers Section 9.01. Without Consent Of Holders. The Company and the Trustee may amend or supplement this Indenture or the Notes without the consent of any Holder: -58- 59 (a) to cure any ambiguity, defect or inconsistency; (b) to comply with Section 5.01 hereof; (c) to provide for uncertificated Notes in addition to or in place of certificated Notes; (d) to make any change that does not adversely affect the interests hereunder of any Holder; or (e) to qualify the Indenture under the TIA or to comply with the requirements of the SEC in order to maintain the qualification of the Indenture under the TIA. Section 9.02. With Consent Of Holders. Subject to Section 6.07 hereof, the Company and the Trustee may amend or supplement this Indenture or the Notes with the written consent of the Holders of at least a majority in principal amount of the then outstanding Notes. Subject to Sections 6.04 and 6.07 hereof, the Holders of a majority in principal amount of the Notes then outstanding may also waive compliance in a particular instance by the Company with any provision of this Indenture or the Notes. However, without the consent of each Holder affected, an amendment, supplement or waiver under this Section may not: (a) reduce the amount of Notes whose Holders must consent to an amendment, supplement or waiver; (b) reduce the principal of or change the fixed maturity of any Note or alter the provisions of Sections 7 and 8 of the Initial Note and Sections 6 and 7 of the Exchange Note (other than provisions relating to the covenants described under Sections 4.10 and 4.13); (c) reduce the rate of or change the time for payment of interest on any Note; (d) waive a default in the payment of the principal of, or interest on, any Note (except a rescission of acceleration of the Notes by the Holders of at least a majority in aggregate principal amount of the Notes and a waiver of the payment default that resulted from such acceleration); (e) except as contemplated by Section 10.07(e), make any Note payable in money other than that stated in the Note; (f) make any change in Section 6.04 or 6.07 hereof; (g) waive a redemption payment with respect to any Note; or (h) make any change in the foregoing amendment and waiver provisions of this Article 9. To secure a consent of the Holders under this Section 9.02, it shall not be necessary for the Holders to approve the particular form of any proposed amendment, supplement or waiver, but it shall be sufficient if such consent approves the substance thereof. -59- 60 After an amendment, supplement or waiver under this Section becomes effective, the Company shall mail to Holders a notice briefly describing the amendment or waiver. Section 9.03. Compliance With Trust Indenture Act. Every amendment to this Indenture or the Notes shall be set forth in a supplemental indenture that complies with the TIA as then in effect. Section 9.04. Revocation And Effect Of Consents. Until an amendment, supplement or waiver becomes effective, a consent to it by a Holder of a Note is a continuing consent by the Holder and every subsequent Holder of a Note or portion of a Note that evidences the same debt as the consenting Holder's Note, even if notation of the consent is not made on any Note. However, any such Holder or subsequent Holder may revoke the consent as to his Note or portion of a Note if the Trustee receives the notice of revocation before the date on which the Trustee receives an Officers' Certificate certifying that the Holders of the requisite principal amount of Notes have consented to the amendment, supplement or waiver. The Company may, but shall not be obligated to, fix a record date for the purpose of determining the Holders entitled to consent to any amendment, supplement or waiver. If a record date is fixed, then notwithstanding the provisions of the immediately preceding paragraph, those Persons who were Holders at such record date (or their duly designated proxies), and only those Persons, shall be entitled to consent to such amendment, supplement or waiver or to revoke any consent previously given, whether or not such Persons continue to be Holders after such record date. No consent shall be valid or effective for more than 90 days after such record date unless consents from Holders of the principal amount of Notes required hereunder for such amendment or waiver to be effective shall have also been given and not revoked within such 90-day period. After an amendment, supplement or waiver becomes effective it shall bind every Holder, unless it is of the type described in any of clauses (a) through (h) of Section 9.02 hereof. In such case, the amendment or waiver shall bind each Holder who has consented to it and every subsequent Holder that evidences the same debt as the consenting Holder's Note. Section 9.05. Notation On Or Exchange Of Notes. The Trustee may place an appropriate notation about an amendment or waiver on any Note thereafter authenticated. The Company in exchange for all Notes may issue and the Trustee shall authenticate new Notes that reflect the amendment or waiver. Failure to make such notation on a Note or to issue a new Note as aforesaid shall not affect the validity and effect of such amendment or waiver. Section 9.06. Trustee Protected. The Trustee shall sign all supplemental indentures, except that the Trustee may, but need not, sign any supplemental indenture that adversely affects its rights. ARTICLE X. -60- 61 Miscellaneous Section 10.01. Trust Indenture Act Controls. This Indenture is subject to the provisions of the TIA that are required to be incorporated into this Indenture (or, prior to the registration of the Notes pursuant to the Registration Rights Agreement, would be required to be incorporated into this Indenture if it were qualified under the TIA), and shall, to the extent applicable, be governed by such provisions. If any provision of this Indenture limits, qualifies, or conflicts with another provision which is required (or would be so required) to be incorporated in this Indenture by the TIA, the incorporated provision shall control. Section 10.02. Notices. Any notice or communication by the Company or the Trustee to the other is duly given if in writing and delivered in Person or mailed by first class mail to the other's address stated in Section 10.10 hereof. The Company or the Trustee by notice to the other may designate additional or different addresses for subsequent notices or communications. Any notice or communication to a Holder shall be mailed by first class mail to his address shown on the register kept by the Registrar. Failure to mail a notice or communication to a Holder or any defect in it shall not affect its sufficiency with respect to other Holders. If a notice or communication is mailed in the manner provided above within the time prescribed, it is duly given, whether or not the addressee receives it. If the Company mails a notice or communication to Holders, it shall mail a copy to the Trustee and each Agent at the same time. All other notices or communications shall be in writing. In case by reason of the suspension of regular mail service, or by reason of any other cause, it shall be impossible to mail any notice as required by the Indenture, then such method of notification as shall be made with the approval of the Trustee shall constitute a sufficient mailing of such notice. Section 10.03. Communication By Holders With Other Holders. Holders may communicate pursuant to TIA (ss.) 312(b) with other Holders with respect to their rights under this Indenture or the Notes. The Company, the Trustee, the Registrar and anyone else shall have the protection of TIA (ss.) 312(c). Section 10.04. Certificate And Opinion As To Conditions Precedent. Upon any request or application by the Company to the Trustee to take any action under this Indenture, the Company shall furnish to the Trustee: (a) an Officers' Certificate stating that, in the opinion of the signers, all conditions precedent, if any, provided for in this Indenture relating to the proposed action have been complied with; and -61- 62 (b) an Opinion of Counsel stating that, in the opinion of such counsel, all such conditions precedent have been complied with. Section 10.05. Statements Required In Certificate Or Opinion. Each certificate or opinion with respect to compliance with a condition or covenant provided for in this Indenture (other than pursuant to Section 4.03) shall include: (a) a statement that the Person signing such certificate or rendering such opinion has read such covenant or condition; (b) a brief statement as to the nature and scope of the examination or investigation upon which the statements or opinions contained in such certificate or opinion are based; (c) a statement that, in the opinion of such Person, such Person has made such examination or investigation as is necessary to enable such Person to express an informed opinion as to whether or not such covenant or condition has been complied with; and (d) a statement as to whether or not, in the opinion of such Person, such condition or covenant has been complied with. Section 10.06. Rules By Trustee And Agents. The Trustee may make reasonable rules for action by, or a meeting of, Holders. The Registrar or Paying Agent may make reasonable rules and set reasonable requirements for its functions. Section 10.07. Legal Holidays. A "Legal Holiday" is a Saturday, a Sunday or a day on which banking institutions in the State of New York are not required to be open. If a payment date is a Legal Holiday at a place of payment, payment may be made at that place on the next succeeding day that is not a Legal Holiday, and no interest shall accrue for the intervening period. If any other operative date for purposes of this Indenture shall occur on a Legal Holiday then for all purposes the next succeeding day that is not a Legal Holiday shall be such operative date. Section 10.08. No Recourse Against Others. A director, officer, employee or stockholder, as such, of the Company shall not have any liability for any obligations of the Company under the Notes or the Indenture or for any claim based on, in respect of or by reason of such obligations or their creation. Each Holder by accepting a Note waives and releases all such liability. The waiver and release are part of the consideration for the issue of the Notes. Section 10.09. Counterparts And Facsimile Signatures. This Indenture may be executed by manual or facsimile signature in any number of counterparts and by the parties hereto in separate counterparts, each of which when so executed shall be deemed to be an original and all of which taken together shall constitute one and the same agreement. Section 10.10. Variable Provisions. -62- 63 "Officer" means the Chairman of the Board, the President, any Vice President, the Treasurer, the Secretary, any Assistant Treasurer or any Assistant Secretary of the Company. The first certificate pursuant to Section 4.03 hereof shall be for the fiscal year ended on December 31, 1998. The reporting date for Section 7.06 hereof is March 15, of each year. The first reporting date is March 15, 1999. The Trustee shall always have a combined capital and surplus of at least $100,000,000 as set forth in its most recent published annual report of condition. The Company's address is: NTL Incorporated 110 East 59th Street, 26th Floor New York, New York 10022 Attention: Richard J. Lubasch, Esq. Senior Vice President and General Counsel The Trustee's address is: The Chase Manhattan Bank 450 West 33rd Street New York, New York 10001 Attention: Corporate Trustee Administration Department Section 10.11. Governing Law. THE INTERNAL LAWS OF THE STATE OF NEW YORK SHALL GOVERN THIS INDENTURE AND THE NOTES, WITHOUT REGARD TO THE CONFLICT OF LAWS PROVISIONS THEREOF. Section 10.12. No Adverse Interpretation Of Other Agreements. This Indenture may not be used to interpret another indenture, loan or debt agreement of the Company or an Affiliate. Any such indenture, loan or debt agreement may not be used to interpret this Indenture. Section 10.13. Successors. All agreements of the Company in this Indenture and the Notes shall bind its successor. All agreements of the Trustee in this Indenture shall bind its successor. Section 10.14. Severability In case any provision in this Indenture or in the Notes shall be invalid, illegal or unenforceable, the validity, legality and enforceability of the remaining provisions shall not in any way be affected or -63- 64 impaired thereby. Section 10.15. Table Of Contents, Headings, Etc. The Table of Contents, Cross-Reference Table, and headings of the Articles and Sections of this Indenture have been inserted for convenience of reference only, are not to be considered a part hereof, and shall in no way modify or restrict any of the terms or provisions hereof. -64- 65 Indenture signature page SIGNATURES IN WITNESS WHEREOF, the parties hereto have caused this Indenture to be duly executed, all as of the date first written above. NTL INCORPORATED, as Company By: /s/ Richard J. Lubasch Name: Richard J. Lubasch Title: Senior Vice President, General Counsel and Secretary THE CHASE MANHATTAN BANK, as Trustee By: /s/ Andrew M. Deck Name: Andrew M. Deck Title: Vice President 66 EXHIBIT A [FORM OF FACE OF INITIAL NOTE] [Global Notes Legend] UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), NEW YORK, NEW YORK, TO THE COMPANY OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO CEDE & CO., OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC) ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN. TRANSFERS OF THIS GLOBAL NOTE SHALL BE LIMITED TO TRANSFERS IN WHOLE, BUT NOT IN PART, TO NOMINEES OF DTC OR TO A SUCCESSOR THEREOF OR SUCH SUCCESSOR'S NOMINEE AND TRANSFERS OF PORTIONS OF THIS GLOBAL NOTE SHALL BE LIMITED TO TRANSFERS MADE IN ACCORDANCE WITH THE RESTRICTIONS SET FORTH IN THE INDENTURE REFERRED TO ON THE REVERSE HEREOF. [Restricted Notes Legend] THIS NOTE HAS NOT BEEN REGISTERED UNDER THE U.S. SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND ACCORDINGLY, MAY NOT BE OFFERED OR SOLD WITHIN THE UNITED STATES OR TO, OR FOR THE ACCOUNT OR BENEFIT OF, U.S. PERSONS EXCEPT AS SET FORTH IN THE FOLLOWING SENTENCE. BY ITS ACQUISITION HEREOF, THE HOLDER (1) REPRESENTS THAT (A) IT IS A "QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT) OR (B) IT IS AN INSTITUTIONAL "ACCREDITED INVESTOR" (AS DEFINED IN RULE 501(a)(1), (2), (3) OR (7) OF REGULATION D UNDER THE SECURITIES ACT) (AN "INSTITUTIONAL ACCREDITED INVESTOR") OR (C) IT IS NOT A U.S. PERSON AND IS ACQUIRING THIS NOTE IN AN OFFSHORE TRANSACTION IN COMPLIANCE WITH REGULATION S UNDER THE SECURITIES ACT, (2) AGREES THAT IT WILL NOT, WITHIN THE TIME PERIOD REFERRED TO UNDER RULE 144(k) UNDER THE SECURITIES ACT AS IN EFFECT ON THE DATE OF THE TRANSFER OF THIS NOTE, RESELL OR OTHERWISE TRANSFER THIS NOTE EXCEPT (A) TO THE COMPANY OR ANY SUBSIDIARY THEREOF, (B) TO A QUALIFIED INSTITUTIONAL BUYER IN COMPLIANCE WITH RULE 144A UNDER THE SECURITIES ACT, (C) INSIDE THE UNITED STATES TO AN INSTITUTIONAL ACCREDITED INVESTOR THAT, PRIOR TO SUCH TRANSFER, FURNISHES TO THE TRUSTEE A SIGNED LETTER CONTAINING CERTAIN REPRESENTATIONS AND AGREEMENTS RELATING TO THE RESTRICTIONS ON TRANSFER OF THIS NOTE (THE FORM OF WHICH LETTER CAN BE OBTAINED FROM THE TRUSTEE), AND, IF SUCH TRANSFER IS IN RESPECT OF AN AGGREGATE PRINCIPAL AMOUNT OF LESS THAN $100,000, AN OPINION OF COUNSEL ACCEPTABLE TO THE COMPANY THAT SUCH TRANSFER IS IN COMPLIANCE WITH THE SECURITIES ACT, (D) OUTSIDE THE UNITED STATES IN AN OFF-SHORE TRANSACTION IN COMPLIANCE WITH RULE 904 UNDER THE SECURITIES ACT, (E) PURSUANT TO THE EXEMPTION FROM REGISTRATION PROVIDED A-66 67 BY RULE 144 UNDER THE SECURITIES ACT (IF AVAILABLE) OR (F) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT AND (3) AGREES THAT IT WILL DELIVER TO EACH PERSON TO WHOM THIS NOTE IS TRANSFERRED A NOTICE SUBSTANTIALLY TO THE EFFECT OF THIS LEGEND. IN CONNECTION WITH ANY TRANSFER OF THIS NOTE WITHIN THE TIME PERIOD REFERRED TO ABOVE, THE HOLDER MUST CHECK THE APPROPRIATE BOX SET FORTH ON THE REVERSE HEREOF RELATING TO THE MANNER OF SUCH TRANSFER AND SUBMIT THIS CERTIFICATE TO THE TRUSTEE. IF THE PROPOSED TRANSFEREE IS AN INSTITUTIONAL ACCREDITED INVESTOR, THE HOLDER MUST, PRIOR TO SUCH TRANSFER, FURNISH TO THE TRUSTEE AND THE COMPANY SUCH CERTIFICATIONS, LEGAL OPINIONS OR OTHER INFORMATION AS EITHER OF THEM MAY REASONABLY REQUIRE TO CONFIRM THAT SUCH TRANSFER IS BEING MADE PURSUANT TO AN EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT. AS USED HEREIN, THE TERMS "OFF-SHORE TRANSACTION," "UNITED STATES" AND "U.S. PERSON" HAVE THE MEANINGS GIVEN TO THEM BY REGULATION S UNDER THE SECURITIES ACT. THE INDENTURE CONTAINS A PROVISION REQUIRING THE TRUSTEE TO REFUSE TO REGISTER ANY TRANSFER OF THIS NOTE IN VIOLATION OF THE FOREGOING RESTRICTIONS. A-67 68 No. ________ $________ CUSIP No. [ ]/CINS No. [ ] 11 1/2% SENIOR NOTE DUE 2008 NTL Incorporated, a Delaware corporation (the "Company"), promises to pay to __________________________ or registered assigns, the principal sum of ____________________ $[____________] [,or such other amount as is indicated on Schedule A hereof* ,] on October 1, 2008, subject to the further provisions of this Note set forth on the reverse hereof which further provisions shall for all purposes have the same effect as if set forth at this place. Interest Payment Dates: April 1 and October 1, commencing April 1, 1999 Record Dates: March 15 and September 15 IN WITNESS WHEREOF, NTL Incorporated has caused this Note to be signed manually or by facsimile by its duly authorized officers. Dated: NTL INCORPORATED by: by: TRUSTEE'S CERTIFICATE OF AUTHENTICATION This is one of the 11 1/2% Senior Notes due 2008 described in the within-mentioned Indenture. THE CHASE MANHATTAN BANK, as Trustee By:______________________________________ Authorized Officer - ---------- * Applicable to Global Notes Only A-68 69 [FORM OF REVERSE OF INITIAL NOTE] NTL INCORPORATED 11 1/2% Senior Note due 2008 1. Interest. NTL INCORPORATED, a Delaware corporation (the "Company"), is the issuer of 11 1/2% Senior Notes due 2008 (the "Notes"). The Notes will accrue interest at a rate of 11 1/2% per annum. The Company promises to pay interest on the Notes in cash semiannually on each April 1 and October 1, commencing on April 1, 1999, to Holders of record on the immediately preceding March 15 and September 15, respectively. Interest on the Notes will accrue from the most recent date to which interest has been paid, or if no interest has been paid, from November 2, 1998. Interest will be computed on the basis of a 360-day year of twelve 30-day months. The Company will pay interest on overdue principal at the interest rate borne by the Notes, compounded semiannually, and it shall pay interest on overdue installments of interest (without regard to any applicable grace period) at the same interest rate compounded semiannually. Any interest paid on this Note shall be increased to the extent necessary to pay Additional Amounts as set forth in this Note. 2. Special Interest. The Holder of this Note is entitled to the benefits of the Registration Rights Agreement relating to the Notes, dated as of November 2, 1998, between the Company and the Initial Purchasers party thereto (the "Registration Rights Agreement"). In the event that either (a) the Exchange Offer Registration Statement (as such term is defined in the Registration Rights Agreement) is not filed with the SEC on or prior to the 90th day following the date of original issuance of the Notes, (b) the Exchange Offer Registration Statement is not declared effective prior to the 180th day following the date of original issuance of the Notes (as such period may be extended in accordance with the SEC review delay provisions of the Registration Rights Agreement) or (c) the Registered Exchange Offer (as such term is defined in the Registration Rights Agreement) is not consummated or a Shelf Registration Statement (as such term is defined in the Registration Rights Agreement) is not declared effective on or prior to the 220th day following the date of original issuance of the Notes (as such period may be extended in accordance with the SEC review delay provisions of the Registration Rights Agreement) (each such event referred to in clauses (a) through (c) above, a "Registration Default"), interest will accrue (in addition to the stated interest on the Notes) from and including the next day following each of (i) such 90-day period in the case of clause (a) above and (ii) such 180-day period in the case of clause (b) above and (iii) such 220-day period in the case of clause (c) above (in each of cases (b) and (c) as such period is extended, if applicable, in the manner aforesaid) (each such period referred to in clauses (i)-(iii) above an "Accrual Period"), at a rate per annum equal to 0.50% of the principal amount of the Notes (determined daily). The amount of such additional interest (the "Special Interest") will increase by an additional 0.50% of the principal amount with respect to each subsequent applicable Accrual Period until all Registration Defaults have been cured, up to a maximum amount of Special Interest of 1.50% per annum of the principal amount (determined daily). In each case such additional interest will be payable in cash semiannually in arrears on each April 1 and October 1, commencing April 1, 1999, to Holders of record on the immediately preceding March 15 and September 15, respectively. In the event that a Shelf Registration Statement is declared effective pursuant to the terms of the Registration Rights Agreement, if the Company fails to keep such Registration Statement continuously effective for the period required by the Registration Rights Agreement, then from such time as the Shelf Registration Statement is no longer effective until the earlier of (i) the date that the Shelf Registration Statement is again deemed effective, (ii) the date that is the second anniversary of the original issuance of the Notes or (iii) the date as of which all of the Notes are sold pursuant to the Shelf A-69 70 Registration Statement, Special Interest shall accrue at a rate per annum equal to 0.50% of the principal amount of the Notes (1.00% thereof if the Shelf Registration Statement is no longer effective for 30 days or more) and shall be payable in cash semiannually in arrears on each April 1 and October 1, commencing April 1, 1999, to the Holders of record on the immediately preceding March 15 and September 15, respectively. 3. Additional Amounts. This Section 3 shall apply only in the event that the Company becomes, or a successor to the Company is, a corporation organized or existing under the laws of the United Kingdom, the Netherlands, the Netherlands Antilles, Bermuda or the Cayman Islands. All payments made by the Company on this Note shall be made without deduction for or on account of, any and all present or future taxes, duties, assessments, or governmental charges of whatever nature unless the deduction or withholding of such taxes, duties, assessments or governmental charges is then required by law. If any deduction or withholding for or on account of any present or future taxes, assessments or other governmental charges of the United Kingdom, the Netherlands, the Netherlands Antilles, Bermuda or the Cayman Islands (or any political subdivision or taxing authority thereof or therein) shall at any time be required in respect of any amounts to be paid by the Company under this Note, the Company shall pay or cause to be paid such additional amounts ("Additional Amounts") as may be necessary in order that the net amounts received by a Holder of this Note after such deduction or withholding shall be not less than the amounts specified in this Note to which the Holder of this Note is entitled; provided, however, that the Company shall not be required to make any payment of Additional Amounts for or on account of: (a) any tax, assessment or other governmental charge to the extent such tax, assessment or other governmental charge would not have been imposed but for (i) the existence of any present or former connection between such Holder (or between a fiduciary, settlor, beneficiary, member or shareholder of, or possessor of a power over, such Holder, if such Holder is an estate, nominee, trust, partnership or corporation), other than the holding of this Note or the receipt of amounts payable in respect of this Note, and the United Kingdom, the Netherlands, the Netherlands Antilles, Bermuda or the Cayman Islands (or any political subdivision or taxing authority thereof or therein) including, without limitation, such Holder (or such fiduciary, settlor, beneficiary, member, shareholder or possessor) being or having been a citizen or resident thereof or being or having been present or engaged in trade or business therein or having or having had a permanent establishment therein or (ii) the presentation of this Note (where presentation is required) for payment on a date more than 30 days after the date on which such payment became due and payable or the date on which payment thereof is duly provided for, whichever occurs later, except to the extent that the Holder would have been entitled to Additional Amounts had this Note been presented on the last day of such period of 30 days; (b) any tax, assessment or other governmental charge that is imposed or withheld by reason of the failure to comply by the Holder of this Note or, if different, the beneficial owner of the interest payable on this Note, with a timely request of the Company addressed to such Holder or beneficial owner to provide information, documents or other evidence concerning the nationality, residence, identity or connection with the taxing jurisdiction of such Holder or beneficial owner which is required or imposed by a statute, regulation or administrative practice of the taxing jurisdiction as a precondition to exemption from all or part of such tax, assessment or governmental charge; (c) any estate, inheritance, gift, sales, transfer, personal property or similar tax, A-70 71 assessment or other governmental charge; (d) any tax, assessment or other governmental charge which is collectible otherwise than by withholding from payments of principal amount, redemption amount, Change of Control Payment or interest with respect to a Note or withholding from the proceeds of a sale or exchange of a Note; (e) any tax, assessment or other governmental charge required to be withheld by any Paying Agent from any payment of principal amount, redemption amount, Change of Control Payment or interest with respect to a Note, if such payment can be made, and is in fact made, without such withholding by any other Paying Agent located inside the United States; (f) any tax, assessment or other governmental charge imposed on a Holder that is not the beneficial owner of a Note to the extent that the beneficial owner would not have been entitled to the payment of any such Additional Amounts had the beneficial owner directly held the Note; (g) any combination of items (a), (b), (c), (d), (e) and (f) above; nor shall Additional Amounts be paid with respect to any payment of the principal of, or any interest on, this Note to any Holder who is a fiduciary or partnership or other than the sole beneficial owner of such payment to the extent that a beneficiary or settlor would not have been entitled to any Additional Amounts had such beneficiary or settlor been the Holder of this Note. All references to principal amount or interest on the Notes in the Indenture or the Notes shall include any Additional Amounts payable to the Company pursuant to this Section 3. 4. Method of Payment. The Company will pay interest on the Notes (except defaulted interest) to the Persons who are registered Holders of Notes at the close of business on the record date for the next interest payment date even though Notes are canceled after the record date and on or before the interest payment date. Holders must surrender Notes to a Paying Agent to collect principal and premium payments. The Company will pay principal, premium, if any, and interest in money of the United States that at the time of payment is legal tender for payment of public and private debts. However, the Company may pay principal, premium, if any, and interest by check payable in such money. It may mail an interest check to a holder's registered address. If a Holder so requests, principal, premium, if any, and interest may be paid by wire transfer of immediately available funds to an account previously specified in writing by such Holder to the Company and the Trustee. 5. Paying Agent and Registrar. The Trustee will act as Paying Agent and Registrar in the City of New York, New York. Chase Manhattan Bank Luxembourg S.A. will act as Paying Agent and Registrar in Luxembourg if and as long as the Notes are listed on the Luxembourg Stock Exchange. The Company may change any Paying Agent or Registrar without prior notice. The Company or any of its Affiliates may act in any such capacity. 6. Indenture. The Company issued the Notes under an Indenture, dated as of November 2, 1998 (the "Indenture"), between the Company and The Chase Manhattan Bank, as Trustee. The terms of the Notes include those stated in the Indenture and those made part of the Indenture by the Trust Indenture Act of 1939 (15 U.S. Code (ss.)(ss.) 77aaa-77bbbb) as in effect on the date of the Indenture. The Notes are subject to, and qualified by, all such terms, certain of which are summarized hereon, and Holders are A-71 72 referred to the Indenture and such Act for a statement of such terms. The Notes are unsecured general obligations of the Company limited to $625,000,000 in aggregate principal amount. 7. Optional Redemption. Except as provided in Section 8 hereof, the Notes are not redeemable at the Company's option prior to October 1, 2003. Thereafter, the Notes will be subject to redemption at the option of the Company, in whole or in part, upon not less than 30 nor more than 60 days' notice, at the redemption prices (expressed as percentages of principal amount ) set forth below plus accrued and unpaid interest thereon to the applicable redemption date, if redeemed during the twelve-month period beginning on October 1 of the years indicated below:
Year Percentage ---- ---------- 2003 105.570% 2004 103.833% 2005 101.917% 2006 and thereafter 100.000%
8. Optional Tax Redemption. (a) The Notes may be redeemed at the option of the Company, in whole but not in part, upon not less than 30 nor more than 60 days notice, at any time at a redemption price equal to the principal amount thereof plus accrued and unpaid interest to the date fixed for redemption if after the date on which Section 3 of this Note becomes applicable (the "Relevant Date") there has occurred any change in or amendment to the laws (or any regulations or official rulings promulgated thereunder) of the United Kingdom, the Netherlands, the Netherlands Antilles, Bermuda or the Cayman Islands (or any political subdivision or taxing authority thereof or therein), or any change in or amendment to the official application or interpretation of such laws, regulation or rulings (a "Change in Tax Law") which becomes effective after the Relevant Date, as a result of which the Company is or would be so required on the next succeeding Interest Payment Date to pay Additional Amounts with respect to the Notes as described under Section 3 hereof with respect to withholding taxes imposed by the United Kingdom, the Netherlands, the Netherlands Antilles, Bermuda or the Cayman Islands (or any political subdivision or taxing authority thereof or therein) (a "Withholding Tax") and such Withholding Tax is imposed at a rate that exceeds the rate (if any) at which Withholding Tax was imposed on the Relevant Date, provided, however, that (i) this paragraph shall not apply to the extent that, at the Relevant Date it was known or would have been known had professional advice of a nationally recognized accounting firm in the United Kingdom, the Netherlands, the Netherlands Antilles, Bermuda or the Cayman Islands, as the case may be, been sought, that a Change in Tax Law in the United Kingdom, the Netherlands, the Netherlands Antilles, Bermuda or the Cayman Islands was to occur after the Relevant Date, (ii) no such notice of redemption may be given earlier than 90 days prior to the earliest date on which the Company would be obliged to pay such Additional Amounts were a payment in respect of the Notes then due, (iii) at the time such notice of redemption is given, such obligation to pay such Additional Amount remains in effect and (iv) the payment of such Additional Amounts cannot be avoided by the use of any reasonable measures available to the Company. The Notes may also be redeemed, in whole but not in part, at any time at a redemption price equal to the principal amount thereof plus accrued and unpaid interest to the date fixed for redemption if the Person formed after the Relevant Date by a consolidation, amalgamation, reorganization or reconstruction (or other similar arrangement) of the Company or the Person into which the Company is merged after the Relevant Date or to which the Company conveys, transfers or leases its properties and assets after the Relevant Date substantially as an entirety (collectively, a "Subsequent Consolidation") is A-72 73 required, as a consequence of such Subsequent Consolidation and as a consequence of a Change in Tax Law in the United Kingdom, the Netherlands, the Netherlands Antilles, Bermuda or the Cayman Islands occurring after the date of such Subsequent Consolidation to pay Additional Amounts with respect to Notes with respect to Withholding Tax as described under Section 3 hereof and such Withholding Tax is imposed at a rate that exceeds the rate (if any) at which Withholding Tax was or would have been imposed on the date of such Subsequent Consolidation, provided, however, that this paragraph shall not apply to the extent that, at the date of such Subsequent Consolidation it was known or would have been known had professional advice of a nationally recognized accounting firm in the United Kingdom, the Netherlands, the Netherlands Antilles, Bermuda or the Cayman Islands, as the case may be, been sought, that a Change in Tax Law in the United Kingdom, the Netherlands, the Netherlands Antilles, Bermuda or the Cayman Islands was to occur after such date. The Company will also pay, or make available for payment, to Holders on the Redemption Date any Additional Amounts (as described, but subject to the exceptions referred to, in Section 3 hereof) resulting from the payment of such Redemption Price. 9. Notice of Redemption. Notice of redemption will be mailed at least 30 days but not more than 60 days before the redemption date to each Holder of the Notes to be redeemed at his address of record. The Notes in denominations larger than $1,000 may be redeemed in part but only in integral multiples of $1,000. In the event of a redemption of less than all of the Notes, the Notes will be chosen for redemption by the Trustee in accordance with the Indenture. On and after the redemption date, interest ceases to accrue on the Notes or portions of them called for redemption. If this Note is redeemed subsequent to a record date with respect to any interest payment date specified above and on or prior to such interest payment date, then any accrued interest will be paid to the Person in whose name this Note is registered at the close of business on such record date. 10. Mandatory Redemption. The Company will not be required to make mandatory redemption or repurchase payments with respect to the Notes. There are no sinking fund payments with respect to the Notes. 11. Repurchase at Option of Holder. (a) If there is a Change of Control Triggering Event, the Company shall be required to offer to purchase on the Purchase Date all outstanding Notes at a purchase price equal to 101% of the aggregate principal amount thereof, plus accrued and unpaid interest to the Purchase Date. Holders of Notes that are subject to an offer to purchase will receive a Change of Control offer from the Company prior to any related Purchase Date and may elect to have such Notes or portions thereof in authorized denominations purchased by completing the form entitled "Option of Holder to Elect Purchase" appearing below. (b) If the Company or a Restricted Subsidiary consummates any Asset Sales, and when the aggregate amount of Excess Proceeds from such Asset Sales exceeds $15 million, the Company shall be required to make an offer (an "Asset Sale Offer") to all holders of the Notes and Other Qualified Notes to purchase the maximum principal amount of Notes and Other Qualified Notes (determined on a pro rata basis according to the principal amount or accreted value, as the case may be, of the Notes and the Other Qualified Notes) that may be purchased out of the Excess Proceeds, with respect to the Notes, at an offer price in cash in an amount equal to 100% of the outstanding principal amount thereof plus accrued and unpaid interest, if any, to the date fixed for the closing of such offer. To the extent that the aggregate principal amount or accreted value, as the case may be, of Notes and Other Qualified Notes tendered A-73 74 pursuant to an Asset Sale Offer is less than the Excess Proceeds, the Company may use such deficiency for general corporate purposes. If the aggregate principal amount or accreted value, as the case may be, of Notes and Other Qualified Notes surrendered by holders thereof exceeds the amount of Excess Proceeds, then such remaining Excess Proceeds will be allocated pro rata according to principal amount or accreted value, as the case may be, to the Notes and each issue of the Other Qualified Notes and, the Trustee will select the Notes to be purchased in accordance with Section 3.09(e) of the Indenture. Upon completion of such offer to purchase, the amount of Excess Proceeds will be reset at zero. 12. Denominations, Transfer, Exchange. The Notes are in registered form, without coupons, in denominations of $1,000 and integral multiples of $1,000. The transfer of Notes may be registered, and Notes may be exchanged, as provided in the Indenture. The Registrar may require a Holder, among other things, to furnish appropriate endorsements and transfer documents and to pay any taxes and fees required by law or permitted by the Indenture. The Registrar need not exchange or register the transfer of any Note or portion of a Note selected for redemption (except the unredeemed portion of any Note being redeemed in part). Also, it need not exchange or register the transfer of any Note for a period of 15 days before a selection of Notes to be redeemed. 13. Persons Deemed Owners. Except as provided in paragraph 4 of this Note, the registered Holder of a Note may be treated as its owner for all purposes. 14. Unclaimed Money. If money for the payment of principal or interest remains unclaimed for two years, the Trustee and the Paying Agent shall pay the money back to the Company at its written request. After that, Holders of Notes entitled to the money must look to the Company for payment unless an abandoned property law designates another Person and all liability of the Trustee and such Paying Agent with respect to such money shall cease. 15. Defaults and Remedies. The Notes shall have the Events of Default set forth in Section 6.01 of the Indenture. Subject to certain limitations in the Indenture, if an Event of Default occurs and is continuing, the Trustee by notice to the Company or the Holders of at least 25% in aggregate principal amount of the then outstanding Notes by notice to the Company and the Trustee may declare all the Notes to be due and payable immediately, except that in the case of an Event of Default arising from certain events of bankruptcy or insolvency, all unpaid principal and interest accrued on the Notes shall become due and payable immediately without further action or notice. The Holders of a majority in principal amount of the Notes then outstanding by written notice to the Trustee may rescind an acceleration and its consequences if the rescission would not conflict with any judgment or decree and if all existing Events of Default have been cured or waived except nonpayment of principal or interest that has become due solely because of the acceleration. Holders may not enforce the Indenture or the Notes except as provided in the Indenture. Subject to certain limitations, Holders of a majority in principal amount of the then outstanding Notes issued under the Indenture may direct the Trustee in its exercise of any trust or power. The Company must furnish annually compliance certificates to the Trustee. The above description of Events of Default and remedies is qualified by reference, and subject in its entirety, to the more complete description thereof contained in the Indenture. 16. Amendments, Supplements and Waivers. Subject to certain exceptions, the Indenture or the Notes may be amended or supplemented with the consent of the Holders of at least a majority in principal amount of the then outstanding Notes (including consents obtained in connection with a tender offer or exchange offer for Notes), and any existing default may be waived with the consent of the Holders of a majority in principal amount of the then outstanding Notes. Without the consent of any Holder, the A-74 75 Indenture or the Notes may be amended among other things, to cure any ambiguity, defect or inconsistency, to provide for assumption of the Company's obligations to Holders, to make any change that does not adversely affect the rights of any Holder or to qualify the Indenture under the TIA or to comply with the requirements of the SEC in order to maintain the qualification of the Indenture under the TIA. 17. Restrictive Covenants. The Indenture imposes certain limitations on the ability of the Company and its Subsidiaries to, among other things, engage in certain transactions with Affiliates, incur additional indebtedness and make payments in respect of Capital Stock. The limitations are subject to a number of important qualifications and exceptions. 18. Trustee Dealings with the Company. The Trustee, in its individual or any other capacity may become the owner or pledgee of the Notes and may otherwise deal with the Company or an Affiliate with the same rights it would have, as if it were not Trustee, subject to certain limitations provided for in the Indenture and in the TIA. Any Agent may do the same with like rights. 19. No Recourse Against Others. A director, officer, employee or stockholder, as such, of the Company shall not have any liability for any obligations of the Company under the Notes or the Indenture or for any claim based on, in respect of or by reason of such obligations or their creation. Each Holder of the Notes by accepting a Note waives and releases all such liability. The waiver and release are part of the consideration for the issue of the Notes. 20. Governing Law. THE INTERNAL LAWS OF THE STATE OF NEW YORK SHALL GOVERN THE INDENTURE AND THE NOTES WITHOUT REGARD TO CONFLICT OF LAW PROVISIONS THEREOF. 21. Authentication. The Notes shall not be valid until authenticated by the manual signature of an authorized officer of the Trustee or an authenticating agent. 22. Abbreviations. Customary abbreviations may be used in the name of a Holder or an assignee, such as: TEN COM (= tenants in common), TEN ENT (= tenants by the entireties), JT TEN (= joint tenants with right of survivorship and not as tenants in common), CUST (- Custodian), and UGMA (= Uniform Gifts to Minors Act). The Company will furnish to any Holder of the Notes upon written request and without charge a copy of the Indenture. Request may be made to: NTL Incorporated 110 East 59th Street, 26th Floor New York, New York 10022 Attention of: Richard J. Lubasch, Esq. Senior Vice President and General Counsel A-75 76 ASSIGNMENT FORM To assign this Note, fill in the form below: (I) or (we) assign and transfer this Note to _____________________________________________________ (Insert assignee's social security or tax I.D. no.) _____________________________________________________ _____________________________________________________ (Print or type assignee's name, address and zip code) and irrevocably appoint _________________________________ agent to transfer this Note on the books of the Company. The agent may substitute another to act for him. Your Signature: (Sign exactly as your name appears on the other side of this Note) Date: __________________ Signature Guarantee: * ____________________________________________ In connection with any transfer of any of the Notes evidenced by this certificate occurring prior to the date that is two years after the later of the date of original issuance of such Notes and the last date, if any, on which such Notes were owned by the Company or any Affiliate of the Company, the undersigned confirms that such Notes are being transferred: CHECK ONE BOX BELOW (1) to the Company or any subsidiary thereof, (2) to a qualified institutional buyer in compliance with Rule 144A, (3) inside the United States to an Institutional Accredited Investor that, prior to such transfer, furnishes to the Trustee a signed letter containing certain representations and agreements relating to the restrictions on transfer of the Notes (the form of which letter can be obtained from the Trustee) and, if such transfer is in respect of an aggregate principal amount of Notes of less than $100,000, an opinion of counsel acceptable to the Company that such transfer is in compliance with the Securities Act, (4) outside the United States in compliance with Rule 904 under the Securities Act, (5) pursuant to the exemption from registration provided by Rule 144 under the Securities Act (if available) or (6) pursuant to an effective registration statement under the Securities Act. - ---------- * Signature must be guaranteed by a commercial bank, trust company or member firm of the New York Stock Exchange A-76 77 __________________________ Signature Signature Guarantee* __________________________ Signature must be guaranteed __________________________________________________________________ TO BE COMPLETED BY PURCHASER IF (2) ABOVE IS CHECKED. The undersigned represents and warrants that it is purchasing this Note for its own account or an account with respect to which it exercises sole investment discretion and that it and any such account is a "qualified institutional buyer" within the meaning of Rule 144A under the Securities Act of 1933, and is aware that the sale to it is being made in reliance on Rule 144A and acknowledges that it has received such information regarding the Company as the undersigned has requested pursuant to Rule 144A or has determined not to request such information and that it is aware that the transferor is relying upon the undersigned's foregoing representations in order to claim the exemption from registration provided by Rule 144A. Date: _____________________ ___________________________ * Signature must be guaranteed by a commercial bank, trust company or member firm of the New York Stock Exchange. NOTICE: To be executed by an executive officer A-77 78 OPTION OF HOLDER TO ELECT PURCHASE If you want to elect to have this Note or a portion thereof repurchased by the Company pursuant to Section 3.09, 4.10 or 4.13 of the Indenture, check the box: [ ] If the purchase is in part, indicate the portion (in denominations of $1,000 or any integral multiple thereof) to be purchased: ______________________ Your Signature: (Sign exactly as your name appears on the other side of this Note) Date: ________________________ Signature Guarantee:**/ - ---------- **/ Signature must be guaranteed by a commercial bank, trust company or member firm of the New York Stock Exchange. A-78 79 [TO BE ATTACHED TO GLOBAL NOTES] SCHEDULE A SCHEDULE OF PRINCIPAL AMOUNT The initial principal amount of this Global Note shall be $__________________. The following increases or decreases in the principal amount of this Global Note have been made: ================================================================================ Amount of Amount of Signature of Date of decrease in increase in Principal authorized exchange principal principal amount of officer of following such amount of this amount of this this Global Trustee or decrease or Global Note Global Note Note Notes Custodian increase - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- ================================================================================ A-79 80 A-80 81 EXHIBIT B [FORM OF FACE OF EXCHANGE NOTE] [Global Notes Legend, if applicable] UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), NEW YORK, NEW YORK, TO THE COMPANY OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO CEDE & CO., OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC) ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN. TRANSFERS OF THIS GLOBAL NOTE SHALL BE LIMITED TO TRANSFERS IN WHOLE, BUT NOT IN PART, TO NOMINEES OF DTC OR TO A SUCCESSOR THEREOF OR SUCH SUCCESSOR'S NOMINEE AND TRANSFERS OF PORTIONS OF THIS GLOBAL NOTE SHALL BE LIMITED TO TRANSFERS MADE IN ACCORDANCE WITH THE RESTRICTIONS SET FORTH IN THE INDENTURE REFERRED TO ON THE REVERSE HEREOF. B-81 82 No. ___________ $__________ CUSIP No. [ ]CINS No. [ ] 11 1/2% SERIES B SENIOR NOTE DUE 2008 NTL Incorporated, a Delaware corporation (the "Company") promises to pay to _________________________ or registered assigns, the principal sum of [ ] $[ ] [or such other amount as is indicated on Schedule A hereof]**** on October 1, 2008, subject to the further provisions of this Note set forth on the reverse hereof which further provisions shall for all purposes have the same effect as if set forth at this place. Interest Payment Dates: April 1 and October 1, commencing April 1, 1999 Record Dates: March 15 and September 15 IN WITNESS WHEREOF, NTL Incorporated has caused this Note to be signed manually or by facsimile by its duly authorized officers. Dated: ________________ NTL INCORPORATED, by:___________________________________ by:___________________________________ - ---------- **** Applicable to Global Notes only. B-82 83 TRUSTEE'S CERTIFICATE OF AUTHENTICATION This is one of the 11 1/2% Series B Senior Notes due 2008 described in the within-mentioned Indenture. THE CHASE MANHATTAN BANK, as Trustee By: _____________________________________ Authorized Officer B-83 84 (FORM OF REVERSE OF EXCHANGE NOTE) NTL INCORPORATED 11 1/2% Series B Senior Note due 2008 1. Interest. NTL INCORPORATED, a Delaware corporation (the "Company"), is the issuer of 11 1/2% Series B Senior Notes due 2008 (the "Notes"). The Notes will accrue interest at a rate of 11 1/2% per annum. The Company promises to pay interest on the Notes in cash semiannually on each April 1 and October 1, commencing April 1, 1999, to Holders of record on the immediately preceding March 15 and September 15, respectively, at the rate of 11 1/2% per annum. Interest on the Notes will accrue from the most recent date to which interest has been paid on the Company's 11 1/2% Senior Notes due 2008, or the Notes, as the case may be, or if no interest has been paid, from November 2, 1998. Interest will be computed on the basis of a 360-day year of twelve 30-day months. The Company will pay interest on overdue principal and premium, if any, at the interest rate borne by the Notes, compounded semiannually, and it shall pay interest on overdue installments of interest (without regard to any applicable grace period) at the same interest rate compounded semiannually. Any interest paid on this Note shall be increased to the extent necessary to pay Additional Amounts as set forth in this Note. 2. Additional Amounts. This Section 2 shall apply only in the event that the Company becomes, or a successor to the Company is, a corporation organized or existing under the laws of the United Kingdom, the Netherlands, the Netherlands Antilles, Bermuda or the Cayman Islands. All payments made by the Company on this Note shall be made without deduction for or on account of, any and all present or future taxes, duties, assessments, or governmental charges of whatever nature unless the deduction of such taxes, duties, assessments or governmental charges is then required by law. If any deduction or withholding for or on account of any present or future taxes, assessments or other governmental charges of the United Kingdom, the Netherlands, the Netherlands Antilles, Bermuda or the Cayman Islands (or any political subdivision or taxing authority thereof or taxing authority thereof or therein) shall at any time be required in respect of any amounts to be paid by the Company under this Note, the Company shall pay or cause to be paid such additional amounts ("Additional Amounts") as may be necessary in order that the net amounts received by a Holder of this Note after such deduction or withholding shall be not less than the amounts specified in this Note to which the Holder of this Note is entitled; provided, however, that the Company shall not be required to make any payment of Additional Amounts for or on account of: (a) any tax, assessment or other governmental charge to the extent such tax, assessment or other governmental charge would not have been imposed but for (i) the existence of any present or former connection between such Holder (or between a fiduciary, settlor, beneficiary, member or shareholder of, or possessor of a power over, such Holder, if such Holder is an estate, nominee, trust, partnership or corporation), other than the holding of this Note or the receipt of amounts payable in respect of this Note, the United Kingdom, the Netherlands, the Netherlands Antilles, Bermuda or the Cayman Islands or any political subdivision or taxing authority thereof or therein, including, without limitation, such Holder (or such fiduciary, settlor, beneficiary, member, shareholder or possessor) being or having been a citizen or resident thereof or being or having been present or engaged in trade or business therein or having or having had a permanent establishment therein or (ii) the presentation of this Note (where presentation is required) for payment on a date more than 30 days after the date on which such payment became due and payable or the date on which payment thereof is duly provided for, whichever occurs B-84 85 later, except to the extent that the Holder would have been entitled to Additional Amounts had this Note been presented on the last day of such period of 30 days; (b) any tax, assessment or other governmental charge that is imposed or withheld by reason of the failure to comply by the Holder of this Note or, if different, the beneficial owner of the interest payable on this Note, with a timely request of the Company addressed to such Holder or beneficial owner to provide information, documents or other evidence concerning the nationality, residence, identity or connection with the taxing jurisdiction of such Holder or beneficial owner which is required or imposed by a statute, regulation or administrative practice of the taxing jurisdiction as a precondition to exemption from all or part of such tax, assessment or governmental charge; (c) any estate, inheritance, gift, sales, transfer, personal property or similar tax, assessment or other governmental charge; (d) any tax, assessment or other governmental charge which is collectible otherwise than by withholding from payments of principal amount, redemption amount, Change of Control Payment or interest with respect to a Note or withholding from the proceeds of a sale or exchange of a Note; (e) any tax, assessment or other governmental charge required to be withheld by any Paying Agent from any payment of principal amount, redemption amount, Change of Control Payment or interest with respect to a Note, if such payment can be made, and is in fact made, without such withholding by any other Paying Agent located inside the United States; (f) any tax, assessment or other governmental charge imposed on a Holder that is not the beneficial owner of a Note to the extent that the beneficial owner would not have been entitled to the payment of any such Additional Amounts had the beneficial owner directly held the Note; (g) any combination of items (a), (b), (c), (d), (e) and (f) above; nor shall Additional Amounts be paid with respect to any payment of the principal of, or any interest on, this Note to any Holder who is a fiduciary or partnership or other than the sole beneficial owner of such payment to the extent that a beneficiary or settlor would not have been entitled to any Additional Amounts had such beneficiary or settlor been the Holder of this Note. All references to principal amount or interest on the Notes in the Indenture or the Notes shall include any Additional Amounts payable to the Company pursuant to this Section 2. 3. Method of Payment. The Company will pay interest on the Notes (except defaulted interest) to the Persons who are registered Holders of Notes at the close of business on the record date for the next interest payment date even though Notes are canceled after the record date and on or before the interest payment date. Holders must surrender Notes to a Paying Agent to collect principal and premium payments. The Company will pay principal, premium, if any, and interest in money of the United States that at the time of payment is legal tender for payment of public and private debts. However, the Company may pay principal, premium, if any, and interest by check payable in such money. It may mail an interest check to a holder's registered address. If a Holder so requests, principal, premium, if any, and interest may be paid by wire transfer of immediately available funds to an account previously specified in B-85 86 writing by such Holder to the Company and the Trustee. 4. Paying Agent and Registrar. The Trustee will act as Paying Agent and Registrar in the City of New York. Chase Manhattan Bank Luxembourg S.A. will act as Paying Agent and Registrar in Luxembourg if and as long as the Notes are listed on the Luxembourg Stock Exchange. The Company may change any Paying Agent or Registrar without prior notice. The Company or any of its Affiliates may act in any such capacity. 5. Indenture. The Company issued the Notes under an indenture, dated as of November 2, 1998 (the "Indenture"), between the Company and The Chase Manhattan Bank, as Trustee. The terms of the Notes include those stated in the Indenture and those made part of the Indenture by the Trust Indenture Act of 1939 (15 U.S. Code (ss.)(ss.) 77aaa-77bbbb) as in effect on the date of the Indenture. The Notes are subject to, and qualified by, all such terms, certain of which are summarized hereon, and Holders are referred to the Indenture and such Act for a statement of such terms. The Notes are unsecured general obligations of the Company limited to $625,000,000 in aggregate principal amount. 6. Optional Redemption. Except as provided in Section 7 herein, the Notes are not redeemable at the Company's option prior to October 1, 2003. Thereafter, the Notes will be subject to redemption at the option of the Company, in whole or in part, upon not less than 30 nor more than 60 days' notice, at the redemption prices (expressed as percentages of principal amount) set forth below plus accrued and unpaid interest thereon to the applicable redemption date, if redeemed during the twelve-month period beginning on October 1 of the years indicated below:
Year Percentage ---- ---------- 2003 105.570% 2004 103.833% 2005 101.917% 2006 and thereafter 100.000%
7. Optional Tax Redemption. (a) The Notes may be redeemed at the option of the Company, in whole but not in part, upon not less than 30 nor more than 60 days notice, at any time at a redemption price equal to the principal amount thereof plus accrued and unpaid interest to the date fixed for redemption if after the date on which Section 2 of this Note becomes applicable (the "Relevant Date") there has occurred any change in or amendment to the laws (or any regulations or official rulings promulgated thereunder) of the United Kingdom, the Netherlands, the Netherlands Antilles, Bermuda or the Cayman Islands (or any political subdivision or taxing authority thereof or therein), or any change in or amendment to the official application or interpretation of such laws, regulations or rulings (a "Change in Tax Law") which becomes effective after the Relevant Date, as a result of which the Company is or would be so required on the next succeeding Interest Payment Date to pay Additional Amounts with respect to the Notes as described under Section 2 hereof with respect to withholding taxes imposed by the United Kingdom, the Netherlands, the Netherlands Antilles, Bermuda or the Cayman Islands (or any political subdivision or taxing authority thereof or therein) (a "Withholding Tax') and such Withholding Tax is imposed at a rate that exceeds the rate (if any) at which Withholding Tax was imposed on the Relevant Date, provided, however, that (i) this paragraph shall not apply to the extent that, at the Relevant Date it was known or would have been known had professional advice of a nationally recognized accounting firm in the United Kingdom, the Netherlands, the Netherlands Antilles, Bermuda or the Cayman Islands, as the case may be, been sought, that a change in Tax Law in the United Kingdom, the B-86 87 Netherlands, the Netherlands Antilles, Bermuda or the Cayman Islands was to occur after the Relevant Date, (ii) no such notice of redemption may be given earlier than 90 days prior to the earliest date on which the Company would be obliged to pay such Additional Amounts were a payment in respect of the Notes then due, (iii) at the time such notice of redemption is given, such obligation to pay such Additional Amount remains in effect and (iv) the payment of such Additional Amounts cannot be avoided by the use of any reasonable measures available to the Company. (b) The Notes may also be redeemed, in whole but not in part, at any time at a redemption price equal to the principal amount thereof plus accrued and unpaid interest to the date fixed for redemption if the Person formed after the Relevant Date by a consolidation, amalgamation, reorganization or reconstruction (or other similar arrangement) of the Company or the Person into which the Company is merged after the Relevant Date or to which the Company conveys, transfers or leases its properties and assets after the Relevant Date substantially as an entirety (collectively, a "Subsequent Consolidation") is required, as a consequence of such Subsequent Consolidation and as a consequence of a Change in Tax Law in the United Kingdom, the Netherlands, the Netherlands Antilles, Bermuda or the Cayman Islands occurring after the date of such Subsequent Consolidation to pay Additional Amounts with respect to Notes with respect to Withholding Tax as described under Section 2 hereof and such Withholding Tax is imposed at a rate that exceeds the rate (if any) at which Withholding Tax was or would have been imposed on the date of such Subsequent Consolidation, provided, however, that this paragraph shall not apply to the extent that, at the date of such Subsequent Consolidation it was known or would have been known had professional advice of a nationally recognized accounting firm in the United Kingdom, the Netherlands, the Netherlands Antilles, Bermuda or the Cayman Islands, as the case may be, been sought, that a Change in Tax Law in the United Kingdom, the Netherlands, the Netherlands Antilles, Bermuda or the Cayman Islands was to occur after such date. The Company will also pay, or make available for payment, to Holders on the Redemption Date any Additional Amounts (as described, but subject to the exceptions referred to, in Section 2 hereof) resulting from the payment of such Redemption Price. 8. Notice of Redemption. Notice of redemption will be mailed at least 30 days but not more than 60 days before the redemption date to each Holder of the Notes to be redeemed at his address of record. The Notes in denominations larger than $1,000 may be redeemed in part but only in integral multiples of $1,000. In the event of a redemption of less than all of the Notes, the Notes will be chosen for redemption by the Trustee in accordance with the Indenture. On and after the redemption date, interest ceases to accrue on the Notes or portions of them called for redemption. If this Note is redeemed subsequent to a record date with respect to any interest payment date specified above and on or prior to such interest payment date, then any accrued interest will be paid to the Person in whose name this Note is registered at the close of business on such record date. 9. Mandatory Redemption. The Company will not be required to make mandatory redemption or repurchase payments with respect to the Notes. There are no sinking fund payments with respect to the Notes. 10. Repurchase at Option of Holder. (a) If there is a Change of Control Triggering Event, the Company shall be required to offer to purchase on the Purchase Date all outstanding Notes at a purchase price equal to 101% of the aggregate principal amount thereof, plus accrued and unpaid interest to the Purchase Date. Holders of Notes that are subject to an offer to purchase will receive a Change of Control offer from the Company prior to any related Purchase Date and may elect to have such Notes or portions thereof in authorized denominations purchased by completing the form entitled "Option of Holder to B-87 88 Elect Purchase" appearing below. (b) If the Company or a Restricted Subsidiary consummates any Asset Sales, and when the aggregate amount of Excess Proceeds from such Asset Sales exceeds $15 million, the Company shall be required to make an offer (an "Asset Sale Offer") to all holders of the Notes and Other Qualified Notes to purchase the maximum principal amount of Notes and other Qualified Notes (determined on a pro rata basis according to the principal amount or accreted value, as the case may be, of the Notes and the Other Qualified Notes) that may be purchased out of the Excess Proceeds with respect to the Notes, at an offer price in cash in an amount equal to 100% of the outstanding principal amount thereof plus accrued and unpaid interest, if any, to the date fixed for the closing of such offer. To the extent that the aggregate principal amount or accreted value, as the case may be, of Notes and Other Qualified Notes tendered pursuant to an Asset Sale Offer is less than the Excess Proceeds, the Company may use such deficiency for general corporate purposes. If the aggregate principal amount or accreted value, as the case may be, of Notes and Other Qualified Notes surrendered by holders thereof exceeds the amount of Excess Proceeds then any remaining Excess Proceeds will be allocated pro rata according to principal amount or accreted value, as the case may be, to the Notes and each issue of the Other Qualified Notes and, the Trustee will select the Notes to be purchased in accordance with Section 3.09(e) of the Indenture. Upon completion of such offer to purchase, the amount of Excess Proceeds will be reset at zero. 11. Denominations, Transfer, Exchange. The Notes are in registered form, without coupons, in denominations of $1,000 and integral multiples of $1,000. The transfer of Notes may be registered, and Notes may be exchanged, as provided in the Indenture. The Registrar may require a Holder, among other things, to furnish appropriate endorsements and transfer documents and to pay any taxes and fees required by law or permitted by the Indenture. The Registrar need not exchange or register the transfer of any Note or portion of a Note selected for redemption (except the unredeemed portion of any Note being redeemed in part). Also, it need not exchange or register the transfer of any Note for a period of 15 days before a selection of Notes to be redeemed. 12. Persons Deemed Owners. Except as provided in paragraph 3 of this Note, the registered Holder of a Note may be treated as its owner for all purposes. 13. Unclaimed Money. If money for the payment of principal or interest remains unclaimed for two years, the Trustee and the Paying Agent shall pay the money back to the Company at its written request. After that, Holders of Notes entitled to the money must look to the Company for payment unless an abandoned property law designates another Person and all liability of the Trustee and such Paying Agent with respect to such money shall cease. 14. Defaults and Remedies. The Notes shall have the Events of Default as set forth in Section 6.01 of the Indenture. Subject to certain limitations in the Indenture, if an Event of Default occurs and is continuing, the Trustee by notice to the Company or the Holders of at least 25% in aggregate principal amount of the then outstanding Notes by notice to the Company and the Trustee may declare all the Notes to be due and payable immediately, except that in the case of an Event of Default arising from certain events of bankruptcy or insolvency, all unpaid principal and interest accrued on the Notes shall become due and payable immediately without further action or notice. The Holders of a majority in principal amount of the Notes then outstanding by written notice to the Trustee may rescind an acceleration and its consequences if the rescission would not conflict with any judgment or decree and if all existing Events of Default have been cured or waived except nonpayment of principal or interest that has become due solely because of the acceleration. Holders may not enforce the Indenture or the Notes as provided in the B-88 89 Indenture. Subject to certain limitations, Holders of a majority in principal amount of the then outstanding Notes issued under the Indenture may direct the Trustee in its exercise of any trust or power. The Company must furnish annually compliance certificates to the Trustee. The above description of Events of Default and remedies is qualified by reference, and subject in its entirety, to the more complete description thereof contained in the Indenture. 15. Amendments, Supplements and Waivers. Subject to certain exceptions, the Indenture or the Notes may be amended or supplemented with the consent of the Holders of at least a majority in principal amount of the then outstanding Notes (including consents obtained in connection with a tender offer or exchange offer for Notes), and any existing default may be waived with the consent of the Holders of a majority in principal amount of the then outstanding Notes. Without the consent of any Holder, the Indenture or the Notes may be amended among other things, to cure any ambiguity, defect or inconsistency, to provide for assumption of the Company's obligations to Holders, to make any change that does not adversely affect the rights of any Holder or to qualify the Indenture under the TIA or to comply with the requirements of the SEC in order to maintain the qualification of the Indenture under the TIA. 16. Restrictive Covenants. The Indenture imposes certain limitations on the ability of the Company and its Subsidiaries to, among other things, engage in certain transactions with Affiliates, incur additional Indebtedness and make payments in respect of Capital Stock. The limitations are subject to a number of important qualifications and exceptions. 17. Trustee Dealings with the Company. The Trustee, in its individual or any other capacity may become the owner or pledgee of the Notes and may otherwise deal with the Company or an Affiliate with the same rights it would have, as if it were not Trustee, subject to certain limitations provided for in the Indenture and in the TIA. Any Agent may do the same with like rights. 18. No Recourse Against Others. A director, officer, employee or stockholder, as such, of the Company shall not have any liability for any obligations of the Company under the Notes or the Indenture or for any claim based on, in respect of or by reason of such obligations or their creation. Each Holder of the Notes by accepting a Note waives and releases all such liability. The waiver and release are part of the consideration for the issue of the Notes. 19. Governing Law. THE INTERNAL LAWS OF THE STATE OF NEW YORK SHALL GOVERN THE INDENTURE AND THE NOTES WITHOUT REGARD TO CONFLICT OF LAW PROVISIONS THEREOF. 20. Authentication. The Notes shall not be valid until authenticated by the manual signature of an authorized officer of the Trustee or an authenticating agent. 21. Abbreviations. Customary abbreviations may be used in the name of a Holder or an assignee, such as: TEN COM (= tenants in common), TEN ENT (= tenants by the entireties), JT TEN (= joint tenants with right of survivorship and not as tenants in common), CUST (= Custodian), and UGMA (= Uniform Gifts to Minors Act). The Company will furnish to any Holder of the Notes upon written request and without charge a copy of the Indenture. Request may be made to: B-89 90 NTL Incorporated 110 East 59th Street, 26th Floor New York, New York 10022 Attention of: Richard J. Lubasch, Esq. Senior Vice President and General Counsel B-90 91 ASSIGNMENT FORM To assign this Note, fill in the form below: (I) or (we) assign and transfer this Note to _____________________________________________________ (Insert assignee's social security or tax I.D. no.) _____________________________________________________ _____________________________________________________ (Print or type assignee's name, address and zip code) and irrevocably appoint _________________________________ agent to transfer this Note on the books of the Company. The agent may substitute another to act for him. Your Signature: (Sign exactly as your name appears on the other side of this Note) Date: __________________ Signature Guarantee: **/ ______________________________ - ---------- **/ Signature must be guaranteed by a commercial Bank, trust company or member of the New York Stock Exchange. B-91 92 OPTION OF HOLDER TO ELECT PURCHASE If you want to elect to have this Note or a portion thereof repurchased by the Company pursuant to Section 3.09, 4.10 or 4.13 of the Indenture, check the box: If the purchase is in part, indicate the portion (in denominations of $1,000 or any integral multiple thereof) to be purchased: _____________________ Your Signature: (Sign exactly as your name appears on the other side of this Note) Date: ________________________ Signature Guarantee:*** - ---------- *** Signature must be guaranteed by a commercial bank, trust company or member firm of the New York Stock Exchange. B-92 93 SCHEDULE A SCHEDULE OF PRINCIPAL AMOUNT The initial principal amount of this Global Note shall be $__________________. The following increases or decreases in the principal amount of this Global Note have been made: ================================================================================ Amount of Amount of Signature of Date of decrease in increase in Principal authorized exchange principal principal amount of officer of following such amount of this amount of this this Global Trustee or decrease or Global Note Global Note Note Notes Custodian increase - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- ================================================================================ B-93 94 B-94 95 EXHIBIT C FORM OF TRANSFER CERTIFICATE FOR TRANSFER FROM RULE 144A GLOBAL NOTE TO REGULATION S GLOBAL NOTE (Transfers pursuant to (ss.) 2.06(a)(ii) of the Indenture) The Chase Manhattan Bank, as Trustee 450 West 33rd Street New York, New York 10001 Attn: Corporate Trustee Administration Department Re: NTL Incorporated 11 1/2% Senior Notes due 2008 (the "Notes") Reference is hereby made to the Indenture, dated as of November 2, 1998 (the "Indenture"), between NTL Incorporated, as Issuer, and The Chase Manhattan Bank, as Trustee. This letter relates to $[ ] aggregate principal amount of Notes which are held in the form of the [Rule 144A Global Note (CUSIP No. )] with the Depositary in the name of [name of transferor] (the "Transferor") to effect the transfer of the Notes in exchange for an equivalent beneficial interest in the Regulation S Global Notes. In connection with such request, the Transferor does hereby certify that such transfer has been effected in accordance with the transfer restrictions set forth in the Notes and (i) with respect to transfers made in reliance on Regulation S, does hereby certify that: (1) the offer of the Notes was not made to a Person in the United States; (2) the transaction was executed in, on or through the facilities of a designated offshore securities market and neither the Transferor nor any Person acting on its behalf knows that the transaction was pre-arranged with a buyer in the United States; (3) no directed selling efforts have been made in contravention of the requirements of Rule 903(b) or 904(b) of Regulation S, as applicable; and (4) the transaction is not part of a plan or scheme to evade the registration requirements of the United States Securities Act of 1933, as amended (the "Securities Act"); and (ii) with respect to transfers made in reliance on Rule 144 does hereby certify that the Notes are being transferred in a transaction permitted by Rule 144 under the Securities Act; and (iii) with respect to transfers made in reliance on Rule 144A, does hereby certify that such Notes are being transferred in accordance with Rule 144A under the Securities Act to a transferee that the Transferor reasonably believes is purchasing the Notes for its own account or an account with respect to which the transferee exercises sole investment discretion and the transferee and any such account is a "qualified institutional buyer" within the meaning of Rule 144A, in a transaction meeting the requirements of Rule 144A and in accordance with applicable securities laws of any state of the United States or any other jurisdiction. In addition, if the sale is made during a distribution compliance period and the provisions C-95 96 of Rule 903(c)(2) or (3) or Rule 904(c)(1) of Regulation S are applicable thereto, we confirm that such sale has been made in accordance with the applicable provisions of Rule 903(c)(2) or (3) or Rule 904(c)(1), as the case may be. You and the Company are entitled to rely upon this letter and are irrevocably authorized to produce this letter or a copy hereof to any interested party in any administrative or legal proceedings or official inquiry with respect to the matters covered hereby. Capitalized terms used in this certificate and not otherwise defined in the Indenture have the meanings set forth in Regulation S. [Name of Transferor] By:___________________________ Name: Title: Dated: cc: NTL Incorporated 110 East 59th Street New York, New York 10022 Attn: Richard J. Lubasch, Esq. Senior Vice President and General Counsel C-96 97 EXHIBIT D FORM OF TRANSFER CERTIFICATE FOR TRANSFER FROM REGULATION S GLOBAL NOTE TO RULE 144A GLOBAL NOTE (Transfers pursuant to (ss.) 2.06(a)(iii) of the Indenture) The Chase Manhattan Bank, as Trustee 450 West 33rd Street New York, New York 10001 Attn: Corporate Trustee Administration Department Re: NTL Incorporated 11 1/2% Senior Notes due 2008 (the "Notes") Reference is hereby made to the Indenture, dated as of November 2, 1998 (the "Indenture"), between NTL Incorporated, as Issuer, and The Chase Manhattan Bank, as Trustee. Capitalized terms used but not defined herein shall have the respective meanings given them in the Indenture. This letter relates to $[ ] aggregate principal amount of Notes which are held in the form of the Regulation S Global Note (CINS No. [ ]) with the Depositary in the name of [name of transferor] (the "Transferor") to effect the transfer of the Notes in exchange for an equivalent beneficial interest in the Rule 144A Global Note. In connection with such request, and in respect of such Notes the Transferor does hereby certify that such Notes are being transferred in accordance with (i) the transfer restrictions set forth in the Notes and (ii) Rule 144A under the United States Securities Act of 1933, as amended, to a transferee that the Transferor reasonably believes is purchasing the Notes for its own account or an account with respect to which the transferee exercises sole investment discretion and the transferee and any such account is a "qualified institutional buyer" within the meaning of Rule 144A, in a transaction meeting the requirements of Rule 144A and in accordance with applicable securities laws of any state of the United States or any other jurisdiction. [Name of Transferor], By:___________________________ Name: Title: Dated: cc: NTL Incorporated 110 East 59th Street New York, New York 10022 Attn: Richard J. Lubasch, Esq. Senior Vice President and General Counsel D-97 98 EXHIBIT E FORM OF TRANSFER CERTIFICATE FOR TRANSFER FROM GLOBAL NOTE OR RESTRICTED NOTE TO RESTRICTED NOTE (Transfers pursuant to (ss.) 2.06(a)(iv) or (ss.) 2.06(a)(v) of the Indenture) The Chase Manhattan Bank, as Trustee 450 West 33rd Street New York, New York 10001 Attn: Corporate Trustee Administration Department Re: NTL Incorporated 11 1/2% Senior Notes due 2008 (the "Notes") Reference is hereby made to the Indenture, dated as of November 2, 1998 (the "Indenture"), between NTL Incorporated, as Issuer, and The Chase Manhattan Bank, as Trustee. Capitalized terms used but not defined herein shall have the respective meanings given them in the Indenture. This letter relates to $[ ] aggregate principal amount of Notes which are held [in the form of the [Rule 144A/Regulation S] [Global] [Restricted] Note (CUSIP No. [ ] CINS No. [ ]) with the Depositary in the name of [name of transferor] (the "Transferor") to effect the transfer of the Notes. In connection with such request, and in respect of such Notes, the Transferor does hereby certify that such Notes are being transferred (i) in accordance with the transfer restrictions set forth in the Notes and (ii) in accordance with applicable securities laws of any state of the United States or any other jurisdiction. *Insert, if appropriate. [Name of Transferor], By:___________________________ Name: Title: Dated: cc: NTL Incorporated 110 East 59th Street New York, New York 10022 Attn: Richard J. Lubasch, Esq. Senior Vice President and General Counsel E-98 99 EXHIBIT F FORM OF ACCREDITED INVESTOR TRANSFEREE CERTIFICATE The Chase Manhattan Bank, as Trustee 450 West 33rd Street New York, New York 10001 Attn: Corporate Trustee Administration Department Re: NTL Incorporated 11 1/2% Senior Notes due 2008 (the "Notes") Reference is hereby made to the Indenture, dated as of November 2, 1998 (the "Indenture), between NTL Incorporated, as Issuer, and The Chase Manhattan Bank, as Trustee. Capitalized terms used but not defined herein shall have the respective meanings given them in the Indenture. This letter relates to $[ ] aggregate principal amount of Notes which are held [in the form of the [Rule 144/Regulation S] [Restricted] [Global] Note (CUSIP No. [ ] CINS No. [ ]) with the Depositary * * in the name of [name of transferor] (the "Transferor") to effect the transfer of the Notes to the undersigned. In connection with such request, and in respect of such Notes we confirm that: 1. We understand that the Notes were originally offered in a transaction not involving any public offering in the United States within the meaning of the United States Securities Act of 1933, as amended (the "Securities Act"), that the Notes have not been registered under the Securities Act and that (A) the Notes may be offered, resold, pledged or otherwise transferred only (i) to a Person who the seller reasonably believes is a "qualified institutional buyer" (as defined in Rule 144A under the Securities Act) in a transaction meeting the requirements of Rule 144A, in a transaction meeting the requirements of Rule 144 under the Securities Act, to a Person who the seller reasonably believes is an institutional "accredited investor" (as defined in Rule 501(a)(1), (2), (3) or (7) of Regulation D under the Securities Act), outside the United States in a transaction meeting the requirements of Rule 903 or 904 of Regulation S under the Securities Act or in accordance with another exemption from the registration requirements of the Securities Act (and based upon an opinion of counsel if the Company so requests), (ii) to the Company, (iii) pursuant to any other available exemption from registration or (iv) pursuant to an effective registration statement, and, in each case, in accordance with any applicable securities laws of any state of the United States or any other applicable jurisdiction and (B) the purchaser will, and each subsequent Holder is required to, notify any subsequent purchaser from it of the resale restrictions set forth in (A) above. 2. We are a corporation, partnership or other entity having such knowledge and experience in financial and business matters as to be capable of evaluating the merits and risks of an investment in the Notes, and we are (or any account for which we are purchasing under paragraph 4 below is) an institutional "accredited investor" as defined in Rule 501(a)(1), (2), (3) or (7) under the Securities Act, - ---------- * Insert and modify if appropriate F-99 100 able to bear the economic risk of our proposed investment in the Notes. 3. We are acquiring the Notes for our own account (or for accounts as to which we exercise sole investment discretion and have authority to make, and do make, the statements contained in this letter) and not with a view to any distribution of the Notes, subject, nevertheless, to the understanding that the disposition of our property shall at all times be and remain within our control. 4. We are, and each account (if any) for which we are purchasing Notes is, purchasing Notes having an aggregate principal amount of not less than $100,000 and, if such transfer is in respect of an aggregate principal amount of Notes of less than $100,000, we are providing an opinion of counsel acceptable to the Company that such transfer is in compliance with the Securities Act. 5. We understand that (a) the Notes will be delivered to us in registered form only and that the certificate delivered to us in respect of the Notes will bear a legend substantially to the following effect: THIS NOTE HAS NOT BEEN REGISTERED UNDER THE U.S. SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND ACCORDINGLY, MAY NOT BE OFFERED OR SOLD WITHIN THE UNITED STATES OR TO, OR FOR THE ACCOUNT OR BENEFIT OF, U.S. PERSONS EXCEPT AS SET FORTH IN THE FOLLOWING SENTENCE. BY ITS ACQUISITION HEREOF, THE HOLDER (1) REPRESENTS THAT (A) IT IS A "QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT) OR (B) IT IS AN INSTITUTIONAL "ACCREDITED INVESTOR" (AS DEFINED IN RULE 501(a)(1), (2), (3) OR (7) OF REGULATION D UNDER THE SECURITIES ACT) (AN "INSTITUTIONAL ACCREDITED INVESTOR") OR (C) IT IS NOT A U.S. PERSON AND IS ACQUIRING THIS NOTE IN AN OFFSHORE TRANSACTION IN COMPLIANCE WITH REGULATION S UNDER THE SECURITIES ACT, (2) AGREES THAT IT WILL NOT, WITHIN THE TIME PERIOD REFERRED TO UNDER RULE 144(k) UNDER THE SECURITIES ACT AS IN EFFECT ON THE DATE OF THE TRANSFER OF THIS NOTE, RESELL OR OTHERWISE TRANSFER THIS NOTE EXCEPT (A) TO THE COMPANY OR ANY SUBSIDIARY THEREOF, (B) TO A QUALIFIED INSTITUTIONAL BUYER IN COMPLIANCE WITH RULE 144A UNDER THE SECURITIES ACT, (C) INSIDE THE UNITED STATES TO AN INSTITUTIONAL ACCREDITED INVESTOR THAT, PRIOR TO SUCH TRANSFER, FURNISHES TO THE TRUSTEE A SIGNED LETTER CONTAINING CERTAIN REPRESENTATIONS AND AGREEMENTS RELATING TO THE RESTRICTIONS ON TRANSFER OF THIS NOTE (THE FORM OF WHICH LETTER CAN BE OBTAINED FROM THE TRUSTEE), AND, IF SUCH TRANSFER IS IN RESPECT OF AN AGGREGATE PRINCIPAL AMOUNT OF LESS THAN $100,000, AN OPINION OF COUNSEL ACCEPTABLE TO THE COMPANY THAT SUCH TRANSFER IS IN COMPLIANCE WITH THE SECURITIES ACT, (D) OUTSIDE THE UNITED STATES IN AN OFF-SHORE TRANSACTION IN COMPLIANCE WITH RULE 904 UNDER THE SECURITIES ACT, (E) PURSUANT TO THE EXEMPTION FROM REGISTRATION PROVIDED BY RULE 144 UNDER THE SECURITIES ACT (IF AVAILABLE) OR (F) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT AND (3) AGREES THAT IT WILL DELIVER TO EACH PERSON TO WHOM THIS NOTE IS TRANSFERRED A NOTICE SUBSTANTIALLY TO THE EFFECT OF THIS LEGEND. IN CONNECTION WITH ANY TRANSFER OF THIS NOTE WITHIN THE TIME PERIOD REFERRED TO ABOVE, THE HOLDER MUST CHECK THE APPROPRIATE BOX SET FORTH ON THE REVERSE HEREOF RELATING TO THE MANNER OF SUCH TRANSFER AND SUBMIT THIS CERTIFICATE TO THE TRUSTEE. IF THE PROPOSED TRANSFEREE IS AN INSTITUTIONAL ACCREDITED INVESTOR, THE HOLDER MUST, PRIOR TO SUCH TRANSFER, FURNISH TO THE TRUSTEE AND THE F-100 101 COMPANY SUCH CERTIFICATIONS, LEGAL OPINIONS OR OTHER INFORMATION AS EITHER OF THEM MAY REASONABLY REQUIRE TO CONFIRM THAT SUCH TRANSFER IS BEING MADE PURSUANT TO AN EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT. AS USED HEREIN, THE TERMS "OFF-SHORE TRANSACTION," "UNITED STATES" AND "U.S. PERSON" HAVE THE MEANINGS GIVEN TO THEM BY REGULATION S UNDER THE SECURITIES ACT. THE INDENTURE CONTAINS A PROVISION REQUIRING THE TRUSTEE TO REFUSE TO REGISTER ANY TRANSFER OF THIS NOTE IN VIOLATION OF THE FOREGOING RESTRICTIONS. and (b) such certificates will be reissued without the foregoing legend only in accordance with the terms of the Indenture. 6. We agree that in the event that at some future time we wish to dispose of any of the Notes, we will not do so unless: (a) the Notes are sold to the Company; (b) the Notes are sold to a qualified institutional buyer in compliance with Rule 144A under the Securities Act; (c) the Notes are sold outside the United States in compliance with Rule 903 or Rule 904 under the Securities Act; (d) the Notes are sold pursuant to an effective registration statement under the Securities Act; or (e) the Notes are sold pursuant to any other available exemption from registration, subject to the requirements of the legend set forth above. Very truly yours, [PURCHASER] By: Name: Title: Dated: cc: NTL Incorporated 110 East 59th Street New York, New York 10022 Attn: Richard J. Lubasch, Esq. Senior Vice President and General Counsel F-101 102 EXHIBIT G FORM OF CERTIFICATE FOR TRANSFERS OF REGULATION S GLOBAL NOTE FOR RESTRICTED NOTES (Transfers pursuant to (ss.) 2.06(a)(viii)) (Transferor) The Chase Manhattan Bank 450 West 33rd Street New York, New York 10001 Attn: Corporate Trustee Administration Department Re: NTL Incorporated 11 1/2% Senior Notes due 2008 (the "Notes") Reference is hereby made to the Indenture, dated as of November 2, 1998 (the "Indenture"), between NTL Incorporated, as Issuer, and The Chase Manhattan Bank, as Trustee. Capitalized terms used but not defined herein shall have the respective meanings given them in the Indenture. This certificate relates to $[ ] aggregate principal amount of Notes which are held in the form of the Regulation S Global Note (CINS No. [ ]) with the Depositary in the name of [name of transferor] (the "Transferor") to effect the transfer of the beneficial interest in such Regulation S Global Note for a beneficial interest in an equivalent aggregate principal amount of Restricted Securities. In connection with such request, and in respect of such Notes, we confirm that: We are either not a U.S. Person (as defined below) or we have purchased our beneficial interest in the above referenced Regulation S Global Note in a transaction that is exempt from the registration requirements under the Securities Act. We are delivering this certificate in connection with obtaining a beneficial interest in Restricted Securities in exchange for our beneficial interest in the Regulation S Global Note. For purposes of this certificate, "U.S. Person" means (i) any individual resident in the United States, (ii) any partnership or corporation organized or incorporated under the laws of the United States, (iii) any estate of which an executor or administrator is a U.S. Person (other than an estate governed by foreign law and of which at least one executor or administrator is a non-U.S. Person who has sole or shared investment discretion with respect to its assets), (iv) any trust of which any trustee is a U.S. Person (other than a trust of which at least one trustee is a non-U.S. Person who has sole or shared investment discretion with respect to its assets and no beneficiary of the trust (and no settlor if the trust is revocable) is a U.S. Person), (v) any agency or branch of a foreign entity located in the United States, (vi) any non- discretionary or similar account (other than an estate or trust) held by a dealer or other fiduciary for the benefit or account of a U.S. Person, (vii) any discretionary or similar account (other than an estate or trust) held by a dealer or other fiduciary organized, incorporated or (if an individual) resident in the United States (other than such an account held for the benefit or account of a non-U.S. Person), (viii) any partnership or corporation organized or incorporated under the laws of a foreign jurisdiction and formed by a U.S. Person principally for the purpose of investing in securities not registered under the Securities G-102 103 Act (unless it is organized or incorporated, and owned, by accredited investors within the meaning of Rule 501(a) under the Securities Act who are not natural Persons, estates or trusts); provided, however, that the term "U.S. Person" shall not include (A) a branch or agency of a U.S. Person that is located and operating outside the United States for valid business purposes as a locally regulated branch or agency engaged in the banking or insurance business, (B) any employee benefit plan established and administered in accordance with the law, customary practices and documentation of a foreign country and (C) the international organizations set forth in Section 902(o)(7) of Regulation S under the Securities Act and any other similar international organizations, and their agencies, affiliates and pension plans. We irrevocably authorize you to produce this certificate or a copy hereof to any interested party in any administrative or other proceedings with respect to the matters covered by this certificate. Very truly yours, [TRANSFEROR] By:___________________________ Name: Title: Dated: To be completed by the account Holder as, or as agent for, the beneficial owner(s) of the Notes to which this certificate relates. cc: NTL Incorporated 110 East 59th Street New York, New York 10022 Attn: Richard J. Lubasch, Esq. Senior Vice President and General Counsel G-103 EX-4.14 4 REGISTRATION RIGHTS AGREEMENT, DATED AS OF 11/2/98 1 Exhibit 4.14 ================================================================================ $625,000,000 11 1/2% SENIOR NOTES DUE 2008 REGISTRATION RIGHTS AGREEMENT Dated as of November 2, 1998 by and among NTL INCORPORATED and MORGAN STANLEY & CO. INCORPORATED CHASE SECURITIES INC. DONALDSON, LUFKIN & JENRETTE SECURITIES CORPORATION GOLDMAN, SACHS & CO. ================================================================================ 2 This Registration Rights Agreement (this "Agreement") is made and entered into as of November 2, 1998 by and among NTL Incorporated, a Delaware corporation (the "Company"), and Morgan Stanley & Co. Incorporated, Chase Securities Inc., Donaldson, Lufkin & Jenrette Securities Corporation and Goldman, Sachs & Co. (each an "Initial Purchaser" and collectively, the "Initial Purchasers"). The Company proposes to issue and sell to the Initial Purchasers (the "Initial Placement") $625,000,000 aggregate principal amount of its 11 1/2% Senior Notes due 2008 (the "Notes"). As an inducement to the Initial Purchasers to enter into the purchase agreement, dated as of October 26, 1998 ( the "Purchase Agreement"), and in satisfaction of a condition to the Initial Purchasers' obligations thereunder, the Company agrees with the Initial Purchasers, (i) for the benefit of the Initial Purchasers and (ii) for the benefit of the holders from time to time of the Notes whose names appear in the register maintained by the Registrar in accordance with the provisions of the Indenture (as defined in Section 1 hereof) (including the Initial Purchasers), as follows: SECTION 1. DEFINITIONS Capitalized terms used herein without definition shall have their respective meanings set forth in the Purchase Agreement. As used in this Agreement, the following capitalized defined terms shall have the following meanings: "Act" means the Securities Act of 1933, as amended, and the rules and regulations of the Commission promulgated thereunder. "Affiliate" of any specified person means any other person which, directly or indirectly, is in control of, is controlled by, or is under common control with, such specified person. For purposes of this definition, control of a person means the power, direct or indirect, to direct or cause the direction of the management and policies of such person whether by contract or otherwise; and the terms "controlling" and "controlled" have meanings correlative to the foregoing. "Closing Date" has the meaning set forth in the Purchase Agreement. "Commission" means the Securities and Exchange Commission. "Commission Delay Period" has the meaning set forth in Section 3(a) hereof. "Consummate" means the occurrence of (i) the filing and effectiveness under the Act of the Exchange Offer Registration Statement relating to the Exchange Notes to be issued in the Registered Exchange Offer, (ii) the maintenance of such Registration Statement continuously effective and the keeping of the Registered Exchange Offer open for a period not less than the minimum period required pursuant to Section 3(c)(ii) hereof, and (iii) the delivery by the Company to the Registrar under the Indenture or the Exchange Notes Indenture, as the case may be, of Exchange Notes in the same aggregate principal amount as the aggregate principal amount of Notes that were tendered by Holders thereof and accepted for exchange pursuant to the Registered Exchange Offer. "Exchange Act" means the Securities Exchange Act of 1934, as amended, and the rules and regulations of the Commission promulgated thereunder. "Exchange Notes" means debt securities of the Company identical in all material respects to the Notes (except that interest will accrue on the Exchange Notes from the last day on which interest was paid on the Notes prior to the date of original issuance of the Exchange Notes or, if no such interest has 3 been paid, from November 2, 1998, and paragraph 2 of, and the transfer restrictions on, the Notes will be eliminated), to be issued under the Indenture or the Exchange Notes Indenture. "Exchange Notes Indenture" means an indenture between the Company and the Exchange Notes Trustee, identical in all material respects to the Indenture (except that interest will accrue on the Exchange Notes from the last day on which interest was paid on the Notes prior to the date of original issuance of the Exchange Notes or, if no such interest has been paid, from November 2, 1998, and paragraph 2 of, and the transfer restrictions on, the Notes will be eliminated). "Exchange Notes Trustee" means a bank or trust company reasonably satisfactory to the Initial Purchasers, as trustee with respect to the Exchange Notes under the Exchange Notes Indenture. "Exchange Offer Registration Period" means a period expiring upon the earliest to occur of (i) the one year period following the Consummation of the Registered Exchange Offer, (ii) the date on which, in the opinion of counsel to the Company, all of the Transfer Restricted Securities then held by the Holders may be sold by such Holders in the public United States securities markets in the absence of a registration statement covering such sales and (iii) the date on which there ceases to be outstanding any Transfer Restricted Securities. "Exchange Offer Registration Statement" means a registration statement of the Company on an appropriate form under the Act with respect to the Registered Exchange Offer, all amendments and supplements to such registration statement, including post-effective amendments, and in each case, including the Prospectus contained therein, all exhibits thereto and all material incorporated by reference therein. "Exchanging Dealer" means any Holder (which may include the Initial Purchasers) that is a broker-dealer, electing to exchange Transfer Restricted Securities, acquired for its own account as a result of market-making activities or other trading activities, for Exchange Notes. "Holder" has the meaning set forth in Section 2 hereof. "Indenture" means the Indenture, dated as of November 2, 1998, between the Company and the Trustee, relating to the Notes, as the same may be amended from time to time in accordance with the terms thereof. "Initial Placement" has the meaning set forth in the preamble hereto. "Losses" has the meaning set forth in Section 8(d) hereof. "Majority Holders" means the Holders of a majority of the aggregate principal amount of securities registered under a Registration Statement. "Managing Underwriters" means the investment banker or investment bankers and manager or managers that shall administer an underwritten offering. "Notes" has the meaning set forth in the preamble hereto. "Prospectus" means the prospectus included in any Registration Statement (including, without limitation, a prospectus that discloses information previously omitted from a prospectus filed as part of an effective registration statement in reliance upon Rule 430A under the Act), as amended or supplemented 3 4 by any prospectus supplement, with respect to the terms of the offering of any portion of Transfer Restricted Securities or the Exchange Notes, covered by such Registration Statement, and all amendments and supplements to the Prospectus, including post-effective amendments. "Registered Exchange Offer" means the proposed offer to the Holders to issue and deliver to such Holders, in exchange for Notes, a like principal amount of the Exchange Notes. "Registration Statement" means any Exchange Offer Registration Statement or any Shelf Registration Statement, which is filed pursuant to the provisions hereof, and in each case, including the Prospectus contained therein, all amendments and supplements thereto, including post-effective amendments, and all exhibits and material incorporated by reference therein. "Shelf Registration" means a registration effected pursuant to Section 4 hereof. "Shelf Registration Period" has the meaning set forth in Section 4(b) hereof. "Shelf Registration Statement" means a "shelf" registration statement of the Company pursuant to the provisions of Section 4 hereof that covers some or all of the Transfer Restricted Securities as applicable, on an appropriate form under Rule 415 under the Act, or any similar rule that may be adopted by the Commission, amendments and supplements to such registration statement, including post-effective amendments, and in each case, including the Prospectus contained therein, all exhibits thereto and all material incorporated by reference therein. "Supplement Delay Period" means any period commencing on the date of receipt by a Holder of Transfer Restricted Securities or Exchange Notes of any notice from the Company of the existence of any fact or event of the kind described in Section 5(b)(2) hereof and ending on the date of receipt by such Holder of an amended or supplemented Registration Statement or Prospectus, as contemplated by Section 5(j) hereof, or the receipt by such Holder of written notice from the Company (the "Advice") that the use of the Prospectus may be resumed, and the receipt of copies of any additional or supplemental filings that are incorporated by reference in the Prospectus. "Transfer Restricted Securities" means each Note until (i) the date on which such Note has been exchanged by a person other than a broker-dealer for an Exchange Note in the Registered Exchange Offer, (ii) following the exchange by an Exchanging Dealer in the Registered Exchange Offer of a Note for an Exchange Note, the date on which such Exchange Note is sold to a purchaser who receives from such broker-dealer on or prior to the date of such sale a copy of the prospectus contained in the Exchange Offer Registration Statement, (iii) the date on which such Note has been effectively registered under the Act and disposed of in accordance with the Shelf Registration Statement (iv) the date on which such Note is distributed to the public pursuant to Rule 144 under the Act (or any similar provision then in effect) or is saleable pursuant to Rule 144(k) under the Act or (v) the date upon which such Note ceases to be outstanding. "Trustee" means the trustee with respect to the Notes under the Indenture. "underwriter" means any underwriter of Notes in connection with an offering thereof under a Shelf Registration Statement. SECTION 2. HOLDERS A person is deemed to be a holder of Transfer Restricted Securities (each, a "Holder") whenever 4 5 such person becomes the registered holder of such Notes under the Indenture and includes broker-dealers that hold Transfer Restricted Securities (i) as a result of market making activities and other trading activities and (ii) which were acquired directly from the Company or an Affiliate. SECTION 3. REGISTERED EXCHANGE OFFER (a) The Company shall prepare and, on or prior to 90 days following the Closing Date, shall file with the Commission the Exchange Offer Registration Statement with respect to the Registered Exchange Offer. The Company shall use its best efforts to cause the Exchange Offer Registration Statement to become effective under the Act on or prior to 180 days after the Closing Date; provided that, if as a result of there being no federal governmental budget for any year following the 1997 fiscal year, the Commission ceases to review registration statements like the Registration Statements in the time within which the Commission normally reviews such registration statements in the ordinary course (a "Commission Delay Period"), then such 180 day period during which the Company must cause the Exchange Offer Registration Statement to become effective shall be extended by the number of days of which the Commission Delay Period is comprised. The Company shall use its best efforts to Consummate the Registered Exchange Offer on or prior to 220 days after the Closing Date. (b) Upon the effectiveness of the Exchange Offer Registration Statement, the Company shall promptly commence the Registered Exchange Offer, it being the objective of such Registered Exchange Offer to enable each Holder electing to exchange Transfer Restricted Securities for Exchange Notes (assuming that such Holder is not an Affiliate of the Company within the meaning of the Act, acquires the Exchange Notes in the ordinary course of such Holder's business and has no arrangements with any person to participate in the distribution of the Exchange Notes) to trade such Exchange Notes from and after their receipt without any limitations or restrictions under the Act and without material restrictions under the securities laws of a substantial proportion of the several states of the United States. (c) In connection with the Registered Exchange Offer, the Company shall: (i) mail to each Holder a copy of the Prospectus forming part of the Exchange Offer Registration Statement, together with an appropriate letter of transmittal and related documents; (ii) keep the Registered Exchange Offer open for not less than 30 days and not more than 45 days after the date notice thereof is mailed to the Holders (or longer if required by applicable law); (iii) utilize the services of one or more depositaries or exchange agents (which, in either case, may be the Trustee) for the Registered Exchange Offer with an address (A) in the Borough of Manhattan, The City of New York and (B) if the Notes are then listed on the Luxembourg Stock Exchange and the rules of the Luxembourg Stock Exchange so require, Luxembourg; and (iv) comply in all material respects with all applicable laws. (d) As soon as practicable after the close of the Registered Exchange Offer, the Company shall: (i) accept for exchange all Transfer Restricted Securities tendered and not validly withdrawn pursuant to the Registered Exchange Offer; (ii) deliver to the Trustee for cancellation all Transfer Restricted Securities so accepted for exchange; and 5 6 (iii) cause the Trustee or the Exchange Notes Trustee, as the case may be, promptly to authenticate and deliver to each Holder of Transfer Restricted Securities, Exchange Notes of a like principal amount to the Transfer Restricted Securities of such Holder so accepted for exchange. (e) The Initial Purchasers and the Company acknowledge that, pursuant to interpretations by the Commission's staff of Section 5 of the Act, and in the absence of an applicable exemption therefrom, each Exchanging Dealer is required to deliver a Prospectus in connection with a sale of any Exchange Notes received by such Exchanging Dealer pursuant to the Registered Exchange Offer in exchange for Transfer Restricted Securities acquired for its own account as a result of market-making activities or other trading activities. Accordingly, the Company shall: (i) include the information set forth in (A) Annex A hereto on the cover of the Exchange Offer Registration Statement, (B) Annex B hereto in the forepart of the Exchange Offer Registration Statement in a section setting forth details of the Registered Exchange Offer, (C) Annex C hereto in the "Plan of Distribution" section of the Prospectus contained in the Exchange Offer Registration Statement and (D) Annex D hereto in the Letter of Transmittal delivered pursuant to the Registered Exchange Offer and (ii) use its best efforts to keep the Exchange Offer Registration Statement continuously effective (subject to the existence of a Supplement Delay Period) under the Act during the Exchange Offer Registration Period for delivery by Exchanging Dealers in connection with sales of Exchange Notes received pursuant to the Registered Exchange Offer, as contemplated by Section 5(g) below. (f) In the event that any Initial Purchaser determines that it is not eligible to participate in the Registered Exchange Offer with respect to the exchange of Transfer Restricted Securities constituting any portion of an unsold allotment of Notes, at the written request of such Initial Purchaser, the Company shall issue and deliver to such Initial Purchaser or the party purchasing Transfer Restricted Securities registered under a Shelf Registration Statement as contemplated by Section 4 hereof from such Initial Purchaser, in exchange for such Transfer Restricted Securities, a like principal amount of Exchange Notes. Exchange Notes issued in exchange for Transfer Restricted Securities constituting any portion of an unsold allotment of Notes that are not registered under a Shelf Registration Statement as contemplated by Section 4 hereof shall bear a legend as to restrictions on transfer. The Company shall seek to cause the CUSIP Service Bureau to issue the same CUSIP number for such Exchange Notes as for Exchange Notes issued pursuant to the Registered Exchange Offer. SECTION 4. SHELF REGISTRATION If, (i) the Company is not required to file the Exchange Offer Registration Statement nor permitted to Consummate the Registered Exchange Offer because the Registered Exchange Offer is not permitted by applicable law or Commission policy or (ii) any Holder of Transfer Restricted Securities notifies the Company in writing within 10 business days of the filing and effectiveness under the Act of the Exchange Offer Registration Statement that (A) it is prohibited by law or Commission policy from participating in the Registered Exchange Offer, (B) it may not resell the Exchange Notes acquired by it in the Registered Exchange Offer to the public without delivering a prospectus, and the prospectus contained in the Exchange Offer Registration Statement is not appropriate or available for such resales or (C) it is a broker-dealer and owns Notes acquired directly from the Company or an Affiliate (it being understood that, for purposes of this Section 4, (x) the requirement that an Initial Purchaser deliver a 6 7 Prospectus containing the information required by Items 507 and/or 508 of Regulation S-K under the Act in connection with sales of Exchange Notes acquired in exchange for such Notes shall result in such Exchange Notes being not "freely tradeable" but (y) the requirement that an Exchanging Dealer deliver a Prospectus in connection with sales of Exchange Notes acquired in the Registered Exchange Offer in exchange for Notes acquired as a result of market-making activities or other trading activities shall not result in such Exchange Notes being not "freely tradeable"), the following provisions shall apply: (a) The Company shall as promptly as practicable, file with the Commission and thereafter shall use its best efforts to cause to be declared effective under the Act on or prior to 220 days (plus any additional days allowed as a result of a Commission Delay Period) after the date of original issuance of the Notes, a Shelf Registration Statement relating to the offer and sale of the Transfer Restricted Securities by the Holders from time to time in accordance with the methods of distribution elected by such Holders and set forth in such Shelf Registration Statement; provided, however, that with respect to Exchange Notes received by an Initial Purchaser in exchange for Transfer Restricted Securities constituting any portion of an unsold allotment of Notes, the Company may, if permitted by current interpretations by the Commission's staff, file a post-effective amendment to the Exchange Offer Registration Statement containing the information required by Regulation S-K Items 507 and/or 508, as applicable, in satisfaction of its obligations under this paragraph (a) with respect thereto, and any such Exchange Offer Registration Statement, as so amended, shall be referred to herein as, and governed by the provisions herein applicable to, a Shelf Registration Statement. (b) The Company shall use its best efforts to keep the Shelf Registration Statement continuously effective in order to permit the Prospectus forming part thereof to be usable by Holders for a period of two years from the date the Shelf Registration statement is declared effective by the Commission (or until one year after such effective date if such Shelf Registration Statement is filed at the request of an Initial Purchaser) or such shorter period that will terminate when (i) all the Transfer Restricted Securities covered by the Shelf Registration Statement have been sold pursuant to the Shelf Registration Statement, (ii) the date on which, in the opinion of counsel to the Company, all of the Transfer Restricted Securities then held by the Holders may be sold by such Holders in the public United States securities markets in the absence of a registration statement covering such sales or (iii) the date on which there ceases to be outstanding any Transfer Restricted Securities (in any such case, such period being called the "Shelf Registration Period"). The Company shall be deemed not to have used its best efforts to keep the Shelf Registration Statement effective during the requisite period if it voluntarily takes any action that would result in Holders of Transfer Restricted Securities covered thereby not being able to offer and sell such securities during that period, unless (i) such action is required by applicable law, (ii) such action is taken by the Company in good faith and for valid business reasons (not including avoidance of the Company's obligations hereunder), including the acquisition or divestiture of assets, so long as the Company promptly thereafter complies with the requirements of Section 5(j) hereof, if applicable or (iii) such action is taken because of any fact or circumstance giving rise to a Supplement Delay Period. SECTION 5. REGISTRATION PROCEDURES In connection with any Shelf Registration Statement and, to the extent applicable, any Exchange Offer Registration Statement, the following provisions shall apply: (a) The Company shall ensure that (i) any Registration Statement and any amendment thereto and any Prospectus forming part thereof and any amendment or supplement thereto complies in all material respects with the Act and the rules and regulations thereunder, (ii) any Registration Statement and any amendment thereto does not, when it becomes effective, contain an untrue statement of a material fact or 7 8 omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading and (iii) any Prospectus forming part of any Registration Statement, and any amendment or supplement to such Prospectus, does not include an untrue statement of a material fact or omit to state a material fact necessary in order to make the statements, in the light of the circumstances under which they were made, not misleading. (b) (1) The Company shall advise the Initial Purchasers and, in the case of a Shelf Registration Statement, the Holders of Transfer Restricted Securities covered thereby, and, if requested by the Initial Purchasers or any such Holder, confirm such advice in writing when a Registration Statement and any amendment thereto has been filed with the Commission and when the Registration Statement or any post-effective amendment thereto has become effective. (2) The Company shall advise the Initial Purchasers and, in the case of a Shelf Registration Statement, the Holders of Transfer Restricted Securities covered thereby, and, in the case of an Exchange Offer Registration Statement, any Exchanging Dealer which has provided in writing to the Company a telephone or facsimile number and address for notices, and, if requested by the Initial Purchasers or any such Holder or Exchanging Dealer, confirm such advice in writing: (i) of any request by the Commission for amendments or supplements to the Registration Statement or the Prospectus included therein or for additional information; (ii) of the initiation by the Commission of proceedings relating to a stop order suspending the effectiveness of the Registration Statement; (iii) of the issuance by the Commission of any stop order suspending the effectiveness of the Registration Statement; (iv) of the receipt by the Company of any notification with respect to the suspension of the qualification of the securities included therein for sale in any jurisdiction or the initiation or threatening of any proceeding for such purpose; and (v) of the existence of any fact and the happening of any event (including, without limitation, pending negotiations relating to, or the consummation of, a transaction or the occurrence of any event which would require additional disclosure of material non-public information by the Company in the Shelf Registration Statement as to which the Company has a bona fide business purpose for preserving confidential or which renders the Company unable to comply with Commission requirements) that, in the opinion of the Company, makes untrue any statement of a material fact made in its Shelf Registration Statement, the Prospectus or any amendment or supplement thereto or any document incorporated by reference therein or requires the making of any changes in the Registration Statement or the Prospectus so that, as of such date, the statements therein are not misleading and do not omit to state a material fact required to be stated therein or necessary to make the statements therein (in the case of the Prospectus, in light of the circumstances under which they were made) not misleading. Such advice may be accompanied by an instruction to suspend the use of the Prospectus until the requisite changes have been made. (c) The Company shall use its best efforts to obtain the withdrawal of any order suspending the effectiveness of any Registration Statement at the earliest possible time. 8 9 (d) The Company shall use its best efforts to furnish to each selling Holder included within the coverage of any Shelf Registration Statement who so requests in writing and who has provided to the Company an address for notices, without charge, at least one conformed copy of such Shelf Registration Statement and any post-effective amendment thereto, including financial statements and, if the Holder so requests in writing, all exhibits and schedules (including those incorporated by reference). (e) The Company shall, during the Shelf Registration Period, deliver to each Holder of Transfer Restricted Securities covered by any Shelf Registration Statement and who has provided to the Company an address for notices, without charge, as many copies of the Prospectus (including each preliminary Prospectus) contained in such Shelf Registration Statement and any amendment or supplement thereto as such Holder may reasonably request; subject to any notice by the Company in accordance with Section 6(b) hereof, the Company consents to the use of the Prospectus or any amendment or supplement thereto by each of the selling Holders for the purposes of offering and resale of the Transfer Restricted Securities covered by the Prospectus in accordance with the applicable regulations promulgated under the Act. (f) The Company shall furnish to each Exchanging Dealer, which so requests in writing, without charge, at least one copy of the Exchange Offer Registration Statement and any post-effective amendment thereto, including financial statements, and, if the Exchanging Dealer so requests in writing, any documents incorporated by reference therein and all exhibits and schedules (including those incorporated by reference). (g) The Company shall, during the Exchange Offer Registration Period, promptly deliver to each Exchanging Dealer, without charge, as many copies of the Prospectus included in such Exchange Offer Registration Statement and any amendment or supplement thereto as such Exchanging Dealer may reasonably request for delivery by such Exchanging Dealer in connection with a sale of Exchange Notes received by it pursuant to the Registered Exchange Offer; the Company consents to the use of the Prospectus or any amendment or supplement thereto by any such Exchanging Dealer for the purposes contemplated by the Act or the applicable regulations promulgated under the Act. (h) Prior to the Registered Exchange Offer or any offering of Transfer Restricted Securities pursuant to any Registration Statement, the Company shall register or qualify or cooperate with the Holders of Transfer Restricted Securities named therein and their respective counsel in connection with the registration or qualification of such Transfer Restricted Securities for offer and sale under the securities or blue sky laws of such jurisdictions of the United States as any such Holders reasonably request in writing not later than the date that is five business days prior to the date upon which this Agreement specifies that the Registration Statement shall become effective; provided, however, that the Company will not be required to qualify generally to do business in any jurisdiction where it is not then so qualified or to take any action which would subject it to general service of process or to taxation in any such jurisdiction where it is not then so subject. (i) The Company shall endeavor to cooperate with the Holders of Transfer Restricted Securities to facilitate the timely preparation and delivery of certificates representing Transfer Restricted Securities to be sold pursuant to any Registration Statement free of any restrictive legends and in such denominations and registered in such names as Holders may request in writing at least two business days prior to sales of securities pursuant to such Registration Statement. (j) Upon the occurrence of any event contemplated by paragraph (b)(2)(v) hereof, the Company shall promptly prepare a post-effective amendment to any Registration Statement or an amendment or supplement to the related Prospectus or file any other required document so that as thereafter delivered to 9 10 purchasers of the Transfer Restricted Securities covered thereby, the Prospectus will not include an untrue statement of a material fact or omit to state any material fact necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading; provided that in the event of a material business transaction (including, without limitation, pending negotiations relating to such a transaction) which would, in the opinion of counsel to the Company, require disclosure by the Company in the Shelf Registration Statement of material non-public information for which the Company has a bona fide business purpose for not disclosing, then for so long as such circumstances exist, the Company shall not be required to prepare and file a supplement or post-effective amendment hereunder. (k) Not later than the effective date of any such Registration Statement hereunder, the Company shall cause to be provided a CUSIP number for the Notes or Exchange Notes, as the case may be, registered under such Registration Statement, and provide the applicable trustee with printed certificates for such Notes or Exchange Notes, in a form eligible for deposit with The Depository Trust Company. (l) The Company shall use its best efforts to comply with all applicable rules and regulations of the Commission and shall make generally available to its security holders in a regular filing on Form 10-Q or 10-K an earnings statement satisfying the provisions of Rule 158 (which need not be audited) for the twelve-month period commencing after effectiveness of the Shelf Registration Statement. (m) The Company shall cause the Indenture or the Exchange Notes Indenture, as the case may be, to be qualified under the Trust Indenture Act in a timely manner. (n) The Company may require each Holder of Transfer Restricted Securities, which are to be sold pursuant to any Shelf Registration Statement, to furnish to the Company within 20 business days after written request for such information has been made by the Company, such information regarding the Holder and the distribution of such securities as the Company may from time to time reasonably require for inclusion in such Registration Statement and such other information as may be necessary or advisable in the reasonable opinion of the Company and its counsel, in connection with such Shelf Registration Statement. No Holder of Transfer Restricted Securities shall be entitled to use the Prospectus unless and until such Holder shall have furnished the information required by this Section 5(n) and all such information required to be disclosed in order to make the information previously furnished to the Company by such Holder not materially misleading. (o) The Company shall, if requested, promptly incorporate in a Prospectus supplement or post-effective amendment to a Shelf Registration Statement, such information as the Managing Underwriters and Majority Holders reasonably agree should be included therein and shall make all required filings of such Prospectus supplement or post-effective amendment as soon as notified of the matters to be incorporated in such Prospectus supplement or post-effective amendment; provided, however, that the Company shall not be required to take any action pursuant to this Section 5(o) that would, in the opinion of counsel for the Company, violate applicable law or to include information the disclosure of which at the time would have an adverse effect on the business or operations of the Company and/or its subsidiaries, as determined in good faith by the Company. (p) In the case of any Shelf Registration Statement, the Company shall enter into such agreements (including underwriting agreements) and take all other reasonably appropriate actions in order to expedite or facilitate the registration or the disposition of the Transfer Restricted Securities, and in connection therewith, if an underwriting agreement is entered into, cause the same to contain indemnification provisions and procedures no less favorable than those set forth in Section 8 (or such other provisions and procedures acceptable to the Majority Holders and the Managing Underwriters, if any), with respect to all 10 11 parties to be indemnified pursuant to Section 8 from Holders of Notes to the Company. (q) In the case of any Shelf Registration Statement, the Company shall: (i) make reasonably available for inspection by representatives of the Holders of Transfer Restricted Securities to be registered thereunder, the Managing Underwriter participating in any disposition pursuant to such Registration Statement, and any attorney, accountant or other agent retained by the Holders or any such Managing Underwriter, at the office where normally kept during normal business hours, all financial and other records, pertinent corporate documents and properties of the Company and its subsidiaries, and cause the Company's officers, directors and employees to supply all relevant information reasonably requested by the Holders or any Managing Underwriter, attorney, accountant or other agent in connection with any such Registration Statement as is customary for similar due diligence examinations; provided, however, that the foregoing inspection and information gathering shall be coordinated by the Managing Underwriters, if any, or by one counsel designated by the Holders and that such persons shall first agree in writing with the Company that any information that is designated in writing by the Company, in good faith, as confidential at the time of delivery of such information shall be kept confidential by such person, unless such disclosure is made in connection with a court proceeding or required by law, or such information becomes available to the public generally or through a third party without an accompanying obligation of confidentiality; (ii) make such representations and warranties to the Holders of Transfer Restricted Securities registered thereunder and the underwriters, if any, in form, substance and scope as are customarily made by issuers to underwriters in underwritten offerings and covering matters including, but not limited to, those set forth in the Purchase Agreement; (iii) obtain opinions of counsel to the Company and updates thereof (which counsel and opinions (in form, scope and substance) shall be reasonably satisfactory to the Managing Underwriters, if any), addressed to each selling Holder and the underwriters, if any, covering such matters as are customarily covered in opinions requested in underwritten offerings and such other matters as may be reasonably requested by such Holders and underwriters; (iv) obtain "cold comfort" letters (or, in the case of any person that does not satisfy the conditions for receipt of a "cold comfort" letter specified in Statement on Auditing Standards No. 72, an "agreed-upon procedures letter") and updates thereof from the independent certified public accountants of the Company (and, if necessary, any other independent certified public accountants of any subsidiary of the Company or of any business acquired by the Company for which financial statements and financial data are, or are required to be, included in the Registration Statement), addressed where reasonably practicable to each selling Holder of Transfer Restricted Securities registered thereunder and the underwriters, if any, in customary form and covering matters of the type customarily covered in "cold comfort" letters in connection with primary underwritten offerings; and (v) deliver such documents and certificates as may be reasonably requested by the Majority Holders and the Managing Underwriters, if any, including those to evidence compliance with Section 5(j) and with any customary conditions contained in the underwriting agreement or other agreement entered into by the Company. The foregoing actions set forth in clauses (ii), (iii), (iv) and (v) of this Section 5(q) shall, 11 12 if reasonably requested by the Majority Holder or the Majority Underwriters, be performed at (A) the effectiveness of such Registration Statement and each post-effective amendment thereto and (B) each closing under any underwriting or similar agreement, as to the extent required thereunder. (vi) The Company may offer securities of the Company other than the Notes or the Exchange Notes under the Shelf Registration Statement, except where such offer would conflict with the terms of the Purchase Agreement. 12 13 SECTION 6. HOLDERS' AGREEMENTS Each Holder of Transfer Restricted Securities and Exchange Notes, by the acquisition of such Transfer Restricted Securities or Exchange Notes, as the case may be, agrees: (a) To furnish the information required to be furnished pursuant to Section 5(n) hereof within the time period set forth therein. (b) That upon receipt of a notice of the commencement of a Supplement Delay Period, it will keep the fact of such notice confidential, forthwith discontinue disposition of its Transfer Restricted Securities or Exchange Notes, as the case may be, pursuant to the Registration Statement, and will not deliver any Prospectus forming a part thereof until receipt of the amended or supplemented Registration Statement or Prospectus, as applicable, as contemplated by Section 5(j) hereof, or until receipt of the Advice. If a Supplement Delay Period should occur, the Exchange Offer Registration Period or the Shelf Registration Period, as applicable, shall be extended by the number of days of which the Supplement Delay Period is comprised; provided that the Shelf Registration Period shall not be extended if the Company has received an opinion of counsel (which counsel, if different from counsel to the Company referred to in Section 6(a) and (b) of the Purchase Agreement, shall be reasonably satisfactory to the Majority Holders of the Transfer Restricted Securities named in the Shelf Registration Period) to the effect that the Transfer Restricted Securities can be freely tradeable without the continued effectiveness of the Shelf Registration Statement. (c) If so directed by the Company in a notice of the commencement of a Supplement Delay Period, each Holder of Transfer Restricted Securities or Exchange Notes, as the case may be, will deliver to the Company (at the Company's expense) all copies, other than permanent file copies then in such Holder's possession, of the Prospectus covering the Transfer Restricted Securities or Exchange Notes, as the case may be. (d) Sales of such Transfer Restricted Securities pursuant to a Registration Statement shall only be made in the manner set forth in such currently effective Registration Statement. SECTION 7. REGISTRATION EXPENSES The Company shall bear all expenses incurred in connection with the performance of its obligations under Sections 3, 4 and 5 hereof and, in the event of any Shelf Registration Statement, will reimburse the Holders for the reasonable fees and disbursements of one firm or counsel designated by the Majority Holders to act as counsel for the Holders in connection therewith, and, in the case of any Exchange Offer Registration Statement, will reimburse the Initial Purchasers for the reasonable fees and disbursements of counsel acting in connection therewith. Notwithstanding the foregoing or anything in this Agreement to the contrary, each Holder shall pay all underwriting discounts and commission of any underwriters with respect to any Transfer Restricted Securities sold by it. SECTION 8. INDEMNIFICATION AND CONTRIBUTION (a) In connection with Registration Statement, the Company agrees to indemnify and hold harmless each Holder of Transfer Restricted Securities covered thereby (including each Initial Purchaser and, with respect to any Prospectus delivery as contemplated in Section 5(g) hereof, each Exchanging 13 14 Dealer), the directors, officers, employees, partners, representatives and agents of each such Holder and each person who controls any such Holder within the meaning of either Section 15 of the Act or Section 20 of the Exchange Act against any and all losses, claims, damages or liabilities, joint or several, to which they or any of them may become subject under the Act, the Exchange Act or other Federal or state statutory law or regulation, at common law or otherwise, insofar as such losses, claims, damages or liabilities (or actions in respect thereof) arise out of, or are based upon, any untrue statement or alleged untrue statement of a material fact contained in the Registration Statement as originally filed or in any amendment thereof, or in any preliminary Prospectus or Prospectus, or in any amendment thereof or supplement thereto, or arise out of, or are based upon, the omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, and to reimburse each such indemnified party, as incurred, for any legal or other expenses reasonably incurred by them in connection with investigating or defending any such loss, claim, damage, liability or action; provided, however, that (i) the Company will not be liable in any case to the extent that any such loss, claim, damage or liability arises out of, or is based upon, any such untrue statement or alleged untrue statement or omission or alleged omission made therein in reliance upon and in conformity with written information furnished to the Company by or on behalf of any such Holder or by the Managing Underwriters specifically for inclusion therein and (ii) the Company will not be liable to any indemnified party under this indemnity agreement with respect to the Registration Statement or Prospectus to the extent that any such loss, claim, damage or liability of such indemnified party results solely from an untrue statement of a material fact contained in, or the omission of a material fact from, the Registration Statement or Prospectus, which untrue statement or omission was corrected in an amended or supplemented Registration Statement or Prospectus, if the person alleging such loss, claim, damage or liability was not sent or given, at or prior to the written confirmation of such sale, a copy of the amended or supplemented Registration Statement or Prospectus if the Company had previously furnished copies thereof to such indemnified party and if delivery of a prospectus is required by the Act and was not so made. This indemnity agreement will be in addition to any liability which the Company may otherwise have. The Company also agrees to indemnify or contribute to Losses of, as provided in Section 8(d), any underwriters of Notes registered under a Shelf Registration Statement, their officers and directors and each person who controls such underwriters on substantially the same basis as that of the indemnification of the Initial Purchasers and the selling Holders provided in this Section 8(a) and shall, if requested by any Holder, enter into an underwriting agreement reflecting such agreement, as provided in Section 5(p) hereof. (b) Each Holder of Transfer Restricted Securities or Exchange Notes covered by a Registration Statement (including each Initial Purchaser and, with respect to any Prospectus delivery as contemplated in Section 5(g) hereof, each Exchanging Dealer) severally agrees to indemnify and hold harmless (i) the Company, (ii) each of its directors, (iii) each of its officers who signs such Registration Statement and (iv) each person who controls the Company within the meaning of either the Act or the Exchange Act to the same extent as the foregoing indemnity from the Company to each such Holder, but only with reference to written information relating to such Holder furnished to the Company by or on behalf of such Holder specifically for inclusion in the documents referred to in the foregoing indemnity. This indemnity agreement will be in addition to any liability which any such Holder may otherwise have. In no event shall any Holder, its directors, officers or any person who controls such Holder be liable or responsible for any amount in excess of the amount by which the total amount received by such Holder with respect to its sale of Transfer Restricted Securities pursuant to a Registration Statement exceeds (i) the amount paid by such Holder for such Transfer Restricted Securities and (ii) the amount of any damages that such Holder, its directors, officers or any person who controls such Holder has otherwise been required to pay 14 15 by reason of such untrue or alleged untrue statement or omission or alleged omission. (c) Promptly after receipt by an indemnified party under this Section 8 or notice of the commencement of any action, the indemnified party will, if a claim in respect thereof is to be made against the indemnifying party under this Section 8, notify the indemnifying party in writing of the commencement thereof; but the failure to so notify the indemnifying party (i) will not relieve it from liability under paragraph (a) or (b) above unless and to the extent it did not otherwise learn of such action and such failure results in the forfeiture by the indemnifying party of substantial rights and defenses and (ii) will not, in any event, relieve the indemnifying party from any obligations to any indemnified party other than the indemnification obligation provided in paragraph (a) or (b) above. The indemnifying party shall be entitled to appoint counsel of the indemnifying party's choice at the indemnifying party's expense to represent the indemnified party in any action for which indemnification is sought (in which case the indemnifying party shall not thereafter be responsible for the fees and expenses of any separate counsel retained by the indemnified party or parties except as set forth below); provided, however, that such counsel shall be reasonably satisfactory to the indemnified party. Notwithstanding the indemnifying party's election to appoint counsel to represent the indemnified party in an action, the indemnified party shall have the right to employ separate counsel (including local counsel), and the indemnifying party shall bear the reasonable fees, costs and expenses of such separate counsel (and local counsel) if (i) the use of counsel chosen by the indemnifying party to represent the indemnified party would present such counsel with a conflict of interest, (ii) the actual or potential defendants in, or targets of, any such action include both the indemnified party and the indemnifying party, and the indemnified party reasonably concluded that there may be legal defenses available to it and/or other indemnified parties that are different from or additional to those available to the indemnifying party, (iii) the indemnifying party did not employ counsel satisfactory to the indemnified party to represent the indemnified party within a reasonable time after notice of the institution of such action or (iv) the indemnifying party authorized the indemnified party to employ separate counsel at the expense of the indemnifying party. An indemnifying party shall not, without the prior written consent of the indemnified parties, settle or compromise or consent to the entry of any judgment with respect to any pending or threatened claim, action, suit or proceeding for which indemnification or contribution may be sought hereunder (whether or not the indemnified parties are actual or potential parties to such claim or action), unless such settlement, compromise or consent includes an unconditional release of each indemnified party from all liability arising out of such claim, action, suit or proceeding and does not include a statement as to or an admission of fault, culpability or a failure to act, by or on behalf of the indemnified party. (d) In the event that the indemnity provided in paragraph (a) or (b) of this Section 8 is unavailable or insufficient to hold harmless an indemnified party for any reason, then each applicable indemnifying party, in lieu of indemnifying such indemnified party, shall have a joint and several obligation to contribute to the aggregate losses, claims, damages and liabilities (including legal or other expenses reasonably incurred in connection with investigating or defending same) (collectively "Losses") to which such indemnified party may be subject in such proportion as is appropriate to reflect the relative benefits received by such indemnifying party, on the one hand, and such indemnified party, on the other hand, from the Initial Placement and the Registration Statement that resulted in such Losses; provided, however, that in no case shall any Initial Purchaser or any subsequent Holder of any Note or Exchange Note be responsible, in the aggregate, for any amount in excess of the purchase discount or commission applicable to such Note, or in the case of an Exchange Note, applicable to the Note which was exchangeable into such Exchange Note, as set forth on the cover page of the Final Offering Memorandum, nor shall any underwriter be responsible for any amount in excess of the underwriting discount or commission applicable to the securities purchased by such underwriter under the Registration Statement that resulted in such Losses. If the allocation provided by the immediately preceding sentence 15 16 is unavailable for any reason, the indemnifying party and the indemnified party shall contribute in such proportion as is appropriate to reflect not only such relative benefits, but also the relative fault of such indemnifying party, on the one hand, and such indemnified party, on the other hand, in connection with the statements or omissions which resulted in such Losses, as well as any other relevant equitable considerations. Benefits received by the Company shall be deemed to be equal to the sum of (x) the total net proceeds from the Initial Placement (before deducting expenses) as set forth on the cover page of the Final Offering Memorandum and (y) the total amount of additional interest that the Company was not required to pay as a result of registering the securities covered by the Registration Statement that resulted in such Losses. Benefits received by the Initial Purchasers shall be deemed to be equal to the total purchase discounts and commissions as set forth on the cover page of the Final Offering Memorandum, and benefits received by any other Holders shall be deemed to be equal to the value of receiving Notes or Exchange Notes, as applicable, registered under the Act. Benefits received by any underwriter shall be deemed to be equal to the total underwriting discounts and commissions, as set forth on the cover page of the Prospectus forming a part of the Registration Statement that resulted in such Losses. Relative fault shall be determined by reference to whether any alleged untrue statement or omission relates to information provided by the indemnifying party, on the one hand, or by the indemnified party, on the other hand. The parties agree that it would not be just and equitable if contribution were determined by pro rata allocation or any other method of allocation that does not take account of the equitable considerations referred to above. Notwithstanding the provisions of this paragraph (d), no person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Act) shall be entitled to contribution from any person who was guilty of such fraudulent misrepresentation. For purposes of this Section 8, each person who controls a Holder within the meaning of either the Act or the Exchange Act and each director, officer, employee and agent of such Holder shall have the same rights to contribution as such Holder, and each person who controls the Company within the meaning of either the Act or the Exchange Act, each officer of the Company who shall have signed the Registration Statement and each director of the Company shall have the same rights to contribution as the Company, subject in each case to the applicable terms and conditions of this paragraph (d). (e) The provisions of this Section 8 shall remain in full force and effect, regardless of any investigation made by or on behalf of any Holder or the Company or any of the officers, directors or controlling persons referred to in Section 8 hereof, and will survive the sale by a Holder of Transfer Restricted Securities or Exchange Notes. SECTION 9. RULE 144A and RULE 144 The Company agrees with each Holder, for so long as any Transfer Restricted Securities remain outstanding and during any period in which the Company (i) is not subject to Section 13 or 15(d) of the Exchange Act, to make available, upon request of any Holder, to such Holder or beneficial owner of Transfer Restricted Securities in connection with any sale thereof and any prospective purchaser of such Transfer Restricted Securities designated by such Holder or beneficial owner, the information required by Rule 144A(d)(4) under the Act in order to permit resales of such Transfer Restricted Securities pursuant to Rule 144A, and (ii) is subject to Section 13 or 15 (d) of the Exchange Act, to make all filings required thereby in a timely manner in order to permit resales of such Transfer Restricted Securities pursuant to Rule 144. SECTION 10. MISCELLANEOUS (a) No Inconsistent Agreements. The Company has not, as of the date hereof, entered into, nor shall it, on or after the date hereof, enter into, any agreement with respect to its securities that is 16 17 inconsistent with the rights granted to the Holders herein or otherwise conflicts with the provisions hereof. (b) Amendments and Waivers. The provisions of this Agreement, including the provisions of this sentence, may not be amended, qualified, modified or supplemented, and waivers or consents to departures from the provisions hereof may not be given, unless the Company has obtained the written consent of the Holders of at least a majority of the then outstanding aggregate principal amount of Notes (or, after the consummation of any Registered Exchange Offer in accordance with Section 3 hereof, of Exchange Notes); provided, however, that with respect to any matter that directly or indirectly affects the rights of any Initial Purchaser hereunder, the Company shall obtain the written consent of each such Initial Purchaser against which such amendment, qualification, supplement, waiver or consent is to be effective. Notwithstanding the foregoing (except the foregoing proviso), a waiver or consent to depart from the provisions hereof, with respect to a matter, which relates exclusively to the rights of Holders whose securities are being sold pursuant to a Registration Statement and does not directly or indirectly affect the rights of other Holders, may be given by the Majority Holders, determined on the basis of Notes being sold rather than registered under such Registration Statement. (c) Notices. All notices and other communications provided for or permitted hereunder shall be made in writing by hand-delivery, first-class mail, telex, telecopier, or air courier guaranteeing overnight delivery: (i) if to a Holder, at the most current address given by such holder to the Company in accordance with the provisions of this Section 10(c), which address initially is, with respect to each Holder, the address of such Holder maintained by the registrar under the Indenture or the Exchange Note Indenture, as the case may be, with a copy in like manner to Morgan Stanley & Co. Incorporated; (ii) if to the Initial Purchasers, initially at the respective addresses set forth in the Purchase Agreement; and (iii) if to the Company, initially at its address set forth in the Purchase Agreement. All such notices and communications shall be deemed to have been duly given when received. The Initial Purchasers or the Company by notice to the other may designate additional or different addresses for subsequent notices or communications. (d) Successors and Assigns. This Agreement shall inure to the benefit of, and be binding upon, the successors and assigns of each of the parties hereto, including, without the need for an express assignment or any consent by the Company thereto, subsequent Holders of Notes and/or Exchange Notes. The Company hereby agrees to extend the benefits of this Agreement to any Holder of Notes and/or Exchange Notes and any such Holder may specifically enforce the provisions of this Agreement as if an original party hereto. (e) Counterparts. This agreement may be executed in any number of counterparts and by the parties hereto in separate counterparts, each of which when so executed shall be deemed to be an original, and all of which taken together shall constitute one and the same agreement. (f) Headings. The headings in this agreement are for convenience of reference only and shall not limit or otherwise affect the meaning hereof. 17 18 (g) Governing Law. This agreement shall be governed by and construed in accordance with the internal laws of the State of New York applicable to agreements made and to be performed in said State (without reference to the conflict of law rules thereof). (h) Severability. In the event that any one or more of the provisions contained herein, or the application thereof in any circumstances, is held invalid, illegal or unenforceable in any respect for any reason, the validity, legality and enforceability of any such provision in every other respect and the remaining provisions hereof shall not be in any way impaired or affected thereby, it being intended that all of the rights and privileges of the parties shall be enforceable to the fullest extent permitted by law. (i) Notes Held by the Company, etc. Whenever the consent or approval of Holders of a specified percentage of principal amount of Notes or Exchange Notes is required hereunder, Notes or Exchange Notes, as applicable, held by the Company or its Affiliates (other than subsequent Holders of Notes or Exchange Notes if such subsequent Holders are deemed to be Affiliates solely by reason of their holdings of such Notes or Exchange Notes) shall not be counted in determining whether such consent or approval was given by the Holders of such required percentage. (j) Entire Agreement. This Agreement is intended by the parties as a final expression of their agreement and intended to be a complete and exclusive statement of the agreement and understanding of the parties hereto with respect to the subject matter contained herein. There are no restrictions, promises, warranties or undertakings, other than those set forth or referred to herein with respect to the registration rights granted with respect to the Transfer Restricted Securities. This Agreement supersedes all prior agreements and understandings between the parties with respect to such subject matter. 18 19 IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first written above. NTL INCORPORATED By: /s/ Richard J. Lubasch -------------------------------------- Name: Richard J. Lubasch Title: Senior Vice President, General Counsel and Secretary Morgan Stanley & Co. Incorporated Chase Securities Inc. Donaldson Lufkin & Jenrette Securities Corporation Goldman, Sachs & Co. By: Morgan Stanley & Co. Incorporated By: /s/ Donal A. Quigley ---------------------------- Name: Donal A. Quigley Title: Executive Director Registration Rights Agreement signature page 20 ANNEX A Each broker-dealer that receives Exchange Notes for its own account pursuant to the Registered Exchange Offer must acknowledge that it will deliver a prospectus in connection with any resale of such Exchange Notes. The Letter of Transmittal states that by so acknowledging and by delivering a prospectus, a broker-dealer will not be deemed to admit that it is an "underwriter" within the meaning of the Act. This Prospectus, as it may be amended or supplemented from time to time, may be used by a broker-dealer in connection with resales of Exchange Notes received in exchange for Notes where such Exchange Notes were acquired by such broker-dealer as a result of market-making activities or other trading activities. The Company has agreed that, starting on the Expiration Date (as defined herein) and ending on the close of business on the 180th day following the Expiration Date, it will make this Prospectus available to any broker-dealer for use in connection with any such resale. See "Plan of Distribution." A-1 21 ANNEX B Each broker-dealer that receives Exchange Notes for its own account in exchange for Notes, where such Notes were acquired by such broker-dealer as a result of market-making activities or other trading activities, must acknowledge that it will deliver a prospectus in connection with any resale of such Exchange Notes. See "Plan of Distribution." B-1 22 ANNEX C PLAN OF DISTRIBUTION Each broker-dealer that receives Exchange Notes for its own account pursuant to the Registered Exchange Offer must acknowledge that it will deliver a prospectus in connection with any resale of such Exchange Notes. The Prospectus, as it may be amended or supplemented from time to time, may be used by a broker-dealer in connection with resales of Exchange Notes received in exchange for Notes where such Notes were acquired as a result of market-making activities or other trading activities. The Company has agreed that, starting on the Expiration Date and ending on the close of business on the 180th day following the Expiration Date, it will make this Prospectus, as amended or supplemented, available to any broker-dealer for use in connection with any such resale. The Company will not receive any proceeds from any sale of Exchange Notes by broker-dealers. Exchange Notes received by broker-dealers for their own account pursuant to the Exchange Offer may be sold from time to time in one or more transactions in the over-the-counter market, in negotiated transactions, through the writing of options on the Exchange Notes or by a combination of such methods of resale, at market prices prevailing at the time of resale, at prices related to such prevailing market prices or at negotiated prices. Any such resale may be made directly to purchaser or to or through brokers or dealers who may receive compensation in the form of commissions or concessions from any such broker-dealer and/or the purchasers of any such Exchange Notes. Any broker- dealer that resells Exchange Notes that were received by it for its own account pursuant to the Registered Exchange Offer and any broker or dealer that participates in a distribution of such Exchange Notes may be deemed to be an "underwriter" within the meaning of the Act and any profit of any such resale of Exchange Notes and any commissions or concessions received by any such persons may be deemed to be underwriting compensation under the Act. The Letter of Transmittal states that by acknowledging that it will deliver and by delivering a prospectus, a broker-dealer will not be deemed to admit that it is an "underwriter" within the meaning of the Act. For a period of 180 days after the Expiration Date, the Company will promptly send additional copies of this Prospectus and any amendment or supplement to this Prospectus to any broker-dealer that requests such documents in the Letter of Transmittal. The Company has agreed to pay all expenses incident to the Registered Exchange Offer (including the expenses of one counsel for the holders of the Notes) other than commissions or concessions of any brokers or dealers and will indemnify the holders of the Notes (including any broker-dealers) against certain liabilities, including liabilities under the Act. [Add information required by Regulation S-K Items 507 and/or 508.] C-1 23 ANNEX D Rider A CHECK HERE IF YOU ARE A BROKER-DEALER AND WISH TO RECEIVE 10 ADDITIONAL COPIES OF THE PROSPECTUS AND 10 COPIES OF ANY AMENDMENTS OR SUPPLEMENTS THERETO. Name: ------------------------------------- Address: ------------------------------------------------------------------------ ------------------------------------------------------------------------ Rider B If the undersigned is not a broker-dealer, the undersigned represents that it is not engaged in, and does not intend to engage in, a distribution of Exchange Notes. If the undersigned is a broker-dealer that will receive Exchange Notes for its own account in exchange for Notes that were acquired as a result of market making activities or other trading activities, it acknowledges that it will deliver a prospectus in connection with any resale of such Exchange Notes; however, by so acknowledging and by delivering a prospectus, the undersigned will not be deemed to admit that it is an "underwriter" within the meaning of the Act. D-1 EX-4.15 5 INDENTURE, DATED AS OF NOVEMBER 6, 1998 1 Exhibit 4.15 NTL INCORPORATED $450,000,000 12-3/8% SENIOR DEFERRED COUPON NOTES DUE 2008 INDENTURE Dated as of November 6, 1998 ------------------------ The Chase Manhattan Bank Trustee ------------------------ 2 TABLE OF CONTENTS ARTICLE I 1 Section 1.01. Definitions 1 Section 1.02. Other Definitions 13 Section 1.03. Incorporation by Reference of Trust Indenture Act 14 Section 1.04. Rules of Construction 14 ARTICLE II. THE NOTES 15 Section 2.01. Form and Dating 15 Section 2.02. Execution and Authentication 17 Section 2.03. Registrar and Paying Agent 17 Section 2.04. Paying Agent to Hold Money in Trust 18 Section 2.05. Holder Lists 18 Section 2.06. Transfer and Exchange 18 Section 2.07. Replacement Notes 22 Section 2.08. Outstanding Notes 22 Section 2.09. Treasury Notes 23 Section 2.10. Temporary Notes; Global Notes 23 Section 2.11. Cancellation 24 Section 2.12. Defaulted Interest 24 ARTICLE III. REDEMPTION 24 Section 3.01. Notices to Trustee 24 Section 3.02. Selection of Notes to Be Redeemed 24 Section 3.03. Notice of Redemption 25 Section 3.04. Effect of Notice of Redemption 25 Section 3.05. Deposit of Redemption Price 25 Section 3.06. Notes Redeemed in Part 26 Section 3.07. Optional Redemption and Optional Tax Redemption 26 Section 3.08. Mandatory Redemption 26 Section 3.09. Asset Sale Offer and Purchase Offer 26 ARTICLE IV. COVENANTS 29 Section 4.01. Payment of Notes 29 Section 4.02. Reports 29 Section 4.03. Compliance Certificate 29 Section 4.04. Stay, Extension and Usury Laws 30 Section 4.05. Corporate Existence 30 Section 4.06. Taxes 30 Section 4.07. Limitations on Liens 31 Section 4.08. Incurrence Of Indebtedness And Issuance Of Preferred Stock 31 Section 4.09. Restricted Payments 33 Section 4.10. Asset Sales 36 Section 4.11. Transactions with Affiliates 38 Section 4.12. Dividends and Other Payment Restrictions Affecting Restricted Subsidiaries 39 Section 4.13. Change of Control 40 Section 4.14. Payment of Additional Amounts 40 ARTICLE V. SUCCESSORS 41 Section 5.01. Merger, Consolidation or Sale of Assets 41 3 Section 5.02. Successor Corporation Substituted 42 ARTICLE VI. DEFAULTS AND REMEDIES 42 Section 6.01. Events of Default 42 Section 6.02. Acceleration 44 Section 6.03. Other Remedies 44 Section 6.04. Waiver of Past Defaults 45 Section 6.05. Control by majority 45 Section 6.06. Limitation on Suits 45 Section 6.07. Rights of Holders to Receive Payment 45 Section 6.08. Collection Suit by Trustee 46 Section 6.09. Trustee May File Proofs of Claim 46 Section 6.10. Priorities 46 Section 6.11. Undertaking for Costs 46 ARTICLE VII. TRUSTEE 46 Section 7.01. Duties of Trustee 47 Section 7.02. Rights of Trustee 47 Section 7.03. Individual Rights of Trustee 48 Section 7.04. Trustee's Disclaimer 48 Section 7.05. Notice of Defaults 48 Section 7.06. Reports by Trustee to Holders 48 Section 7.07. Compensation and Indemnity 48 Section 7.08. Replacement of Trustee 49 Section 7.09. Successor Trustee by Merger, Etc 50 Section 7.10. Eligibility; Disqualification 50 Section 7.11. Preferential Collection of Claims Against Company 50 ARTICLE VIII. DISCHARGE OF INDENTURE 51 Section 8.01. Termination of Company's Obligations 51 Section 8.02. Option to Effect Defeasance 51 Section 8.03. Application of Trust Money 52 Section 8.04. Repayment to Company 53 Section 8.05. Reinstatement 53 ARTICLE IX. AMENDMENTS, SUPPLEMENTS AND WAIVERS 53 Section 9.01. Without Consent of Holders 53 Section 9.02. With Consent of Holders 54 Section 9.03. Compliance with Trust Indenture Act 54 Section 9.04. Revocation and Effect of Consents 55 Section 9.05. Notation on or Exchange of Notes 55 Section 9.06. Trustee Protected 55 ARTICLE X. MISCELLANEOUS 55 Section 10.01. Trust Indenture Act Controls 55 Section 10.02. Notices 56 Section 10.03. Communication by Holders with Other Holders 56 Section 10.04. Certificate and Opinion as to Conditions Precedent 56 Section 10.05. Statements Required in Certificate or Opinion 56 Section 10.06. Rules by Trustee and Agents 57 Section 10.07. Legal Holidays 57 Section 10.08. No Recourse Against Others 57 Section 10.09. Counterparts and Facsimile Signatures 57 -3- 4 Section 10.10. Variable Provisions 57 Section 10.11. Governing Law 58 Section 10.12. No Adverse Interpretation of Other Agreements 58 Section 10.13. Successors 58 Section 10.14. Severability 58 Section 10.15. Table of Contents, Headings, Etc 59 -4- 5 CROSS-REFERENCE TABLE* Trust Indenture Act Section Indenture Section 310 (a)(1) 7.10 (a)(2) 7.10 (a)(3) N.A. (a)(4) N.A. (a)(5) 7.10 (b) 7.08, 7.10 (c) N.A. 311(a) 7.11 (b) 7.11 (c) N.A. 312 (a) 2.05 (b) 10.03 (c) 10.03 313(a) 7.06 (b)(1) N.A. (b)(2) 7.06 (c) 7.06 (d) 7.06 314(a) 4.02 4.03, (b) N.A. (c)(1) 10.04 (c)(2) 10.04 (c)(3) N.A. (d) N.A. (e) N.A. (f) N.A. 315(a) 7.01(b) (b) 7.05 -5- 6 (c) 7.01(a) (d) 7.01(c) (e) 6.11 316 (a)(last sentence) 2.09 (a)(1)(A) 6.05 (a)(1)(B) 6.04 (a)(2) N.A. (b) 6.07 (c) 9.04 317 (a)(1) 6.08 (a)(2) 6.09 (b) 2.04 318 (a) N.A. N.A. means not applicable. *This Cross-Reference Table is not part of the Indenture. -6- 7 INDENTURE, dated as of November 6, 1998, between NTL Incorporated, a Delaware corporation (the "Company"), and The Chase Manhattan Bank, a New York corporation, as trustee (the "Trustee"). Each party agrees as follows for the benefit of the other party and for the equal and ratable benefit of the Holders (as defined in Section 1.01) of the Company's 12-3/8% Senior Deferred Coupon Notes due 2008 (the "Initial Notes") and, if and when issued in exchange for Initial Notes, the Company's 12-3/8% Series B Senior Deferred Coupon Notes due 2008 (the "Exchange Notes" and, together with the Initial Notes, the "Notes"): ARTICLE I. Section 1.01. Definitions. "9 1/2% Notes" means the Company's 9 1/2% Senior Notes due 2008 and the Company's 9 1/2% Series B Senior Notes due 2008. "9 3/4% Notes" means the Company's 9 3/4% Senior Deferred Coupon Notes due 2008 and the Company's 9 3/4% Series B Senior Deferred Coupon Notes due 2008. "10% Notes" means the Company's 10% Series B Senior Notes due 2007. "10 3/4% Notes" means the Company's 10 3/4% Senior Deferred Coupon Notes due 2008 and the Company's 10 3/4% Series B Senior Deferred Coupon Notes due 2008. "11 1/2% Deferred Coupon Notes" means the Company's 11 1/2% Series B Senior Deferred Coupon Notes due 2006. "11 1/2% Notes" means the Company's 11 1/2% Senior Notes due 2008 and the Company's 11 1/2% Series B Senior Notes due 2008. "12 3/4% Notes" means the Company's 12 3/4% Series A Senior Deferred Coupon Notes due 2005. "Accreted Value" means, as of any date of determination prior to October 1, 2003, with respect to any Note, the sum of (a) the initial offering price (which is $555.05 per $1000.00 principal amount at maturity of the Notes) of such Note, and (b) the portion of the excess of the principal amount of such Note over such initial offering price which shall have been accreted thereon through such date, such amount to be so accreted on a daily basis at a rate of 12-3/8% per annum of the initial offering price of such Note compounded semiannually on each April 1 and October 1 from the date of issuance of the Note through the date of determination, computed on the basis of a 360-day year of twelve 30-day months. "Acquired Debt" means, with respect to any specified Person, Indebtedness of any other Person (the "Acquired Person") existing at the time such Acquired Person merged with or into or became a Subsidiary of such specified Person, including Indebtedness incurred in connection with, or in contemplation of, such Acquired Person merging with or into or becoming a Subsidiary of such specified Person. "Acquired Person" has the meaning specified in the definition of Acquired Debt. -7- 8 "Adjusted Total Assets" means the total amount of assets of the Company and its Restricted Subsidiaries (including the amount of any Investment in any Non-Restricted Subsidiary), except to the extent resulting from write-ups of assets (other than write-ups in connection with accounting for acquisitions in conformity with GAAP), after deducting therefrom (i) all current liabilities of the Company and its Restricted Subsidiaries, and (ii) all goodwill, trade names, trademarks, patents, unamortized debt discount and expense and other like intangibles, all as calculated in conformity with GAAP. For purposes of this Adjusted Total Assets definition, (a) assets shall be calculated less applicable accumulated depreciation, accumulated amortization and other valuation reserves, and (b) all calculations shall exclude all intercompany items. "Adjusted Total Controlled Assets" means the total amount of assets of the Company and its Cable Controlled Subsidiaries, except to the extent resulting from write-ups of assets (other than write-ups in connection with accounting for acquisitions in conformity with GAAP), after deducting therefrom (i) all current liabilities of the Company and such Cable Controlled Subsidiaries; and (ii) all goodwill, trade names, trademarks, patents, unamortized debt discount and expense and other like intangibles of the Company and such Restricted Subsidiaries, all as calculated in conformity with GAAP; provided that Adjusted Total Controlled Assets shall be reduced (to the extent not otherwise reduced in accordance with GAAP) by an amount equal to the aggregate amount of all Investments of the Company or any such Cable Controlled Subsidiaries in any Person other than a Cable Controlled Subsidiary, except Cash Equivalents. For purposes of this Adjusted Total Controlled Assets definition, (a) assets shall be calculated less applicable accumulated depreciation, accumulated amortization and other valuation reserves, and (b) all calculations shall exclude all intercompany items. "Affiliate" of any specified Person means any other Person directly indirectly controlling or controlled by or under direct or indirect common control with such specified Person. For purposes of this definition, "control" (including, with correlative meanings, the terms "controlling," "controlled by" and "under common control with"), as used with respect to any Person, shall mean the possession, directly or indirectly, of the power to direct or cause the direction of the management or policies of such Person, whether through the ownership of voting securities, by agreement or otherwise; provided, however, that beneficial ownership of 10% or more of the voting securities of a Person shall be deemed to be control. "Agent" means any Registrar or Paying Agent. "Annualized Pro Forma EBITDA" means, with respect to any Person, such Person's Pro Forma EBITDA for the latest fiscal quarter multiplied by four. "Asset Sale" means (i) any sale, lease, transfer, conveyance or other disposition of any assets (including by way of a sale-and-leaseback) other than the sale or transfer of inventory or goods held for sale in the ordinary course of business (provided that the sale, lease, transfer, conveyance or other disposition of all or substantially all of the assets of the Company shall be governed by Section 4.13 or 5.01 hereof) or (ii) any issuance, sale, lease, transfer, conveyance or other disposition of any Equity Interests of any of the Company's Restricted Subsidiaries to any Person; in either case other than (A) to (w) the Company, (x) any Wholly Owned Subsidiary, or (y) any Subsidiary which is a Subsidiary of the Company on the Issuance Date provided that at the time of and after giving effect to such issuance, sale, lease, transfer, conveyance or other disposition to such Subsidiary, the Company's ownership percentage in such Subsidiary is equal to or greater than such percentage on the Issuance Date or (B) the issuance, sale, transfer, conveyance or other disposition of Equity Interests of a Subsidiary in exchange for capital contributions made on a pro rata basis by the holders of the Equity Interests of such Subsidiary. -8- 9 "Board of Directors" means the Board of Directors of the Company or any authorized committee of the Board. "Business Day" means any day that is not a Legal Holiday. "Cable Assets" means tangible or intangible assets, licenses (including, without limitation, Licenses) and computer software used in connection with a Cable Business. "Cable Business" means (i) any Person directly or indirectly operating, or owning a license to operate, a cable and/or television and/or telephone and/or telecommunications system or service principally within the United Kingdom and/or the Republic of Ireland and (ii) any Cable Related Business. "Cable Controlled Property" means a Cable Controlled Subsidiary or a Cable Asset held by a Cable Controlled Subsidiary. "Cable Controlled Subsidiary" means any Restricted Subsidiary that is primarily engaged, directly or indirectly, in one or more Cable Businesses. "Cable Related Business" means a Person which directly or indirectly owns or provides a service or product used in a Cable Business, including, without limitation, any television programming, production and/or licensing business or any programming guide or telephone directory business or content or software related thereto. "Capital Stock" means any and all shares, interests, participations, rights or other equivalents (however designated) of corporate stock, including, without limitation, partnership interests. "Capital Stock Sale Proceeds" means the aggregate net sale proceeds (including from the sale of any property received for the Capital Stock or the fair market value of such property, as determined by an independent appraisal firm) received by the Company or any Subsidiary of the Company from the issue or sale (other than to a Subsidiary) by the Company of any class of its Capital Stock after October 14, 1993 (including Capital Stock of the Company issued after October 14, 1993 upon conversion of or in exchange for other securities of the Company). "Cash Equivalents" means (i) Permitted Currency, (ii) securities issued or directly and fully guaranteed or insured by the United States government, a European Union member government or any agency or instrumentality thereof having maturities of not more than six months and two days from the date of acquisition, (iii) certificates of deposit and eurodollar time deposits with maturities of six months or less from the date of acquisition, bankers' acceptances with maturities not exceeding six months and overnight bank deposits, in each case with any commercial bank(s) domiciled in the United States, the United Kingdom, the Republic of Ireland or any other European Union member having capital and surplus in excess of $500 million, (iv) repurchase obligations with a term of not more than seven days for underlying securities of the types described in clauses (ii) and (iii) entered into with any financial institution meeting the qualifications specified in clause (iii) above, (v) commercial paper rated P-1 or the equivalent thereof by Moody's or A-1 or the equivalent thereof by S & P and in each case maturing within six months and two days after the date of acquisition and (vi) money market funds at least 95% of the assets of which constitute Cash Equivalents of the kinds described in clauses (i)-(v) of this definition. "Change of Control" means (i) the sale, lease or transfer of all or substantially all of the assets of -9- 10 the Company to any "Person" or "group" (within the meaning of Sections 13(d)(3) and 14(d)(2) of the Exchange Act or any successor provision to either of the foregoing, including any group acting for the purpose of acquiring, holding or disposing of securities within the meaning of Rule 13d-5(b)(1) under the Exchange Act) (other than any Permitted Holder), (ii) the approval by the requisite stockholders of the Company of a plan of liquidation or dissolution of the Company, (iii) any "Person" or "group" (within the meaning of Sections 13(d) and 14(d)(2) of the Exchange Act or any successor provision to either of the foregoing, including any group acting for the purpose of acquiring, holding or disposing of securities within the meaning of Rule 13d- 5(b)(1) under the Exchange Act), other than any Permitted Holder, becomes the "beneficial owner" (as defined in Rule 13d-3 under the Exchange Act) of more than 50% of the total voting power of all classes of the voting stock of the Company and/or warrants or options to acquire such voting stock, calculated on a fully diluted basis, unless, as a result of such transaction, the ultimate direct or indirect ownership of the Company is substantially the same immediately after such transaction as it was immediately prior to such transaction, or (iv) during any period of two consecutive years, individuals who at the beginning of such period constituted the Company's Board of Directors (together with any new directors whose election or appointment by such board or whose nomination for election by the shareholders of the Company was approved by a vote of a majority of the directors then still in office who were either directors at the beginning of such period or whose election or nomination for election was previously so approved) cease for any reason to constitute a majority of the Company's Board of Directors then in office. "Change of Control Triggering Event" means the occurrence of both a Change of Control and a Ratings Decline. "Company" means the party named as such above until a successor replaces it in accordance with Article V and thereafter means the successor. "Consolidated Interest Expense" means, for any Person, for any period, the amount of interest in respect of Indebtedness (including amortization of original issue discount, amortization of debt issuance costs, and non-cash interest payments on any Indebtedness and the interest portion of any deferred payment obligation and after taking into account the effect of elections made under any Interest Rate Agreement, however denominated, with respect to such Indebtedness), the amount of Redeemable Dividends, Restricted Subsidiary Preferred Stock Dividends and the interest component of rentals in respect of any capital lease obligation paid, in each case whether accrued or scheduled to be paid or accrued by such Person and its Subsidiaries (other than Non-Restricted Subsidiaries) during such period to the extent such amounts were deducted in computing Consolidated Net Income, determined on a consolidated basis in accordance with GAAP. For purposes of this definition, interest on a capital lease obligation shall be deemed to accrue at an interest rate reasonably determined by such Person to be the rate of interest implicit in such capital lease obligation in accordance with GAAP consistently applied. "Consolidated Net Income" means, with respect to any Person, for any period, the aggregate of the Net Income of such Person and its Subsidiaries (other than Non-Restricted Subsidiaries) for such period, on a consolidated basis, determined in accordance with GAAP; provided that (i) the Net Income of any Person that is not a Subsidiary or that is accounted for by the equity method of accounting shall be included only to the extent of the amount of dividends or distributions -10- 11 paid to the referent Person or a Wholly Owned Subsidiary, (ii) the Net Income of any Person that is a Subsidiary (other than a Subsidiary of which at least 80% of the Capital Stock having ordinary voting power for the election of directors or other governing body of such Subsidiary is owned by the referent Person directly or indirectly through one or more Subsidiaries) shall be included only to the extent of the amount of dividends or distributions paid to the referent Person or a Wholly Owned Subsidiary, (iii) the Net Income of any Person acquired in a pooling of interests transaction for any period prior to the date of such acquisition shall be excluded and (iv) the cumulative effect of a change in accounting principles shall be excluded. "Convertible Subordinated Notes" means the Company's 7% Convertible Subordinated Notes issued pursuant to an indenture dated as of June 12, 1996, between the Company and The Chase Manhattan Bank (formerly known as Chemical Bank), as trustee. "Credit Facility" means the Facilities Agreement, dated October 17, 1997, between NTL (UK) Group Inc., as principal guarantor, Chase Manhattan plc, as arranger, Chase Manhattan International Limited, as agent and security trustee and the Chase Manhattan Bank as issuer, as such Facilities Agreement may be supplemented, amended, restated, modified, renewed, refunded, replaced or refinanced, in whole or in part, from time to time in an aggregate outstanding principal amount not to exceed the greater of (i) (pounds)555 million and (ii) the amount of the aggregate commitments thereunder as the same may be increased after March 13, 1998 as contemplated by the Facilities Agreement as amended or supplemented to March 13, 1998, but in no event greater than (pounds)875 million, less in each case, the aggregate amount of all Net Proceeds of Asset Sales that have been applied to permanently reduce Indebtedness under the Credit Facility pursuant Section 4.10 hereof. Indebtedness that may otherwise be incurred under this Indenture may, but need not, be incurred under the Credit Facility without regard to the limit set forth in the preceding sentence. Indebtedness outstanding under the Credit Facility on the date hereof shall be deemed to have been incurred on such date in reliance on the exception provided by Section 4.08(b)(i). "Cumulative EBITDA" means the cumulative EBITDA of the Company from and after the Issuance Date to the end of the fiscal quarter immediately preceding the date of a proposed Restricted Payment, or, if such cumulative EBITDA for such period is negative, minus the amount by which such cumulative EBITDA is less than zero; provided, however, that EBITDA of Non-Restricted Subsidiaries shall not be included. "Cumulative Interest Expense" means the aggregate amount of Consolidated Interest Expense paid, accrued or scheduled to be paid or accrued by the Company from the Issuance Date to the end of the fiscal quarter immediately preceding a proposed Restricted Payment, determined on a consolidated basis in accordance with GAAP. "Default" means any event that is, or with the passage of time or the giving of notice or both would be, an Event of Default. "Depositary" shall mean The Depository Trust Company, its nominees and their respective successors. "Disqualified Stock" means any Capital Stock which, by its terms (or by the terms of any security into which it is convertible or for which it is exchangeable), or upon the happening of any event, matures or is mandatorily redeemable, pursuant to a sinking fund obligation or otherwise, or redeemable at the option of the holder thereof, in whole or in part, on or prior to the date on which the Notes mature. "EBITDA" means, for any Person, for any period, an amount equal to (A) the sum of (i) Consolidated Net Income for such period (exclusive of any gain or loss realized in such period upon an Asset Sale), plus (ii) the provision for taxes for such period based on income or profits to the extent such -11- 12 income or profits were included in computing Consolidated Net Income and any provision for taxes utilized in computing net loss under clause (i) hereof, plus (iii) Consolidated Interest Expense for such period, plus (iv) depreciation for such period on a consolidated basis, plus (v) amortization of intangibles for such period on a consolidated basis, plus (vi) any other non-cash item reducing Consolidated Net Income for such period (excluding any such non-cash item to the extent that it represents an accrual of or reserve for cash expenses in any future period or amortization of a prepaid cash expense that was paid in a prior period), minus (B) all non-cash items increasing Consolidated Net Income for such period, all for such Person and its Subsidiaries determined in accordance with GAAP consistently applied. "Equity Interests" means Capital Stock and all warrants, options or other rights to acquire Capital Stock (but excluding any Indebtedness that is convertible into, or exchangeable for Capital Stock). "European Union member" means any country that is or becomes a member of the European Union or any successor organization thereto. "Exchange Act" means the Securities Exchange Act of 1934, as amended. "Exchange Rate Contract" means, with respect to any Person, any currency swap agreements, forward exchange rate agreements, foreign currency futures or options, exchange rate collar agreements, exchange rate insurance and other agreements or arrangements, or combination thereof, the principal purpose of which is to provide protection against fluctuations in currency exchange rates. An Exchange Rate Contract may also include an Interest Rate Agreement. "Existing Indebtedness" means Indebtedness of the Company and its Subsidiaries in existence on the Issuance Date, until such amounts are repaid, including, without limitation, the Existing Notes. "Existing Notes" means the Old Notes and the Convertible Subordinated Notes. "GAAP" means generally accepted accounting principles set forth in the opinions and pronouncements of the Accounting Principles Board of the American Institute of Certified Public Accountants and statements and pronouncements of the Financial Accounting Standards Board or in such other statements by such other entity as approved by a significant segment of the accounting profession, which are in effect on the Issuance Date and are applied on a consistent basis. "Guarantee" means a guarantee (other than by endorsement of negotiable instruments for collection in the ordinary course of business), direct or indirect, in any manner (including, without limitation, letters of credit and reimbursement agreements in respect thereof), of all or any part of any Indebtedness. "Holder" means a Person in whose name a Note is registered in the register referred to in Section 2.03. "Indebtedness" means, with respect to any Person, any indebtedness of such Person, whether or not contingent, in respect of borrowed money or evidenced by bonds, notes, debentures or similar instruments or letters of credit (or reimbursement agreements in respect thereof) or representing the balance deferred and unpaid of the purchase price of any property (including pursuant to capital leases and sale-and-leaseback transactions) or representing any hedging obligations under an Exchange Rate Contract or an Interest Rate Agreement, except any such balance that constitutes an accrued expense or -12- 13 trade payable, if and to the extent any of the foregoing indebtedness (other than obligations under an Exchange Rate Contract or an Interest Rate Agreement) would appear as a liability upon a balance sheet of such Person prepared in accordance with GAAP, and also includes, to the extent not otherwise included, the Guarantee of items which would be included within this definition. The amount of any Indebtedness outstanding as of any date shall be the accreted value thereof, in the case of any Indebtedness issued with original issue discount "Indenture" means this Indenture, as amended from time to time. "Initial Purchasers" means Morgan Stanley & Co. Incorporated, Chase Securities Inc., Donaldson, Lufkin & Jenrette Securities Corporation and Goldman, Sachs & Co. "Interest Rate Agreement" means, for any Person, any interest rate swap agreement, interest rate cap agreement, interest rate collar agreement, or other similar agreement, the principal purpose of which is to protect the party indicated therein against fluctuations in interest rates. "Investment Grade" means BBB- or higher by S&P or Baa3 or higher by Moody's or the equivalent of such ratings by S&P or Moody's. In the event that the Company shall be permitted to select any other Rating Agency, the equivalent of such ratings by such Rating Agency shall be used. "Investments" means, with respect to any Person, all investments by such Person in other Persons (including Affiliates) in the forms of loans (including Guarantees), advances or capital contributions (excluding commission, travel and similar advances and loans, joint property ownership and other arrangements, in each case, made to officers and employees made in the ordinary course of business), purchases or other acquisitions for consideration of Indebtedness, Equity Interests or other securities and all other items that are or would be classified as investments on a balance sheet prepared in accordance with GAAP. "Issuance Date" means the date on which the Notes are first authenticated and issued. "License" means any license issued or awarded pursuant to the Broadcasting Act 1990, the Cable and Broadcasting Act 1984, the Telecommunications Act 1984 or the Wireless Telegraphy Act 1948 (in each case, as such Acts may, from time to time, be amended, modified or re-enacted) (or equivalent statutes of any jurisdiction) to operate or own a Cable Business. "Lien" means, with respect to any asset, any mortgage, lien, pledge, charge, security interest or encumbrance of any kind in respect of such asset, whether or not filed, recorded or otherwise perfected under applicable law (including any conditional sale or other title retention agreement, any lease in the nature thereof, any option or other agreement to sell or give a security interest in and any filing of or agreement to give any financing statement under the Uniform Commercial Code (or equivalent or successor statutes) of any jurisdiction). "Material License" means a License held by the Company or any of its Subsidiaries which License at the time of determination covers a number of Net Households which equals or exceeds 5% of the aggregate number of Net Households covered by all of the Licenses held by the Company and its Subsidiaries at such time. "Material Subsidiary" means (i) NTL UK Group, Inc. (formerly known as OCOM Sub II, Inc.), NTL Investment Holdings Limited, NTL Group Limited, CableTel Surrey Limited, CableTel Cardiff -13- 14 Limited, CableTel Glasgow, CableTel Newport and CableTel Kirklees and (ii) any other Subsidiary of the Company which is a "significant subsidiary" as defined in Rule 1-02(w) of Regulation S-X under the Securities Act and the Exchange Act (as such Regulation is in effect on the date hereof). "Monetize" means a strategy with respect to Equity Interests that generates an amount of cash equal to the fair value of such Equity Interests. "Moody's" means Moody's Investors Service, Inc. and its successors. "Net Households" means the product of (i) the number of households covered by a License in the United Kingdom and (ii) the percentage of the entity holding such License which is owned directly or indirectly by the Company. "Net Income" means, with respect to any Person for a specific period, the net income (loss) of such Person during such period, determined in accordance with GAAP, excluding, however, any gain (but not loss) during such period, together with any related provision for taxes on such gain (but not loss), realized during such period in connection with any Asset Sale (including, without limitation, dispositions pursuant to sale-and-leaseback transactions), and excluding any extraordinary gain (but not loss) during such period, together with any related provision for taxes on such extraordinary gain (but not loss). "Net Proceeds" means the aggregate cash proceeds received by the Company or any of its Subsidiaries in respect of any Asset Sale, net of the direct costs relating to such Asset Sale (including, without limitation, legal, accounting and investment banking fees, and sales commissions) and any relocation expenses incurred as a result thereof, taxes paid or payable as a result thereof (after taking into account any available tax credits or deductions and any tax sharing arrangements), amounts required to be applied to the repayment of Indebtedness secured by a Lien on the asset or assets the subject of such Asset Sale and any reserve for adjustment in respect of the sale price of such asset or assets. "Non-Controlled Subsidiary" means an entity which is not a Cable Controlled Subsidiary. "Non-Recourse Debt" means Indebtedness or that portion of Indebtedness as to which none of the Company, nor any Restricted Subsidiary: (i) provides credit support (including any undertaking, agreement or instrument which would constitute Indebtedness); (ii) is directly or indirectly liable; or (iii) constitutes the lender. "Non-Restricted Subsidiary" means (A) a Subsidiary that (a) at the time of its designation by the Board of Directors as a Non-Restricted Subsidiary has not acquired any assets (other than as specifically permitted by clause (e) of "Permitted Investments" or Section 4.09 hereof), at any previous time, directly or indirectly from the Company or any of its Restricted Subsidiaries, (b) has no Indebtedness other than Non-Recourse Debt and (c) that at the time of such designation, after giving pro forma effect to such designation, the ratio of Indebtedness to Annualized Pro Forma EBITDA of the Company is equal to or less than the ratio of Indebtedness to Annualized Pro Forma EBITDA of the Company immediately preceding such designation, provided, however, that if the ratio of Indebtedness to Annualized Pro Forma EBITDA of the Company immediately preceding such designation is 6:1 or less, then the ratio of Indebtedness to Annualized Pro Forma EBITDA of the Company may be 0.5 greater than such ratio immediately preceding such designation; (B) any Subsidiary which (a) has been acquired or capitalized out of or by Equity Interests (other than Disqualified Stock) of the Company or Capital Stock Sale Proceeds therefrom, (b) has no Indebtedness other than Non-Recourse Debt and (c) is designated as a -14- 15 Non-Restricted Subsidiary by the Board of Directors or is merged, amalgamated or consolidated with or into, or its assets or capital stock is to be transferred to, a Non-Restricted Subsidiary; or (C) any Subsidiary of a Non-Restricted Subsidiary. "Notes" has the meaning set forth in the preamble hereto. "Obligations" means any principal, interest, penalties, fees, indemnifications, reimbursements, damages and other liabilities payable under the documentation governing any Indebtedness. "Officers' Certificate" means a certificate signed by two Officers, one of whom must be the Chairman of the Board, the President, the Treasurer or a Vice President of the Company. See Sections 10.04 and 10.05 hereof. "Old Notes" means the 12 3/4% Notes, the 11 1/2% Deferred Coupon Notes, the 10 3/4% Notes, the 10% Notes, the 9 3/4% Notes, the 9 1/2% Notes and the 11 1/2% Notes. "Opinion of Counsel" means a written opinion from legal counsel who is acceptable to the Trustee. The counsel may be an employee of or counsel to the Company or the Trustee. See Sections 10.04 and 10.05 hereof. "Other Qualified Notes" means any outstanding senior indebtedness of the Company issued pursuant to an indenture having a provision substantially similar to Section 4.10 hereof (including, without limitation, the 12 3/4% Notes, the 11 1/2% Deferred Coupon Notes, the 10 3/4% Notes, the 10% Notes, the 9 3/4% Notes, the 9 1/2% Notes and the 11 1/2% Notes). "Permitted Acquired Debt" means, with respect to any Acquired Person (including, for this purpose, any Non-Restricted Subsidiary at the time such Non-Restricted Subsidiary becomes a Restricted Subsidiary), Acquired Debt of such Acquired Person and its Subsidiaries in an amount (determined on a consolidated basis) not exceeding the sum of (x) amount of the gross book value of property, plant and equipment of the Acquired Person and its Subsidiaries as set forth on the most recent consolidated balance sheet of the Acquired Person (which may be unaudited) prior to the date it becomes an Acquired Person and (y) the aggregate amount of any Cash Equivalents held by such Acquired Person at the time it becomes an Acquired Person. "Permitted Currency" means the lawful currency of the United States or a European Union member. "Permitted Designee" means (i) a spouse or a child of a Permitted Holder, (ii) trusts for the benefit of a Permitted Holder or a spouse or child of a Permitted Holder, (iii) in the event of the death or incompetence of a Permitted Holder, his estate, heirs, executor, administrator, committee or other personal representative or (iv) any Person so long as a Permitted Holder owns at least 50% of the voting power of all classes of the voting stock of such Person. "Permitted Holders" means George S. Blumenthal, J. Barclay Knapp and their Permitted Designees. "Permitted Investments" means (a) any Investments in the Company or in a Cable Controlled Property or in a Qualified Subsidiary (including, without limitation, (i) Guarantees of Indebtedness of the Company, a Cable Controlled Subsidiary or a Qualified Subsidiary, (ii) Liens securing such Indebtedness -15- 16 or Guarantees or (iii) the payment of any balance deferred and unpaid of the purchase price of any Qualified Subsidiary); (b) any Investments in Cash Equivalents; (c) Investments by the Company in Indebtedness of a counter-party to an Exchange Rate Contract for hedging a Permitted Currency exchange risk that are made, for purposes other than speculation, in connection with such contract to hedge not more than the aggregate principal amount of the Indebtedness being hedged (or, in the case of Indebtedness issued with original issue discount, based on the amounts payable after the amortization of such discount); (d) Investments by the Company or any Subsidiary of the Company in a Person, if as a result of such Investment (i) such Person becomes a Cable Controlled Subsidiary or (ii) such Person is merged, consolidated or amalgamated with or into, or transfers or conveys substantially all of its assets to, or is liquidated into, the Company or a Wholly Owned Subsidiary of the Company; and (e) any issuance, transfer or other conveyance of Equity Interests (other than Disqualified Stock) in the Company (or any Capital Stock Sale Proceeds therefrom) to a Subsidiary of the Company. "Permitted Liens" means (a) Liens in favor of the Company; (b) Liens on property of a Person existing at the time such Person is merged into or consolidated with the Company or any Subsidiary of the Company; provided, that such Liens were in existence prior to the contemplation of such merger or consolidation and do not secure any property or assets of the Company or any of its Subsidiaries other than the property or assets subject to the Liens prior to such merger or consolidation; (c) liens imposed by law, such as carriers', warehousemen's and mechanics' liens and other similar liens arising in the ordinary course of business which secure payment of obligations not more than 60 days past due or are being contested in good faith and by appropriate proceedings; (d) Liens existing on the Issuance Date; (e) Liens for taxes, assessments or governmental charges or claims that are not yet delinquent or that are being contested in good faith by appropriate proceedings promptly instituted and diligently concluded; provided, that any reserve or other appropriate provision as shall be required in conformity with GAAP shall have been made therefor and (f) easements, rights of way, restrictions and other similar easements, licenses, restrictions on the use of properties or minor imperfections of title that, in the aggregate, are not material in amount, and do not in any case materially detract from the properties subject thereto or interfere with the ordinary conduct of the business of the Company or its Restricted Subsidiaries. "Permitted Non-Controlled Assets" means Equity Interests in any Person primarily engaged, directly or indirectly, in one or more Cable Businesses if such Equity Interests (x) were acquired by the Company or any of its Restricted Subsidiaries in connection with any Asset Sale or any Investment otherwise permitted under the terms of the Indenture and (y) to the extent that, after giving pro forma effect to the acquisition thereof by the Company or any of its Restricted Subsidiaries, Adjusted Total Controlled Assets is greater than 80% of Adjusted Total Assets based on the most recent consolidated balance sheet of the Company. "Person" means any individual, corporation, partnership, joint venture, association, joint stock company, trust, unincorporated organization or government or any agency or political subdivision thereof. "Preferred Stock" means the 13% Senior Redeemable Exchangeable Preferred Stock of the Company with an original aggregate liquidation preference of $100,000,000. "Pro Forma EBITDA" means for any Person, for any period, the EBITDA of such Person as determined on a consolidated basis for such Person and its Subsidiaries in accordance with GAAP after giving effect to the following: (i) if, during or after such period, such Person or any of its Subsidiaries shall have made any Asset Sale, Pro Forma EBITDA of such Person and its Subsidiaries for such period -16- 17 shall be reduced by an amount equal to the Pro Forma EBITDA (if positive) directly attributable to the assets which are the subject of such Asset Sale for the period or increased by an amount equal to the Pro Forma EBITDA (if negative) directly attributable thereto for such period and (ii) if, during or after such period, such Person or any of its Subsidiaries completes an acquisition of any Person or business which immediately after such acquisition is a Subsidiary of such Person or whose assets are held directly by such Person or a Subsidiary of such Person, Pro Forma EBITDA shall be computed so as to give pro forma effect to the acquisition of such Person or business (without giving effect to clause (iii) of the definition of Consolidated Net Income); and provided further that, with respect to the Company, all of the foregoing references to "Subsidiary" or "Subsidiaries" shall be deemed to refer only to a "Restricted Subsidiary" or "Restricted Subsidiaries" of the Company. "Purchase Agreement" means the Purchase Agreement, dated as of October 30, 1998, between the Company and the Initial Purchasers. "Qualified Subsidiary" means a Wholly Owned Subsidiary, or an entity that will become a Wholly Owned Subsidiary after giving effect to the transaction being considered, that at the time of and after giving effect to the consummation of the transaction under consideration, (i) is a Cable Business or holds only Cable Assets, (ii) has no Indebtedness (other than Indebtedness being incurred to consummate such transaction) and (iii) has no encumbrances or restrictions (other than such encumbrances or restrictions imposed or permitted by this Indenture, the indentures governing the Old Notes or any other instrument governing unsecured indebtedness of the Company which is pari passu with the Notes) on its ability to pay dividends or make any other distributions to the Company or any of its Subsidiaries. "Rating Agencies" means (i) S&P, (ii) Moody's and (iii) if S&P or Moody's or both shall not make a rating of the Notes publicly available, a nationally recognized securities rating agency or agencies, as the case may be, selected by the Company, which shall be substituted for S&P or Moody's or both, as the case may be. "Rating Category" means (i) with respect to S&P, any of the following categories: BB, B, CCC, CC, C and D (or equivalent successor categories), (ii) with respect to Moody's, any of the following categories: Ba, B, Caa, Ca, C and D (or equivalent successor categories) and (iii) the equivalent of any such category of S&P or Moody's used by another Rating Agency. In determining whether the rating of the Notes has decreased by one or more gradations, gradations within Rating Categories (+ and - for S&P; 1, 2 and 3 for Moody's; or the equivalent gradations for another Rating Agency) shall be taken into account (e.g., with respect to S&P, a decline in a rating from BB to BB-, as well as from BB-to B+, will constitute a decrease of one gradation). "Rating Date" means that date which is 90 days prior to the earlier of (x) a Change of Control and (y) public notice of the occurrence of a Change of Control or of the intention by the Company or any Permitted Holder to effect a Change of Control. "Ratings Decline" means the occurrence of any of the following events on, or within six months after, the date of public notice of the occurrence of a Change of Control or of the intention of the Company or any Person to effect a Change of Control (which period shall be extended so long as the rating of any of the Company's debt securities is under publicly announced consideration for possible downgrade by any of the Rating Agencies): (a) in the event that any of the Company's debt securities are rated by both of the Rating Agencies on the Rating Date as Investment Grade, the rating of such securities by either of the Rating Agencies shall be below Investment Grade, (b) in the event that any of -17- 18 the Company's debt securities are rated by either, but not both, of the Rating Agencies on the Rating Date as Investment Grade, the rating of such securities by both of the Rating Agencies shall be below Investment Grade, or (c) in the event any of the Company's debt securities are rated below Investment Grade by both of the Rating Agencies on the Rating Date, the rating of such securities by either Rating Agency shall be decreased by one or more gradations (including gradations within Rating Categories as well as between Rating Categories). "Redeemable Dividend" means, for any dividend with regard to Disqualified Stock, the quotient of the dividend divided by the difference between one and the maximum statutory federal income tax rate (expressed as a decimal number between 1 and 0) then applicable to the issuer of such Disqualified Stock. "Registered Exchange Offer" has the meaning set forth in the Registration Rights Agreement. "Registration Rights Agreement" means the Registration Rights Agreement relating to the Notes, dated November 6, 1998, between the Company and the Initial Purchasers party thereto. "Replacement Assets" means (w) Cable Assets, (x) Equity Interests of any Person engaged, directly or indirectly, primarily in a Cable Business, which Person is or will become on the date of acquisition thereof a Restricted Subsidiary as a result of the Company's acquiring such Equity Interests, (y) Permitted Non-Controlled Assets or (z) any combination of the foregoing. "Restricted Investment" means an Investment other than a Permitted Investment. "Restricted Subsidiary" means any Subsidiary of the Company which is not a Non-Restricted Subsidiary. "Restricted Subsidiary Preferred Stock Dividend" means, for any dividend with regard to preferred stock of a Restricted Subsidiary, the quotient of the dividend divided by the difference between one and the maximum statutory federal income tax rate (expressed as a decimal number between 1 and 0) then applicable to the issuer of such preferred stock. "S&P" means Standard & Poor's Ratings Group and its successors. "SEC" means the Securities and Exchange Commission. "Securities Act" means the Securities Act of 1933, as amended. "Subordinated Debentures" means the debentures exchangeable by the Company for the Preferred Stock in accordance with the Certificate of Designations therefor. "Subsidiary" means any corporation, association or other business entity of which more than 50% of the total voting power of shares of Capital Stock entitled (without regard to the occurrence of any contingency) to vote in the election of directors, managers or trustees thereof is at the time owned or controlled, directly or indirectly, by any Person or one or more of the other Subsidiaries of that Person or a combination thereof. "TIA" means the Trust Indenture Act of 1939 (15 U.S. Code ss.ss. 77aaa-77bbbb) as in effect on the date of execution of this Indenture. -18- 19 "Trustee" means the party named as such above until a successor replaces it in accordance with the applicable provisions of this Indenture and thereafter means the successor. "Trust Officer" means the Chairman of the Board, the President or any other officer or assistant officer of the Trustee assigned by the Trustee to administer its corporate trust matters. "Weighted Average Life to Maturity" means, when applied to any Indebtedness at any date, the number of years obtained by dividing (a) the sum of the products obtained by multiplying (x) the amount of each then remaining installment, sinking fund, serial maturity or other required payments of principal, including payment at final maturity, in respect thereof, by (y) the number of years (calculated to the nearest one-twelfth) that will elapse between such date and the making of such payment, by (b) the then outstanding principal amount of such Indebtedness. "Wholly Owned Subsidiary" means, at any time, a Restricted Subsidiary all of the Capital Stock of which (except directors' qualifying shares) is at the time owned directly or indirectly by the Company. SECTION 1.02. Other Definitions. Defined Term in Section - ---- ---------- "Additional Amounts" 4.14 "Affiliate Transaction" 4.11 "Agent Member" 2.01 "Asset Sale Offer" 4.10 "Bankruptcy Law" 6.01 "Cedel" 2.01 "Change of Control Payment" 4.13 "Commencement Date" 3.09 "Custodian" 6.01 "Defeasance" 8.02 "Euroclear" 2.01 "Event of Default" 6.01 "Excess Proceeds" 4.10 "Global Note" 2.01 "incur" 4.08 "Legal Holiday" 10.08 "Offer Amount" 3.09 "Officer" 10.11 "Paying Agent" 2.03 "Payment Default" 6.01 "Purchase Date" 3.09 "Purchase Offer" 4.13 "QIBs" 2.01 "Refinancing Indebtedness" 4.08 "Regulation S" 2.01 -19- 20 "Regulation S Global Note" 2.01 "Registrar" 2.03 "Restricted Notes" 2.01 "Restricted Payments" 4.09 "Rule 144A" 2.01 "Rule 144A Global Note" 2.01 "Tender Period" 3.09 "U.S. Government Obligations" 8.02 Section 1.03. Incorporation By Reference Of Trust Indenture Act. Whenever this Indenture refers to a provision of the TIA, the provision is incorporated by reference in and made a part of this Indenture. The following TIA terms used in this Indenture have the following meanings: "indenture securities" means the Notes; "indenture security Holder" means a Holder of a Note; "indenture to be qualified" means this Indenture; "indenture trustee" or "institutional trustee" means the Trustee; and "obligor" on the Notes means the Company or any other obligor on the Notes. All other terms used in this Indenture that are defined by the TIA, defined by TIA reference to another statute or defined by SEC rule under the TIA have the meanings so assigned to them. Section 1.04. Rules Of Construction. Unless the context otherwise requires: (a) a term has the meaning assigned to it; (b) an accounting term not otherwise defined has the meaning assigned to it in accordance with GAAP consistently applied; (c) references to "GAAP" shall mean GAAP in effect as of the time when and for the period as to which such accounting principles are to be applied; (d) "or" is not exclusive; (e) words in the singular include the plural, and in the plural include the singular; (f) provisions apply to successive events and transactions; (g) references to sections of or rules under the Securities Act shall be deemed to -20- 21 include substitute, replacement or successor sections or rules adopted by the SEC from time to time; and (h) a reference to "$" or U.S. Dollars is to United States dollars and a reference to "(pounds)" or pounds sterling is to British pounds sterling. ARTICLE II. THE NOTES Section 2.01. Form And Dating. (a) General. The Initial Notes and the Trustee's certificate of authentication shall be substantially in the form of Exhibit A hereto, which is hereby incorporated by reference and expressly made a part of this Indenture. The Exchange Notes and the Trustee's certificate of authentication shall be substantially in the form of Exhibit B hereto, which is hereby incorporated by reference and expressly made a part of this Indenture. The Notes may have notations, legends or endorsements required by law, stock exchange rule, agreements to which the Company is subject, if any, or usage (provided that any such notation, legend or endorsement is in a form acceptable to the Company). The Company shall furnish any such legend not contained in Exhibit A or Exhibit B to the Trustee in writing. Each Note shall be dated the date of its authentication. The Notes shall be in denominations of $1,000 and integral multiples thereof. The terms and provisions of the Notes set forth in Exhibit A and Exhibit B are part of this Indenture and to the extent applicable, the Company and the Trustee, by their execution and delivery of this Indenture, expressly agree to such terms and provisions and to be bound thereby. However, to the extent any provision of any Note conflicts with the express provisions of this Indenture, the provisions of this Indenture shall govern and be controlling. (b) Global Notes. The Initial Notes are being offered and sold by the Company pursuant to the Purchase Agreement. Initial Notes offered and sold in reliance on Regulation S under the Securities Act ("Regulation S"), as provided in the Purchase Agreement, shall be issued initially in the form of one or more permanent Global Notes in definitive, fully registered form without interest coupons with the Global Notes Legend and Restricted Notes Legend set forth in Exhibit A hereto (the "Regulation S Global Note"), which shall be deposited on behalf of the purchasers of the Initial Notes represented thereby with the Trustee, at its New York office, as custodian, for the Depositary, and registered in the name of the Depositary or the nominee of the Depositary for the accounts of designated agents holding on behalf of the Euroclear System ("Euroclear") or Cedel Bank, societe anonyme ("Cedel"), duly executed by the Company and authenticated by the Trustee as hereinafter provided. The aggregate principal amount at maturity of the Regulation S Global Note may from time to time be increased or decreased by adjustments made on the records of the Trustee and the Depositary or its nominee as hereinafter provided. Initial Notes offered and sold to Qualified Institutional Buyers ("QIBs") in reliance on Rule 144A under the Securities Act ("Rule 144A"), as provided in the Purchase Agreement, shall be issued initially in the form of one or more permanent Global Notes in definitive, fully registered form -21- 22 without interest coupons with the Global Notes Legend and Restricted Notes Legend set forth in Exhibit A hereto ("Rule 144A Global Note"), which shall be deposited on behalf of the purchasers of the Initial Notes represented thereby with the Trustee, at its New York office, as custodian for the Depositary, and registered in the name of the Depositary or a nominee of the Depositary, duly executed by the Company and authenticated by the Trustee as hereinafter provided. The aggregate principal amount at maturity of the Rule 144A Global Note may from time to time be increased or decreased by adjustments made on the records of the Trustee and the Depositary or its nominee as hereinafter provided. Upon consummation of the Registered Exchange Offer, the Exchange Notes may be issued in the form of one or more permanent Global Notes in definitive, fully registered form without interest coupons with the Global Notes Legend but not the Restricted Notes Legend set forth in Exhibit A hereto, registered in the name of the Depositary or a nominee of the Depositary, duly executed by the Company and authenticated by the Trustee as hereinafter provided. The aggregate principal amount at maturity of such Global Notes may from time to time be increased or decreased by adjustments made on the records of the Trustee and the Depositary or its nominee as hereinafter provided. (c) Book-Entry Provisions. This Section 2.01(c) shall apply only to the Regulation S Global Note, the Rule 144A Global Note and the Exchange Notes issued in the form of one or more permanent Global Notes (collectively, the "Global Notes") deposited with or on behalf of the Depositary. The Company shall execute and the Trustee shall, in accordance with this Section 2.01(c), authenticate and deliver initially one or more Global Notes that (a) shall be registered in the name of the Depositary for such Global Note or Global Notes or the nominee of such Depositary and (b) shall be delivered by the Trustee to such Depositary or pursuant to such Depositary's instructions or held by the Trustee as custodian for the Depositary. Members of, or participants in, the Depositary ("Agent Members") shall have no rights under this Indenture with respect to any Global Note held on their behalf by the Depositary or by the Trustee as the custodian of the Depositary or under such Global Note, and the Depositary may be treated by the Company, the Trustee and any agent of the Company or the Trustee as the absolute owner of such Global Note for all purposes whatsoever. Notwithstanding the foregoing, nothing herein shall prevent the Company, the Trustee or any agent of the Company or the Trustee from giving effect to any written certification, proxy or other authorization furnished by the Depositary or impair, as between the Depositary and its Agent Members, the operation of customary practices of such Depositary governing the exercise of the rights of an owner of a beneficial interest in any Global Note. (d) Certificated Notes. In addition to the provisions of Section 2.10, owners of beneficial interests in Global Notes may, upon request to the Trustee, receive a certificated Initial Note, which certificated Initial Note shall bear the Restricted Notes Legend set forth in Exhibit A hereto ("Restricted Notes"). After a transfer of any Initial Notes during the period of the effectiveness of a Shelf Registration Statement with respect to the Initial Notes and pursuant thereto, all requirements for Restricted Notes Legends on such Initial Note will cease to apply, and a certificated Initial Note without a Restricted Notes Legend will be available to the Holder of such Initial Notes. Upon the consummation of -22- 23 a Registered Exchange Offer with respect to the Initial Notes pursuant to which Holders of Initial Notes are offered Exchange Notes in exchange for their Initial Notes, certificated Initial Notes with the Restricted Notes Legend set forth in Exhibit A hereto will be available to Holders of such Initial Notes that do not exchange their Initial Notes, and Exchange Notes in certificated form without the Restricted Notes Legend set forth in Exhibit A hereto will be available to Holders that exchange such Initial Notes in such Registered Exchange Offer. Section 2.02. Execution And Authentication. Two Officers shall sign the Notes for the Company by manual or facsimile signature. If an Officer whose signature is on a Note no longer holds that office at the time the Note is authenticated, the Note shall nevertheless be valid. A Note shall not be valid until authenticated by the manual signature of an authorized officer of the Trustee. The signature shall be conclusive evidence that the Note has been authenticated under this Indenture. The Trustee shall, upon a written order of the Company signed by two Officers, authenticate (1) Initial Notes for original issue up to an aggregate principal amount at maturity stated in paragraph 6 of the Initial Notes and (2) Exchange Notes for issue only in a Registered Exchange Offer, pursuant to the Registration Rights Agreement, in exchange for Initial Notes for a like principal amount at maturity. The aggregate principal amount at maturity of Notes outstanding at any time shall not exceed the amount set forth herein, except as provided in Section 2.07. The Trustee may appoint an authenticating agent acceptable to the Company to authenticate Notes. An authenticating agent may authenticate Notes whenever the Trustee may do so. Each reference in this Indenture to authentication by the Trustee includes authentication by such agent. An authenticating agent has the same rights as an Agent to deal with Holders, the Company or an Affiliate. Section 2.03. Registrar And Paying Agent. The Company shall maintain in the Borough of Manhattan, City of New York, State of New York and, if and as long as the Notes are listed on the Luxembourg Stock Exchange, in Luxembourg, (i) offices or agencies where the Notes may be presented for registration of transfer or for exchange ("Registrar") and (ii) offices or agencies where the Notes may be presented for payment ("Paying Agent"). The Company initially designates the Trustee at its corporate trust offices in the Borough of Manhattan, City of New York, State of New York to act as principal Registrar and Paying Agent and Chase Manhattan Bank Luxembourg S.A. to act as a Registrar and Paying Agent. The principal Registrar shall keep a register of the Notes and of their transfer and exchange. The Company may appoint one or more co-registrars and one or more additional paying agents in such other locations as it shall determine. The term "Registrar" includes any co-registrar and the term "Paying Agent" includes any additional paying agent. The Company may change any Paying Agent or Registrar without prior notice to any Holder. The Company shall notify the Trustee of the name and address of any Agent not a party to this Indenture. If the Company fails to appoint or maintain another entity as Registrar or Paying Agent, the Trustee shall act as such. The Company or any of its Affiliates may act as Paying Agent or Registrar. Section 2.04. Paying Agent To Hold Money In Trust. -23- 24 The Company shall require each Paying Agent other than the Trustee to agree in writing that the Paying Agent will hold in trust for the benefit of Holders or the Trustee all money held by the Paying Agent for the payment of principal or interest on the Notes, and will notify the Trustee of any default by the Company in making any such payment. While any such default continues, the Trustee may require a Paying Agent to pay all money held by it to the Trustee and to account for any money disbursed by it. The Company at any time may require a Paying Agent to pay all money held by it to the Trustee. Upon payment over to the Trustee, the Paying Agent (if other than the Company or an Affiliate of the Company) shall have no further liability for the money. If the Company or an Affiliate of the Company acts as Paying Agent, it shall segregate and hold in a separate trust fund for the benefit of the Holders all money held by it as Paying Agent. Section 2.05. Holder Lists. The Trustee shall preserve in as current a form as is reasonably practicable the most recent list available to it of the names and addresses of Holders. If the Trustee is not the Registrar, the Company shall furnish to the Trustee on or before each interest payment date and at such other times as the Trustee may request in writing a list in such form and as of such date as the Trustee may reasonably require of the names and addresses of Holders. Section 2.06. Transfer And Exchange. Where Notes are presented to the Registrar or a co-registrar with a request to register a transfer or to exchange them for an equal principal amount at maturity of Notes of other denominations, the Registrar shall register the transfer or make the exchange if its requirements for such transactions are met. To permit registrations of transfers and exchanges, the Company shall issue and the Trustee shall authenticate Notes at the Registrar's request. No service charge shall be made for any registration of transfer or exchange (except as otherwise expressly permitted herein), but the Company may require payment of a sum sufficient to cover any transfer tax or similar governmental charge payable in connection therewith (other than any such transfer tax or similar governmental charge payable upon exchanges pursuant to Sections 2.10, 3.06 or 9.05 hereof). The Company shall not be required (i) to issue, register the transfer of or exchange any Note for a period beginning at the opening of business 15 days before the day of any selection of Notes to be redeemed under Section 3.02 hereof and ending at the close of business on the day of selection, or (ii) to register the transfer, or exchange, of any Note so selected for redemption in whole or in part, except the unredeemed portion of any Note being redeemed in part. (a) Notwithstanding any provision to the contrary herein, so long as a Global Note remains outstanding and is held by or on behalf of the Depositary, transfers of a Global Note, in whole or in part, or of any beneficial interest therein, shall only be made in accordance with Section 2.01(b) and this Section 2.06(a); provided, however, that beneficial interests in a Global Note may be transferred to Persons who take delivery thereof in the form of a beneficial interest in the same Global Note in accordance with the transfer restrictions set forth in the Restricted Notes Legend and under the heading "Transfer Restrictions" in the Company's Offering Memorandum dated October 30, 1998. (i) Except for transfers or exchanges made in accordance with clauses (ii) through (iv) of this Section 2.06(a), transfers of a Global Note shall be limited to -24- 25 transfers of such Global Note in whole, but not in part, to nominees of the Depositary or to a successor of the Depositary or such successor's nominee. (ii) Rule 144A Global Note to Regulation S Global Note. If an owner of a beneficial interest in the Rule 144A Global Note deposited with the Depositary or the Trustee as custodian for the Depositary wishes at any time to transfer its interest in such Rule 144A Global Note to a Person who is required to take delivery thereof in the form of an interest in the Regulation S Global Note, such owner may, subject to the rules and procedures of the Depositary, exchange or cause the exchange of such interest for an equivalent beneficial interest in the Regulation S Global Notes. Upon receipt by the principal Registrar of (1) instructions given in accordance with the Depositary's procedures from an Agent Member directing the principal Registrar to credit or cause to be credited a beneficial interest in the Regulation S Global Note in an amount equal to the beneficial interest in the Rule 144A Global Note to be exchanged, (2) a written order given in accordance with the Depositary's procedures containing information regarding the participant account of the Depositary and the Euroclear or Cedel account to be credited with such increase and (3) a certificate in the form of Exhibit C attached hereto given by the Holder of such beneficial interest, then the principal Registrar shall instruct the Depositary to reduce or cause to be reduced the principal amount at maturity of the Rule 144A Global Note and to increase or cause to be increased the principal amount at maturity of the Regulation S Global Note by the aggregate principal amount at maturity of the beneficial interest in the Rule 144A Global Note equal to the beneficial interest in the Regulation S Global Note to be exchanged or transferred, to credit or cause to be credited to the account of the Person specified in such instructions a beneficial Interest in the Regulation S Global Note equal to the reduction in the principal amount at maturity of the Rule 144A Global Note and to debit or cause to be debited from the account of the Person making such exchange or transfer the beneficial interest in the Rule 144A Global Note that is being exchanged or transferred. (iii) Regulation S Global Note to Rule 144A Global Note. If an owner of a beneficial interest in the Regulation S Global Note deposited with the Depositary or with the Trustee as custodian for the Depositary wishes at any time to transfer its interest in such Regulation S Global Note to a Person who is required to take delivery thereof in the form of an interest in the Rule 144A Global Note, such Holder may, subject to the rules and procedures of Euroclear or Cedel, as the case may be, and the Depositary, exchange or cause the exchange of such interest for an equivalent beneficial interest in the Rule 144A Global Note. Upon receipt by the principal Registrar of (1) instructions from Euroclear or Cedel, if applicable, and the Depositary, directing the principal Registrar to credit or cause to be credited a beneficial interest in the Rule 144A Global Note equal to the beneficial interest in the Regulation S Global Note to be exchanged or transferred, such instructions to contain information regarding the participant account with the Depositary to be credited with such increase, (2) a written order given in accordance with the Depositary's procedures containing information regarding the participant account of the Depositary and (3) a certificate in the form of Exhibit D attached hereto given by the owner of such beneficial interest, then Euroclear or Cedel or the principal Registrar, as the case may be, will instruct the Depositary to reduce or cause to be reduced the Regulation S Global Note and to increase or cause to be increased the principal amount at maturity of the Rule 144A Global Note by the aggregate principal amount at maturity of -25- 26 the beneficial interest in the Regulation S Global Note to be exchanged or transferred, and the principal Registrar shall instruct the Depositary, concurrently with such reduction, to credit or cause to be credited to the account of the Person specified in such instructions a beneficial interest in the Rule 144A Global Note equal to the reduction in the principal amount at maturity of the Regulation S Global Note and to debit or cause to be debited from the account of the Person making such exchange or transfer the beneficial interest in the Regulation S Global Note that is being exchanged or transferred. (iv) Global Note to Restricted Note. If an owner of a beneficial interest in a Global Note deposited with the Depositary or with the Trustee as custodian for the Depositary wishes at any time to transfer its interest in such Global Note to a Person who is required to take delivery thereof in the form of a Restricted Note, such owner may, subject to the rules and procedures of Euroclear or Cedel, if applicable, and the Depositary, cause the exchange of such interest for one or more Restricted Notes of any authorized denomination or denominations and of the same aggregate principal amount at maturity. Upon receipt by the principal Registrar of (1) instructions from Euroclear or Cedel, if applicable, and the Depositary directing the principal Registrar to authenticate and deliver one or more Restricted Notes of the same aggregate principal amount at maturity as the beneficial interest in the Global Note to be exchanged, such instructions to contain the name or names of the designated transferee or transferees, the authorized denomination or denominations of the Restricted Notes to be so issued and appropriate delivery instructions, (2) a certificate in the form of Exhibit E attached hereto given by the owner of such beneficial interest to the effect set forth therein, (3) a certificate in the form of Exhibit F attached hereto given by the Person acquiring the Restricted Notes for which such interest is being exchanged, to the effect set forth therein, and (4) such other certifications, legal opinions or other information as the Company may reasonably require to confirm that such transfer is being made pursuant to an exemption from, or in a transaction not subject to, the registration requirements of the Securities Act, then Euroclear or Cedel, if applicable, or the principal Registrar, as the case may be, will instruct the Depositary to reduce or cause to be reduced such Global Note by the aggregate principal amount at maturity of the beneficial interest therein to be exchanged and to debit or cause to be debited from the account of the Person making such transfer the beneficial interest in the Global Note that is being transferred, and concurrently with such reduction and debit the Company shall execute, and the Trustee shall authenticate and deliver, one or more Restricted Notes of the same aggregate principal amount at maturity in accordance with the instructions referred to above. (v) Restricted Note to Restricted Note. If a Holder of a Restricted Note wishes at any time to transfer such Restricted Note to a Person who is required to take delivery thereof in the form of a Restricted Note, such Holder may, subject to the restrictions on transfer set forth herein and in such Restricted Note, cause the exchange of such Restricted Note for one or more Restricted Notes of any authorized denomination or denominations and of the same aggregate principal amount at maturity. Upon receipt by the principal Registrar of (1) such Restricted Note, duly endorsed as provided herein, (2) instructions from such Holder directing the principal Registrar to authenticate and deliver one or more Restricted Notes of the same aggregate principal amount at maturity as the Restricted Note to be exchanged, such instructions to contain the name or authorized denomination or denominations of the Restricted Notes to be so issued and -26- 27 appropriate delivery instructions, (3) a certificate from the Holder of the Restricted Note to be exchanged in the form of Exhibit E attached hereto, (4) a certificate in the form of Exhibit F attached hereto given by the Person acquiring the Restricted Notes for which such interest is being exchanged, to the effect set forth therein, and (5) such other certifications, legal opinions or other information as the Company may reasonably require to confirm that such transfer is being made pursuant to an exemption from, or in a transaction not subject to, the registration requirements of the Securities Act, then the Registrar shall cancel or cause to be canceled such Restricted Note and concurrently therewith, the Company shall execute, and the Trustee shall authenticate and deliver, one or more Restricted Notes of the same aggregate principal amount at maturity, in accordance with the instructions referred to above. (vi) Other Exchanges. In the event that a beneficial interest in a Global Note is exchanged for Notes in definitive registered form pursuant to Section 2.10, prior to the effectiveness of a Shelf Registration Statement with respect to such Notes, such Notes may be exchanged only in accordance with such procedures as are substantially consistent with the provisions of clauses (ii) through (v) above (including the certification requirements intended to ensure that such transfers comply with Rule 144A, Rule 144, Regulation S or any other available exemption from registration, as the case may be) and such other procedures as may from time to time be adopted by the Company. (vii) Distribution Compliance Period. Prior to the termination of the "distribution compliance period" (as defined in Regulation S) with respect to the issuance of the Notes, transfers of interests in the Regulation S Global Note to "U.S. Persons" (as defined in Regulation S) shall be limited to transfers to QIBs made pursuant to the provisions of Sections 2.06(a)(iii). The Company shall advise the Trustee as to the termination of the distribution compliance period and the Trustee may rely conclusively thereon. (viii) Regulation S Global Note to Certificated Note. Upon proper presentment to the Trustee of a certificate substantially in the form of Exhibit G hereto and subject to the rules and procedures of the Depositary or its direct or indirect participants, including Euroclear and Cedel, an interest in a Regulation S Global Note may be exchanged for a certificated Restricted Note. At any time following consummation of the Exchange Offer pursuant to the Registration Rights Agreement (provided that such consummation is after the expiration of the 40-day distribution compliance period provided for in Rule 903 of Regulation S), such exchange may be made without presentment of the certificate in substantially the form of Exhibit G by any Holder who certifies to the Trustee that such Holder would have been able to participate in such Exchange Offer and resell Exchange Notes without delivery of a prospectus under applicable rules and interpretations of the Commission, and such certificated Note shall be free from any restriction on transfer (other than such as are solely attributable to any holder's status). (b) Except in connection with a Registered Exchange Offer or a Shelf Registration Statement contemplated by and in accordance with the terms of the Registration Rights Agreement, if Initial Notes are issued upon the transfer, exchange or replacement of Initial Notes -27- 28 bearing the Restricted Securities Legend set forth in Exhibit A hereto, or if a request is made to remove such Restricted Notes Legend on Initial Notes, the Initial Notes so issued shall bear the Restricted Notes Legend, or the Restricted Notes Legend shall not be removed, as the case may be, unless there is delivered to the Company such satisfactory evidence, which may include an opinion of counsel licensed to practice law in the State of New York, as may be reasonably required by the Company, that neither the legend nor the restrictions on transfer set forth therein are required to ensure that transfers thereof comply with the provisions of Rule 144A, Rule 144, Regulation S or any other available exemption from registration under the Securities Act or, with respect to Restricted Notes, that such Notes are not "restricted" within the meaning of Rule 144 under the Securities Act. Upon provision of such satisfactory evidence, the Trustee, at the direction of the Company, shall authenticate and deliver Initial Notes that do not bear the legend. (c) Neither the Company nor the Trustee shall have any responsibility for any actions taken or not taken by the Depositary and the Company shall have no responsibility for any actions taken or not taken by the Trustee as agent or custodian of the Depositary. Section 2.07. Replacement Notes. If the Holder of a Note claims that the Note has been lost, destroyed or wrongfully taken or if such Note is mutilated and is surrendered to the Trustee, the Company shall issue and the Trustee shall authenticate a replacement Note if the Trustee's and the Company's requirements are met. If required by the Trustee or the Company, an indemnity bond must be sufficient in the judgment of both to protect the Company, the Trustee, any Agent or any authenticating agent from any loss which any of them may suffer if a Note is replaced. The Company may charge for its expenses in replacing a Note. In case any such mutilated, destroyed, lost or stolen Note has become or is about to become due and payable, or is about to be purchased by the Company pursuant to Article III hereof, the Company in its discretion may, instead of issuing a new Note, pay or purchase such Note, as the case may be. Every replacement Note is an additional obligation of the Company and shall be entitled to all of the benefits of this Indenture equally and proportionately with all other Notes duly issued hereunder. Section 2.08. Outstanding Notes. The Notes outstanding at any time are all the Notes authenticated by the Trustee except for those canceled by it, those delivered to it for cancellation, and those described in this Section as not outstanding. If a Note is replaced, paid or purchased pursuant to Section 2.07 hereof, it ceases to be outstanding unless the Trustee receives proof satisfactory to it that the replaced, paid or purchased Note is held by a bona fide purchaser. If the principal amount or Accreted Value, as applicable, of any Note is considered paid under Section 4.01 hereof, such Note ceases to be outstanding and interest on it ceases to accrue (or, if before October 1, 2003, the Accreted Value of such Note ceases to increase). Except as set forth in Section 2.09 hereof, a Note does not cease to be outstanding because the Company or an Affiliate of the Company holds the Note. -28- 29 Section 2.09. Treasury Notes. In determining whether the Holders of the required principal amount at maturity of Notes have concurred in any direction, waiver or consent, Notes owned by the Company or an Affiliate of the Company shall be considered as though they are not outstanding, except that for the purposes of determining whether the Trustee shall be protected in relying on any such direction, waiver or consent, only Notes that the Trustee knows are so owned shall be so disregarded. Section 2.10. Temporary Notes; Global Notes. (a) Until definitive Notes are ready for delivery, the Company may prepare and the Trustee shall authenticate temporary Notes. Temporary Notes shall be substantially in the form of definitive Notes but may have variations that the Company considers appropriate for temporary Notes. Without unreasonable delay, the Company shall prepare and the Trustee shall authenticate definitive Notes in exchange for temporary Notes. Holders of temporary Notes shall be entitled to all of the benefits of this Indenture. (b) A Global Note deposited with the Depositary or with the Trustee as custodian for the Depositary pursuant to Section 2.01 shall be transferred to the beneficial owners thereof in the form of certificated Notes only in accordance with Section 2.01(d) or if such transfer complies with Section 2.06 and (i) the Depositary notifies the Company that it is unwilling or unable to continue as Depositary for such Global Note or if at any time such Depositary ceases to be a "clearing agency" registered under the Exchange Act and a successor depositary is not appointed by the Company within 90 days of such notice, or (ii) an Event of Default has occurred and is continuing. (c) Any Global Note that is transferable to the beneficial owners thereof in the form of certificated Notes pursuant to Section 2.01(d) or to this Section 2.10 shall be surrendered by the Depositary to the Trustee to be so transferred, in whole or from time to time in part, without charge, and the Trustee shall authenticate and deliver, upon such transfer of each portion of such Global Note, an equal aggregate principal amount at maturity of Initial Notes of authorized denominations in the form of certificated Notes. Any portion of a Global Note transferred pursuant to this Section shall be executed, authenticated and delivered only in denominations of $1,000 and any integral multiple thereof and registered in such names as the Depositary shall direct. Any Initial Note in the form of certificated Notes delivered in exchange for an interest in the Global Notes shall, except as otherwise provided by Section 2.06(b) bear the Restricted Notes Legend set forth in Exhibit A hereto. (d) The registered Holder of a Global Note may grant proxies and otherwise authorize any Person, including Agent Members and Persons that may hold interests through Agent Members, to take any action which a Holder is entitled to take under this Indenture or the Notes. (e) In the event of the occurrence of either of the events specified in Section 2.10(b), the Company will promptly make available to the Trustee a reasonable supply of certificated Notes in definitive, fully registered form without interest coupons. Section 2.11. Cancellation. -29- 30 The Company at any time may deliver Notes to the Trustee for cancellation. The Registrar and Paying Agent shall forward to the Trustee any Notes surrendered to them for registration of transfer, exchange or payment. The Trustee shall promptly cancel all Notes surrendered for registration of transfer, exchange, payment, replacement or cancellation and shall dispose of canceled Notes as the Company directs. The Company may not issue new Notes to replace Notes that it has paid or that have been delivered to the Trustee for cancellation. Section 2.12. Defaulted Interest. If the Company fails to make a payment of interest on the Notes, it shall pay such defaulted interest plus any interest payable on the defaulted interest, in any lawful manner. It may pay such defaulted interest, plus any such interest payable on it, to the Persons who are Holders on a subsequent special record date. The Company shall fix any such record date and payment date, provided that no such record date shall be less than 10 days prior to the related payment date for such defaulted interest. At least 15 days before any such record date, the Company shall mail to Holders a notice that states the special record date, the related payment date and amount of such interest to be paid. ARTICLE III. Redemption Section 3.01. Notices To Trustee. If the Company elects to redeem Notes pursuant to the optional redemption provisions of the Notes and Section 3.07 hereof or pursuant to the Optional Tax Redemption provision of the Notes (Section 8 of the Initial Notes and Section 7 of the Exchange Notes), it shall notify the Trustee of the redemption date and the principal amount at maturity of Notes to be redeemed, and in connection with an Optional Tax Redemption as provided in the Notes, such notice shall be accompanied by an Officers' Certificate to the effect that the conditions to such redemption contained herein have been complied with. The Company shall give each notice provided for in this Section 3.01 at least 50 days before the redemption date (unless a shorter notice period shall be satisfactory to the Trustee). Section 3.02. Selection Of Notes To Be Redeemed. If less than all of the Notes are to be redeemed at any time, selection of Notes shall be made by the Trustee on a pro rata basis or by lot or by method that complies with the requirements of any exchange on which the Notes are listed and that the Trustee considers fair and appropriate, provided that no Notes of $1,000 or less shall be redeemed in part. The Trustee shall make the selection not more than 60 days and not less than 30 days before the redemption date from Notes outstanding not previously called for redemption. Notes and portions of Notes selected shall be in amounts of $1,000 or integral multiples of $1,000. Provisions of this Indenture that apply to Notes called for redemption also apply to portions of Notes called for redemption. The Trustee shall notify the Company promptly of the Notes or portions of Notes to be called for redemption. Section 3.03. Notice Of Redemption. At least 30 days but not more than 60 days before a redemption date, the Company shall mail, by first class mail, a notice of redemption to each Holder whose Notes are to be redeemed at its registered address. The notice shall identify the Notes to be redeemed and shall state: -30- 31 (a) the redemption date; (b) the redemption price; (c) if any Note is to be redeemed in part only, the portion of the principal amount at maturity thereof redeemed, and that, after the redemption date, upon surrender of such Note, a new Note in principal amount at maturity equal to the unredeemed portion thereof shall be issued in the name of the Holder thereof upon cancellation of the original Note; (d) the name and address of the Paying Agent; (e) that Notes called for redemption must be surrendered to the Paying Agent to collect the redemption price plus accrued interest, if any; (f) that interest on Notes called for redemption ceases to accrue on and after the redemption date (or, in the case of redemption prior to October 1, 2003, the Accreted Value will cease to increase after the redemption date); and (g) the paragraph of the Notes pursuant to which the Notes called for redemption are being redeemed. At the Company's request, the Trustee shall give notice of redemption in the Company's name and at its expense; provided that the Company shall have delivered to the Trustee, at least 45 days prior to the redemption date, an Officers' Certificate requesting that the Trustee give such notice and setting forth the information to be stated in such notice, as provided in the preceding paragraph. Section 3.04. Effect Of Notice Of Redemption. Once notice of redemption is mailed in accordance with Section 3.03 hereof, Notes called for redemption become due and payable on the redemption date at the price set forth in the Note. A notice of redemption may not be conditional. Section 3.05. Deposit Of Redemption Price. On or before the redemption date, the Company shall deposit with the Trustee or with the Paying Agent money sufficient to pay the redemption price of and accrued interest, if any, on all Notes to be redeemed on that date. The Trustee or the Paying Agent shall return to the Company any money not required for that purpose. Section 3.06. Notes Redeemed In Part. Upon surrender of a Note that is redeemed in part, the Company shall issue and the Trustee shall authenticate for the Holder at the expense of the Company a new Note equal in principal amount at maturity to the unredeemed portion of the Note surrendered. Section 3.07. Optional Redemption And Optional Tax Redemption. The Company may redeem all or any portion of the Notes, upon the terms and at the redemption prices set forth in each of the Notes. The Company may also redeem all of the Notes in accordance with -31- 32 the Optional Tax Redemption provision of the Notes (Section 8 of the Initial Notes and Section 7 of the Exchange Notes). Any redemption pursuant to this Section 3.07 shall be made pursuant to the provisions of Section 3.01 through 3.06 hereof. Section 3.08. Mandatory Redemption The Company shall not be required to make mandatory redemption payments with respect to the Notes. Section 3.09. Asset Sale Offer And Purchase Offer. (a) In the event that the Company shall commence an offer to all Holders of the Notes to purchase Notes pursuant to Section 4.10 hereof (the "Asset Sale Offer") or pursuant to Section 4.13 hereof (the "Purchase Offer"), the Company shall follow the procedures in this Section 3.09. (b) The Asset Sale Offer or the Purchase Offer, as the case may be, shall remain open for a period specified by the Company which shall be no less than 30 calendar days and no more than 40 calendar days following its commencement (the "Commencement Date") (as determined in accordance with Section 4.10 or 4.13 hereof, as the case may be), except to the extent that a longer period is required by applicable law (the "Tender Period"). Upon the expiration of the Tender Period (the "Purchase Date"), the Company shall purchase the Accreted Value (if prior to October 1, 2003) or principal amount (if on or after October 1, 2003) of Notes required to be purchased pursuant to Section 4.10 or 4.13 hereof (the "Offer Amount") or, if less than the Offer Amount has been tendered, all Notes tendered in response to the Asset Sale Offer or the Purchase Offer, as the case may be. (c) If the Purchase Date is (i) on or after October 1, 2003, (ii) on or after an interest payment record date and (iii) on or before the related interest payment date, any accrued interest shall be paid to the Person in whose name a Note is registered at the close of business on such record date, and no additional interest will be payable to Holders who tender Notes pursuant to the Asset Sale Offer or the Purchase Offer, as the case may be. (d) The Company shall provide the Trustee with notice of the Asset Sale Offer or the Purchase Offer, as the case may be, at least 10 days before the Commencement Date. (e) On or before the Commencement Date, the Company or the Trustee (at the expense of the Company) shall send, by first class mail, a notice to each of the Holders, which shall govern the terms of the Asset Sale Offer or the Purchase Offer and shall state: (i) that the Asset Sale Offer or the Purchase Offer is being made pursuant to this Section 3.09 and, as applicable, Section 4.10 or 4.13 hereof and the length of time the Asset Sale Offer or the Purchase Offer will remain open; (ii) the Offer Amount, the purchase price (as determined in accordance with Section 4.10 or 4.13 hereof) and the Purchase Date, and in the case of a Purchase Offer made pursuant to Section 4.13 hereof, that all Notes tendered will be accepted for payment; -32- 33 (iii) that any Note or portion thereof not tendered or accepted for payment will continue to accrue interest (or, if applicable, that the Accreted Value of any Note or portion thereof not tendered or accepted for payment will continue to increase as provided in such Notes); (iv) that, unless the Company defaults in the payment of the purchase price, any Note or portion thereof accepted for payment pursuant to the Asset Sale Offer or the Purchase Offer will cease to accrue interest after the Purchase Date (or, if applicable, the Accreted Value of any Note or portion thereof accepted for payment pursuant to the Asset Sale Offer or Purchase Offer will cease to increase after the Purchase Date as provided in such Notes); (v) that Holders electing to have a Note or portion thereof purchased pursuant to any Asset Sale Offer or Purchase Offer will be required to surrender the Note, with the form entitled "Option of Holder to Elect Purchase" on the reverse of the Note completed, to the Company, a depositary, if appointed by the Company, or a Paying Agent at the address specified in the notice prior to the close of business on the third Business Day preceding the Purchase Date; (vi) that Holders will be entitled to withdraw their election if the Company, depositary or Paying Agent, as the case may be, receives, not later than the close of business on the second Business Day preceding the Purchase Date, or such longer period as may be required by law, a letter or a telegram, telex or facsimile transmission (receipt of which is confirmed and promptly followed by a letter) setting forth the name of the Holder, the principal amount at maturity of the Note or portion thereof the Holder delivered for purchase and a statement that such Holder is withdrawing his election to have the Note or portion thereof purchased; (vii) that, in the event of an Asset Sale Offer, if the aggregate principal amount at maturity of Notes surrendered by Holders exceeds the Offer Amount, the Trustee will select the Notes to be purchased pro rata or by a method that complies with the requirements of any exchange on which the Notes are listed and that the Trustee considers fair and appropriate with such adjustments as may be deemed appropriate by the Company so that only Notes in denominations of $1,000, or integral multiples thereof, shall be purchased; and (viii) that Holders whose Notes were purchased only in part will be issued new Notes equal in principal amount at maturity to the unpurchased portion of the Notes surrendered. In addition, the notice shall, to the extent permitted by applicable law, be accompanied by a copy of the information regarding the Company and its Subsidiaries which is required to be contained in the most recent Quarterly Report on Form 10-Q or Annual Report on Form 10-K (including any financial statements or other information required to be included or incorporated by reference therein) and any Reports on Form 8-K filed since the date of such Quarterly Report or Annual Report (or would have been required to file if the Company remained a company incorporated in the United States), as the case may be, which the Company has filed (or would have been required to file if it remained a company incorporated in the United States) with the SEC on or prior to the date of the notice. The notice shall -33- 34 contain all instructions and materials necessary to enable such Holders to tender Notes pursuant to the Asset Sale Offer or the Purchase Offer, as the case may be. (f) At least one Business Day prior to the Purchase Date, the Company shall irrevocably deposit with the Trustee or a Paying Agent in immediately available funds an amount equal to the Offer Amount to be held for payment in accordance with the terms of this Section. On the Purchase Date, the Company shall, to the extent lawful, (i) accept for payment the Notes or portions thereof tendered pursuant to the Asset Sale Offer or the Purchase Offer, (ii) deliver or cause the depositary or Paying Agent to deliver to the Trustee Notes so accepted and (iii) deliver to the Trustee an Officers' Certificate stating such Notes or portions thereof have been accepted for payment by the Company in accordance with the terms of this Section 3.09. The depositary, the Paying Agent or the Company, as the case may be, shall promptly (but in any case not later than ten (10) calendar days after the Purchase Date) mail or deliver to each tendering Holder an amount equal to the purchase price of the Notes tendered by such Holder and accepted by the Company for purchase, and the Trustee shall promptly authenticate and mail or deliver to such Holders a new Note equal in principal amount at maturity at maturity to any unpurchased portion of the Note surrendered. Any Notes not so accepted shall be promptly mailed or delivered by or on behalf of the Company to the Holder thereof. The Company will publicly announce in a newspaper of general circulation the results of the Asset Sale Offer or the Purchase Offer on the Purchase Date. (g) For the purposes of calculating the allocation of available Excess Proceeds to the Notes and each issue of Other Qualified Notes on a pro rata basis according to accreted value or principal amount, as the case may be, the relevant principal amount or the accreted value, as the case may be, of any Other Qualified Notes denominated in a currency other than United States dollars will be notionally converted into United States dollars from the currency such Other Qualified Notes are denominated in (the "Base Currency"); (i) in the case of determining the maximum principal amount or accreted value of Notes and Other Qualified Notes that may be purchased out of the Excess Proceeds, at the noon buying rate in the City of New York as certified for customs purposes by the Federal Reserve Bank of New York for cable transfers in the Base Currency (the "Noon Buying Rate") on the Business Day which is 10 Business Days prior to the Commencement Date; and (ii) in the case of determining the allocation of the remaining Excess Proceeds if the aggregate principal amount or accreted value, as the case may be, of Notes and Other Qualified Notes surrendered by holders in the Asset Sale Offer exceeds the remaining amount of Excess Proceeds, at the Noon Buying Rate on the second Business Day preceding the Purchase Date. (h) The Asset Sale Offer or the Purchase Offer shall be made by the Company in compliance with all applicable provisions of the Exchange Act, and all applicable tender offer rules promulgated thereunder, and shall include all instructions and materials necessary to enable such Holders to tender their Notes. -34- 35 ARTICLE IV. Covenants Section 4.01. Payment Of Notes. The Company shall pay the principal of, premium, if any, and interest on, the Notes on the dates and in the manner provided in the Notes. Principal, premium, if any, and interest shall be considered paid on the date due if the Paying Agent (other than the Company or an Affiliate of the Company) holds on that date money designated for and sufficient to pay all principal and interest then due. To the extent lawful, the Company shall pay interest (including post-petition interest in any proceeding under any Bankruptcy Law) on (i) the overdue Accreted Value of the Notes, if prior to October 1, 2003, or the overdue principal and premium, if any, if on or after October 1, 2003, at the rate borne by the Notes, compounded semiannually; and (ii) overdue installments of interest (without regard to any applicable grace period) at the same rate, compounded semiannually. Section 4.02. Reports. Whether or not required by the rules and regulations of the SEC, so long as any Notes are outstanding, the Company shall file with the SEC and furnish to the Trustee and to the Holders of Notes, all quarterly and annual financial information required to be contained in a filing with the SEC on Forms 10-Q and 10-K (or the equivalent thereof under the Exchange Act for foreign private issuers in the event the Company becomes a corporation organized under the laws of the United Kingdom, the Netherlands, the Netherlands Antilles, Bermuda or the Cayman Islands), including a "Management's Discussion and Analysis of Results of Operations and Financial Condition" and, with respect to the annual information only, a report thereon by the Company's certified independent accountants, in each case, in the form required by the rules and regulations of the SEC as in effect on the Issuance Date. This Section 4.02 will apply notwithstanding that the Company becomes a corporation organized under the laws of the United Kingdom, the Netherlands, the Netherlands Antilles, Bermuda or the Cayman Islands. Section 4.03. Compliance Certificate. The Company shall deliver to the Trustee, within 90 days after the end of each fiscal year of the Company, an Officers' Certificate stating that a review of the activities of the Company and its subsidiaries during the preceding fiscal year has been made under the supervision of the signing Officers with a view to determining whether the Company has kept, observed, performed and fulfilled its obligations under, and complied with the covenants and conditions contained in, this Indenture, and further stating, as to each such Officer signing such certificate, that to the best of his knowledge the Company has kept, observed, performed and fulfilled each and every covenant, and complied with the covenants and conditions contained in this Indenture and is not in default in the performance or observance of any of the terms, provisions and conditions hereof (or, if a Default or Event of Default shall have occurred, describing all such Defaults or Events of Default of which he may have knowledge) and that to the best of his knowledge no event has occurred and remains in existence by reason of which payments on account of the principal or of interest, if any, on the Notes are prohibited. One of the Officers signing such Officers' Certificate shall be either the Company's principal executive officer, principal financial officer or principal accounting officer. The Company will so long as any of the Notes are outstanding, deliver to the Trustee, forthwith -35- 36 upon becoming aware of any Default or Event of Default an Officers' Certificate specifying such Default or Event of Default. Immediately upon the occurrence of any event giving rise to the accrual of Special Interest (as such term is defined in Exhibit A hereto) or the cessation of such accrual, the Company shall give the Trustee notice thereof and of the event giving rise to such accrual or cessation (such notice to be contained in an Officers' Certificate) and prior to receipt of such Officers' Certificate the Trustee shall be entitled to assume that no such accrual has commenced or ceased, as the case may be. Section 4.04. Stay, Extension And Usury Laws. The Company covenants (to the extent that it may lawfully do so) that it will not at any time insist upon, plead, or in any manner whatsoever claim or take the benefit or advantage of, any stay, extension or usury law wherever enacted, now or at any time hereafter in force, which may affect the covenants or the performance of this Indenture; and the Company (to the extent it may lawfully do so) hereby expressly waives all benefit or advantage of any such law, and covenants that it will not, by resort to any such law, hinder, delay or impede the execution of any power herein granted to the Trustee, but will suffer and permit the execution of every such power as though no such law had been enacted. Section 4.05. Corporate Existence. Subject to Article V hereof, the Company will do or cause to be done all things necessary to preserve and keep in full force and effect its corporate existence and the corporate, partnership or other existence of each subsidiary of the Company in accordance with the respective organizational documents of each subsidiary and the rights (charter and statutory), licenses and franchises of the Company and its subsidiaries; provided, however, that the Company shall not be required to preserve any such right, license or franchise, or the corporate, partnership or other existence of any subsidiary, if the Board of Directors shall determine that the preservation thereof is no longer desirable in the conduct of the business of the Company and its subsidiaries taken as a whole and that the loss thereof is not adverse in any material respect to the Holders. The Company shall notify the Trustee in writing of any subsidiary which qualifies as a Material Subsidiary and is not specified in clause (i) of the definition thereof. Section 4.06. Taxes. The Company shall, and shall cause each of its subsidiaries to, pay prior to delinquency all taxes, assessments and governmental levies, except as contested in good faith and by appropriate proceedings. Section 4.07. Limitations On Liens. Neither the Company nor any of its Restricted Subsidiaries may, directly or indirectly create, incur, assume or suffer to exist any Lien on any asset now owned or hereafter acquired, or any income or profits therefrom or assign or convey any right to receive income therefrom, except: (a) Permitted Liens; (b) Liens securing Indebtedness and related obligations to the extent such Indebtedness and related obligations are permitted under Sections 4.08(b)(i), (iii), (iv), (v), (viii), (ix) and (xi) hereof; -36- 37 (c) Liens on the assets acquired or leased with the proceeds of Indebtedness permitted to be incurred under Section 4.08 hereof; and (d) Liens securing Refinancing Indebtedness permitted to be incurred under Section 4.08 hereof; provided that the Refinancing Indebtedness so issued and secured by such Lien shall not be secured by any property or assets of the Company or any of its Restricted Subsidiaries other than the property or assets subject to the Liens securing such Indebtedness being refinanced. Section 4.08. Incurrence Of Indebtedness And Issuance Of Preferred Stock. (a) The Company shall not, and shall not permit any of its Restricted Subsidiaries to, directly or indirectly, create, incur, issue, assume, guaranty or otherwise become directly or indirectly liable with respect to (collectively, "incur") any Indebtedness (including Acquired Debt) and the Company shall not issue any Disqualified Stock and shall not permit any of its Restricted Subsidiaries to issue any shares of preferred stock that is Disqualified Stock; provided, however, that the Company may incur Indebtedness or issue shares of Disqualified Stock and any of its Restricted Subsidiaries may issue shares of preferred stock that is Disqualified Stock if after giving effect to such issuance or incurrence on a pro forma basis, the sum of (x) Indebtedness of the Company and its Restricted Subsidiaries, on a consolidated basis, (y) the liquidation value of outstanding preferred stock of Restricted Subsidiaries and (z) the aggregate amount payable by the Company and its Restricted Subsidiaries, on a consolidated basis, upon redemption of Disqualified Stock to the extent such amount is not included in the preceding clause (y) shall be less than the product of Annualized Pro Forma EBITDA for the latest fiscal quarter for which internal financial statements are available immediately preceding the date on which such additional Indebtedness is incurred or such Disqualified Stock or preferred stock is issued multiplied by 7.0, determined on a pro forma basis (including a pro forma application of the net proceeds therefrom), as if the additional Indebtedness had been incurred, or the Disqualified Stock or preferred stock had been issued, as the case may be, at the beginning of such quarter. (b) The foregoing limitations in Section 4.08(a) shall not apply to: (i) the incurrence by the Company or any Restricted Subsidiary of Indebtedness pursuant to the Credit Facility; (ii) the issuance by any Restricted Subsidiary of preferred stock (other than Disqualified Stock) to the Company, any Restricted Subsidiary of the Company or the holders of Equity Interests in any Restricted Subsidiary on a pro rata basis to such holders; (iii) the incurrence of Indebtedness or the issuance of preferred stock by the Company or any of its Restricted Subsidiaries the proceeds of which are (or the credit support provided by any such Indebtedness is), in each case, used to finance the construction, capital expenditure and working capital needs of a Cable Business (including, without limitation, payments made pursuant to any License), the acquisition of Cable Assets or the Capital Stock of a Qualified Subsidiary; (iv) the incurrence by the Company or any of its Restricted Subsidiaries of -37- 38 additional Indebtedness in an aggregate principal amount not to exceed $50 million; (v) the incurrence by the Company or any Restricted Subsidiary of any Permitted Acquired Debt; (vi) the incurrence by the Company or any Subsidiary of Indebtedness issued in exchange for, or the proceeds of which are used to extend, refinance, renew, replace, or refund the Notes, Existing Indebtedness or Indebtedness referred to in clauses (i), (ii), (iii), (iv) or (v) above or Indebtedness incurred pursuant to Section 4.08(a) hereof (the "Refinancing Indebtedness"); provided, however, that (1) the principal amount of, and any premium payable in respect of, such Refinancing Indebtedness shall not exceed the principal amount of Indebtedness so extended, refinanced, renewed, replaced or refunded (plus the amount of reasonable expenses incurred in connection therewith); (2) the Refinancing Indebtedness shall have (A) a Weighted Average Life to Maturity equal to or greater than the Weighted Average Life to Maturity of, and (B) a stated maturity no earlier than the stated maturity of, the Indebtedness being extended, refinanced, renewed, replaced or refunded; and (3) the Refinancing Indebtedness shall be subordinated in right of payment to the Notes as and to the extent of the Indebtedness being extended, refinanced, renewed, replaced or refunded; (vii) the issuance of the Preferred Stock in lieu of payment of cash interest on the Subordinated Debentures or the incurrence by the Company of Indebtedness represented by the Subordinated Debentures upon the exchange of the Preferred Stock in accordance with the Certificate of Designations therefor; (viii) Indebtedness under Exchange Rate Contracts, provided that such Exchange Rate Contracts are related to payment obligations under Existing Indebtedness or Indebtedness incurred under Section 4.08(a) or (b) hereof that are being hedged thereby, and not for speculation and that the aggregate notional amount under each such Exchange Rate Contract does not exceed the aggregate payment obligations under such Indebtedness; (ix) Indebtedness under Interest Rate Agreements, provided that the obligations under such agreements are related to payment obligations on Existing Indebtedness or Indebtedness otherwise incurred pursuant to Section 4.08(a) or (b) hereof, and not for speculation; (x) the incurrence of Indebtedness between the Company and any Restricted Subsidiary, between or among Restricted Subsidiaries and between any Restricted Subsidiary and other holders of Equity Interests of such Restricted Subsidiary (or other Persons providing funding on their behalf) on a pro rata basis and on substantially identical principal financial terms; provided, however, that if any such Restricted Subsidiary that is the payee of any such Indebtedness ceases to be a Restricted Subsidiary or transfers such Indebtedness (other than to the Company or a Restricted Subsidiary of the Company), such events shall be deemed, in each case, to constitute the incurrence of such Indebtedness by the Company or by a Restricted Subsidiary, as the case may be, at the time of such event; and -38- 39 (xi) Indebtedness of the Company and/or any Restricted Subsidiary in respect of performance bonds of the Company or any Subsidiary or surety bonds provided by the Company or any Restricted Subsidiary received in the ordinary course of business in connection with the construction or operation of a Cable Business. (c) Any redesignation of a Non-Restricted Subsidiary as a Restricted Subsidiary shall be deemed for purposes of this Section 4.08 to be an incurrence of Indebtedness by the Company and its Restricted Subsidiaries of the Indebtedness of such Non-Restricted Subsidiary as of the time of such redesignation to the extent such Indebtedness does not already constitute Indebtedness of the Company or one of its Restricted Subsidiaries. Section 4.09. Restricted Payments. (a) The Company shall not, and shall not permit any of its Restricted Subsidiaries to, directly or indirectly: (i) declare or pay any dividend or make any distribution on account of the Company's or any of its Restricted Subsidiaries' Equity Interests (other than (x) dividends or distributions payable in Equity Interests (other than Disqualified Stock) of the Company or such Restricted Subsidiary or (y) dividends or distributions payable to the Company or any Wholly Owned Subsidiary of the Company, or (z) pro rata dividends or pro rata distributions payable by a Restricted Subsidiary); (ii) purchase, redeem or otherwise acquire or retire for value any Equity Interests of the Company (other than any such Equity Interests owned by the Company or any Wholly Owned Subsidiary of the Company); (iii) voluntarily purchase, redeem or otherwise acquire or retire for value any Indebtedness that is subordinated to the Notes; or (iv) make any Restricted Investment (all such payments and other actions set forth in clauses (i) through (iv) above being collectively referred to as "Restricted Payments"), unless, at the time of such Restricted Payment: (1) no Default or Event of Default shall have occurred and be continuing or would occur as a consequence thereof; and (2) such Restricted Payment, together with the aggregate of all other Restricted Payments made by the Company and its Restricted Subsidiaries after the Issuance Date (including Restricted Payments permitted by clauses (ii) through (ix) of Section 4.09(b)), is less than the sum of (x) the difference between Cumulative EBITDA and 1.5 times Cumulative Interest Expense plus (y) Capital Stock Sale Proceeds plus (z) cash received by the Company or a Restricted Subsidiary from a Non-Restricted Subsidiary (other than cash which is or is required to be repaid or returned to such Non-Restricted Subsidiary); provided, however, that to the extent that any Restricted Investment that was made after the date of this Indenture is sold for cash or otherwise liquidated or repaid for cash, the amount credited pursuant to this clause (z) shall be the lesser of (A) the cash received with respect to such sale, liquidation or repayment of such -39- 40 Restricted Investment (less the cost of such sale, liquidation or repayment, if any) and (B) the initial amount of such Restricted Investment, in each case as determined in good faith by the Company's Board of Directors. (b) The foregoing provisions in Section 4.09(a) shall not prohibit: (i) the payment of any dividend within 60 days after the date of declaration thereof, if at said date of declaration such payment would have complied with the provisions of this Indenture; (ii) (x) the redemption, repurchase, retirement or other acquisition of any Equity Interests of the Company or any Restricted Subsidiary or (y) an Investment in any Person, in each case, in exchange for, or out of the proceeds of, the substantially concurrent sale (other than to a Restricted Subsidiary of the Company) of other Equity Interests (other than any Disqualified Stock) of the Company, provided that the Company delivers to the Trustee: (1) with respect to any transaction involving in excess of $1 million, a resolution of the Board of Directors set forth in an Officers' Certificate certifying that such transaction is approved by a majority of the directors on the Board of Directors; and (2) with respect to any transaction involving in excess of $25 million, an opinion as to the fairness to the Company or such Subsidiary from a financial point of view issued by an investment banking firm of national standing with high yield experience, together with an Officers' Certificate to the effect that such opinion complies with this clause (2), provided that the amount of such proceeds from the sale of such Equity Interests shall be excluded in each case from Capital Stock Sale Proceeds for purposes of clause (a)(iv)(2)(y), above; (iii) Investments by the Company or any Restricted Subsidiary in a Non-Controlled Subsidiary which (A) has no Indebtedness on a consolidated basis other than Indebtedness incurred to finance the purchase of equipment used in a Cable Business, (B) has no restrictions (other than restrictions imposed or permitted by this Indenture or the indentures governing the Other Qualified Notes or any other instrument governing unsecured indebtedness of the Company which is pari passu with the Notes) on its ability to pay dividends or make any other distributions to the Company or any of its Restricted Subsidiaries, (C) is or will be a Cable Business and (D) uses the proceeds of such Investment for constructing a Cable Business or the working capital needs of a Cable Business; (iv) the redemption, purchase, defeasance, acquisition or retirement of Indebtedness that is subordinated to the Notes (including premium, if any, and accrued and unpaid interest) made by exchange for, or out of the proceeds of the substantially concurrent sale (other than to a Restricted Subsidiary of the Company) of (A) Equity Interests of the Company, provided that the amount of such proceeds from the sale of such Equity Interests shall be excluded in each case from Capital Stock Sale Proceeds for purposes of clause (a)(iv)(2)(y) above or (B) Refinancing Indebtedness permitted to be incurred under Section 4.08 hereof; -40- 41 (v) Investments by the Company or any Restricted Subsidiary in a Non-Controlled Subsidiary which is or will be a Cable Business in an amount not to exceed $80 million in the aggregate plus the sum of (x) cash received by the Company or a Restricted Subsidiary from a Non-Restricted Subsidiary (other than cash which s or is required to be repaid or returned to such Non-Restricted Subsidiary) and (y) Capital Stock Sale Proceeds (excluding the aggregate net sale proceeds to be received upon conversion of the Convertible Subordinated Notes), provided that the amount of such proceeds from the sale of such Equity Interests shall be excluded in each case from the Capital Stock Sale Proceeds for purposes of clause (a)(iv)(2)(y) above; (vi) Investments by the Company or any Restricted Subsidiary in Permitted Non-Controlled Assets; (vii) the extension by the Company or any Restricted Subsidiary of trade credit to a Non-Restricted Subsidiary extended on usual and customary terms in the ordinary course of business, provided that the aggregate amount of such trade credit shall not exceed $25 million at any one time; (viii) the payment of cash dividends on the Preferred Stock accruing on or after February 15, 2004 or any mandatory redemption or repurchase of the Preferred Stock, in each case, in accordance with the Certificate of Designations therefor; and (ix) the exchange of all of the outstanding shares of Preferred Stock for Subordinated Debentures in accordance with the Certificate of Designations for the Preferred Stock. (c) Any Investment in a Subsidiary (other than the issuance, transfer or other conveyance of Equity Interests of the Company (or any Capital Stock Sale Proceeds therefrom)) that is designated by the Board of Directors as a Non-Restricted Subsidiary shall become a Restricted Payment made on the date of such designation in the amount of the greater of (x) the book value of such Subsidiary on the date such Subsidiary becomes a Non-Restricted Subsidiary and (y) the fair market value of such Subsidiary on such date as determined (A) in good faith by the Board of Directors of such Subsidiary if such fair market value is determined to be less than $25 million and (B) by an investment banking firm of national standing with high yield underwriting expertise if such fair market value is determined to be in excess of $25 million. (d) Not later than the fifth Business Day after making any Restricted Payment (other than those referred to in sub-clause (vii) of Section 4.09(b)), the Company shall deliver to the Trustee an Officers' Certificate stating that such Restricted Payment is permitted and setting forth the basis upon which the calculations required by this Section 4.09 were computed, which calculations may be based upon the Company's latest available financial statements. Section 4.10. Asset Sales. (a) The Company will not, and will not permit any of its Restricted Subsidiaries to cause, make or suffer to exist any Asset Sale, unless: (i) no Default exists or is continuing immediately prior to and after giving -41- 42 effect to such Asset Sale; (ii) the Company (or the Restricted Subsidiary, as the case may be) receives consideration at the time of such Asset Sale at least equal to the fair market value (evidenced for purposes of this Section 4.10 by a resolution of the Board of Directors set forth in an Officers' Certificate delivered to the Trustee) of the assets sold or otherwise disposed of; and (iii) at least 80% of the consideration therefor received by the Company or such Restricted Subsidiary is in the form of (w) Cash Equivalents, (x) Replacement Assets, (y) publicly traded Equity Interests of a Person who is, directly or indirectly, engaged primarily in one or more Cable Businesses; provided, however, that the Company or such Restricted Subsidiary shall Monetize such Equity Interests by sale to one or more Persons (other than to the Company or a Subsidiary thereof) at a price not less than the fair market value thereof within 180 days of the consummation of such Asset Sale, or (z) any combination of the foregoing clauses (w) through (y); provided, however, that the amount of (x) any liabilities (as shown on the Company's or such Restricted Subsidiary's most recent balance sheet or in the notes thereto) of the Company or any Restricted Subsidiary (other than liabilities that are by their terms subordinated to the Notes) that are assumed by the transferee of any such assets and (y) any notes or other obligations received by the Company or any such Restricted Subsidiary from such transferee that are within five Business Days converted by the Company or such Restricted Subsidiary into cash, shall be deemed to be Cash Equivalents (to the extent of the Cash Equivalents received in such conversion) for purposes of this clause (iii). (b) Within 360 days after any Asset Sale, the Company (or the Restricted Subsidiary, as the case may be) shall cause the Net Proceeds from such Asset Sale: (i) to be used to permanently reduce Indebtedness of a Restricted Subsidiary; or (ii) to be invested or reinvested in Replacement Assets. Pending final application of any such Net Proceeds, the Company may temporarily reduce revolving credit borrowings or otherwise invest such Net Proceeds in any manner that is not prohibited by this Indenture or the indentures for the Other Qualified Notes. Any Net Proceeds from any Asset Sale that are not used or reinvested as provided in the preceding sentence constitute "Excess Proceeds." When the aggregate amount of Excess Proceeds exceeds $15 million, the Company shall make an offer (an "Asset Sale Offer") to all holders of Notes and Other Qualified Notes to purchase the maximum principal amount of Notes and Other Qualified Notes (determined on a pro rata basis according to the accreted value or principal amount, as the case may be, of the Notes and the Other Qualified Notes and in accordance with Section 3.09(g)(i)) that may be purchased out of the Excess Proceeds (x) with respect to the Other Qualified Notes, based on the terms set forth in the indenture related to each issue of the Other Qualified Notes and (y) with respect to the Notes, at an offer price in cash in an amount equal to 100% of the outstanding principal amount thereof plus accrued and unpaid interest, if any, to the date fixed for the closing of such offer (or, in the case of repurchases of Notes prior to October 1, 2003, at a purchase price equal to 100% of the Accreted Value -42- 43 thereof as of the date fixed for the closing of such offer), in accordance with the procedures set forth in Section 3.09 hereof. To the extent that the aggregate principal amount or accreted value, as the case may be, of Notes and Other Qualified Notes tendered pursuant to an Asset Sale Offer is less than the Excess Proceeds, the Company may use such deficiency for general corporate purposes. If the aggregate principal amount or accreted value, as the case may be, of Notes and Other Qualified Notes surrendered by holders thereof exceeds the amount of Excess Proceeds, then such remaining Excess Proceeds shall be allocated pro rata according to accreted value or principal amount, as the case may be, to the Notes and each issue of the Other Qualified Notes and in accordance with Section 3.09(g)(ii), and the Trustee shall select the Notes to be purchased from the amount allocated to the Notes on the basis set forth in Section 3.09(e) hereof. Upon completion of such offers to purchase each of the Notes and the Other Qualified Notes, the amount of Excess Proceeds will be reset at zero. (c) Notwithstanding the provisions of Sections 4.10(a) and (b): the Company and its Subsidiaries may: (i) sell, lease, transfer, convey or otherwise dispose of assets or property acquired after October 14, 1993, by the Company or any Subsidiary in a sale-and-leaseback transaction so long as the proceeds of such sale are applied within five Business Days to permanently reduce Indebtedness of a Restricted Subsidiary or if there is no such Indebtedness or such proceeds exceed the amount of such Indebtedness then such proceeds or excess proceeds are reinvested in a Replacement Assets within 360 days after such sale, lease, transfer, conveyance or disposition; (ii) (x) swap or exchange assets or property with a Cable Controlled Subsidiary or (y) issue, sell, lease, transfer, convey or otherwise dispose of equity securities of any of the Company's Subsidiaries to a Cable Controlled Subsidiary, in each of cases (x) and (y) so long as (A) the ratio of Indebtedness to Annualized Pro Forma EBITDA of the Company after such transaction is equal to or less than the ratio of Indebtedness to Annualized Pro Forma EBITDA of the Company immediately preceding such transaction; provided, however, that if the ratio of Indebtedness to Annualized Pro Forma EBITDA of the Company immediately preceding such transaction is 6:1 or less, then the ratio of Indebtedness to Annualized Pro Forma EBITDA of the Company may be 0.5 greater than such ratio immediately preceding such transaction and (B) either (I) the assets so contributed consist solely of a license to operate a Cable Business and the Net Households covered by all of the licenses to operate cable and telephone systems held by the Company and its Restricted Subsidiaries immediately after and giving effect to such transaction equals or exceeds the number of Net Households covered by all of the licenses to operate cable and telephone systems held by the Company and its Restricted Subsidiaries immediately prior to such transaction or (II) the assets so contributed consist solely of Cable Assets and the value of the Capital Stock received, immediately after and giving effect to such transaction, as determined by an investment banking firm of recognized standing with knowledge of the Cable Business, equals or exceeds the value of Cable Assets exchanged for such Capital Stock; or (iii) issue, sell, lease, transfer, convey or otherwise dispose of Equity Interests (other than Disqualified Stock) of the Company (or any Capital Stock Sale Proceeds therefrom) to any Person (including Non-Restricted Subsidiaries). -43- 44 Section 4.11. Transactions With Affiliates. The Company shall not, and shall not permit any of its Restricted Subsidiaries to, sell, lease, transfer or otherwise dispose of any of its properties or assets to, or purchase any property or assets from, or enter into or amend any contract, agreement, understanding, loan, advance or guarantee with, or for the benefit of, any Affiliate (each of the foregoing, an "Affiliate Transaction"), unless: (a) such Affiliate Transaction is on terms that are no less favorable to the Company or the relevant Subsidiary than those that could have been obtained in a comparable transaction by the Company or such Subsidiary with an unrelated Person and (b) the Company delivers to the Trustee: (i) with respect to any Affiliate Transaction involving aggregate payments in excess of $1 million or any series of Affiliate Transactions with an Affiliate involving aggregate payments in excess of $1 million, a resolution of the Board of Directors set forth in an Officers' Certificate certifying that such Affiliate Transaction complies with Section 4.11 (a) and such Affiliate Transaction is approved by a majority of the disinterested directors on the Board of Directors; and (ii) with respect to any Affiliate Transaction involving aggregate payments in excess of $25 million or any series of Affiliate Transactions with an Affiliate involving aggregate payments in excess of $25 million, an opinion as to the fairness to the Company or such Subsidiary from a financial point of view issued by an investment banking firm of national standing with high yield experience together with an Officers' Certificate to the effect that such opinion complies with this clause (ii); provided, however, that notwithstanding the foregoing provisions, the following shall not be deemed to be Affiliate Transactions: (1) any employment agreement entered into by the Company or any of its Subsidiaries in the ordinary course of business and consistent with the past practice of the Company or its predecessor or such Subsidiary; (2) transactions between or among the Company and/or its Restricted Subsidiaries; (3) transactions permitted by the provisions of Section 4.09 hereof; (4) Liens permitted under Section 4.07 hereof which are granted by the Company or any of its Subsidiaries to an unrelated Person for the benefit of the Company or any other Subsidiary of the Company; (5) any transaction pursuant to an agreement in effect on the Issuance Date; (6) the incurrence of Indebtedness by a Restricted Subsidiary where such Indebtedness is owed to the holders of the Equity Interests of such Restricted Subsidiary on a pro rata basis and on substantially identical principal financial terms; -44- 45 (7) management, operating, service or interconnect agreements entered into in the ordinary course of business with any Cable Business in which the Company or any Restricted Subsidiary has an Investment and which is not a Cable Controlled Subsidiary (and of which no Affiliate of the Company is an Affiliate other than as a result of such Investment); and (8) any tax sharing agreement. Section 4.12. Dividends And Other Payment Restrictions Affecting Restricted Subsidiaries. The Company shall not, and shall not permit any of its Restricted Subsidiaries to, directly or indirectly, create or otherwise cause or suffer to exist or become effective any encumbrance or restriction on the ability of any Restricted Subsidiary to: (a) (i) pay dividends or make any other distributions to the Company or any of its Subsidiaries (A) on its Capital Stock or (B) with respect to any other interest or participation in, or measured by, its profits, or (ii) pay any indebtedness owed to the Company or any of its Subsidiaries, or (b) make loans or advances to the Company or any of its Subsidiaries, or (c) transfer any of its properties or assets to the Company or any of its Subsidiaries, except for such encumbrances or restrictions existing under or by reason of: (i) Existing Indebtedness as in effect on the Issuance Date; (ii) this Indenture and the Notes; (iii) any agreement covering or relating to Indebtedness permitted to be incurred under Section 4.08(b)(i), (ii), (iii), (iv), (v), (viii) or (ix) hereof (but only, in the case of Section 4.08(b)(viii) or (ix), to the extent contemplated by the then-existing Credit Facility), provided that the provisions of such agreement permit any action referred to in clause (a) above in aggregate amounts sufficient to enable the payment of interest and principal and mandatory repurchases pursuant to the terms of this Indenture and the Notes, but provided further that: (x) any such agreement may nevertheless encumber, prohibit or restrict any action referred to in clause (a) above if an event of default under such agreement has occurred and is continuing or would occur as a result of any such action; and (y) any such agreement may nevertheless contain (I) restrictions limiting the payment of dividends or the making of any other distributions to all or a portion of excess cash-flow (or any similar formulation thereof) and (II) subordination provisions governing Indebtedness owed to the Company or any Restricted Subsidiary; (iv) applicable law; (v) any instrument governing Indebtedness or Capital Stock of a Person acquired by the Company or any of its Subsidiaries as in effect at the time of such acquisition (except to the extent such Indebtedness was incurred in connection with such acquisition), which encumbrance or restriction is not applicable to any Person, or the properties or assets of any Person, other than the Person, or the property or assets of the -45- 46 Person, so acquired; provided that the EBITDA of such Person is not taken into account in determining whether such acquisition was permitted by the terms of this Indenture; (vi) customary nonassignment provisions in leases entered into in the ordinary course of business and consistent with past practices; (vii) provisions of joint venture or stockholder agreements, so long as such provisions are determined by a resolution of the Board of Directors to be, at the time of such determination, customary for such agreements; (viii) with respect to clause (c) above, purchase money obligations for property acquired in the ordinary course of business or the provisions of any agreement with respect to any Asset Sale (or transaction which, but for its size, would be an Asset Sale), solely with respect to the assets being sold; or (ix) permitted Refinancing Indebtedness, provided that the restrictions contained in the agreements governing such Refinancing Indebtedness are determined by a resolution of the Board of Directors to be no more restrictive than those contained in the agreements governing the Indebtedness being refinanced. Section 4.13. Change Of Control. (a) Upon the occurrence of a Change of Control Triggering Event, each Holder of Notes shall have the right to require the Company to repurchase all or any part (equal to $1,000 or an integral multiple thereof) of such Holder's Notes pursuant to the offer described in Section 3.09 hereof (the "Purchase Offer") at a purchase price equal to 101% of the principal amount thereof plus accrued and unpaid interest thereon, if any, to the date of purchase (or, in the case of repurchases of Notes prior to October 1, 2003, at a purchase price equal to 101% of the Accreted Value thereof as of the date fixed for purchase) (the "Change of Control Payment"). (b) Within 40 days following any Change of Control Triggering Event, the Company shall mail to each Holder the notice provided by Section 3.09(e). Section 4.14. Payment Of Additional Amounts. At least 10 days prior to the first date on which payment of principal and any premium or interest on the Notes is to be made, and at least 10 days prior to any subsequent such date if there has been any change with respect to the matters set forth in the Officers' Certificate described in this Section 4.14, the Company shall furnish the Trustee and the Paying Agent, if other than the Trustee, with an Officers' Certificate instructing the Trustee and the Paying Agent whether the Company is obligated to pay Additional Amounts (as defined in Section 3 of the Initial Notes or Section 2 of the Exchange Notes) with respect to such payment of principal, or of any premium or interest on the Notes. If the Company will be obligated to pay Additional Amounts with respect to such payment, then such Officers' Certificate shall specify by country the amount, if any, required to be withheld on such payments to such Holders and the Company will pay to the Trustee or the Paying Agent such Additional Amounts. The Company shall indemnify the Trustee and the Paying Agent for, and hold them harmless against, any loss, liability or expense reasonably incurred without negligence or bad faith on their part arising out of or in connection with actions taken or omitted by any of them in reliance on any Officers' Certificate furnished to them -46- 47 pursuant to this Section 4.14. Whenever in this Indenture there is mentioned, in any context, the payment of principal (and premium, if any), Offer Amount, interest or any other amount payable under or with respect to any Note such mention shall be deemed to include mention of the payment of Additional Amounts provided for in this Section 4.14 and Section 3 of the Initial Notes (or Section 2 of the Exchange Notes) to the extent that, in such context, Additional Amounts are, were or would be payable in respect thereof pursuant to the provisions of this Section 4.14 and Section 3 of the Initial Notes (or Section 2 of the Exchange Notes) and express mention of the payment of Additional Amounts (if applicable) in any provisions hereof shall not be construed as excluding Additional Amounts in those provisions hereof where such express mention is not made (if applicable). ARTICLE V. Successors Section 5.01. Merger, Consolidation Or Sale Of Assets. The Company may not consolidate or merge with or into (whether or not the Company is the surviving corporation), or sell, assign, transfer, lease, convey or otherwise dispose of all or substantially all of its properties or assets in one or more related transactions to, another corporation, Person or entity unless: (a) the Company is the surviving corporation or the entity or the Person formed by or surviving any such consolidation or merger (if other than the Company) or to which such sale, assignment, transfer, lease, conveyance or other disposition shall have been made is a corporation organized or existing under the laws of the United Kingdom, the Netherlands, the Netherlands Antilles, Bermuda or the Cayman Islands or of the United States, any state thereof or the District of Columbia; (b) the entity or Person formed by or surviving any such consolidation or merger (if other than the Company) or the entity or Person to which such sale, assignment, transfer, lease, conveyance or other disposition will have been made assumes all the Obligations (including the due and punctual payment of Additional Amounts if the surviving corporation is a corporation organized or existing under the laws of the United Kingdom, the Netherlands, the Netherlands Antilles, Bermuda or the Cayman Islands) of the Company, pursuant to a supplemental indenture in a form reasonably satisfactory to the Trustee, under the Notes and this Indenture; (c) immediately after such transaction no Default or Event of Default exists; (d) the Company or any entity or Person formed by or surviving any such consolidation or merger, or to which such sale, assignment, transfer, lease, conveyance or other disposition will have been made will have a ratio of Indebtedness to Annualized Pro Forma EBITDA equal to or less than the ratio of Indebtedness to Annualized Pro Forma EBITDA of the Company immediately preceding the transaction; provided, however, that if the ratio of Indebtedness to Annualized Pro Forma EBITDA of the Company immediately preceding such transaction is 6:1 or less, then the ratio of Indebtedness to Annualized Pro Forma EBITDA of the Company may be 0.5 greater than such ratio immediately preceding such transaction; and -47- 48 (e) such transaction would not result in the loss of any material authorization or Material License of the Company or its Subsidiaries. Section 5.02. Successor Corporation Substituted. Upon any consolidation or merger, or any sale, assignment, transfer, lease, conveyance or other disposition of all or substantially all of the assets of the Company in accordance with Section 5.01 hereof, the successor corporation formed by such consolidation or into or with which the Company is merged or to which such sale, assignment, transfer, lease, conveyance or other disposition is made shall succeed to, and be substituted for and may exercise every right and power of, the Company under this Indenture with the same effect as if such successor Person has been named as the Company herein; provided, however, that the predecessor Company in the case of a sale, assignment, transfer, lease, conveyance or other disposition shall not be released from the obligation to pay the principal of and interest on the Notes. ARTICLE VI. Defaults and Remedies Section 6.01. Events Of Default. An "Event of Default" occurs if: (a) the Company defaults in the payment of interest (and Additional Amounts, if applicable) on any Note when the same becomes due and payable and the Default continues for a period of 30 days after the date due and payable; (b) the Company defaults in the payment of the principal of any Note when the same becomes due and payable at maturity, upon redemption or otherwise; (c) the Company fails to observe or perform any covenant or agreement contained in Section 4.08, 4.09, or 4.13 hereof; (d) the Company fails to observe or perform any other covenant or agreement contained in this Indenture or the Notes, required by any of them to be performed and the Default continues for a period of 60 days after notice from the Trustee to the Company or from the Holders of 25% in aggregate principal amount at maturity of the then outstanding Notes to the Company and the Trustee stating that such notice is a "Notice of Default"; (e) default under any mortgage, indenture or instrument under which there may be issued or by which there may be secured or evidenced any Indebtedness for money borrowed by the Company or any Restricted Subsidiary (or the payment of which is guaranteed by the Company or any Restricted Subsidiary), whether such Indebtedness or guarantee now exists or is created after the Issuance Date, which default: (i) is caused by a failure to pay when due principal of or interest on such Indebtedness within the grace period provided for in such Indebtedness (which failure continues beyond any applicable grace period) (a "Payment Default"); or (ii) results in the acceleration of such Indebtedness prior to its express -48- 49 maturity and, in each case, the principal amount of any such Indebtedness, together with the principal amount of any other such Indebtedness under which there is a Payment Default or the maturity of which has been so accelerated, aggregates $10 million or more; (f) a final judgment or final judgments (other than any judgment as to which a reputable insurance company has accepted full liability) for the payment of money are entered by a court or courts of competent jurisdiction against the Company or any Restricted Subsidiary of the Company which remains undischarged for a period (during which execution shall not be effectively stayed) of 60 days, provided that the aggregate of all such judgments exceeds $5 million; (g) the Company or any Material Subsidiary pursuant to or within the meaning of any Bankruptcy Law: (i) commences a voluntary case; (ii) consents to the entry of an order for relief against it in an involuntary case in which it is the debtor; (iii) consents to the appointment of a Custodian of it or for all or substantially all of its property; (iv) makes a general assignment for the benefit of its creditors; or (v) generally is unable to pay its debts as the same become due; (h) a court of competent jurisdiction enters an order or decree under any Bankruptcy Law that: (i) is for relief against the Company or any Material Subsidiary in an involuntary case; (ii) appoints a Custodian of the Company or any Material Subsidiary or for all or substantially all of its property; or (iii) orders the liquidation of the Company or any Material Subsidiary, and the order or decree remains unstayed and in effect for 60 days; and (i) the revocation of a Material License. The term "Bankruptcy Law" means Title 11, U.S. Code or any similar Federal, state or foreign law for the relief of debtors or the protection of creditors. The term "Custodian" means any receiver, trustee, assignee, liquidator or similar official under any Bankruptcy Law. Section 6.02. Acceleration. If an Event of Default (other than an Event of Default specified in clauses (g) and (h) of Section -49- 50 6.01 hereof) occurs and is continuing, the Trustee by notice to the Company, or the Holders of at least 25% in principal amount at maturity of the then outstanding Notes by notice to the Company and the Trustee, may declare all the Notes to be due and payable. Upon such declaration, the principal (or the Accreted Value, if prior to October 1, 2003) of, premium, if any, and interest (if on or after October 1, 2003) on, the Notes shall be due and payable immediately. If an Event of Default specified in clause (g) or (h) of Section 6.01 hereof occurs, such an amount shall ipso facto become and be immediately due and payable without any declaration or other act on the part of the Trustee or any Holder. The Holders of a majority in principal amount at maturity of the then outstanding Notes by notice to the Trustee may rescind an acceleration and its consequences if the rescission would not conflict with any judgment or decree and if all existing Events of Default have been cured or waived except nonpayment of principal or interest that has become due solely because of the acceleration. In the case of any Event of Default pursuant to the provisions of Section 6.01 occurring by reason of any willful action (or inaction) taken (or not taken) by or on behalf of the Company with the intention of avoiding payment of the premium that the Company would have had to pay if the Company then had elected to redeem the Notes pursuant to Section 7 of the Initial Notes (Section 6 in the case of the Exchange Notes), an equivalent premium shall, upon demand of the Holders of at least 25% in principal amount at maturity of the then outstanding Notes delivered to the Company and the Trustee, also become and be immediately due and payable to the extent permitted by law, anything in this Indenture or in the Notes contained to the contrary notwithstanding. If an Event of Default occurs prior to October 1, 2003, by reason of any willful action (or inaction) taken (or not taken) by or on behalf of the Company with the intention of avoiding the prohibition on redemption of the Notes prior to October 1, 2003, pursuant to Section 7 of the Initial Notes (Section 6 in the case of the Exchange Notes), then the premium payable for purposes of this paragraph for each of the years beginning on October 1 of the years (November 6 in the case of 1998) set forth below shall, subject to the foregoing demand, be as set forth in the following table expressed as a percentage of the amount that would otherwise be due pursuant to this Section 6.02 hereof but for the provisions of this sentence.
Year Percentage ---- ---------- 1998 116.501% 1999 114.438% 2000 112.376% 2001 110.313% 2002 108.251%
Section 6.03. Other Remedies. If an Event of Default occurs and is continuing, the Trustee may pursue any available remedy to collect the payment of principal or interest on the Notes or to enforce the performance of any provision of the Notes or this Indenture. The Trustee may maintain a proceeding even if it does not possess any of the Notes or does not produce any of them in the proceeding. A delay or omission by the Trustee or any Holder in exercising any right or remedy accruing upon an Event of Default shall not impair the right or remedy or constitute a waiver of or acquiescence in the Event of Default. All remedies are cumulative to the extent permitted by law. Section 6.04. Waiver Of Past Defaults. -50- 51 The Holders of a majority in principal amount at maturity of the then outstanding Notes by notice to the Trustee may waive an existing Default or Event of Default and its consequences except a continuing Default or Event of Default in the payment of the principal or Accreted Value of, or interest on any Note. When a Default or Event of Default is waived, it is cured and ceases; but no such waiver shall extend to any subsequent or other Default or impair any right consequent thereon. Section 6.05. Control By Majority. The Holders of a majority in principal amount at maturity of the then outstanding Notes may direct the time, method and place of conducting any proceeding for any remedy available to the Trustee or exercising any trust or power conferred on it. However, the Trustee may refuse to follow any direction that conflicts with law or this Indenture, is unduly prejudicial to the rights of other Holders, or would involve the Trustee in personal liability. Section 6.06. Limitation On Suits. A Holder may pursue a remedy with respect to this Indenture or the Notes only if: (a) the Holder gives to the Trustee notice of a continuing Event of Default; (b) the Holders of at least 25% in principal amount at maturity of the then outstanding Notes make a request to the Trustee to pursue the remedy; (c) such Holder or Holders offer to the Trustee indemnity satisfactory to the Trustee against any loss, liability or expense; (d) the Trustee does not comply with the request within 60 days after receipt of the request and the offer of indemnity; and (e) during such 60-day period the Holders of a majority in principal amount at maturity of the then outstanding Notes do not give the Trustee a direction inconsistent with the request. A Holder may not use this Indenture to prejudice the rights of another Holder or to obtain a preference or priority over another Holder. Section 6.07. Rights Of Holders To Receive Payment. Notwithstanding any other provision of this Indenture, the right of any Holder of a Note to receive payment of principal and interest on the Note, on or after the respective due dates expressed in the Note, or to bring suit for the enforcement of any such payment on or after such respective dates, shall not be impaired or affected without the consent of the Holder made pursuant to this Section. Section 6.08. Collection Suit By Trustee. If an Event of Default specified in Section 6.01(a) or (b) occurs and is continuing, the Trustee may recover judgment in its own name and as trustee of an express trust against the Company for the whole amount of principal and interest remaining unpaid on the Notes and interest on overdue principal and interest and such further amount as shall be sufficient to cover the costs and, to the extent lawful, -51- 52 expenses of collection, including the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel. Section 6.09. Trustee May File Proofs Of Claim. The Trustee may file such proofs of claim and other papers or documents as may be necessary or advisable in order to have the claims of the Trustee and the Holders allowed in any judicial proceedings relative to the Company, its creditors or its property. Nothing contained herein shall be deemed to authorize the Trustee to authorize or consent to or accept or adopt on behalf of any Holder any plan of reorganization, arrangement, adjustment or composition affecting the Notes or the rights of any Holder thereof, or to authorize the Trustee to vote in respect of the claim of any Holder in any such proceeding. Section 6.10. Priorities. If the Trustee collects any money pursuant to this Article, it shall pay out the money in the following order: First: to the Trustee for amounts due under Section 7.07 hereof; Second: to Holders for amounts due and unpaid on the Notes for principal and interest (and Additional Amounts, if applicable), ratably, without preference or priority of any kind, according to the amounts due and payable on the Notes for principal and interest, respectively; and Third: to the Company. The Trustee may fix a record date and payment date for any payment to Holders made pursuant to this Section. Section 6.11. Undertaking For Costs. In any suit for the enforcement of any right or remedy under this Indenture or in any suit against the Trustee for any action taken or omitted by it as a Trustee, a court in its discretion may require the filing by any party litigant in the suit of an undertaking to pay the costs of the suit, and the court in its discretion may assess reasonable costs, including reasonable attorneys' fees, against any party litigant in the suit, having due regard to the merits and good faith of the claims or defenses made by the party litigant. This Section does not apply to a suit by the Trustee, a suit by a Holder pursuant to Section 6.07 hereof, or a suit by Holders of more than 10% in principal amount at maturity of the then outstanding Notes. ARTICLE VII. Trustee Section 7.01. Duties Of Trustee. (a) If an Event of Default has occurred and is continuing, the Trustee shall exercise such of the rights and powers vested in it by this Indenture, and use the same degree of care and skill in their exercise, as a prudent man would exercise or use under the circumstances in the conduct of his own affairs. -52- 53 (b) Except during the continuance of an Event of Default: (i) the Trustee need perform only those duties that are specifically set forth in this Indenture and no others and (ii) in the absence of bad faith on its part, the Trustee may conclusively rely, as to the truth of the statements and the correctness of the opinions expressed therein, upon certificates or opinions furnished to the Trustee and conforming to the requirements of this Indenture. However, the Trustee shall examine the certificates and opinions to determine whether or not they conform to the requirements of this Indenture and to confirm the correctness of all mathematical computations. (c) The Trustee may not be relieved from liability for its own negligent action, its own negligent failure to act, or its own willful misconduct, except that: (i) this paragraph does not limit the effect of paragraph (b) of this Section 7.01; (ii) the Trustee shall not be liable for any error of judgment made in good faith by a Trust Officer, unless it is proved that the Trustee was negligent in ascertaining the pertinent facts and (iii) the Trustee shall not be liable with respect to any action it takes or omits to take in good faith in accordance with a direction received by it pursuant to Section 6.05 hereof. (d) Every provision of this Indenture that in any way relates to the Trustee is subject to paragraphs (a), (b) and (c) of this Section 7.01. (e) The Trustee may refuse to perform any duty or exercise any right or power unless it receives indemnity satisfactory to it against any loss, liability or expense. (f) The Trustee shall not be liable for interest on any money received by it except as the Trustee may agree in writing with the Company. Money held in trust by the Trustee need not be segregated from other funds except to the extent required by law. Section 7.02. Rights Of Trustee. (a) The Trustee may rely on any document believed by it to be genuine and to have been signed or presented by the proper Person. The Trustee need not investigate any fact or matter stated in the document. (b) Before the Trustee acts or refrains from acting, it may require an Officers' Certificate or an Opinion of Counsel, or both. The Trustee shall not be liable for any action it takes or omits to take in good faith in reliance on such Officers' Certificate or Opinion of Counsel. (c) The Trustee may act through agents and shall not be responsible for the misconduct or negligence of any agent appointed with due care. (d) The Trustee shall not be liable for any action it takes or omits to take in good faith which it believes to be authorized or within its rights or powers. (e) The Trustee shall not be charged with knowledge of any Event of Default under subsection (c), (d), (e), (f) or (i) (and subsection (a) or (b) if the Trustee does not act as Paying Agent) of Section 6.01 or of the identity of any Material Subsidiary referred to in clause (ii) of the definition thereof unless either (1) a Trust Officer of the Trustee assigned to its Corporate Trustee Administration Department shall have actual knowledge thereof, or (2) the Trustee shall -53- 54 have received notice thereof in accordance with Section 10.02 hereof from the Company or any Holder. Section 7.03. Individual Rights Of Trustee. The Trustee in its individual or any other capacity may become the owner or pledgee of Notes and may otherwise deal with the Company or an Affiliate with the same rights it would have if it were not Trustee. Any Agent may do the same with like rights. However, the Trustee is subject to Sections 7.10 and 7.11 hereof. Section 7.04. Trustee's Disclaimer. The Trustee makes no representation as to the validity or adequacy of this Indenture or the Notes, it shall not be accountable for the Company's use of the proceeds from the Notes, and it shall not be responsible for any statement of the Company in the Indenture or any statement in the Notes other than its authentication or for compliance by the Company with the Registration Rights Agreement. Section 7.05. Notice Of Defaults. If a Default or Event of Default occurs and is continuing and if it is known to the Trustee, the Trustee shall mail to Holders a notice of the Default or Event of Default within 90 days after it occurs. Except in the case of a Default or Event of Default in payment on any Note, the Trustee may withhold the notice if and so long as a committee of its Trust Officers in good faith determines that withholding the notice is in the interests of Holders. Section 7.06. Reports By Trustee To Holders. Within 60 days after the reporting date stated in Section 10.11, the Trustee shall mail to Holders a brief report dated as of such reporting date that complies with TIA ss. 313(a) if and to the extent required by such ss. 313(a). The Trustee also shall comply with TIA ss. 313(b)(2). The Trustee shall also transmit by mail all reports as required by TIA ss. 313(c). A copy of each report at the time of its mailing to Holders shall be filed with the SEC and each stock exchange on which the Notes are listed. The Company shall notify the Trustee when the Notes are listed on any stock exchange. Section 7.07. Compensation And Indemnity. The Company shall pay to the Trustee from time to time reasonable compensation for its services hereunder. The Trustee's compensation shall not be limited by any law on compensation of a trustee of an express trust. The Company shall reimburse the Trustee upon request for all reasonable disbursements, expenses and advances incurred or made by it. Such disbursements and expenses may include the reasonable disbursements, compensation and expenses of the Trustee's agents and counsel. The Company shall indemnify the Trustee against any loss or liability incurred by it except as set forth in the next paragraph. The Trustee shall notify the Company promptly of any claim for which it may seek indemnity. The Company shall defend the claim and the Trustee shall cooperate in the defense. The Trustee may have separate counsel and the Company shall pay the reasonable fees, disbursements and expenses of such counsel. The Company need not pay for any settlement made without its consent, -54- 55 which consent shall not be unreasonably withheld. The Company need not reimburse any expense or indemnify against any loss or liability incurred by the Trustee through negligence or bad faith. To secure the Company's payment obligations in this Section, the Trustee shall have a lien prior to the Notes on all money or property held or collected by the Trustee, except money or property held in trust to pay principal and interest on particular Notes. Without prejudice to any other rights available to the Trustee under applicable law, when the Trustee incurs expenses or renders services after an Event of Default specified in Section 6.01(g) or (h) occurs, the expenses and the compensation for the services are intended to constitute expenses of administration under any Bankruptcy Law. All amounts owing to the Trustee under this Section shall be payable by the Company in United States dollars. Section 7.08. Replacement Of Trustee. A resignation or removal of the Trustee and appointment of a successor Trustee shall become effective only upon the successor Trustee's acceptance of appointment as provided in this Section. The Trustee may resign by so notifying the Company. The Holders of a majority in principal amount at maturity of the then outstanding Notes may remove the Trustee by so notifying the Trustee and the Company. The Company may remove the Trustee if: (a) the Trustee fails to comply with Section 7.10 hereof, unless the Trustee's duty to resign is stayed as provided in TIA ss. 310(b); (b) the Trustee is adjudged a bankrupt or an insolvent or an order for relief is entered with respect to the Trustee under any Bankruptcy Law; (c) a Custodian or public officer takes charge of the Trustee or its property; or (d) the Trustee becomes incapable of acting. If the Trustee resigns or is removed or if a vacancy exists in the office of Trustee for any reason, the Company shall promptly appoint a successor Trustee. Within one year after the successor Trustee takes office, the Holders of a majority in principal amount at maturity of the then outstanding Notes may appoint a successor Trustee to replace the successor Trustee appointed by the Company. If a successor Trustee does not take office within 60 days after the retiring Trustee resigns or is removed, the retiring Trustee, the Company or the Holders of at least 10% in principal amount at maturity of the then outstanding Notes may petition any court of competent jurisdiction for the appointment of a successor Trustee. If the Trustee fails to comply with Section 7.10 hereof, unless the Trustee's duty to resign is stayed as provided in TIA ss. 310(b), any Holder who has been a bona fide Holder of a Note for at least six months may petition any court of competent jurisdiction for the removal of the Trustee and the -55- 56 appointment of a successor Trustee. A successor Trustee shall deliver a written acceptance of its appointment to the retiring Trustee and to the Company. Thereupon the resignation or removal of the retiring Trustee shall become effective, and the successor Trustee shall have all the rights, powers and duties of the Trustee under this Indenture. The successor Trustee shall mail a notice of its succession to Holders. The retiring Trustee shall promptly transfer all property held by it as Trustee to the successor Trustee, subject to the lien provided for in Section 7.07 hereof. Notwithstanding replacement of the Trustee pursuant to this Section 7.08 hereof, the Company's obligations under Section 7.07 hereof shall continue for the benefit of the retiring trustee with respect to expenses and liabilities incurred by it prior to such replacement. Section 7.09. Successor Trustee By Merger, Etc. If the Trustee consolidates, merges or converts into, or transfers all or substantially all of its corporate trust business to, another corporation, the successor corporation without any further act shall be the successor Trustee. Section 7.10. Eligibility; Disqualification. This Indenture shall always have a Trustee who satisfies the requirements of TIA ss. 310(a)(1) and (5). The Trustee shall always have a combined capital and surplus as stated in Section 10.11 hereof. The Trustee is subject to TIA ss. 310(b). The following indentures shall be deemed to be specifically described herein for the purposes of clause (i) of the first proviso contained in TIA ss. 310(b): (a) indenture, dated as of April 20, 1995, between the Company and The Chase Manhattan Bank, as trustee, relating to the 12 3/4% Notes, as amended, (b) indenture, dated as of January 30, 1996, between the Company and The Chase Manhattan Bank, as trustee, relating to the 11 1/2% Deferred Coupon Notes, as amended, (c) indenture, dated as February 12, 1997, between the Company and The Chase Manhattan Bank, as trustee, relating to the 10% Notes, as amended, (d) indenture dated as of March 13, 1998, between the Company and The Chase Manhattan Bank, as trustee, relating to the Company's 9 1/2% Notes, (e) indenture, dated as of March 13, 1998, between the Company and The Chase Manhattan Bank, as trustee, relating to the Company's 10 3/4% Notes, (f) indenture, dated as of March 13, 1998, between the Company and The Chase Manhattan Bank, as trustee, relating to Company's the 9 3/4% Notes and (g) indenture, dated as of November 2, 1998, between the Company and The Chase Manhattan Bank, as Trustee, relating to the Company's 11 1/2% Notes. Section 7.11. Preferential Collection Of Claims Against Company. The Trustee is subject to TIA ss.311(a), excluding any creditor relationship listed in TIA ss.311(b). A Trustee who has resigned or been removed shall be subject to TIA ss. 311(a) to the extent indicated therein. ARTICLE VIII. Discharge Of Indenture Section 8.01. Termination Of Company's Obligations. This Indenture shall cease to be of further effect (except that the Company's obligations under Sections 7.07 and 8.03 hereof shall survive) when all outstanding Notes theretofore authenticated and -56- 57 issued have been delivered to the Trustee for cancellation and the Company has paid all sums payable hereunder. Section 8.02. Option To Effect Defeasance. The Company may, at the option of its Board of Directors evidenced by a resolution set forth in an Officers' Certificate, at any time, elect to have this Section 8.02 be applied to all outstanding Notes upon compliance with the conditions set forth below in this Section. Upon the Company's election to have this Section 8.02 apply to all the outstanding Notes, the Company shall, subject to the satisfaction of the conditions set forth in the next paragraph, be deemed to have been discharged from its obligations with respect to all outstanding Notes on the date such conditions are satisfied (hereinafter, "Defeasance"). For this purpose, Defeasance means that the Company shall be deemed to have paid and discharged the entire Obligations represented by the outstanding Notes, which shall thereafter be deemed to be "outstanding" only for the purposes of Section 8.03 hereof and the other Sections of this Indenture referred to in clauses (a) and (b) below, and to have satisfied all its other obligations under such Notes and this Indenture (and the Trustee, on demand of and at the expense of the Company, shall execute proper instruments acknowledging the same), except for the following provisions which shall survive until otherwise terminated or discharged hereunder: (i) the rights of Holders of outstanding Notes to receive solely from the trust fund described in the following paragraph, payments in respect of the principal of (or, if applicable, all amounts payable in respect of Accreted Value) and interest on such Notes when such payments are due; (ii) the Company's obligations with respect to such Notes under Article II hereof; (iii) the rights, powers, trusts, duties and immunities of the Trustee hereunder and the Company's obligations in connection therewith; and (iv) this Article VIII. In order to exercise Defeasance: (a) the Company must irrevocably deposit with the Trustee, in trust, for the benefit of the Holders, pursuant to an irrevocable trust and security agreement in form satisfactory to the Trustee, money in U.S. dollars sufficient or U.S. Government Obligations the principal of and interest on which will be sufficient or a combination thereof sufficient in the opinion of a nationally recognized firm of independent public accountants, expressed in a written certification thereof (in form satisfactory to the Trustee) to pay the principal of (or, if applicable, payments in respect of Accreted Value), premium, if any, and interest, if any, on the outstanding Notes on the stated date for payment thereof or on the applicable redemption date, as the case may be, of such principal or installment of principal of (or, if applicable, payments in respect of Accreted Value), premium, if any, and interest, if any, on the outstanding Notes; (b) the Company shall have delivered to the Trustee, an Opinion of Counsel (which counsel may be an employee of the Company) reasonably acceptable to the Trustee confirming that: (A) the Company has received from, or there has been published by, the Internal Revenue Service a ruling or (B) since the Issuance Date, there has been a change in the applicable federal income tax law, in either case to the effect that, and based thereon such Opinion of Counsel shall confirm that, the Holders of the outstanding Notes will not recognize income, gain or loss for federal income tax purposes as a result of such Defeasance and will be subject to federal income tax on the same amounts, in the same manner and at the same times as would have been the case if such Defeasance had not occurred; (c) no Event of Default shall have occurred and be continuing on the date of such -57- 58 Defeasance (other than an Event of Default resulting from or related to the incurrence of Indebtedness, the proceeds of which are to be applied to such deposit) or, insofar as Sections 6.01(g) and (h) hereof are concerned, at any time in the period ending on the 91st day after the date of deposit (or greater period of time in which any such deposit of trust funds may remain subject to the effect of any Bankruptcy Law insofar as those apply to the deposit by the Company); (d) such Defeasance shall not result in a breach or violation of, or constitute a default under, any material agreement or instrument (other than this Indenture) to which the Company or any of its Subsidiaries is a party or by which the Company or any of its Subsidiaries is bound; (e) the Company shall have delivered to the Trustee an Opinion of Counsel to the effect that after the 91st day following the deposit (or such greater period referred to in (c) above), the trust funds will not be subject to the effect of any applicable Bankruptcy Law; (f) the Company shall have delivered to the Trustee an Officers' Certificate stating that the deposit was not made by the Company with the intent of preferring the Holders of Notes over any other creditors of the Company with the intent of defeating, hindering, delaying or defrauding creditors of the Company or others; (g) the deposit shall not result in the Company, the Trustee or the trust fund established pursuant to (a) above being subject to regulation under the Investment Company Act of 1940, as amended; (h) Holders of the Notes will have a valid, perfected and unavoidable (under applicable Bankruptcy Law), subject to the passage of time referred to clause (e) above, first priority security interest in the trust funds; and (i) the Company shall have delivered to the Trustee an Officers' Certificate and an Opinion of Counsel (subject to customary exceptions), each stating that all conditions precedent provided for or relating to the Defeasance have been complied with. "U.S. Government Obligations" means direct obligations of the United States of America for the payment of which the full faith and credit of the United States of America is pledged. In order to have money available on a payment date to pay principal or interest (including Additional Amounts, if applicable) on the Notes, the U.S. Government Obligations shall be payable as to principal or interest on or before such payment date in such amounts as will provide the necessary money. U.S. Government Obligations shall not be callable at the issuer's option. Section 8.03. Application Of Trust Money. The Trustee shall hold in trust money or U.S. Government Obligations deposited with it pursuant to Section 8.02 hereof. It shall apply the deposited money and the money from U.S. Government Obligations through the Paying Agent and in accordance with this Indenture to the payment of principal and interest, if any, on the Notes. Section 8.04. Repayment to Company. The Trustee and the Paying Agent shall promptly pay to the Company upon request any excess -58- 59 money or securities held by them at any time. The Trustee and the Paying Agent shall pay to the Company upon request any money held by them for the payment of principal (or, if applicable, payments in respect of Accreted Value) or interest that remains unclaimed for two years after the date upon which such payment shall have become due; provided, however, that the Company shall have first caused notice of such payment to the Company to be mailed to each Holder entitled thereto no less than 30 days prior to such payment. After payment to the Company, the Trustee and the Paying Agent shall have no further liability with respect to such money and Holders entitled to the money must look to the Company for payment as general creditors unless any applicable abandoned property law designates another Person. Section 8.05. Reinstatement. If (i) the Trustee or Paying Agent is unable to apply any money in accordance with Section 8.03 hereof by reason of any order or judgment of any court or governmental authority enjoining, restraining or otherwise prohibiting such application and (ii) the Holders of at least a majority in principal amount at maturity of the then outstanding Notes so request by written notice to the Trustee, the Company's obligations under this Indenture and the Notes shall be revived and reinstated as though no deposit had occurred pursuant to Section 8.02 hereof until such time as the Trustee or Paying Agent is permitted to apply all such money in accordance with Section 8.03 hereof or such request is revoked by such Holders; provided, however, that if the Company makes any payment of interest on or principal (or, if applicable, payments in respect of Accreted Value) of any Note following the reinstatement of its obligations, the Company shall be subrogated to the rights of the Holders of such Notes to receive such payment from the money held by the Trustee or Paying Agent. ARTICLE IX. Amendments, Supplements and Waivers Section 9.01. Without Consent Of Holders. The Company and the Trustee may amend or supplement this Indenture or the Notes without the consent of any Holder: (a) to cure any ambiguity, defect or inconsistency; (b) to comply with Section 5.01 hereof; (c) to provide for uncertificated Notes in addition to or in place of certificated Notes; (d) to make any change that does not adversely affect the interests hereunder of any Holder; or (e) to qualify the Indenture under the TIA or to comply with the requirements of the SEC in order to maintain the qualification of the Indenture under the TIA. Section 9.02. With Consent of Holders. Subject to Section 6.07 hereof, the Company and the Trustee may amend or supplement this -59- 60 Indenture or the Notes with the written consent of the Holders of at least a majority in principal amount at maturity of the then outstanding Notes. Subject to Sections 6.04 and 6.07 hereof, the Holders of a majority in principal amount at maturity of the Notes then outstanding may also waive compliance in a particular instance by the Company with any provision of this Indenture or the Notes. However, without the consent of each Holder affected, an amendment, supplement or waiver under this Section may not: (a) reduce the amount of Notes whose Holders must consent to an amendment, supplement or waiver; (b) reduce the principal of or change the fixed maturity of any Note or alter the provisions of Sections 7 and 8 of the Initial Note and Sections 6 and 7 of the Exchange Note (other than provisions relating to the covenants described under Sections 4.10 and 4.13); (c) alter the manner of calculating the Accreted Value of any Note or reduce the rate of or change the time for payment of interest on any Note; (d) waive a default in the payment of the principal of (or, if applicable, payments in respect of Accreted Value), or interest, if any, on, any Note (except a rescission of acceleration of the Notes by the Holders of at least a majority in aggregate principal amount at maturity of the Notes and a waiver of the payment default that resulted from such acceleration); (e) except as contemplated by Section 10.07(e), make any Note payable in money other than that stated in the Note; (f) make any change in Section 6.04 or 6.07 hereof; (g) waive a redemption payment with respect to any Note; or (h) make any change in the foregoing amendment and waiver provisions of this Article 9. To secure a consent of the Holders under this Section 9.02, it shall not be necessary for the Holders to approve the particular form of any proposed amendment, supplement or waiver, but it shall be sufficient if such consent approves the substance thereof. After an amendment, supplement or waiver under this Section becomes effective, the Company shall mail to Holders a notice briefly describing the amendment or waiver. Section 9.03. Compliance with Trust Indenture Act. Every amendment to this Indenture or the Notes shall be set forth in a supplemental indenture that complies with the TIA as then in effect. Section 9.04. Revocation And Effect Of Consents. Until an amendment, supplement or waiver becomes effective, a consent to it by a Holder of a Note is a continuing consent by the Holder and every subsequent Holder of a Note or portion of a Note that evidences the same debt as the consenting Holder's Note, even if notation of the consent is not made on any Note. However, any such Holder or subsequent Holder may revoke the consent as to his Note or -60- 61 portion of a Note if the Trustee receives the notice of revocation before the date on which the Trustee receives an Officers' Certificate certifying that the Holders of the requisite principal amount at maturity of Notes have consented to the amendment, supplement or waiver. The Company may, but shall not be obligated to, fix a record date for the purpose of determining the Holders entitled to consent to any amendment, supplement or waiver. If a record date is fixed, then notwithstanding the provisions of the immediately preceding paragraph, those Persons who were Holders at such record date (or their duly designated proxies), and only those Persons, shall be entitled to consent to such amendment, supplement or waiver or to revoke any consent previously given, whether or not such Persons continue to be Holders after such record date. No consent shall be valid or effective for more than 90 days after such record date unless consents from Holders of the principal amount at maturity of Notes required hereunder for such amendment or waiver to be effective shall have also been given and not revoked within such 90-day period. After an amendment, supplement or waiver becomes effective it shall bind every Holder, unless it is of the type described in any of clauses (a) through (h) of Section 9.02 hereof. In such case, the amendment or waiver shall bind each Holder who has consented to it and every subsequent Holder that evidences the same debt as the consenting Holder's Note. Section 9.05. Notation on or Exchange of Notes. The Trustee may place an appropriate notation about an amendment or waiver on any Note thereafter authenticated. The Company in exchange for all Notes may issue and the Trustee shall authenticate new Notes that reflect the amendment or waiver. Failure to make such notation on a Note or to issue a new Note as aforesaid shall not affect the validity and effect of such amendment or waiver. Section 9.06. Trustee Protected. The Trustee shall sign all supplemental indentures, except that the Trustee may, but need not, sign any supplemental indenture that adversely affects its rights. ARTICLE X. Miscellaneous Section 10.01. Trust Indenture Act Controls. This Indenture is subject to the provisions of the TIA that are required to be incorporated into this Indenture (or, prior to the registration of the Notes pursuant to the Registration Rights Agreement, would be required to be incorporated into this Indenture if it were qualified under the TIA), and shall, to the extent applicable, be governed by such provisions. If any provision of this Indenture limits, qualifies, or conflicts with another provision which is required (or would be so required) to be incorporated in this Indenture by the TIA, the incorporated provision shall control. Section 10.02. Notices. Any notice or communication by the Company or the Trustee to the other is duly given if in -61- 62 writing and delivered in Person or mailed by first class mail to the other's address stated in Section 10.10 hereof. The Company or the Trustee by notice to the other may designate additional or different addresses for subsequent notices or communications. Any notice or communication to a Holder shall be mailed by first class mail to his address shown on the register kept by the Registrar. Failure to mail a notice or communication to a Holder or any defect in it shall not affect its sufficiency with respect to other Holders. If a notice or communication is mailed in the manner provided above within the time prescribed, it is duly given, whether or not the addressee receives it. If the Company mails a notice or communication to Holders, it shall mail a copy to the Trustee and each Agent at the same time. All other notices or communications shall be in writing. In case by reason of the suspension of regular mail service, or by reason of any other cause, it shall be impossible to mail any notice as required by the Indenture, then such method of notification as shall be made with the approval of the Trustee shall constitute a sufficient mailing of such notice. Section 10.03. Communication by Holders with Other Holders. Holders may communicate pursuant to TIA ss.312(b) with other Holders with respect to their rights under this Indenture or the Notes. The Company, the Trustee, the Registrar and anyone else shall have the protection of TIA ss. 312(c). Section 10.04. Certificate and Opinion as to Conditions Precedent. Upon any request or application by the Company to the Trustee to take any action under this Indenture, the Company shall furnish to the Trustee: (a) an Officers' Certificate stating that, in the opinion of the signers, all conditions precedent, if any, provided for in this Indenture relating to the proposed action have been complied with; and (b) an Opinion of Counsel stating that, in the opinion of such counsel, all such conditions precedent have been complied with. Section 10.05. Statements Required in Certificate or Opinion. Each certificate or opinion with respect to compliance with a condition or covenant provided for in this Indenture (other than pursuant to Section 4.03) shall include: (a) a statement that the Person signing such certificate or rendering such opinion has read such covenant or condition; (b) a brief statement as to the nature and scope of the examination or investigation upon which the statements or opinions contained in such certificate or opinion are based; -62- 63 (c) a statement that, in the opinion of such Person, such Person has made such examination or investigation as is necessary to enable such Person to express an informed opinion as to whether or not such covenant or condition has been complied with; and (d) a statement as to whether or not, in the opinion of such Person, such condition or covenant has been complied with. Section 10.06. Rules by Trustee and Agents. The Trustee may make reasonable rules for action by, or a meeting of, Holders. The Registrar or Paying Agent may make reasonable rules and set reasonable requirements for its functions. Section 10.07. Legal Holidays. A "Legal Holiday" is a Saturday, a Sunday or a day on which banking institutions in the State of New York are not required to be open. If a payment date is a Legal Holiday at a place of payment, payment may be made at that place on the next succeeding day that is not a Legal Holiday, and no interest shall accrue for the intervening period. If any other operative date for purposes of this Indenture shall occur on a Legal Holiday then for all purposes the next succeeding day that is not a Legal Holiday shall be such operative date. Section 10.08. No Recourse Against Others. A director, officer, employee or stockholder, as such, of the Company shall not have any liability for any obligations of the Company under the Notes or the Indenture or for any claim based on, in respect of or by reason of such obligations or their creation. Each Holder by accepting a Note waives and releases all such liability. The waiver and release are part of the consideration for the issue of the Notes. Section 10.09. Counterparts and Facsimile Signatures. This Indenture may be executed by manual or facsimile signature in any number of counterparts and by the parties hereto in separate counterparts, each of which when so executed shall be deemed to be an original and all of which taken together shall constitute one and the same agreement. Section 10.10. Variable Provisions. "Officer" means the Chairman of the Board, the President, any Vice President, the Treasurer, the Secretary, any Assistant Treasurer or any Assistant Secretary of the Company. The first certificate pursuant to Section 4.03 hereof shall be for the fiscal year ended on December 31, 1998. The reporting date for Section 7.06 hereof is March 15, of each year. The first reporting date is March 15, 1999. The Trustee shall always have a combined capital and surplus of at least $100,000,000 as set forth in its most recent published annual report of condition. The Company's address is: -63- 64 NTL Incorporated 110 East 59th Street, 26th Floor New York, New York 10022 Attention: Richard J. Lubasch, Esq. Senior Vice President and General Counsel The Trustee's address is: The Chase Manhattan Bank 450 West 33rd Street New York, New York 10001 Attention: Corporate Trustee Administration Department Section 10.11. Governing Law. THE INTERNAL LAWS OF THE STATE OF NEW YORK SHALL GOVERN THIS INDENTURE AND THE NOTES, WITHOUT REGARD TO THE CONFLICT OF LAWS PROVISIONS THEREOF. Section 10.12. No Adverse Interpretation of Other Agreements. This Indenture may not be used to interpret another indenture, loan or debt agreement of the Company or an Affiliate. Any such indenture, loan or debt agreement may not be used to interpret this Indenture. Section 10.13. Successors. All agreements of the Company in this Indenture and the Notes shall bind its successor. All agreements of the Trustee in this Indenture shall bind its successor. Section 10.14. Severability In case any provision in this Indenture or in the Notes shall be invalid, illegal or unenforceable, the validity, legality and enforceability of the remaining provisions shall not in any way be affected or impaired thereby. Section 10.15. Table of Contents, Headings, Etc. The Table of Contents, Cross-Reference Table, and headings of the Articles and Sections of this Indenture have been inserted for convenience of reference only, are not to be considered a part hereof, and shall in no way modify or restrict any of the terms or provisions hereof. -64- 65 SIGNATURES IN WITNESS WHEREOF, the parties hereto have caused this Indenture to be duly executed, all as of the date first written above. NTL INCORPORATED, as Company By: /s/ Richard J. Lubasch Name: Richard J. Lubasch Title: Senior Vice President, General Counsel and Secretary THE CHASE MANHATTAN BANK, as Trustee By: /s/ Andrew M. Deck Name: Andrew M. Deck Title: Vice President 66 EXHIBIT A [FORM OF FACE OF INITIAL NOTE] [Global Notes Legend] UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), NEW YORK, NEW YORK, TO THE COMPANY OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO CEDE & CO., OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC) ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN. TRANSFERS OF THIS GLOBAL NOTE SHALL BE LIMITED TO TRANSFERS IN WHOLE, BUT NOT IN PART, TO NOMINEES OF DTC OR TO A SUCCESSOR THEREOF OR SUCH SUCCESSOR'S NOMINEE AND TRANSFERS OF PORTIONS OF THIS GLOBAL NOTE SHALL BE LIMITED TO TRANSFERS MADE IN ACCORDANCE WITH THE RESTRICTIONS SET FORTH IN THE INDENTURE REFERRED TO ON THE REVERSE HEREOF. [Restricted Notes Legend] THIS NOTE HAS NOT BEEN REGISTERED UNDER THE U.S. SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND ACCORDINGLY, MAY NOT BE OFFERED OR SOLD WITHIN THE UNITED STATES OR TO, OR FOR THE ACCOUNT OR BENEFIT OF, U.S. PERSONS EXCEPT AS SET FORTH IN THE FOLLOWING SENTENCE. BY ITS ACQUISITION HEREOF, THE HOLDER (1) REPRESENTS THAT (A) IT IS A "QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT) OR (B) IT IS AN INSTITUTIONAL "ACCREDITED INVESTOR" (AS DEFINED IN RULE 501(a)(1), (2), (3) OR (7) OF REGULATION D UNDER THE SECURITIES ACT) (AN "INSTITUTIONAL ACCREDITED INVESTOR") OR (C) IT IS NOT A U.S. PERSON AND IS ACQUIRING THIS NOTE IN AN OFFSHORE TRANSACTION IN COMPLIANCE WITH REGULATION S UNDER THE SECURITIES ACT, (2) AGREES THAT IT WILL NOT, WITHIN THE TIME PERIOD REFERRED TO UNDER RULE 144(k) UNDER THE SECURITIES ACT AS IN EFFECT ON THE DATE OF THE TRANSFER OF THIS NOTE, RESELL OR OTHERWISE TRANSFER THIS NOTE EXCEPT (A) TO THE COMPANY OR ANY SUBSIDIARY THEREOF, (B) TO A QUALIFIED INSTITUTIONAL BUYER IN COMPLIANCE WITH RULE 144A UNDER THE SECURITIES ACT, (C) INSIDE THE UNITED STATES TO AN INSTITUTIONAL ACCREDITED INVESTOR THAT, PRIOR TO SUCH TRANSFER, FURNISHES TO THE TRUSTEE A SIGNED LETTER CONTAINING CERTAIN REPRESENTATIONS AND AGREEMENTS RELATING TO THE RESTRICTIONS ON TRANSFER OF THIS NOTE (THE FORM OF WHICH LETTER CAN BE OBTAINED FROM THE TRUSTEE), AND, IF SUCH TRANSFER IS IN RESPECT OF AN AGGREGATE PRINCIPAL AMOUNT AT MATURITY OF LESS THAN $100,000, AN OPINION OF COUNSEL ACCEPTABLE TO THE COMPANY THAT SUCH TRANSFER IS IN COMPLIANCE WITH THE SECURITIES ACT, (D) OUTSIDE THE UNITED STATES IN AN OFF-SHORE TRANSACTION IN COMPLIANCE WITH RULE 904 UNDER THE SECURITIES ACT, (E) PURSUANT TO THE EXEMPTION FROM A-66 67 REGISTRATION PROVIDED BY RULE 144 UNDER THE SECURITIES ACT (IF AVAILABLE) OR (F) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT AND (3) AGREES THAT IT WILL DELIVER TO EACH PERSON TO WHOM THIS NOTE IS TRANSFERRED A NOTICE SUBSTANTIALLY TO THE EFFECT OF THIS LEGEND. IN CONNECTION WITH ANY TRANSFER OF THIS NOTE WITHIN THE TIME PERIOD REFERRED TO ABOVE, THE HOLDER MUST CHECK THE APPROPRIATE BOX SET FORTH ON THE REVERSE HEREOF RELATING TO THE MANNER OF SUCH TRANSFER AND SUBMIT THIS CERTIFICATE TO THE TRUSTEE. IF THE PROPOSED TRANSFEREE IS AN INSTITUTIONAL ACCREDITED INVESTOR, THE HOLDER MUST, PRIOR TO SUCH TRANSFER, FURNISH TO THE TRUSTEE AND THE COMPANY SUCH CERTIFICATIONS, LEGAL OPINIONS OR OTHER INFORMATION AS EITHER OF THEM MAY REASONABLY REQUIRE TO CONFIRM THAT SUCH TRANSFER IS BEING MADE PURSUANT TO AN EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT. AS USED HEREIN, THE TERMS "OFF-SHORE TRANSACTION," "UNITED STATES" AND "U.S. PERSON" HAVE THE MEANINGS GIVEN TO THEM BY REGULATION S UNDER THE SECURITIES ACT. THE INDENTURE CONTAINS A PROVISION REQUIRING THE TRUSTEE TO REFUSE TO REGISTER ANY TRANSFER OF THIS NOTE IN VIOLATION OF THE FOREGOING RESTRICTIONS. [Original Issue Discount Legend] THE FOLLOWING INFORMATION IS PROVIDED SOLELY FOR PURPOSES OF APPLYING THE UNITED STATES FEDERAL INCOME TAX ORIGINAL ISSUE DISCOUNT RULES TO THIS NOTE. THE ISSUE DATE OF THIS NOTE IS NOVEMBER 6, 1998. THE ISSUE PRICE OF THIS NOTE IS $555.05 PER $1000.00 OF INITIAL PRINCIPAL AMOUNT AT MATURITY. THIS NOTE IS ISSUED WITH $444.95 OF ORIGINAL ISSUE DISCOUNT PER $1000.00 OF INITIAL PRINCIPAL AMOUNT AT MATURITY. THE YIELD TO MATURITY OF THIS NOTE IS 12.375%. A-67 68 No. ________ $_______ CUSIP No. [ ]/CINS No.[ ] 12-3/8% SENIOR DEFERRED COUPON NOTE DUE 2008 NTL Incorporated, a Delaware corporation (the "Company"), promises to pay to __________________________ or registered assigns, the principal sum of ____________________ $[____________] [,or such other amount as is indicated on Schedule A hereof*,] on October 1, 2008, subject to the further provisions of this Note set forth on the reverse hereof which further provisions shall for all purposes have the same effect as if set forth at this place. Interest Payment Dates: April 1 and October 1, commencing April 1, 2004 Record Dates: March 15 and September 15 IN WITNESS WHEREOF, NTL Incorporated has caused this Note to be signed manually or by facsimile by its duly authorized officers. Dated: NTL INCORPORATED by: by: TRUSTEE'S CERTIFICATE OF AUTHENTICATION This is one of the 12-3/8% Senior Deferred Coupon Notes due 2008 described in the within-mentioned Indenture. THE CHASE MANHATTAN BANK, as Trustee By: - ------------------------------ Authorized Officer - ------------------------------ *Applicable to Global Notes Only A-68 69 [FORM OF REVERSE OF INITIAL NOTE] NTL INCORPORATED 12-3/8% Senior Deferred Coupon Note due 2008 1. Interest. NTL INCORPORATED, a Delaware corporation (the "Company"), is the issuer of 12-3/8% Senior Deferred Coupon Notes due 2008 (the "Notes"). The Notes are being issued at a discount from their principal amount and will accrete (in accordance with the definition of Accreted Value contained in the Indenture) at a rate of 12-3/8%, compounded semiannually, to an aggregate principal amount of $450,000,000 by October 1, 2003. The Company promises to pay interest on the Notes in cash semiannually on each April 1 and October 1, commencing on April 1, 2004, to Holders of record on the immediately preceding March 15 and September 15, respectively, at the rate of 12-3/8% per annum. Interest on the Notes will accrue from the most recent date to which interest has been paid on the Notes, or if no interest has been paid, from October 1, 2003. Interest will be computed on the basis of a 360-day year of twelve 30-day months. The Company will pay interest on overdue principal and premium, if any, or overdue Accreted Value at the interest or accretion rate borne by the Notes, compounded semiannually, and it shall pay interest on overdue installments of interest (without regard to any applicable grace period) at the same interest rate compounded semiannually. Any interest paid on this Note shall be increased to the extent necessary to pay Additional Amounts as set forth in this Note. 2. Special Interest. The Holder of this Note is entitled to the benefits of the Registration Rights Agreement relating to the Notes, dated as of November 6, 1998, between the Company and the Initial Purchasers party thereto (the "Registration Rights Agreement"). In the event that either (a) the Exchange Offer Registration Statement (as such term is defined in the Registration Rights Agreement) is not filed with the SEC on or prior to the 90th day following the date of original issuance of the Notes, (b) the Exchange Offer Registration Statement is not declared effective prior to the 180th day following the date of original issuance of the Notes (as such period may be extended in accordance with the SEC review delay provisions of the Registration Rights Agreement) or (c) the Registered Exchange Offer (as such term is defined in the Registration Rights Agreement) is not consummated or a Shelf Registration Statement (as such term is defined in the Registration Rights Agreement) is not declared effective on or prior to the 220th day following the date of original issuance of the Notes (as such period may be extended in accordance with the SEC review delay provisions of the Registration Rights Agreement) (each such event referred to in clauses (a) through (c) above, a "Registration Default"), interest will accrue (in addition to the stated interest on the Notes) from and including the next day following each of (i) such 90-day period in the case of clause (a) above and (ii) such 180-day period in the case of clause (b) above and (iii) such 220-day period in the case of clause (c) above (in each of cases (b) and (c) as such period is extended, if applicable, in the manner aforesaid) (each such period referred to in clauses (i)-(iii) above an "Accrual Period"), at a rate per annum equal to 0.50% of the Accreted Value of the Notes (determined daily). The amount of such additional interest (the "Special Interest") will increase by an additional 0.50% of the Accreted Value with respect to each subsequent applicable Accrual Period until all Registration Defaults have been cured, up to a maximum amount of Special Interest of 1.50% per annum of the Accreted Value (determined daily). In each case such additional interest will be payable in cash semiannually in arrears on each April 1 and October 1, commencing April 1, 1999, to Holders of record on the immediately preceding March 15 and September 15, respectively. In the event that a Shelf Registration Statement is declared effective pursuant to the terms of the Registration Rights Agreement, if the Company fails to keep such Registration Statement continuously effective for the period required by the Registration Rights Agreement, then from such time A-69 70 as the Shelf Registration Statement is no longer effective until the earlier of (i) the date that the Shelf Registration Statement is again deemed effective, (ii) the date that is the second anniversary of the original issuance of the Notes or (iii) the date as of which all of the Notes are sold pursuant to the Shelf Registration Statement, Special Interest shall accrue at a rate per annum equal to 0.50% of the Accreted Value of the Notes (1.00% thereof if the Shelf Registration Statement is no longer effective for 30 days or more) and shall be payable in cash semiannually in arrears on each April 1 and October 1, commencing April 1, 1999, to the Holders of record on the immediately preceding March 15 and September 15, respectively. 3. Additional Amounts. This Section 3 shall apply only in the event that the Company becomes, or a successor to the Company is, a corporation organized or existing under the laws of the United Kingdom, the Netherlands, the Netherlands Antilles, Bermuda or the Cayman Islands. All payments made by the Company on this Note shall be made without deduction for or on account of, any and all present or future taxes, duties, assessments, or governmental charges of whatever nature unless the deduction or withholding of such taxes, duties, assessments or governmental charges is then required by law. If any deduction or withholding for or on account of any present or future taxes, assessments or other governmental charges of the United Kingdom, the Netherlands, the Netherlands Antilles, Bermuda or the Cayman Islands (or any political subdivision or taxing authority thereof or therein) shall at any time be required in respect of any amounts to be paid by the Company under this Note, the Company shall pay or cause to be paid such additional amounts ("Additional Amounts") as may be necessary in order that the net amounts received by a Holder of this Note after such deduction or withholding shall be not less than the amounts specified in this Note to which the Holder of this Note is entitled; provided, however, that the Company shall not be required to make any payment of Additional Amounts for or on account of: (a) any tax, assessment or other governmental charge to the extent such tax, assessment or other governmental charge would not have been imposed but for (i) the existence of any present or former connection between such Holder (or between a fiduciary, settlor, beneficiary, member or shareholder of, or possessor of a power over, such Holder, if such Holder is an estate, nominee, trust, partnership or corporation), other than the holding of this Note or the receipt of amounts payable in respect of this Note, and the United Kingdom, the Netherlands, the Netherlands Antilles, Bermuda or the Cayman Islands (or any political subdivision or taxing authority thereof or therein) including, without limitation, such Holder (or such fiduciary, settlor, beneficiary, member, shareholder or possessor) being or having been a citizen or resident thereof or being or having been present or engaged in trade or business therein or having or having had a permanent establishment therein or (ii) the presentation of this Note (where presentation is required) for payment on a date more than 30 days after the date on which such payment became due and payable or the date on which payment thereof is duly provided for, whichever occurs later, except to the extent that the Holder would have been entitled to Additional Amounts had this Note been presented on the last day of such period of 30 days; (b) any tax, assessment or other governmental charge that is imposed or withheld by reason of the failure to comply by the Holder of this Note or, if different, the beneficial owner of the interest payable on this Note, with a timely request of the Company addressed to such Holder or beneficial owner to provide information, documents or other evidence concerning the nationality, residence, identity or connection with the taxing jurisdiction of such Holder or beneficial owner which is required or imposed by a statute, regulation or administrative practice of the taxing jurisdiction as a precondition to exemption from all or part A-70 71 of such tax, assessment or governmental charge; (c) any estate, inheritance, gift, sales, transfer, personal property or similar tax, assessment or other governmental charge; (d) any tax, assessment or other governmental charge which is collectible otherwise than by withholding from payments of principal amount, redemption amount, Change of Control Payment or interest with respect to a Note or withholding from the proceeds of a sale or exchange of a Note; (e) any tax, assessment or other governmental charge required to be withheld by any Paying Agent from any payment of principal amount, redemption amount, Change of Control Payment or interest with respect to a Note, if such payment can be made, and is in fact made, without such withholding by any other Paying Agent located inside the United States; (f) any tax, assessment or other governmental charge imposed on a Holder that is not the beneficial owner of a Note to the extent that the beneficial owner would not have been entitled to the payment of any such Additional Amounts had the beneficial owner directly held the Note; (g) any combination of items (a), (b), (c), (d), (e) and (f) above; nor shall Additional Amounts be paid with respect to any payment of the principal of, or any interest on, this Note to any Holder who is a fiduciary or partnership or other than the sole beneficial owner of such payment to the extent that a beneficiary or settlor would not have been entitled to any Additional Amounts had such beneficiary or settlor been the Holder of this Note. All references to principal amount or interest on the Notes in the Indenture or the Notes shall include any Additional Amounts payable to the Company pursuant to this Section 3. 4. Method of Payment. The Company will pay interest on the Notes (except defaulted interest) to the Persons who are registered Holders of Notes at the close of business on the record date for the next interest payment date even though Notes are canceled after the record date and on or before the interest payment date. Holders must surrender Notes to a Paying Agent to collect principal and premium payments (or, if applicable, payments with respect to Accreted Value). The Company will pay principal (or, if applicable, payments with respect to Accreted Value), premium, if any, and interest in money of the United States that at the time of payment is legal tender for payment of public and private debts. However, the Company may pay principal, premium, (or, if applicable, payments with respect to Accreted Value) if any, and interest by check payable in such money. It may mail an interest check to a holder's registered address. If a Holder so requests, principal (or, if applicable, payments with respect to Accreted Value), premium, if any, and interest may be paid by wire transfer of immediately available funds to an account previously specified in writing by such Holder to the Company and the Trustee. 5. Paying Agent and Registrar. The Trustee will act as Paying Agent and Registrar in the City of New York, New York. Chase Manhattan Bank Luxembourg S.A. will act as Paying Agent and Registrar in Luxembourg if and as long as the Notes are listed on the Luxembourg Stock Exchange. The Company may change any Paying Agent or Registrar without prior notice. The Company or any of its Affiliates may act in any such capacity. A-71 72 6. Indenture. The Company issued the Notes under an Indenture, dated as of November 6, 1998 (the "Indenture"), between the Company and The Chase Manhattan Bank, as Trustee. The terms of the Notes include those stated in the Indenture and those made part of the Indenture by the Trust Indenture Act of 1939 (15 U.S. Code ss.ss. 77aaa-77bbbb) as in effect on the date of the Indenture. The Notes are subject to, and qualified by, all such terms, certain of which are summarized hereon, and Holders are referred to the Indenture and such Act for a statement of such terms. The Notes are unsecured general obligations of the Company limited to $450,000,000 in aggregate principal amount at maturity. 7. Optional Redemption. Except as provided in Section 8 hereof, the Notes are not redeemable at the Company's option prior to October 1, 2003. Thereafter, the Notes will be subject to redemption at the option of the Company, in whole or in part, upon not less than 30 nor more than 60 days' notice, at the redemption prices (expressed as percentages of principal amount ) set forth below plus accrued and unpaid interest thereon to the applicable redemption date, if redeemed during the twelve-month period beginning on October 1 of the years indicated below:
Year Percentage ---- ---------- 2003 106.188% 2004 104.125% 2005 102.063% 2006 and thereafter 100.000%
8. Optional Tax Redemption. (a) The Notes may be redeemed at the option of the Company, in whole but not in part, upon not less than 30 nor more than 60 days notice, at any time at a redemption price equal to the principal amount thereof plus accrued and unpaid interest to the date fixed for redemption (or, in the case of redemption of the Notes prior to October 1, 2003, at a redemption price equal to 100% of the Accreted Value thereof as of the date of redemption) if after the date on which Section 3 of this Note becomes applicable (the "Relevant Date") there has occurred any change in or amendment to the laws (or any regulations or official rulings promulgated thereunder) of the United Kingdom, the Netherlands, the Netherlands Antilles, Bermuda or the Cayman Islands (or any political subdivision or taxing authority thereof or therein), or any change in or amendment to the official application or interpretation of such laws, regulation or rulings (a "Change in Tax Law") which becomes effective after the Relevant Date, as a result of which the Company is or would be so required on the next succeeding Interest Payment Date to pay Additional Amounts with respect to the Notes as described under Section 3 hereof with respect to withholding taxes imposed by the United Kingdom, the Netherlands, the Netherlands Antilles, Bermuda or the Cayman Islands (or any political subdivision or taxing authority thereof or therein) (a "Withholding Tax") and such Withholding Tax is imposed at a rate that exceeds the rate (if any) at which Withholding Tax was imposed on the Relevant Date, provided, however, that (i) this paragraph shall not apply to the extent that, at the Relevant Date it was known or would have been known had professional advice of a nationally recognized accounting firm in the United Kingdom, the Netherlands, the Netherlands Antilles, Bermuda or the Cayman Islands, as the case may be, been sought, that a Change in Tax Law in the United Kingdom, the Netherlands, the Netherlands Antilles, Bermuda or the Cayman Islands was to occur after the Relevant Date, (ii) no such notice of redemption may be given earlier than 90 days prior to the earliest date on which the Company would be obliged to pay such Additional Amounts were a payment in respect of the Notes then due, (iii) at the time such notice of redemption is given, such obligation to pay such Additional Amount remains in effect and (iv) the payment of such Additional Amounts cannot be avoided by the use of any reasonable measures A-72 73 available to the Company. The Notes may also be redeemed, in whole but not in part, at any time at a redemption price equal to the principal amount thereof plus accrued and unpaid interest to the date fixed for redemption (or, in the case of redemption of the Notes prior to October 1, 2003, at a redemption price equal to 100% of the Accreted Value thereof as of the date fixed for redemption) if the Person formed after the Relevant Date by a consolidation, amalgamation, reorganization or reconstruction (or other similar arrangement) of the Company or the Person into which the Company is merged after the Relevant Date or to which the Company conveys, transfers or leases its properties and assets after the Relevant Date substantially as an entirety (collectively, a "Subsequent Consolidation") is required, as a consequence of such Subsequent Consolidation and as a consequence of a Change in Tax Law in the United Kingdom, the Netherlands, the Netherlands Antilles, Bermuda or the Cayman Islands occurring after the date of such Subsequent Consolidation to pay Additional Amounts with respect to Notes with respect to Withholding Tax as described under Section 3 hereof and such Withholding Tax is imposed at a rate that exceeds the rate (if any) at which Withholding Tax was or would have been imposed on the date of such Subsequent Consolidation, provided, however, that this paragraph shall not apply to the extent that, at the date of such Subsequent Consolidation it was known or would have been known had professional advice of a nationally recognized accounting firm in the United Kingdom, the Netherlands, the Netherlands Antilles, Bermuda or the Cayman Islands, as the case may be, been sought, that a Change in Tax Law in the United Kingdom, the Netherlands, the Netherlands Antilles, Bermuda or the Cayman Islands was to occur after such date. The Company will also pay, or make available for payment, to Holders on the Redemption Date any Additional Amounts (as described, but subject to the exceptions referred to, in Section 3 hereof) resulting from the payment of such Redemption Price. 9. Notice of Redemption. Notice of redemption will be mailed at least 30 days but not more than 60 days before the redemption date to each Holder of the Notes to be redeemed at his address of record. The Notes in denominations larger than $1,000 may be redeemed in part but only in integral multiples of $1,000. In the event of a redemption of less than all of the Notes, the Notes will be chosen for redemption by the Trustee in accordance with the Indenture. On and after the redemption date, interest ceases to accrue on the Notes or portions of them called for redemption (and, if applicable, the Accreted Value of the Notes called for redemption will cease to increase) If this Note is redeemed subsequent to a record date with respect to any interest payment date specified above and on or prior to such interest payment date, then any accrued interest will be paid to the Person in whose name this Note is registered at the close of business on such record date. 10. Mandatory Redemption. The Company will not be required to make mandatory redemption or repurchase payments with respect to the Notes. There are no sinking fund payments with respect to the Notes. 11. Repurchase at Option of Holder. (a) If there is a Change of Control Triggering Event, the Company shall be required to offer to purchase on the Purchase Date all outstanding Notes at a purchase price equal to 101% of the aggregate principal amount thereof, plus accrued and unpaid interest to the Purchase Date (or, in the case of repurchases of Notes prior to October 1, 2003, at a purchase price equal to 100% of the Accreted Value thereof as of the Purchase Date), Holders of Notes that are subject to an offer to purchase will receive a Change of Control offer from the Company prior to any related Purchase A-73 74 Date and may elect to have such Notes or portions thereof in authorized denominations purchased by completing the form entitled "Option of Holder to Elect Purchase" appearing below. (b) If the Company or a Restricted Subsidiary consummates any Asset Sales, and when the aggregate amount of Excess Proceeds from such Asset Sales exceeds $15 million, the Company shall be required to make an offer (an "Asset Sale Offer") to all holders of the Notes and Other Qualified Notes to purchase the maximum principal amount of Notes and Other Qualified Notes (determined on a pro rata basis according to the principal amount or accreted value, as the case may be, of the Notes and the Other Qualified Notes) that may be purchased out of the Excess Proceeds, with respect to the Notes, at an offer price in cash in an amount equal to 100% of the outstanding principal amount thereof plus accrued and unpaid interest, if any, to the date fixed for the closing of such offer (or, in the case of repurchases of Notes prior to October 1, 2003, at a purchase price equal to 100% of the Accreted Value thereof as of the date fixed for the closing of such offer). To the extent that the aggregate principal amount or accreted value, as the case may be, of Notes and Other Qualified Notes tendered pursuant to an Asset Sale Offer is less than the Excess Proceeds, the Company may use such deficiency for general corporate purposes. If the aggregate principal amount or accreted value, as the case may be, of Notes and Other Qualified Notes surrendered by holders thereof exceeds the amount of Excess Proceeds, then such remaining Excess Proceeds will be allocated pro rata according to principal amount or accreted value, as the case may be, to the Notes and each issue of the Other Qualified Notes and, the Trustee will select the Notes to be purchased in accordance with Section 3.09(e) of the Indenture. Upon completion of such offer to purchase, the amount of Excess Proceeds will be reset at zero. 12. Denominations, Transfer, Exchange. The Notes are in registered form, without coupons, in denominations of $1,000 and integral multiples of $1,000. The transfer of Notes may be registered, and Notes may be exchanged, as provided in the Indenture. The Registrar may require a Holder, among other things, to furnish appropriate endorsements and transfer documents and to pay any taxes and fees required by law or permitted by the Indenture. The Registrar need not exchange or register the transfer of any Note or portion of a Note selected for redemption (except the unredeemed portion of any Note being redeemed in part). Also, it need not exchange or register the transfer of any Note for a period of 15 days before a selection of Notes to be redeemed. 13. Persons Deemed Owners. Except as provided in paragraph 4 of this Note, the registered Holder of a Note may be treated as its owner for all purposes. 14. Unclaimed Money. If money for the payment of principal or interest remains unclaimed for two years, the Trustee and the Paying Agent shall pay the money back to the Company at its written request. After that, Holders of Notes entitled to the money must look to the Company for payment unless an abandoned property law designates another Person and all liability of the Trustee and such Paying Agent with respect to such money shall cease. 15. Defaults and Remedies. The Notes shall have the Events of Default set forth in Section 6.01 of the Indenture. Subject to certain limitations in the Indenture, if an Event of Default occurs and is continuing, the Trustee by notice to the Company or the Holders of at least 25% in aggregate principal amount at maturity of the then outstanding Notes by notice to the Company and the Trustee may declare all the Notes to be due and payable immediately, except that in the case of an Event of Default arising from certain events of bankruptcy or insolvency, all unpaid principal and interest accrued on the Notes (or, if applicable, the Accreted Value thereof) shall become due and payable immediately without further action or notice. The Holders of a majority in principal amount at maturity of the Notes then outstanding A-74 75 by written notice to the Trustee may rescind an acceleration and its consequences if the rescission would not conflict with any judgment or decree and if all existing Events of Default have been cured or waived except nonpayment of principal or interest (or, if applicable, the Accreted Value) that has become due solely because of the acceleration. Holders may not enforce the Indenture or the Notes except as provided in the Indenture. Subject to certain limitations, Holders of a majority in principal amount at maturity of the then outstanding Notes issued under the Indenture may direct the Trustee in its exercise of any trust or power. The Company must furnish annually compliance certificates to the Trustee. The above description of Events of Default and remedies is qualified by reference, and subject in its entirety, to the more complete description thereof contained in the Indenture. 16. Amendments, Supplements and Waivers. Subject to certain exceptions, the Indenture or the Notes may be amended or supplemented with the consent of the Holders of at least a majority in principal amount at maturity of the then outstanding Notes (including consents obtained in connection with a tender offer or exchange offer for Notes), and any existing default may be waived with the consent of the Holders of a majority in principal amount at maturity of the then outstanding Notes. Without the consent of any Holder, the Indenture or the Notes may be amended among other things, to cure any ambiguity, defect or inconsistency, to provide for assumption of the Company's obligations to Holders, to make any change that does not adversely affect the rights of any Holder or to qualify the Indenture under the TIA or to comply with the requirements of the SEC in order to maintain the qualification of the Indenture under the TIA. 17. Restrictive Covenants. The Indenture imposes certain limitations on the ability of the Company and its Subsidiaries to, among other things, engage in certain transactions with Affiliates, incur additional indebtedness and make payments in respect of Capital Stock. The limitations are subject to a number of important qualifications and exceptions. 18. Trustee Dealings with the Company. The Trustee, in its individual or any other capacity may become the owner or pledgee of the Notes and may otherwise deal with the Company or an Affiliate with the same rights it would have, as if it were not Trustee, subject to certain limitations provided for in the Indenture and in the TIA. Any Agent may do the same with like rights. 19. No Recourse Against Others. A director, officer, employee or stockholder, as such, of the Company shall not have any liability for any obligations of the Company under the Notes or the Indenture or for any claim based on, in respect of or by reason of such obligations or their creation. Each Holder of the Notes by accepting a Note waives and releases all such liability. The waiver and release are part of the consideration for the issue of the Notes. 20. Governing Law. THE INTERNAL LAWS OF THE STATE OF NEW YORK SHALL GOVERN THE INDENTURE AND THE NOTES WITHOUT REGARD TO CONFLICT OF LAW PROVISIONS THEREOF. 21. Authentication. The Notes shall not be valid until authenticated by the manual signature of an authorized officer of the Trustee or an authenticating agent. 22. Abbreviations. Customary abbreviations may be used in the name of a Holder or an assignee, such as: TEN COM (= tenants in common), TEN ENT (= tenants by the entireties), JT TEN (= joint tenants with right of survivorship and not as tenants in common), CUST (= Custodian), and UGMA (= Uniform Gifts to Minors Act). A-75 76 The Company will furnish to any Holder of the Notes upon written request and without charge a copy of the Indenture. Request may be made to: NTL Incorporated 110 East 59th Street, 26th Floor New York, New York 10022 Attention of: Richard J. Lubasch, Esq. Senior Vice President and General Counsel A-76 77 ASSIGNMENT FORM To assign this Note, fill in the form below: (I) or (we) assign and transfer this Note to ------------------------------------------ (Insert assignee's social security or tax I.D. no.) ------------------------------------------ ------------------------------------------ (Print or type assignee's name, address and zip code) and irrevocably appoint _________________________________ agent to transfer this Note on the books of the Company. The agent may substitute another to act for him. Your Signature: (Sign exactly as your name appears on the other side of this Note) Date: __________________ Signature Guarantee: * ____________________________________________ In connection with any transfer of any of the Notes evidenced by this certificate occurring prior to the date that is two years after the later of the date of original issuance of such Notes and the last date, if any, on which such Notes were owned by the Company or any Affiliate of the Company, the undersigned confirms that such Notes are being transferred: CHECK ONE BOX BELOW (1) to the Company or any subsidiary thereof, (2) to a qualified institutional buyer in compliance with Rule 144A, (3) inside the United States to an Institutional Accredited Investor that, prior to such transfer, furnishes to the Trustee a signed letter containing certain representations and agreements relating to the restrictions on transfer of the Notes (the form of which letter can be obtained from the Trustee) and, if such transfer is in respect of an aggregate principal amount at maturity of Notes of less than $100,000, an opinion of counsel acceptable to the Company that such transfer is in compliance with the Securities Act, (4) outside the United States in compliance with Rule 904 under the Securities Act, (5) pursuant to the exemption from registration provided by Rule 144 under the Securities Act (if available) or (6) pursuant to an effective registration statement under the Securities Act. - ---------- *Signature must be guaranteed by a commercial bank, trust company or member firm of the New York Stock Exchange A-77 78 -------------------------- Signature Signature Guarantee* - -------------------------- Signature must be guaranteed - ------------------------------------------------------------------ TO BE COMPLETED BY PURCHASER IF (2) ABOVE IS CHECKED. The undersigned represents and warrants that it is purchasing this Note for its own account or an account with respect to which it exercises sole investment discretion and that it and any such account is a "qualified institutional buyer" within the meaning of Rule 144A under the Securities Act of 1933, and is aware that the sale to it is being made in reliance on Rule 144A and acknowledges that it has received such information regarding the Company as the undersigned has requested pursuant to Rule 144A or has determined not to request such information and that it is aware that the transferor is relying upon the undersigned's foregoing representations in order to claim the exemption from registration provided by Rule 144A. Date: --------------------- - -------------------------- * Signature must be guaranteed by a commercial bank, trust company or member firm of the New York Stock Exchange. NOTICE: To be executed by an executive officer A-78 79 OPTION OF HOLDER TO ELECT PURCHASE If you want to elect to have this Note or a portion thereof repurchased by the Company pursuant to Section 3.09, 4.10 or 4.13 of the Indenture, check the box: | | If the purchase is in part, indicate the portion (in denominations of $1,000 or any integral multiple thereof) to be purchased: ------------------- Your Signature: (Sign exactly as your name appears on the other side of this Note) Date: ________________________ Signature Guarantee:**/ - ---------- **/Signature must be guaranteed by a commercial bank, trust company or member firm of the New York Stock Exchange. A-79 80 [TO BE ATTACHED TO GLOBAL NOTES] SCHEDULE A SCHEDULE OF PRINCIPAL AMOUNT The initial principal amount of this Global Note shall be $__________________. The following increases or decreases in the principal amount at maturity of this Global Note have been made: ================================================================================
Amount of Amount of increase in decrease in principal Principal Signature of Date of principal amount at amount at authorized exchange amount at maturity of maturity of officer of following such maturity of this Global this Global Trustee or decrease or this Global Note Note Note Notes Custodian increase - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- ================================================================================
-80- 81 EXHIBIT B [FORM OF FACE OF EXCHANGE NOTE] [Global Notes Legend, if applicable] UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), NEW YORK, NEW YORK, TO THE COMPANY OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO CEDE & CO., OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC) ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN. TRANSFERS OF THIS GLOBAL NOTE SHALL BE LIMITED TO TRANSFERS IN WHOLE, BUT NOT IN PART, TO NOMINEES OF DTC OR TO A SUCCESSOR THEREOF OR SUCH SUCCESSOR'S NOMINEE AND TRANSFERS OF PORTIONS OF THIS GLOBAL NOTE SHALL BE LIMITED TO TRANSFERS MADE IN ACCORDANCE WITH THE RESTRICTIONS SET FORTH IN THE INDENTURE REFERRED TO ON THE REVERSE HEREOF. [Original Issue Discount Legend] THE FOLLOWING INFORMATION IS PROVIDED SOLELY FOR PURPOSES OF APPLYING THE UNITED STATES FEDERAL INCOME TAX ORIGINAL ISSUE DISCOUNT RULES TO THIS NOTE. THE ISSUE DATE OF THIS NOTE IS NOVEMBER 6, 1998. THE ISSUE PRICE OF THIS NOTE IS $555.05 PER $1000.00 OF INITIAL PRINCIPAL AMOUNT AT MATURITY. THIS NOTE IS ISSUED WITH $444.95 OF ORIGINAL ISSUE DISCOUNT PER $1000.00 OF INITIAL PRINCIPAL AMOUNT AT MATURITY. THE YIELD TO MATURITY OF THIS NOTE IS 12.375%. B-82 82 No. ___________ $__________ CUSIP No. |_| CINS No. |_| 12-3/8% SERIES B SENIOR DEFERRED COUPON NOTE DUE 2008 NTL Incorporated, a Delaware corporation (the "Company") promises to pay to _________________________ or registered assigns, the principal sum of [ ] $[ ] [or such other amount as is indicated on Schedule A hereof]**** on October 1, 2008, subject to the further provisions of this Note set forth on the reverse hereof which further provisions shall for all purposes have the same effect as if set forth at this place. Interest Payment Dates: April 1 and October 1, commencing April 1, 2004 Record Dates: March 15 and September 15 IN WITNESS WHEREOF, NTL Incorporated has caused this Note to be signed manually or by facsimile by its duly authorized officers. Dated: ________________ NTL INCORPORATED, by: ------------------------------------- by: ------------------------------------- - ---------- **** Applicable to Global Notes only. B-83 83 TRUSTEE'S CERTIFICATE OF AUTHENTICATION This is one of the 12-3/8% Series B Senior Deferred Coupon Notes due 2008 described in the within-mentioned Indenture. THE CHASE MANHATTAN BANK, as Trustee By: ------------------------------------- Authorized Officer B-84 84 (FORM OF REVERSE OF EXCHANGE NOTE) NTL INCORPORATED 12-3/8% Series B Senior Deferred Coupon Note due 2008 1. Interest. NTL INCORPORATED, a Delaware corporation (the "Company"), is the issuer of 12-3/8% Series B Senior Deferred Coupon Notes due 2008 (the "Notes"). The Notes are being issued at a discount from their principal amount and will accrete (in accordance with the definition of Accreted Value contained in the Indenture) at a rate of 12-3/8%, compounded semiannually, to an aggregate principal amount of $450,000,000 by October 1, 2003. The Company promises to pay interest on the Notes in cash semiannually on each April 1 and October 1, commencing on April 1, 2004, to Holders of record on the immediately preceding March 15 and September 15, respectively, at the rate of 12-3/8% per annum. Interest on the Notes will accrue from the most recent date to which interest has been paid on the Notes, or if no interest has been paid, from October 1, 2003. Interest will be computed on the basis of a 360-day year of twelve 30-day months. The Company will pay interest on overdue principal and premium, if any, or overdue Accreted Value at the interest or accretion rate borne by the Notes, compounded semiannually, and it shall pay interest on overdue installments of interest (without regard to any applicable grace period) at the same interest rate compounded semiannually. Any interest paid on this Note shall be increased to the extent necessary to pay Additional Amounts as set forth in this Note. 2. Additional Amounts. This Section 2 shall apply only in the event that the Company becomes, or a successor to the Company is, a corporation organized or existing under the laws of the United Kingdom, the Netherlands, the Netherlands Antilles, Bermuda or the Cayman Islands. All payments made by the Company on this Note shall be made without deduction for or on account of, any and all present or future taxes, duties, assessments, or governmental charges of whatever nature unless the deduction of such taxes, duties, assessments or governmental charges is then required by law. If any deduction or withholding for or on account of any present or future taxes, assessments or other governmental charges of the United Kingdom, the Netherlands, the Netherlands Antilles, Bermuda or the Cayman Islands (or any political subdivision or taxing authority thereof or taxing authority thereof or therein) shall at any time be required in respect of any amounts to be paid by the Company under this Note, the Company shall pay or cause to be paid such additional amounts ("Additional Amounts") as may be necessary in order that the net amounts received by a Holder of this Note after such deduction or withholding shall be not less than the amounts specified in this Note to which the Holder of this Note is entitled; provided, however, that the Company shall not be required to make any payment of Additional Amounts for or on account of: (a) any tax, assessment or other governmental charge to the extent such tax, assessment or other governmental charge would not have been imposed but for (i) the existence of any present or former connection between such Holder (or between a fiduciary, settlor, beneficiary, member or shareholder of, or possessor of a power over, such Holder, if such Holder is an estate, nominee, trust, partnership or corporation), other than the holding of this Note or the receipt of amounts payable in respect of this Note, the United Kingdom, the Netherlands, the Netherlands Antilles, Bermuda or the Cayman Islands or any political subdivision or taxing authority thereof or therein, including, without limitation, such Holder (or such fiduciary, settlor, beneficiary, member, shareholder or possessor) being or having been a citizen or resident thereof or being or having been present or engaged in trade or business therein or having or having had a permanent establishment therein or (ii) the presentation of this Note (where presentation is B-85 85 required) for payment on a date more than 30 days after the date on which such payment became due and payable or the date on which payment thereof is duly provided for, whichever occurs later, except to the extent that the Holder would have been entitled to Additional Amounts had this Note been presented on the last day of such period of 30 days; (b) any tax, assessment or other governmental charge that is imposed or withheld by reason of the failure to comply by the Holder of this Note or, if different, the beneficial owner of the interest payable on this Note, with a timely request of the Company addressed to such Holder or beneficial owner to provide information, documents or other evidence concerning the nationality, residence, identity or connection with the taxing jurisdiction of such Holder or beneficial owner which is required or imposed by a statute, regulation or administrative practice of the taxing jurisdiction as a precondition to exemption from all or part of such tax, assessment or governmental charge; (c) any estate, inheritance, gift, sales, transfer, personal property or similar tax, assessment or other governmental charge; (d) any tax, assessment or other governmental charge which is collectible otherwise than by withholding from payments of principal amount, redemption amount, Change of Control Payment or interest with respect to a Note or withholding from the proceeds of a sale or exchange of a Note; (e) any tax, assessment or other governmental charge required to be withheld by any Paying Agent from any payment of principal amount, redemption amount, Change of Control Payment or interest with respect to a Note, if such payment can be made, and is in fact made, without such withholding by any other Paying Agent located inside the United States; (f) any tax, assessment or other governmental charge imposed on a Holder that is not the beneficial owner of a Note to the extent that the beneficial owner would not have been entitled to the payment of any such Additional Amounts had the beneficial owner directly held the Note; (g) any combination of items (a), (b), (c), (d), (e) and (f) above; nor shall Additional Amounts be paid with respect to any payment of the principal of, or any interest on, this Note to any Holder who is a fiduciary or partnership or other than the sole beneficial owner of such payment to the extent that a beneficiary or settlor would not have been entitled to any Additional Amounts had such beneficiary or settlor been the Holder of this Note. All references to principal amount or interest on the Notes in the Indenture or the Notes shall include any Additional Amounts payable to the Company pursuant to this Section 2. 3. Method of Payment. The Company will pay interest on the Notes (except defaulted interest) to the Persons who are registered Holders of Notes at the close of business on the record date for the next interest payment date even though Notes are canceled after the record date and on or before the interest payment date. Holders must surrender Notes to a Paying Agent to collect principal and premium payments (or, if applicable, payments with respect to Accreted Value). The Company will pay principal (or, if applicable, payments with respect to Accreted Value), premium, if any, and interest in money of the United States that at the time of payment is legal tender for payment of public and private debts. B-86 86 However, the Company may pay principal (or, if applicable, payments with respect to Accreted Value), premium, if any, and interest by check payable in such money. It may mail an interest check to a holder's registered address. If a Holder so requests, principal (or, if applicable, payments with respect to Accreted Value), premium, if any, and interest may be paid by wire transfer of immediately available funds to an account previously specified in writing by such Holder to the Company and the Trustee. 4. Paying Agent and Registrar. The Trustee will act as Paying Agent and Registrar in the City of New York. Chase Manhattan Bank Luxembourg S.A. will act as Paying Agent and Registrar in Luxembourg if and as long as the Notes are listed on the Luxembourg Stock Exchange. The Company may change any Paying Agent or Registrar without prior notice. The Company or any of its Affiliates may act in any such capacity. 5. Indenture. The Company issued the Notes under an indenture, dated as of November 6, 1998 (the "Indenture"), between the Company and The Chase Manhattan Bank, as Trustee. The terms of the Notes include those stated in the Indenture and those made part of the Indenture by the Trust Indenture Act of 1939 (15 U.S. Code ss.ss. 77aaa-77bbbb) as in effect on the date of the Indenture. The Notes are subject to, and qualified by, all such terms, certain of which are summarized hereon, and Holders are referred to the Indenture and such Act for a statement of such terms. The Notes are unsecured general obligations of the Company limited to $450,000,000 in aggregate principal amount at maturity. 6. Optional Redemption. Except as provided in Section 7 herein, the Notes are not redeemable at the Company's option prior to October 1, 2003. Thereafter, the Notes will be subject to redemption at the option of the Company, in whole or in part, upon not less than 30 nor more than 60 days' notice, at the redemption prices (expressed as percentages of principal amount) set forth below plus accrued and unpaid interest thereon to the applicable redemption date, if redeemed during the twelve-month period beginning on October 1 of the years indicated below:
Year Percentage ---- ---------- 2003 106.188% 2004 104.125% 2005 102.063% 2006 and thereafter 100.000%
7. Optional Tax Redemption. (a) The Notes may be redeemed at the option of the Company, in whole but not in part, upon not less than 30 nor more than 60 days notice, at any time at a redemption price equal to the principal amount thereof plus accrued and unpaid interest to the date fixed for redemption (or, in the case of redemption of the Notes prior to October 1, 2003, at a redemption price equal to 100% of the Accreted Value thereof as of the date of redemption) if after the date on which Section 2 of this Note becomes applicable (the "Relevant Date") there has occurred any change in or amendment to the laws (or any regulations or official rulings promulgated thereunder) of the United Kingdom, the Netherlands, the Netherlands Antilles, Bermuda or the Cayman Islands (or any political subdivision or B-87 87 taxing authority thereof or therein), or any change in or amendment to the official application or interpretation of such laws, regulations or rulings (a "Change in Tax Law") which becomes effective after the Relevant Date, as a result of which the Company is or would be so required on the next succeeding Interest Payment Date to pay Additional Amounts with respect to the Notes as described under Section 2 hereof with respect to withholding taxes imposed by the United Kingdom, the Netherlands, the Netherlands Antilles, Bermuda or the Cayman Islands (or any political subdivision or taxing authority thereof or therein) (a "Withholding Tax') and such Withholding Tax is imposed at a rate that exceeds the rate (if any) at which Withholding Tax was imposed on the Relevant Date, provided, however, that (i) this paragraph shall not apply to the extent that, at the Relevant Date it was known or would have been known had professional advice of a nationally recognized accounting firm in the United Kingdom, the Netherlands, the Netherlands Antilles, Bermuda or the Cayman Islands, as the case may be, been sought, that a change in Tax Law in the United Kingdom, the Netherlands, the Netherlands Antilles, Bermuda or the Cayman Islands was to occur after the Relevant Date, (ii) no such notice of redemption may be given earlier than 90 days prior to the earliest date on which the Company would be obliged to pay such Additional Amounts were a payment in respect of the Notes then due, (iii) at the time such notice of redemption is given, such obligation to pay such Additional Amount remains in effect and (iv) the payment of such Additional Amounts cannot be avoided by the use of any reasonable measures available to the Company. (b) The Notes may also be redeemed, in whole but not in part, at any time at a redemption price equal to the principal amount thereof plus accrued and unpaid interest to the date fixed for redemption (or, in the case of redemption of the Notes prior to October 1, 2003, at a redemption price equal to 100% of the Accreted Value thereof as of the date fixed for redemption) if the Person formed after the Relevant Date by a consolidation, amalgamation, reorganization or reconstruction (or other similar arrangement) of the Company or the Person into which the Company is merged after the Relevant Date or to which the Company conveys, transfers or leases its properties and assets after the Relevant Date substantially as an entirety (collectively, a "Subsequent Consolidation") is required, as a consequence of such Subsequent Consolidation and as a consequence of a Change in Tax Law in the United Kingdom, the Netherlands, the Netherlands Antilles, Bermuda or the Cayman Islands occurring after the date of such Subsequent Consolidation to pay Additional Amounts with respect to Notes with respect to Withholding Tax as described under Section 2 hereof and such Withholding Tax is imposed at a rate that exceeds the rate (if any) at which Withholding Tax was or would have been imposed on the date of such Subsequent Consolidation, provided, however, that this paragraph shall not apply to the extent that, at the date of such Subsequent Consolidation it was known or would have been known had professional advice of a nationally recognized accounting firm in the United Kingdom, the Netherlands, the Netherlands Antilles, Bermuda or the Cayman Islands, as the case may be, been sought, that a Change in Tax Law in the United Kingdom, the Netherlands, the Netherlands Antilles, Bermuda or the Cayman Islands was to occur after such date. The Company will also pay, or make available for payment, to Holders on the Redemption Date any Additional Amounts (as described, but subject to the exceptions referred to, in Section 2 hereof) resulting from the payment of such Redemption Price. 8. Notice of Redemption. Notice of redemption will be mailed at least 30 days but not more than 60 days before the redemption date to each Holder of the Notes to be redeemed at his address of record. The Notes in denominations larger than $1,000 may be redeemed in part but only in integral multiples of $1,000. In the event of a redemption of less than all of the Notes, the Notes will be chosen for redemption by the Trustee in accordance with the Indenture. On and after the redemption date, interest ceases to accrue on the Notes or portions of them called for redemption. If this Note is redeemed subsequent to a record date with respect to any interest payment date specified above and on or prior to such interest payment date, then any accrued interest will be paid to the Person in whose name this Note is registered at the close of business on such record date (and, if applicable, the Accreted Value of the Notes called for redemption will cease to increase). B-88 88 9. Mandatory Redemption. The Company will not be required to make mandatory redemption or repurchase payments with respect to the Notes. There are no sinking fund payments with respect to the Notes. 10. Repurchase at Option of Holder. (a) If there is a Change of Control Triggering Event, the Company shall be required to offer to purchase on the Purchase Date all outstanding Notes at a purchase price equal to 101% of the aggregate principal amount thereof, plus accrued and unpaid interest to the Purchase Date (or, in the case of repurchases of Notes prior to October 1, 2003, at a purchase price equal to 100% of the Accreted Value thereof as of the Purchase Date) . Holders of Notes that are subject to an offer to purchase will receive a Change of Control offer from the Company prior to any related Purchase Date and may elect to have such Notes or portions thereof in authorized denominations purchased by completing the form entitled "Option of Holder to Elect Purchase" appearing below. (b) If the Company or a Restricted Subsidiary consummates any Asset Sales, and when the aggregate amount of Excess Proceeds from such Asset Sales exceeds $15 million, the Company shall be required to make an offer (an "Asset Sale Offer") to all holders of the Notes and Other Qualified Notes to purchase the maximum principal amount of Notes and other Qualified Notes (determined on a pro rata basis according to the principal amount or accreted value, as the case may be, of the Notes and the Other Qualified Notes) that may be purchased out of the Excess Proceeds with respect to the Notes, at an offer price in cash in an amount equal to 100% of the outstanding principal amount thereof plus accrued and unpaid interest, if any, to the date fixed for the closing of such offer (or, in the case of repurchases of Notes prior to October 1, 2003, at a purchase price equal to 100% of the Accreted Value thereof as of the date fixed for the closing of such offer). To the extent that the aggregate principal amount or accreted value, as the case may be, of Notes and Other Qualified Notes tendered pursuant to an Asset Sale Offer is less than the Excess Proceeds, the Company may use such deficiency for general corporate purposes. If the aggregate principal amount or accreted value, as the case may be, of Notes and Other Qualified Notes surrendered by holders thereof exceeds the amount of Excess Proceeds then any remaining Excess Proceeds will be allocated pro rata according to principal amount or accreted value, as the case may be, to the Notes and each issue of the Other Qualified Notes and, the Trustee will select the Notes to be purchased in accordance with Section 3.09(e) of the Indenture. Upon completion of such offer to purchase, the amount of Excess Proceeds will be reset at zero. 11. Denominations, Transfer, Exchange. The Notes are in registered form, without coupons, in denominations of $1,000 and integral multiples of $1,000. The transfer of Notes may be registered, and Notes may be exchanged, as provided in the Indenture. The Registrar may require a Holder, among other things, to furnish appropriate endorsements and transfer documents and to pay any taxes and fees required by law or permitted by the Indenture. The Registrar need not exchange or register the transfer of any Note or portion of a Note selected for redemption (except the unredeemed portion of any Note being redeemed in part). Also, it need not exchange or register the transfer of any Note for a period of 15 days before a selection of Notes to be redeemed. 12. Persons Deemed Owners. Except as provided in paragraph 3 of this Note, the registered Holder of a Note may be treated as its owner for all purposes. 13. Unclaimed Money. If money for the payment of principal or interest remains unclaimed for two years, the Trustee and the Paying Agent shall pay the money back to the Company at its written request. After that, Holders of Notes entitled to the money must look to the Company for payment unless an abandoned property law designates another Person and all liability of the Trustee and such Paying B-89 89 Agent with respect to such money shall cease. 14. Defaults and Remedies. The Notes shall have the Events of Default as set forth in Section 6.01 of the Indenture. Subject to certain limitations in the Indenture, if an Event of Default occurs and is continuing, the Trustee by notice to the Company or the Holders of at least 25% in aggregate principal amount at maturity of the then outstanding Notes by notice to the Company and the Trustee may declare all the Notes to be due and payable immediately, except that in the case of an Event of Default arising from certain events of bankruptcy or insolvency, all unpaid principal and interest accrued on the Notes (or, if applicable, the Accreted Value thereof) shall become due and payable immediately without further action or notice. The Holders of a majority in principal amount at maturity of the Notes then outstanding by written notice to the Trustee may rescind an acceleration and its consequences if the rescission would not conflict with any judgment or decree and if all existing Events of Default have been cured or waived except nonpayment of principal or interest (or, if applicable, the Accreted Value) that has become due solely because of the acceleration. Holders may not enforce the Indenture or the Notes as provided in the Indenture. Subject to certain limitations, Holders of a majority in principal amount at maturity of the then outstanding Notes issued under the Indenture may direct the Trustee in its exercise of any trust or power. The Company must furnish annually compliance certificates to the Trustee. The above description of Events of Default and remedies is qualified by reference, and subject in its entirety, to the more complete description thereof contained in the Indenture. 15. Amendments, Supplements and Waivers. Subject to certain exceptions, the Indenture or the Notes may be amended or supplemented with the consent of the Holders of at least a majority in principal amount at maturity of the then outstanding Notes (including consents obtained in connection with a tender offer or exchange offer for Notes), and any existing default may be waived with the consent of the Holders of a majority in principal amount at maturity of the then outstanding Notes. Without the consent of any Holder, the Indenture or the Notes may be amended among other things, to cure any ambiguity, defect or inconsistency, to provide for assumption of the Company's obligations to Holders, to make any change that does not adversely affect the rights of any Holder or to qualify the Indenture under the TIA or to comply with the requirements of the SEC in order to maintain the qualification of the Indenture under the TIA. 16. Restrictive Covenants. The Indenture imposes certain limitations on the ability of the Company and its Subsidiaries to, among other things, engage in certain transactions with Affiliates, incur additional Indebtedness and make payments in respect of Capital Stock. The limitations are subject to a number of important qualifications and exceptions. 17. Trustee Dealings with the Company. The Trustee, in its individual or any other capacity may become the owner or pledgee of the Notes and may otherwise deal with the Company or an Affiliate with the same rights it would have, as if it were not Trustee, subject to certain limitations provided for in the Indenture and in the TIA. Any Agent may do the same with like rights. 18. No Recourse Against Others. A director, officer, employee or stockholder, as such, of the Company shall not have any liability for any obligations of the Company under the Notes or the Indenture or for any claim based on, in respect of or by reason of such obligations or their creation. Each Holder of the Notes by accepting a Note waives and releases all such liability. The waiver and release are part of the consideration for the issue of the Notes. 19. Governing Law. THE INTERNAL LAWS OF THE STATE OF NEW YORK SHALL B-90 90 GOVERN THE INDENTURE AND THE NOTES WITHOUT REGARD TO CONFLICT OF LAW PROVISIONS THEREOF. 20. Authentication. The Notes shall not be valid until authenticated by the manual signature of an authorized officer of the Trustee or an authenticating agent. 21. Abbreviations. Customary abbreviations may be used in the name of a Holder or an assignee, such as: TEN COM (= tenants in common), TEN ENT (= tenants by the entireties), JT TEN (= joint tenants with right of survivorship and not as tenants in common), CUST (= Custodian), and UGMA (= Uniform Gifts to Minors Act). The Company will furnish to any Holder of the Notes upon written request and without charge a copy of the Indenture. Request may be made to: NTL Incorporated 110 East 59th Street, 26th Floor New York, New York 10022 Attention of: Richard J. Lubasch, Esq. Senior Vice President and General Counsel B-91 91 ASSIGNMENT FORM To assign this Note, fill in the form below: (I) or (we) assign and transfer this Note to ______________________________________________________ (Insert assignee's social security or tax I.D. no.) ______________________________________________________ ______________________________________________________ (Print or type assignee's name, address and zip code) and irrevocably appoint _________________________________ agent to transfer this Note on the books of the Company. The agent may substitute another to act for him. Your Signature: (Sign exactly as your name appears on the other side of this Note) Date: __________________ Signature Guarantee: **/ ______________________________ - ---------- **/ Signature must be guaranteed by a commercial Bank, trust company or member of the New York Stock Exchange. B-92 92 OPTION OF HOLDER TO ELECT PURCHASE If you want to elect to have this Note or a portion thereof repurchased by the Company pursuant to Section 3.09, 4.10 or 4.13 of the Indenture, check the box: If the purchase is in part, indicate the portion (in denominations of $1,000 or any integral multiple thereof) to be purchased:_____________________ Your Signature: (Sign exactly as your name appears on the other side of this Note) Date: __________________ Signature Guarantee: *** - ---------- *** Signature must be guaranteed by a commercial bank, trust company or member firm of the New York Stock Exchange. B-93 93 SCHEDULE A SCHEDULE OF PRINCIPAL AMOUNT The initial principal amount of this Global Note shall be $__________________. The following increases or decreases in the principal amount at maturity of this Global Note have been made:
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B-95 95 EXHIBIT C FORM OF TRANSFER CERTIFICATE FOR TRANSFER FROM RULE 144A GLOBAL NOTE TO REGULATION S GLOBAL NOTE (Transfers pursuant to ss. 2.06(a)(ii) of the Indenture) The Chase Manhattan Bank, as Trustee 450 West 33rd Street New York, New York 10001 Attn: Corporate Trustee Administration Department Re: NTL Incorporated 12-3/8% Senior Deferred Coupon Notes due 2008 (the "Notes") Reference is hereby made to the Indenture, dated as of November 6, 1998 (the "Indenture"), between NTL Incorporated, as Issuer, and The Chase Manhattan Bank, as Trustee. This letter relates to $[ ] aggregate principal amount at maturity of Notes which are held in the form of the [Rule 144A Global Note (CUSIP No. )] with the Depositary in the name of [name of transferor] (the "Transferor") to effect the transfer of the Notes in exchange for an equivalent beneficial interest in the Regulation S Global Notes. In connection with such request, the Transferor does hereby certify that such transfer has been effected in accordance with the transfer restrictions set forth in the Notes and (i) with respect to transfers made in reliance on Regulation S, does hereby certify that: (1) the offer of the Notes was not made to a Person in the United States; (2) the transaction was executed in, on or through the facilities of a designated offshore securities market and neither the Transferor nor any Person acting on its behalf knows that the transaction was pre-arranged with a buyer in the United States; (3) no directed selling efforts have been made in contravention of the requirements of Rule 903(b) or 904(b) of Regulation S, as applicable; and (4) the transaction is not part of a plan or scheme to evade the registration requirements of the United States Securities Act of 1933, as amended (the "Securities Act"); and (ii) with respect to transfers made in reliance on Rule 144 does hereby certify that the Notes are being transferred in a transaction permitted by Rule 144 under the Securities Act; and (iii) with respect to transfers made in reliance on Rule 144A, does hereby certify that such Notes are being transferred in accordance with Rule 144A under the Securities Act to a transferee that the Transferor reasonably believes is purchasing the Notes for its own account or an account with respect to which the transferee exercises sole investment discretion and the transferee and any such account is a "qualified institutional buyer" within the meaning of Rule 144A, in a transaction meeting the requirements of Rule 144A and in accordance with applicable securities laws of any state of the United States or any other jurisdiction. In addition, if the sale is made during a distribution compliance period and the provisions C-96 96 of Rule 903(c)(2) or (3) or Rule 904(c)(1) of Regulation S are applicable thereto, we confirm that such sale has been made in accordance with the applicable provisions of Rule 903(c)(2) or (3) or Rule 904(c)(1), as the case may be. You and the Company are entitled to rely upon this letter and are irrevocably authorized to produce this letter or a copy hereof to any interested party in any administrative or legal proceedings or official inquiry with respect to the matters covered hereby. Capitalized terms used in this certificate and not otherwise defined in the Indenture have the meanings set forth in Regulation S. [Name of Transferor] By: ----------------------------- Name: Title: Dated: cc: NTL Incorporated 110 East 59th Street New York, New York 10022 Attn: Richard J. Lubasch, Esq. Senior Vice President and General Counsel C-97 97 EXHIBIT D FORM OF TRANSFER CERTIFICATE FOR TRANSFER FROM REGULATION S GLOBAL NOTE TO RULE 144A GLOBAL NOTE (Transfers pursuant to ss. 2.06(a)(iii) of the Indenture) The Chase Manhattan Bank, as Trustee 450 West 33rd Street New York, New York 10001 Attn: Corporate Trustee Administration Department Re: NTL Incorporated 12-3/8% Senior Deferred Coupon Notes due 2008 (the "Notes") Reference is hereby made to the Indenture, dated as of November 6, 1998 (the "Indenture"), between NTL Incorporated, as Issuer, and The Chase Manhattan Bank, as Trustee. Capitalized terms used but not defined herein shall have the respective meanings given them in the Indenture. This letter relates to $[ ] aggregate principal amount at maturity of Notes which are held in the form of the Regulation S Global Note (CINS No. [ ]) with the Depositary in the name of [name of transferor] (the "Transferor") to effect the transfer of the Notes in exchange for an equivalent beneficial interest in the Rule 144A Global Note. In connection with such request, and in respect of such Notes the Transferor does hereby certify that such Notes are being transferred in accordance with (i) the transfer restrictions set forth in the Notes and (ii) Rule 144A under the United States Securities Act of 1933, as amended, to a transferee that the Transferor reasonably believes is purchasing the Notes for its own account or an account with respect to which the transferee exercises sole investment discretion and the transferee and any such account is a "qualified institutional buyer" within the meaning of Rule 144A, in a transaction meeting the requirements of Rule 144A and in accordance with applicable securities laws of any state of the United States or any other jurisdiction. [Name of Transferor], By: ----------------------------- Name: Title: Dated: cc: NTL Incorporated 110 East 59th Street New York, New York 10022 Attn: Richard J. Lubasch, Esq. Senior Vice President and General Counsel D-98 98 EXHIBIT E FORM OF TRANSFER CERTIFICATE FOR TRANSFER FROM GLOBAL NOTE OR RESTRICTED NOTE TO RESTRICTED NOTE (Transfers pursuant to ss. 2.06(a)(iv) or ss. 2.06(a)(v) of the Indenture) The Chase Manhattan Bank, as Trustee 450 West 33rd Street New York, New York 10001 Attn: Corporate Trustee Administration Department Re: NTL Incorporated 12-3/8% Senior Deferred Coupon Notes due 2008 (the "Notes") Reference is hereby made to the Indenture, dated as of November 6, 1998 (the "Indenture"), between NTL Incorporated, as Issuer, and The Chase Manhattan Bank, as Trustee. Capitalized terms used but not defined herein shall have the respective meanings given them in the Indenture. This letter relates to $[ ] aggregate principal amount at maturity of Notes which are held [in the form of the [Rule 144A/Regulation S] [Global] [Restricted] Note (CUSIP No. [ ] CINS No. [ ]) with the Depositary in the name of [name of transferor] (the "Transferor") to effect the transfer of the Notes. In connection with such request, and in respect of such Notes, the Transferor does hereby certify that such Notes are being transferred (i) in accordance with the transfer restrictions set forth in the Notes and (ii) in accordance with applicable securities laws of any state of the United States or any other jurisdiction. *Insert, if appropriate. [Name of Transferor], By: ----------------------------- Name: Title: Dated: cc: NTL Incorporated 110 East 59th Street New York, New York 10022 Attn: Richard J. Lubasch, Esq. Senior Vice President and General Counsel E-99 99 EXHIBIT F FORM OF ACCREDITED INVESTOR TRANSFEREE CERTIFICATE The Chase Manhattan Bank, as Trustee 450 West 33rd Street New York, New York 10001 Attn: Corporate Trustee Administration Department Re: NTL Incorporated 12-3/8% Senior Deferred Coupon Notes due 2008 (the "Notes") Reference is hereby made to the Indenture, dated as of November 6, 1998 (the "Indenture), between NTL Incorporated, as Issuer, and The Chase Manhattan Bank, as Trustee. Capitalized terms used but not defined herein shall have the respective meanings given them in the Indenture. This letter relates to $[ ] aggregate principal amount at maturity of Notes which are held [in the form of the [Rule 144/Regulation S] [Restricted] [Global] Note (CUSIP No. [ ] CINS No. [ ]) with the Depositary * * in the name of [name of transferor] (the "Transferor") to effect the transfer of the Notes to the undersigned. In connection with such request, and in respect of such Notes we confirm that: 1. We understand that the Notes were originally offered in a transaction not involving any public offering in the United States within the meaning of the United States Securities Act of 1933, as amended (the "Securities Act"), that the Notes have not been registered under the Securities Act and that (A) the Notes may be offered, resold, pledged or otherwise transferred only (i) to a Person who the seller reasonably believes is a "qualified institutional buyer" (as defined in Rule 144A under the Securities Act) in a transaction meeting the requirements of Rule 144A, in a transaction meeting the requirements of Rule 144 under the Securities Act, to a Person who the seller reasonably believes is an institutional "accredited investor" (as defined in Rule 501(a)(1), (2), (3) or (7) of Regulation D under the Securities Act), outside the United States in a transaction meeting the requirements of Rule 903 or 904 of Regulation S under the Securities Act or in accordance with another exemption from the registration requirements of the Securities Act (and based upon an opinion of counsel if the Company so requests), (ii) to the Company, (iii) pursuant to any other available exemption from registration or (iv) pursuant to an effective registration statement, and, in each case, in accordance with any applicable securities laws of any state of the United States or any other applicable jurisdiction and (B) the purchaser will, and each subsequent Holder is required to, notify any subsequent purchaser from it of the resale restrictions set forth in (A) above. 2. We are a corporation, partnership or other entity having such knowledge and experience in financial and business matters as to be capable of evaluating the merits and risks of an investment in the Notes, and we are (or any account for which we are purchasing under paragraph 4 below is) an institutional "accredited investor" as defined in Rule 501(a)(1), (2), (3) or (7) under the Securities Act, - ---------- * Insert and modify if appropriate F-100 100 able to bear the economic risk of our proposed investment in the Notes. 3. We are acquiring the Notes for our own account (or for accounts as to which we exercise sole investment discretion and have authority to make, and do make, the statements contained in this letter) and not with a view to any distribution of the Notes, subject, nevertheless, to the understanding that the disposition of our property shall at all times be and remain within our control. 4. We are, and each account (if any) for which we are purchasing Notes is, purchasing Notes having an aggregate principal amount at maturity of not less than $100,000 and, if such transfer is in respect of an aggregate principal amount at maturity of Notes of less than $100,000, we are providing an opinion of counsel acceptable to the Company that such transfer is in compliance with the Securities Act. 5. We understand that (a) the Notes will be delivered to us in registered form only and that the certificate delivered to us in respect of the Notes will bear a legend substantially to the following effect: THIS NOTE HAS NOT BEEN REGISTERED UNDER THE U.S. SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND ACCORDINGLY, MAY NOT BE OFFERED OR SOLD WITHIN THE UNITED STATES OR TO, OR FOR THE ACCOUNT OR BENEFIT OF, U.S. PERSONS EXCEPT AS SET FORTH IN THE FOLLOWING SENTENCE. BY ITS ACQUISITION HEREOF, THE HOLDER (1) REPRESENTS THAT (A) IT IS A "QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT) OR (B) IT IS AN INSTITUTIONAL "ACCREDITED INVESTOR" (AS DEFINED IN RULE 501(a)(1), (2), (3) OR (7) OF REGULATION D UNDER THE SECURITIES ACT) (AN "INSTITUTIONAL ACCREDITED INVESTOR") OR (C) IT IS NOT A U.S. PERSON AND IS ACQUIRING THIS NOTE IN AN OFFSHORE TRANSACTION IN COMPLIANCE WITH REGULATION S UNDER THE SECURITIES ACT, (2) AGREES THAT IT WILL NOT, WITHIN THE TIME PERIOD REFERRED TO UNDER RULE 144(k) UNDER THE SECURITIES ACT AS IN EFFECT ON THE DATE OF THE TRANSFER OF THIS NOTE, RESELL OR OTHERWISE TRANSFER THIS NOTE EXCEPT (A) TO THE COMPANY OR ANY SUBSIDIARY THEREOF, (B) TO A QUALIFIED INSTITUTIONAL BUYER IN COMPLIANCE WITH RULE 144A UNDER THE SECURITIES ACT, (C) INSIDE THE UNITED STATES TO AN INSTITUTIONAL ACCREDITED INVESTOR THAT, PRIOR TO SUCH TRANSFER, FURNISHES TO THE TRUSTEE A SIGNED LETTER CONTAINING CERTAIN REPRESENTATIONS AND AGREEMENTS RELATING TO THE RESTRICTIONS ON TRANSFER OF THIS NOTE (THE FORM OF WHICH LETTER CAN BE OBTAINED FROM THE TRUSTEE), AND, IF SUCH TRANSFER IS IN RESPECT OF AN AGGREGATE PRINCIPAL AMOUNT AT MATURITY OF LESS THAN $100,000, AN OPINION OF COUNSEL ACCEPTABLE TO THE COMPANY THAT SUCH TRANSFER IS IN COMPLIANCE WITH THE SECURITIES ACT, (D) OUTSIDE THE UNITED STATES IN AN OFF-SHORE TRANSACTION IN COMPLIANCE WITH RULE 904 UNDER THE SECURITIES ACT, (E) PURSUANT TO THE EXEMPTION FROM REGISTRATION PROVIDED BY RULE 144 UNDER THE SECURITIES ACT (IF AVAILABLE) OR (F) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT AND (3) AGREES THAT IT WILL DELIVER TO EACH PERSON TO WHOM THIS NOTE IS TRANSFERRED A NOTICE SUBSTANTIALLY TO THE EFFECT OF THIS LEGEND. IN CONNECTION WITH ANY TRANSFER OF THIS NOTE WITHIN THE TIME PERIOD REFERRED TO ABOVE, THE HOLDER MUST CHECK THE APPROPRIATE BOX SET FORTH ON THE REVERSE HEREOF RELATING TO THE MANNER OF SUCH TRANSFER AND SUBMIT THIS CERTIFICATE TO THE TRUSTEE. IF THE PROPOSED TRANSFEREE IS AN INSTITUTIONAL ACCREDITED INVESTOR, THE HOLDER MUST, PRIOR TO SUCH TRANSFER, FURNISH TO F-101 101 THE TRUSTEE AND THE COMPANY SUCH CERTIFICATIONS, LEGAL OPINIONS OR OTHER INFORMATION AS EITHER OF THEM MAY REASONABLY REQUIRE TO CONFIRM THAT SUCH TRANSFER IS BEING MADE PURSUANT TO AN EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT. AS USED HEREIN, THE TERMS "OFF-SHORE TRANSACTION," "UNITED STATES" AND "U.S. PERSON" HAVE THE MEANINGS GIVEN TO THEM BY REGULATION S UNDER THE SECURITIES ACT. THE INDENTURE CONTAINS A PROVISION REQUIRING THE TRUSTEE TO REFUSE TO REGISTER ANY TRANSFER OF THIS NOTE IN VIOLATION OF THE FOREGOING RESTRICTIONS. and (b) such certificates will be reissued without the foregoing legend only in accordance with the terms of the Indenture. 6. We agree that in the event that at some future time we wish to dispose of any of the Notes, we will not do so unless: (a) the Notes are sold to the Company; (b) the Notes are sold to a qualified institutional buyer in compliance with Rule 144A under the Securities Act; (c) the Notes are sold outside the United States in compliance with Rule 903 or Rule 904 under the Securities Act; (d) the Notes are sold pursuant to an effective registration statement under the Securities Act; or (e) the Notes are sold pursuant to any other available exemption from registration, subject to the requirements of the legend set forth above. Very truly yours, [PURCHASER] By: Name: Title: Dated: cc: NTL Incorporated 110 East 59th Street New York, New York 10022 Attn: Richard J. Lubasch, Esq. Senior Vice President and General Counsel F-102 102 EXHIBIT G FORM OF CERTIFICATE FOR TRANSFERS OF REGULATION S GLOBAL NOTE FOR RESTRICTED NOTES (Transfers pursuant to ss. 2.06(a)(viii)) (Transferor) The Chase Manhattan Bank 450 West 33rd Street New York, New York 10001 Attn: Corporate Trustee Administration Department Re: NTL Incorporated 12-3/8% Senior Deferred Coupon Notes due 2008 (the "Notes") Reference is hereby made to the Indenture, dated as of November 6, 1998 (the "Indenture"), between NTL Incorporated, as Issuer, and The Chase Manhattan Bank, as Trustee. Capitalized terms used but not defined herein shall have the respective meanings given them in the Indenture. This certificate relates to $[ ] aggregate principal amount at maturity of Notes which are held in the form of the Regulation S Global Note (CINS No. [ ]) with the Depositary in the name of [name of transferor] (the "Transferor") to effect the transfer of the beneficial interest in such Regulation S Global Note for a beneficial interest in an equivalent aggregate principal amount of Restricted Securities. In connection with such request, and in respect of such Notes, we confirm that: We are either not a U.S. Person (as defined below) or we have purchased our beneficial interest in the above referenced Regulation S Global Note in a transaction that is exempt from the registration requirements under the Securities Act. We are delivering this certificate in connection with obtaining a beneficial interest in Restricted Securities in exchange for our beneficial interest in the Regulation S Global Note. For purposes of this certificate, "U.S. Person" means (i) any individual resident in the United States, (ii) any partnership or corporation organized or incorporated under the laws of the United States, (iii) any estate of which an executor or administrator is a U.S. Person (other than an estate governed by foreign law and of which at least one executor or administrator is a non-U.S. Person who has sole or shared investment discretion with respect to its assets), (iv) any trust of which any trustee is a U.S. Person (other than a trust of which at least one trustee is a non-U.S. Person who has sole or shared investment discretion with respect to its assets and no beneficiary of the trust (and no settlor if the trust is revocable) is a U.S. Person), (v) any agency or branch of a foreign entity located in the United States, (vi) any non- discretionary or similar account (other than an estate or trust) held by a dealer or other fiduciary for the benefit or account of a U.S. Person, (vii) any discretionary or similar account (other than an estate or trust) held by a dealer or other fiduciary organized, incorporated or (if an individual) resident in the United States (other than such an account held for the benefit or account of a non-U.S. Person), (viii) any partnership or corporation organized or incorporated under the laws of a foreign jurisdiction and formed G-103 103 by a U.S. Person principally for the purpose of investing in securities not registered under the Securities Act (unless it is organized or incorporated, and owned, by accredited investors within the meaning of Rule 501(a) under the Securities Act who are not natural Persons, estates or trusts); provided, however, that the term "U.S. Person" shall not include (A) a branch or agency of a U.S. Person that is located and operating outside the United States for valid business purposes as a locally regulated branch or agency engaged in the banking or insurance business, (B) any employee benefit plan established and administered in accordance with the law, customary practices and documentation of a foreign country and (C) the international organizations set forth in Section 902(o)(7) of Regulation S under the Securities Act and any other similar international organizations, and their agencies, affiliates and pension plans. We irrevocably authorize you to produce this certificate or a copy hereof to any interested party in any administrative or other proceedings with respect to the matters covered by this certificate. Very truly yours, [TRANSFEROR] By: ----------------------------- Name: Title: Dated: To be completed by the account Holder as, or as agent for, the beneficial owner(s) of the Notes to which this certificate relates. cc: NTL Incorporated 110 East 59th Street New York, New York 10022 Attn: Richard J. Lubasch, Esq. Senior Vice President and General Counsel G-104 EX-4.16 6 REGISTRATION RIGHTS AGREEMENT, DATED AS OF 11/6/98 1 Exhibit 4.16 ================================================================================ $450,000,000 12-3/8% SENIOR DEFERRED COUPON NOTES DUE 2008 REGISTRATION RIGHTS AGREEMENT Dated as of November 6, 1998 by and among NTL INCORPORATED and MORGAN STANLEY & CO. INCORPORATED CHASE SECURITIES INC. DONALDSON, LUFKIN & JENRETTE SECURITIES CORPORATION GOLDMAN, SACHS & CO. ================================================================================ 2 This Registration Rights Agreement (this "Agreement") is made and entered into as of November 6, 1998 by and among NTL Incorporated, a Delaware corporation (the "Company"), and Morgan Stanley & Co. Incorporated, Chase Securities Inc., Donaldson, Lufkin & Jenrette Securities Corporation and Goldman, Sachs & Co. (each an "Initial Purchaser" and collectively, the "Initial Purchasers"). The Company proposes to issue and sell to the Initial Purchasers (the "Initial Placement") $450,000,000 aggregate principal amount at maturity of its 12-3/8% Senior Deferred Coupon Notes due 2008 (the "Notes"). As an inducement to the Initial Purchasers to enter into the purchase agreement, dated as of October 30, 1998 ( the "Purchase Agreement"), and in satisfaction of a condition to the Initial Purchasers' obligations thereunder, the Company agrees with the Initial Purchasers, (i) for the benefit of the Initial Purchasers and (ii) for the benefit of the holders from time to time of the Notes whose names appear in the register maintained by the Registrar in accordance with the provisions of the Indenture (as defined in Section 1 hereof) (including the Initial Purchasers), as follows: SECTION 1. DEFINITIONS Capitalized terms used herein without definition shall have their respective meanings set forth in the Purchase Agreement. As used in this Agreement, the following capitalized defined terms shall have the following meanings: "Act" means the Securities Act of 1933, as amended, and the rules and regulations of the Commission promulgated thereunder. "Accreted Value" means, as of any date of determination prior to October 1, 2003, with respect to any Note or Exchange Note, the sum of (a) the initial offering price (which shall be calculated by discounting the aggregate principal amount at maturity of such Note, at a rate of 12-3/8% per annum, compounded semiannually on each April 1 and October 1 from October 1, 2003 to the date of issuance) of such Note, and (b) the portion of the excess of the principal amount of such Note or Exchange Note over such initial offering price which shall have been accreted thereon through such date, such amount to be so accreted on a daily basis at a rate of 12-3/8% per annum of the initial offering price of a Note compounded semiannually on each April 1 and October 1 from the date of issuance of the Note or, with respect to the Exchange Notes, from the last day on which the increase in the Accreted Value of the Notes was compounded prior to the date of original issuance of such Exchange Notes through the date of determination, computed on the basis of a 360-day year of twelve 30-day months. "Affiliate" of any specified person means any other person which, directly or indirectly, is in control of, is controlled by, or is under common control with, such specified person. For purposes of this definition, control of a person means the power, direct or indirect, to direct or cause the direction of the management and policies of such person whether by contract or otherwise; and the terms "controlling" and "controlled" have meanings correlative to the foregoing. "Closing Date" has the meaning set forth in the Purchase Agreement. "Commission" means the Securities and Exchange Commission. "Commission Delay Period" has the meaning set forth in Section 3(a) hereof. "Consummate" means the occurrence of (i) the filing and effectiveness under the Act of the Exchange Offer Registration Statement relating to the Exchange Notes to be issued in the Registered 3 Exchange Offer, (ii) the maintenance of such Registration Statement continuously effective and the keeping of the Registered Exchange Offer open for a period not less than the minimum period required pursuant to Section 3(c)(ii) hereof, and (iii) the delivery by the Company to the Registrar under the Indenture or the Exchange Notes Indenture, as the case may be, of Exchange Notes in the same aggregate principal amount as the aggregate principal amount of Notes that were tendered by Holders thereof and accepted for exchange pursuant to the Registered Exchange Offer. "Exchange Act" means the Securities Exchange Act of 1934, as amended, and the rules and regulations of the Commission promulgated thereunder. "Exchange Notes" means debt securities of the Company identical in all material respects to the Notes (except that the Accreted Value of the Exchange Notes will increase from the last day on which the increase in the Accreted Value of the Notes was compounded prior to the date of original issuance of the Exchange Notes, and paragraph 2 of, and the transfer restrictions on, the Notes will be eliminated), to be issued under the Indenture or the Exchange Notes Indenture. "Exchange Notes Indenture" means an indenture between the Company and the Exchange Notes Trustee, identical in all material respects to the Indenture (except that the Accreted Value of the Exchange Notes will increase from the last day on which the increase in the Accreted Value of the Notes was compounded prior to the date of original issuance of the Exchange Notes, and paragraph 2 of, and the transfer restrictions on, the Notes will be eliminated). "Exchange Notes Trustee" means a bank or trust company reasonably satisfactory to the Initial Purchasers, as trustee with respect to the Exchange Notes under the Exchange Notes Indenture. "Exchange Offer Registration Period" means a period expiring upon the earliest to occur of (i) the one year period following the Consummation of the Registered Exchange Offer, (ii) the date on which, in the opinion of counsel to the Company, all of the Transfer Restricted Securities then held by the Holders may be sold by such Holders in the public United States securities markets in the absence of a registration statement covering such sales and (iii) the date on which there ceases to be outstanding any Transfer Restricted Securities. "Exchange Offer Registration Statement" means a registration statement of the Company on an appropriate form under the Act with respect to the Registered Exchange Offer (which registration statement may also relate to the exchange offer for the Company's 11 1/2% Senior Notes due 2008 pursuant to the Registration Rights Agreement dated November 2, 1998 between the Company and the Initial Purchasers), all amendments and supplements to such registration statement, including post-effective amendments, and in each case, including the Prospectus contained therein, all exhibits thereto and all material incorporated by reference therein. "Exchanging Dealer" means any Holder (which may include the Initial Purchasers) that is a broker-dealer, electing to exchange Transfer Restricted Securities, acquired for its own account as a result of market-making activities or other trading activities, for Exchange Notes. "Holder" has the meaning set forth in Section 2 hereof. "Indenture" means the Indenture, dated as of November 6, 1998, between the Company and the Trustee, relating to the Notes, as the same may be amended from time to time in accordance with the terms thereof. 3 4 "Initial Placement" has the meaning set forth in the preamble hereto. "Losses" has the meaning set forth in Section 8(d) hereof. "Majority Holders" means the Holders of a majority of the aggregate principal amount at maturity of securities registered under a Registration Statement. "Managing Underwriters" means the investment banker or investment bankers and manager or managers that shall administer an underwritten offering. "Notes" has the meaning set forth in the preamble hereto. "Prospectus" means the prospectus included in any Registration Statement (including, without limitation, a prospectus that discloses information previously omitted from a prospectus filed as part of an effective registration statement in reliance upon Rule 430A under the Act), as amended or supplemented by any prospectus supplement, with respect to the terms of the offering of any portion of Transfer Restricted Securities or the Exchange Notes, covered by such Registration Statement, and all amendments and supplements to the Prospectus, including post-effective amendments. "Registered Exchange Offer" means the proposed offer to the Holders to issue and deliver to such Holders, in exchange for Notes, a like principal amount at maturity of the Exchange Notes. "Registration Statement" means any Exchange Offer Registration Statement or any Shelf Registration Statement, which is filed pursuant to the provisions hereof, and in each case, including the Prospectus contained therein, all amendments and supplements thereto, including post-effective amendments, and all exhibits and material incorporated by reference therein. "Shelf Registration" means a registration effected pursuant to Section 4 hereof. "Shelf Registration Period" has the meaning set forth in Section 4(b) hereof. "Shelf Registration Statement" means a "shelf" registration statement of the Company pursuant to the provisions of Section 4 hereof that covers some or all of the Transfer Restricted Securities as applicable, on an appropriate form under Rule 415 under the Act, or any similar rule that may be adopted by the Commission, amendments and supplements to such registration statement, including post-effective amendments, and in each case, including the Prospectus contained therein, all exhibits thereto and all material incorporated by reference therein. "Supplement Delay Period" means any period commencing on the date of receipt by a Holder of Transfer Restricted Securities or Exchange Notes of any notice from the Company of the existence of any fact or event of the kind described in Section 5(b)(2) hereof and ending on the date of receipt by such Holder of an amended or supplemented Registration Statement or Prospectus, as contemplated by Section 5(j) hereof, or the receipt by such Holder of written notice from the Company (the "Advice") that the use of the Prospectus may be resumed, and the receipt of copies of any additional or supplemental filings that are incorporated by reference in the Prospectus. "Transfer Restricted Securities" means each Note until (i) the date on which such Note has been exchanged by a person other than a broker-dealer for an Exchange Note in the Registered Exchange Offer, (ii) following the exchange by an Exchanging Dealer in the Registered Exchange Offer of a Note for an Exchange Note, the date on which such Exchange Note is sold to a purchaser who receives from 4 5 such broker-dealer on or prior to the date of such sale a copy of the prospectus contained in the Exchange Offer Registration Statement, (iii) the date on which such Note has been effectively registered under the Act and disposed of in accordance with the Shelf Registration Statement (iv) the date on which such Note is distributed to the public pursuant to Rule 144 under the Act (or any similar provision then in effect) or is saleable pursuant to Rule 144(k) under the Act or (v) the date upon which such Note ceases to be outstanding. "Trustee" means the trustee with respect to the Notes under the Indenture. "underwriter" means any underwriter of Notes in connection with an offering thereof under a Shelf Registration Statement. SECTION 2. HOLDERS A person is deemed to be a holder of Transfer Restricted Securities (each, a "Holder") whenever such person becomes the registered holder of such Notes under the Indenture and includes broker-dealers that hold Transfer Restricted Securities (i) as a result of market making activities and other trading activities and (ii) which were acquired directly from the Company or an Affiliate. SECTION 3. REGISTERED EXCHANGE OFFER (a) The Company shall prepare and, on or prior to 90 days following the Closing Date, shall file with the Commission the Exchange Offer Registration Statement with respect to the Registered Exchange Offer. The Company shall use its best efforts to cause the Exchange Offer Registration Statement to become effective under the Act on or prior to 180 days after the Closing Date; provided that, if as a result of there being no federal governmental budget for any year following the 1997 fiscal year, the Commission ceases to review registration statements like the Registration Statements in the time within which the Commission normally reviews such registration statements in the ordinary course (a "Commission Delay Period"), then such 180 day period during which the Company must cause the Exchange Offer Registration Statement to become effective shall be extended by the number of days of which the Commission Delay Period is comprised. The Company shall use its best efforts to Consummate the Registered Exchange Offer on or prior to 220 days after the Closing Date. (b) Upon the effectiveness of the Exchange Offer Registration Statement, the Company shall promptly commence the Registered Exchange Offer, it being the objective of such Registered Exchange Offer to enable each Holder electing to exchange Transfer Restricted Securities for Exchange Notes (assuming that such Holder is not an Affiliate of the Company within the meaning of the Act, acquires the Exchange Notes in the ordinary course of such Holder's business and has no arrangements with any person to participate in the distribution of the Exchange Notes) to trade such Exchange Notes from and after their receipt without any limitations or restrictions under the Act and without material restrictions under the securities laws of a substantial proportion of the several states of the United States. (c) In connection with the Registered Exchange Offer, the Company shall: (i) mail to each Holder a copy of the Prospectus forming part of the Exchange Offer Registration Statement, together with an appropriate letter of transmittal and related documents; (ii) keep the Registered Exchange Offer open for not less than 30 days and not more than 45 days after the date notice thereof is mailed to the Holders (or longer if required by applicable 5 6 law); (iii) utilize the services of one or more depositaries or exchange agents (which, in either case, may be the Trustee) for the Registered Exchange Offer with an address (A) in the Borough of Manhattan, The City of New York and (B) if the Notes are then listed on the Luxembourg Stock Exchange and the rules of the Luxembourg Stock Exchange so require, Luxembourg; and (iv) comply in all material respects with all applicable laws. (d) As soon as practicable after the close of the Registered Exchange Offer, the Company shall: (i) accept for exchange all Transfer Restricted Securities tendered and not validly withdrawn pursuant to the Registered Exchange Offer; (ii) deliver to the Trustee for cancellation all Transfer Restricted Securities so accepted for exchange; and (iii) cause the Trustee or the Exchange Notes Trustee, as the case may be, promptly to authenticate and deliver to each Holder of Transfer Restricted Securities, Exchange Notes of a like principal amount at maturity to the Transfer Restricted Securities of such Holder so accepted for exchange. (e) The Initial Purchasers and the Company acknowledge that, pursuant to interpretations by the Commission's staff of Section 5 of the Act, and in the absence of an applicable exemption therefrom, each Exchanging Dealer is required to deliver a Prospectus in connection with a sale of any Exchange Notes received by such Exchanging Dealer pursuant to the Registered Exchange Offer in exchange for Transfer Restricted Securities acquired for its own account as a result of market-making activities or other trading activities. Accordingly, the Company shall: (i) include the information set forth in (A) Annex A hereto on the cover of the Exchange Offer Registration Statement, (B) Annex B hereto in the forepart of the Exchange Offer Registration Statement in a section setting forth details of the Registered Exchange Offer, (C) Annex C hereto in the "Plan of Distribution" section of the Prospectus contained in the Exchange Offer Registration Statement and (D) Annex D hereto in the Letter of Transmittal delivered pursuant to the Registered Exchange Offer and (ii) use its best efforts to keep the Exchange Offer Registration Statement continuously effective (subject to the existence of a Supplement Delay Period) under the Act during the Exchange Offer Registration Period for delivery by Exchanging Dealers in connection with sales of Exchange Notes received pursuant to the Registered Exchange Offer, as contemplated by Section 5(g) below. (f) In the event that any Initial Purchaser determines that it is not eligible to participate in the Registered Exchange Offer with respect to the exchange of Transfer Restricted Securities constituting any portion of an unsold allotment of Notes, at the written request of such Initial Purchaser, the Company shall issue and deliver to such Initial Purchaser or the party purchasing Transfer Restricted Securities registered under a Shelf Registration Statement as contemplated by Section 4 hereof from such Initial Purchaser, in exchange for such Transfer Restricted Securities, a like principal amount at maturity of Exchange Notes. Exchange Notes issued in exchange for Transfer Restricted Securities constituting any portion of an unsold allotment of Notes that are not registered under a Shelf Registration Statement as 6 7 contemplated by Section 4 hereof shall bear a legend as to restrictions on transfer. The Company shall seek to cause the CUSIP Service Bureau to issue the same CUSIP number for such Exchange Notes as for Exchange Notes issued pursuant to the Registered Exchange Offer. SECTION 4. SHELF REGISTRATION If, (i) the Company is not required to file the Exchange Offer Registration Statement nor permitted to Consummate the Registered Exchange Offer because the Registered Exchange Offer is not permitted by applicable law or Commission policy or (ii) any Holder of Transfer Restricted Securities notifies the Company in writing within 10 business days of the filing and effectiveness under the Act of the Exchange Offer Registration Statement that (A) it is prohibited by law or Commission policy from participating in the Registered Exchange Offer, (B) it may not resell the Exchange Notes acquired by it in the Registered Exchange Offer to the public without delivering a prospectus, and the prospectus contained in the Exchange Offer Registration Statement is not appropriate or available for such resales or (C) it is a broker-dealer and owns Notes acquired directly from the Company or an Affiliate (it being understood that, for purposes of this Section 4, (x) the requirement that an Initial Purchaser deliver a Prospectus containing the information required by Items 507 and/or 508 of Regulation S-K under the Act in connection with sales of Exchange Notes acquired in exchange for such Notes shall result in such Exchange Notes being not "freely tradeable" but (y) the requirement that an Exchanging Dealer deliver a Prospectus in connection with sales of Exchange Notes acquired in the Registered Exchange Offer in exchange for Notes acquired as a result of market-making activities or other trading activities shall not result in such Exchange Notes being not "freely tradeable"), the following provisions shall apply: (a) The Company shall as promptly as practicable, file with the Commission and thereafter shall use its best efforts to cause to be declared effective under the Act on or prior to 220 days (plus any additional days allowed as a result of a Commission Delay Period) after the date of original issuance of the Notes, a Shelf Registration Statement relating to the offer and sale of the Transfer Restricted Securities by the Holders from time to time in accordance with the methods of distribution elected by such Holders and set forth in such Shelf Registration Statement; provided, however, that with respect to Exchange Notes received by an Initial Purchaser in exchange for Transfer Restricted Securities constituting any portion of an unsold allotment of Notes, the Company may, if permitted by current interpretations by the Commission's staff, file a post-effective amendment to the Exchange Offer Registration Statement containing the information required by Regulation S-K Items 507 and/or 508, as applicable, in satisfaction of its obligations under this paragraph (a) with respect thereto, and any such Exchange Offer Registration Statement, as so amended, shall be referred to herein as, and governed by the provisions herein applicable to, a Shelf Registration Statement. (b) The Company shall use its best efforts to keep the Shelf Registration Statement continuously effective in order to permit the Prospectus forming part thereof to be usable by Holders for a period of two years from the date the Shelf Registration statement is declared effective by the Commission (or until one year after such effective date if such Shelf Registration Statement is filed at the request of an Initial Purchaser) or such shorter period that will terminate when (i) all the Transfer Restricted Securities covered by the Shelf Registration Statement have been sold pursuant to the Shelf Registration Statement, (ii) the date on which, in the opinion of counsel to the Company, all of the Transfer Restricted Securities then held by the Holders may be sold by such Holders in the public United States securities markets in the absence of a registration statement covering such sales or (iii) the date on which there ceases to be outstanding any Transfer Restricted Securities (in any such case, such period being called the "Shelf Registration Period"). The Company shall be deemed not to have used its best efforts to keep the Shelf Registration Statement effective during the requisite period if it voluntarily takes any action that would 7 8 result in Holders of Transfer Restricted Securities covered thereby not being able to offer and sell such securities during that period, unless (i) such action is required by applicable law, (ii) such action is taken by the Company in good faith and for valid business reasons (not including avoidance of the Company's obligations hereunder), including the acquisition or divestiture of assets, so long as the Company promptly thereafter complies with the requirements of Section 5(j) hereof, if applicable or (iii) such action is taken because of any fact or circumstance giving rise to a Supplement Delay Period. SECTION 5. REGISTRATION PROCEDURES In connection with any Shelf Registration Statement and, to the extent applicable, any Exchange Offer Registration Statement, the following provisions shall apply: (a) The Company shall ensure that (i) any Registration Statement and any amendment thereto and any Prospectus forming part thereof and any amendment or supplement thereto complies in all material respects with the Act and the rules and regulations thereunder, (ii) any Registration Statement and any amendment thereto does not, when it becomes effective, contain an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading and (iii) any Prospectus forming part of any Registration Statement, and any amendment or supplement to such Prospectus, does not include an untrue statement of a material fact or omit to state a material fact necessary in order to make the statements, in the light of the circumstances under which they were made, not misleading. (b) (1) The Company shall advise the Initial Purchasers and, in the case of a Shelf Registration Statement, the Holders of Transfer Restricted Securities covered thereby, and, if requested by the Initial Purchasers or any such Holder, confirm such advice in writing when a Registration Statement and any amendment thereto has been filed with the Commission and when the Registration Statement or any post-effective amendment thereto has become effective. (2) The Company shall advise the Initial Purchasers and, in the case of a Shelf Registration Statement, the Holders of Transfer Restricted Securities covered thereby, and, in the case of an Exchange Offer Registration Statement, any Exchanging Dealer which has provided in writing to the Company a telephone or facsimile number and address for notices, and, if requested by the Initial Purchasers or any such Holder or Exchanging Dealer, confirm such advice in writing: (i) of any request by the Commission for amendments or supplements to the Registration Statement or the Prospectus included therein or for additional information; (ii) of the initiation by the Commission of proceedings relating to a stop order suspending the effectiveness of the Registration Statement; (iii) of the issuance by the Commission of any stop order suspending the effectiveness of the Registration Statement; (iv) of the receipt by the Company of any notification with respect to the suspension of the qualification of the securities included therein for sale in any jurisdiction or the initiation or threatening of any proceeding for such purpose; and (v) of the existence of any fact and the happening of any event (including, without limitation, pending negotiations relating to, or the consummation of, a transaction or the occurrence of any 8 9 event which would require additional disclosure of material non-public information by the Company in the Shelf Registration Statement as to which the Company has a bona fide business purpose for preserving confidential or which renders the Company unable to comply with Commission requirements) that, in the opinion of the Company, makes untrue any statement of a material fact made in its Shelf Registration Statement, the Prospectus or any amendment or supplement thereto or any document incorporated by reference therein or requires the making of any changes in the Registration Statement or the Prospectus so that, as of such date, the statements therein are not misleading and do not omit to state a material fact required to be stated therein or necessary to make the statements therein (in the case of the Prospectus, in light of the circumstances under which they were made) not misleading. Such advice may be accompanied by an instruction to suspend the use of the Prospectus until the requisite changes have been made. (c) The Company shall use its best efforts to obtain the withdrawal of any order suspending the effectiveness of any Registration Statement at the earliest possible time. (d) The Company shall use its best efforts to furnish to each selling Holder included within the coverage of any Shelf Registration Statement who so requests in writing and who has provided to the Company an address for notices, without charge, at least one conformed copy of such Shelf Registration Statement and any post-effective amendment thereto, including financial statements and, if the Holder so requests in writing, all exhibits and schedules (including those incorporated by reference). (e) The Company shall, during the Shelf Registration Period, deliver to each Holder of Transfer Restricted Securities covered by any Shelf Registration Statement and who has provided to the Company an address for notices, without charge, as many copies of the Prospectus (including each preliminary Prospectus) contained in such Shelf Registration Statement and any amendment or supplement thereto as such Holder may reasonably request; subject to any notice by the Company in accordance with Section 6(b) hereof, the Company consents to the use of the Prospectus or any amendment or supplement thereto by each of the selling Holders for the purposes of offering and resale of the Transfer Restricted Securities covered by the Prospectus in accordance with the applicable regulations promulgated under the Act. (f) The Company shall furnish to each Exchanging Dealer, which so requests in writing, without charge, at least one copy of the Exchange Offer Registration Statement and any post-effective amendment thereto, including financial statements, and, if the Exchanging Dealer so requests in writing, any documents incorporated by reference therein and all exhibits and schedules (including those incorporated by reference). (g) The Company shall, during the Exchange Offer Registration Period, promptly deliver to each Exchanging Dealer, without charge, as many copies of the Prospectus included in such Exchange Offer Registration Statement and any amendment or supplement thereto as such Exchanging Dealer may reasonably request for delivery by such Exchanging Dealer in connection with a sale of Exchange Notes received by it pursuant to the Registered Exchange Offer; the Company consents to the use of the Prospectus or any amendment or supplement thereto by any such Exchanging Dealer for the purposes contemplated by the Act or the applicable regulations promulgated under the Act. (h) Prior to the Registered Exchange Offer or any offering of Transfer Restricted Securities pursuant to any Registration Statement, the Company shall register or qualify or cooperate with the Holders of Transfer Restricted Securities named therein and their respective counsel in connection with the 9 10 registration or qualification of such Transfer Restricted Securities for offer and sale under the securities or blue sky laws of such jurisdictions of the United States as any such Holders reasonably request in writing not later than the date that is five business days prior to the date upon which this Agreement specifies that the Registration Statement shall become effective; provided, however, that the Company will not be required to qualify generally to do business in any jurisdiction where it is not then so qualified or to take any action which would subject it to general service of process or to taxation in any such jurisdiction where it is not then so subject. (i) The Company shall endeavor to cooperate with the Holders of Transfer Restricted Securities to facilitate the timely preparation and delivery of certificates representing Transfer Restricted Securities to be sold pursuant to any Registration Statement free of any restrictive legends and in such denominations and registered in such names as Holders may request in writing at least two business days prior to sales of securities pursuant to such Registration Statement. (j) Upon the occurrence of any event contemplated by paragraph (b)(2)(v) hereof, the Company shall promptly prepare a post-effective amendment to any Registration Statement or an amendment or supplement to the related Prospectus or file any other required document so that as thereafter delivered to purchasers of the Transfer Restricted Securities covered thereby, the Prospectus will not include an untrue statement of a material fact or omit to state any material fact necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading; provided that in the event of a material business transaction (including, without limitation, pending negotiations relating to such a transaction) which would, in the opinion of counsel to the Company, require disclosure by the Company in the Shelf Registration Statement of material non-public information for which the Company has a bona fide business purpose for not disclosing, then for so long as such circumstances exist, the Company shall not be required to prepare and file a supplement or post-effective amendment hereunder. (k) Not later than the effective date of any such Registration Statement hereunder, the Company shall cause to be provided a CUSIP number for the Notes or Exchange Notes, as the case may be, registered under such Registration Statement, and provide the applicable trustee with printed certificates for such Notes or Exchange Notes, in a form eligible for deposit with The Depository Trust Company. (l) The Company shall use its best efforts to comply with all applicable rules and regulations of the Commission and shall make generally available to its security holders in a regular filing on Form 10-Q or 10-K an earnings statement satisfying the provisions of Rule 158 (which need not be audited) for the twelve-month period commencing after effectiveness of the Shelf Registration Statement. (m) The Company shall cause the Indenture or the Exchange Notes Indenture, as the case may be, to be qualified under the Trust Indenture Act in a timely manner. (n) The Company may require each Holder of Transfer Restricted Securities, which are to be sold pursuant to any Shelf Registration Statement, to furnish to the Company within 20 business days after written request for such information has been made by the Company, such information regarding the Holder and the distribution of such securities as the Company may from time to time reasonably require for inclusion in such Registration Statement and such other information as may be necessary or advisable in the reasonable opinion of the Company and its counsel, in connection with such Shelf Registration Statement. No Holder of Transfer Restricted Securities shall be entitled to use the Prospectus unless and until such Holder shall have furnished the information required by this Section 5(n) and all such information required to be disclosed in order to make the information previously furnished to the Company by such Holder not materially misleading. 10 11 (o) The Company shall, if requested, promptly incorporate in a Prospectus supplement or post-effective amendment to a Shelf Registration Statement, such information as the Managing Underwriters and Majority Holders reasonably agree should be included therein and shall make all required filings of such Prospectus supplement or post-effective amendment as soon as notified of the matters to be incorporated in such Prospectus supplement or post-effective amendment; provided, however, that the Company shall not be required to take any action pursuant to this Section 5(o) that would, in the opinion of counsel for the Company, violate applicable law or to include information the disclosure of which at the time would have an adverse effect on the business or operations of the Company and/or its subsidiaries, as determined in good faith by the Company. (p) In the case of any Shelf Registration Statement, the Company shall enter into such agreements (including underwriting agreements) and take all other reasonably appropriate actions in order to expedite or facilitate the registration or the disposition of the Transfer Restricted Securities, and in connection therewith, if an underwriting agreement is entered into, cause the same to contain indemnification provisions and procedures no less favorable than those set forth in Section 8 (or such other provisions and procedures acceptable to the Majority Holders and the Managing Underwriters, if any), with respect to all parties to be indemnified pursuant to Section 8 from Holders of Notes to the Company. (q) In the case of any Shelf Registration Statement, the Company shall: (i) make reasonably available for inspection by representatives of the Holders of Transfer Restricted Securities to be registered thereunder, the Managing Underwriter participating in any disposition pursuant to such Registration Statement, and any attorney, accountant or other agent retained by the Holders or any such Managing Underwriter, at the office where normally kept during normal business hours, all financial and other records, pertinent corporate documents and properties of the Company and its subsidiaries, and cause the Company's officers, directors and employees to supply all relevant information reasonably requested by the Holders or any Managing Underwriter, attorney, accountant or other agent in connection with any such Registration Statement as is customary for similar due diligence examinations; provided, however, that the foregoing inspection and information gathering shall be coordinated by the Managing Underwriters, if any, or by one counsel designated by the Holders and that such persons shall first agree in writing with the Company that any information that is designated in writing by the Company, in good faith, as confidential at the time of delivery of such information shall be kept confidential by such person, unless such disclosure is made in connection with a court proceeding or required by law, or such information becomes available to the public generally or through a third party without an accompanying obligation of confidentiality; (ii) make such representations and warranties to the Holders of Transfer Restricted Securities registered thereunder and the underwriters, if any, in form, substance and scope as are customarily made by issuers to underwriters in underwritten offerings and covering matters including, but not limited to, those set forth in the Purchase Agreement; (iii) obtain opinions of counsel to the Company and updates thereof (which counsel and opinions (in form, scope and substance) shall be reasonably satisfactory to the Managing Underwriters, if any), addressed to each selling Holder and the underwriters, if any, covering such matters as are customarily covered in opinions requested in underwritten offerings and such other matters as may be reasonably requested by such Holders and underwriters; (iv) obtain "cold comfort" letters (or, in the case of any person that does not satisfy the 11 12 conditions for receipt of a "cold comfort" letter specified in Statement on Auditing Standards No. 72, an "agreed-upon procedures letter") and updates thereof from the independent certified public accountants of the Company (and, if necessary, any other independent certified public accountants of any subsidiary of the Company or of any business acquired by the Company for which financial statements and financial data are, or are required to be, included in the Registration Statement), addressed where reasonably practicable to each selling Holder of Transfer Restricted Securities registered thereunder and the underwriters, if any, in customary form and covering matters of the type customarily covered in "cold comfort" letters in connection with primary underwritten offerings; and (v) deliver such documents and certificates as may be reasonably requested by the Majority Holders and the Managing Underwriters, if any, including those to evidence compliance with Section 5(j) and with any customary conditions contained in the underwriting agreement or other agreement entered into by the Company. The foregoing actions set forth in clauses (ii), (iii), (iv) and (v) of this Section 5(q) shall, if reasonably requested by the Majority Holder or the Majority Underwriters, be performed at (A) the effectiveness of such Registration Statement and each post-effective amendment thereto and (B) each closing under any underwriting or similar agreement, as to the extent required thereunder. (vi) The Company may offer securities of the Company other than the Notes or the Exchange Notes under the Shelf Registration Statement, except where such offer would conflict with the terms of the Purchase Agreement. SECTION 6. HOLDERS' AGREEMENTS Each Holder of Transfer Restricted Securities and Exchange Notes, by the acquisition of such Transfer Restricted Securities or Exchange Notes, as the case may be, agrees: (a) To furnish the information required to be furnished pursuant to Section 5(n) hereof within the time period set forth therein. (b) That upon receipt of a notice of the commencement of a Supplement Delay Period, it will keep the fact of such notice confidential, forthwith discontinue disposition of its Transfer Restricted Securities or Exchange Notes, as the case may be, pursuant to the Registration Statement, and will not deliver any Prospectus forming a part thereof until receipt of the amended or supplemented Registration Statement or Prospectus, as applicable, as contemplated by Section 5(j) hereof, or until receipt of the Advice. If a Supplement Delay Period should occur, the Exchange Offer Registration Period or the Shelf Registration Period, as applicable, shall be extended by the number of days of which the Supplement Delay Period is comprised; provided that the Shelf Registration Period shall not be extended if the Company has received an opinion of counsel (which counsel, if different from counsel to the Company referred to in Section 6(a) and (b) of the Purchase Agreement, shall be reasonably satisfactory to the Majority Holders of the Transfer Restricted Securities named in the Shelf Registration Period) to the effect that the Transfer Restricted Securities can be freely tradeable without the continued effectiveness of the Shelf Registration Statement. (c) If so directed by the Company in a notice of the commencement of a Supplement Delay Period, each Holder of Transfer Restricted Securities or Exchange Notes, as the case may be, will deliver 12 13 to the Company (at the Company's expense) all copies, other than permanent file copies then in such Holder's possession, of the Prospectus covering the Transfer Restricted Securities or Exchange Notes, as the case may be. (d) Sales of such Transfer Restricted Securities pursuant to a Registration Statement shall only be made in the manner set forth in such currently effective Registration Statement. SECTION 7. REGISTRATION EXPENSES The Company shall bear all expenses incurred in connection with the performance of its obligations under Sections 3, 4 and 5 hereof and, in the event of any Shelf Registration Statement, will reimburse the Holders for the reasonable fees and disbursements of one firm or counsel designated by the Majority Holders to act as counsel for the Holders in connection therewith, and, in the case of any Exchange Offer Registration Statement, will reimburse the Initial Purchasers for the reasonable fees and disbursements of counsel acting in connection therewith. Notwithstanding the foregoing or anything in this Agreement to the contrary, each Holder shall pay all underwriting discounts and commission of any underwriters with respect to any Transfer Restricted Securities sold by it. SECTION 8. INDEMNIFICATION AND CONTRIBUTION (a) In connection with Registration Statement, the Company agrees to indemnify and hold harmless each Holder of Transfer Restricted Securities covered thereby (including each Initial Purchaser and, with respect to any Prospectus delivery as contemplated in Section 5(g) hereof, each Exchanging Dealer), the directors, officers, employees, partners, representatives and agents of each such Holder and each person who controls any such Holder within the meaning of either Section 15 of the Act or Section 20 of the Exchange Act against any and all losses, claims, damages or liabilities, joint or several, to which they or any of them may become subject under the Act, the Exchange Act or other Federal or state statutory law or regulation, at common law or otherwise, insofar as such losses, claims, damages or liabilities (or actions in respect thereof) arise out of, or are based upon, any untrue statement or alleged untrue statement of a material fact contained in the Registration Statement as originally filed or in any amendment thereof, or in any preliminary Prospectus or Prospectus, or in any amendment thereof or supplement thereto, or arise out of, or are based upon, the omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, and to reimburse each such indemnified party, as incurred, for any legal or other expenses reasonably incurred by them in connection with investigating or defending any such loss, claim, damage, liability or action; provided, however, that (i) the Company will not be liable in any case to the extent that any such loss, claim, damage or liability arises out of, or is based upon, any such untrue statement or alleged untrue statement or omission or alleged omission made therein in reliance upon and in conformity with written information furnished to the Company by or on behalf of any such Holder or by the Managing Underwriters specifically for inclusion therein and (ii) the Company will not be liable to any indemnified party under this indemnity agreement with respect to the Registration Statement or Prospectus to the extent that any such loss, claim, damage or liability of such indemnified party results solely from an untrue statement of a material fact contained in, or the omission of a material fact from, the Registration Statement or Prospectus, which untrue statement or omission was corrected in an amended or supplemented Registration Statement or Prospectus, if the person alleging such loss, claim, damage or liability was not sent or given, at or prior to the written confirmation of such sale, a copy of the amended or supplemented Registration Statement or Prospectus if the Company had previously furnished copies thereof to such indemnified party and if delivery of a prospectus is required by the Act and was not so made. This indemnity agreement will be in addition to any liability which the Company may otherwise 13 14 have. The Company also agrees to indemnify or contribute to Losses of, as provided in Section 8(d), any underwriters of Notes registered under a Shelf Registration Statement, their officers and directors and each person who controls such underwriters on substantially the same basis as that of the indemnification of the Initial Purchasers and the selling Holders provided in this Section 8(a) and shall, if requested by any Holder, enter into an underwriting agreement reflecting such agreement, as provided in Section 5(p) hereof. (b) Each Holder of Transfer Restricted Securities or Exchange Notes covered by a Registration Statement (including each Initial Purchaser and, with respect to any Prospectus delivery as contemplated in Section 5(g) hereof, each Exchanging Dealer) severally agrees to indemnify and hold harmless (i) the Company, (ii) each of its directors, (iii) each of its officers who signs such Registration Statement and (iv) each person who controls the Company within the meaning of either the Act or the Exchange Act to the same extent as the foregoing indemnity from the Company to each such Holder, but only with reference to written information relating to such Holder furnished to the Company by or on behalf of such Holder specifically for inclusion in the documents referred to in the foregoing indemnity. This indemnity agreement will be in addition to any liability which any such Holder may otherwise have. In no event shall any Holder, its directors, officers or any person who controls such Holder be liable or responsible for any amount in excess of the amount by which the total amount received by such Holder with respect to its sale of Transfer Restricted Securities pursuant to a Registration Statement exceeds (i) the amount paid by such Holder for such Transfer Restricted Securities and (ii) the amount of any damages that such Holder, its directors, officers or any person who controls such Holder has otherwise been required to pay by reason of such untrue or alleged untrue statement or omission or alleged omission. (c) Promptly after receipt by an indemnified party under this Section 8 or notice of the commencement of any action, the indemnified party will, if a claim in respect thereof is to be made against the indemnifying party under this Section 8, notify the indemnifying party in writing of the commencement thereof; but the failure to so notify the indemnifying party (i) will not relieve it from liability under paragraph (a) or (b) above unless and to the extent it did not otherwise learn of such action and such failure results in the forfeiture by the indemnifying party of substantial rights and defenses and (ii) will not, in any event, relieve the indemnifying party from any obligations to any indemnified party other than the indemnification obligation provided in paragraph (a) or (b) above. The indemnifying party shall be entitled to appoint counsel of the indemnifying party's choice at the indemnifying party's expense to represent the indemnified party in any action for which indemnification is sought (in which case the indemnifying party shall not thereafter be responsible for the fees and expenses of any separate counsel retained by the indemnified party or parties except as set forth below); provided, however, that such counsel shall be reasonably satisfactory to the indemnified party. Notwithstanding the indemnifying party's election to appoint counsel to represent the indemnified party in an action, the indemnified party shall have the right to employ separate counsel (including local counsel), and the indemnifying party shall bear the reasonable fees, costs and expenses of such separate counsel (and local counsel) if (i) the use of counsel chosen by the indemnifying party to represent the indemnified party would present such counsel with a conflict of interest, (ii) the actual or potential defendants in, or targets of, any such action include both the indemnified party and the indemnifying party, and the indemnified party reasonably concluded that there may be legal defenses available to it and/or other indemnified parties that are different from or additional to those available to the indemnifying party, (iii) the indemnifying party did not employ counsel satisfactory to the indemnified party to represent the indemnified party within a reasonable time after notice of the institution of such action or (iv) the indemnifying party authorized the indemnified party to employ separate counsel at the expense of the indemnifying party. An indemnifying party shall 14 15 not, without the prior written consent of the indemnified parties, settle or compromise or consent to the entry of any judgment with respect to any pending or threatened claim, action, suit or proceeding for which indemnification or contribution may be sought hereunder (whether or not the indemnified parties are actual or potential parties to such claim or action), unless such settlement, compromise or consent includes an unconditional release of each indemnified party from all liability arising out of such claim, action, suit or proceeding and does not include a statement as to or an admission of fault, culpability or a failure to act, by or on behalf of the indemnified party. (d) In the event that the indemnity provided in paragraph (a) or (b) of this Section 8 is unavailable or insufficient to hold harmless an indemnified party for any reason, then each applicable indemnifying party, in lieu of indemnifying such indemnified party, shall have a joint and several obligation to contribute to the aggregate losses, claims, damages and liabilities (including legal or other expenses reasonably incurred in connection with investigating or defending same) (collectively "Losses") to which such indemnified party may be subject in such proportion as is appropriate to reflect the relative benefits received by such indemnifying party, on the one hand, and such indemnified party, on the other hand, from the Initial Placement and the Registration Statement that resulted in such Losses; provided, however, that in no case shall any Initial Purchaser or any subsequent Holder of any Note or Exchange Note be responsible, in the aggregate, for any amount in excess of the purchase discount on the initial offering price of such Notes or commission applicable to such Note, or in the case of an Exchange Note, applicable to the Note which was exchangeable into such Exchange Note (which shall be 2.125% per Note), nor shall any underwriter be responsible for any amount in excess of the underwriting discount or commission applicable to the securities purchased by such underwriter under the Registration Statement that resulted in such Losses. If the allocation provided by the immediately preceding sentence is unavailable for any reason, the indemnifying party and the indemnified party shall contribute in such proportion as is appropriate to reflect not only such relative benefits, but also the relative fault of such indemnifying party, on the one hand, and such indemnified party, on the other hand, in connection with the statements or omissions which resulted in such Losses, as well as any other relevant equitable considerations. Benefits received by the Company shall be deemed to be equal to the sum of (x) the total net proceeds from the Initial Placement (before deducting expenses) (which shall be $241,967,109.38) and (y) the total amount of additional interest that the Company was not required to pay as a result of registering the securities covered by the Registration Statement that resulted in such Losses. Benefits received by the Initial Purchasers shall be deemed to be equal to the total purchase discounts and commissions in connection with the Initial Placement, and benefits received by any other Holders shall be deemed to be equal to the value of receiving Notes or Exchange Notes, as applicable, registered under the Act. Benefits received by any underwriter shall be deemed to be equal to the total underwriting discounts and commissions, as set forth on the cover page of the Prospectus forming a part of the Registration Statement that resulted in such Losses. Relative fault shall be determined by reference to whether any alleged untrue statement or omission relates to information provided by the indemnifying party, on the one hand, or by the indemnified party, on the other hand. The parties agree that it would not be just and equitable if contribution were determined by pro rata allocation or any other method of allocation that does not take account of the equitable considerations referred to above. Notwithstanding the provisions of this paragraph (d), no person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Act) shall be entitled to contribution from any person who was guilty of such fraudulent misrepresentation. For purposes of this Section 8, each person who controls a Holder within the meaning of either the Act or the Exchange Act and each director, officer, employee and agent of such Holder shall have the same rights to contribution as such Holder, and each person who controls the Company within the meaning of either the Act or the Exchange Act, each officer of the Company who shall have signed the Registration Statement and each director of the Company shall have the same rights to contribution as the Company, subject in each case to the applicable terms and conditions of this paragraph (d). 15 16 (e) The provisions of this Section 8 shall remain in full force and effect, regardless of any investigation made by or on behalf of any Holder or the Company or any of the officers, directors or controlling persons referred to in Section 8 hereof, and will survive the sale by a Holder of Transfer Restricted Securities or Exchange Notes. SECTION 9. RULE 144A and RULE 144 The Company agrees with each Holder, for so long as any Transfer Restricted Securities remain outstanding and during any period in which the Company (i) is not subject to Section 13 or 15(d) of the Exchange Act, to make available, upon request of any Holder, to such Holder or beneficial owner of Transfer Restricted Securities in connection with any sale thereof and any prospective purchaser of such Transfer Restricted Securities designated by such Holder or beneficial owner, the information required by Rule 144A(d)(4) under the Act in order to permit resales of such Transfer Restricted Securities pursuant to Rule 144A, and (ii) is subject to Section 13 or 15 (d) of the Exchange Act, to make all filings required thereby in a timely manner in order to permit resales of such Transfer Restricted Securities pursuant to Rule 144. SECTION 10. MISCELLANEOUS (a) No Inconsistent Agreements. The Company has not, as of the date hereof, entered into, nor shall it, on or after the date hereof, enter into, any agreement with respect to its securities that is inconsistent with the rights granted to the Holders herein or otherwise conflicts with the provisions hereof. (b) Amendments and Waivers. The provisions of this Agreement, including the provisions of this sentence, may not be amended, qualified, modified or supplemented, and waivers or consents to departures from the provisions hereof may not be given, unless the Company has obtained the written consent of the Holders of at least a majority of the then outstanding aggregate principal amount of Notes (or, after the consummation of any Registered Exchange Offer in accordance with Section 3 hereof, of Exchange Notes); provided, however, that with respect to any matter that directly or indirectly affects the rights of any Initial Purchaser hereunder, the Company shall obtain the written consent of each such Initial Purchaser against which such amendment, qualification, supplement, waiver or consent is to be effective. Notwithstanding the foregoing (except the foregoing proviso), a waiver or consent to depart from the provisions hereof, with respect to a matter, which relates exclusively to the rights of Holders whose securities are being sold pursuant to a Registration Statement and does not directly or indirectly affect the rights of other Holders, may be given by the Majority Holders, determined on the basis of Notes being sold rather than registered under such Registration Statement. (c) Notices. All notices and other communications provided for or permitted hereunder shall be made in writing by hand-delivery, first-class mail, telex, telecopier, or air courier guaranteeing overnight delivery: (i) if to a Holder, at the most current address given by such holder to the Company in accordance with the provisions of this Section 10(c), which address initially is, with respect to each Holder, the address of such Holder maintained by the registrar under the Indenture or the Exchange Note Indenture, as the case may be, with a copy in like manner to Morgan Stanley & Co. Incorporated; (ii) if to the Initial Purchasers, initially at the respective addresses set forth in the Purchase 16 17 Agreement; and (iii) if to the Company, initially at its address set forth in the Purchase Agreement. All such notices and communications shall be deemed to have been duly given when received. The Initial Purchasers or the Company by notice to the other may designate additional or different addresses for subsequent notices or communications. (d) Successors and Assigns. This Agreement shall inure to the benefit of, and be binding upon, the successors and assigns of each of the parties hereto, including, without the need for an express assignment or any consent by the Company thereto, subsequent Holders of Notes and/or Exchange Notes. The Company hereby agrees to extend the benefits of this Agreement to any Holder of Notes and/or Exchange Notes and any such Holder may specifically enforce the provisions of this Agreement as if an original party hereto. (e) Counterparts. This agreement may be executed in any number of counterparts and by the parties hereto in separate counterparts, each of which when so executed shall be deemed to be an original, and all of which taken together shall constitute one and the same agreement. (f) Headings. The headings in this agreement are for convenience of reference only and shall not limit or otherwise affect the meaning hereof. (g) Governing Law. This agreement shall be governed by and construed in accordance with the internal laws of the State of New York applicable to agreements made and to be performed in said State (without reference to the conflict of law rules thereof). (h) Severability. In the event that any one or more of the provisions contained herein, or the application thereof in any circumstances, is held invalid, illegal or unenforceable in any respect for any reason, the validity, legality and enforceability of any such provision in every other respect and the remaining provisions hereof shall not be in any way impaired or affected thereby, it being intended that all of the rights and privileges of the parties shall be enforceable to the fullest extent permitted by law. (i) Notes Held by the Company, etc. Whenever the consent or approval of Holders of a specified percentage of principal amount at maturity of Notes or Exchange Notes is required hereunder, Notes or Exchange Notes, as applicable, held by the Company or its Affiliates (other than subsequent Holders of Notes or Exchange Notes if such subsequent Holders are deemed to be Affiliates solely by reason of their holdings of such Notes or Exchange Notes) shall not be counted in determining whether such consent or approval was given by the Holders of such required percentage. (j) Entire Agreement. This Agreement is intended by the parties as a final expression of their agreement and intended to be a complete and exclusive statement of the agreement and understanding of the parties hereto with respect to the subject matter contained herein. There are no restrictions, promises, warranties or undertakings, other than those set forth or referred to herein with respect to the registration rights granted with respect to the Transfer Restricted Securities. This Agreement supersedes all prior agreements and understandings between the parties with respect to such subject matter. 17 18 IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first written above. NTL INCORPORATED By: /s/ Richard J. Lubasch Name: Richard J. Lubasch Title: Senior Vice President, General Counsel and Secretary Morgan Stanley & Co. Incorporated Chase Securities Inc. Donaldson, Lufkin & Jenrette Securities Corporation Goldman, Sachs & Co. By: Morgan Stanley & Co. Incorporated By: /s/ Donal A. Quigley Name: Donal A. Quigley Title: Executive Director Registration Rights Agreement signature page 19 ANNEX A Each broker-dealer that receives Exchange Notes for its own account pursuant to the Registered Exchange Offer must acknowledge that it will deliver a prospectus in connection with any resale of such Exchange Notes. The Letter of Transmittal states that by so acknowledging and by delivering a prospectus, a broker-dealer will not be deemed to admit that it is an "underwriter" within the meaning of the Act. This Prospectus, as it may be amended or supplemented from time to time, may be used by a broker-dealer in connection with resales of Exchange Notes received in exchange for Notes where such Exchange Notes were acquired by such broker-dealer as a result of market-making activities or other trading activities. The Company has agreed that, starting on the Expiration Date (as defined herein) and ending on the close of business on the 180th day following the Expiration Date, it will make this Prospectus available to any broker-dealer for use in connection with any such resale. See "Plan of Distribution." Registration Rights Agreement signature page 20 ANNEX B Each broker-dealer that receives Exchange Notes for its own account in exchange for Notes, where such Notes were acquired by such broker-dealer as a result of market-making activities or other trading activities, must acknowledge that it will deliver a prospectus in connection with any resale of such Exchange Notes. See "Plan of Distribution." B-1 21 ANNEX C PLAN OF DISTRIBUTION Each broker-dealer that receives Exchange Notes for its own account pursuant to the Registered Exchange Offer must acknowledge that it will deliver a prospectus in connection with any resale of such Exchange Notes. The Prospectus, as it may be amended or supplemented from time to time, may be used by a broker-dealer in connection with resales of Exchange Notes received in exchange for Notes where such Notes were acquired as a result of market-making activities or other trading activities. The Company has agreed that, starting on the Expiration Date and ending on the close of business on the 180th day following the Expiration Date, it will make this Prospectus, as amended or supplemented, available to any broker-dealer for use in connection with any such resale. The Company will not receive any proceeds from any sale of Exchange Notes by broker-dealers. Exchange Notes received by broker-dealers for their own account pursuant to the Exchange Offer may be sold from time to time in one or more transactions in the over-the-counter market, in negotiated transactions, through the writing of options on the Exchange Notes or by a combination of such methods of resale, at market prices prevailing at the time of resale, at prices related to such prevailing market prices or at negotiated prices. Any such resale may be made directly to purchaser or to or through brokers or dealers who may receive compensation in the form of commissions or concessions from any such broker-dealer and/or the purchasers of any such Exchange Notes. Any broker- dealer that resells Exchange Notes that were received by it for its own account pursuant to the Registered Exchange Offer and any broker or dealer that participates in a distribution of such Exchange Notes may be deemed to be an "underwriter" within the meaning of the Act and any profit of any such resale of Exchange Notes and any commissions or concessions received by any such persons may be deemed to be underwriting compensation under the Act. The Letter of Transmittal states that by acknowledging that it will deliver and by delivering a prospectus, a broker-dealer will not be deemed to admit that it is an "underwriter" within the meaning of the Act. For a period of 180 days after the Expiration Date, the Company will promptly send additional copies of this Prospectus and any amendment or supplement to this Prospectus to any broker-dealer that requests such documents in the Letter of Transmittal. The Company has agreed to pay all expenses incident to the Registered Exchange Offer (including the expenses of one counsel for the holders of the Notes) other than commissions or concessions of any brokers or dealers and will indemnify the holders of the Notes (including any broker-dealers) against certain liabilities, including liabilities under the Act. [Add information required by Regulation S-K Items 507 and/or 508.] C-1 22 ANNEX D Rider A CHECK HERE IF YOU ARE A BROKER-DEALER AND WISH TO RECEIVE 10 ADDITIONAL COPIES OF THE PROSPECTUS AND 10 COPIES OF ANY AMENDMENTS OR SUPPLEMENTS THERETO. Name:_______________________________ Address:______________________________________________________________ ______________________________________________________________ Rider B If the undersigned is not a broker-dealer, the undersigned represents that it is not engaged in, and does not intend to engage in, a distribution of Exchange Notes. If the undersigned is a broker-dealer that will receive Exchange Notes for its own account in exchange for Notes that were acquired as a result of market making activities or other trading activities, it acknowledges that it will deliver a prospectus in connection with any resale of such Exchange Notes; however, by so acknowledging and by delivering a prospectus, the undersigned will not be deemed to admit that it is an "underwriter" within the meaning of the Act. D-1 EX-4.17 7 INDENTURE, DATED AS OF DECEMBER 16, 1998 1 Exhibit 4.17 NTL INCORPORATED $600,000,000 7% CONVERTIBLE SUBORDINATED NOTES DUE 2008 INDENTURE Dated as of December 16, 1998 ------------------------ The Chase Manhattan Bank Trustee ------------------------ 2 TABLE OF CONTENTS ARTICLE I 1 Section 1.01. Definitions. 1 Section 1.02. Other Definitions. 8 Section 1.03. Incorporation by Reference of Trust Indenture Act. 9 Section 1.04. Rules of Construction. 9 ARTICLE II. THE NOTES. 9 Section 2.01. Form and Dating. 9 Section 2.02. Execution and Authentication. 11 Section 2.03. Registrar and Paying Agent. 12 Section 2.04. Paying Agent to Hold Money in Trust. 12 Section 2.05. Holder Lists. 12 Section 2.06. Transfer and Exchange. 12 Section 2.07. Replacement Notes. 17 Section 2.08. Outstanding Notes. 17 Section 2.09. Treasury Notes. 18 Section 2.10. Temporary Notes; Global Notes. 18 Section 2.11. Cancellation. 19 Section 2.12. Defaulted Interest. 19 ARTICLE III. REDEMPTION. 19 Section 3.01. Notices to Trustee. 19 Section 3.02. Selection of Notes to Be Redeemed. 19 Section 3.03. Notice of Redemption. 20 Section 3.04. Effect of Notice of Redemption. 20 Section 3.05. Deposit of Redemption Price. 21 Section 3.06. Notes Redeemed in Part. 21 Section 3.07. Optional Redemption and Optional Tax Redemption. 21 Section 3.08. Mandatory Redemption. 21 Section 3.09. Purchase Offer. 21 ARTICLE IV. COVENANTS. 23 Section 4.01. Payment of Notes. 23 Section 4.02. Reports. 23 Section 4.03. Compliance Certificate. 24 Section 4.04. Stay, Extension and Usury Laws. 24 Section 4.05. Corporate Existence. 24 Section 4.06. Taxes. 25 Section 4.07. Change of Control. 25 Section 4.08. Payment of Additional Amounts. 25 ARTICLE V. CONVERSION. 26 Section 5.01. Conversion Privilege. 26 Section 5.02. Conversion Procedure. 26 Section 5.03. Fractional Shares. 27 Section 5.04. Taxes on Conversion. 27 Section 5.05. Company to Provide Stock. 27 Section 5.06. Adjustment of Conversion Price. 27 Section 5.07. No Adjustment. 30 Section 5.08. Other Adjustments. 30 Section 5.09. Adjustments for Tax Purposes. 31 Section 5.10. Notice of Adjustment. 31 3 Section 5.11. Notice of Certain Transactions. 31 Section 5.12. Effect of Reclassifications, Consolidations, Mergers or Sales on Conversion Privilege. 32 Section 5.13. Trustee's Disclaimer. 32 ARTICLE VI. SUBORDINATION. 33 Section 6.01. Agreement to Subordinate and Ranking. 33 Section 6.02. No Payment on Notes if Senior Debt in Default. 33 Section 6.03. Distribution on Acceleration of Notes; Dissolution and Reorganization; Subrogation of Notes. 34 Section 6.04. Reliance by Senior Debt on Subordination Provisions. 37 Section 6.05. No Waiver of Subordination Provisions. 37 Section 6.06. Trustee's Relation to Senior Debt. 37 Section 6.07. Other Provisions Subject Hereto. 38 ARTICLE VII. SUCCESSORS. 38 Section 7.01. Merger, Consolidation or Sale of Assets. 38 Section 7.02. Successor Corporation Substituted. 39 ARTICLE VIII. DEFAULTS AND REMEDIES. 39 Section 8.01. Events of Default. 39 Section 8.02. Acceleration. 41 Section 8.03. Other Remedies. 42 Section 8.04. Waiver of Past Defaults. 42 Section 8.05. Control by majority. 42 Section 8.06. Limitation on Suits. 42 Section 8.07. Rights of Holders to Receive Payment. 43 Section 8.08. Collection Suit by Trustee. 43 Section 8.09. Trustee May File Proofs of Claim. 43 Section 8.10. Priorities. 43 Section 8.11. Undertaking for Costs. 43 ARTICLE IX. TRUSTEE. 44 Section 9.01. Duties of Trustee. 44 Section 9.02. Rights of Trustee. 44 Section 9.03. Individual Rights of Trustee. 45 Section 9.04. Trustee's Disclaimer. 45 Section 9.05. Notice of Defaults. 45 Section 9.06. Reports by Trustee to Holders. 45 Section 9.07. Compensation and Indemnity. 46 Section 9.08. Replacement of Trustee. 46 Section 9.09. Successor Trustee by Merger, Etc. 47 Section 9.10. Eligibility; Disqualification. 47 Section 9.11. Preferential Collection of Claims Against Company. 47 ARTICLE X. DISCHARGE OF INDENTURE 48 Section 10.01. Termination of Company's Obligations. 48 Section 10.02. Repayment to Company. 48 ARTICLE XI. AMENDMENTS, SUPPLEMENTS AND WAIVERS. 48 Section 11.01. Without Consent of Holders. 48 Section 11.02. With Consent of Holders. 48 Section 11.03. Compliance with Trust Indenture Act. 49 Section 11.04. Revocation and Effect of Consents. 49 Section 11.05. Notation on or Exchange of Notes. 50 Section 11.06. Trustee Protected. 50 ARTICLE XII. MISCELLANEOUS. 50 3 4 Section 12.01. Trust Indenture Act Controls. 50 Section 12.02. Notices. 50 Section 12.03. Communication by Holders with Other Holders. 51 Section 12.04. Certificate and Opinion as to Conditions Precedent. 51 Section 12.05. Statements Required in Certificate or Opinion. 51 Section 12.06. Rules by Trustee and Agents. 52 Section 12.07. Legal Holidays. 52 Section 12.08. No Recourse Against Others. 52 Section 12.09. Counterparts and Facsimile Signatures. 52 Section 12.10. Variable Provisions. 52 Section 12.11. Governing Law. 53 Section 12.12. No Adverse Interpretation of Other Agreements. 53 Section 12.13. Successors. 53 Section 12.14. Severability. 53 Section 12.15. Table of Contents, Headings, Etc. 53 4 5 CROSS-REFERENCE TABLE* Trust Indenture Act Section Indenture Section 310 (a)(1) 9.10 (a)(2) 9.10 (a)(3) N.A. (a)(4) N.A. (a)(5) 9.10 (b) 9.08, 9.10 (c) N.A. 311(a) 9.11 (b) 9.11 (c) N.A. 312 (a) 2.05 (b) 12.03 (c) 12.03 313(a) 9.06 (b)(1) N.A. (b)(2) 9.06 (c) 9.06 (d) 9.06 314(a) 4.02 4.03, 12.02 (b) N.A. (c)(1) 12.04 (c)(2) 12.04 (c)(3) N.A. (d) N.A. (e) N.A. (f) N.A. 315(a) 9.01(b) (b) 9.05 (c) 9.01(a) 5 6 (d) 9.01(c) (e) 8.11 316 (a)(last sentence) 2.09 (a)(1)(A) 8.05 (a)(1)(B) 8.04 (a)(2) N.A. (b) 8.07 (c) 11.04 317 (a)(1) 8.08 (a)(2) 8.09 (b) 2.04 318 (a) N.A. N.A. means not applicable. * This Cross-Reference Table is not part of the Indenture. 6 7 INDENTURE, dated as of December 16, 1998, between NTL Incorporated, a Delaware corporation (the "Company"), and The Chase Manhattan Bank, a New York corporation, as trustee (the "Trustee"). Each party agrees as follows for the benefit of the other party and for the equal and ratable benefit of the Holders (as defined in Section 1.01 hereof) of the Company's 7% Convertible Subordinated Notes due 2008 (the "Notes"): ARTICLE I. Section 1.01. Definitions. "Affiliate" of any specified Person means any other Person directly indirectly controlling or controlled by or under direct or indirect common control with such specified Person. For purposes of this definition, "control" (including, with correlative meanings, the terms "controlling," "controlled by" and "under common control with"), as used with respect to any Person, shall mean the possession, directly or indirectly, of the power to direct or cause the direction of the management or policies of such Person, whether through the ownership of voting securities, by agreement or otherwise; provided, however, that beneficial ownership of 10% or more of the voting securities of a Person shall be deemed to be control. "Agent" means any Registrar, Paying Agent or Conversion Agent. "Annualized Pro Forma EBITDA" means, with respect to any Person, such Person's Pro Forma EBITDA for the latest fiscal quarter multiplied by four. "Asset Sale" means (i) any sale, lease, transfer, conveyance or other disposition of any assets (including by way of a sale-and-leaseback) other than the sale or transfer of inventory or goods held for sale in the ordinary course of business or (ii) any issuance, sale, lease, transfer, conveyance or other disposition of any Equity Interests of any of the Company's Restricted Subsidiaries to any Person; in either case other than (A) to (w) the Company, (x) any Wholly Owned Subsidiary, or (y) any Subsidiary which is a Subsidiary of the Company on the Issuance Date provided that at the time of and after giving effect to such issuance, sale, lease, transfer, conveyance or other disposition to such Subsidiary, the Company's ownership percentage in such Subsidiary is equal to or greater than such percentage on the Issuance Date or (B) the issuance, sale, transfer, conveyance or other disposition of Equity Interests of a Subsidiary in exchange for capital contributions made on a pro rata basis by the holders of the Equity Interests of such Subsidiary. "Board of Directors" means the Board of Directors of the Company or any authorized committee of the Board of Directors. "Board Resolution" means a duly authorized resolution of the Board of Directors. "Business Day" means any day that is not a Legal Holiday. "Capital Stock" means any and all shares, interests, participations, rights or other equivalents (however designated) of corporate stock, including, without limitation, partnership interests. "Change of Control" means (i) the sale, lease or transfer of all or substantially all of the assets of 7 8 the Company to any "Person" or "group" (within the meaning of Sections 13(d)(3) and 14(d)(2) of the Exchange Act or any successor provision to either of the foregoing, including any group acting for the purpose of acquiring, holding or disposing of securities within the meaning of Rule 13d-5(b)(1) under the Exchange Act) (other than any Permitted Holder), (ii) the approval by the requisite stockholders of the Company of a plan of liquidation or dissolution of the Company, (iii) any "Person" or "group" (within the meaning of Sections 13(d) and 14(d)(2) of the Exchange Act or any successor provision to either of the foregoing, including any group acting for the purpose of acquiring, holding or disposing of securities within the meaning of Rule 13d- 5(b)(1) under the Exchange Act), other than any Permitted Holder, becomes the "beneficial owner" (as defined in Rule 13d-3 under the Exchange Act) of more than 50% of the total voting power of all classes of the voting stock of the Company and/or warrants or options to acquire such voting stock, calculated on a fully diluted basis, unless, as a result of such transaction, the ultimate direct or indirect ownership of the Company is substantially the same immediately after such transaction as it was immediately prior to such transaction, or (iv) during any period of two consecutive years, individuals who at the beginning of such period constituted the Company's Board of Directors (together with any new directors whose election or appointment by such board or whose nomination for election by the shareholders of the Company was approved by a vote of a majority of the directors then still in office who were either directors at the beginning of such period or whose election or nomination for election was previously so approved) cease for any reason to constitute a majority of the Company's Board of Directors then in office. "Common Stock" means the common stock, par value $0.01 per share, of the Company as the same exists at the date of the execution of this Indenture or as such stock may be constituted from time to time. "Company" means the party named as such above until a successor replaces it in accordance with Article VII and thereafter means the successor. "Consolidated Interest Expense" means, for any Person, for any period, the amount of interest in respect of Indebtedness (including amortization of original issue discount, amortization of debt issuance costs, and non-cash interest payments on any Indebtedness and the interest portion of any deferred payment obligation and after taking into account the effect of elections made under any Interest Rate Agreement, however denominated, with respect to such Indebtedness), the amount of Redeemable Dividends, Restricted Subsidiary Preferred Stock Dividends and the interest component of rentals in respect of any capital lease obligation paid, in each case whether accrued or scheduled to be paid or accrued by such Person and its Subsidiaries (other than Non-Restricted Subsidiaries) during such period to the extent such amounts were deducted in computing Consolidated Net Income, determined on a consolidated basis in accordance with GAAP. For purposes of this definition, interest on a capital lease obligation shall be deemed to accrue at an interest rate reasonably determined by such Person to be the rate of interest implicit in such capital lease obligation in accordance with GAAP consistently applied. "Consolidated Net Income" means, with respect to any Person, for any period, the aggregate of the Net Income of such Person and its Subsidiaries (other than Non-Restricted Subsidiaries) for such period, on a consolidated basis, determined in accordance with GAAP; provided that (i) the Net Income of any Person that is not a Subsidiary or that is accounted for by the equity method of accounting shall be included only to the extent of the amount of dividends or distributions paid to the referent Person or a Wholly Owned Subsidiary, (ii) the Net Income of any Person that is a Subsidiary (other than a Subsidiary of which at least 80% of the Capital Stock having ordinary voting power for the election of directors or other governing body of such Subsidiary is owned by the referent Person directly or indirectly through 8 9 one or more Subsidiaries) shall be included only to the extent of the amount of dividends or distributions paid to the referent Person or a Wholly Owned Subsidiary, (iii) the Net Income of any Person acquired in a pooling of interests transaction for any period prior to the date of such acquisition shall be excluded and (iv) the cumulative effect of a change in accounting principles shall be excluded. "Daily Market Price" means the price of a share of Common Stock on the relevant date, determined (a) on the basis of the last reported sale price regular way of the Common Stock as reported on the Nasdaq Stock Market's National Market (the "NNM"), or if the Common Stock is not then listed on the NNM, as reported on such national securities exchange upon which the Common Stock is listed, or (b) if there is no such reported sale on the day in question, on the basis of the average of the closing bid and asked quotations regular way as so reported, or (c) if the Common Stock is not listed on the NNM or on any national securities exchange, on the basis of the average of the high bid and low asked quotations regular way on the day in question in the over-the-counter market as reported by the National Association of Securities Dealers Automated Quotation System, or if not so quoted, as reported by National Quotation Bureau, Incorporated, or a similar organization. "Default" means any event that is, or with the passage of time or the giving of notice or both would be, an Event of Default. "Depositary" shall mean The Depository Trust Company, its nominees and their respective successors. "Disqualified Stock" means any Capital Stock which, by its terms (or by the terms of any security into which it is convertible or for which it is exchangeable), or upon the happening of any event, matures or is mandatorily redeemable, pursuant to a sinking fund obligation or otherwise, or redeemable at the option of the holder thereof, in whole or in part, on or prior to the date on which the Notes mature. "EBITDA" means, for any Person, for any period, an amount equal to (A) the sum of (i) Consolidated Net Income for such period (exclusive of any gain or loss realized in such period upon an Asset Sale), plus (ii) the provision for taxes for such period based on income or profits to the extent such income or profits were included in computing Consolidated Net Income and any provision for taxes utilized in computing net loss under clause (i) hereof, plus (iii) Consolidated Interest Expense for such period, plus (iv) depreciation for such period on a consolidated basis, plus (v) amortization of intangibles for such period on a consolidated basis, plus (vi) any other non-cash item reducing Consolidated Net Income for such period, minus (B) all non-cash items increasing Consolidated Net Income for such period, all for such Person and its Subsidiaries determined in accordance with GAAP consistently applied. "Equity Interests" means Capital Stock and all warrants, options or other rights to acquire Capital Stock (but excluding any Indebtedness that is convertible into, or exchangeable for Capital Stock). "Excess Payment" means the excess of (A) the aggregate of the cash and value of other consideration paid by the Company or any of its Subsidiaries with respect to shares acquired in a tender offer or other negotiated transaction over (B) the market value of each such acquired shares after giving effect to the completion of a tender offer or other negotiated transaction. "Exchange Act" means the Securities Exchange Act of 1934, as amended. 9 10 "Exchange Rate Contract" means, with respect to any Person, any currency swap agreements, forward exchange rate agreements, foreign currency futures or options, exchange rate collar agreements, exchange rate insurance and other agreements or arrangements, or combination thereof, the principal purpose of which is to provide protection against fluctuations in currency exchange rates. An Exchange Rate Contract may also include an Interest Rate Agreement. "Existing Convertible Notes" means the Company's 7% Convertible Subordinated Notes due 2008 issued pursuant to an indenture dated as of June 12, 1996, between the Company and The Chase Manhattan Bank (formerly known as Chemical Bank), as trustee. "GAAP" means generally accepted accounting principles set forth in the opinions and pronouncements of the Accounting Principles Board of the American Institute of Certified Public Accountants and statements and pronouncements of the Financial Accounting Standards Board or in such other statements by such other entity as approved by a significant segment of the accounting profession, which are in effect on the Issuance Date. "Guarantee" means a guarantee (other than by endorsement of negotiable instruments for collection in the ordinary course of business), direct or indirect, in any manner (including, without limitation, letters of credit and reimbursement agreements in respect thereof), of all or any part of any Indebtedness. "Holder" means a Person in whose name a Note is registered in the register referred to in Section 2.03. "Indebtedness" means, with respect to any Person, any indebtedness of such Person, whether or not contingent, in respect of borrowed money or evidenced by bonds, notes, debentures or similar instruments or letters of credit (or reimbursement agreements in respect thereof) or representing the balance deferred and unpaid of the purchase price of any property (including pursuant to capital leases and sale-and-leaseback transactions) or representing any hedging obligations under an Exchange Rate Contract or an Interest Rate Agreement, except any such balance that constitutes an accrued expense or trade payable, if and to the extent any of the foregoing indebtedness (other than obligations under an Exchange Rate Contract or an Interest Rate Agreement) would appear as a liability upon a balance sheet of such Person prepared in accordance with GAAP, and also includes, to the extent not otherwise included, the Guarantee of items which would be included within this definition. "Indenture" means this Indenture, as amended from time to time. "Initial Purchasers" means Donaldson, Lufkin & Jenrette Securities Corporation, Morgan Stanley & Co. Incorporated, Goldman, Sachs & Co., Chase Securities Inc., Salomon Smith Barney Inc., BT Alex. Brown Incorporated and Warburg Dillon Read LLC. "Interest Rate Agreement" means, for any Person, any interest rate swap agreement, interest rate cap agreement, interest rate collar agreement, or other similar agreement designed to protect the party indicated therein against fluctuations in interest rates. "Issuance Date" means the date on which the Notes are first authenticated and issued. "License" means any license issued or awarded pursuant to the Broadcasting Act 1990, the Cable and Broadcasting Act 1984, the Telecommunications Act 1984 or the Wireless Telegraphy Act 1948 (in 10 11 each case, as such Acts may, from time to time, be amended, modified or re-enacted) (or equivalent statutes of any jurisdiction) to operate or own a Cable Business. "Liquidated Damages" has the meaning set forth in Section 2 of the Notes. "Material License" means a License held by the Company or any of its Subsidiaries which License at the time of determination covers a number of Net Households which equals or exceeds 5% of the aggregate number of Net Households covered by all of the Licenses held by the Company and its Subsidiaries at such time. "Material Subsidiary" means (i) NTL UK Group, Inc. (formerly known as OCOM Sub II, Inc.), NTL Group Limited, CableTel Surrey, CableTel Cardiff Limited, CableTel Glasgow, CableTel Newport and CableTel Kirklees and (ii) any other Subsidiary of the Company which is a "significant subsidiary" as defined in Rule 1-02(w) of Regulation S-X under the Securities Act and the Exchange Act (as such Regulation is in effect on the date hereof). "Net Households" means the product of (i) the number of households covered by a License in the United Kingdom and (ii) the percentage of the entity holding such License which is owned directly or indirectly by the Company. "Net Income" means, with respect to any Person for a specific period, the net income (loss) of such Person during such period, determined in accordance with GAAP, excluding, however, any gain (but not loss) during such period, together with any related provision for taxes on such gain (but not loss), realized during such period in connection with any Asset Sale (including, without limitation, dispositions pursuant to sale-and-leaseback transactions), and excluding any extraordinary gain (but not loss) during such period, together with any related provision for taxes on such extraordinary gain (but not loss). "Non-Recourse Debt" means Indebtedness or that portion of Indebtedness as to which none of the Company, nor any Restricted Subsidiary: (i) provides credit support (including any undertaking, agreement or instrument which would constitute Indebtedness); (ii) is directly or indirectly liable; or (iii) constitutes the lender. "Non-Restricted Subsidiary" means (A) a Subsidiary that (a) at the time of its designation by the Board of Directors as a Non-Restricted Subsidiary has not acquired any assets, at any previous time, directly or indirectly from the Company or any of its Restricted Subsidiaries, (b) has no Indebtedness other than Non-Recourse Debt and (c) that at the time of such designation, after giving pro forma effect to such designation, the ratio of Indebtedness to Annualized Pro Forma EBITDA of the Company is equal to or less than the ratio of Indebtedness to Annualized Pro Forma EBITDA of the Company immediately preceding such designation, provided, however, that if the ratio of Indebtedness to Annualized Pro Forma EBITDA of the Company immediately preceding such designation is 6:1 or less, then the ratio of Indebtedness to Annualized Pro Forma EBITDA of the Company may be 0.5 greater than such ratio immediately preceding such designation; (B) any Subsidiary which (a) has been acquired or capitalized out of or by Equity Interests (other than Disqualified Stock) of the Company or Capital Stock Sale Proceeds therefrom, (b) has no Indebtedness other than Non-Recourse Debt and (c) is designated as a Non-Restricted Subsidiary by the Board of Directors or is merged, amalgamated or consolidated with or into, or its assets or capital stock is to be transferred to, a Non-Restricted Subsidiary; or (C) any Subsidiary of a Non-Restricted Subsidiary. 11 12 "Notes" has the meaning set forth in the preamble hereto. "Obligations" means any principal, interest, penalties, fees, indemnifications, reimbursements, damages and other liabilities payable under the documentation governing any Indebtedness. "Officers' Certificate" means a certificate signed by two Officers, one of whom must be the Chairman of the Board, the President, the Treasurer or a Vice President of the Company. "Opinion of Counsel" means a written opinion from legal counsel who is acceptable to the Trustee. The counsel may be an employee of or counsel to the Company or the Trustee. "Permitted Designee" means (i) a spouse or a child of a Permitted Holder, (ii) trusts for the benefit of a Permitted Holder or a spouse or child of a Permitted Holder, (iii) in the event of the death or incompetence of a Permitted Holder, his estate, heirs, executor, administrator, committee or other personal representative or (iv) any Person so long as a Permitted Holder owns at least 50% of the voting power of all classes of the voting stock of such Person. "Permitted Holders" means George S. Blumenthal, J. Barclay Knapp and their Permitted Designees. "Person" means any individual, corporation, partnership, joint venture, association, joint stock company, trust, unincorporated organization or government or any agency or political subdivision thereof. "Pro Forma EBITDA" means for any Person, for any period, the EBITDA of such Person as determined on a consolidated basis in accordance with GAAP consistently applied after giving effect to the following: (i) if, during or after such period, such Person or any of its Subsidiaries shall have made any Asset Sale, Pro Forma EBITDA of such Person and its Subsidiaries for such period shall be reduced by an amount equal to the Pro Forma EBITDA (if positive) directly attributable to the assets which are the subject of such Asset Sale for the period or increased by an amount equal to the Pro Forma EBITDA (if negative) directly attributable thereto for such period and (ii) if, during or after such period, such Person or any of its Subsidiaries completes an acquisition of any Person or business which immediately after such acquisition is a Subsidiary of such Person or whose assets are held directly by such Person or a Subsidiary of such Person, Pro Forma EBITDA shall be computed so as to give pro forma effect to the acquisition of such Person or business; and provided further that, with respect to the Company, all of the foregoing references to "Subsidiary" or "Subsidiaries" shall be deemed to refer only to a "Restricted Subsidiary" or "Restricted Subsidiaries" of the Company. "Purchase Agreement" means the Purchase Agreement, dated as of December 10, 1998, among the Company and the Initial Purchasers. "Redeemable Dividend" means, for any dividend with regard to Disqualified Stock, the quotient of the dividend divided by the difference between one and the maximum statutory federal income tax rate (expressed as a decimal number between 1 and 0) then applicable to the issuer of such Disqualified Stock. "Registration Rights Agreement" means the Registration Rights Agreement relating to the Notes and the underlying Common Stock, dated December 16, 1998, among the Company and the Initial Purchasers party thereto. 12 13 "Restricted Subsidiary" means any Subsidiary of the Company which is not a Non-Restricted Subsidiary. "Restricted Subsidiary Preferred Stock Dividend" means, for any dividend with regard to preferred stock of a Restricted Subsidiary, the quotient of the dividend divided by the difference between one and the maximum statutory federal income tax rate (expressed as a decimal number between 1 and 0) then applicable to the issuer of such preferred stock. "SEC" means the Securities and Exchange Commission. "Securities Act" means the Securities Act of 1933, as amended. "Senior Debt" means the principal of, interest on and other amounts due on (i) Indebtedness of the Company, whether outstanding on the Issuance Date or thereafter created, incurred, assumed or guaranteed by the Company, for money borrowed from banks or other financial institutions; (ii) Indebtedness of the Company, whether outstanding on the Issuance Date or thereafter created, incurred, assumed or guaranteed by the Company; and (iii) Indebtedness of the Company under interest rate swaps, caps or similar hedging agreements and foreign exchange contracts, currency swaps or similar agreements: unless, in the instrument creating or evidencing or pursuant to which Indebtedness under (i) or (ii) is outstanding, it is expressly provided that such Indebtedness is not senior in right of payment to the Notes. Senior Debt includes, with respect to the obligations described in clauses (i) and (ii) above, interest accruing, pursuant to the terms of such Senior Debt, on or after the filing of any petition in bankruptcy or for reorganization relating to the Company, whether or not post-filing interest is allowed in such proceeding, at the rate specified in the instrument governing the relevant obligation. Notwithstanding anything to the contrary in the foregoing, Senior Debt shall not include: (a) Indebtedness of or amounts owed by the Company for compensation to employees, or for goods or materials purchased in the ordinary course of business, or for services; (b) Indebtedness of the Company to a Subsidiary of the Company; or (c) the Existing Convertible Notes. "Shelf Registration Statement" shall have the meaning set forth in the Registration Rights Agreement. "Subsidiary" means any corporation, association or other business entity of which more than 50% of the total voting power of shares of Capital Stock entitled (without regard to the occurrence of any contingency) to vote in the election of directors, managers or trustees thereof is at the time owned or controlled, directly or indirectly, by any Person or one or more of the other Subsidiaries of that Person or a combination thereof. "TIA" means the Trust Indenture Act of 1939 (15 U.S. Code (ss.)(ss.) 77aaa-77bbbb) as in effect on the date of execution of this Indenture. "Trustee" means the party named as such above until a successor replaces it in accordance with the applicable provisions of this Indenture and thereafter means the successor. "Trust Officer" means the Chairman of the Board, the President or any other officer or assistant officer of the Trustee assigned by the Trustee to administer its corporate trust matters. "Wholly Owned Subsidiary" means, at any time, a Restricted Subsidiary all of the Capital Stock of which (except directors' qualifying shares) is at the time owned directly or indirectly by the Company. 13 14 Section 1.02. Other Definitions.
Defined Term in Section - ---- ---------- "Accredited Investor Restricted Notes" 2.01 "Additional Amounts" 4.08 "Agent Member" 2.01 "Bankruptcy Law" 8.01 "Cedel" 2.01 "Change of Control Payment" 4.07 "Commencement Date" 3.09 "Conversion Agent" 2.03 "Conversion Date" 5.02 "Conversion Price" 5.06 "Conversion Shares" 5.06 "Custodian" 8.01 "Distribution Date" 5.06 "Distribution Record Date" 5.06 "Euroclear" 2.01 "Event of Default" 8.01 "Global Note" 2.01 "Legal Holiday" 12.08 "Offer Amount" 3.09 "Officer" 12.11 "Paying Agent" 2.03 "Payment Blockage Notice" 6.02 "Payment Blockage Period" 6.02 "Payment Default" 8.01 "Purchase Date" 3.09 "Purchase Offer" 3.09 "QIBs" 2.01 "Regulation S" 2.01 "Regulation S Global Note" 2.01 "Registrar" 2.03 "Restricted Notes" 2.01 "Rights" 5.06 "Rule 144A" 2.01 "Rule 144A Global Note" 2.01 "Tender Period" 3.09
Section 1.03. Incorporation by Reference of Trust Indenture Act. Whenever this Indenture refers to a provision of the TIA, the provision is incorporated by 14 15 reference in and made a part of this Indenture. The following TIA terms used in this Indenture have the following meanings: "indenture securities" means the Notes; "indenture security Holder" means a Holder of a Note; "indenture to be qualified" means this Indenture; "indenture trustee" or "institutional trustee" means the Trustee; and "obligor" on the Notes means the Company or any other obligor on the Notes. All other terms used in this Indenture that are defined by the TIA, defined by TIA reference to another statute or defined by SEC rule under the TIA have the meanings so assigned to them. Section 1.04. Rules of Construction. Unless the context otherwise requires: (a) a term has the meaning assigned to it; (b) an accounting term not otherwise defined has the meaning assigned to it in accordance with GAAP consistently applied; (c) references to "GAAP" shall mean GAAP in effect as of the time when and for the period as to which such accounting principles are to be applied; (d) "or" is not exclusive; (e) words in the singular include the plural, and in the plural include the singular; (f) provisions apply to successive events and transactions; (g) references to sections of or rules under the Securities Act shall be deemed to include substitute, replacement or successor sections or rules adopted by the SEC from time to time; and (h) a reference to "$" or U.S. Dollars is to United States dollars. ARTICLE II. The Notes Section 2.01. Form and Dating. (a) General. The Notes and the Trustee's certificate of authentication shall be substantially in the form 15 16 of Exhibit A hereto, which is hereby incorporated by reference and expressly made a part of this Indenture. The Notes may have notations, legends or endorsements required by law, stock exchange rule, agreements to which the Company is subject, if any, or usage (provided that any such notation, legend or endorsement is in a form acceptable to the Company). The Company shall furnish any such legend not contained in Exhibit A to the Trustee in writing. Each Note shall be dated the date of its authentication. The Notes shall be in denominations of $1,000 and integral multiples thereof. The terms and provisions of the Notes set forth in Exhibit A are part of this Indenture and to the extent applicable, the Company and the Trustee, by their execution and delivery of this Indenture, expressly agree to such terms and provisions and to be bound thereby. However, to the extent any provision of any Note conflicts with the express provisions of this Indenture, the provisions of this Indenture shall govern and be controlling. (b) Global Notes. The Notes are being offered and sold by the Company pursuant to the Purchase Agreement. Notes transferred in reliance on Regulation S under the Securities Act ("Regulation S"), as provided in Section 2.06(a)(ii) hereof, shall be issued in the form of one or more permanent Global Notes in definitive, fully registered form without interest coupons with the Global Notes Legend and Restricted Notes Legend set forth in Exhibit A hereto (the "Regulation S Global Note"), which shall be deposited on behalf of the transferee of the Notes represented thereby with the Trustee, at its New York office, as custodian, for the Depositary, and registered in the name of the Depositary or the nominee of the Depositary for the accounts of designated agents holding on behalf of the Euroclear System ("Euroclear") or Cedel Bank, societe anonyme ("Cedel"), duly executed by the Company and authenticated by the Trustee as hereinafter provided. The aggregate principal amount of the Regulation S Global Note may from time to time be increased or decreased by adjustments made on the records of the Trustee and the Depositary or its nominee as hereinafter provided. Notes offered and sold to Qualified Institutional Buyers ("QIBs") in reliance on Rule 144A under the Securities Act ("Rule 144A"), as provided in the Purchase Agreement, shall be issued initially in the form of one or more permanent Global Notes in definitive, fully registered form without interest coupons with the Global Notes Legend and Restricted Notes Legend set forth in Exhibit A hereto ("Rule 144A Global Note"), which shall be deposited on behalf of the purchasers of the Notes represented thereby with the Trustee, at its New York office, as custodian for the Depositary, and registered in the name of the Depositary or a nominee of the Depositary, duly executed by the Company and authenticated by the Trustee as hereinafter provided. The aggregate principal amount of the Rule 144A Global Note may from time to time be increased or decreased by adjustments made on the records of the Trustee and the Depositary or its nominee as hereinafter provided. (c) Book-Entry Provisions. This Section 2.01(c) shall apply only to the Regulation S Global Note and the Rule 144A Global Note issued in the form of one or more permanent Global Notes (collectively, the "Global Notes") deposited with or on behalf of the Depositary. The Company shall execute and the Trustee shall, in accordance with this Section 2.01(c), authenticate and deliver initially one or more Global Notes that (a) shall be registered in the name of the Depositary for such Global Note or Global Notes or the nominee of such Depositary and (b) shall be delivered by the Trustee to such Depositary or pursuant to such Depositary's instructions or held by the 16 17 Trustee as custodian for the Depositary. Members of, or participants in, the Depositary ("Agent Members") shall have no rights under this Indenture with respect to any Global Note held on their behalf by the Depositary or by the Trustee as the custodian of the Depositary or under such Global Note, and the Depositary may be treated by the Company, the Trustee and any agent of the Company or the Trustee as the absolute owner of such Global Note for all purposes whatsoever. Notwithstanding the foregoing, nothing herein shall prevent the Company, the Trustee or any agent of the Company or the Trustee from giving effect to any written certification, proxy or other authorization furnished by the Depositary or impair, as between the Depositary and its Agent Members, the operation of customary practices of such Depositary governing the exercise of the rights of an owner of a beneficial interest in any Global Note. (d) Certificated Notes. Notes offered and sold to "accredited investors" (as defined in Rule 501 (a) (1), (2), (3), (4) or (7) under the Securities Act), as provided in the Purchase Agreement, shall be issued initially in the form of one or more certificated Notes in definitive, fully registered form without interest coupons with the Restricted Notes Legend set forth in Exhibit A hereto ("Accredited Investor Restricted Notes"), which shall be registered in the name of such Accredited Investor or its nominee, duly executed by the Company and authenticated by the Trustee as hereinafter provided. Such Accredited Investor Restricted Notes may only be transferred in reliance on Regulation S or to QIBs in reliance on Rule 144A. In addition to the provisions of Section 2.10, owners of beneficial interests in Global Notes may, upon request to the Trustee, receive a certificated Note, which certificated Note shall bear the Restricted Notes Legend set forth in Exhibit A hereto (together with the Accredited Investor Restricted Notes, the "Restricted Notes") unless otherwise provided in this Section 2.01(d) and Section 2.06(b) hereof. After a transfer of any Notes during the period of the effectiveness of a Shelf Registration Statement with respect to the Notes and pursuant thereto, all requirements for Restricted Notes Legends on such Note will cease to apply, and a certificated Note without a Restricted Notes Legend will be available to the Holder of such Notes. Section 2.02. Execution and Authentication. One Officer shall sign the Notes for the Company by manual or facsimile signature. If an Officer whose signature is on a Note no longer holds that office at the time the Note is authenticated, the Note shall nevertheless be valid. A Note shall not be valid until authenticated by the manual signature of an authorized officer of the Trustee. The signature shall be conclusive evidence that the Note has been authenticated under this Indenture. The Trustee shall, upon a written order of the Company signed by an Officer, authenticate (1) Notes for original issue up to an aggregate principal amount stated in paragraph 6 of the Notes. The aggregate principal amount of Notes outstanding at any time may not exceed $600,000,000 except as provided in Section 2.07. The Trustee may appoint an authenticating agent acceptable to the Company to authenticate 17 18 Notes. An authenticating agent may authenticate Notes whenever the Trustee may do so. Each reference in this Indenture to authentication by the Trustee includes authentication by such agent. An authenticating agent has the same rights as an Agent to deal with Holders, the Company or an Affiliate. Section 2.03. Registrar and Paying Agent. The Company shall maintain in the Borough of Manhattan, City of New York, State of New York, (i) offices or agencies where the Notes may be presented for registration of transfer or for exchange ("Registrar") (ii) offices or agencies where the Notes may be presented for payment ("Paying Agent") and (iii) offices or agencies where the Notes may be presented for conversion ("Conversion Agent"). The Company initially designates the Trustee at its corporate trust offices in the Borough of Manhattan, City of New York, State of New York to act as principal Registrar, Paying Agent and Conversion Agent. The principal Registrar shall keep a register of the Notes and of their transfer and exchange. The Company may appoint one or more co-registrars, one or more additional paying agents and one or more additional Conversion Agents in such other locations as it shall determine. The term "Registrar" includes any co-registrar, the term "Paying Agent" includes any additional paying agent and the term "Conversion Agent" includes any additional conversion agent. The Company may change any Paying Agent, Registrar or Conversion Agent without prior notice to any Holder. The Company shall notify the Trustee of the name and address of any Agent not a party to this Indenture. If the Company fails to appoint or maintain another entity as Registrar, Paying Agent or Conversion Agent, the Trustee shall act as such. The Company or any of its Affiliates may act as Paying Agent, Registrar or Conversion Agent. Section 2.04. Paying Agent to Hold Money in Trust. The Company shall require each Paying Agent other than the Trustee to agree in writing that the Paying Agent will hold in trust for the benefit of Holders or the Trustee all money held by the Paying Agent for the payment of principal or interest on the Notes, and will notify the Trustee of any default by the Company in making any such payment. While any such default continues, the Trustee may require a Paying Agent to pay all money held by it to the Trustee and to account for any money disbursed by it. The Company at any time may require a Paying Agent to pay all money held by it to the Trustee. Upon payment over to the Trustee, the Paying Agent (if other than the Company or an Affiliate of the Company) shall have no further liability for the money. If the Company or an Affiliate of the Company acts as Paying Agent, it shall segregate and hold in a separate trust fund for the benefit of the Holders all money held by it as Paying Agent. Section 2.05. Holder Lists. The Trustee shall preserve in as current a form as is reasonably practicable the most recent list available to it of the names and addresses of Holders. If the Trustee is not the Registrar, the Company shall furnish to the Trustee on or before each interest payment date and at such other times as the Trustee may request in writing a list in such form and as of such date as the Trustee may reasonably require of the names and addresses of Holders. Section 2.06. Transfer and Exchange. Where Notes are presented to the Registrar or a co-registrar with a request to register a transfer or to exchange them for an equal principal amount of Notes of other denominations, the Registrar shall 18 19 register the transfer or make the exchange if its requirements for such transactions are met. To permit registrations of transfers and exchanges, the Company shall issue and the Trustee shall authenticate Notes at the Registrar's request. No service charge shall be made for any registration of transfer or exchange (except as otherwise expressly permitted herein), but the Company may require payment of a sum sufficient to cover any transfer tax or similar governmental charge payable in connection therewith (other than any such transfer tax or similar governmental charge payable upon exchanges pursuant to Sections 2.10, 3.06 or 11.05 hereof). The Company shall not be required (i) to issue, register the transfer of or exchange any Note for a period beginning at the opening of business 15 days before the day of any selection of Notes to be redeemed under Section 3.02 hereof and ending at the close of business on the day of selection, or (ii) to register the transfer, or exchange, of any Note so selected for redemption in whole or in part, except the unredeemed portion of any Note being redeemed in part. (a) Notwithstanding any provision to the contrary herein, so long as a Global Note remains outstanding and is held by or on behalf of the Depositary, transfers of a Global Note, in whole or in part, or of any beneficial interest therein, shall only be made in accordance with Section 2.01(b) and this Section 2.06(a); provided, however, that beneficial interests in a Global Note may be transferred to Persons who take delivery thereof in the form of a beneficial interest in the same Global Note in accordance with the transfer restrictions set forth in the Restricted Notes Legend and under the heading "Notice to Investors" in the Company's Offering Memorandum dated December 10, 1998. (i) Except for transfers or exchanges made in accordance with clauses (ii) through (iv) of this Section 2.06(a), transfers of a Global Note shall be limited to transfers of such Global Note in whole, but not in part, to nominees of the Depositary or to a successor of the Depositary or such successor's nominee. (ii) Rule 144A Global Note to Regulation S Global Note. If an owner of a beneficial interest in the Rule 144A Global Note deposited with the Depositary or the Trustee as custodian for the Depositary wishes at any time to transfer its interest in such Rule 144A Global Note to a Person who is required to take delivery thereof in the form of an interest in the Regulation S Global Note, such owner may, subject to the rules and procedures of the Depositary, exchange or cause the exchange of such interest for an equivalent beneficial interest in the Regulation S Global Note. Upon receipt by the principal Registrar of (1) instructions given in accordance with the Depositary's procedures from an Agent Member directing the principal Registrar to credit or cause to be credited a beneficial interest in the Regulation S Global Note in an amount equal to the beneficial interest in the Rule 144A Global Note to be exchanged, (2) a written order given in accordance with the Depositary's procedures containing information regarding the participant account of the Depositary and the Euroclear or Cedel account to be credited with such increase and (3) a certificate in the form of Exhibit B attached hereto given by the Holder of such beneficial interest, then the principal Registrar shall instruct the Depositary to reduce or cause to be reduced the principal amount of the Rule 144A Global Note and to increase or cause to be increased the principal amount of the Regulation S Global Note by the aggregate principal amount of the beneficial interest in the Rule 144A Global Note equal to the beneficial interest in the Regulation S Global Note to be exchanged or 19 20 transferred, to credit or cause to be credited to the account of the Person specified in such instructions a beneficial interest in the Regulation S Global Note equal to the reduction in the principal amount of the Rule 144A Global Note and to debit or cause to be debited from the account of the Person making such exchange or transfer the beneficial interest in the Rule 144A Global Note that is being exchanged or transferred. (iii) Regulation S Global Note to Rule 144A Global Note. If an owner of a beneficial interest in the Regulation S Global Note deposited with the Depositary or with the Trustee as custodian for the Depositary wishes at any time to transfer its interest in such Regulation S Global Note to a Person who is required to take delivery thereof in the form of an interest in the Rule 144A Global Note, such Holder may, subject to the rules and procedures of Euroclear or Cedel, as the case may be, and the Depositary, exchange or cause the exchange of such interest for an equivalent beneficial interest in the Rule 144A Global Note. Upon receipt by the principal Registrar of (1) instructions from Euroclear or Cedel, if applicable, and the Depositary, directing the principal Registrar to credit or cause to be credited a beneficial interest in the Rule 144A Global Note equal to the beneficial interest in the Regulation S Global Note to be exchanged or transferred, (2) a written order given in accordance with the Depositary's procedures containing information regarding the participant account of the Depositary and (3) a certificate in the form of Exhibit C attached hereto given by the owner of such beneficial interest, then Euroclear or Cedel or the principal Registrar, as the case may be, will instruct the Depositary to reduce or cause to be reduced the Regulation S Global Note and to increase or cause to be increased the principal amount of the Rule 144A Global Note by the aggregate principal amount of the beneficial interest in the Regulation S Global Note to be exchanged or transferred, and the principal Registrar shall instruct the Depositary, concurrently with such reduction, to credit or cause to be credited to the account of the Person specified in such instructions a beneficial interest in the Rule 144A Global Note equal to the reduction in the principal amount of the Regulation S Global Note and to debit or cause to be debited from the account of the Person making such exchange or transfer the beneficial interest in the Regulation S Global Note that is being exchanged or transferred. (iv) Global Note to Restricted Note. If an owner of a beneficial interest in a Global Note deposited with the Depositary or with the Trustee as custodian for the Depositary wishes at any time to transfer its interest in such Global Note to a Person who is required to take delivery thereof in the form of a Restricted Note, such owner may, subject to the rules and procedures of Euroclear or Cedel, if applicable, and the Depositary, cause the exchange of such interest for one or more Restricted Notes of any authorized denomination or denominations and of the same aggregate principal amount. Upon receipt by the principal Registrar of (1) instructions from Euroclear or Cedel, if applicable, and the Depositary directing the principal Registrar to authenticate and deliver one or more Restricted Notes of the same aggregate principal amount as the beneficial interest in the Global Note to be exchanged, such instructions to contain the name or names of the designated transferee or transferees, the authorized denomination or denominations of the Restricted Notes to be so issued and appropriate delivery instructions, (2) a certificate in the form of Exhibit D 20 21 attached hereto given by the owner of such beneficial interest to the effect set forth therein, (3) a certificate in the form of Exhibit E attached hereto given by the Person acquiring the Restricted Notes for which such interest is being exchanged, to the effect set forth therein, and (4) such other certifications, legal opinions or other information as the Company may reasonably require to confirm that such transfer is being made pursuant to an exemption from, or in a transaction not subject to, the registration requirements of the Securities Act, then Euroclear or Cedel, if applicable, or the principal Registrar, as the case may be, will instruct the Depositary to reduce or cause to be reduced such Global Note by the aggregate principal amount of the beneficial interest therein to be exchanged and to debit or cause to be debited from the account of the Person making such transfer the beneficial interest in the Global Note that is being transferred, and concurrently with such reduction and debit the Company shall execute, and the Trustee shall authenticate and deliver, one or more Restricted Notes of the same aggregate principal amount in accordance with the instructions referred to above. (v) Restricted Note to Restricted Note. If a Holder of a Restricted Note wishes at any time to transfer such Restricted Note to a Person who is required to take delivery thereof in the form of a Restricted Note, such Holder may, subject to the restrictions on transfer set forth herein and in such Restricted Note, cause the exchange of such Restricted Note for one or more Restricted Notes of any authorized denomination or denominations and of the same aggregate principal amount. Upon receipt by the principal Registrar of (1) such Restricted Note, duly endorsed as provided herein, (2) instructions from such Holder directing the principal Registrar to authenticate and deliver one or more Restricted Notes of the same aggregate principal amount as the Restricted Note to be exchanged, such instructions to contain the name or authorized denomination or denominations of the Restricted Notes to be so issued and appropriate delivery instructions, (3) a certificate from the Holder of the Restricted Note to be exchanged in the form of Exhibit D attached hereto, (4) a certificate in the form of Exhibit E attached hereto given by the Person acquiring the Restricted Notes for which such interest is being exchanged, to the effect set forth therein, and (5) such other certifications, legal opinions or other information as the Company may reasonably require to confirm that such transfer is being made pursuant to an exemption from, or in a transaction not subject to, the registration requirements of the Securities Act, then the Registrar shall cancel or cause to be canceled such Restricted Note and concurrently therewith, the Company shall execute, and the Trustee shall authenticate and deliver, one or more Restricted Notes of the same aggregate principal amount, in accordance with the instructions referred to above. (vi) Restricted Note to Rule 144A Note. If an owner of a Restricted Note registered in the name of such owner wishes at any time to transfer such Restricted Note to a Person who is required to take delivery thereof in the form of an interest in the Rule 144A 21 22 Global Note, such Holder may, subject to the rules and procedures of the Depositary, exchange or cause the exchange of such Restricted Note for an equivalent beneficial interest in the Rule 144A Global Note. Upon receipt by the principal Registrar of (1) instructions from the Company, directing the principal Registrar (A) to credit or cause to be credited a beneficial interest in the Rule 144A Global Note equal to the principal amount of the Restricted Note to be exchanged or transferred and (B) to cancel such Restricted Note to be exchanged or transferred, (2) a written order given in accordance with the Depositary's procedures containing information regarding the participant account of the Depositary and (3) a certificate in the form of Exhibit C attached hereto given by the owner of such Restricted Note, then the principal Registrar will instruct the Trustee to cancel such Restricted Note and will instruct the Depositary to increase or cause to be increased the principal amount of the Rule 144A Global Note by the principal amount of the Restricted Note to be exchanged or transferred, and the principal Registrar shall instruct the Depositary, concurrently with such cancellation of the Restricted Note, to credit or cause to be credited to the account of the Person specified in such instructions a beneficial interest in the Rule 144A Global Note equal to the principal amount of the Restricted Note to be canceled by the Trustee. (vii) Restricted Note to Regulation S Global Note. If an owner of a Restricted Note registered in the name of such owner wishes at any time to transfer such Restricted Note to a Person who is required to take delivery thereof in the form of an interest in the Regulation S Global Note, such owner may, subject to the rules and procedures of the Euroclear or Cedel, as the case may be, exchange or cause the exchange of such Restricted Note for an equivalent beneficial interest in the Regulation S Global Note. Upon receipt by the principal Registrar of (1) instructions from the Company, directing the principal Registrar (A) to credit or cause to be credited a beneficial interest in the Regulation S Global Note equal to the principal amount of the Restricted Note to be exchanged or transferred and (B) to cancel such Restricted Note to be exchanged or transferred, (2) a written order given in accordance with the Depositary's procedures containing information regarding the participant account of the Euroclear or Cedel account to be credited with such increase and (3) a certificate in the form of Exhibit B attached hereto given by the Holder of such Restricted Note, then the principal Registrar will instruct the Trustee to cancel such Restricted Note and will instruct the Depositary to increase or cause to be increased the principal amount of the Regulation S Global Note by the principal amount of the Restricted Note to be exchanged or transferred, and the principal Registrar shall instruct the Depositary, concurrently with such cancellation of the Restricted Note, to credit or cause to be credited to the account of the Person specified in such instructions a beneficial interest in the Regulation S Global Note equal to the principal amount of the Restricted Note to be cancelled by the Trustee. (viii) Other Exchanges. In the event that a beneficial interest in a Global Note is exchanged for a certificated Note in definitive registered form pursuant to Section 2.10, prior to the effectiveness of a Shelf Registration Statement with respect to such Notes, such Notes may be exchanged only in accordance with such procedures as are substantially consistent with the provisions of clauses (ii) through (v) above (including the certification requirements intended to ensure that such transfers comply with Rule 144A, Rule 144, Regulation S or any other available exemption from registration, as the case may be) and such other procedures as may from time to time be adopted by the Company. (b) Except in connection with a Shelf Registration Statement contemplated by and in 22 23 accordance with the terms of the Registration Rights Agreement, if Notes are issued upon the transfer, exchange or replacement of Notes bearing the Restricted Securities Legend set forth in Exhibit A hereto, or if a request is made to remove such Restricted Notes Legend on Notes, the Notes so issued shall bear the Restricted Notes Legend, or the Restricted Notes Legend shall not be removed, as the case may be, unless there is delivered to the Company such satisfactory evidence, which may include an opinion of counsel licensed to practice law in the State of New York, as may be reasonably required by the Company, that neither the legend nor the restrictions on transfer set forth therein are required to ensure that transfers thereof comply with the provisions of Rule 144A, Rule 144, Regulation S or any other available exemption from registration under the Securities Act or, with respect to Restricted Notes, that such Notes are not "restricted" within the meaning of Rule 144 under the Securities Act. Upon provision of such satisfactory evidence, the Trustee, at the direction of the Company, shall authenticate and deliver Notes that do not bear the legend. (c) Neither the Company nor the Trustee shall have any responsibility for any actions taken or not taken by the Depositary and the Company shall have no responsibility for any actions taken or not taken by the Trustee as agent or custodian of the Depositary. Section 2.07. Replacement Notes. If the Holder of a Note claims that the Note has been lost, destroyed or wrongfully taken or if such Note is mutilated and is surrendered to the Trustee, the Company shall issue and the Trustee shall authenticate a replacement Note if the Trustee's and the Company's requirements are met. If required by the Trustee or the Company, an indemnity bond must be sufficient in the judgment of both to protect the Company, the Trustee, any Agent or any authenticating agent from any loss which any of them may suffer if a Note is replaced. The Company may charge for its expenses in replacing a Note. In case any such mutilated, destroyed, lost or stolen Note has become or is about to become due and payable, or is about to be purchased by the Company pursuant to Article III hereof, the Company in its discretion may, instead of issuing a new Note, pay or purchase such Note, as the case may be. Every replacement Note is an additional obligation of the Company and shall be entitled to all of the benefits of this Indenture equally and proportionately with all other Notes duly issued hereunder. Section 2.08. Outstanding Notes. The Notes outstanding at any time are all the Notes authenticated by the Trustee except for those canceled by it, those delivered to it for cancellation, and those described in this Section as not outstanding. If a Note is replaced, paid or purchased pursuant to Section 2.07 hereof, it ceases to be outstanding unless the Trustee receives proof satisfactory to it that the replaced, paid or purchased Note is held by a bona fide purchaser. If the principal amount of any Note is considered paid under Section 4.01 hereof, it ceases to be outstanding and interest on it ceases to accrue. Except as set forth in Section 2.09 hereof, a Note does not cease to be outstanding because the Company or an Affiliate of the Company holds the Note. 23 24 Section 2.09. Treasury Notes. In determining whether the Holders of the required principal amount of Notes have concurred in any direction, waiver or consent, Notes owned by the Company or an Affiliate of the Company shall be considered as though they are not outstanding, except that for the purposes of determining whether the Trustee shall be protected in relying on any such direction, waiver or consent, only Notes that the Trustee knows are so owned shall be so disregarded. Section 2.10. Temporary Notes; Global Notes. (a) Until definitive Notes are ready for delivery, the Company may prepare and the Trustee shall authenticate temporary Notes. Temporary Notes shall be substantially in the form of definitive Notes but may have variations that the Company considers appropriate for temporary Notes. Without unreasonable delay, the Company shall prepare and the Trustee shall authenticate definitive Notes in exchange for temporary Notes. Holders of temporary Notes shall be entitled to all of the benefits of this Indenture. (b) A Global Note deposited with the Depositary or with the Trustee as custodian for the Depositary pursuant to Section 2.01 shall be transferred to the beneficial owners thereof in the form of certificated Notes only in accordance with Section 2.01(d) or if such transfer complies with Section 2.06 and (i) the Depositary notifies the Company that it is unwilling or unable to continue as Depositary for such Global Note or if at any time such Depositary ceases to be a "clearing agency" registered under the Exchange Act and a successor depositary is not appointed by the Company within 90 days of such notice, or (ii) an Event of Default has occurred and is continuing. (c) Any Global Note that is transferable to the beneficial owners thereof in the form of certificated Notes pursuant to Section 2.01(d) or to this Section 2.10 shall be surrendered by the Depositary to the Trustee to be so transferred, in whole or from time to time in part, without charge, and the Trustee shall authenticate and deliver, upon such transfer of each portion of such Global Note, an equal aggregate principal amount of Notes of authorized denominations in the form of certificated Notes. Any portion of a Global Note transferred pursuant to this Section 2.10 shall be executed, authenticated and delivered only in denominations of $1,000 and any integral multiple thereof and registered in such names as the Depositary shall direct. Any Note in the form of certificated Notes delivered in exchange for an interest in the Global Notes shall, except as otherwise provided by Section 2.06(b) bear the Restricted Notes Legend set forth in Exhibit A hereto. (d) The registered Holder of a Global Note may grant proxies and otherwise authorize any Person, including Agent Members and Persons that may hold interests through Agent Members, to take any action which a Holder is entitled to take under this Indenture or the Notes. (e) In the event of the occurrence of either of the events specified in Section 2.10(b), the Company will promptly make available to the Trustee a reasonable supply of certificated Notes in definitive, fully registered form without interest coupons. Section 2.11. Cancellation. 24 25 The Company at any time may deliver Notes to the Trustee for cancellation. The Registrar, Paying Agent and Conversion Agent shall forward to the Trustee any Notes surrendered to them for registration of transfer, exchange or payment. The Trustee shall promptly cancel all Notes surrendered for registration of transfer, exchange, payment, conversion, replacement or cancellation and shall dispose of canceled Notes as the Company directs. The Company may not issue new Notes to replace Notes that it has paid or that have been delivered to the Trustee for cancellation. Section 2.12. Defaulted Interest. If the Company fails to make a payment of interest on the Notes, it shall pay such defaulted interest plus any interest payable on the defaulted interest, in any lawful manner. It may pay such defaulted interest, plus any such interest payable on it, to the Persons who are Holders on a subsequent special record date. The Company shall fix any such record date and payment date, provided that no such record date shall be less than 10 days prior to the related payment date for such defaulted interest. At least 15 days before any such record date, the Company shall mail to Holders a notice that states the special record date, the related payment date and amount of such interest to be paid. ARTICLE III. Redemption Section 3.01. Notices to Trustee. If the Company elects to redeem Notes pursuant to the optional redemption provisions of the Notes and Section 3.07 hereof or pursuant to the Optional Tax Redemption provision of the Notes (Section 8 of the Notes), it shall notify the Trustee of the redemption date and the principal amount of Notes to be redeemed, and in connection with an Optional Tax Redemption as provided in the Notes, such notice shall be accompanied by an Officers' Certificate to the effect that the conditions to such redemption contained herein have been complied with. The Company shall give each notice provided for in this Section 3.01 at least 50 days before the redemption date (unless a shorter notice period shall be satisfactory to the Trustee). Section 3.02. Selection of Notes to Be Redeemed. If less than all of the Notes are to be redeemed at any time, selection of Notes shall be made by the Trustee on a pro rata basis or by lot or by method that complies with the requirements of any exchange on which the Notes are listed and that the Trustee considers fair and appropriate, provided that no Notes of $1,000 or less shall be redeemed in part. The Trustee shall make the selection not more than 60 days and not less than 30 days before the redemption date from Notes outstanding not previously called for redemption. Notes and portions of Notes selected shall be in amounts of $1,000 or integral multiples of $1,000. Provisions of this Indenture that apply to Notes called for redemption also apply to portions of Notes called for redemption. The Trustee shall notify the Company promptly of the Notes or portions of Notes to be called for redemption. If any Note selected for partial redemption is converted in part after such selection, the converted portion of such Note shall be deemed (so far as may be) to be the portion to be selected for redemption. The Notes (or portions thereof) so selected shall be deemed duly selected for redemption for all purposes hereunder, notwithstanding that any such Note is converted in whole or in part before the mailing of the notice of redemption. Upon any redemption of less than all the Notes, the Company and the Trustee may 25 26 treat as outstanding any Notes surrendered for conversion during the period 15 days next preceding the mailing of a notice of redemption and need not treat as outstanding any Note authenticated and delivered during such period in exchange for the unconverted portion of any Note converted in part during such period. Section 3.03. Notice of Redemption. At least 30 days but not more than 60 days before a redemption date, the Company shall mail, by first class mail, a notice of redemption to each Holder whose Notes are to be redeemed at its registered address. The notice shall identify the Notes to be redeemed and shall state: (a) the redemption date; (b) the redemption price; (c) if any Note is to be redeemed in part only, the portion of the principal amount thereof redeemed, and that, after the redemption date, upon surrender of such Note, a new Note in principal amount equal to the unredeemed portion thereof shall be issued in the name of the Holder thereof upon cancellation of the original Note; (d) the name and address of the Paying Agent; (e) that Notes called for redemption must be surrendered to the Paying Agent to collect the redemption price plus accrued interest, if any, and Liquidated Damages, if any; (f) that interest on Notes called for redemption ceases to accrue on and after the redemption date; and (g) the paragraph of the Notes pursuant to which the Notes called for redemption are being redeemed. Such notice shall also state the current Conversion Price and the date on which the right to convert such Notes or portions thereof into Common Stock of the Company will expire. At the Company's request, the Trustee shall give notice of redemption in the Company's name and at its expense; provided that the Company shall have delivered to the Trustee, at least 45 days prior to the redemption date, an Officers' Certificate requesting that the Trustee give such notice and setting forth the information to be stated in such notice, as provided in the preceding paragraph. Section 3.04. Effect of Notice of Redemption. Once notice of redemption is mailed in accordance with Section 3.03 hereof, Notes called for redemption become due and payable on the redemption date at the price set forth in the Note. A notice of redemption may not be conditional. Section 3.05. Deposit of Redemption Price. On or before the redemption date, the Company shall deposit with the Trustee or with the Paying Agent money sufficient to pay the redemption price of and accrued interest on all Notes to be redeemed 26 27 on that date unless theretofore converted into Common Stock pursuant to the provisions hereof. The Trustee or the Paying Agent shall return to the Company any money not required for that purpose. Section 3.06. Notes Redeemed in Part. Upon surrender of a Note that is redeemed in part, the Company shall issue and the Trustee shall authenticate for the Holder at the expense of the Company a new Note equal in principal amount to the unredeemed portion of the Note surrendered. Section 3.07. Optional Redemption and Optional Tax Redemption. The Company may redeem all or any portion of the Notes, upon the terms and at the redemption prices set forth in the Notes. The Company may also redeem all of the Notes in accordance with the Optional Tax Redemption provision of the Notes (Section 8 of the Notes). Any redemption pursuant to this Section 3.07 shall be made pursuant to the provisions of Section 3.01 through 3.06 hereof. Section 3.08. Mandatory Redemption The Company shall not be required to make mandatory redemption payments with respect to the Notes. Section 3.09. Purchase Offer. (a) In the event that, pursuant to 4.07 hereof, the Company shall commence an offer to all Holders of the Notes to purchase Notes (the "Purchase Offer"), the Company shall follow the procedures in this Section 3.09. (b) The Purchase Offer shall remain open for a period specified by the Company which shall be no less than 30 calendar days and no more than 40 calendar days following its commencement (the "Commencement Date") (as determined in accordance with Section 4.07 hereof), except to the extent that a longer period is required by applicable law (the "Tender Period"). Upon the expiration of the Tender Period (the "Purchase Date"), the Company shall purchase the principal amount of all of the Notes required to be purchased pursuant to Section 4.07 hereof (the "Offer Amount"). (c) If the Purchase Date is on or after an interest payment record date and on or before the related interest payment date, any accrued interest shall be paid to the Person in whose name a Note is registered at the close of business on such record date, and no additional interest will be payable to Holders who tender Notes pursuant to the Purchase Offer. (d) The Company shall provide the Trustee with notice of the Purchase Offer at least 10 days before the Commencement Date. (e) On or before the Commencement Date, the Company or the Trustee (at the expense of the Company) shall send, by first class mail, a notice to each of the Holders, which shall govern the terms of the Purchase Offer and shall state: (i) that the Purchase Offer is being made pursuant to this Section 3.09 and Section 4.07 hereof and the length of time the Purchase Offer will remain open; 27 28 (ii) The purchase price (as determined in accordance with Section 4.07 hereof) and the Purchase Date, and that all Notes tendered will be accepted for payment; (iii) that any Note or portion thereof not tendered or accepted for payment will continue to accrue interest; (iv)that, unless the Company defaults in the payment of the purchase price, any Note or portion thereof accepted for payment pursuant to the Purchase Offer will cease to accrue interest after the Purchase Date; (v) that Holders electing to have a Note or portion thereof purchased pursuant to any Purchase Offer will be required to surrender the Note, with the form entitled "Option of Holder to Elect Purchase" on the reverse of the Note completed, to the Company, a depositary, if appointed by the Company, or a Paying Agent at the address specified in the notice prior to the close of business on the third Business Day preceding the Purchase Date; (vi) that Holders will be entitled to withdraw their election if the Company, depositary or Paying Agent, as the case may be, receives, not later than the close of business on the second Business Day preceding the Purchase Date, or such longer period as may be required by law, a letter or a telegram, telex or facsimile transmission (receipt of which is confirmed and promptly followed by a letter) setting forth the name of the Holder, the principal amount of the Note or portion thereof the Holder delivered for purchase and a statement that such Holder is withdrawing his election to have the Note or portion thereof purchased; (vii) that Holders whose Notes were purchased only in part will be issued new Notes equal in principal amount to the unpurchased portion of the Notes surrendered. In addition, the notice shall, to the extent permitted by applicable law, be accompanied by a copy of the information regarding the Company and its Subsidiaries which is required to be contained in the most recent Quarterly Report on Form 10-Q or Annual Report on Form 10-K (including any financial statements or other information required to be included or incorporated by reference therein) and any Reports on Form 8-K filed since the date of such Quarterly Report or Annual Report (or would have been required to file if the Company remained a company incorporated in the United States), as the case may be, which the Company has filed (or would have been required to file if it remained a company incorporated in the United States) with the SEC on or prior to the date of the notice. The notice shall contain all instructions and materials necessary to enable such Holders to tender Notes pursuant to the Asset Sale Offer or the Purchase Offer, as the case may be. (f) At least one Business Day prior to the Purchase Date, the Company shall irrevocably deposit with the Trustee or a Paying Agent in immediately available funds an amount equal to the Offer Amount to be held for payment in accordance with the terms of this Section 3.09. On the Purchase Date, the Company shall, to the extent lawful, (i) accept for payment the Notes or portions thereof tendered pursuant to the Purchase Offer, (ii) deliver or cause the depositary or Paying Agent to deliver to the Trustee Notes so accepted and (iii) deliver to the Trustee an Officers' Certificate stating such Notes or portions thereof have been accepted for 28 29 payment by the Company in accordance with the terms of this Section 3.09. The Depositary, the Paying Agent or the Company, as the case may be, shall promptly (but in any case not later than ten (10) calendar days after the Purchase Date) mail or deliver to each tendering Holder an amount equal to the purchase price of the Notes tendered by such Holder and accepted by the Company for purchase, and the Trustee shall promptly authenticate and mail or deliver to such Holders a new Note equal in principal amount to any unpurchased portion of the Note surrendered. Any Notes not so accepted shall be promptly mailed or delivered by or on behalf of the Company to the Holder thereof. The Company will publicly announce in a newspaper of general circulation the results of the Purchase Offer on the Purchase Date. (g) The Purchase Offer shall be made by the Company in compliance with all applicable provisions of the Exchange Act, and all applicable tender offer rules promulgated thereunder, and shall include all instructions and materials necessary to enable such Holders to tender their Notes. ARTICLE IV. Covenants Section 4.01. Payment of Notes. The Company shall pay the principal of, premium, if any, Liquidated Damages, if any, and interest on, the Notes on the dates and in the manner provided in the Notes. Principal, premium, if any, Liquidated Damages, if any, and interest shall be considered paid on the date due if the Paying Agent (other than the Company or an Affiliate of the Company) holds on that date money designated for and sufficient to pay all principal, premium, if any, Liquidated Damages, if any, and interest then due. To the extent lawful, the Company shall pay interest (including post-petition interest in any proceeding under any Bankruptcy Law) on (i) overdue principal and premium, if any, at the rate borne by the Notes, compounded semiannually; and (ii) overdue installments of interest or Liquidated Damages, if any, (without regard to any applicable grace period) at the same rate, compounded semiannually. Section 4.02. Reports. Whether or not required by the rules and regulations of the SEC, so long as any Notes are outstanding, the Company shall file with the SEC and furnish to the Trustee and to the Holders of Notes, all quarterly and annual financial information required to be contained in a filing with the SEC on Forms 10-Q and 10-K (or the equivalent thereof under the Exchange Act for foreign private issuers in the event the Company becomes a corporation organized under the laws of the United Kingdom, the Netherlands, the Netherlands Antilles, Bermuda or the Cayman Islands), including a "Management's Discussion and Analysis of Results of Operations and Financial Condition" and, with respect to the annual information only, a report thereon by the Company's certified independent accountants, in each case, as required by the rules and regulations of the SEC as in effect on the Issuance Date. This Section 4.02 will apply notwithstanding that the Company becomes a corporation organized under the laws of the United Kingdom, the Netherlands, the Netherlands Antilles, Bermuda or the Cayman Islands. Section 4.03. Compliance Certificate. The Company shall deliver to the Trustee, within 90 days after the end of each fiscal year of the Company, an Officers' Certificate stating that a review of the activities of the Company and its 29 30 subsidiaries during the preceding fiscal year has been made under the supervision of the signing Officers with a view to determining whether the Company has kept, observed, performed and fulfilled its obligations under, and complied with the covenants and conditions contained in, this Indenture, and further stating, as to each such Officer signing such certificate, that to the best of his knowledge the Company has kept, observed, performed and fulfilled each and every covenant, and complied with the covenants and conditions contained in this Indenture and is not in default in the performance or observance of any of the terms, provisions and conditions hereof (or, if a Default or Event of Default shall have occurred, describing all such Defaults or Events of Default of which he may have knowledge) and that to the best of his knowledge no event has occurred and remains in existence by reason of which payments on account of the principal or of interest, if any, on the Notes are prohibited. One of the Officers signing such Officers' Certificate shall be either the Company's principal executive officer, principal financial officer or principal accounting officer. The Company will so long as any of the Notes are outstanding, deliver to the Trustee, forthwith upon becoming aware of any Default or Event of Default an Officers' Certificate specifying such Default or Event of Default. Immediately upon the occurrence of any Registration Default giving rise to Liquidated Damages or the cure of any such Registration Default, the Company shall give the Trustee notice thereof and of the event giving rise to such Registration Default or the cure of any such Registration Default (such notice to be contained in an Officers' Certificate) and prior to receipt of such Officers' Certificate the Trustee shall be entitled to assume that no such Registration Default has occurred or been cured, as the case may be. Section 4.04. Stay, Extension and Usury Laws. The Company covenants (to the extent that it may lawfully do so) that it will not at any time insist upon, plead, or in any manner whatsoever claim or take the benefit or advantage of, any stay, extension or usury law wherever enacted, now or at any time hereafter in force, which may affect the covenants or the performance of this Indenture; and the Company (to the extent it may lawfully do so) hereby expressly waives all benefit or advantage of any such law, and covenants that it will not, by resort to any such law, hinder, delay or impede the execution of any power herein granted to the Trustee, but will suffer and permit the execution of every such power as though no such law had been enacted. Section 4.05. Corporate Existence. Subject to Article VII hereof, the Company will do or cause to be done all things necessary to preserve and keep in full force and effect its corporate existence and the corporate, partnership or other existence of each subsidiary of the Company in accordance with the respective organizational documents of each subsidiary and the rights (charter and statutory), licenses and franchises of the Company and its subsidiaries; provided, however, that the Company shall not be required to preserve any such right, license or franchise, or the corporate, partnership or other existence of any subsidiary, if the Board of Directors shall determine that the preservation thereof is no longer desirable in the conduct of the business of the Company and its subsidiaries taken as a whole and that the loss thereof is not adverse in any material respect to the Holders. The Company shall notify the Trustee in writing of any subsidiary which qualifies as a Material Subsidiary and is not specified in clause (i) of the definition thereof. Section 4.06. Taxes. 30 31 The Company shall, and shall cause each of its subsidiaries to, pay prior to delinquency all taxes, assessments and governmental levies, except as contested in good faith and by appropriate proceedings. Section 4.07. Change of Control. (a) Upon the occurrence of a Change of Control, each Holder of Notes shall have the right to require the Company to repurchase all or any part (equal to $1,000 or an integral multiple thereof) of such Holder's Notes pursuant to the Purchase Offer at a purchase price equal to 101% of the principal amount thereof plus accrued and unpaid interest and Liquidated Damages thereon, if any, to the date of purchase (the "Change of Control Payment"). (b) Within 40 days following any Change of Control, the Company shall mail to each Holder the notice provided by Section 3.09(e). Section 4.08. Payment of Additional Amounts. At least 10 days prior to the first date on which payment of principal and any premium, Liquidated Damages or interest on the Notes is to be made, and at least 10 days prior to any subsequent such date if there has been any change with respect to the matters set forth in the Officers' Certificate described in this Section 4.08, the Company shall furnish the Trustee and the Paying Agent, if other than the Trustee, with an Officers' Certificate instructing the Trustee and the Paying Agent whether the Company is obligated to pay Additional Amounts (as defined in Section 3 of the Notes) with respect to such payment of principal, or of any premium or interest or Liquidated Damages, if any, on the Notes. If the Company will be obligated to pay Additional Amounts with respect to such payment then such Officers' Certificate shall specify by country the amount, if any, required to be withheld on such payments to such Holders and the Company will pay to the Trustee or the Paying Agent such Additional Amounts. The Company shall indemnify the Trustee and the Paying Agent for, and hold them harmless against, any loss, liability or expense reasonably incurred without negligence or bad faith on their part arising out of or in connection with actions taken or omitted by any of them in reliance on any Officers' Certificate furnished to them pursuant to this Section 4.08. Whenever in this Indenture or the Notes there is mentioned, in any context, the payment of principal (and premium, if any), Offer Amount, interest or any other amount payable, including Liquidated Damages, under or with respect to any Note such mention shall be deemed to include mention of the payment of Additional Amounts provided for in this Section 4.08 and Section 3 of the Notes to the extent that, in such context, Additional Amounts are, were or would be payable in respect thereof pursuant to the provisions of this Section 4.08 and Section 3 of the Notes and express mention of the payment of Additional Amounts (if applicable) in any provisions hereof shall not be construed as excluding Additional Amounts in those provisions hereof where such express mention is not made (if applicable). ARTICLE V. Conversion Section 5.01. Conversion Privilege. A Holder of a Note may convert it into fully paid and nonassessable shares of Common Stock at any time after 90 days following the Issuance Date and prior to maturity at the Conversion Price then in 31 32 effect, except that, with respect to any Note called for redemption, such conversion right shall terminate at the close of business on the Business Day immediately preceding the redemption date (unless the Company shall default in making the redemption payment when it becomes due, in which case the conversion right shall terminate on the date such default is cured). The number of shares of Common Stock issuable upon conversion of a Note is determined by dividing the principal amount of such Note by the conversion price in effect on the Conversion Date (the "Conversion Price"). The initial Conversion Price is stated in paragraph 13 of the Notes and is subject to adjustment as provided in this Article V. A holder may convert a portion of a Note equal to any integral multiple of $1,000. Provisions of this Indenture that apply to conversion of all of a Note also apply to conversion of a portion of it. Section 5.02. Conversion Procedure. To convert a Note, a holder must satisfy the requirements in paragraph 13 of the Notes. The date on which the holder satisfies all of those requirements is the conversion date (the "Conversion Date"). As soon as practicable after the Conversion Date, the Company shall deliver to the Holder through the Conversion Agent a certificate for the number of whole shares of Common Stock issuable upon the conversion and a check for any fractional share determined pursuant to Section 5.03 hereof. The Person in whose name the certificate is registered shall become the stockholder of record on the Conversion Date and, as of such date, such Person's rights as a Holder shall cease; provided, however, that no surrender of a Note on any date when the stock transfer books of the Company shall be closed shall be effective to constitute the Person entitled to receive the shares of Common Stock upon such conversion as the stockholder of record of such shares of Common Stock on such date, but such surrender shall be effective to constitute the Person entitled to receive such shares of Common Stock as the stockholder of record thereof for all purposes at the close of business on the next succeeding day on which such stock transfer books are open; provided further, however, that such conversion shall be at the Conversion Price in effect on the date that such Note shall have been surrendered for conversion, as if the stock transfer books of the Company had not been closed. No payment or adjustment will be made for accrued and unpaid interest or Liquidated Damages, if any, on a converted Note or for dividends or distributions on shares of Common Stock issued upon conversion of a Note, but if any holder surrenders a Note for conversion after the close of business on the record date for the payment of an installment of interest and prior to the opening of business on the next interest payment date, then, notwithstanding such conversion, the interest payable on such interest payment date shall be paid to the holder of such Note on such record date. In such event, such Note, when surrendered for conversion, need not be accompanied by payment of an amount equal to the interest payable on such interest payment date on the portion so converted. If a holder converts more than one Note at the same time, the number of whole shares of Common Stock issuable upon the conversion shall be based on the total principal amount of Notes converted. Upon surrender of a Note that is converted in part, the Trustee shall authenticate for the holder a new Note equal in principal amount to the unconverted portion of the Note surrendered. Section 5.03. Fractional Shares. 32 33 The Company will not issue fractional shares of Common Stock upon conversion of a Note. In lieu thereof, the Company will pay an amount in cash based upon the Daily Market Price of the Common Stock on the trading day prior to the date of conversion. Section 5.04. Taxes in Conversion. The issuance of certificates for shares of Common Stock upon the conversion of any Note shall be made without charge to the converting Holder for such certificates or for any tax in respect of the issuance of such certificates, and such certificates shall be issued in the respective names of, or in such names as may be directed by, the Holder or Holders of the converted Note; provided, however, that in the event that certificates for shares of Common Stock are to be issued in a name other than the name of the holder of the Note converted, such Note, when surrendered for conversion, shall be accompanied by an instrument of transfer, in form satisfactory to the Company, duly executed by the registered holder thereof or his duly authorized attorney; and provided further, however, that the Company shall not be required to pay any tax which may be payable in respect of any transfer involved in the issuance and delivery of any such certificates in a name other than that of the holder of the converted Note, and the Company shall not be required to issue or deliver such 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 or is not applicable. Section 5.05. Company to Provide Stock. The Company shall at all times reserve and keep available, free from preemptive rights, out of its authorized but unissued Common Stock, solely for the purpose of issuance upon conversion of Notes as herein provided, a sufficient number of shares of Common Stock to permit the conversion of all outstanding Notes for shares of Common Stock. All shares of Common Stock which may be issued upon conversion of the Notes shall be duly authorized, validly issued, fully paid and nonassessable when so issued. Shares of Common Stock issuable upon conversion of a Restricted Note shall bear such restrictive legends as the Company shall provide in accordance with applicable law. If shares of Common Stock are to be issued upon conversion of a Restricted Note and they are to be registered in a name other than that of the holder of such Restricted Note, then the Person in whose name such shares of Common Stock are to be registered must deliver to the Trustee a certificate satisfactory to the Company and signed by such Person as to compliance with the restrictions on transfer contained in such restrictive legends. Section 5.06. Adjustment of Conversion Price. The Conversion Price shall be subject to adjustment from time to time as follows: (a) In case the Company shall (1) pay a dividend in shares of Common Stock to holders of Common Stock, (2) make a distribution in shares of Common Stock to holders of Common Stock, (3) subdivide its outstanding shares of Common Stock into a greater number of shares of Common Stock or (4) combine its outstanding shares of Common Stock into a smaller number of shares of Common Stock, the Conversion Price in effect immediately prior to such action shall be adjusted so that the holder of any Note thereafter surrendered for conversion shall be entitled to receive the number of shares of Common Stock which he would have owned immediately following such action had such Notes been converted immediately prior thereto. Any adjustment made pursuant to this subsection (a) shall become effective immediately after the 33 34 record date in the case of a dividend or distribution and shall become effective immediately after the effective date in the case of a subdivision or combination. (b) In case the Company shall issue rights or warrants to substantially all holders of Common Stock entitling them (for a period commencing no earlier than the record date for the determination of holders of Common Stock entitled to receive such rights or warrants and expiring not more than 45 days after such record date) to subscribe for or purchase shares of Common Stock (or securities convertible into Common Stock) at a price per share less than the current market price (as determined pursuant to subsection (f) below) of the Common Stock on such record date, the Conversion Price shall be adjusted so that the same shall equal the price determined by multiplying the Conversion Price in effect immediately prior to such record date by a fraction of which the numerator shall be the number of shares of Common Stock outstanding on such record date, plus the number of shares of Common Stock which the aggregate offering price of the offered shares of Common Stock (or the aggregate conversion price of the convertible securities so offered) would purchase at such current market price, and of which the denominator shall be the number of shares of Common Stock outstanding on such record date plus the number of additional shares of Common Stock offered (or into which the convertible securities so offered are convertible). Such adjustments shall become effective immediately after such record date. (c) In case the Company shall distribute to all holders of Common Stock shares of any class of stock other than Common Stock, evidences of indebtedness or other assets (other than cash dividends out of current or retained earnings), or shall distribute to substantially all holders of Common Stock rights or warrants to subscribe for securities (other than those referred to in subsection (b) above), then in each such case the Conversion Price shall be adjusted so that the same shall equal the price determined by multiplying the Conversion Price in effect immediately prior to the date of such distribution by a fraction of which the numerator shall be the current market price (determined as provided in subsection (f) below) of the Common Stock on the record date mentioned below less the then fair market value (as determined by the Board of Directors, whose determination shall be conclusive evidence of such fair market value and described in a Board Resolution) of the portion of the assets so distributed or of such subscription rights or warrants applicable to one share of Common Stock, and of which the denominator shall be such current market price of the Common Stock. Such adjustment shall become effective immediately after the record date for the determination of the holders of Common Stock entitled to receive such distribution. Notwithstanding the foregoing, in the event that the Company shall distribute rights or warrants (other than those referred to in subsection (b) above) ("Rights") pro rata to holders of Common Stock, the Company may, in lieu of making any adjustment pursuant to this Section 5.06, make proper provision so that each holder of a Note who converts such Note (or any portion thereof) after the record date for such distribution and prior to the expiration or redemption of the Rights shall be entitled to receive upon such conversion, in addition to the shares of Common Stock issuable upon such conversion (the "Conversion Shares"), a number of Rights to be determined as follows: (i) if such conversion occurs on or prior to the date for the distribution to the holders of Rights of separate certificates evidencing such Rights (the "Distribution Date"), the same number of Rights to which a holder of a number of shares of Common Stock equal to the number of Conversion Shares is entitled at the time of such conversion in accordance with the terms and provisions of and applicable to the Rights; and (ii) if such conversion occurs after the Distribution Date, the same number of Rights to which a holder of the number of shares of Common Stock into which the principal amount of the Note so 34 35 converted was convertible immediately prior to the Distribution Date would have been entitled on the Distribution Date in accordance with the terms and provisions of and applicable to the Rights. (d) In case the Company shall, by dividend or otherwise, at any time distribute to all holders of its Common Stock cash (including any distributions of cash out of current or retained earnings of the Company but excluding any cash that is distributed as part of a distribution requiring a Conversion Price adjustment pursuant to paragraph (c) of this Section 5.06) in an aggregate amount that, together with the sum of (x) the aggregate amount of any other distributions to all holders of its Common Stock made in cash plus (y) all Excess Payments, in each case made within the 12 months preceding the date fixed for determining the stockholders entitled to such distribution (the "Distribution Record Date") and in respect of which no Conversion Price adjustment pursuant to paragraphs (c) or (e) of this Section 5.06 or this paragraph (d) has been made, exceeds 10% of the product of the current market price per share (determined as provided in paragraph (f) of this Section 5.06) of the Common Stock on the Distribution Record Date times the number of shares of Common Stock outstanding on the Distribution Record Date (excluding shares held in the treasury of the Company), the Conversion Price shall be reduced so that the same shall equal the price determined by multiplying such Conversion Price in effect immediately prior to the effectiveness of the Conversion Price reduction contemplated by this paragraph (d) by a fraction of which the numerator shall be the current market price per share (determined as provided in paragraph (f) of this Section 5.06) of the Common Stock on the Distribution Record Date less the amount of such cash and other consideration (including any Excess Payments) so distributed applicable to one share (based on the pro rata portion of the aggregate amount of such cash and other consideration (including any Excess Payments), divided by the shares of Common Stock outstanding on the Distribution Record Date) of Common Stock and the denominator shall be such current market price per share (determined as provided in paragraph (f) of this Section 5.06) of the Common Stock on the Distribution Record Date, such reduction to become effective immediately prior to the opening of business on the day following the Distribution Record Date. (e) In case a tender offer or other negotiated transaction made by the Company or any Subsidiary for all or any portion of the Common Stock shall be consummated, if an Excess Payment is made in respect of such tender offer or other negotiated transaction and the amount of such Excess Payment, together with the sum of (x) the aggregate amount of all Excess Payments plus (y) the aggregate amount of all distributions to all holders of the Common Stock made in cash (specifically including distributions of cash out of retained earnings), in each case made within the 12 months preceding the date of payment of such current negotiated transaction consideration or expiration of such current tender offer, as the case may be (the "Purchase Date"), and as to which no adjustment pursuant to paragraph (c) or paragraph (d) of this Section 5.06 or this paragraph (e) has been made, exceeds 10% of the product of the current market price per share (determined as provided in paragraph (f) of this Section 5.06) of the Common Stock on the Purchase Date times the number of shares of Common Stock outstanding (including any tendered shares but excluding any shares held in the treasury of the Company) on the Purchase Date, the Conversion Price shall be reduced so that the same shall equal the price determined by multiplying such Conversion Price in effect immediately prior to the effectiveness of the Conversion Price reduction contemplated by this paragraph (e) by a fraction of which the numerator shall be the current market price per share (determined as provided in paragraph (f) of this Section 5.06) of the Common Stock on the Purchase Date less the amount of such Excess Payments and such cash distributions, if any, applicable to one share (based on the pro rata 35 36 portion of the aggregate amount of such Excess Payments and such cash distributions, divided by the shares of Common Stock outstanding on the Purchase Date) of Common Stock and the denominator shall be such current market price per share (determined as provided in paragraph (f) of this Section 5.06) of the Common Stock on the Purchase Date, such reduction to become effective immediately prior to the opening of business on the day following the Purchase Date. (f) The current market price per share of Common Stock on any date shall be deemed to be the average of the Daily Market Prices for the shorter of (i) thirty consecutive business days ending on the last full trading day on the exchange or market referred to in determining such Daily Market Prices prior to the time of determination or (ii) the period commencing on the date next succeeding the first public announcement of the issuance of such rights or such warrants or such other distribution or such negotiated transaction through such last full trading day on the exchange or market referred to in determining such Daily Market Prices prior to the time of determination. (g) In any case in which this Section 5.06 shall require that an adjustment be made immediately following a record date, the Company may elect to defer (but only until five Business Days following the filing by the Company with the Trustee of the certificate described in Section 5.10 hereof) issuing to the holder of any Note converted after such record date the shares of Common Stock and other Capital Stock of the Company issuable upon such conversion over and above the shares of Common Stock and other Capital Stock of the Company issuable upon such conversion only on the basis of the Conversion Price prior to adjustment; and, in lieu of the shares the issuance of which is so deferred, the Company shall issue or cause its transfer agents to issue due bills or other appropriate evidence of the right to receive such shares. Section 5.07. No Adjustment. No adjustment in the Conversion Price shall be required until cumulative adjustments amount to 1% or more of the Conversion Price as last adjusted; provided, however, that any adjustments which by reason of this Section 5.07 are not required to be made shall be carried forward and taken into account in any subsequent adjustment. All calculations under this Article V shall be made to the nearest cent or to the nearest one-hundredth of a share, as the case may be. No adjustment need be made for rights to purchase Common Stock pursuant to a Company plan for reinvestment of dividends or interest. No adjustment need be made for a change in the par value or no par value of the Common Stock. Section 5.08. Other Adjustments. (a) In the event that, as a result of an adjustment made pursuant to Section 5.06 hereof, the holder of any Note thereafter surrendered for conversion shall become entitled to receive any shares of Capital Stock of the Company other than shares of its Common Stock, thereafter the Conversion Price of such other shares so receivable upon conversion of any Note shall be subject to adjustment from time to time in a manner and on terms as nearly equivalent as practicable to the provisions with respect to Common Stock contained in this Article V. (b) In the event that shares of Common Stock are not delivered after the expiration of any of the rights or warrants referred to in Section 5.06(b) and Section 5.06(c) hereof, the Conversion Price shall be readjusted to the Conversion Price which would otherwise be in effect had the adjustment made upon the issuance of such rights or warrants been made on the basis of delivery of only the number of shares of 36 37 Common Stock actually delivered. Section 5.09. Adjustments for Tax Purposes. The Company may make such reductions in the Conversion Price, in addition to those required by Section 5.06 hereof, as it determines to be advisable in order that any stock dividend, subdivision of shares, distribution or rights to purchase stock or securities or distribution of securities convertible into or exchangeable for stock made by the Company to its stockholders will not be taxable to the recipients thereof. Section 5.10. Notice of Adjustment. Whenever the Conversion Price is adjusted, the Company shall promptly mail to Holders at the addresses appearing on the Registrar's books a notice of the adjustment and file with the Trustee an Officers' Certificate briefly stating the facts requiring the adjustment and the manner of computing it. The certificate shall be conclusive evidence of the correctness of such adjustment. Section 5.11. Notice of Certain Transactions. In the event that: (1) the Company takes any action which would require an adjustment in the Conversion Price; (2) the Company takes any action that would require a supplemental indenture pursuant to Section 5.12; or (3) there is a dissolution or liquidation of the Company; a Holder of a Note may wish to convert such Note into shares of Common Stock prior to the record date for or the effective date of the transaction so that he may receive the rights, warrants, securities or assets which a holder of shares of Common Stock on that date may receive. Therefore, the Company shall mail to Holders at the addresses appearing on the Registrar's books and the Trustee a notice stating the proposed record or effective date, as the case may be. The Company shall mail the notice at least 15 days before such date; however, failure to mail such notice or any defect therein shall not affect the validity of any transaction referred to in clause (1), (2) or (3) of this Section 5.11. Section 5.12. Effect of Reclassifications, Consolidations, Mergers or Sales on Conversion Privilege. If any of the following shall occur, namely: (i) any reclassification or change of outstanding shares of Common Stock issuable upon conversion of Notes (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), (ii) any consolidation or merger to which the Company is a party other than a merger in which the Company is the continuing corporation and which does not result in any reclassification of, or change (other than a change in name, or 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) in, outstanding shares of Common Stock or (iii) any sale or conveyance of all or substantially all of the property or business of the Company as an entirety, then the Company, or such successor or purchasing corporation, as the case may be, shall, as a condition precedent to such reclassification, change, consolidation, merger, sale or conveyance, execute and deliver to the Trustee a supplemental indenture in form satisfactory to the Trustee providing that the 37 38 holder of each Note then outstanding shall have the right to convert such Note into the kind and amount of shares of stock and other securities and property (including cash) receivable upon such reclassification, change, consolidation, merger, sale or conveyance by a holder of the number of shares of Common Stock deliverable upon conversion of such Note immediately prior to such reclassification, change, consolidation, merger, sale or conveyance. Such supplemental indenture shall provide for adjustments of the Conversion Price which shall be as nearly equivalent as may be practicable to the adjustments of the Conversion Price provided for in this Article V. The foregoing, however, shall not in any way affect the right a holder of a Note may otherwise have, pursuant to clause (ii) of the last sentence of subsection (c) of Section 5.06 hereof, to receive Rights upon conversion of a Note. If, in the case of any such consolidation, merger, sale or conveyance, the stock or other securities and property (including cash) receivable thereupon by a holder of Common Stock includes shares of stock or other securities and property of a corporation other than the successor or purchasing corporation, as the case may be, in such consolidation, merger, sale or conveyance, then such supplemental indenture shall also be executed by such other corporation and shall contain such additional provisions to protect the interests of the holders of the Notes as the Board of Directors of the Company shall reasonably consider necessary by reason of the foregoing. The provision of this Section 5.12 shall similarly apply to successive consolidations, mergers, sales or conveyances. In the event the Company shall execute a supplemental indenture pursuant to this Section 5.12, the Company shall promptly file with the Trustee an Officers' Certificate briefly stating the reasons therefor, the kind or amount of shares of stock or securities or property (including cash) receivable by holders of the Notes upon the conversion of their Notes after any such reclassification, change, consolidation, merger, sale or conveyance and any adjustment to be made with respect thereto. Section 5.13. Trustee's Disclaimer. The Trustee has no duty to determine when an adjustment under this Article V should be made, how it should be made or what such adjustment should be, but may accept as conclusive evidence of the correctness of any such adjustment, and shall be protected in relying upon the Officers' Certificate with respect thereto which the Company is obligated to file with the Trustee pursuant to Section 5.10 hereof. The Trustee makes no representation as to the validity or value of any securities or assets issued upon conversion of Notes, and the Trustee shall not be responsible for the Company's failure to comply with any provisions of this Article V. The Trustee shall not be under any responsibility to determine the correctness of any provisions contained in any supplemental indenture executed pursuant to Section 5.12, but may accept as conclusive evidence of the correctness thereof, and shall be protected in relying upon, the Officers' Certificate with respect thereto which the Company is obligated to file with the Trustee pursuant to Section 5.12 hereof. ARTICLE VI. Subordination Section 6.01. Agreement to Subordinate and Ranking. The Company, for itself and its successors, and each holder, by his acceptance of Notes, agree that the payment of the principal of or interest or Liquidated Damages, if any, on or any other amounts due on the Notes is subordinated in right of payment, to the extent and in the manner stated in this Article VI, to the prior payment in full of all existing and future Senior Debt. The Notes shall rank pari passu 38 39 with, and shall not be senior in right of payment to, the Existing Convertible Notes or such other Indebtedness of the Company whether outstanding on the date of this Indenture or hereafter created, incurred, issued or guaranteed by the Company, where the instrument creating or evidencing such Indebtedness expressly provides that such Indebtedness ranks pari passu with the Notes and the Existing Convertible Notes. Section 6.02. No Payment in Notes if Senior Debt in Default. Anything in this Indenture to the contrary notwithstanding, no payment on account of principal of or redemption of, interest or Liquidated Damages, if any, on or other amounts due on the Notes, and no redemption, purchase, or other acquisition of the Notes, shall be made by or on behalf of the Company (i) unless full payment of amounts then due for principal and interest and of all other amounts then due on all Senior Debt has been made or duly provided for pursuant to the terms of the instrument governing such Senior Debt, (ii) if, at the time of such payment, redemption, purchase or other acquisition, or immediately after giving effect thereto, there shall exist under any Senior Debt, or any agreement pursuant to which any Senior Debt is issued, any default, which default shall not have been cured or waived and which default shall have resulted in the full amount of such Senior Debt being declared due and payable or (iii) if, at the time of such payment, redemption, purchase or other acquisition, the Trustee shall have received written notice from any of the holders of Senior Debt or such holder's representative (a "Payment Blockage Notice") that there exists under such Senior Debt, or any agreement pursuant to which such Senior Debt is issued, any default, which default shall not have been cured or waived, permitting the holders thereof to declare any amounts of such Senior Debt due and payable, but only for the period (the "Payment Blockage Period") commencing on the date of receipt of the Payment Blockage Notice and ending (unless earlier terminated by notice given to the Trustee by the holders of such Senior Debt) on the earlier of (a) the date on which such event of default shall have been cured or waived or (b)180 days from the receipt of the Payment Blockage Notice. Upon termination of the Payment Blockage Period, payments on account of principal of or interest or Liquidated Damages, if any, on the Notes (other than, subject to Section 6.03 hereof, amounts due and payable by reason of the acceleration of the maturity of the Notes) and redemptions, purchases or other acquisitions may be made by or on behalf of the Company. Notwithstanding anything herein to the contrary, (a) only one Payment Blockage Notice may be given during any period of 360 consecutive days with respect to the same event of default or any other events of default on the same issue of Senior Debt existing and known to the Person giving such notice at the time of such notice unless such event of default or such other events of default have been cured or waived for a period of not less than 90 consecutive days and (b) no new Payment Blockage Period may be commenced by the holder or holders of the same issue of Senior Debt or their representative or representatives during any period of 360 consecutive days unless all events of default which were the object of the immediately preceding Payment Blockage Notice, and any other event of default on the same issue of Senior Debt existing and known to the Person giving such notice at the time of such notice, have been cured or waived. In the event that, notwithstanding the provisions of this Section 6.02, payments are made by or on behalf of the Company in contravention of the provisions of this Section 6.02, such payments shall be held by the Trustee, any Paying Agent or the holders, as applicable, in trust for the benefit of, and shall be paid over to and delivered to, the holders of Senior Debt or their representative or the trustee under the indenture or other agreement (if any), pursuant to which any instruments evidencing any Senior Debt may have been issued for application to the payment of all Senior Debt ratably according to the aggregate amounts remaining unpaid to the extent necessary to pay all Senior Debt in full in accordance with the terms of such Senior Debt, after giving effect to any concurrent payment or distribution to or for the 39 40 holders of Senior Debt. The Company shall give prompt written notice to the Trustee and any Paying Agent of any default or event of default under any Senior Debt or under any agreement pursuant to which any Senior Debt may have been issued. Section 6.03. Distribution in Acceleration of Notes; Dissolution and Reorganization; Subrogation of Notes. (a) If the Notes are declared due and payable because of the occurrence of an Event of Default, the Company or the Trustee shall give prompt written notice to the holders of all Senior Debt or to the trustee(s) for such Senior Debt of such acceleration. The Company may not pay the principal of or interest or Liquidated Damages, if any, on or any other amounts due on the Notes until five days after such holders or trustee(s) of Senior Debt receive such notice and, thereafter, the Company may pay the principal of or interest or Liquidated Damages, if any, on or any other amounts due on the Notes only if the provisions of this Article VI permit such payment. (b) Upon (i) any acceleration of the principal amount due on the Notes because of an Event of Default or (ii) any distribution of assets of the Company upon any dissolution, winding up, liquidation or reorganization of the Company (whether in bankruptcy, insolvency or receivership proceedings or upon an assignment for the benefit of creditors or any other dissolution, winding up, liquidation or reorganization of the Company): (1) the holders of all Senior Debt shall first be entitled to receive payment in full of the principal thereof, the interest thereon and any other amounts due thereon before the holders are entitled to receive payment on account of the principal of or interest or Liquidated Damages, if any, on or any other amounts due on the Notes; (2) any payment or distribution of assets of the Company of any kind or character, whether in cash, property or securities (other than securities of the Company as reorganized or readjusted or securities of the Company or any other corporation provided for by a plan of reorganization or readjustment the payment of which is subordinate, at least to the extent provided in this Article VI with respect to the Notes, to the payment in full without diminution or modification by such plan of all Senior Debt), to which the holders or the Trustee would be entitled except for the provisions of this Article VI, shall be paid by the liquidating trustee or agent or other Person making such a payment or distribution, directly to the holders of Senior Debt (or their representatives(s) or trustee(s) acting on their behalf), ratably according to the aggregate amounts remaining unpaid on account of the principal of or interest on and other amounts due on the Senior Debt held or represented by each, to the extent necessary to make payment in full of all Senior Debt remaining unpaid, after giving effect to any concurrent payment or distribution to the holders of such Senior Debt; and (3) in the event that, notwithstanding the foregoing, any payment or distribution of assets of the Company of any kind or character, whether in cash, property or securities (other than securities of the Company as reorganized or readjusted, or securities of the Company or any other corporation provided for by a plan of reorganization or readjustment the payment of which is subordinate, at least to the extent provided in this Article VI with respect to the Notes, to the payment in full without diminution or modification by such plan of Senior Debt), shall be 40 41 received by the Trustee or the holders before all Senior Debt is paid in full, such payment or distribution shall be held in trust for the benefit of, and be paid over to upon request by a holder of the Senior Debt, the holders of the Senior Debt remaining unpaid (or their representatives) or trustee(s) acting on their behalf, ratably as aforesaid, for application to the payment of such Senior Debt until all such Senior Debt shall have been paid in full, after giving effect to any concurrent payment or distribution to the holders of such Senior Debt. Subject to the payment in full of all Senior Debt, the holders shall be subrogated to the rights of the holders of Senior Debt to receive payments or distributions of cash, property or securities of the Company applicable to the Senior Debt until the principal of and interest and Liquidated Damages, if any, on the Notes shall be paid in full and, for purposes of such subrogation, no such payments or distributions to the holders of Senior Debt of cash, property or securities which otherwise would have been payable or distributable to holders shall, as between the Company, its creditors other than the holders of Senior Debt, and the holders, be deemed to be a payment by the Company to or on account of the Senior Debt, it being understood that the provisions of this Article VI are and are intended solely for the purpose of defining the relative rights of the Holders, on the one hand, and the holders of Senior Debt, on the other hand. Nothing contained in this Article VI or elsewhere in this Indenture or in the Notes is intended to or shall (i) impair, as between the Company and its creditors other than the holders of Senior Debt, the obligation of the Company, which is absolute and unconditional, to pay to the holders the principal of and interest and Liquidated Damages, if any, on the Notes as and when the same shall become due and payable in accordance with the terms of the Notes or is intended to or (ii) affect the relative rights of the holders and creditors of the Company other than holders of Senior Debt or, as between the Company and the Trustee, the obligations of the Company to the Trustee, or (iii) prevent the Trustee or the holders from exercising all remedies otherwise permitted by applicable law upon default under this Indenture, subject to the rights, if any, under this Article VI of the holders of Senior Debt in respect of cash, property and securities of the Company received upon the exercise of any such remedy. Upon distribution of assets of the Company referred to in this Article VI, the Trustee, subject to the provisions of Section 9.01 hereof, and the holders shall be entitled to rely upon a certificate of the liquidating trustee or agent or other Person making any distribution to the Trustee or to the holders for the purpose of ascertaining the Persons entitled to participate in such distribution, the holders of the Senior Debt and other indebtedness of the Company, the amount thereof or payable thereon, the amount or amounts paid or distributed thereon and all other facts pertinent thereto or to this Article VI. The Trustee, however, shall not be deemed to owe any fiduciary duty to the holders of Senior Debt. Nothing contained in this Article VI or elsewhere in this Indenture, or in any of the Notes, shall prevent the good faith application by the Trustee of any moneys which were deposited with it hereunder, prior to its receipt of written notice of facts which would prohibit such application, for the purpose of the payment of or on account of the principal of or interest or Liquidated Damages, if any, on, the Notes unless, prior to the date on which such application is made by the Trustee, the Trustee shall be charged with notice under Section 6.03(d) hereof of the facts which would prohibit the making of such application. (c) The provisions of this Article VI shall not be applicable to any cash, properties or securities received by the Trustee or by any holder when received as a holder of Senior Debt and nothing in Section 9.11 hereof or elsewhere in this Indenture shall deprive the Trustee or such holder of any of its rights as such holder. (d) The Company shall give prompt written notice to the Trustee of any fact known to the 41 42 Company which would prohibit the making of any payment of money to or by the Trustee in respect of the Notes pursuant to the provisions of this Article VI. The Trustee, subject to the provisions of Section 9.01 hereof, shall be entitled to assume that no such fact exists unless the Company or any holder of Senior Debt or any trustee therefor has given such notice to the Trustee. Notwithstanding the provisions of this Article VI or any other provisions of this Indenture, the Trustee shall not be charged with knowledge of the existence of any fact which would prohibit the making of any payment of monies to or by the Trustee in respect of the Notes pursuant to the provisions in this Article VI, unless, and until three Business Days after, the Trustee shall have received written notice thereof from the Company or any holder or holders of Senior Debt or from any trustee therefor; and, prior to the receipt of any such written notice, the Trustee, subject to the provisions of Section 9.01 hereof, shall be entitled in all respects conclusively to assume that no such facts exist; provided that if on a date not less than three Business Days immediately preceding the date upon which by the terms hereof any such monies may become payable for any purpose (including, without limitation, the principal of or interest or Liquidated Damages, if any, on any Note), the Trustee shall not have received with respect to such monies the notice provided for in this Section 6.03(d), than anything herein contained to the contrary notwithstanding, the Trustee shall have full power and authority to receive such monies and to apply the same to the purpose for which they were received, and shall not be affected by any notice to the contrary which may be received by it on or after such prior date. The Trustee shall be entitled to rely on the delivery to it of a written notice by a Person representing himself to be a holder of Senior Debt (or a trustee on behalf of such holder) to establish that such notice has been given by a holder of Senior Debt (or a trustee on behalf of any such holder or holders). In the event that the Trustee determines in good faith that further evidence is required with respect to the right of any Person as a holder of Senior Debt to participate in any payment or distribution pursuant to this Article VI, the Trustee may request such Person to furnish evidence to the reasonable satisfaction of the Trustee as to the amount of Senior Debt held by such Person, the extent to which such Person is entitled to participate in such payment or distribution and any other facts pertinent to the rights of such Person under this Article VI, and, if such evidence is not furnished, the Trustee may defer any payment to such Person pending judicial determination as to the right of such Person to receive such payment; nor shall the Trustee be charged with knowledge of the curing or waiving of any default of the character specified in Section 6.02 hereof or that any event or any condition preventing any payment in respect of the Notes shall have ceased to exist, unless and until the Trustee shall have received an Officers' Certificate to such effect. (e) The provisions of this Section 6.03 applicable to the Trustee shall also apply to any Paying Agent for the Company. Section 6.04. Reliance by Senior Debt in Subordination Provisions. Each holder of any Note by his acceptance thereof acknowledges and agrees that the foregoing subordination provisions are, and are intended to be, an inducement and a consideration for each holder of any Senior Debt, whether such Senior Debt was created or acquired before or after the issuance of the Notes, to acquire and continue to hold, or to continue to hold, such Senior Debt, and such holder of Senior Debt shall be deemed conclusively to have relied on such subordination provisions in acquiring and continuing to hold, or in continuing to hold, such Senior Debt. Notice of any default in the payment of any Senior Debt, except as expressly stated in this Article VI, and notice of acceptance of the provisions hereof are hereby expressly waived. Except as otherwise expressly provided herein, no waiver, forbearance or release by any holder of Senior Debt under such Senior Debt or under this 42 43 Article VI shall constitute a release of any of the obligations or liabilities of the Trustee or holders of the Notes provided in this Article VI. Section 6.05. No Waiver of Subordination Provisions. Except as otherwise expressly provided herein, no right of any present or future holder of any Senior Debt to enforce subordination as herein provided shall at any time in any way be prejudiced or impaired by any act or failure to act on the part of the Company or by any act or failure to act, in good faith, by any such holder, or by any noncompliance by the Company with the terms, provisions and covenants of this Indenture, regardless of any knowledge thereof any such holder may have or be otherwise charged with. Without in any way limiting the generality of the foregoing paragraph, the holders of Senior Debt may, at any time and from time to time, without the consent of, or notice to, the Trustee or the holders of the Notes, without incurring responsibility to the holders of the Notes and without impairing or releasing the subordination provided in this Article VI or the obligations hereunder of the holders of the Notes to the holders of Senior Debt, do any one or more of the following: (i) change the manner, place or terms of payment of, or renew or alter, Senior Debt, or otherwise amend or supplement in any manner Senior Debt or any instrument evidencing the same or any agreement under which Senior Debt is outstanding; (ii) sell, exchange, release or otherwise dispose of any property pledged, mortgaged or otherwise securing Senior Debt; (iii) release any Person liable in any manner for the collection of Senior Debt; and (iv) exercise or refrain from exercising any rights against the Company or any other Person. Section 6.06. Trustee's Relation to Senior Debt. The Trustee in its individual capacity shall be entitled to all the rights set forth in this Article VI in respect of any Senior Debt at any time held by it, to the same extent as any holder of Senior Debt, and nothing in Section 9.11 hereof or elsewhere in this Indenture shall deprive the Trustee of any of its rights as such holder. With respect to the holders of Senior Debt, the Trustee undertakes to perform or to observe only such of its covenants and obligation, as are specifically set forth in this Article VI, and no implied covenants or obligations with respect to the holders of Senior Debt shall be read into this Indenture against the Trustee. The Trustee shall not owe any fiduciary duty to the holders of Senior Debt but shall have only such obligations to such holders as are expressly set forth in this Article VI. Each holder of a Note by his acceptance thereof authorizes and directs the Trustee on his behalf to take such action as may be necessary or appropriate to effectuate the subordination provided in this Article VI and appoints the Trustee his attorney-in-fact for any and all such purposes, including, in the event of any dissolution, winding up or liquidation or reorganization under any applicable bankruptcy law of the Company (whether in bankruptcy, insolvency or receivership proceedings or otherwise), the timely filing of a claim for the unpaid balance of such holder's Notes in the form required in such proceedings and the causing of such claim to be approved. If the Trustee does not file a claim or proof of debt in the form required in such proceedings prior to 30 days before the expiration of the time to file such claims or proofs, then any holder or holders of Senior Debt or their representative or representatives shall have the right to demand, sue for, collect, receive and receipt for the payments and distributions in respect of the Notes which are required to be paid or delivered to the holders of Senior Debt as provided in this Article VI and to file and prove all claims therefore and to take all such other action in the name of the holders or 43 44 otherwise, as such holders of Senior Debt or representative thereof may determine to be necessary or appropriate for the enforcement of the provisions of this Article VI. Section 6.07. Other Provisions Subject Hereto. Expect as expressly stated in this Article VI, notwithstanding anything contained in this Indenture to the contrary, all the provisions of this Indenture and the Notes are subject to the provisions of this Article VI. However, nothing in this Article VI shall apply to or adversely affect the claims of, or payment, to, the Trustee pursuant to Section 9.07 hereof. Notwithstanding the foregoing, the failure to make a payment on account of principal of or interest or Liquidated Damages, if any, on the Notes by reason of any provision of this Article VI shall not be construed as preventing the occurrence of an Event of Default under Section 8.01 hereof. ARTICLE VII. Successors Section 7.01. Merger, Consolidation or Sale of Assets. The Company may not consolidate or merge with or into (whether or not the Company is the surviving corporation), or sell, assign, transfer, lease, convey or otherwise dispose of all or substantially all of its properties or assets in one or more related transactions to, another corporation, Person or entity unless: (a) the Company is the surviving corporation or the entity or the Person formed by or surviving any such consolidation or merger (if other than the Company) or to which such sale, assignment, transfer, lease, conveyance or other disposition shall have been made is a corporation organized or existing under the laws of the United Kingdom, the Netherlands, the Netherlands Antilles, Bermuda or the Cayman Islands or of the United States, any state thereof or the District of Columbia; (b) the entity or Person formed by or surviving any such consolidation or merger (if other than the Company) or the entity or Person to which such sale, assignment, transfer, lease, conveyance or other disposition will have been made assumes all the Obligations (including the due and punctual payment of Additional Amounts if the surviving corporation is a corporation organized or existing under the laws of the United Kingdom, the Netherlands, the Netherlands Antilles, Bermuda or the Cayman Islands) of the Company, pursuant to a supplemental indenture in a form reasonably satisfactory to the Trustee, under the Notes and this Indenture; (c) immediately after such transaction no Default or Event of Default exists; (d) the Company or any entity or Person formed by or surviving any such consolidation or merger, or to which such sale, assignment, transfer, lease, conveyance or other disposition will have been made will have a ratio of Indebtedness to Annualized Pro Forma EBITDA equal to or less than the ratio of Indebtedness to Annualized Pro Forma EBITDA of the Company immediately preceding the transaction; provided, however, that if the ratio of Indebtedness to Annualized Pro Forma EBITDA of the Company immediately preceding such transaction is 6:1 or less, then the ratio of Indebtedness to Annualized Pro Forma EBITDA of the Company may be 0.5 greater than such ratio immediately preceding such transaction; and 44 45 (e) such transaction would not result in the loss of any material authorization or Material License of the Company or its Subsidiaries. Section 7.02. Successor Corporation Substituted. Upon any consolidation or merger, or any sale, assignment, transfer, lease, conveyance or other disposition of all or substantially all of the assets of the Company in accordance with Section 7.01 hereof, the successor corporation formed by such consolidation or into or with which the Company is merged or to which such sale, assignment, transfer, lease, conveyance or other disposition is made shall succeed to, and be substituted for and may exercise every right and power of, the Company under this Indenture with the same effect as if such successor Person has been named as the Company herein; provided, however, that the predecessor Company in the case of a sale, assignment, transfer, lease, conveyance or other disposition shall not be released from the obligation to pay the principal of and interest on the Notes. ARTICLE VIII. Defaults and Remedies Section 8.01. Events of Default. An "Event of Default" occurs if: (a) the Company defaults in the payment of interest or Liquidated Damages, if any, (and Additional Amounts, if applicable) on any Note when the same becomes due and payable and the Default continues for a period of 30 days after the date due and payable; (b) the Company defaults in the payment of the principal of any Note when the same becomes due and payable at maturity, upon redemption or otherwise; (c) the Company fails to observe or perform any covenant or agreement contained in Section 4.07 hereof; (d) the Company fails to observe or perform any other covenant or agreement contained in this Indenture or the Notes, required by it to be performed and the Default continues for a period of 60 days after notice from the Trustee to the Company or from the Holders of 25% in aggregate principal amount of the then outstanding Notes to the Company and the Trustee stating that such notice is a "Notice of Default"; (e) default under any mortgage, indenture or instrument under which there may be issued or by which there may be secured or evidenced any Indebtedness for money borrowed by the Company or any Restricted Subsidiary (or the payment of which is guaranteed by the Company or any Restricted Subsidiary), whether such Indebtedness or guarantee now exists or is created after the Issuance Date, which default: (i) is caused by a failure to pay when due principal of or interest on such Indebtedness within the grace period provided for in such Indebtedness (which failure continues beyond any applicable grace period) (a "Payment Default"); or (ii) results in the acceleration of such Indebtedness prior to its express 45 46 maturity and, in each case, the principal amount of any such Indebtedness, together with the principal amount of any other such Indebtedness under which there is a Payment Default or the maturity of which has been so accelerated, aggregates $10 million or more; (f) a final judgment or final judgments (other than any judgment as to which a reputable insurance company has accepted full liability) for the payment of money are entered by a court or courts of competent jurisdiction against the Company or any Restricted Subsidiary of the Company which remains undischarged for a period (during which execution shall not be effectively stayed) of 60 days, provided that the aggregate of all such judgments exceeds $5 million; (g) the Company or any Material Subsidiary pursuant to or within the meaning of any Bankruptcy Law: (i) commences a voluntary case; (ii) consents to the entry of an order for relief against it in an involuntary case in which it is the debtor; (iii) consents to the appointment of a Custodian of it or for all or substantially all of its property; (iv) makes a general assignment for the benefit of its creditors; or (v) generally is unable to pay its debts as the same become due; (h) a court of competent jurisdiction enters an order or decree under any Bankruptcy Law that: (i) is for relief against the Company or any Material Subsidiary in an involuntary case; (ii) appoints a Custodian of the Company or any Material Subsidiary or for all or substantially all of its property; or (iii) orders the liquidation of the Company or any Material Subsidiary, and the order or decree remains unstayed and in effect for 60 days; and (i) the revocation of a Material License. The term "Bankruptcy Law" means Title 11, U.S. Code or any similar Federal, state or foreign law for the relief of debtors or the protection of creditors. The term "Custodian" means any receiver, trustee, assignee, liquidator or similar official under any Bankruptcy Law. Section 8.02. Acceleration. If an Event of Default (other than an Event of Default specified in clauses (g) and (h) of Section 46 47 8.01 hereof) occurs and is continuing, the Trustee by notice to the Company, or the Holders of at least 25% in principal amount of the then outstanding Notes by notice to the Company and the Trustee, may declare all the Notes to be due and payable. Upon such declaration, the principal of, premium, if any, and interest and Liquidated Damages, if any, on, the Notes shall be due and payable immediately. If an Event of Default specified in clause (g) or (h) of Section 8.01 hereof occurs, such an amount shall ipso facto become and be immediately due and payable without any declaration or other act on the part of the Trustee or any Holder. The Holders of a majority in principal amount of the then outstanding Notes by notice to the Trustee may rescind an acceleration and its consequences if the rescission would not conflict with any judgment or decree and if all existing Events of Default have been cured or waived except nonpayment of principal or interest that has become due solely because of the acceleration. In the case of any Event of Default pursuant to the provisions of Section 8.01 occurring by reason of any willful action (or inaction) taken (or not taken) by or on behalf of the Company with the intention of avoiding payment of the premium that the Company would have had to pay if the Company then had elected to redeem the Notes pursuant to Section 7 of the Notes, an equivalent premium shall, upon demand of the Holders of at least 25% in principal amount of the then outstanding Notes delivered to the Company and the Trustee, also become and be immediately due and payable to the extent permitted by law, anything in this Indenture or in the Notes contained to the contrary notwithstanding. If an Event of Default occurs prior to December 15, 2001, by reason of any willful action (or inaction) taken (or not taken) by or on behalf of the Company with the intention of avoiding the prohibition on redemption of the Notes prior to December 15, 2001, pursuant to Section 7 of the Notes, then the premium payable for purposes of this paragraph for each of the years beginning on December 15 of the years (December 16, in the case of the year 1998) set forth below shall, subject to the foregoing demand, be as set forth in the following table expressed as a percentage of the amount that would otherwise be due pursuant to this Section 8.02 hereof but for the provisions of this sentence.
Year Percentage ---- ---------- 1998 107.000% 1999 106.125% 2000 105.250%
Section 8.03. Other Remedies. If an Event of Default occurs and is continuing, the Trustee may pursue any available remedy to collect the payment of principal or interest on the Notes or to enforce the performance of any provision of the Notes or this Indenture. The Trustee may maintain a proceeding even if it does not possess any of the Notes or does not produce any of them in the proceeding. A delay or omission by the Trustee or any Holder in exercising any right or remedy accruing upon an Event of Default shall not impair the right or remedy or constitute a waiver of or acquiescence in the Event of Default. All remedies are cumulative to the extent permitted by law. Section 8.04. Waiver of Past Defaults. The Holders of a majority in principal amount of the then outstanding Notes by notice to the Trustee may waive an existing Default or Event of Default and its consequences except a continuing Default or Event of Default in the payment of the principal of or interest on any Note. When a Default or 47 48 Event of Default is waived, it is cured and ceases; but no such waiver shall extend to any subsequent or other Default or impair any right consequent thereon. Section 8.05. Control by Majority. The Holders of a majority in principal amount of the then outstanding Notes may direct the time, method and place of conducting any proceeding for any remedy available to the Trustee or exercising any trust or power conferred on it. However, the Trustee may refuse to follow any direction that conflicts with law or this Indenture, is unduly prejudicial to the rights of other Holders, or would involve the Trustee in personal liability. Section 8.06. Limitation in Suits. A Holder may pursue a remedy with respect to this Indenture or the Notes only if: (a) the Holder gives to the Trustee notice of a continuing Event of Default; (b) the Holders of at least 25% in principal amount of the then outstanding Notes make a request to the Trustee to pursue the remedy; (c) such Holder or Holders offer to the Trustee indemnity satisfactory to the Trustee against any loss, liability or expense; (d) the Trustee does not comply with the request within 60 days after receipt of the request and the offer of indemnity; and (e) during such 60-day period the Holders of a majority in principal amount of the then outstanding Notes do not give the Trustee a direction inconsistent with the request. A Holder may not use this Indenture to prejudice the rights of another Holder or to obtain a preference or priority over another Holder. Section 8.07. Rights of Holders to Receive Payment. Notwithstanding any other provision of this Indenture, the right of any Holder of a Note to receive payment of principal, Liquidated Damages, if any, and interest on the Note, on or after the respective due dates expressed in the Note, or to bring suit for the enforcement of any such payment on or after such respective dates, shall not be impaired or affected without the consent of the Holder made pursuant to this Section 8.07. Section 8.08. Collection Suit by Trustee. If an Event of Default specified in Section 8.01(a) or (b), hereof occurs and is continuing, the Trustee may recover judgment in its own name and as trustee of an express trust against the Company for the whole amount of principal, Liquidated Damages, if any, and interest remaining unpaid on the Notes and interest on overdue principal, Liquidated Damages, if any, and interest and such further amount as shall be sufficient to cover the costs and, to the extent lawful, expenses of collection, including the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel. 48 49 Section 8.09. Trustee May File Proofs of Claim. The Trustee may file such proofs of claim and other papers or documents as may be necessary or advisable in order to have the claims of the Trustee and the Holders allowed in any judicial proceedings relative to the Company, its creditors or its property. Nothing contained herein shall be deemed to authorize the Trustee to authorize or consent to or accept or adopt on behalf of any Holder any plan of reorganization, arrangement, adjustment or composition affecting the Notes or the rights of any Holder thereof, or to authorize the Trustee to vote in respect of the claim of any Holder in any such proceeding. Section 8.10. Priorities. If the Trustee collects any money pursuant to this Article, it shall pay out the money in the following order: First: to the Trustee for amounts due under Section 9.07 hereof; Second: to the holders of Senior Debt to the extent required by Article VI; Third: to Holders for amounts due and unpaid on the Notes for principal, Liquidated Damages, if any, and interest (and Additional Amounts, if applicable), ratably, without preference or priority of any kind, according to the amounts due and payable on the Notes for principal, Liquidated Damages, if any, and interest, respectively; and Fourth: to the Company. The Trustee may fix a record date and payment date for any payment to Holders made pursuant to this Section 8.10. Section 8.11. Undertaking for Costs. In any suit for the enforcement of any right or remedy under this Indenture or in any suit against the Trustee for any action taken or omitted by it as a Trustee, a court in its discretion may require the filing by any party litigant in the suit of an undertaking to pay the costs of the suit, and the court in its discretion may assess reasonable costs, including reasonable attorneys' fees, against any party litigant in the suit, having due regard to the merits and good faith of the claims or defenses made by the party litigant. This Section 8.11 does not apply to a suit by the Trustee, a suit by a Holder pursuant to Section 8.07 hereof, or a suit by Holders of more than 10% in principal amount of the then outstanding Notes. ARTICLE IX. Trustee Section 9.01. Duties of Trustee. (a) If an Event of Default has occurred and is continuing, the Trustee shall exercise such of the rights and powers vested in it by this Indenture, and use the same degree of care and skill in their exercise, as a prudent man would exercise or use under the circumstances in the conduct of his own affairs. 49 50 (b) Except during the continuance of an Event of Default: (i) the Trustee need perform only those duties that are specifically set forth in this Indenture and no others and (ii) in the absence of bad faith on its part, the Trustee may conclusively rely, as to the truth of the statements and the correctness of the opinions expressed therein, upon certificates or opinions furnished to the Trustee and conforming to the requirements of this Indenture. However, the Trustee shall examine the certificates and opinions to determine whether or not they conform to the requirements of this Indenture and to confirm the correctness of all mathematical computations. (c) The Trustee may not be relieved from liability for its own negligent action, its own negligent failure to act, or its own willful misconduct, except that: (i) this paragraph does not limit the effect of paragraph (b) of this Section 9.01; (ii) the Trustee shall not be liable for any error of judgment made in good faith by a Trust Officer, unless it is proved that the Trustee was negligent in ascertaining the pertinent facts and (iii) the Trustee shall not be liable with respect to any action it takes or omits to take in good faith in accordance with a direction received by it pursuant to Section 8.05 hereof. (d) Every provision of this Indenture that in any way relates to the Trustee is subject to paragraphs (a), (b) and (c) of this Section 9.01. (e) The Trustee may refuse to perform any duty or exercise any right or power unless it receives indemnity satisfactory to it against any loss, liability or expense. (f) The Trustee shall not be liable for interest on any money received by it except as the Trustee may agree in writing with the Company. Money held in trust by the Trustee need not be segregated from other funds except to the extent required by law. Section 9.02. Rights of Trustee. (a) The Trustee may rely on any document believed by it to be genuine and to have been signed or presented by the proper Person. The Trustee need not investigate any fact or matter stated in the document. (b) Before the Trustee acts or refrains from acting, it may require an Officers' Certificate or an Opinion of Counsel, or both. The Trustee shall not be liable for any action it takes or omits to take in good faith in reliance on such Officers' Certificate or Opinion of Counsel. (c) The Trustee may act through agents and shall not be responsible for the misconduct or negligence of any agent appointed with due care. (d) The Trustee shall not be liable for any action it takes or omits to take in good faith which it believes to be authorized or within its rights or powers. (e) The Trustee shall not be charged with knowledge of any Event of Default under subsection (c), (d), (e), (f) or (i) (and subsection (a) or (b) if the Trustee does not act as Paying Agent) of Section 8.01 or of the identity of any Material Subsidiary referred to in clause (ii) of the definition thereof unless either (1) a Trust Officer of the Trustee assigned to its Corporate Trustee Administration Department shall have actual knowledge thereof, or (2) the Trustee shall have received notice thereof in accordance with Section 12.02 hereof from the Company or any Holder. Section 9.03. Individual Rights of Trustee. 50 51 The Trustee in its individual or any other capacity may become the owner or pledgee of Notes and may otherwise deal with the Company or an Affiliate with the same rights it would have if it were not Trustee. Any Agent may do the same with like rights. However, the Trustee is subject to Sections 9.10 and 9.11 hereof. Section 9.04. Trustee's Disclaimer. The Trustee makes no representation as to the validity or adequacy of this Indenture or the Notes, it shall not be accountable for the Company's use of the proceeds from the Notes, and it shall not be responsible for any statement of the Company in the Indenture or any statement in the Notes other than its authentication or for compliance by the Company with the Registration Rights Agreement. Section 9.05. Notice of Defaults. If a Default or Event of Default occurs and is continuing and if it is known to the Trustee, the Trustee shall mail to Holders a notice of the Default or Event of Default within 90 days after it occurs. Except in the case of a Default or Event of Default in payment on any Note, the Trustee may withhold the notice if and so long as a committee of its Trust Officers in good faith determines that withholding the notice is in the interests of Holders. Section 9.06. Reports by Trustee to Holders. Within 60 days after the reporting date stated in Section 12.10, the Trustee shall mail to Holders a brief report dated as of such reporting date that complies with TIA (ss.) 313(a) if and to the extent required by such (ss.) 313(a). The Trustee also shall comply with TIA (ss.) 313(b)(2). The Trustee shall also transmit by mail all reports as required by TIA (ss.) 313(c). A copy of each report at the time of its mailing to Holders shall be filed with the SEC and each stock exchange on which the Notes are listed. The Company shall notify the Trustee when the Notes are listed on any stock exchange. Section 9.07. Compensation and Indemnity. The Company shall pay to the Trustee from time to time reasonable compensation for its services hereunder. The Trustee's compensation shall not be limited by any law on compensation of a trustee of an express trust. The Company shall reimburse the Trustee upon request for all reasonable disbursements, expenses and advances incurred or made by it. Such disbursements and expenses may include the reasonable disbursements, compensation and expenses of the Trustee's agents and counsel. The Company shall indemnify the Trustee against any loss or liability incurred by it except as set forth in the next paragraph. The Trustee shall notify the Company promptly of any claim for which it may seek indemnity. The Company shall defend the claim and the Trustee shall cooperate in the defense. The Trustee may have separate counsel and the Company shall pay the reasonable fees, disbursements and expenses of such counsel. The Company need not pay for any settlement made without its consent, which consent shall not be unreasonably withheld. The Company need not reimburse any expense or indemnify against any loss or liability incurred by the Trustee through negligence or bad faith. 51 52 To secure the Company's payment obligations in this Section 9.07, the Trustee shall have a lien prior to the Notes on all money or property held or collected by the Trustee, except money or property held in trust to pay principal and interest on particular Notes. Without prejudice to any other rights available to the Trustee under applicable law, when the Trustee incurs expenses or renders services after an Event of Default specified in Section 8.01(g) or (h) hereof occurs, the expenses and the compensation for the services are intended to constitute expenses of administration under any Bankruptcy Law. All amounts owing to the Trustee under this Section 9.07 shall be payable by the Company in United States dollars. Section 9.08. Replacement of Trustee. A resignation or removal of the Trustee and appointment of a successor Trustee shall become effective only upon the successor Trustee's acceptance of appointment as provided in this Section 9.08. The Trustee may resign by so notifying the Company. The Holders of a majority in principal amount of the then outstanding Notes may remove the Trustee by so notifying the Trustee and the Company. The Company may remove the Trustee if: (a) the Trustee fails to comply with Section 9.10 hereof, unless the Trustee's duty to resign is stayed as provided in TIA (ss.) 310(b); (b) the Trustee is adjudged a bankrupt or an insolvent or an order for relief is entered with respect to the Trustee under any Bankruptcy Law; (c) a Custodian or public officer takes charge of the Trustee or its property; or (d) the Trustee becomes incapable of acting. If the Trustee resigns or is removed or if a vacancy exists in the office of Trustee for any reason, the Company shall promptly appoint a successor Trustee. Within one year after the successor Trustee takes office, the Holders of a majority in principal amount of the then outstanding Notes may appoint a successor Trustee to replace the successor Trustee appointed by the Company. If a successor Trustee does not take office within 60 days after the retiring Trustee resigns or is removed, the retiring Trustee, the Company or the Holders of at least 10% in principal amount of the then outstanding Notes may petition any court of competent jurisdiction for the appointment of a successor Trustee. If the Trustee fails to comply with Section 9.10 hereof, unless the Trustee's duty to resign is stayed as provided in TIA (ss.) 310(b), any Holder who has been a bona fide Holder of a Note for at least six months may petition any court of competent jurisdiction for the removal of the Trustee and the appointment of a successor Trustee. A successor Trustee shall deliver a written acceptance of its appointment to the retiring Trustee and to the Company. Thereupon the resignation or removal of the retiring Trustee shall become effective, and the successor Trustee shall have all the rights, powers and duties of the Trustee under this Indenture. 52 53 The successor Trustee shall mail a notice of its succession to Holders. The retiring Trustee shall promptly transfer all property held by it as Trustee to the successor Trustee, subject to the lien provided for in Section 9.07 hereof. Notwithstanding replacement of the Trustee pursuant to this Section 9.08 hereof, the Company's obligations under Section 9.07 hereof shall continue for the benefit of the retiring trustee with respect to expenses and liabilities incurred by it prior to such replacement. Section 9.09. Successor Trustee by Merger, Etc. If the Trustee consolidates, merges or converts into, or transfers all or substantially all of its corporate trust business to, another corporation, the successor corporation without any further act shall be the successor Trustee. Section 9.10. Eligibility; Disqualification. This Indenture shall always have a Trustee who satisfies the requirements of TIA (ss.) 310(a)(1) and (5). The Trustee shall always have a combined capital and surplus as stated in Section 12.10 hereof. The Trustee is subject to TIA (ss.) 310(b). The indenture, dated as of June 12, 1996, between the Company and The Chase Manhattan Bank (formerly known as Chemical Bank), as trustee, relating to the Existing Convertible Notes shall be deemed to be specifically described herein for the purposes of clause (i) of the first proviso contained in TIA (ss.) 310(b). Section 9.11. Preferential Collection of Claims Against Company. The Trustee is subject to TIA (ss.) 311(a), excluding any creditor relationship listed in TIA (ss.) 311(b). A Trustee who has resigned or been removed shall be subject to TIA (ss.) 311(a) to the extent indicated therein. ARTICLE X. Discharge of Indenture Section 10.01. Termination of Company's Obligations. This Indenture shall cease to be of further effect (except that the Company's obligations under Sections 9.07 and 10.02 hereof shall survive) when all outstanding Notes theretofore authenticated and issued have been delivered to the Trustee for cancellation and the Company has paid all sums payable hereunder. Section 10.02. Repayment to Company. The Trustee and the Paying Agent shall promptly pay to the Company upon request any excess money or securities held by them at any time. The Trustee and the Paying Agent shall pay to the Company upon request any money held by them for the payment of principal or interest that remains unclaimed for two years after the date upon which such payment shall have become due; provided, however, that the Company shall have first caused notice of such payment to the Company to be mailed to each Holder entitled thereto no less than 30 days prior to such payment. After payment to the Company, the Trustee and the Paying Agent shall have no further liability with respect to such money and Holders entitled to the money must look to the Company 53 54 for payment as general creditors unless any applicable abandoned property law designates another Person. ARTICLE XI. Amendments, Supplements and Waivers Section 11.01. Without Consent of Holders. The Company and the Trustee may amend or supplement this Indenture or the Notes without the consent of any Holder: (a) to cure any ambiguity, defect or inconsistency; (b) to comply with Sections 5.12 and 7.01 hereof; (c) to provide for uncertificated Notes in addition to or in place of certificated Notes; (d) to make any change that does not adversely affect the interests hereunder of any Holder; or (e) to qualify the Indenture under the TIA or to comply with the requirements of the SEC in order to maintain the qualification of the Indenture under the TIA. Section 11.02. With Consent of Holders. Subject to Section 8.07 hereof, the Company and the Trustee may amend or supplement this Indenture or the Notes with the written consent of the Holders of at least a majority in principal amount of the then outstanding Notes. Subject to Sections 8.04 and 8.07 hereof, the Holders of a majority in principal amount of the Notes then outstanding may also waive compliance in a particular instance by the Company with any provision of this Indenture or the Notes. However, without the consent of each Holder affected, an amendment, supplement or waiver under this Section 11.02 may not: (a) reduce the principal amount of Notes whose Holders must consent to an amendment, supplement or waiver; (b) reduce the principal of or change the fixed maturity of any Note or alter the provisions of Sections 7 and 8 of the Notes; (c) reduce the rate of or change the time for payment of interest on any Note; (d) waive a default in the payment of the principal of, or interest or Liquidated Damages, if any, on, any Note (except a rescission of acceleration of the Notes by the Holders of at least a majority in aggregate principal amount of the Notes and a waiver of the payment default that resulted from such acceleration); (e) make any Note payable in money other than that stated in the Note; (f) make any change in Section 8.04 or 8.07 hereof; 54 55 (g) waive a redemption payment with respect to any Note; (h) impair the right to convert the Notes into Common Stock; (i) modify Article V or VI in a manner adverse to the Holders of Notes; and (j) make any change in the foregoing amendment and waiver provisions of this Article XI. To secure a consent of the Holders under this Section 11.02, it shall not be necessary for the Holders to approve the particular form of any proposed amendment, supplement or waiver, but it shall be sufficient if such consent approves the substance thereof. After an amendment, supplement or waiver under this Section 11.02 becomes effective, the Company shall mail to Holders a notice briefly describing the amendment or waiver. Section 11.03. Compliance With Trust Indenture Act. Every amendment to this Indenture or the Notes shall be set forth in a supplemental indenture that complies with the TIA as then in effect. Section 11.04. Revocation and Effect of Consents. Until an amendment, supplement or waiver becomes effective, a consent to it by a Holder of a Note is a continuing consent by the Holder and every subsequent Holder of a Note or portion of a Note that evidences the same debt as the consenting Holder's Note, even if notation of the consent is not made on any Note. However, any such Holder or subsequent Holder may revoke the consent as to his Note or portion of a Note if the Trustee receives the notice of revocation before the date on which the Trustee receives an Officers' Certificate certifying that the Holders of the requisite principal amount of Notes have consented to the amendment, supplement or waiver. The Company may, but shall not be obligated to, fix a record date for the purpose of determining the Holders entitled to consent to any amendment, supplement or waiver. If a record date is fixed, then notwithstanding the provisions of the immediately preceding paragraph, those Persons who were Holders at such record date (or their duly designated proxies), and only those Persons, shall be entitled to consent to such amendment, supplement or waiver or to revoke any consent previously given, whether or not such Persons continue to be Holders after such record date. No consent shall be valid or effective for more than 90 days after such record date unless consents from Holders of the principal amount of Notes required hereunder for such amendment or waiver to be effective shall have also been given and not revoked within such 90-day period. After an amendment, supplement or waiver becomes effective it shall bind every Holder, unless it is of the type described in any of clauses (a) through (j) of Section 11.02 hereof. In such case, the amendment or waiver shall bind each Holder who has consented to it and every subsequent Holder that evidences the same debt as the consenting Holder's Note. Section 11.05. Notation in or Exchange of Notes. The Trustee may place an appropriate notation about an amendment or waiver on any Note 55 56 thereafter authenticated. The Company in exchange for all Notes may issue and the Trustee shall authenticate new Notes that reflect the amendment or waiver. Failure to make such notation on a Note or to issue a new Note as aforesaid shall not affect the validity and effect of such amendment or waiver. Section 11.06. Trustee Protected. The Trustee shall sign all supplemental indentures, except that the Trustee may, but need not, sign any supplemental indenture that adversely affects its rights. ARTICLE XII. Miscellaneous Section 12.01. Trust Indenture Act Controls. This Indenture is subject to the provisions of the TIA that are required to be incorporated into this Indenture (or, prior to the registration of the Notes pursuant to the Registration Rights Agreement, would be required to be incorporated into this Indenture if it were qualified under the TIA), and shall, to the extent applicable, be governed by such provisions. If any provision of this Indenture limits, qualifies, or conflicts with another provision which is required (or would be so required) to be incorporated in this Indenture by the TIA, the incorporated provision shall control. Section 12.02. Notices. Any notice or communication by the Company or the Trustee to the other is duly given if in writing and delivered in Person or mailed by first class mail to the other's address stated in Section 12.10 hereof. The Company or the Trustee by notice to the other may designate additional or different addresses for subsequent notices or communications. Any notice or communication to a Holder shall be mailed by first class mail to his address shown on the register kept by the Registrar. Failure to mail a notice or communication to a Holder or any defect in it shall not affect its sufficiency with respect to other Holders. If a notice or communication is mailed in the manner provided above within the time prescribed, it is duly given, whether or not the addressee receives it. If the Company mails a notice or communication to Holders, it shall mail a copy to the Trustee and each Agent at the same time. All other notices or communications shall be in writing. In case by reason of the suspension of regular mail service, or by reason of any other cause, it shall be impossible to mail any notice as required by the Indenture, then such method of notification as shall be made with the approval of the Trustee shall constitute a sufficient mailing of such notice. Section 12.03. Communication by Holders With Other Holders. Holders may communicate pursuant to TIA (ss.) 312(b) with other Holders with respect to their 56 57 rights under this Indenture or the Notes. The Company, the Trustee, the Registrar and anyone else shall have the protection of TIA (ss.) 312(c). Section 12.04. Certificate and Opinion as to Conditions Precedent. Upon any request or application by the Company to the Trustee to take any action under this Indenture, the Company shall furnish to the Trustee: (a) an Officers' Certificate stating that, in the opinion of the signers, all conditions precedent, if any, provided for in this Indenture relating to the proposed action have been complied with; and (b) an Opinion of Counsel stating that, in the opinion of such counsel, all such conditions precedent have been complied with. Section 12.05. Statements Required in Certificate or Opinion. Each certificate or opinion with respect to compliance with a condition or covenant provided for in this Indenture (other than pursuant to Section 4.03) shall include: (a) a statement that the Person signing such certificate or rendering such opinion has read such covenant or condition; (b) a brief statement as to the nature and scope of the examination or investigation upon which the statements or opinions contained in such certificate or opinion are based; (c) a statement that, in the opinion of such Person, such Person has made such examination or investigation as is necessary to enable such Person to express an informed opinion as to whether or not such covenant or condition has been complied with; and (d) a statement as to whether or not, in the opinion of such Person, such condition or covenant has been complied with. Section 12.06. Rules by Trustee and Agents. The Trustee may make reasonable rules for action by, or a meeting of, Holders. The Registrar or Paying Agent may make reasonable rules and set reasonable requirements for its functions. Section 12.07. Legal Holidays. A "Legal Holiday" is a Saturday, a Sunday or a day on which banking institutions in the State of New York are not required to be open. If a payment date is a Legal Holiday at a place of payment, payment may be made at that place on the next succeeding day that is not a Legal Holiday, and no interest or Liquidated Damages, if any, shall accrue for the intervening period. If any other operative date for purposes of this Indenture shall occur on a Legal Holiday then for all purposes the next succeeding day that is not a Legal Holiday shall be such operative date. Section 12.08. No Recourse Against Others. 57 58 A director, officer, employee or stockholder, as such, of the Company shall not have any liability for any obligations of the Company under the Notes or the Indenture or for any claim based on, in respect of or by reason of such obligations or their creation. Each Holder by accepting a Note waives and releases all such liability. The waiver and release are part of the consideration for the issue of the Notes. Section 12.09. Counterparts and Facsimile Signatures. This Indenture may be executed by manual or facsimile signature in any number of counterparts and by the parties hereto in separate counterparts, each of which when so executed shall be deemed to be an original and all of which taken together shall constitute one and the same agreement. Section 12.10. Variable Provisions. "Officer" means the Chairman of the Board, the President, any Vice President, the Treasurer, the Secretary, any Assistant Treasurer or any Assistant Secretary of the Company. The first certificate pursuant to Section 4.03 hereof shall be for the fiscal year ended on December 31, 1998. The reporting date for Section 9.06 hereof is March 15, of each year. The first reporting date is March 15, 1999. The Trustee shall always have a combined capital and surplus of at least $100,000,000 as set forth in its most recent published annual report of condition. The Company's address is: NTL Incorporated 110 East 59th Street, 26th Floor New York, New York 10022 Attention: Richard J. Lubasch, Esq. Senior Vice President and General Counsel The Trustee's address is: The Chase Manhattan Bank 450 West 33rd Street New York, New York 10001 Attention: Corporate Trustee Administration Department Section 12.11. Governing Law. THE INTERNAL LAWS OF THE STATE OF NEW YORK SHALL GOVERN THIS INDENTURE AND THE NOTES, WITHOUT REGARD TO THE CONFLICT OF LAWS PROVISIONS THEREOF. Section 12.12. No Adverse Interpretation of Other Agreements. 58 59 This Indenture may not be used to interpret another indenture, loan or debt agreement of the Company or an Affiliate. Any such indenture, loan or debt agreement may not be used to interpret this Indenture. Section 12.13. Successors. All agreements of the Company in this Indenture and the Notes shall bind its successor. All agreements of the Trustee in this Indenture shall bind its successor. Section 12.14. Severability. In case any provision in this Indenture or in the Notes shall be invalid, illegal or unenforceable, the validity, legality and enforceability of the remaining provisions shall not in any way be affected or impaired thereby. Section 12.15. Table of Contents, Headings, Etc. The Table of Contents, Cross-Reference Table, and headings of the Articles and Sections of this Indenture have been inserted for convenience of reference only, are not to be considered a part hereof, and shall in no way modify or restrict any of the terms or provisions hereof. 59 60 SIGNATURES IN WITNESS WHEREOF, the parties hereto have caused this Indenture to be duly executed, all as of the date first written above. NTL INCORPORATED, as Company By: /s/ Richard J. Lubasch Name: Richard J. Lubasch Title: Senior Vice President, General Counsel and Secretary THE CHASE MANHATTAN BANK, as Trustee By: /s/ Andrew M. Deck Name: Andrew M. Deck Title: Vice President 61 EXHIBIT A [FORM OF FACE OF INITIAL NOTE] [Global Notes Legend] UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), NEW YORK, NEW YORK, TO THE COMPANY OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO CEDE & CO., OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC) ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN. TRANSFERS OF THIS GLOBAL NOTE SHALL BE LIMITED TO TRANSFERS IN WHOLE, BUT NOT IN PART, TO NOMINEES OF DTC OR TO A SUCCESSOR THEREOF OR SUCH SUCCESSOR'S NOMINEE AND TRANSFERS OF PORTIONS OF THIS GLOBAL NOTE SHALL BE LIMITED TO TRANSFERS MADE IN ACCORDANCE WITH THE RESTRICTIONS SET FORTH IN THE INDENTURE REFERRED TO ON THE REVERSE HEREOF. [Restricted Notes Legend] THE SECURITY (OR ITS PREDECESSOR) EVIDENCED HEREBY WAS ORIGINALLY ISSUED IN A TRANSACTION EXEMPT FROM REGISTRATION UNDER SECTION 5 OF THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND THE SECURITY EVIDENCED HEREBY AND ANY SHARES OF COMMON STOCK ISSUED UPON CONVERSION HEREOF MAY NOT BE OFFERED, SOLD OR OTHERWISE TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR AN APPLICABLE EXEMPTION THEREFROM. EACH PURCHASER OF THE SECURITY EVIDENCED HEREBY IS HEREBY NOTIFIED THAT THE SELLER MAY BE RELYING ON THE EXEMPTION FROM THE PROVISIONS OF SECTION 5 OF THE SECURITIES ACT PROVIDED BY RULE 144A THEREUNDER. THE HOLDER OF THE SECURITY EVIDENCED HEREBY AGREES FOR THE BENEFIT OF THE COMPANY THAT (A) SUCH SECURITY AND ANY SHARES OF COMMON STOCK ISSUED UPON CONVERSION HEREOF MAY BE RESOLD, PLEDGED OR OTHERWISE TRANSFERRED, ONLY (1) (a) TO A PERSON WHO THE SELLER REASONABLY BELIEVES IS A QUALIFIED INSTITUTIONAL BUYER (AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT) IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144A, (b) IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144 UNDER THE SECURITIES ACT, IF AVAILABLE, (c) OUTSIDE THE UNITED STATES TO A NON-U.S. PERSON IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 904 UNDER THE SECURITIES ACT OR (d) IN ACCORDANCE WITH ANOTHER EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT (AND BASED UPON AN OPINION OF COUNSEL IF THE COMPANY SO REQUESTS), (2) TO THE COMPANY OR (3) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT AND, IN EACH CASE, IN ACCORDANCE WITH ANY APPLICABLE SECURITIES LAWS OF ANY STATE OF THE UNITED STATES OR ANY OTHER APPLICABLE JURISDICTION AND (B) THE PURCHASER WILL, AND EACH SUBSEQUENT A-61 62 PURCHASER IS REQUIRED TO, NOTIFY ANY SUBSEQUENT PURCHASER FROM IT OF THE SECURITY EVIDENCED HEREBY OR ANY COMMON STOCK ISSUABLE UPON CONVERSION HEREOF OF THE RESALE RESTRICTIONS SET FORTH IN (A) ABOVE. A-62 63 No. ________ $-------- CUSIP No. [ ]/CINS No. [ ] 7% CONVERTIBLE SUBORDINATED NOTE DUE 2008 NTL Incorporated, a Delaware corporation (the "Company"), promises to pay to __________________________ or registered assigns, the principal sum of ____________________ $[____________] [,or such other amount as is indicated on Schedule A hereof* ,] on December 15, 2008, subject to the further provisions of this Note set forth on the reverse hereof which further provisions shall for all purposes have the same effect as if set forth at this place. Interest Payment Dates: June 15 and December 15, commencing June 15, 1999 Record Dates: June 1 and December 1 IN WITNESS WHEREOF, NTL Incorporated has caused this Note to be signed manually or by facsimile by one of its duly authorized officers. Dated: NTL INCORPORATED by: TRUSTEE'S CERTIFICATE OF AUTHENTICATION This is one of the 7% Convertible Subordinated Notes due 2008 described in the within-mentioned Indenture. THE CHASE MANHATTAN BANK, as Trustee By:______________________________________ Authorized Officer - ---------- * Applicable to Global Notes Only A-63 64 [FORM OF REVERSE OF INITIAL NOTE] NTL INCORPORATED 7% Convertible Subordinated Note due 2008 1. Interest. NTL INCORPORATED, a Delaware corporation (the "Company"), is the issuer of 7% Convertible Subordinated Notes due 2008 (the "Notes"). The Notes will accrue interest at a rate of 7% per annum. The Company promises to pay interest on the Notes in cash semiannually on each June 15 and December 15, commencing on June 15, 1999, to Holders of record on the immediately preceding June 1 and December 1, respectively. Interest on the Notes will accrue from the most recent date to which interest has been paid, or if no interest has been paid, from December 16, 1998. Interest will be computed on the basis of a 360-day year of twelve 30-day months. The Company will pay interest on overdue principal at the interest rate borne by the Notes, compounded semiannually, and it shall pay interest on overdue installments of interest and Liquidated Damages, if any, (without regard to any applicable grace period) at the same interest rate compounded semiannually. Any interest paid on this Note shall be increased to the extent necessary to pay Additional Amounts as set forth in this Note. 2. Registration Rights. The holder of this Note is entitled to the benefits of a Registration Rights Agreement, dated as of December 16, 1998, among the Company and the Initial Purchasers (the "Registration Rights Agreement"). Pursuant to the Registration Rights Agreement the Company has agreed for the benefit of the Holders of the Notes, that (i) it will, at its cost, within 90 days after the closing of the sale of the Notes (the "Closing"), file a shelf registration statement (the "Shelf Registration Statement") with the Securities and Exchange Commission (the "Commission") with respect to resales of the Notes and the Common Stock issuable upon conversion thereof, (ii) it will use its best efforts to cause such Shelf Registration Statement to be declared effective within 180 days after the Closing, and (iii) it will use its best efforts to keep such Shelf Registration Statement continuously effective under the Securities Act, subject to certain exceptions specified in the Registration Rights Agreement until the second anniversary of the date of the Closing. If (a) the Company fails to file the Shelf Registration Statement required by the Registration Rights Agreement on or before the date specified above for such filing, (b) such Shelf Registration Statement is not declared effective by the Commission on or prior to the date specified above for such effectiveness, or (c) the Shelf Registration Statement is declared effective but thereafter ceases to be effective or useable in connection with resales of Transfer Restricted Securities (as defined in the Registration Rights Agreement) during the periods specified in the Registration Rights Agreement (each such event referred to in clauses (a) through (c) above a "Registration Default"), then the Company will pay liquidated damages to each Holder of Transfer Restricted Securities, with respect to the first 90-day period immediately following the occurrence of such Registration Default in an amount equal to $.05 per week per $1,000 principal amount of Notes constituting Transfer Restricted Securities held by such Holder ("Liquidated Damages"), provided that a Holder of Transfer Restricted Securities shall not be entitled to the benefit of any Liquidated Damages unless and until such Holder shall have furnished to the Company the information required by Section 4(l) of the Registration Rights Agreement. The amount of Liquidated Damages will increase by an additional $.05 per week per $1,000 principal amount constituting Transfer Restricted Securities with respect to each subsequent 90-day period until all Registration Defaults have been cured, up to a maximum amount of Liquidated Damages of $.50 per week per $1,000 principal amount of Notes constituting Transfer Restricted Securities. All accrued Liquidated Damages shall be paid by the Company on each Interest Payment Date for which Liquidated Damages are owed to the holders of Global Notes by wire transfer of immediately available funds or by federal funds check and to holders of certificated Notes registered as such as of the preceding Record Date by mailing checks to their registered A-64 65 addresses. Following the cure of all Registration Defaults, the accrual of Liquidated Damages will cease. 3. Additional Amounts. This Section 3 shall apply only in the event that the Company becomes, or a successor to the Company is, a corporation organized or existing under the laws of the United Kingdom, the Netherlands, the Netherlands Antilles, Bermuda or the Cayman Islands. All payments made by the Company on this Note shall be made without deduction for or on account of, any and all present or future taxes, duties, assessments, or governmental charges of whatever nature unless the deduction or withholding of such taxes, duties, assessments or governmental charges is then required by law. If any deduction or withholding for or on account of any present or future taxes, assessments or other governmental charges of the United Kingdom, the Netherlands, the Netherlands Antilles, Bermuda or the Cayman Islands (or any political subdivision or taxing authority thereof or therein) shall at any time be required in respect of any amounts to be paid by the Company under this Note, the Company shall pay or cause to be paid such additional amounts ("Additional Amounts") as may be necessary in order that the net amounts received by a Holder of this Note after such deduction or withholding shall be not less than the amounts specified in this Note to which the Holder of this Note is entitled; provided, however, that the Company shall not be required to make any payment of Additional Amounts for or on account of: (a) any tax, assessment or other governmental charge to the extent such tax, assessment or other governmental charge would not have been imposed but for (i) the existence of any present or former connection between such Holder (or between a fiduciary, settlor, beneficiary, member or shareholder of, or possessor of a power over, such Holder, if such Holder is an estate, nominee, trust, partnership or corporation), other than the holding of this Note or the receipt of amounts payable in respect of this Note, and the United Kingdom, the Netherlands, the Netherlands Antilles, Bermuda or the Cayman Islands (or any political subdivision or taxing authority thereof or therein) including, without limitation, such Holder (or such fiduciary, settlor, beneficiary, member, shareholder or possessor) being or having been a citizen or resident thereof or being or having been present or engaged in trade or business therein or having or having had a permanent establishment therein or (ii) the presentation of this Note (where presentation is required) for payment on a date more than 30 days after the date on which such payment became due and payable or the date on which payment thereof is duly provided for, whichever occurs later, except to the extent that the Holder would have been entitled to Additional Amounts had this Note been presented on the last day of such period of 30 days; (b) any tax, assessment or other governmental charge that is imposed or withheld by reason of the failure to comply by the Holder of this Note or, if different, the beneficial owner of the interest payable on this Note, with a timely request of the Company addressed to such Holder or beneficial owner to provide information, documents or other evidence concerning the nationality, residence, identity or connection with the taxing jurisdiction of such Holder or beneficial owner which is required or imposed by a statute, regulation or administrative practice of the taxing jurisdiction as a precondition to exemption from all or part of such tax, assessment or governmental charge; (c) any estate, inheritance, gift, sales, transfer, personal property or similar tax, assessment or other governmental charge; (d) any tax, assessment or other governmental charge which is collectible otherwise than by withholding from payments of principal amount, redemption amount, Change A-65 66 of Control Payment or interest with respect to a Note or withholding from the proceeds of a sale or exchange of a Note; (e) any tax, assessment or other governmental charge required to be withheld by any Paying Agent from any payment of principal amount, redemption amount, Change of Control Payment or interest with respect to a Note, if such payment can be made, and is in fact made, without such withholding by any other Paying Agent located inside the United States; (f) any tax, assessment or other governmental charge imposed on a Holder that is not the beneficial owner of a Note to the extent that the beneficial owner would not have been entitled to the payment of any such Additional Amounts had the beneficial owner directly held the Note; (g) any combination of items (a), (b), (c), (d), (e) and (f) above; nor shall Additional Amounts be paid with respect to any payment of the principal of, or any interest on, this Note to any Holder who is a fiduciary or partnership or other than the sole beneficial owner of such payment to the extent that a beneficiary or settlor would not have been entitled to any Additional Amounts had such beneficiary or settlor been the Holder of this Note. All references to principal amount or interest on the Notes in the Indenture or the Notes shall include any Additional Amounts payable to the Company pursuant to this Section 3. 4. Method of Payment. The Company will pay interest on the Notes (except defaulted interest) to the Persons who are registered Holders of Notes at the close of business on the record date for the next interest payment date even though Notes are canceled after the record date and on or before the interest payment date. Holders must surrender Notes to a Paying Agent to collect principal and premium payments. The Company will pay principal, premium, if any, interest and Liquidated Damages, if any, in money of the United States that at the time of payment is legal tender for payment of public and private debts. However, the Company may pay principal, premium, if any, interest and Liquidated Damages, if any, by check payable in such money. It may mail an interest or Liquidated Damages check to a Holder's registered address. If a Holder so requests, principal, premium, if any, interest and Liquidated Damages, if any, may be paid by wire transfer of immediately available funds to an account previously specified in writing by such Holder to the Company and the Trustee. 5. Paying Agent, Conversion Agent and Registrar. The Trustee will act as Paying Agent, Conversion Agent and Registrar in the City of New York, New York. The Company may change any Paying Agent, Conversion Agent or Registrar without prior notice. The Company or any of its Affiliates may act in any such capacity. 6. Indenture. The Company issued the Notes under an Indenture, dated as of December 16, 1998 (the "Indenture"), between the Company and The Chase Manhattan Bank, as Trustee. The terms of the Notes include those stated in the Indenture and those made part of the Indenture by the Trust Indenture Act of 1939 (15 U.S. Code (ss.)(ss.) 77aaa-77bbbb) as in effect on the date of the Indenture. The Notes are subject to, and qualified by, all such terms, certain of which are summarized hereon, and Holders are referred to the Indenture and such Act for a statement of such terms. The Notes are unsecured general obligations of the Company limited to $600,000,000 in aggregate principal amount and subordinated in right of payment to all existing and future Senior Debt of the Company. A-66 67 7. Optional Redemption. Except as provided in Section 8 hereof, the Notes are not redeemable at the Company's option prior to December 15, 2001. Thereafter, the Notes will be subject to redemption at the option of the Company, in whole or in part, upon not less than 30 nor more than 60 days' notice, at the redemption prices (expressed as percentages of principal amount thereof) set forth below plus accrued and unpaid interest and Liquidated Damages, if any, thereon to the applicable redemption date, if redeemed during the twelve-month period beginning on December 15 of the years indicated below: Year Percentage ---- ---------- 2001 104.375% 2002 103.500% 2003 102.625% 2004 101.750% 2005 100.875% 2006 and thereafter 100.000% 8. Optional Tax Redemption. (a) The Notes may be redeemed at the option of the Company, in whole but not in part, upon not less than 30 nor more than 60 days notice, at any time at a redemption price equal to the principal amount thereof plus accrued and unpaid interest and Liquidated Damages, if any, to the date fixed for redemption if after the date on which Section 3 of this Note becomes applicable (the "Relevant Date") there has occurred any change in or amendment to the laws (or any regulations or official rulings promulgated thereunder) of the United Kingdom, the Netherlands, the Netherlands Antilles, Bermuda or the Cayman Islands (or any political subdivision or taxing authority thereof or therein), or any change in or amendment to the official application or interpretation of such laws, regulation or rulings (a "Change in Tax Law") which becomes effective after the Relevant Date, as a result of which the Company is or would be so required on the next succeeding Interest Payment Date to pay Additional Amounts with respect to the Notes as described under Section 3 hereof with respect to withholding taxes imposed by the United Kingdom, the Netherlands, the Netherlands Antilles, Bermuda or the Cayman Islands (or any political subdivision or taxing authority thereof or therein) (a "Withholding Tax") and such Withholding Tax is imposed at a rate that exceeds the rate (if any) at which Withholding Tax was imposed on the Relevant Date, provided, however, that (i) this paragraph shall not apply to the extent that, at the Relevant Date it was known or would have been known had professional advice of a nationally recognized accounting firm in the United Kingdom, the Netherlands, the Netherlands Antilles, Bermuda or the Cayman Islands, as the case may be, been sought, that a Change in Tax Law in the United Kingdom, the Netherlands, the Netherlands Antilles, Bermuda or the Cayman Islands was to occur after the Relevant Date, (ii) no such notice of redemption may be given earlier than 90 days prior to the earliest date on which the Company would be obliged to pay such Additional Amounts were a payment in respect of the Notes then due, (iii) at the time such notice of redemption is given, such obligation to pay such Additional Amount remains in effect and (iv) the payment of such Additional Amounts cannot be avoided by the use of any reasonable measures available to the Company. The Notes may also be redeemed, in whole but not in part, at any time at a redemption price equal to the principal amount thereof plus accrued and unpaid interest and Liquidated Damages, if any, to the date fixed for redemption if the Person formed after the Relevant Date by a consolidation, amalgamation, reorganization or reconstruction (or other similar arrangement) of the Company or the Person into which the Company is merged after the Relevant Date or to which the Company conveys, transfers or leases its properties and assets after the Relevant Date substantially as an entirety A-67 68 (collectively, a "Subsequent Consolidation") is required, as a consequence of such Subsequent Consolidation and as a consequence of a Change in Tax Law in the United Kingdom, the Netherlands, the Netherlands Antilles, Bermuda or the Cayman Islands occurring after the date of such Subsequent Consolidation to pay Additional Amounts with respect to Notes with respect to Withholding Tax as described under Section 3 hereof and such Withholding Tax is imposed at a rate that exceeds the rate (if any) at which Withholding Tax was or would have been imposed on the date of such Subsequent Consolidation, provided, however, that this paragraph shall not apply to the extent that, at the date of such Subsequent Consolidation it was known or would have been known had professional advice of a nationally recognized accounting firm in the United Kingdom, the Netherlands, the Netherlands Antilles, Bermuda or the Cayman Islands, as the case may be, been sought, that a Change in Tax Law in the United Kingdom, the Netherlands, the Netherlands Antilles, Bermuda or the Cayman Islands was to occur after such date. The Company will also pay, or make available for payment, to Holders on the Redemption Date any Additional Amounts (as described, but subject to the exceptions referred to, in Section 3 hereof) resulting from the payment of such Redemption Price. 9. Notice of Redemption. Notice of redemption will be mailed at least 30 days but not more than 60 days before the redemption date to each Holder of the Notes to be redeemed at his address of record. The Notes in denominations larger than $1,000 may be redeemed in part but only in integral multiples of $1,000. In the event of a redemption of less than all of the Notes, the Notes will be chosen for redemption by the Trustee in accordance with the Indenture. On and after the redemption date, interest ceases to accrue on the Notes or portions of them called for redemption. If this Note is redeemed subsequent to a record date with respect to any interest payment date specified above and on or prior to such interest payment date, then any accrued interest will be paid to the Person in whose name this Note is registered at the close of business on such record date. 10. Mandatory Redemption. The Company will not be required to make mandatory redemption or repurchase payments with respect to the Notes. There are no sinking fund payments with respect to the Notes. 11. Repurchase at Option of Holder. If there is a Change of Control, the Company shall be required to offer to purchase on the Purchase Date all outstanding Notes at a purchase price equal to 101% of the aggregate principal amount thereof, plus accrued and unpaid interest and Liquidated Damages, if any, to the Purchase Date. Holders of Notes that are subject to an offer to purchase will receive a Change of Control offer from the Company prior to any related Purchase Date and may elect to have such Notes or portions thereof in authorized denominations purchased by completing the form entitled "Option of Holder to Elect Purchase" appearing below. 12. Subordination. The payment of the principal of, interest on or any other amounts due on the Notes is subordinated in right of payment to all existing and future Senior Debt of the Company, as described in the Indenture. Each Holder, by accepting a Note, agrees to such subordination and authorizes and directs the Trustee on its behalf to take such action as may be necessary or appropriate to effectuate the subordination so provided and appoints the Trustee as its attorney-in-fact for such purpose. 13. Conversion. The holder of any Note has the right, exerciseable at any time after 90 days following the Issuance Date and prior to the close of business (New York time) on the date of the Note's A-68 69 maturity, to convert the principal amount thereof (or any portion thereof that is an integral multiple of $1,000) into shares of Common Stock at the initial Conversion Price of $61.25 per share, subject to adjustment under certain circumstances as set forth in the Indenture, except that if a Note is called for redemption, the conversion right will terminate at the close of business on the Business Day immediately preceding the date fixed for redemption. To convert a Note, a holder must (1) complete and sign a conversion notice substantially in the form set forth below, (2) surrender the Note to a Conversion Agent, (3) furnish appropriate endorsements or transfer documents if required by the Registrar or Conversion Agent and (4) pay any transfer or similar tax, if required. Upon conversion, no adjustment or payment will be made for interest or dividends, but if any holder surrenders a Note for conversion after the close of business on the record date for the payment of an installment of interest and prior to the opening of business on the next interest payment date, then, notwithstanding such conversion, the interest payable on such interest payment date will be paid to the registered holder of such Note on such record date. In such event, such Note, when surrendered for conversion, need not be accompanied by payment of an amount equal to the interest payable on such interest payment date on the portion so converted. The number of shares issuable upon conversion of a Note is determined by dividing the principal amount of the Note converted by the Conversion Price in effect on the Conversion Date. No fractional shares will be issued upon conversion but a cash adjustment will be made for any fractional interest. A Note in respect of which a holder has delivered an "Option of Holder to Elect Purchase" form appearing below exercising the option of such holder to require the Company to purchase such Note may be converted only if the notice of exercise is withdrawn as provided above and in accordance with the terms of the Indenture. The above description of conversion of the Notes is qualified by reference to, and is subject in its entirety by, the more complete description thereof contained in the Indenture. 14. Denominations, Transfer, Exchange. The Notes are in registered form, without coupons, in denominations of $1,000 and integral multiples of $1,000. The transfer of Notes may be registered, and Notes may be exchanged, as provided in the Indenture. The Registrar may require a Holder, among other things, to furnish appropriate endorsements and transfer documents and to pay any taxes and fees required by law or permitted by the Indenture. The Registrar need not exchange or register the transfer of any Note or portion of a Note selected for redemption (except the unredeemed portion of any Note being redeemed in part). Also, it need not exchange or register the transfer of any Note for a period of 15 days before a selection of Notes to be redeemed. 15. Persons Deemed Owners. Except as provided in paragraph 4 of this Note, the registered Holder of a Note may be treated as its owner for all purposes. 16. Unclaimed Money. If money for the payment of principal or interest remains unclaimed for two years, the Trustee and the Paying Agent shall pay the money back to the Company at its written request. After that, Holders of Notes entitled to the money must look to the Company for payment unless an abandoned property law designates another Person and all liability of the Trustee and such Paying Agent with respect to such money shall cease. 17. Defaults and Remedies. The Notes shall have the Events of Default set forth in Section 8.01 of the Indenture. Subject to certain limitations in the Indenture, if an Event of Default occurs and is continuing, the Trustee by notice to the Company or the Holders of at least 25% in aggregate principal amount of the then outstanding Notes by notice to the Company and the Trustee may declare all the Notes A-69 70 to be due and payable immediately, except that in the case of an Event of Default arising from certain events of bankruptcy or insolvency, all unpaid principal and interest accrued on the Notes shall become due and payable immediately without further action or notice. The Holders of a majority in principal amount of the Notes then outstanding by written notice to the Trustee may rescind an acceleration and its consequences if the rescission would not conflict with any judgment or decree and if all existing Events of Default have been cured or waived except nonpayment of principal or interest that has become due solely because of the acceleration. Holders may not enforce the Indenture or the Notes except as provided in the Indenture. Subject to certain limitations, Holders of a majority in principal amount of the then outstanding Notes issued under the Indenture may direct the Trustee in its exercise of any trust or power. The Company must furnish annually compliance certificates to the Trustee. The above description of Events of Default and remedies is qualified by reference, and subject in its entirety, to the more complete description thereof contained in the Indenture. 18. Amendments, Supplements and Waivers. Subject to certain exceptions, the Indenture or the Notes may be amended or supplemented with the consent of the Holders of at least a majority in principal amount of the then outstanding Notes (including consents obtained in connection with a tender offer or exchange offer for Notes), and any existing default may be waived with the consent of the Holders of a majority in principal amount of the then outstanding Notes. Without the consent of any Holder, the Indenture or the Notes may be amended among other things, to cure any ambiguity, defect or inconsistency, to provide for uncertificated Notes in addition to or in place of certificated Notes, to provide for assumption of the Company's obligations to Holders, to make any change that does not adversely affect the rights of any Holder or to qualify the Indenture under the TIA or to comply with the requirements of the SEC in order to maintain the qualification of the Indenture under the TIA. 19. Trustee Dealings with the Company. The Trustee, in its individual or any other capacity may become the owner or pledgee of the Notes and may otherwise deal with the Company or an Affiliate with the same rights it would have, as if it were not Trustee, subject to certain limitations provided for in the Indenture and in the TIA. Any Agent may do the same with like rights. 20. No Recourse Against Others. A director, officer, employee or stockholder, as such, of the Company shall not have any liability for any obligations of the Company under the Notes or the Indenture or for any claim based on, in respect of or by reason of such obligations or their creation. Each Holder of the Notes by accepting a Note waives and releases all such liability. The waiver and release are part of the consideration for the issue of the Notes. 21. Governing Law. THE INTERNAL LAWS OF THE STATE OF NEW YORK SHALL GOVERN THE INDENTURE AND THE NOTES WITHOUT REGARD TO CONFLICT OF LAW PROVISIONS THEREOF. 22. Authentication. The Notes shall not be valid until authenticated by the manual signature of an authorized officer of the Trustee or an authenticating agent. 23. Abbreviations. Customary abbreviations may be used in the name of a Holder or an assignee, such as: TEN COM (= tenants in common), TEN ENT (= tenants by the entireties), JT TEN (= joint tenants with right of survivorship and not as tenants in common), CUST (- Custodian), and UGMA (= Uniform Gifts to Minors Act). The Company will furnish to any Holder of the Notes upon written request and without charge a A-70 71 copy of the Indenture. Request may be made to: NTL Incorporated 110 East 59th Street, 26th Floor New York, New York 10022 Attention of: Richard J. Lubasch, Esq. Senior Vice President and General Counsel A-71 72 ASSIGNMENT FORM To assign this Note, fill in the form below: (I) or (we) assign and transfer this Note to ------------------------------------------------- (Insert assignee's social security or tax I.D. no.) ------------------------------------------ ------------------------------------------ (Print or type assignee's name, address and zip code) and irrevocably appoint _________________________________ agent to transfer this Note on the books of the Company. The agent may substitute another to act for him. Your Signature: (Sign exactly as your name appears on the other side of this Note) Date: __________________ Signature Guarantee: * ____________________________________________ In connection with any transfer of any of the Notes evidenced by this certificate occurring prior to the date that is two years after the later of the date of original issuance of such Notes and the last date, if any, on which such Notes were owned by the Company or any Affiliate of the Company, the undersigned confirms that such Notes are being transferred: CHECK ONE BOX BELOW (1) to the Company or any subsidiary thereof, (2) to a qualified institutional buyer in compliance with Rule 144A, (3) outside the United States in compliance with Rule 904 under the Securities Act, (4) pursuant to the exemption from registration provided by Rule 144 under the Securities Act (if available) or (5) pursuant to an effective registration statement under the Securities Act. - ---------- * Signature must be guaranteed by a commercial bank, trust company or member firm of the New York Stock Exchange A-72 73 -------------------------- Signature Signature Guarantee* - -------------------------- Signature must be guaranteed - ------------------------------------------------------------------ TO BE COMPLETED BY PURCHASER IF (2) ABOVE IS CHECKED. The undersigned represents and warrants that it is purchasing this Note for its own account or an account with respect to which it exercises sole investment discretion and that it and any such account is a "qualified institutional buyer" within the meaning of Rule 144A under the Securities Act of 1933, and is aware that the sale to it is being made in reliance on Rule 144A and acknowledges that it has received such information regarding the Company as the undersigned has requested pursuant to Rule 144A or has determined not to request such information and that it is aware that the transferor is relying upon the undersigned's foregoing representations in order to claim the exemption from registration provided by Rule 144A. Date: _____________________ ___________________________ * Signature must be guaranteed by a commercial bank, trust company or member firm of the New York Stock Exchange. NOTICE: To be executed by an executive officer A-73 74 OPTION OF HOLDER TO ELECT PURCHASE If you want to elect to have this Note or a portion thereof repurchased by the Company pursuant to Section 3.09 or 4.07 of the Indenture, check the box: [ ] If the purchase is in part, indicate the portion (in denominations of $1,000 or any integral multiple thereof) to be purchased:____________________ Your Signature: (Sign exactly as your name appears on the other side of this Note) Date: ________________________ Signature Guarantee:**/ - ---------- **/ Signature must be guaranteed by a commercial bank, trust company or member firm of the New York Stock Exchange. A-74 75 ELECTION TO CONVERT To NTL Incorporated The undersigned owner of this Note hereby irrevocably exercises the option to convert this Note, or the portion below designated, into Common Stock of NTL Incorporated in accordance with the terms of the Indenture referred to in this Note, and directs that the shares issuable and deliverable upon conversion, together with any check in payment for fractional shares, be issued in the name of and delivered to the undersigned, unless a different name has been indicated in the assignment below. If the shares are to be issued in the name of a person other than the undersigned, the undersigned will pay all transfer taxes payable with respect thereto. Any holder of Notes, upon the exercise of its conversion rights in accordance with the terms of the Indenture and the Note, agrees to be bound by the terms of the Registration Rights Agreement relating to the Common Stock issuable upon conversion of the Notes. Date: in whole ___ Portions of Note to be converted ($1,000 or integral multiples thereof): $______________ Signature Please Print or Typewrite Name and Address, Including Zip Code, and Social Security or Other Identifying Number Signature Guarantee: * - ---------- * Signature must be guaranteed by a commercial bank, trust company or member firm of the New York Stock Exchange. A-75 76 [TO BE ATTACHED TO GLOBAL NOTES] SCHEDULE A SCHEDULE OF PRINCIPAL AMOUNT The initial principal amount of this Global Note shall be $__________________. The following increases or decreases in the principal amount of this Global Note have been made: - -------------------------------------------------------------------------------- Amount of Amount of Signature of Date of decrease in increase in Principal authorized exchange principal principal amount of officer of following such amount of this amount of this this Global Trustee or decrease or Global Note Global Note Note Notes Custodian increase - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- A-76 77 EXHIBIT B FORM OF TRANSFER CERTIFICATE FOR TRANSFER FROM RULE 144A GLOBAL NOTE OR RESTRICTED NOTE TO REGULATION S GLOBAL NOTE (Transfers pursuant to (ss.) 2.06(a)(ii) or 2.06(a)(vii) of the Indenture) The Chase Manhattan Bank, as Trustee 450 West 33rd Street New York, New York 10001 Attn: Corporate Trustee Administration Department Re: NTL Incorporated 7% Convertible Subordinated Notes due 2008 (the "Notes") Reference is hereby made to the Indenture, dated as December 16, 1998 (the "Indenture"), between NTL Incorporated, as Issuer, and The Chase Manhattan Bank, as Trustee. This letter relates to $[ ] [check one] (i) aggregate principal amount of Notes which are held in the form of the Rule 144A Global Note (CUSIP No. 629407AK3) with the Depositary or (ii) principal amount of Restricted Note (CUSIP No. 629407AM9) registered, in either case, in the name of [name of transferor] (the "Transferor") to effect the transfer of the Notes in exchange for an equivalent beneficial interest in the Regulation S Global Notes. In connection with such request, the Transferor does hereby certify that such transfer has been effected in accordance with (i) the transfer restrictions set forth in the Notes and (ii) that: (1) the offer of the Notes was not made to a Person in the United States; (2) the transaction was executed in, on or through the facilities of a designated offshore securities market and neither the Transferor nor any Person acting on its behalf knows that the transaction was pre-arranged with a buyer in the United States; (3) no directed selling efforts have been made in contravention of the requirements of Rule 903(b) or 904(b) of Regulation S, as applicable; and (4) the transaction is not part of a plan or scheme to evade the registration requirements of the United States Securities Act of 1933, as amended (the "Securities Act"). In addition, if the sale is made during a distribution compliance period and the provisions of Rule 903(c)(2) or (3) or Rule 904(c)(1) of Regulation S are applicable thereto, we confirm that such sale has been made in accordance with the applicable provisions of Rule 903(c)(2) or (3) or Rule 904(c)(1), as the case may be. You and the Company are entitled to rely upon this letter and are irrevocably authorized to produce this letter or a copy hereof to any interested party in any administrative or legal proceedings or B-77 78 official inquiry with respect to the matters covered hereby. Capitalized terms used in this certificate and not otherwise defined in the Indenture have the meanings set forth in Regulation S. [Name of Transferor] By:___________________________ Name: Title: Dated: cc: NTL Incorporated 110 East 59th Street New York, New York 10022 Attn: Richard J. Lubasch, Esq. Senior Vice President and General Counsel B-78 79 EXHIBIT C FORM OF TRANSFER CERTIFICATE FOR TRANSFER FROM REGULATION S GLOBAL NOTE OR RESTRICTED NOTE TO RULE 144A GLOBAL NOTE (Transfers pursuant to (ss.) 2.06(a)(iii) or 2.06(a)(vi) of the Indenture) The Chase Manhattan Bank, as Trustee 450 West 33rd Street New York, New York 10001 Attn: Corporate Trustee Administration Department Re: NTL Incorporated 7% Convertible Subordinated Notes due 2008 (the "Notes") Reference is hereby made to the Indenture, dated as of December 16, 1998 (the "Indenture"), between NTL Incorporated, as Issuer, and The Chase Manhattan Bank, as Trustee. Capitalized terms used but not defined herein shall have the respective meanings given them in the Indenture. This letter relates to $[ ] [check one] (i) aggregate principal amount of Notes which are held in the form of the Regulation S Global Note (CUSIP No. ____) with the Depositary or (ii) principal amount of Restricted Note (CUSIP No. 629407AM9) registered, in each case, in the name of [name of transferor] (the "Transferor") to effect the transfer of the Notes in exchange for an equivalent beneficial interest in the Rule 144A Global Note. In connection with such request, and in respect of such Notes the Transferor does hereby certify that such Notes are being transferred in accordance with (i) the transfer restrictions set forth in the Notes and (ii) Rule 144A under the United States Securities Act of 1933, as amended, to a transferee that the Transferor reasonably believes is purchasing the Notes for its own account or an account with respect to which the transferee exercises sole investment discretion and the transferee and any such account is a "qualified institutional buyer" within the meaning of Rule 144A, in a transaction meeting the requirements of Rule 144A and in accordance with applicable securities laws of any state of the United States or any other jurisdiction. [Name of Transferor], By:___________________________ Name: Title: Dated: cc: NTL Incorporated 110 East 59th Street New York, New York 10022 Attn: Richard J. Lubasch, Esq. Senior Vice President and General Counsel C-79 80 EXHIBIT D FORM OF TRANSFER CERTIFICATE FOR TRANSFER FROM GLOBAL NOTE OR RESTRICTED NOTE TO RESTRICTED NOTE (Transfers pursuant to (ss.) 2.06(a)(iv) or (ss.) 2.06(a)(v) of the Indenture) The Chase Manhattan Bank, as Trustee 450 West 33rd Street New York, New York 10001 Attn: Corporate Trustee Administration Department Re: NTL Incorporated 7% Convertible Subordinated Notes due 2008 (the "Notes") Reference is hereby made to the Indenture, dated as of December 16, 1998 (the "Indenture"), between NTL Incorporated, as Issuer, and The Chase Manhattan Bank, as Trustee. Capitalized terms used but not defined herein shall have the respective meanings given them in the Indenture. This letter relates to $[ ] aggregate principal amount of Notes which are held [in the form of the [Rule 144A/Regulation S] [Global] [Restricted] Note (CUSIP No. [ ] CINS No. [ ]) [with the Depositary] in the name of [name of transferor] (the "Transferor") to effect the transfer of the Notes. In connection with such request, and in respect of such Notes, the Transferor does hereby certify that such Notes are being transferred (i) in accordance with the transfer restrictions set forth in the Notes and (ii) in accordance with applicable securities laws of any state of the United States or any other jurisdiction. *Insert, if appropriate. [Name of Transferor], By:___________________________ Name: Title: Dated: cc: NTL Incorporated 110 East 59th Street New York, New York 10022 Attn: Richard J. Lubasch, Esq. Senior Vice President and General Counsel D-80 81 EXHIBIT E FORM OF ACCREDITED INVESTOR CERTIFICATE NTL Incorporated 110 East 59th Street New York, New York 10022 We are delivering this letter in connection with our purchase of $ principal amount of 7% Convertible Subordinated Notes due 2008 (the "Convertible Notes") of NTL Incorporated, a Delaware corporation (the "Company") issued pursuant to an indenture, dated December 16, 1998, between the Company and The Chase Manhattan Bank, as trustee, as described in the Offering Memorandum (the "Offering Memorandum") relating to such offering. We hereby confirm that: (i) we are an "accredited investor" within the meaning of Rule 501 (a) (1), (2), (3), (4) or (7) under the Securities Act of 1933, as amended (the "Securities Act"), or an entity in which all of the equity owners are accredited investors within the meaning of Rule 501(a) (1), (2), (3), (4) or (7), under the Securities Act (an "Accredited Investor"); (ii) (A) any purchase of the Convertible Notes by us will be for our own account or for the account of one or more other Accredited Investors or as fiduciary for the account of one or more trusts, each of which is an "accredited investor" within the meaning of Rule 501 (a) (7) under the Securities Act and for each of which we exercise sole investment discretion or (B) we are a "bank," within the meaning of Section 3(a) (2) of the Securities Act, or a "savings and loan association" or other institution described in Section 3(a) (5) (A) of the Securities Act that is acquiring the Convertible Notes as fiduciary for the account of one or more institutions for which we exercise sole investment discretion; (iii) in the event that we purchase any of the Convertible Notes, we will acquire Convertible Notes having a minimum purchase price of not less than $100,000 for our own account or for any separate account for which we are acting; (iv) we have such knowledge and experience in financial and business matters that we are capable of evaluating the merits and risks of purchasing the Convertible Notes; (v) we are not acquiring the Convertible Notes with a view to any distribution thereof in a transaction that would violate the Securities Act or the securities laws of any State of the United States or any other applicable jurisdictions; provided that the disposition of our property and the property of any accounts for which we are acting as fiduciary shall remain at all times within our control; (vi) we have received a copy of the Offering Memorandum and acknowledge that we have had access to such financial and other information, and have been afforded the opportunity to ask such questions of representatives of the Company and receive answers E-81 82 thereto, as we deem necessary in connection with our decision to purchase the Convertible Notes. We understand that the Convertible Notes are being offered in a transaction not involving any public offering within the meaning of the Securities Act, that the Convertible Notes have not been registered under the Securities Act, and we agree, on our own behalf and on behalf of each account for which we acquire any Convertible Notes, that the Convertible Notes may be offered, resold, pledged or otherwise transferred only (i) inside the United States to a person whom we reasonably believe to be a Qualified Institutional Buyer (as defined in Rule 144A under the Securities Act) in a transaction meeting the requirements of Rule 144A, in a transaction meeting the requirements of Rule 144 under the Securities Act, if available, or outside the United States to a non-U.S. person in a transaction meeting the requirements of Rule 904 under the Securities Act, or unless the holder thereof is the initial accredited investor, in accordance with another exemption from the registration requirements of the Securities Act (and based upon an opinion of counsel if the Company so requests), (ii) to the Company or (iii) pursuant to an effective registration statement under the Securities Act, and, in each case, in accordance with any applicable securities laws of any State of the United States or any other applicable jurisdiction. We understand that the registrar and transfer agent will not be required to accept for registration of transfer any Convertible Notes, except upon presentation of evidence satisfactory to the Company, as applicable, that the foregoing restrictions on transfer have been complied with. We further understand that Convertible Notes will be in the form of definitive physical certificates and that any such certificates will bear a legend reflecting the substance of this paragraph. We further agree to provide any person purchasing the Convertible Notes or the Common Stock issuable upon conversion thereof (other than pursuant to clause (iii) of this paragraph) from us a notice advising such purchaser that resales of such securities are restricted as stated therein. We acknowledge that you, the Company, and others will rely upon our confirmations, acknowledgments and agreements set forth herein, and we agree to notify you promptly in writing if any of our representations or warranties herein ceases to be accurate and complete. THIS LETTER SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK. Dated: . ________________________________________ By: ____________________________________ Its: ____________________________________ Address:________________________________ _________________________________ cc: The Chase Manhattan Bank, as Trustee 450 West 33rd Street New York, New York 10001 Attn: Corporate Trustee Administration Department EX-4.18 8 REGISTRATION RIGHTS AGREEMENT, DATED 12/16/98 1 Exhibit 4.18 ================================================================================ $600,000,000 7% CONVERTIBLE SUBORDINATED NOTES DUE 2008 REGISTRATION RIGHTS AGREEMENT Dated as of December 16, 1998 by and among NTL INCORPORATED and DONALDSON, LUFKIN & JENRETTE SECURITIES CORPORATION MORGAN STANLEY & CO. INCORPORATED GOLDMAN, SACHS & CO. BT ALEX. BROWN INCORPORATED CHASE SECURITIES INC. SALOMON SMITH BARNEY INC. WARBURG DILLON READ LLC ================================================================================ 2 This Registration Rights Agreement (this "Agreement") is made and entered into as of December 16, 1998 by and among NTL Incorporated, a Delaware corporation (the "Company"), and Donaldson, Lufkin & Jenrette Securities Corporation, Morgan Stanley & Co. Incorporated, Chase Securities, Inc., Goldman, Sachs & Co., BT Alex. Brown Incorporated, Salomon Smith Barney Inc, and Warburg, Dillon Read LLC (each an "Initial Purchaser" and collectively, the "Initial Purchasers"). The Company proposes to issue and sell to the Initial Purchasers (the "Initial Placement") $600,000,000 principal amount of its 7% Convertible Subordinated Notes due 2008 (the "Notes"). As an inducement to the Initial Purchasers to enter into the purchase agreement, dated as of December 10, 1998 (the "Purchase Agreement"), and in satisfaction of a condition to the Initial Purchasers' obligations thereunder, the Company agrees with the Initial Purchasers, (i) for the benefit of the Initial Purchasers and (ii) for the benefit of the holders from time to time of the Notes whose names appear in the register maintained by the Registrar in accordance with the provisions of the Indenture (as defined in Section 1 hereof) (including the Initial Purchasers), as follows: SECTION 1. DEFINITIONS Capitalized terms used herein without definition shall have their respective meanings set forth in the Purchase Agreement. As used in this Agreement, the following capitalized defined terms shall have the following meanings: "Act" means the Securities Act of 1933, as amended, and the rules and regulations of the Commission promulgated thereunder. "Affiliate" of any specified person means any other person which, directly or indirectly, is in control of, is controlled by, or is under common control with, such specified person. For purposes of this definition, control of a person means the power, direct or indirect, to direct or cause the direction of the management and policies of such person whether by contract or otherwise; and the terms "controlling" and "controlled" have meanings correlative to the foregoing. "Agreement" menas this Registration Rights Agreement. "Closing Date" has the meaning set forth in the Purchase Agreement. "Commission" means the Securities and Exchange Commission. "Common Stock" means the common stock of the Company, par value $0.01 per share, issuable upon the conversion of the Notes. "Company" means NTL Incorporated. "Exchange Act" means the Securities Exchange Act of 1934, as amended, and the rules and regulations of the Commission promulgated thereunder. "Holder" has the meaning set forth in Section 2 hereof. "Indenture" means the Indenture, dated as of December 16, 1998, between the Company and the Trustee, relating to the Notes, as the same may be amended from time to time in accordance with the terms thereof. "Initial Placement" has the meaning set forth in the preamble hereto. 3 "Initial Purchasers" means, collectively, Donaldson, Lufkin & Jenrette Securities Corporation, Morgan Stanley & Co. Incorporated, Chase Securities, Inc., Goldman, Sachs & Co., BT Alex. Brown Incorporated, Salomon Smith Barney Inc., and Warburg, Dillon Read LLC. "Losses" has the meaning set forth in Section 7(d) hereof. "Majority Holders" means the Holders of a majority of the aggregate principal amount of securities registered under a Shelf Registration Statement. "Notes" has the meaning set forth in the preamble hereto. "Prospectus" means the prospectus included in any Shelf Registration Statement (including, without limitation, a prospectus that discloses information previously omitted from a prospectus filed as part of an effective registration statement in reliance upon Rule 430A under the Act), as amended or supplemented by any prospectus supplement, with respect to the terms of the offering of any portion of Transfer Restricted Securities covered by such Shelf Registration Statement, and all amendments and supplements to the Prospectus, including post-effective amendments. "Shelf Registration" means a registration effected pursuant to Section 3 hereof. "Shelf Registration Period" has the meaning set forth in Section 3(b) hereof. "Shelf Registration Statement" means a "shelf" registration statement of the Company pursuant to the provisions of Section 3 hereof that covers some or all of the Transfer Restricted Securities as applicable, on an appropriate form under Rule 415 under the Act, or any similar rule that may be adopted by the Commission, amendments and supplements to such registration statement, including post-effective amendments, and in each case, including the Prospectus contained therein, all exhibits thereto and all material incorporated by reference therein. "Supplement Delay Period" means any period commencing on the date of receipt by a Holder of Transfer Restricted Securities of any notice from the Company of the existence of any fact or event of the kind described in Section 4(b)(2) hereof and ending on the date of receipt by such Holder of an amended or supplemented Shelf Registration Statement or Prospectus, as contemplated by Section 4(h) hereof, or the receipt by such Holder of written notice from the Company (the "Advice") that the use of the Prospectus may be resumed, and the receipt of copies of any additional or supplemental filings that are incorporated by reference in the Prospectus. "Transfer Restricted Securities" means each Note and the Common Stock issuable upon conversion thereof until (i) the date on which such Note or the Common Stock issuable upon conversion thereof has been effectively registered under the Act and disposed of in accordance with the Shelf Registration Statement, (ii) the date on which such Note or Common Stock issuable upon conversion thereof is distributed to the public pursuant to Rule 144 under the Act (or any similar provision then in effect) or is saleable pursuant to Rule 144(k) under the Act or (iii) the date on which such Note is converted into Common Stock in accordance with the terms and provisions of the Indenture or otherwise ceases to be outstanding. "Trustee" means the trustee with respect to the Notes under the Indenture. "underwriter" means any underwriter of Notes in connection with an offering thereof under a Shelf Registration Statement. 3 4 SECTION 2. HOLDERS A person is deemed to be a holder of Transfer Restricted Securities (each, a "Holder") whenever such person becomes the registered holder of such Notes under the Indenture and includes broker-dealers that hold Transfer Restricted Securities (i) as a result of market making activities and other trading activities and (ii) which were acquired directly from the Company or an Affiliate. SECTION 3. SHELF REGISTRATION The Company shall within 90 days of the date of original issuance of the Notes, file with the Commission and thereafter shall use its best efforts to cause to be declared effective under the Act on or prior to 180 days (plus any additional days allowed as a result of a Supplemental Delay Period) after the date of original issuance of the Notes, a Shelf Registration Statement relating to the offer and sale of the Transfer Restricted Securities by the Holders from time to time in accordance with the methods of distribution elected by such Holders and set forth in such Shelf Registration Statement. The Company shall use its best efforts to keep the Shelf Registration Statement continuously effective in order to permit the Prospectus forming part thereof to be usable by Holders for a period of two years from the date the Shelf Registration statement is declared effective by the Commission or such shorter period that will terminate when (i) all the Transfer Restricted Securities covered by the Shelf Registration Statement have been sold pursuant to the Shelf Registration Statement, (ii) the date on which, in the opinion of counsel to the Company, all of the Transfer Restricted Securities then held by the Holders may be sold by such Holders in the public United States securities markets in the absence of a registration statement covering such sales or (iii) the date on which there ceases to be outstanding any Transfer Restricted Securities (in any such case, such period being called the "Shelf Registration Period"). The Company shall be deemed not to have used its best efforts to keep the Shelf Registration Statement effective during the requisite period if it voluntarily takes any action that would result in Holders of Transfer Restricted Securities covered thereby not being able to offer and sell such securities during that period, unless (i) such action is required by applicable law, (ii) such action is taken by the Company in good faith and for valid business reasons (not including avoidance of the Company's obligations hereunder), including the acquisition or divestiture of assets, so long as the Company promptly thereafter complies with the requirements of Section 4(h) hereof, if applicable or (iii) such action is taken because of any fact or circumstance giving rise to a Supplement Delay Period. SECTION 4. REGISTRATION PROCEDURES In connection with any Shelf Registration Statement, the following provisions shall apply: (a) The Company shall ensure that (i) any Shelf Registration Statement and any amendment thereto and any Prospectus forming part thereof and any amendment or supplement thereto complies in all material respects with the Act and the rules and regulations thereunder, (ii) any Shelf Registration Statement and any amendment thereto does not, when it becomes effective, contain an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading and (iii) any Prospectus forming part of any Shelf Registration Statement, and any amendment or supplement to such Prospectus, does not include an untrue statement of a material fact or omit to state a material fact necessary in order to make the statements, in the light of the circumstances under which they were made, not misleading. (b) (1) The Company shall advise the Initial Purchasers and the Holders of Transfer Restricted 4 5 Securities named in any Shelf Registration Statement, and, if requested by the Initial Purchasers or any such Holder, confirm such advice in writing when a Shelf Registration Statement and any amendment thereto has been filed with the Commission and when the Shelf Registration Statement or any post-effective amendment thereto has become effective. (2) The Company shall advise the Initial Purchasers and the Holders of Transfer Restricted Securities named in any Shelf Registration Statement, which have provided in writing to the Company a telephone or facsimile number and address for notices, and, if requested by the Initial Purchasers or any such Holder, confirm such advice in writing: (i) of any request by the Commission for amendments or supplements to the Shelf Registration Statement or the Prospectus included therein or for additional information; (ii) of the initiation by the Commission of proceedings relating to a stop order suspending the effectiveness of the Shelf Registration Statement; (iii) of the issuance by the Commission of any stop order suspending the effectiveness of the Shelf Registration Statement; (iv) of the receipt by the Company of any notification with respect to the suspension of the qualification of the securities included therein for sale in any jurisdiction or the initiation or threatening of any proceeding for such purpose; and (v) of the existence of any fact and the happening of any event (including, without limitation, pending negotiations relating to, or the consummation of, a transaction or the occurrence of any event which would require additional disclosure of material non-public information by the Company in the Shelf Registration Statement as to which the Company has a bona fide business purpose for preserving confidential or which renders the Company unable to comply with Commission requirements) that, in the opinion of the Company, makes untrue any statement of a material fact made in its Shelf Registration Statement, the Prospectus or any amendment or supplement thereto or any document incorporated by reference therein or requires the making of any changes in the Shelf Registration Statement or the Prospectus so that, as of such date, the statements therein are not misleading and do not omit to state a material fact required to be stated therein or necessary to make the statements therein (in the case of the Prospectus, in light of the circumstances under which they were made) not misleading. Such advice may be accompanied by an instruction to suspend the use of the Prospectus until the requisite changes have been made. (c) The Company shall use its best efforts to obtain the withdrawal of any order suspending the effectiveness of any Shelf Registration Statement at the earliest possible time. (d) The Company shall use its best efforts to furnish to each selling Holder named in any Shelf Registration Statement who so requests in writing and who has provided to the Company an address for notices, without charge, at least one conformed copy of such Shelf Registration Statement and any post-effective amendment thereto, including financial statements and, if the Holder so requests in writing, all exhibits and schedules (including those incorporated by reference). (e) The Company shall, during the Shelf Registration Period, deliver to each Holder of Transfer Restricted Securities named in any Shelf Registration Statement and who has provided to the Company 5 6 an address for notices, without charge, as many copies of the Prospectus (including each preliminary Prospectus) contained in such Shelf Registration Statement and any amendment or supplement thereto as such Holder may reasonably request; subject to any notice by the Company in accordance with Section 5(b) hereof, the Company consents to the use of the Prospectus or any amendment or supplement thereto by each of the selling Holders for the purposes of offering and resale of the Transfer Restricted Securities covered by the Prospectus in accordance with the applicable regulations promulgated under the Act. (f) Prior to any offering of Transfer Restricted Securities pursuant to any Shelf Registration Statement, the Company shall register or qualify or cooperate with the Holders of Transfer Restricted Securities named therein and their respective counsel in connection with the registration or qualification of such Transfer Restricted Securities for offer and sale under the securities or blue sky laws of such jurisdictions of the United States as any such Holders reasonably request in writing not later than the date that is five business days prior to the date upon which this Agreement specifies that the Shelf Registration Statement shall become effective; provided, however, that the Company will not be required to qualify generally to do business in any jurisdiction where it is not then so qualified or to take any action which would subject it to general service of process or to taxation in any such jurisdiction where it is not then so subject. (g) The Company shall endeavor to cooperate with the Holders of Transfer Restricted Securities to facilitate the timely preparation and delivery of certificates representing Transfer Restricted Securities to be sold pursuant to any Shelf Registration Statement free of any restrictive legends and in such denominations and registered in such names as Holders may request in writing at least two business days prior to sales of securities pursuant to such Shelf Registration Statement. (h) Upon the occurrence of any event contemplated by paragraph (b)(2)(v) hereof, the Company shall promptly prepare a post-effective amendment to any Shelf Registration Statement or an amendment or supplement to the related Prospectus or file any other required document so that as thereafter delivered to purchasers of the Transfer Restricted Securities covered thereby, the Prospectus will not include an untrue statement of a material fact or omit to state any material fact necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading; provided that in the event of a material business transaction (including, without limitation, pending negotiations relating to such a transaction) which would, in the opinion of counsel to the Company, require disclosure by the Company in the Shelf Registration Statement of material non-public information for which the Company has a bona fide business purpose for not disclosing, then for so long as such circumstances exist, the Company shall not be required to prepare and file a supplement or post-effective amendment hereunder. (i) Not later than the effective date of any such Shelf Registration Statement hereunder, the Company shall cause to be provided a CUSIP number for the Notes registered under such Shelf Registration Statement, and provide the applicable trustee with printed certificates for such Notes in a form eligible for deposit with The Depository Trust Company. (j) The Company shall use its best efforts to comply with all applicable rules and regulations of the Commission and shall make generally available to its security holders in a regular filing on Form 10-Q or 10-K an earnings statement satisfying the provisions of Rule 158 (which need not be audited) for the twelve-month period commencing after effectiveness of the Shelf Registration Statement. (k) The Company shall cause the Indenture to be qualified under the Trust Indenture Act in a timely manner. 6 7 (l) The Company may require each Holder of Transfer Restricted Securities, which are to be sold pursuant to any Shelf Registration Statement, to furnish to the Company within 20 business days after written request for such information has been made by the Company, such information regarding the Holder and the distribution of such securities as the Company may from time to time reasonably require for inclusion in such Shelf Registration Statement and such other information as may be necessary or advisable in the reasonable opinion of the Company and its counsel, in connection with such Shelf Registration Statement. No Holder of Transfer Restricted Securities shall be entitled to the benefit of any Liquidated Damages (as defined in the Indenture) under the Indenture or be entitled to use the Prospectus unless and until such Holder shall have furnished the information required by this Section 4(l) and all such information required to be disclosed in order to make the information previously furnished to the Company by such Holder not materially misleading. (m) The Company shall, if requested, promptly incorporate in a Prospectus supplement or post-effective amendment to a Shelf Registration Statement, such information as the Majority Holders reasonably agree should be included therein and shall make all required filings of such Prospectus supplement or post-effective amendment as soon as notified of the matters to be incorporated in such Prospectus supplement or post-effective amendment; provided, however, that the Company shall not be required to take any action pursuant to this Section 4(m) that would, in the opinion of counsel for the Company, violate applicable law or to include information the disclosure of which at the time would have an adverse effect on the business or operations of the Company and/or its subsidiaries, as determined in good faith by the Company. (n) The Company shall enter into such agreements and take all other reasonably appropriate actions in order to expedite or facilitate the registration or the disposition of the Transfer Restricted Securities, and in connection therewith, if an underwriting agreement is entered into, cause the same to contain indemnification provisions and procedures no less favorable than those set forth in Section 7 (or such other provisions and procedures acceptable to the Majority Holders), with respect to all parties to be indemnified pursuant to Section 7 from Holders of Notes to the Company. (o) The Company shall upon receipt of a reasonable request in writing therefor: (i) make reasonably available at reasonable times prior to the effectiveness of the related Shelf Registration Statement for inspection by representatives of the Holders of Transfer Restricted Securities to be registered thereunder and any attorney, accountant or other agent retained by the Holders, at the office where normally kept during normal business hours, all financial and other records, pertinent corporate documents and properties of the Company and its subsidiaries, and cause the Company's officers, directors and employees to supply all relevant information reasonably requested by the Holders attorney, accountant or other agent in connection with any such Shelf Registration Statement as is customary for similar due diligence examinations; provided, however, that the foregoing inspection and information gathering shall be coordinated by one counsel designated by the Holders and that such persons shall first agree in writing with the Company that any information that is designated in writing by the Company, in good faith, as confidential at the time of delivery of such information shall be kept confidential by such person, unless such disclosure is made in connection with a court proceeding or required by law, or such information becomes available to the public generally or through a third party without an accompanying obligation of confidentiality; (ii) obtain opinions of counsel to the Company and updates thereof (which counsel and opinions (in form, scope and substance) shall be reasonably satisfactory to the Majority Holders), 7 8 addressed to each selling Holder covering such matters (in form, scope and substance) as those matters set forth in Section 6(a), (b) and (c) of the Purchase Agreement; (iii) obtain "cold comfort" letters (or, in the case of any person that does not satisfy the conditions for receipt of a "cold comfort" letter specified in Statement on Auditing Standards No. 72, an "agreed-upon procedures letter") and updates thereof from the independent certified public accountants of the Company (and, if necessary, any other independent certified public accountants of any subsidiary of the Company or of any business acquired by the Company for which financial statements and financial data are, or are required to be, included in the Shelf Registration Statement), addressed where reasonably practicable to each selling Holder of Transfer Restricted Securities registered thereunder and the underwriters, if any, in customary form and covering matters of the type customarily covered in "cold comfort" letters in connection with primary underwritten offerings; and (iv) deliver such documents and certificates as may be reasonably requested by the Majority Holders, including those to evidence compliance with Section 4(h). The foregoing actions set forth in clauses (ii), (iii), (iv) and (v) of this Section 4(o) shall, if reasonably requested by the Majority Holder, be performed at (A) the effectiveness of such Shelf Registration Statement and each post-effective amendment thereto. (v) The Company may offer securities of the Company other than the Notes under the Shelf Registration Statement, except where such offer would conflict with the terms of the Purchase Agreement. SECTION 5. HOLDERS' AGREEMENTS Each Holder of Transfer Restricted Securities , by the acquisition of such Transfer Restricted Securities, agrees: (a) To furnish the information required to be furnished pursuant to Section 4(l) hereof within the time period set forth therein. (b) That upon receipt of a notice of the commencement of a Supplement Delay Period, it will keep the fact of such notice confidential, forthwith discontinue disposition of its Transfer Restricted Securities pursuant to the Shelf Registration Statement, and will not deliver any Prospectus forming a part thereof until receipt of the amended or supplemented Shelf Registration Statement or Prospectus, as applicable, as contemplated by Section 4(h) hereof, or until receipt of the Advice. If a Supplement Delay Period should occur, the Shelf Registration Period shall be extended by the number of days of which the Supplement Delay Period is comprised; provided that the Shelf Registration Period shall not be extended if the Company has received an opinion of counsel (which counsel, if different from counsel to the Company referred to in Section 6(b) of the Purchase Agreement, shall be reasonably satisfactory to the Majority Holders of the Transfer Restricted Securities named in the Shelf Registration Period) to the effect that the Transfer Restricted Securities can be freely tradeable without the continued effectiveness of the Shelf Registration Statement. (c) If so directed by the Company in a notice of the commencement of a Supplement Delay Period, each Holder of Transfer Restricted Securities will deliver to the Company (at the Company's expense) all copies, other than permanent file copies then in such Holder's possession, of the Prospectus covering the 8 9 Transfer Restricted Securities. (d) Sales of such Transfer Restricted Securities pursuant to a Shelf Registration Statement shall only be made in the manner set forth in such currently effective Shelf Registration Statement. SECTION 6. REGISTRATION EXPENSES The Company shall bear all expenses incurred in connection with the performance of its obligations under Sections 3 and 4 hereof and will reimburse the Holders for the reasonable fees and disbursements of one firm or counsel designated by the Majority Holders to act as counsel for the Holders in connection with any Shelf Registration Statement. Notwithstanding the foregoing or anything in this Agreement to the contrary, each Holder shall pay all underwriting discounts and commission of any underwriters with respect to any Transfer Restricted Securities sold by it. SECTION 7. INDEMNIFICATION AND CONTRIBUTION (a) In connection with Shelf Registration Statement, the Company agrees to indemnify and hold harmless each Holder of Transfer Restricted Securities covered thereby (including each Initial Purchaser), the directors, officers, employees, partners, representatives and agents of each such Holder and each person who controls any such Holder within the meaning of either Section 15 of the Act or Section 20 of the Exchange Act against any and all losses, claims, damages or liabilities, joint or several, to which they or any of them may become subject under the Act, the Exchange Act or other Federal or state statutory law or regulation, at common law or otherwise, insofar as such losses, claims, damages or liabilities (or actions in respect thereof) arise out of, or are based upon, any untrue statement or alleged untrue statement of a material fact contained in the Shelf Registration Statement as originally filed or in any amendment thereof, or in any preliminary Prospectus or Prospectus, or in any amendment thereof or supplement thereto, or arise out of, or are based upon, the omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, and to reimburse each such indemnified party, as incurred, for any legal or other expenses reasonably incurred by them in connection with investigating or defending any such loss, claim, damage, liability or action; provided, however, that (i) the Company will not be liable in any case to the extent that any such loss, claim, damage or liability arises out of, or is based upon, any such untrue statement or alleged untrue statement or omission or alleged omission made therein in reliance upon and in conformity with written information furnished to the Company by or on behalf of any such Holder specifically for inclusion therein and (ii) the Company will not be liable to any indemnified party under this indemnity agreement with respect to the Shelf Registration Statement or Prospectus to the extent that any such loss, claim, damage or liability of such indemnified party results solely from an untrue statement of a material fact contained in, or the omission of a material fact from, the Shelf Registration Statement or Prospectus, which untrue statement or omission was corrected in an amended or supplemented Shelf Registration Statement or Prospectus, if the person alleging such loss, claim, damage or liability was not sent or given, at or prior to the written confirmation of such sale, a copy of the amended or supplemented Shelf Registration Statement or Prospectus if the Company had previously furnished copies thereof to such indemnified party and if delivery of a prospectus is required by the Act and was not so made. This indemnity agreement will be in addition to any liability which the Company may otherwise have. (b) Each Holder of Transfer Restricted Securities covered by a Shelf Registration Statement (including each Initial Purchaser) severally agrees to indemnify and hold harmless (i) the Company, (ii) each of its directors, (iii) each of its officers who signs such Shelf Registration Statement and (iv) each person who controls the Company within the meaning of either the Act or the Exchange Act to the same 9 10 extent as the foregoing indemnity from the Company to each such Holder, but only with reference to written information relating to such Holder furnished to the Company by or on behalf of such Holder specifically for inclusion in the documents referred to in the foregoing indemnity. This indemnity agreement will be in addition to any liability which any such Holder may otherwise have. In no event shall any Holder, its directors, officers or any person who controls such Holder be liable or responsible for any amount in excess of the amount by which the total amount received by such Holder with respect to its sale of Transfer Restricted Securities pursuant to a Shelf Registration Statement exceeds (i) the amount paid by such Holder for such Transfer Restricted Securities and (ii) the amount of any damages that such Holder, its directors, officers or any person who controls such Holder has otherwise been required to pay by reason of such untrue or alleged untrue statement or omission or alleged omission. (c) Promptly after receipt by an indemnified party under this Section 7 or notice of the commencement of any action, the indemnified party will, if a claim in respect thereof is to be made against the indemnifying party under this Section 7, notify the indemnifying party in writing of the commencement thereof; but the failure to so notify the indemnifying party (i) will not relieve it from liability under paragraph (a) or (b) above unless and to the extent it did not otherwise learn of such action and such failure results in the forfeiture by the indemnifying party of substantial rights and defenses and (ii) will not, in any event, relieve the indemnifying party from any obligations to any indemnified party other than the indemnification obligation provided in paragraph (a) or (b) above. The indemnifying party shall be entitled to appoint counsel of the indemnifying party's choice at the indemnifying party's expense to represent the indemnified party in any action for which indemnification is sought (in which case the indemnifying party shall not thereafter be responsible for the fees and expenses of any separate counsel retained by the indemnified party or parties except as set forth below); provided, however, that such counsel shall be reasonably satisfactory to the indemnified party. Notwithstanding the indemnifying party's election to appoint counsel to represent the indemnified party in an action, the indemnified party shall have the right to employ separate counsel (including local counsel), and the indemnifying party shall bear the reasonable fees, costs and expenses of such separate counsel (and local counsel) if (i) the use of counsel chosen by the indemnifying party to represent the indemnified party would present such counsel with a conflict of interest, (ii) the actual or potential defendants in, or targets of, any such action include both the indemnified party and the indemnifying party, and the indemnified party reasonably concluded that there may be legal defenses available to it and/or other indemnified parties that are different from or additional to those available to the indemnifying party, (iii) the indemnifying party did not employ counsel satisfactory to the indemnified party to represent the indemnified party within a reasonable time after notice of the institution of such action or (iv) the indemnifying party authorized the indemnified party to employ separate counsel at the expense of the indemnifying party. An indemnifying party shall not, without the prior written consent of the indemnified parties, settle or compromise or consent to the entry of any judgment with respect to any pending or threatened claim, action, suit or proceeding for which indemnification or contribution may be sought hereunder (whether or not the indemnified parties are actual or potential parties to such claim or action), unless such settlement, compromise or consent includes an unconditional release of each indemnified party from all liability arising out of such claim, action, suit or proceeding and does not include a statement as to or an admission of fault, culpability or a failure to act, by or on behalf of the indemnified party. (d) In the event that the indemnity provided in paragraph (a) or (b) of this Section 7 is unavailable or insufficient to hold harmless an indemnified party for any reason, then each applicable indemnifying party, in lieu of indemnifying such indemnified party, shall have a joint and several obligation to contribute to the aggregate losses, claims, damages and liabilities (including legal or other expenses reasonably incurred in connection with investigating or defending same) (collectively "Losses") to which such indemnified party may be subject in such proportion as is appropriate to reflect the relative benefits 10 11 received by such indemnifying party, on the one hand, and such indemnified party, on the other hand, from the Initial Placement and the Shelf Registration Statement that resulted in such Losses; provided, however, that in no case shall any Initial Purchaser or any subsequent Holder of any Note be responsible, in the aggregate, for any amount in excess of the purchase discount or commission applicable to such Note, as set forth on the cover page of the Final Offering Memorandum. If the allocation provided by the immediately preceding sentence is unavailable for any reason, the indemnifying party and the indemnified party shall contribute in such proportion as is appropriate to reflect not only such relative benefits, but also the relative fault of such indemnifying party, on the one hand, and such indemnified party, on the other hand, in connection with the statements or omissions which resulted in such Losses, as well as any other relevant equitable considerations. Benefits received by the Company shall be deemed to be equal to the sum of (x) the total net proceeds from the Initial Placement (in each case, before deducting expenses) as set forth on the cover page of the Final Offering Memorandum and (y) the total amount of additional interest that the Company was not required to pay as a result of registering the securities covered by the Shelf Registration Statement that resulted in such Losses. Benefits received by the Initial Purchasers shall be deemed to be equal to the total purchase discounts and commissions as set forth on the cover page of the Final Offering Memorandum, and benefits received by any other Holders shall be deemed to be equal to the value of receiving Notes registered under the Act. Relative fault shall be determined by reference to whether any alleged untrue statement or omission relates to information provided by the indemnifying party, on the one hand, or by the indemnified party, on the other hand. The parties agree that it would not be just and equitable if contribution were determined by pro rata allocation or any other method of allocation that does not take account of the equitable considerations referred to above. Notwithstanding the provisions of this paragraph (d), no person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Act) shall be entitled to contribution from any person who was guilty of such fraudulent misrepresentation. For purposes of this Section 7, each person who controls a Holder within the meaning of either the Act or the Exchange Act and each director, officer, employee and agent of such Holder shall have the same rights to contribution as such Holder, and each person who controls the Company within the meaning of either the Act or the Exchange Act, each officer of the Company who shall have signed the Shelf Registration Statement and each director of the Company shall have the same rights to contribution as the Company, subject in each case to the applicable terms and conditions of this paragraph (d). (e) The provisions of this Section 7 shall remain in full force and effect, regardless of any investigation made by or on behalf of any Holder or the Company or any of the officers, directors or controlling persons referred to in Section 7 hereof, and will survive the sale by a Holder of Transfer Restricted Securities or Exchange Notes. SECTION 8. RULE 144A and RULE 144 The Company agrees with each Holder, for so long as any Transfer Restricted Securities remain outstanding and during any period in which the Company (i) is not subject to Section 13 or 15(d) of the Exchange Act, to make available, upon request of any Holder, to such Holder or beneficial owner of Transfer Restricted Securities in connection with any sale thereof and any prospective purchaser of such Transfer Restricted Securities designated by such Holder or beneficial owner, the information required by Rule 144A(d)(4) under the Act in order to permit resales of such Transfer Restricted Securities pursuant to Rule 144A, and (ii) is subject to Section 13 or 15 (d) of the Exchange Act, to make all filings required thereby in a timely manner in order to permit resales of such Transfer Restricted Securities pursuant to Rule 144. SECTION 9. MISCELLANEOUS 11 12 (a) No Inconsistent Agreements. The Company has not, as of the date hereof, entered into, nor shall it, on or after the date hereof, enter into, any agreement with respect to its securities that is inconsistent with the rights granted to the Holders herein or otherwise conflicts with the provisions hereof. (b) Amendments and Waivers. The provisions of this Agreement, including the provisions of this sentence, may not be amended, qualified, modified or supplemented, and waivers or consents to departures from the provisions hereof may not be given, unless the Company has obtained the written consent of the Holders of at least a majority of the then outstanding aggregate principal amount of Notes; provided, however, that with respect to any matter that directly or indirectly affects the rights of any Initial Purchaser hereunder, the Company shall obtain the written consent of each such Initial Purchaser against which such amendment, qualification, supplement, waiver or consent is to be effective. Notwithstanding the foregoing (except the foregoing proviso), a waiver or consent to depart from the provisions hereof, with respect to a matter, which relates exclusively to the rights of Holders whose securities are being sold pursuant to a Shelf Registration Statement and does not directly or indirectly affect the rights of other Holders, may be given by the Majority Holders, determined on the basis of Notes being sold rather than registered under such Shelf Registration Statement. (c) Notices. All notices and other communications provided for or permitted hereunder shall be made in writing by hand-delivery, first-class mail, telex, telecopier, or air courier guaranteeing overnight delivery: (i) if to a Holder, at the most current address given by such holder to the Company in accordance with the provisions of this Section 9(c), which address initially is, with respect to each Holder, the address of such Holder maintained by the registrar under the Indenture or the Exchange Note Indenture, as the case may be, with a copy in like manner to Morgan Stanley & Co. Incorporated; (ii) if to the Initial Purchasers, initially at the respective addresses set forth in the Purchase Agreement; and (iii) if to the Company, initially at its address set forth in the Purchase Agreement. All such notices and communications shall be deemed to have been duly given when received. The Initial Purchasers or the Company by notice to the other may designate additional or different addresses for subsequent notices or communications. (d) Successors and Assigns. This Agreement shall inure to the benefit of, and be binding upon, the successors and assigns of each of the parties hereto, including, without the need for an express assignment or any consent by the Company thereto, subsequent Holders of Notes. The Company hereby agrees to extend the benefits of this Agreement to any Holder of Notes and any such Holder may specifically enforce the provisions of this Agreement as if an original party hereto. (e) Counterparts. This agreement may be executed in any number of counterparts and by the parties hereto in separate counterparts, each of which when so executed shall be deemed to be an original, and all of which taken together shall constitute one and the same agreement. (f) Headings. The headings in this agreement are for convenience of reference only and shall not limit or otherwise affect the meaning hereof. 12 13 (g) Governing Law. This agreement shall be governed by and construed in accordance with the internal laws of the State of New York applicable to agreements made and to be performed in said State (without reference to the conflict of law rules thereof). (h) Severability. In the event that any one or more of the provisions contained herein, or the application thereof in any circumstances, is held invalid, illegal or unenforceable in any respect for any reason, the validity, legality and enforceability of any such provision in every other respect and the remaining provisions hereof shall not be in any way impaired or affected thereby, it being intended that all of the rights and privileges of the parties shall be enforceable to the fullest extent permitted by law. (i) Notes Held by the Company, etc. Whenever the consent or approval of Holders of a specified percentage of principal amount of Notes is required hereunder, Notes held by the Company or its Affiliates (other than subsequent Holders of Notes if such subsequent Holders are deemed to be Affiliates solely by reason of their holdings of such Notes) shall not be counted in determining whether such consent or approval was given by the Holders of such required percentage. (j) Entire Agreement. This Agreement is intended by the parties as a final expression of their agreement and intended to be a complete and exclusive statement of the agreement and understanding of the parties hereto with respect to the subject matter contained herein. There are no restrictions, promises, warranties or undertakings, other than those set forth or referred to herein with respect to the registration rights granted with respect to the Transfer Restricted Securities. This Agreement supersedes all prior agreements and understandings between the parties with respect to such subject matter. 13 14 IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first written above. NTL INCORPORATED By: /s/ Richard J. Lubasch ----------------------------------- Name: Richard J. Lubasch Title: Senior Vice President, General Counsel and Secretary Donaldson, Lufkin & Jenrette Securities Corporation Morgan Stanley & Co. Incorporated Chase Securities Inc. Goldman, Sachs & Co. BT Alex. Brown Incorporated Salomon Smith Barney Inc Walburg Dillon Read LLC By: Donaldson, Lufkin & Jenrette Securities Corporation By: /s/ Michael J. Connelly --------------------------- Name: Michael J. Connelly Title: 14 EX-10.2 9 RULES OF THE NTL SHARESAVE PLAN 1 Exhibit 10.2 NTL INCORPORATED - -------------------------------------------------------------------------------- RULES OF THE NTL SHARESAVE PLAN - -------------------------------------------------------------------------------- Adopted by the Company on 28 October 1997 and approved by the Inland Revenue under Schedule 9 ICTA 1988 on 16 January 1998 under reference SRS 2073, with further amendments adopted by the Company on 3 February 1998 and approved by the Inland Revenue on 10 February 1998. ERNST & YOUNG 7 Rolls House Rolls Building Fetter Lane LONDON, EC4A 1NH Tel: 071-928-2000 Final Approved Version/10.02.98/SXP.Client.NTL.Rules4 2 NTL SHARESAVE PLAN INDEX Clause Number ------------- DEFINITIONS AND INTERPRETATION 1 Definitions 1.1 Interpretation 1.2 Statutory Provisions 1.3 Clause Headings 1.4 Title 1.5 INVITATIONS TO APPLY FOR OPTIONS 2 Inland Revenue Approval 2.1 Invitations 2.2 Form of Invitation 2.3 Applications for Options 2.4 SCALING DOWN 3 Excess Procedure 3.1 Modification 3.2 GRANT OF OPTIONS 4 Grant 4.1 Grant Date 4.2 Acquisition Price 4.3 OPTION CERTIFICATES 5 Issue 5.1 Content 5.2 RIGHTS TO EXERCISE OPTIONS 6 Exercise Dates 6.1 Specified Age 6.2 Termination of Employment 6.3 Material Interest 6.4 Maximum Exercise 6.5 Lapse of Rights 6.6 EXERCISE OF OPTION 7 Notice 7.1 Allotment 7.2 Share Certificates 7.3 Ranking of Shares 7.4 Partial Exercise 7.5 3 NTL SHARESAVE PLAN INDEX Clause Number ------------- TAKEOVERS AND LIQUIDATIONS 8 General Offers 8.1 Scheme of Reconstruction 8.2 Compulsory Purchase 8.3 Voluntary Winding Up 8.4 Meaning of Control 8.5 Manner of Exercise 8.6 Rights to Exercise 8.7 EXCHANGE OF OPTIONS ON A TAKEOVER 9 Replacement of Options 9.1 Option Certificate 9.2 No Immediate Exercise 9.3 VARIATION OF CAPITAL 10 Adjustment 10.1 Auditors' Confirmation 10.2 Inland Revenue Approval 10.3 Notice of Adjustment 10.4 ADMINISTRATION AND ALTERATION 11 Discretion of the Board 11.1 Board Decisions 11.2 Amendments 11.3 Inland Revenue Consent 11.4 Rights of Option holders 11.5 Notice of Alteration 11.6 Circulars 11.7 Cost 11.8 GENERAL 12 Availability of Shares 12.1 Employment Rights 12.2 Non-Admission 12.3 Consequence of Lapse 12.4 Transfer, Assignment or Charge 12.5 Termination 12.6 Status of Auditors 12.7 Notices 12.8 Law 12.9 4 NTL Incorporated NTL SHARESAVE PLAN Plan Rules approved under Section 185 and Schedule 9 Income and Corporation Taxes Act 1988 1. DEFINITIONS AND INTERPRETATION 1.1 Definitions: In these Rules:- "Acquisition Price" means the price at which each Share subject to an Option may be acquired on the exercise of that Option determined pursuant to sub-clause 4.3; "Approved Scheme" means a scheme established by the Company or by any Associated Company and approved by the Board of Inland Revenue under Paragraph 1 of Schedule 9; "Associated Company" bears the meaning ascribed to it in Paragraph 23 Schedule 9 by virtue of Section 187 (2) of the Taxes Act; "the Auditors" means the auditors of the Company for the time being; "the Board" means the board of directors of the Company as from time to time constituted or one or more persons duly appointed by such board of directors and having such powers as the board may from time to time decide; "Bonus Date" means either (a) where pursuant to Clauses 2 and 3 the repayment under the Savings Contract is taken as including the Maximum Bonus, the earliest date on which the Maximum Bonus is payable; or (b) under a three year Savings Contract, the earliest date on which the Minimum Bonus is payable under the Savings Contract; or 5 (c) under a five year Savings Contract, the earliest date on which the Standard Bonus is payable under the Savings Contract; "the Commencement Date" means the date on which the Company receives notice that the Plan has been approved by the Board of Inland Revenue under Paragraph 1 of Schedule 9 Provided That the Plan has been approved by the Company in general meeting; "the Company" means NTL Incorporated of 110 East 59th Street, New York, NY 10022, USA; "Control" bears the meaning ascribed to that term by Section 840 of the Taxes Act; "Dealing Day" means any weekday (excluding Saturday) which is not a statutory, public or bank holiday in either the United Kingdom or the United States of America; "Grant Date" means in relation to an Option the date on which the Option was or is to be granted; "Grantor" means the grantor of any Option pursuant to Clause 4; "Invitee" means a person to whom the Board has issued an invitation which is subsisting to apply for the grant of an Option; "Market Value" means the market value of such Share determined in accordance with the provisions of Part VIII of the Taxation of Chargeable Gains Act 1992 and agreed for the purposes of the Plan with the Inland Revenue Shares Valuation Division on or before the day the invitation to apply for the Option to acquire such Share was issued pursuant to Clause 2; 6 "Materially Interested Person" means an employee or director of any one or more of the Participating Companies who at any relevant time has, or within the relevant preceding twelve (12) months has had, a material interest (as defined in Section 187(3) of the Taxes Act) in the Company or in a company which has Control of the Company or which is a member of a consortium which owns the Company, if the Company or any such company is at any relevant time a close company for the purposes of Paragraph 8 of Schedule 9; "Maximum Bonus" means the bonus payable under a seven (7) year Savings Contract; "Maximum Contribution" means Two hundred and Fifty Pounds ((pound)250) per month or (subject to sub-clause 12.3) such other amount as is, for the time being, the maximum Monthly Contribution permitted pursuant to Paragraph 24 of Schedule 9; "Minimum Bonus" means the bonus payable under a three (3) year Savings Contract; "Monthly Contribution" means the monthly contribution to be paid by an Option Holder under his Savings Contract; "Option" means an option to acquire Shares by purchase or subscription granted (whether by the Company or a third party) pursuant to the Rules; "Option Certificate" means a certificate recording the terms of grant of an Option in accordance with the Rules; "Option Holder" means any person who holds an Option or (where the context admits) his legal personal representative(s); "Option to Subscribe" means an Option which confers a right to subscribe for new Shares pursuant to this Plan; 7 "Participating Company" means NTL (UK) Group, Incorporated and any UK resident company of which NTL (UK) Group, Incorporated has Control, but excluding any company which is for the time being specified by the Board as not being a Participating Company; "Qualifying Employee" means any person who is not a Materially Interested Person and who:- (a) is an employee or full-time director of any Participating Company (and for the purposes of this definition a director will be regarded as "full-time" if his terms of employment require him to devote to the duties of his office not less than twenty five (25) hours per week (excluding meal breaks); and (b) on the the date of issue of the relevant invitations pursuant to Clause 2 had been such an employee or director for at least six (6) months or such other period specified from time to time by the Board (which shall not exceed a period of five years ending on the date of grant of the Option; and (c) is chargeable to tax in respect of his office or employment under Case I of Schedule E and any other employee or full-time director of any Participating Company nominated by the Board to be a Qualifying Employee; "the Rules" means these rules as from time to time amended; "Savings Contract" means a contract under a certified contractual savings scheme, within the meaning of Section 326 of the Taxes Act and which has been approved by the Commissioners of Inland Revenue for the purposes of Schedule 9; "Schedule 9" means Schedule 9 to the Taxes Act; 8 "the Plan" means this Plan as from time to time constituted by the Rules; "Share" means fully paid irredeemable Common Stock of $0.01 per share in the capital of the Company which complies with Paragraphs 10 to 14 of Schedule 9; "Specified Age" means sixty (60) years of age; "Standard Bonus" means the bonus payable under a five (5) year Savings Contract; "Subsidiary" means a subsidiary of the Company within the meaning of Section 736 of the Companies Act 1985; "Subsisting Option" mean an Option or Option and "Subsisting Option to Subscribe (as the to Subscribe" case may be) then capable of being exercised which has neither lapsed nor been exercised; "Taxes Act" means the Income and Corporation Taxes Act 1988. 1.2 Interpretation: Where the context so admits the singular includes the plural and each gender includes each other gender. 1.3 Statutory Provisions: Any reference to a statutory provision is to be construed as a reference to that provision as for the time being amended or re-enacted. 1.4 Clause headings shall be ignored in interpretation. 1.5 Title: The Plan shall be entitled and referred to as the "NTL Sharesave Plan". 2. INVITATIONS TO APPLY FOR OPTIONS 2.1. Inland Revenue Approval: No invitations to apply for Options under the Plan may be made until this Plan becomes an Approved Scheme. 2.2 Invitations: Subject to sub-clauses 2.1 and 4.3, on such dates as it may from time to time resolve the Board shall invite every Qualifying Employee to apply for the grant of Options Provided That before issuing invitations the Board may on any occasion place a limit on the number of Shares to be made available on that occasion such number to be published upon issue of the invitations. 2.3 Form of Invitation: Each invitation shall be in writing and shall:- 9 (a) state the date on which it is issued; (b) specify a date not earlier than fourteen (14) days after the date on which it was issued by which an application must be received and in default of which it will lapse; (c) invite the Invitee to apply for an Option; (d) specify the Acquisition Price at which each Share may be acquired on the exercise of an Option granted pursuant to the invitation; (e) specify the maximum Monthly Contribution the Invitee may propose to save which shall be in multiples of one pound ((pound)1) and shall not be greater than the lesser of the Maximum Contribution and such sum (being a multiple of one pound ((pound)1) and not less than five pounds ((pound)5) as the Board decides shall apply to every Qualifying Employee in respect of that invitation; (f) otherwise, be in such form as the Board may from time to time prescribe. 2.4 Applications for Options: 2.4.1 Time: Within the time allowed in the invitation as the last date for receipt of the application, each Invitee may apply for the grant of an Option 2.4.2 Form: Each invitation shall be accompanied by a proposal form for a Savings Contract and an application form which shall provide for the Invitee to state:- (a) his proposed Monthly Contribution (being a multiple of one pound ((pound)1) and not less than five pounds ((pound)5)); and (b) that his proposed Monthly Contribution when added to any monthly savings contributions then being made by him under any other Savings Contracts will not exceed the maximum specified in Paragraph 24 of Schedule 9; and (c) whether for the purpose of determining the number of Shares over which an Option is to be granted the repayment under the Savings Contract is to be taken as including the Maximum Bonus, the Standard Bonus, the Minimum Bonus or no bonus; and (d) that he authorises the Board to enter on the Savings Contract proposal form such Monthly Contribution not exceeding the maximum stated on the application form as shall be determined pursuant to Clause 3. 2.4.3 Shares: Each application shall be deemed to be for an Option over the largest whole number of Shares which can be bought at the US dollar Acquisition Price with the expected repayment under the related Savings Contract at the appropriate Bonus Date following the conversion of the repayment into US dollars. 10 2.4.4 Consideration: No amount shall be payable in respect of the grant of an Option. 3. SCALING DOWN 3.1 Excess Procedure: where the Board in its discretion considers that it is desirable to limit the number of Shares in respect of which Options are granted in relation to any invitation Options shall be granted to each Qualifying Employee in respect of that number of Shares which shall be determined by reducing the monthly savings contribution chosen by each applicant under the Savings Contract in such manner as the Board shall, in its discretion, determine (provided that all Qualifying Employees shall be treated on a similar basis without regard to differences among Qualifying Employees in respect of remuneration, length of service or any other factor); imposing a new maximum Monthly Contribution on all Qualifying Employees; or replacing the Maximum Bonus with the Standard Bonus or eliminating the Maximum Standard and/or the Minimum Bonus so as to reduce the aggregate number of Shares applied for to or as near to as shall be practicable without exceeding the said limitation. 3.2 Modification: Each application shall be deemed to have been modified or withdrawn in accordance with the application of sub-clause 3.1 and the Board shall complete each Savings Contract proposal form to reflect any resultant reduction in Monthly Contribution. 4. GRANT OF OPTIONS 4.1 Grant: The Board shall grant or procure the grant to each applicant who is still a Qualifying Employee and is not precluded from participating in this Plan by Paragraph 8 of Schedule 9 an Option over the number of Shares for which pursuant to sub-clause 2.4.3 and subject to Clause 3 he shall be deemed to have applied. 4.2 Grant Date: Any Option to be granted shall be granted as soon as the Board deems practicable following the date stated on the relevant invitation as being the date of its expiry Provided That the Grant Date shall not in any circumstances be more than thirty (30) days after the date on which the Market Value of the Shares to be subject to the Option was determined. 4.3 Acquisition Price: Subject to Clause 10, the price at which each Share subject to an Option may be acquired on the exercise of that Option shall be:- (a) in the case of an Option to Subscribe, not less than the greater of the nominal value of such Share and its Market Value on the Dealing Day immediately preceding the day the Invitation is issued; and 11 (b) in any other case not less than its Market Value and subject thereto shall be such sum as the Grantor shall decide and cause to be stated in that behalf in the relevant Option Certificate. 5. OPTION CERTIFICATES 5.1 Issue: As soon as is practicable after having granted an Option to a Qualifying Employee, the Grantor shall issue to him a duly executed Option Certificate in respect of such Option. 5.2 Content: The Option Certificate shall:- (a) state the Grant Date of the Option; (b) state the expected number of Shares subject to the Option being such number of shares as the repayment under the Savings Contract can acquire following conversion of the repayment into US dollars; (c) state the Acquisition Price payable for each Share under the Option; (d) refer the holder to the provisions of sub-clause 12.5; and (e) subject to these conditions, be in such form as the Board may from time to time prescribe. 6. RIGHTS TO EXERCISE OPTIONS 6.1 Exercise Dates: Except as otherwise provided in this Plan any Subsisting Option may be exercised in whole or in part only after the earliest of the following events:- (a) the relevant Bonus Date; (b) the death of the Option Holder; (c) the Option Holder ceasing to be a director or employee of any Participating Company by reason of:- (i) injury or disability (evidenced to the satisfaction of the Board); (ii) redundancy within the meaning of the Employment Rights Act 1996; or (iii) retirement on reaching the Specified Age or any other age at which he is bound to retire in accordance with the terms of his contract of employment; 12 (d) the Option Holder ceasing to be a director or employee of any Participating Company by reason only that:- (i) that office or employment is in a company of which the Company ceases to have Control; or (ii) that office or employment relates to a business or part of a business which is transferred to a person other than a Participating Company; (e) the relevant Bonus Date where an Option Holder holds an office or employment in a company which is not a Participating Company but which is:- (i) an associated company of the Grantor within the meaning of Section 416 of the Taxes Act; or (ii) a company of which the Grantor has Control; the Option Holder may exercise his Option within six (6) months of such date. 6.2 Specified Age: If an Option Holder continues to be employed by a Participating Company after the date on which he reaches the Specified Age he may excercise any Subsisting Option within six months following that date 6.3 Termination of Employment: No person shall be treated for the purposes of this clause as ceasing to be employed by any Participating Company until he ceases to hold an office or employment in the Company or any Associated Company or company of which the Company has Control. 6.4 Material Interest: No Option may be exercised by an individual at any time when he is a Materially Interested Person or by the personal representative of an individual who at the date of his death was a Materially Interested Person. 6.5 Maximum Exercise: The number of Shares over which an Option may be exercised may not exceed the number of Shares which may be purchased with the sum obtained by way of repayment under the related Savings Contract excluding the repayment of any Monthly Contribution the due date for payment of which falls more than one month after the date on which repayment is made. 6.6 Lapse of Rights: An Option shall lapse and cease to be exercisable on the earliest of the following events:- (a) except where the Option Holder has died, on the expiry of six (6) months following the Bonus Date; 13 (b) where the Option Holder has died during the six (6) months following the Bonus Date, on the first anniversary of the Bonus Date; (c) where the Option Holder has died before the Bonus Date, on the first anniversary of his death; (d) unless the Option Holder has died, on the expiry of six (6) months after the Option has become exercisable by virtue of sub-clause 6.1(c); (e) on the expiry of six (6) months after the Option has become exercisable by virtue of sub-clause 6.1(d) to (e) inclusive or (subject to a release being effected pursuant to sub-clause 9.1) by virtue of Clause 8; (f) the Option Holder ceasing to be a director or employee of any Participating Company in circumstances in which the Option does not become exercisable; (g) the date on which a resolution is passed or an order is made by the Court for the compulsory winding up of the Company; (h) upon the Option Holder, before the Option has become exercisable:- (i) giving notice or being deemed to have given notice under the Savings Contract that he intends to stop paying Monthly Contributions; or (ii) making an application for repayment of the related Savings Contract; (i) the date on which the Option Holder does or omits to do anything as a result of which he ceases to be the legal and beneficial owner of the Option; (j) the date on which the Option Holder is adjudicated bankrupt. 7. EXERCISE OF OPTION 7.1 Notice: Subject to Clause 6, an Option may be exercised by the Option Holder or as the case may be his personal representative giving notice to the Company, the Grantor or such other person as shall be specified in the notice of exercise in writing of the number of Shares in respect of which he wishes to exercise the Option accompanied by the appropriate payment (which shall not exceed the sum obtained by way of repayment under the related Savings Contract) and the relevant Option Certificate and shall be effective on the date of its receipt by the Company, the Grantor or such other person as shall be specified in the notice of exercise. The Notice exercising the Option shall be given in such form and manner, not inconsistent with these Rules, as the Board or (as the case may be) the Grantor may determine. In respect of Options granted otherwise than by the Company any such 14 notice (or remittance enclosed therewith) shall be received by the Company for and on behalf of the Grantor. 7.2 Allotment: Subject to the Rules, within twenty-eight (28) days following receipt of a notice constituting a valid exercise of an Option and complying with the provisions of sub-clause 7.1 and the appropriate remittance the Grantor shall allot issue or transfer or (as the case may be) cause to be allotted, issued or transferred to the Option holder or (as the case may be) his personal representatives the Shares the subject of such notice. 7.3 Share Certificates: As soon as reasonably practicable after such allotment or transfer of Shares under the Plan, the Company shall issue to such Option Holder or his personal representatives a definitive share certificate in respect of the Shares so allotted or transferred. 7.4 Ranking of Shares: Save for any rights determined by reference to a date preceding the date of allotment or transfer, the Shares so issued or transferred shall rank pari passu with the other shares of the same class in issue at the date of allotment or transfer and carry all rights attaching thereto at that date. 7.5 Partial Exercise: When an Option is exercised only in part it shall lapse to the extent of the unexercised balance. 8. TAKEOVERS AND LIQUIDATIONS 8.1 General Offers: If any person (either alone or together with any person acting in concert with him) obtains Control of the Company or having such Control makes a general offer to acquire all the Shares of the Company (other than those which are already owned by him and/or any person acting in concert with him) then, notwithstanding any other provision of the Rules but subject to sub-clauses 6.4 and 9.1, any Subsisting Option may be exercised within six (6) months of the time when the person making the offer has obtained Control of the Company and any condition subject to which the offer is made has been satisfied. 8.2 Scheme of Reconstruction: If under Section 425 of the Companies Act 1985 the court sanctions a compromise or arrangement between the Company and its members proposed for the purposes of, or in connection with, a scheme for the reconstruction of the Company or its amalgamation with any other company or companies, then:- (a) each Participant may exercise his Option at any time and from time to time in the period starting with the date upon which the compromise or arrangement is sanctioned by the court and ending with the earlier of the date upon which it becomes effective and the date which is six months after the date on which it is sanctioned; and 15 (b) upon the compromise or arrangement becoming effective, all Options shall, subject to Rule 9, lapse. 8.3 Compulsory Purchase: If any person becomes bound or entitled to acquire Shares in the Company under Section 428 to 430F of the Companies Act 1985, any Subsisting Option (subject to sub-clauses 6.4 and 9.1) may be exercised at any time while that person remains so bound or entitled. 8.4 Voluntary Winding-Up: Subject to sub-clause 6.4 if the Company passes a resolution for voluntary winding up, any Subsisting Option may be exercised within six (6) months of the passing of the resolution. 8.5 Meaning of Control and Concert in sub-clause 8.1: For the purposes of sub-clause 8.1 (and only for such purpose):- (a) a person shall be deemed to have obtained Control of the Company if he and others acting in concert with him have together obtained Control of the Company; (b) persons acting in concert comprise persons who, pursuant to an agreement or understanding (whether formal or informal), actively co-operate, through the acquisition by any of them of shares in the Company, to obtain or consolidate Control of the Company. 8.6 Manner of Exercise: The exercise of an Option pursuant to the preceding provisions of this clause shall be subject to the provisions of Clause 7. 8.7 Rights to Exercise: For the avoidance of doubt, an Option may only be exercised pursuant to this clause on a date on which it remains a Subsisting Option. 9. EXCHANGE OF OPTIONS ON A TAKEOVER 9.1 Replacement of Options: If any company ("the Acquiring Company") obtains Control of the Company, or becomes bound or entitled to acquire shares in the Company within any of the sets of circumstances specified in Paragraphs 15(1)(a) (b) or (c) of Schedule 9, any Option holder may at any time within the appropriate period (as defined in Paragraph 15(2) of Schedule 9) by agreement with the Acquiring Company release his option ("the Old Option") in consideration of the grant to him of an option ("the New Option") which:- (a) relates to shares in a different company (whether the Acquiring Company itself or some other company which on the assumption that the Acquiring Company were the grantor would be a company falling within Paragraph 10(b) or (c) of Schedule 9); 16 (b) is a right to acquire such number of such shares as has on acquisition of the New Option an aggregate Market Value equal to the aggregate Market Value of the Shares subject to the Old Option on its release; (c) has an acquisition price per Share such that the aggregate price payable on complete exercise equals the aggregate Acquisition Price which would have been payable on complete exercise of the Old Option; (d) is otherwise equivalent to the Old Option (as defined in Paragraph 15(3) of Schedule 9). The New Option shall, for all other purposes of this Plan, be treated as having been acquired at the same time as the Old Option for which it is released and, following release of the Old Option and the grant of the New Option, for the purposes of applying Rules 6, 7, 8, 9, 10 and 12 thereto:- (i) "Company" and "Shares" in relation to the New Option shall be construed as if references to the Company and to the Shares were references to the Acquiring Company and to shares in the Acquiring Company or (as the case may be) to the other company to whose shares the New Options relate and to the shares in the other company whether the Acquiring Company itself or some other company falling within Paragraph 10(b) or 10(c) of Schedule 9 but for the purpose of "Participating Company" the Company shall continue to be NTL Incorporated. (ii) "Board" shall mean the board of directors of that company or a duly constituted committee thereof. 9.2 Option Certificate: Upon grant of the New Option, a new Option Certificate shall be issued accordingly and the Third and Fourth Schedules shall be amended mutatis mutandis; 9.3 No Immediate Exercise: For the avoidance of doubt where in accordance with sub-clause 9.1 Subsisting Options are released and New Options granted, the New Options shall not be exercisable in accordance with sub-clauses 8.1 to 8.3 by virtue of the event on which the New Options were granted. 10. VARIATION OF CAPITAL 10.1 Adjustment: Subject as provided in sub-clauses 10.2 and 10.3, in the event of any capitalisation issue, rights issue, sub-division, consolidation or reduction of share capital, or any other variation in the share capital of the Company the Board and (as appropriate) the Grantor may make such adjustment as shall be fair and reasonable in all the circumstance to:- (a) the number or nominal value of Shares comprised in any Option; and/or 17 (b) the Acquisition Price payable for Shares subject to any Option. Provided Always That the Acquisition Price payable on subscription for new Shares shall never be less than the nominal value of the Share to which it relates, the aggregate amount payable on the exercise of an Option in full shall not thereby be increased and no adjustment shall cause any of the conditions of the approval of the Plan under Schedule 9 to be thereby breached. 10.2 Auditors' Confirmation: Except in the case of a capitalisation issue no adjustment under sub-clause 10.1 shall take effect without prior confirmation in writing by the Auditors that the adjustment is in their opinion fair and reasonable in all the circumstances. 10.3 Inland Revenue Approval: No adjustment under sub-clause 10.1 shall take effect without prior confirmation in writing by the Board of the Inland Revenue approving such proposed adjustment. 10.4 Notice of Adjustment: As soon as reasonably practicable after making any adjustment under sub-clause 10.1 the Board and (as appropriate) the Grantor shall give notice in writing to every Option Holder thereby affected specifying the adjustments made insofar as they affect him and (subject to sub-clauses 10.2 and 10.3) such notice shall be binding upon the Option Holder in the absence of manifest error Provided That where pursuant to Paragraphs 10.1(b) or 10.1(c) an adjustment is made to the terms of an Option prior to the issue of an Option Certificate pursuant to sub-clause 5.1, the certificate shall set out details of the Option as so adjusted and shall be deemed to be sufficient notice of the adjustment for the purpose of this sub-clause. 11. ADMINISTRATION AND ALTERATION 11.1 Discretion of the Board: The Board shall have power from time to time to make and vary such regulations (not being inconsistent with the Rules) for the implementation and administration of this Plan. 11.2 Board Decisions: Save in respect matters to be confirmed by the Auditors in accordance with these Rules, the decision of the Board shall be final and binding in all matters relating to this Plan, any dispute or disagreement as to the interpretation of the Plan or of any rule, regulation or procedure or as to any question of right arising out of or in respect of the Plan. 11.3 Amendments: Subject to sub-clause 11.4, this Plan may be amended in any respect by resolution of the Board PROVIDED THAT no amendment shall take effect which would cause this Plan to cease to be an Approved Scheme. 11.4 Inland Revenue Consent: No amendment to these Rules shall have effect unless and until approved by the Board of the Inland Revenue. 18 11.5 Rights of Option Holders: No amendments shall be made to the Plan which would have the effect of abrogating or prejudicially affecting any of the subsisting rights of Option Holders except with such consent on their part as would be required by provisions of the Company's Certificate of Incorporation if the Shares to be issued on the exercise of the Options were so issued and constituted a separate class of share capital and if such provisions applied mutatis mutandis thereto. 11.6 Notice of Alteration: As soon as reasonably practicable after making any alteration or addition under this clause the Board shall give notice in writing thereof to any Option Holder who is thereby affected. 11.7 Circulars: The Company shall not be obliged to provide Qualifying Employees or Option Holders with copies of any notices, circulars or other documents sent to shareholders of the Company. 11.8 Cost: The cost of establishing and operating the Plan shall be borne by such of the Participating Companies and in such proportions as the Board shall determine. 12. GENERAL 12.1 Availability of Shares: The Company shall at all times ensure there are sufficient Shares available to satisfy the exercise to the full extent still possible of all Subsisting Options whether by issue of new Shares or the transfer of exisiting Shares, taking account of any other obligations of the Company to issue unissued Shares and of the availability of existing unissued Shares. 12.2 Employment Rights: 12.2.1 Effect of Participation: This Plan shall not form part of any contract of employment between any Participating Company and any employee of any such company and the rights and obligations of any individual under the terms of his office or employment with the Company or any Participating Company shall not be affected by his participation in the Plan or any right which he may have to participate therein. 12.2.2 Effect of Loss of Office: Participation in the Plan shall be on the express condition that:- (i) neither it nor cessation of participation shall afford any individual under the terms of his office or employment with the Company or any Participating Company any additional or other rights to compensation or damage; and 19 (ii) no damages or compensation shall be payable in consequence of the termination of such office or employment or for any other reason whatsoever to compensate him for the loss or any right he would otherwise have had (actual or prospective) under the Plan howsoever arising but for such termination; and (iii) by applying for an Option he shall be deemed irrevocably to have waived any such rights to which he may otherwise have been entitled. 12.3 Non-Admission: No Qualifying Employee shall have any claim against a Participating Company arising out of his not being admitted to participation in the Plan if the Qualifying Employee's participation in the Plan is entirely within the discretion of the Board. 12.4 Consequence of Lapse: No Option Holder shall be entitled to claim compensation from any Participating Company or the Grantor of any Option to acquire Shares in respect of any sums paid by him pursuant to the Plan or of any diminution or extinction of his rights or benefits (actual or otherwise) under any Option held by him consequent upon the lapse for any reason of any Option held by him or otherwise in connection with the Plan and the Company and each Participating Company shall be entirely free to conduct its affairs as it sees fit without regard to any consequences under, upon or in relation to the Plan or any Option or Option Holder. 12.5 Transfer, Assignment or Charge: All Options granted to Qualifying Employees are personal rights which cannot be transferred, assigned or charged in any circumstances whatsoever save as set out in sub-clause 10.1 and any purported transfer, assignment or charge (save as aforesaid) shall cause the Option to lapse forthwith. 12.6 Termination: The Board may terminate the Plan at any time but Options granted prior to such termination shall continue to be valid and exercisable in accordance with the Rules, which shall continue to apply thereto. 12.7 Status of Auditors: In any matter in which they are required to act under the Plan, the Auditors shall act as experts and not as arbitrators and their determination of the matter referred to them shall be final and conclusive. 12.8 Notices: Any notice or other communication required to be given pursuant to the terms of the Plan shall be sent:- (a) in the case of any Participating Company, by personal delivery or by first-class post to such company at its registered office and shall be effective upon receipt; 20 (b) in any other case, by personal delivery or by delivering or sending the same by first-class post to the addressee's address last know to the Company or the address of the place of business from which he performs the whole or substantially the whole of his duties of his office or employment (and notice to the personal representatives of a deceased Option holder shall be effective if given personally or if left at or sent by first class post addressed to the Option holder and delivered or sent by post accordingly) and where such notice or other communication is given by post it shall be deemed to have been received no later than forty-eight (48) hours after it was put into the post properly addressed and stamped. 12.9 Law: The Plan and all Options shall be governed by and construed in accordance with English law. EX-10.4 10 1998 NON-QUALIFIED STOCK OPTION PLAN 1 Exhibit 10.4 NTL INCORPORATED 1998 NON-QUALIFIED STOCK OPTION PLAN AS AMENDED AND RESTATED OCTOBER 1998 1. Purpose; Construction. This NTL Incorporated 1998 Stock Option Plan (the "Plan"), is intended to encourage stock ownership by employees and directors of NTL Incorporated (the "Corporation") and its divisions and subsidiary and parent corporations and other affiliates, so that they may acquire or increase their proprietary interest in the Corporation, and to encourage such employees and directors to remain in the employ of the Corporation or its affiliates and to put forth maximum efforts for the success of the business. Services of directors will be considered employment for purposes of this Plan. 2. Definitions. As used in this Plan, the following words and phrases shall have the meanings indicated: (a) "AFFILIATE" shall have the meaning set forth in Rule 12b-2 under Section 12 of the Exchange Act. (b) "BENEFICIAL OWNER" shall have the meaning set forth in Rule 13d-3 under the Exchange Act, except that a Person shall not be deemed to be the Beneficial Owner of any securities which are properly filed on a Form 13-G. (c) "DISABILITY" shall mean an Optionee's inability to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment that can be expected to result in death or that has lasted or can be expected to last for a continuous period of not less than twelve (12) months. (d) "EXCHANGE ACT" shall mean the Securities Exchange Act of 1934, as amended from time to time. (e) "FAIR MARKET VALUE" per share as of a particular date shall mean (i) if the shares of common stock, par value $.01 per share, of the Corporation ("Common Stock") are then traded in a stock exchange, on an over-the-counter market, or otherwise, the average of the highest and lowest quoted selling prices for the shares of Common Stock in such market on such date or, if there were no such sales on the particular date, but there were such sales of Common Stock on dates within a reasonable period both before and after the particular date, the weighted average of the means between the highest and lowest sales on the nearest date before and nearest date after the particular date, (ii) if the provisions of (i) of this subsection (e) are inapplicable because actual sales are 2 not available during a reasonable period beginning before and ending after the particular date, the average between the bona fide bid and asked prices on the particular date, or if none, the weighted average of the means between the bona fide bid and asked prices on the nearest trading date before and the nearest trading date after the particular date, if both such nearest dates are within a reasonable period, (iii) if the provisions of (i) and (ii) of this subsection (e) are inapplicable because no actual sale prices or bona fide bid and asked prices are available on a date within a reasonable period before the particular date, but such prices are available on a date within a reasonable period after the valuation date, or vice versa, then the average between the highest and lowest available sales prices or bid and asked prices, or (iv) if the Committee believes the value of the Common Stock determined under (i), (ii) or (iii) of this subsection (e) does not reflect the fair market value on the particular date, such value as the Committee in its discretion may determine. (f) "OPTION" shall mean an option to purchase shares of common stock of the corporation. (g) "OPTIONEE" shall mean a person who has been granted an Option under the Plan. (h) "PARENT CORPORATION" shall mean any corporation (other than the Corporation) in an unbroken chain of corporations ending with the employer corporation if, at the time of granting an Option, each of the corporations other than the employer corporation owns stock possessing fifty percent (50%) or more of the total combined voting power of all classes of stock in one of the other corporations in such chain. (i) "PERSON" shall have the meaning given in Section 3(a)(9) of the Exchange Act, as modified and used in Sections 13(d) and 14(d) thereof, except that such term shall not include (i) the Corporation or any of its Affiliates, (ii) a trustee or other fiduciary holding securities under an employee benefit plan of the Corporation or any of its subsidiaries, (iii) an underwriter temporarily holding securities pursuant to an offering of such securities, or (iv) a corporation owned, directly or indirectly, by the stockholders of the Corporation in substantially the same proportions as their ownership of stock of the Corporation. (j) "RULE 16b-3" shall mean Rule 16b-3 promulgated under Section 16 of the Exchange Act (or any other comparable 2 3 provisions in effect at the time or times in question). (k) "SUBSIDIARY CORPORATION" shall mean any corporation (other than the Corporation) in an unbroken chain of corporations beginning with the employer corporation if, at the time of granting an Option, each of the corporations other than the last corporation in the unbroken chain owns stock possessing fifty percent (50%) or more of the total combined voting power of all classes of stock in one of the other corporations in such chain. 3. Administration. The Plan shall be administered by the Compensation and Option Committee of the Corporation's Board of Directors or such other committee appointed either by the Board of Directors of the Corporation (the "Board") or by such Compensation and Option Committee (the "Committee"); provided, however, to the extent determined necessary to satisfy the requirements for exemption from Section 16(b) of the Exchange Act with respect to the acquisition or disposition of securities hereunder, action by the Committee may be by a subcommittee of a committee of the Board composed solely of two or more "non-employee directors," within the meaning of Rule 16b-3, appointed by the Board or by the Compensation and Option Committee of the Board, or by a committee composed solely of two or more "non-employee directors," within the meaning of Rule 16b-3, as a result of the refusal of those members who do not qualify as non-employee directors. Notwithstanding anything in the Plan to the contrary, and to the extent determined to be necessary to satisfy an exemption under Rule 16b-3 with respect to a grant hereunder (and, as applicable, with respect to the disposition to the Corporation of a security hereunder), or as otherwise determined advisable by the Committee, the terms of such grant and disposition under the Plan shall be subject to the prior approval of the Board. Any prior approval of the Board, as provided in the preceding sentence, shall not otherwise limit or restrict the authority of the Committee to make grants under the Plan. The Committee shall have the authority in its discretion, subject to and not inconsistent with the express provisions of the Plan, to administer the Plan and to exercise all the powers and authorities either specifically granted to it under the Plan or necessary or advisable in the administration of the Plan, including, without limitation, the authority to grant Options; to determine the purchase price of the shares of Common Stock covered by each Option (the "Option Price"); to determine the persons to whom, and the time or times at which, Options shall be granted; to determine the number of shares to be covered by each Option; to interpret the Plan; to 3 4 prescribe, amend and rescind rules and regulations relating to the Plan; to determine the terms and provisions of the Option Notices (which need not be identical) entered into in connection with Options granted under the Plan; and to make all other determinations deemed necessary or advisable for the administration of the Plan. The Committee may delegate to one or more of its members or to one or more agents such administrative duties as it may deem advisable, and the Committee or any person to whom it has delegated duties as aforesaid may employ one or more persons to render advice with respect to any responsibility the Committee or such person may have under the Plan. The Board shall fill all vacancies, however caused, in the Committee. The Board may from time to time appoint additional members to the Committee, and may at any time remove one or more Committee members and substitute others. One member of the Committee may be selected by the Board as chairman. The Committee shall hold its meetings at such times and places, as it shall deem advisable. All determinations of the Committee shall be made by a majority of its members either present in person or participating by conference telephone at any meeting or by written consent. The Committee may appoint a secretary and make such rules and regulations for the conduct of its business as it shall deem advisable, and shall keep minutes of its meetings. No member of the Board or Committee shall be liable for any action taken or determination made in good faith with respect to the Plan or any Option granted hereunder. 4. Eligibility. Options may be granted (i) to employees (including, without limitation, officers and directors who are employees) and directors (who are not employees) of the Corporation, its present or future divisions and Subsidiary Corporations and Parent Corporations and (ii) also to employees of an affiliated entity of the Corporation (an "Affiliated Entity") which is designated by the Board to participate in the Plan. In determining the persons to whom Options shall be granted and the number of shares to be covered by each Option, the Committee shall take into account the duties of the respective persons, their present and potential contributions to the success of the Corporation and such other factors as the Committee shall deem relevant in connection with accomplishing the purpose of the Plan. An Optionee shall be eligible to receive more than one grant of an Option during the term of the Plan, but only on the terms and subject to the restrictions hereinafter set forth. 4 5 5. Stock. The stock subject to Options hereunder shall be shares of the Corporation's Common Stock. Such shares may, in whole or in part, be authorized but unissued shares or shares that shall have been or that may be reacquired by the Corporation. The aggregate number of shares of Common Stock as to which Options may be granted from time to time under the Plan shall not exceed 15,000,000. The limitation established by the preceding sentence shall be subject to adjustment as provided in Section 8(j) hereof. In the event that any outstanding Option under the Plan for any reason expires or is canceled, surrendered, exchanged or otherwise terminated without having been exercised in full, the shares of Common Stock allocable to the unexercised portion of such Option shall (unless the Plan shall have been terminated) become available for subsequent grants of Options under the Plan. 6. Automatic Option Grants. (a) MARCH GRANTS. Each employee of the Corporation, or a Subsidiary Corporation the ("Employer") who has completed at least one year of employment on or prior to March 2, 1998 and remains in the continual employ of Employer shall be granted an Option to purchased 100 shares of Common Stock (the "March Automatic Grants") on the first business day in March each year (the "March Grant Date") beginning in 1998 and continuing through March 2002 provided however, that an employee otherwise eligible for a grant under this Section 6(a) will not be granted the March Automatic Grant in any given year if such employee received a grant pursuant to Section 7 hereof on or during the twelve-month period immediately preceding the relevant March Grant Date. (b) ANNIVERSARY GRANTS. Each employee of the Employer who does not qualify for the March Automatic Grants under Section 6(a) above and remains in the continual employ of the Employer shall be granted an Option to purchase 100 shares of Common Stock (The "Anniversary Automatic Grants", and together with the March Automatic Grants, the "Automatic Grants") on the first business day in the month following the month that contains the anniversary date of such employee's employment (the "Anniversary Grant Date" and, together with the March Grant Date, the "Grant Date") beginning one year following the employee's 5 6 first day of employment and continuing through December 2002 provided however, that an employee otherwise eligible for a grant under this Section 6(b) will not be granted the Anniversary Automatic Grant in any given year if such employee received a grant pursuant to Section 7 hereof on or during the twelve-month period immediately preceding the relevant Anniversary Grant Date. Notwithstanding anything herein to the contrary, no Anniversary Automatic Grants shall be made until such date as the Plan has received approval from the Inland Revenue of the United Kingdom (the "Approval"). Once the Approval has been obtained, all grants that would have been made pursuant to this section 6(b) (the "Delayed Grants") will be made as soon as practicable following such approval (the "Delayed Grant Date" and, together with the March Grant Date and the Anniversary Grant Date, the "Grant Date"). (c) TERMS OF AUTOMATIC GRANTS. In the event that the Optionee's Employer ceases to be a direct or indirect subsidiary of the Corporation or in the event of an Acceleration Event (as defined in Section 8(j)) no further Automatic Grants will be made to such Optionee pursuant to this Section 6. The Automatic Grants shall be at the Fair Market Value on the relevant Grant Date and shall become exercisable as to 20% on the Grant Date and as to 20% on each anniversary of the Grant Date, until fully exercisable, as further described in the Option Notice. The Delayed Grants shall become exercisable as to 20% on the Delayed Grant Date and as to 20% on each anniversary of the date that would have been the Anniversary Grant Date, until fully exercisable. The Automatic Grants and the Delayed Grants shall be subject to the terms set out in this Plan and in the Option Notice reflecting the grant. For the avoidance of doubt, this Section 6 may be suspended, terminated, modified or amended at any time by the Board, subject to Section 11 hereof. 7. Discretionary Option Grants. The Committee may make discretionary option grants under this Plan. Such grants will be subject to the terms set forth in the Option Notice and in the Plan. The Committee shall determine eligibility for option grants pursuant to this Section 7 in its sole discretion. 6 7 8. Terms and Conditions of Options. Each Option granted pursuant to the Plan shall be evidenced by a written notice (an "Option Notice") from the Corporation to the Optionee, which Notice shall comply with and be subject to the following terms and conditions: (a) NUMBER OF SHARES. Each Option Notice shall state the number of shares of Common Stock to which the Option relates. (b) TYPE OF OPTION. Each Option Notice shall specifically identify the Option as a nonqualified stock option. (c) OPTION PRICE. Each Option Notice shall state the Option Price, which shall be determined by the Committee. The Option Price shall be subject to adjustment as provided in Section 8(i) hereof. An Option shall be considered to be granted on the date the Committee adopts a resolution expressly granting such Option. (d) MEDIUM AND TIME OF PAYMENT. Options may be exercised in whole or in part at any time during the option period by giving written notice of exercise to the Corporation specifying the number of shares to be purchased, accompanied by payment of the purchase price. Payment of the purchase price shall be made in such manner as the Committee may provide in the Option Notice, which may include cash (including cash equivalents, such as by certified or bank check payable to the Corporation), delivery of unrestricted shares of Common Stock that have been owned by the Optionee or, as applicable, a permissible transferee (as provided in Section 8(i)) for at least six months, any other manner permitted by law as determined by the Committee, or any combination of the foregoing. (e) TERM AND EXERCISE OF OPTIONS. Options shall be exercisable over the exercise period as and at the times and upon the conditions that the Committee may determine, as reflected in the Option Notice; provided, however, that the Committee shall have the authority to accelerate the exercisability of any outstanding Option at such time and under such circumstances as it, in its sole discretion, deems appropriate; and further provided, however, that such exercise period shall not exceed ten (10) years from the date of grant of such Option. The exercise period shall be subject to earlier termination as provided in Sections 8(g) and 8(h) hereof. An Option may be exercised, as to any or all full shares of Common Stock as to which the Option has become exercisable, by 7 8 giving written notice of such exercise to the Committee or to such individual(s) as the Committee may from time to time designate. (f) Intentionally Left Blank (g) TERMINATION. Except as provided in this Section 8(g) and in Section 8(h) hereof, an Option may not be exercised by the Optionee to whom it was granted or by a transferee to whom such Option was transferred (as provided in Section 8(i)) unless the Optionee is then in the employ of the Corporation or a division or any corporation which was, at the time of grant of such Option, a Subsidiary Corporation or Parent Corporation thereof (or a corporation or a Parent or Subsidiary Corporation of such corporation issuing or assuming the Option in a corporate transaction) or an affiliated entity, and unless the Optionee has remained continuously so employed since the date of grant of the Option. In the event that the employment of an Optionee shall terminate (other than by reason of death, Disability or retirement), all Options granted to such Optionee or transferred by such Optionee (as provided in Section 8(i)) that are exercisable at the time of such termination may, unless earlier terminated in accordance with their terms, be exercised by the Optionee or by a transferee within three (3) months after such termination; provided, however, that if the employment of an Optionee shall terminate for cause, all Options theretofore granted to such Optionee or transferred by such Optionee (as provided in Section 8(i)) shall, to the extent not theretofore exercised, terminate forthwith. Nothing in the Plan or in any Option granted pursuant hereto shall confer upon an individual any right to continue in the employ of the Corporation or any of its divisions, Parent or Subsidiary Corporations or Affiliated entities or interfere in any way with the right of the Corporation or any such division, Parent or Subsidiary Corporation or affiliated entity to terminate such employment. (h) DEATH, DISABILITY OR RETIREMENT OF OPTIONEE. If an Optionee shall die while employed by the Corporation or a division thereof or any corporation which was, at the time of grant of such Option, a Subsidiary Corporation or Parent Corporation thereof (or a corporation or a Parent or Subsidiary Corporation of such corporation issuing or assuming the Option in a corporate transaction) or an Affiliated Entity, or within three (3) months after the termination of such Optionee's employment, other than for cause, or if the Optionee's employment shall terminate by reason of Disability or retirement (as determined by the 8 9 Committee in its sole discretion), all Options theretofore granted to such Optionee or transferred by such Optionee (as provided in Section 8(i)), to the extent otherwise exercisable at the time of death or termination of employment, may, unless earlier terminated in accordance with their terms, be exercised by the Optionee or by the Optionee's estate or by a person who acquired the right to exercise such Option by bequest or inheritance or otherwise by reason of the death or Disability of the Optionee, or by a transferee (as provided in Section 8(i)), at any time within one year after the date of death, Disability or retirement of the Optionee. (i) NONTRANSFERABILITY OF OPTIONS. Except as provided in this Section 8(i), no Option granted hereunder shall be transferable by the Optionee to whom granted, other than by will or the laws of descent and distribution, and the Option may be exercised during the lifetime of such Optionee only by the Optionee or such Optionee's guardian or legal representative. To the extent the Option Notice so provides, and subject to such conditions as the Committee may prescribe, an Optionee may, upon providing written notice to the General Counsel of the Corporation, elect to transfer the Nonqualified Stock Options granted to such Optionee pursuant to such agreement, without consideration therefor, to members of his or her "immediate family" (as defined below), to a trust or trusts maintained solely for the benefit of the Optionee and/or the members of his or her immediate family, or to a partnership or partnerships whose only partners are the Optionee and/or the members of his or her immediate family. Any purported assignment, alienation, pledge, attachment, sale, transfer, or encumbrance that does not qualify as a permissible transfer under this Section 8(i) shall be void and unenforceable against the Plan and the Corporation. For purposes of this Section 8(i), the term "immediate family" shall mean, with respect to a particular Optionee, the Optionee's spouse, children or grandchildren, and such other persons as may be determined by the Committee. The terms of any such Option and the Plan shall be binding upon a permissible transferee, and the beneficiaries, executors, administrators, heirs and successors of the Optionee and, as applicable, a permissible transferee. (j) EFFECT OF CERTAIN CHANGES. (1) If there is any change in the number of shares of Common Stock through the declaration of stock or cash dividends, or recapitalization resulting in 9 10 stock splits, or combinations or exchanges of such shares, or other corporate transactions affecting the capitalization of the Corporation, the aggregate number of shares of Common Stock available for Options, the number of such shares covered by outstanding Options, and the price per share of such Options shall be proportionately adjusted by the Committee to reflect any increase or decrease in the number of issued shares of Common Stock; provided, however, that any fractional shares resulting from such adjustment shall be rounded to the nearest whole share. In the event of any other extraordinary corporate transaction, including but not limited to distributions of cash or other property to the Corporation's shareholders, the Committee may equitably adjust outstanding Options as it deems appropriate. (2) In the event of the proposed dissolution or liquidation of the Corporation, in the event of any corporate separation or division, including, but not limited to, split-up, split-off or spin-off, or in the event of a merger or consolidation of the Corporation with another corporation, the Committee may provide that the holder of each Option then exercisable shall have the right to exercise such Option (at its then Option Price) solely for the kind and amount of shares of stock and other securities, property, cash or any combination thereof receivable upon such dissolution, liquidation, or corporate separation or division, or merger or consolidation by a holder of the number of shares of Common Stock for which such Option might have been exercised immediately prior to such dissolution, liquidation, or corporate separation or division, or merger or consolidation. (3) If there is an "Acceleration Event" while unexercised Options remain outstanding under the Plan then from and after the date of the Acceleration Event (the "Acceleration Date"), all Options that have not expired or terminated in accordance with the Plan or the Option Notice shall be exercisable in full, whether or not otherwise exercisable. Following the Acceleration Date, the Committee shall, in the case of a merger, consolidation or sale or disposition of assets, promptly make an appropriate adjustment to the number and class of shares of Common Stock available for Options, and to the amount and kind of shares or other securities or property receivable upon 10 11 exercise of any outstanding Options after the effective date of such transaction, and the price thereof. An "Acceleration Event" shall be deemed to have occurred if the event set forth in any one of the following paragraphs shall have occurred: (i) Any Person is or becomes the Beneficial Owner, directly or indirectly, of securities of the Corporation (not including in the securities beneficially owned by such Person any securities acquired directly from the Corporation or its Affiliates) representing 20% or more of the combined voting power of the Corporation's then outstanding securities, excluding any Person who becomes such a Beneficial Owner in connection with a transaction described in clause (a) of Paragraph (iii) below; or (ii) the following individuals cease for any reason to constitute a majority of the number of directors then serving: individuals who, on the date hereof, constitute the Board and any new director (other than a director whose initial assumption of office is in connection with an actual or threatened election contest, including but not limited to a consent solicitation, relating to the election of directors of the Corporation) whose appointment or election by the Board or nomination for election by the Corporation's stockholders was approved or recommended by a vote of at least two-thirds (2/3) of the directors then still in office who either were directors on the date hereof or whose appointment, election or nomination for election was previously so approved or recommended; or (iii) there is consummated a merger or consolidation of the Corporation or any direct or indirect subsidiary of the Corporation with any other corporation, other than (a) a merger or consolidation which would result in the voting securities of the Corporation outstanding immediately prior to such merger or consolidation continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity or any parent thereof) at least 60% of the 11 12 combined voting power of the securities of the Corporation or such surviving entity or any parent thereof outstanding immediately after such merger or consolidation, or (b) a merger or consolidation effected to implement a recapitalization of the Corporation (or similar transaction) in which no Person is or becomes the Beneficial Owner, directly or indirectly, of securities of the Corporation (not including in the securities beneficially owned by such Person any securities acquired directly from the Corporation or its Affiliates) representing 20% or more of the combined voting power of the Corporation's then outstanding securities; or (iv) the stockholders of the Corporation approve a plan of complete liquidation or dissolution of the Corporation or there is consummated an agreement for the sale or disposition by the Corporation of all or substantially all of the Corporation's assets, other than a sale or disposition by the Corporation of all or substantially all of the Corporation's assets to an entity, at least 60% of the combined voting power of the voting securities of which are owned by the stockholders of the Corporation in substantially the same proportions as their ownership of the Corporation immediately prior to such sale. Notwithstanding the foregoing, an "Acceleration Event" shall not be deemed to have occurred by virtue of the consummation of any transaction or series of integrated transactions immediately following which the record holders of the common stock of the Corporation immediately prior to such transaction or series of transactions continue to have substantially the same proportionate ownership in an entity which owns all or substantially all of the assets of the Corporation immediately following such transaction or series of transactions. (4) To the extent that the foregoing adjustments relate to stock or securities of the Corporation, such adjustments shall be made by the Committee, whose determination in that respect shall be final, binding and conclusive. (k) RIGHTS AS A STOCKHOLDER. An Optionee or a transferee of an Option shall have no rights as a stockholder with respect to any shares covered by the Option until the 12 13 date of the issuance of a stock certificate to him for such shares. No adjustment shall be made for dividends (ordinary or extraordinary, whether in cash, securities or other property) or distribution of other rights for which the record date is prior to the date such stock certificate is issued, except as provided in Section 8(j) hereof. (l) RIGHTS AS AN EMPLOYEE. Nothing in the Plan or in any instrument executed pursuant to the Plan will confer upon any Optionee any right to continue in the employ of the Corporation or affect the right of the Corporation to terminate the employment of any Optionee at any time with or without cause. (m) OTHER PROVISIONS. The Option Notices authorized under the Plan shall contain such other provisions, including, without limitation, the imposition of restrictions upon the exercise of an Option and the inclusion of any condition as the Committee shall deem advisable. 9. Agreement by Optionee Regarding Withholding Taxes. As a condition of exercise, each Optionee agrees that:- (a) no later than the date of exercise of any Option granted hereunder, the Optionee will pay to the Corporation or make arrangements satisfactory to the Committee regarding payment of any federal, state or local taxes of any kind required by law to be withheld upon the exercise of such Option including, without limitation, any income tax payable by deduction in the United Kingdom; and (b) the Corporation shall, to the extent permitted or required by law, have the right to deduct federal, state and local and employment taxes of any kind required by law to be withheld upon the exercise of such Option including, without limitation, any income tax payable by deduction in the United Kingdom, from any payment of any kind otherwise due to the Optionee. 10. Term of Plan. Options may be granted pursuant to the Plan from time to time within a period of ten (10) years from the date the Plan is adopted by the Board. 11. Amendment and Termination of the Plan. The Board at any time and from time to time may suspend, terminate, modify or amend the Plan. Except as provided in 13 14 Section 8 hereof, no suspension, termination, modification or amendment of the Plan may adversely affect any Option previously granted, unless the written consent of the Optionee or, as applicable, a permissible transferee (as provided in Section 8(i)) is obtained. No amendment to this Plan shall become effective to the extent that it applies to Approved Options (as defined in the addendum hereto)unless it is approved by the UK Inland Revenue. 12. Interpretation. The Plan is designed and intended to comply with Rule 16b-3 and all provisions hereof shall be construed in a manner to so comply. 13. Effect of Headings. The section and subsection headings contained herein are for convenience only and shall not affect the construction hereof. 14. Governing Law. The Plan shall be governed by the laws of the State of Delaware. 15. Effective Date of Plan. The effective date of the Plan is the date the Plan is adopted by the Board. 14 15 ADDITIONAL SECTIONS FOR UK 16. Purpose. (a) The purpose of these additional sections for UK Participants is to obtain Approved Share Option Scheme Status for UK Participants under the Plan as modified by these additional sections ("the Subplan"). These sections are to be read as a continuation of the Plan and only modify the Plan as it relates to the Stock Options granted under the Plan to UK Participants. These sections do not apply to or modify the Plan in respect of any other participants. (b) The Board has adopted these additional sections in accordance with Section 11. 17. Definitions. (a) The following additional capitalized definitions shall have the respective meanings set forth below:- "APPROVED OPTION" means a stock option granted under the Subplan to a UK Participant while the Subplan is approved by the UK Inland Revenue under the Taxes Act. "CONTROL" has the meaning given by Section 840 of the Taxes Act. "LIMIT" means the limit of (pound)30,000 (thirty thousand pounds sterling) on the aggregate Fair Market Value of all the Common Stock or shares which a UK Participant may acquire on the exercise in full of all unexercised Approved Options granted to him under this Subplan and other share option plans (other than a savings-related share option plan) adopted by the Company or any associated company (as defined by s416 of the Taxes Act) and approved by the UK Inland Revenue under the Taxes Act or such other amount as may from time to time be specified by paragraph 28(I) of Schedule 9 to the Taxes Act. "TAXES ACT" means the (UK) Income and Corporation Taxes Act 1988. "UK PARTICIPANTS" means a full-time director (that is to say is required to work not less than 25 hours per week (excluding meal breaks)) or employee of the Company or its Subsidiaries who has been selected by the Committee to receive an Approved Option under the Subplan and is 15 16 not ineligible to participate (that is to say be granted or to exercise Approved Options) in the Subplan by virtue of paragraph 8 of Schedule 9 to the Taxes Act. (b) The following definitions in Section 2 shall be modified as set forth below in relation to Approved Options only and shall be so construed throughout the Subplan:- "SUBSIDIARY" means any business entity in which the Corporation owns directly or indirectly more than fifty per cent (50%) of the total combined voting power. "COMMON STOCK" means Common Stock of the Corporation which satisfies the provisions of paragraphs 10 to 14 inclusive of Schedule 9 to the Taxes Act. "FAIR MARKET VALUE" means the market value of Stock determined in accordance with the provisions of Part VIII of the Taxation of Chargeable Gains Act 1992 and agreed in advance for the purposes of the Subplan with the Inland Revenue Shares Valuation Division. "OPTION" means Approved Options only. 18. Eligibility. Section 4 of the Plan shall be modified in relation to Approved Options so that:- All UK Participants are eligible to participate in the Plan. 19. Terms and Conditions of Options. (a) Section 8(b) shall be modified in relation to Approved Options to read:- "Each Option Notice shall specifically identify the Approved Option as an "Approved Option"." (b) Section 8(c) shall be modified in relation to Approved Options to read:- "Each Option Notice shall state the Option Price which:- (1) shall not be less than the nominal value of the Common Stock; and (2) subject to Section 8(j) shall not be less than the Fair Market Value on the date of grant of the Option. An Option shall be considered to be expressly granted on the date the Committee adopts a 16 17 resolution expressly granting such Option." (c) Section 8(d) shall be modified in relation to Approved Options by replacing the following words:- "Payment of the purchase price shall be made ......... as determined by the Committee, or any combination of the foregoing" with the following words:- "Within 30 days of the exercise of an Approved Option the Committee shall allot or procure the transfer of the shares of Common Stock in respect of which the Option has been validly exercised." (d) Section 8(f) shall be modified in relation to Approved Options by inserting the following:- "No Approved Options shall be granted to UK Participants in excess of the Limit." (e) Section 8(g) shall be deleted in relation to Approved Options and be replaced with the following:- "Save as otherwise provided in this Subplan, an Approved Option may not be exercised by the Optionee unless the Optionee is then in the employ of the Corporation or a division or any corporation which was, at the time of grant of such Option, a Subsidiary Corporation, and the Optionee has remained continuously so employed since the date of grant of the Option." (f) Section 8(h) shall be deleted in relation to Approved Options and be replaced with the following:- "(1) An Approved Option may be exercised by the personal representatives of a deceased UK Participant within the period of one year following the date of his death provided that such deceased UK Participant is not precluded by Paragraph 8 of Schedule 9 from exercising such Approved Option. (2) If a UK Participant ceases to be a director or employee of the Corporation or any Subsidiary on account of injury, ill-health, disability, redundancy or retirement or any other reason which the Committee reasonably considers justifies the exercise of the Approved Option, the Approved Option may be exercised within the period of three months following such cessation or, at the discretion of 17 18 the Committee, not later than three months after the first date following such cessation upon which the Approved Option could be exercised in circumstances in which section 185(3) of the Taxes Act would apply." (g) Section 8(i) shall be deleted in relation to Approved Options and be replaced with the following:- "No Option may be transferred, assigned or charged and any purported transfer assignment or charge shall cease the Option to lapse forthwith." (h) Section 8(j)(1) shall be deleted in relation to Approved Options and be replaced with the following:- "In the event of any variation of the share capital of the Corporation by way of capitalization or rights issue, consolidation, sub-division or reduction of capital or otherwise, the number of shares of Common Stock subject to any Approved Option and the option price for each of these shares shall be adjusted in such manner as the Committee is satisfied is fair and reasonable provided that:- (1) the aggregate amount payable on the exercise of an Approved Option in full is not increased; (2) the option price for a share of Common Stock is not reduced below its nominal value; (3) no adjustment shall be made without the prior approval of the Board of the Inland Revenue; and (4) following the adjustment the shares of Common Stock continue to satisfy the conditions specified in Paragraphs 10 to 14 inclusive of Schedule 9." (i) Section 8(j)(3) shall be modified in relation to Approved Options by inserting the following:- "If any company ("the Acquiring Company"): (1) obtains Control of the Corporation as a result either of making a general offer to acquire the whole of the issued share capital of the Corporation which is made on a condition such that if it is satisfied the person making the offer will have Control of the Corporation, or making an offer to acquire all the common stock in the Corporation which is of the same class as the Common Stock; or 18 19 (2) obtains Control of the Corporation in pursuance of a compromise or arrangement sanctioned by the court under section 425 of the (UK) Companies Act 1985 (or legislation that the Inland Revenue agrees is the overseas equivalent thereof); or (3) becomes bound or entitled to acquire common stock in the Corporation under sections 428 to 430 of the (UK) Companies Act 1985 (or legislation that the Inland Revenue agrees is the overseas equivalent thereof); any UK participant may at any time within: (4) the period of six months following the offerer obtaining Control of the Corporation and the satisfaction of any condition to which the offer was made pursuant to subsection (1) above; (5) the period of six months following the court sanctioning the compromise or arrangement pursuant to subsection (2) above; or (6) the period during which the Acquiring Company remains bound or entitled to acquire the Common Stock pursuant to subsection (3) above; by agreement with the Acquiring Company release his old Approved Option ("the Old Option") in consideration of the grant to him of a new Approved Option ("the New Option") which: (7) relates to shares in a different company (whether the Acquiring Company itself or some other company) which on the assumption that the Acquiring Company were the grantor of the Approved Option would be a company falling within Paragraph 10(b) or (c) of Schedule 9; (8) is a right to acquire such number of shares as on acquisition of the New Option has an aggregate Fair Market Value equal to the aggregate Fair Market Value of the shares of Common Stock subject to the Old Option on its release; (9) has an acquisition price per share such that the aggregate price payable on complete exercise equals the aggregate option price which would have been payable on complete exercise of the Old Option; and 19 20 (10) is otherwise equivalent to the Old Option (as defined in Paragraph 15(3) of Schedule 9). The New Option shall, for all other purposes of this Plan, be treated as having been acquired at the same time as the Old Option and, following release of the Old Option and the grant of the New Option, for the purposes of applying these rules thereto: (11) "Corporation" and "shares" in relation to the New Options shall be construed as if references to the Corporation and to the shares of Common Stock were references to the Acquiring Company and to shares in the Acquiring Company or (as the case may be) to the other company to which the New Options relate and to the shares in that other company; and (12) "Committee" shall mean the board of directors of the Acquiring Company or that other company or any committee designated to administer the Plan under Section 3. (j) Section 8(m) shall be modified in relation to Approved Options so that the word "objective" is inserted before "condition". 20. Administration of Plans and Amendments. In relation to Approved Options, Section 11 shall be read as if the following sentence had been added at the end thereof:- (a) "No amendments to the Subplan or to the Plan insofar as it applies to Approved Options shall become effective until they are approved by the UK Inland Revenue. (b) No Approved Options may be granted unless and until the Subplan is approved by the UK Inland Revenue." 20 21 Users/Hochman/General/NTL 1998 Non-Qualified Stock Option Plan 21 EX-10.5 11 BRIDGE LOAN AGREEMENT, DATED AS OF MARCH 17, 1999 1 Exhibit 10.5 ================================================================================ BRIDGE LOAN AGREEMENT dated as of March 17, 1999 among NTL INCORPORATED as Borrower, -------------------- THE LENDERS named herein, -------------------- and GOLDMAN SACHS CREDIT PARTNERS L.P., as Arranger and Administrative Agent ================================================================================ 2 TABLE OF CONTENTS Page ARTICLE I. DEFINITIONS.......................................................1 SECTION 1.1. DEFINED TERMS...................................................1 SECTION 1.2. INTERPRETATION.................................................22 ARTICLE II. THE CREDIT FACILITY.............................................22 SECTION 2.1. COMMITMENTS TO MAKE BRIDGE LOANS...............................22 SECTION 2.2. OPTION TO EXCHANGE BRIDGE LOANS FOR EXCHANGE NOTES.............23 SECTION 2.3. INTEREST; DEFAULT INTEREST.....................................24 SECTION 2.4. MANDATORY PREPAYMENT...........................................25 SECTION 2.5. OPTIONAL PREPAYMENT............................................25 SECTION 2.6. BREAKAGE COSTS; INDEMNITY......................................26 SECTION 2.7. EFFECT OF NOTICE OF PREPAYMENT.................................26 SECTION 2.8. PAYMENTS.......................................................26 SECTION 2.9. TAXES..........................................................28 SECTION 2.10. RIGHT OF SET OFF; SHARING OF PAYMENTS, ETC....................31 SECTION 2.11. CERTAIN FEES..................................................32 ARTICLE III. REPRESENTATIONS AND WARRANTIES.................................32 SECTION 3.1. [INTENTIONALLY OMITTED]........................................32 SECTION 3.2. ORGANIZATION; POWERS...........................................32 SECTION 3.3. DUE AUTHORIZATION AND ENFORCEABILITY...........................32 SECTION 3.4. NO CONFLICTS...................................................33 SECTION 3.5. NO VIOLATIONS; MATERIAL CONTRACTS..............................33 SECTION 3.6. CAPITAL STOCK; SUBSIDIARIES....................................33 SECTION 3.7. LIENS..........................................................34 SECTION 3.8. NO VIOLATION OF REGULATIONS OF BOARD OF GOVERNORS OF FEDERAL RESERVE SYSTEM................................................34 SECTION 3.9. GOVERNMENTAL REGULATIONS.......................................34 SECTION 3.10. FINANCIAL STATEMENTS; NO UNDISCLOSED LIABILITIES..............34 SECTION 3.11. FULL DISCLOSURE...............................................35 SECTION 3.12. PRIVATE OFFERING; RULE 144A MATTERS...........................35 SECTION 3.13. ABSENCE OF PROCEEDINGS........................................36 SECTION 3.14. TAXES.........................................................36 SECTION 3.15. FINANCIAL CONDITION; SOLVENCY.................................36 SECTION 3.16. ABSENCE OF CERTAIN CHANGES....................................36 SECTION 3.17. YEAR 2000 COMPLIANCE..........................................36 SECTION 3.18. PROPERTIES....................................................37 SECTION 3.19. PERMITS; REGISTRATION.........................................37 SECTION 3.20. ERISA.........................................................37 SECTION 3.21. ENVIRONMENTAL MATTERS.........................................38 SECTION 3.22. ACQUIRED BUSINESS.............................................38 ARTICLE IV. COVENANTS.......................................................38 SECTION 4.1. USE OF PROCEEDS................................................38 SECTION 4.2. NOTICE OF DEFAULT AND RELATED MATTERS..........................38 SECTION 4.3. REPORTS........................................................39 SECTION 4.4. COMPLIANCE CERTIFICATE.........................................39 SECTION 4.5. TAXES..........................................................40 SECTION 4.6. STAY, EXTENSION AND USURY LAWS.................................40 SECTION 4.7. RESTRICTED PAYMENTS............................................40 SECTION 4.8. DIVIDEND AND OTHER PAYMENT RESTRICTIONS AFFECTING RESTRICTED SUBSIDIARIES..................................................43 SECTION 4.9. INCURRENCE OF INDEBTEDNESS AND ISSUANCE OF PREFERRED STOCK.....44 SECTION 4.10. ASSET SALES...................................................46 SECTION 4.11. TRANSACTIONS WITH AFFILIATES..................................48 SECTION 4.12. LIENS.........................................................49 i 3 SECTION 4.13. CHANGE OF CONTROL.............................................49 SECTION 4.14. CORPORATE EXISTENCE...........................................50 SECTION 4.15. [INTENTIONALLY OMITTED].......................................50 SECTION 4.16. ADDITIONAL AMOUNTS............................................50 SECTION 4.17. [INTENTIONALLY OMITTED].......................................51 SECTION 4.18. [INTENTIONALLY OMITTED].......................................51 SECTION 4.19. MERGER; SALE OF ALL OR SUBSTANTIALLY ALL ASSETS...............51 SECTION 4.20. INSPECTION RIGHTS.............................................51 SECTION 4.21. SPECIAL RIGHTS................................................52 SECTION 4.22. NOTE GUARANTEES...............................................52 SECTION 4.23. OFFER TO PURCHASE.............................................53 ARTICLE V. CONDITIONS.......................................................53 SECTION 5.1. CORPORATE AND OTHER PROCEEDINGS................................53 SECTION 5.2. [INTENTIONALLY OMITTED]........................................54 SECTION 5.3. ABSENCE OF CERTAIN CHANGES.....................................54 SECTION 5.4. MARKET DISRUPTION..............................................54 SECTION 5.5. FINANCIAL STATEMENTS...........................................55 SECTION 5.6. LITIGATION, ETC................................................55 SECTION 5.7. PAYMENT OF FEES AND EXPENSES...................................55 SECTION 5.8. ESCROW AGREEMENT...............................................55 SECTION 5.9. EXCHANGE NOTES.................................................55 SECTION 5.10. REGISTRATION RIGHTS AGREEMENT.................................55 SECTION 5.11. DELIVERY OF OPINIONS..........................................56 SECTION 5.12. [INTENTIONALLY OMITTED].......................................56 SECTION 5.13. NO BREACH; NO DEFAULT.........................................56 SECTION 5.14. OTHER CONDITIONS..............................................56 SECTION 5.15. REPRESENTATIONS AND WARRANTIES................................56 SECTION 5.16. NO BREACH; NO DEFAULT.........................................56 SECTION 5.17. ABSENCE OF CERTAIN CHANGES....................................57 SECTION 5.18. MARKET DISRUPTION.............................................57 SECTION 5.19. FINANCIAL STATEMENTS..........................................57 SECTION 5.20. LITIGATION, ETC...............................................58 SECTION 5.21. PAYMENT OF FEES AND EXPENSES..................................58 SECTION 5.22. BORROWING NOTICE; BRIDGE NOTES................................58 SECTION 5.23. OFFER TO PURCHASE.............................................58 SECTION 5.24. SOLVENCY......................................................58 SECTION 5.25. ADDITIONAL MATTERS............................................59 ARTICLE VI. TRANSFER OF THE LOANS, THE INSTRUMENTS EVIDENCING SUCH LOANS AND THE SECURITIES; REPRESENTATIONS OF LENDERS; PARTICIPATIONS.................................................59 SECTION 6.1. TRANSFER OF THE LOANS, THE INSTRUMENTS EVIDENCING THE LOANS AND THE SECURITIES................................................59 SECTION 6.2. PERMITTED ASSIGNMENTS..........................................59 SECTION 6.3. PERMITTED PARTICIPANTS; EFFECT.................................60 SECTION 6.4. DISSEMINATION OF INFORMATION...................................60 SECTION 6.5. TAX TREATMENT..................................................61 SECTION 6.6. REPLACEMENT SECURITIES UPON TRANSFER OR EXCHANGE...............61 SECTION 6.7. REGISTER.......................................................61 ARTICLE VII. EVENTS OF DEFAULT..............................................61 SECTION 7.1. EVENTS OF DEFAULT..............................................61 SECTION 7.2. ACCELERATION...................................................63 SECTION 7.3. RIGHTS AND REMEDIES............................................63 SECTION 7.4. WAIVER OF PAST DEFAULTS........................................64 SECTION 7.5. RIGHTS OF LENDERS TO RECEIVE PAYMENT...........................64 ARTICLE VIII. DEBT SECURITIES...............................................64 ii 4 SECTION 8.1. DEBT SECURITIES................................................64 ARTICLE IX. TERMINATION.....................................................64 SECTION 9.1. TERMINATION....................................................64 SECTION 9.2. SURVIVAL OF CERTAIN PROVISIONS.................................64 ARTICLE X. INDEMNITY........................................................64 SECTION 10.1. INDEMNIFICATION...............................................64 SECTION 10.2. SETTLEMENT OF CLAIMS..........................................65 SECTION 10.3. APPEARANCE EXPENSES...........................................65 SECTION 10.4. INDEMNITY FOR TAXES, RESERVES AND EXPENSES....................66 SECTION 10.5. SURVIVAL OF INDEMNIFICATION...................................66 SECTION 10.6. LIABILITY NOT EXCLUSIVE; PAYMENTS.............................67 ARTICLE XI. THE ADMINISTRATIVE AGENT; THE ARRANGER..........................67 SECTION 11.1. APPOINTMENT...................................................67 SECTION 11.2. DELEGATION OF DUTIES..........................................67 SECTION 11.3. EXCULPATORY PROVISIONS........................................67 SECTION 11.4. RELIANCE BY THE ADMINISTRATIVE AGENT..........................68 SECTION 11.5. NOTICE OF DEFAULT.............................................68 SECTION 11.6. NON-RELIANCE ON THE ADMINISTRATIVE AGENT AND OTHER LENDERS....68 SECTION 11.7. INDEMNIFICATION...............................................69 SECTION 11.8. ADMINISTRATIVE AGENT, IN ITS INDIVIDUAL CAPACITY..............69 SECTION 11.9. SUCCESSOR ADMINISTRATIVE AGENT................................69 SECTION 11.10. ARRANGER....................................................70 ARTICLE XII. MISCELLANEOUS..................................................70 SECTION 12.1. EXPENSES; DOCUMENTARY TAXES...................................70 SECTION 12.2. NOTICES.......................................................70 SECTION 12.3. CONSENT TO AMENDMENTS AND WAIVERS.............................71 SECTION 12.4. PARTIES.......................................................72 SECTION 12.5. NEW YORK LAW; SUBMISSION TO JURISDICTION; WAIVER OF JURY TRIAL.72 SECTION 12.6. REPLACEMENT NOTES.............................................72 SECTION 12.7. [INTENTIONALLY OMITTED].......................................73 SECTION 12.8. MARSHALLING; RECAPTURE........................................73 SECTION 12.9. LIMITATION OF LIABILITY.......................................73 SECTION 12.10. INDEPENDENCE OF COVENANTS....................................73 SECTION 12.11. CURRENCY INDEMNITY...........................................73 SECTION 12.12. WAIVER OF IMMUNITY...........................................73 SECTION 12.13. FREEDOM OF CHOICE............................................74 SECTION 12.14. SUCCESSORS AND ASSIGNS.......................................74 SECTION 12.15. MERGER.......................................................74 SECTION 12.16. SEVERABILITY CLAUSE..........................................74 SECTION 12.17. REPRESENTATIONS, WARRANTIES AND AGREEMENTS TO SURVIVE DELIVERY............................................75 iii 5 EXHIBIT A FORM OF ASSIGNMENT AND ACCEPTANCE EXHIBIT B FORM OF BRIDGE NOTE EXHIBIT C FORM OF REGISTRATION RIGHTS AGREEMENT EXHIBIT D FORM OF ESCROW AGREEMENT EXHIBIT E FORM OF EXCHANGE NOTE INDENTURE EXHIBIT F-1 FORM OF OPINION OF SKADDEN, ARPS, SLATE, MEAGHER & FLOM LLP EXHIBIT F-2 FORM OF OPINION OF IN-HOUSE COUNSEL EXHIBIT G-1 FORM OF BRIDGE NOTE GUARANTEE EXHIBIT G-2 FORM OF EXCHANGE NOTE GUARANTEE EXHIBIT H-1 FORM OF OPINION TO BE DELIVERED IN CONNECTION WITH BRIDGE NOTE GUARANTEE EXHIBIT H-2 FORM OF OPINION TO BE DELIVERED IN CONNECTION WITH EXCHANGE NOTE GUARANTEE EXHIBIT I FORM OF SOLVENCY CERTIFICATE SCHEDULES: SCHEDULE 2.4 PERMITTED ISSUANCES UNDER SECTION 2.4 SCHEDULE 3.6 AUTHORIZED CAPITALIZATION OF THE BORROWER SCHEDULE 3.10(a) CONSOLIDATED BALANCE SHEET AND CONSOLIDATED STATEMENTS OF INCOME AND CASH FLOWS OF THE BORROWER SCHEDULE 3.10(b) BALANCE SHEET AND STATEMENTS OF INCOME OF DIAMOND CABLE COMMUNICATIONS PLC. SCHEDULE 3.10(c) PRO FORMA CONSOLIDATED BALANCE SHEET AND CONSOLIDATED STATEMENTS OF INCOME AND CASH FLOWS OF THE BORROWER SCHEDULE 3.13 ABSENCE OF PROCEEDINGS SCHEDULE 5.3 ABSENCE OF CERTAIN CHANGES iv 6 THIS BRIDGE LOAN AGREEMENT, dated as of March 17, 1999 (as amended, restated and/or otherwise modified from time to time, this "Agreement"), is by and between: (a) NTL Incorporated, a Delaware corporation (the "Borrower") and (b) Goldman Sachs Credit Partners L.P., as arranger and administrative agent (the "Administrative Agent"). The parties hereto agree as follows: ARTICLE I. DEFINITIONS Section 1.1. Defined Terms. As used in this Agreement, the following terms shall have the meanings specified below: "9 1/8% and 10% Diamond Indenture" means the Indenture dated as of February 6, 1998, between the Acquired Business and The Bank of New York, relating to the 9 1/8% Diamond Notes and the 10% Diamond Notes. "10 3/4% Diamond Indenture" means the Indenture dated as of February 27, 1997, between the Acquired Business and The Bank of New York, relating to the 10 3/4% Diamond Notes. "11 3/4% Diamond Indenture" means the Indenture dated as of December 15, 1995, between the Acquired Business and The Bank of New York, relating to the 11 3/4% Diamond Notes. "13 1/4% Diamond Indenture" means the Indenture dated as of September 28, 1994, between the Acquired Business and The Bank of New York, relating to the 13 1/4% Diamond Notes. "9 1/8% Diamond Notes" means the Acquired Business's 9 1/8% Senior Notes due February 1, 2008 issued pursuant to the 9 1/8% and 10% Diamond Indenture. "10% Diamond Notes" means the Acquired Business's 10% Senior Notes due February 1, 2008 pursuant to the 9 1/8 and 10% Diamond Indenture. "10 3/4% Diamond Notes" means the Acquired Business's 10 3/4% Senior Discount Notes due February 15, 2007 issued pursuant to the 10 3/4% Diamond Indenture. "11 3/4% Diamond Notes" means the Acquired Business's 11 3/4% Senior Discount Notes due December 15, 2005 issued pursuant to the 11 3/4% Diamond Indenture. "13 1/4% Diamond Notes" means the Acquired Business's 13 1/4% Senior Discount Notes due September 13, 2004 issued pursuant to the 13 1/4% Diamond Indenture. "9 1/2% Notes" means the Borrower's 9 1/2% Senior Notes due 2008 and the Borrower's 9 1/2% Series B Senior Notes due 2008. "9 3/4% Notes" means the Borrower's 9 3/4% Senior Deferred Coupon Notes due 2008 and the Borrower's 9 3/4% Series B Senior Deferred Coupon Notes due 2008. "10% Notes" means the Borrower's 10% Series B Senior Notes due 2007. 7 "10 3/4% Notes" means the Borrower's 10 3/4% Senior Deferred Coupon Notes due 2008 and the Borrower's 10 3/4% Series B Senior Deferred Coupon Notes due 2008. "11 1/2% Deferred Coupon Notes" means the Borrower's 11 1/2% Series B Senior Deferred Coupon Notes due 2006. "11 1/2% Notes" means the Borrower's 11 1/2% Senior Notes due 2008 and the Borrower's 11 1/2% Series B Senior Notes due 2008. "12 3/4% Notes" means the Borrower's 12 3/4% Series A Senior Deferred Coupon Notes due 2005. "123/8% Notes" means the Borrower's 123/8% Senior Deferred Coupon Notes due 2008. "7% Convertible Subordinated Notes" means the Borrower's 7% Convertible Subordinated Notes due 2008 governed by the indenture dated as of December 16, 1998. "Acquired Business" means Diamond Cable Communications plc. "Acquired Debt" means with respect to any specified Person, Indebtedness of any other Person (the "Acquired Person") existing at the time such Acquired Person merged with or into or became a Subsidiary of such specified Person, including Indebtedness incurred in connection with, or in contemplation of, such Acquired Person merging with or into or becoming a Subsidiary of such specified Person. "Acquired Person" has the meaning specified in the definition of Acquired Debt. "Acquisition" means the Diamond Cable Acquisition. "Additional Amounts" has the meaning specified in the Bridge Notes. "Adjusted Total Assets" means the total amount of assets of the Borrower and its Restricted Subsidiaries (including the amount of any Investment in any Non-Restricted Subsidiary), except to the extent resulting from write-ups of assets (other than write-ups in connection with accounting for acquisitions in conformity with GAAP), after deducting therefrom (i) all current liabilities of the Borrower and its Restricted Subsidiaries, and (ii) all goodwill, trade names, trademarks, patents, unamortized debt discount and expense and other like intangibles, all as calculated in conformity with GAAP. For purposes of this Adjusted Total Assets definition, (a) assets shall be calculated less applicable accumulated depreciation, accumulated amortization and other valuation reserves, and (b) all calculations shall exclude all intercompany items. "Adjusted Total Controlled Assets" means the total amount of assets of the Borrower and its Cable Controlled Subsidiaries, except to the extent resulting from write-ups of assets (other than write-ups in connection with accounting for acquisitions in conformity with GAAP), after deducting therefrom (i) all current liabilities of the Borrower and such Cable Controlled Subsidiaries; and (ii) all goodwill, trade names, trademarks, patents, unamortized debt discount and expense and other like intangibles of the Borrower and such Restricted Subsidiaries, all as calculated in conformity with GAAP; provided that Adjusted Total Controlled Assets shall be reduced (to the extent not otherwise reduced in accordance with GAAP) by an amount equal to the aggregate amount of all Investments of the Borrower or any such Cable Controlled Subsidiaries in any Person other than a Cable Controlled Subsidiary, except Cash Equivalents. For purposes of this Adjusted Total Controlled Assets definition, (a) assets 2 8 shall be calculated less applicable accumulated depreciation, accumulated amortization and other valuation reserves, and (b) all calculations shall exclude all intercompany items. "Administrative Agent" means Goldman Sachs Credit Partners L.P., acting as administrative agent pursuant to Article XI or any successor or replacement Administrative Agent, acting in such capacity. "Affected Party" means any Lender, any Lender's LIBOR Lending Office, any beneficial owner of any Lender, and their respective successors and assigns. "Affiliate" of any specified Person means any other Person directly or indirectly controlling or controlled by or under direct or indirect common control with such specified Person. For purposes of this definition, "control" (including, with correlative meanings, the terms "controlling," "controlled by" and "under common control with"), as used with respect to any Person, shall mean the possession, directly or indirectly, of the power to direct or cause the direction of the management or policies of such Person, whether through the ownership of voting securities, by agreement or otherwise; provided, however, that beneficial ownership of 10% or more of the voting securities of a Person shall be deemed to be control. Neither the Lenders nor any of their Affiliates will be treated as an Affiliate of the Borrower or any of its Subsidiaries for purposes of this Agreement. "Agent" means any Registrar or Paying Agent. "Agreement" has the meaning specified in the preamble to this Agreement, as the same may be amended or supplemented from time to time. "Anniversary Date" means first anniversary of Funding Date A, which shall be the initial Funding Date hereunder. "Annualized Pro Forma EBITDA" means, with respect to any Person, such Person's Pro Forma EBITDA for the latest fiscal quarter multiplied by four. "Arranger" means Goldman Sachs Credit Partners L.P. acting as arranger in connection with the Bridge Loans. "Asset Sale" means (i) any sale, lease, transfer, conveyance or other disposition of any assets (including by way of a sale-and-leaseback) other than the sale or transfer of inventory or goods held for sale in the ordinary course of business (provided that the sale, lease, transfer, conveyance or other disposition of all or substantially all of the assets of the Borrower shall be governed by Section 4.13 or 4.19 hereof) or (ii) any issuance, sale, lease, transfer, conveyance or other disposition of any Equity Interests of any of the Borrower's Restricted Subsidiaries to any Person; in either case other than (A) to (w) the Borrower, (x) any Wholly Owned Subsidiary, or (y) any Subsidiary which is a Subsidiary of the Borrower on the date hereof provided that at the time of and after giving effect to such issuance, sale, lease, transfer, conveyance or other disposition to such Subsidiary, the Borrower's ownership percentage in such Subsidiary is equal to or greater than such percentage on the date hereof or (B) the issuance, sale, transfer, conveyance or other disposition of Equity Interests of a Subsidiary in exchange for capital contributions made on a pro rata basis by the holders of the Equity Interests of such Subsidiary. "Assignment and Acceptance" shall mean an assignment and acceptance entered into by a Lender and an assignee, and accepted by the Administrative Agent, in the form of Exhibit A or such other form as shall be approved by the Administrative Agent. 3 9 "Bankruptcy Law" means Title 11 of the U.S. Code or any similar federal or state law for the relief of debtors. "Base Rate" means, for any day, the sum of higher of (i) the Federal Funds Rate for such day plus 400 basis points and (ii) the Prime Rate for such day. Any change in the Base Rate due to a change in the Prime Rate or the Federal Funds Rate shall be effective on the effective date of such change in the Prime Rate or Federal Funds Rate. "Base Rate Loan" means a Bridge Loan at any time that the interest rate thereon is computed with reference to the Base Rate. "beneficial owner" and "beneficial ownership" each has the meaning as defined in Rule 13d-3 and Rule 13d-5 under the Exchange Act. "Board" means the Board of Governors of the Federal Reserve System of the United States or any successor. "Board of Directors" means the Board of Directors of the Borrower, or any authorized committee of the Board of Directors. "Borrower" has the meaning specified in the preamble to this Agreement. "Borrowing Notice" has the meaning specified in Section 2.1(c). "Bridge Loan" means, collectively, up to $1.35 billion in aggregate principal amount of Series A Bridge Loans, Series B Bridge Loans and Series C Bridge Loans made by Lenders to the Borrower. "Bridge Note" means a promissory note of the Borrower in the form attached as Exhibit B hereto evidencing the Bridge Loan of any Lender. "Bridge Note Guarantee" has the meaning specified in Section 4.22. "Business Day" means each day other than a Legal Holiday. "Cable Assets" means tangible or intangible assets, licenses (including, without limitation, Licenses) and computer software used in connection with a Cable Business. "Cable Business" means (i) any Person directly or indirectly operating, or owning a license to operate, a cable and/or television and/or telephone and/or telecommunications system or service principally within the United Kingdom and/or the Republic of Ireland and (ii) any Cable Related Business. "Cable Controlled Property" means a Cable Controlled Subsidiary or a Cable Asset held by a Cable Controlled Subsidiary. "Cable Controlled Subsidiary" means any Restricted Subsidiary that is primarily engaged, directly or indirectly, in one or more Cable Businesses. "Cable Related Business" means a Person which directly or indirectly owns or provides a service or product used in a Cable Business, including, without limitation, any television programming, 4 10 production and/or licensing business or any programming guide or telephone directory business or content or software related thereto. "Capital Markets Transaction" has the meaning specified in Section 2.4(a). "Capital Stock" means any and all shares, interests, participations, rights or other equivalents (however designated) of corporate stock, including, without limitation, partnership interests. "Capital Stock Sale Proceeds" means the aggregate net sale proceeds (including from the sale of any property received for the Capital Stock or the fair market value of such property, as determined by an independent appraisal firm) received by the Borrower or any Subsidiary of the Borrower from the issue or sale (other than to a Subsidiary) by the Borrower of any class of its Capital Stock after October 14, 1993 (including Capital Stock of the Borrower issued after October 14, 1993 upon conversion of or in exchange for other securities of the Borrower). "Cash Equivalents" means (i) Permitted Currency, (ii) securities issued or directly and fully guaranteed or insured by the United States government, a European Union member government or any agency or instrumentality thereof having maturities of not more than six months and two days from the date of acquisition, (iii) certificates of deposit and eurodollar time deposits with maturities of six months or less from the date of acquisition, bankers' acceptances with maturities not exceeding six months and overnight bank deposits, in each case with any commercial bank(s) domiciled in the United States, the United Kingdom, the Republic of Ireland or any other European Union member having capital and surplus in excess of $500 million, (iv) repurchase obligations with a term of not more than seven days for underlying securities of the types described in clauses (ii) and (iii) entered into with any financial institution meeting the qualifications specified in clause (iii) above, (v) commercial paper rated P-1 or the equivalent thereof by Moody's or A-1 or the equivalent thereof by S & P and in each case maturing within six months and two days after the date of acquisition and (vi) money market funds at least 95% of the assets of which constitute Cash Equivalents of the kinds described in clauses (i)-(v) of this definition. "Change of Control" means (i) the sale, lease or transfer of all or substantially all of the assets of the Borrower to any "Person" or "group" (within the meaning of Sections 13(d)(3) and 14(d)(2) of the Exchange Act or any successor provision to either of the foregoing, including any group acting for the purpose of acquiring, holding or disposing of securities within the meaning of Rule 13d-5(b)(1) under the Exchange Act) (other than any Permitted Holder), (ii) the approval by the requisite stockholders of the Borrower of a plan of liquidation or dissolution of the Borrower, (iii) any "Person" or "group" (within the meaning of Sections 13(d) and 14(d)(2) of the Exchange Act or any successor provision to either of the foregoing, including any group acting for the purpose of acquiring, holding or disposing of securities within the meaning of Rule 13d- 5(b)(1) under the Exchange Act), other than any Permitted Holder, becomes the "beneficial owner" (as defined in Rule 13d-3 under the Exchange Act) of more than 50% of the total voting power of all classes of the voting stock of the Borrower and/or warrants or options to acquire such voting stock, calculated on a fully diluted basis, unless, as a result of such transaction, the ultimate direct or indirect ownership of the Borrower is substantially the same immediately after such transaction as it was immediately prior to such transaction, or (iv) during any period of two consecutive years, individuals who at the beginning of such period constituted the Borrower's Board of Directors (together with any new directors whose election or appointment by such board or whose nomination for election by the shareholders of the Borrower was approved by a vote of a majority of the directors then still in office who were either directors at the beginning of such period or whose election or nomination for election was previously so approved) cease for any reason to constitute a majority of the Borrower's Board of Directors then in office. 5 11 "Change of Control Fee" means a fee equal to 1.00% of the principal amount of the Bridge Loans prepaid pursuant to the Change of Control Offer. "Change of Control Offer" has the meaning specified in Section 4.13(a). "Change of Control Payment" has the meaning specified in Section 4.13(a). "Change of Control Payment Date" has the meaning specified in Section 4.13(a). "Closing Date" means the date on which the conditions set forth in Article V subsection (A) are satisfied or waived in accordance with Section 12.3 and the parties hereto have executed and delivered this Agreement. "Code" has the meaning specified in Section 3.20. "Commitment" means, with respect to any Lender, the amount set forth opposite such Lender's signature on the signature pages of this Agreement. "Commitment Letter" means that certain letter agreement, dated as of March 4, 1999, among the Borrower and Goldman Sachs Credit Partners L.P., as amended, modified or supplemented from time to time. "Consolidated Interest Expense" means, for any Person, for any period, the amount of interest in respect of Indebtedness (including amortization of original issue discount, amortization of debt issuance costs, and non-cash interest payments on any Indebtedness and the interest portion of any deferred payment obligation and after taking into account the effect of elections made under any Interest Rate Agreement, however denominated, with respect to such Indebtedness), the amount of Redeemable Dividends, Restricted Subsidiary Preferred Stock Dividends and the interest component of rentals in respect of any capital lease obligation paid, in each case whether accrued or scheduled to be paid or accrued by such Person and its Subsidiaries (other than Non-Restricted Subsidiaries) during such period to the extent such amounts were deducted in computing Consolidated Net Income, determined on a consolidated basis in accordance with GAAP. For purposes of this definition, interest on a capital lease obligation shall be deemed to accrue at an interest rate reasonably determined by such Person to be the rate of interest implicit in such capital lease obligation in accordance with GAAP consistently applied. "Consolidated Net Income" means, with respect to any Person, for any period, the aggregate of the Net Income of such Person and its Subsidiaries (other than Non-Restricted Subsidiaries) for such period, on a consolidated basis, determined in accordance with GAAP; provided that (i) the Net Income of any Person that is not a Subsidiary or that is accounted for by the equity method of accounting shall be included only to the extent of the amount of dividends or distributions paid to the referent Person or a Wholly Owned Subsidiary, (ii) the Net Income of any Person that is a Subsidiary (other than a Subsidiary of which at least 80% of the Capital Stock having ordinary voting power for the election of directors or other governing body of such Subsidiary is owned by the referent Person directly or indirectly through one or more Subsidiaries) shall be included only to the extent of the amount of dividends or distributions paid to the referent Person or a Wholly Owned Subsidiary, (iii) the Net Income of any Person acquired in a pooling of interests transaction for any period prior to the date of such acquisition shall be excluded and (iv) the cumulative effect of a change in accounting principles shall be excluded. 6 12 "Continuing Rate" with respect to each Interest Period from and after the Anniversary Date, will be determined on the second Business Day immediately preceding such Interest Period and will be the greatest of the following (expressed as a percentage per annum): (i) the LIBOR Rate plus 600 basis points, (ii) the sum of the yield (expressed as a percentage per annum) then in effect for United States Treasury Notes with a remaining maturity closest to 9 years from the Anniversary Date (provided, however, that if the remaining term of the Bridge Loans is not equal to the constant maturity of a United States Treasury Note for which a weekly average yield is given, such yield on United States Treasury Notes shall be obtained by linear interpolation (calculated to the nearest one-twelfth of a year) from the weekly average yields of United States Treasury Notes for which such yields are given) plus 553 basis points, and (iii) the sum of the Single B Goldman Sachs High Yield Index Rate then in effect plus 25 basis points. "Continuing Spread" means zero basis points at all times during the period commencing on and including the Anniversary Date and ending on the 90th day thereafter, and increasing by 25 basis points on the 90th day after the Anniversary Date and by an additional 25 basis points on the last day of each 90-day period thereafter for so long as any Bridge Loans are outstanding. "Convertible Subordinated Notes" means the Borrower's 7% Convertible Subordinated Notes issued pursuant to an indenture dated as of June 12, 1996, between the Borrower and The Chase Manhattan Bank (formerly known as Chemical Bank), as trustee. "Credit Facility" means the Facilities Agreement, dated October 17, 1997, between NTL (UK) Group Inc., as principal guarantor, Chase Manhattan plc, as arranger, Chase Manhattan International Limited, as agent and security trustee and the Chase Manhattan Bank as issuer, as such Facilities Agreement may be supplemented, amended, restated, modified, renewed, refunded, replaced or refinanced, in whole or in part, from time to time in an aggregate outstanding principal amount not to exceed the greater of (i) (pound)555 million and (ii) the amount of the aggregate commitments thereunder as the same may be increased after March 13, 1998 as contemplated by the Facilities Agreement as amended or supplemented to March 13, 1998, but in no event greater than (pound)875 million, less in each case, the aggregate amount of all net proceeds of asset sales that have been applied to permanently reduce Indebtedness under the Credit Facility pursuant Section 4.10 of the indenture, dated November 6, 1998, between the Borrower and The Chase Manhattan Bank, governing the 123/8% Notes. "Cumulative EBITDA" means the cumulative EBITDA of the Borrower from and after the date hereof to the end of the fiscal quarter immediately preceding the date of a proposed Restricted Payment, or, if such cumulative EBITDA for such period is negative, minus the amount by which such cumulative EBITDA is less than zero; provided, however, that EBITDA of Non-Restricted Subsidiaries shall not be included. "Cumulative Interest Expense" means the aggregate amount of Consolidated Interest Expense paid, accrued or scheduled to be paid or accrued by the Borrower from the date hereof to the end of the fiscal quarter immediately preceding a proposed Restricted Payment, determined on a consolidated basis in accordance with GAAP. "Custodian" means any receiver, interim receiver, receiver and manager, trustee, assignee, liquidator, sequestrator, custodian or similar official under any Bankruptcy Law. 7 13 "Debt Securities" means debt securities or preferred stock issued by the Borrower or any of its Affiliates which have either been registered with the SEC and sold pursuant to a registration statement in a public offering or privately placed or otherwise sold in an offering exempt from registration with the SEC to refinance the Bridge Loans, in accordance with the provisions of the Engagement Letter. "Default" means any event that is, or with the passage of time or the giving of notice or both would be, an Event of Default. "Diamond Cable Acquisition" means the acquisition of all of the issued and outstanding ordinary shares of the Acquired Business pursuant to the Diamond Cable Acquisition Agreement. "Diamond Cable Acquisition Agreement" means that certain Share Exchange Agreement dated as of June 16, 1998, as amended, among the Borrower and the Shareholders of the Acquired Business, with respect to the purchase of the issued and outstanding ordinary shares of the Acquired Business. "Diamond Indentures" means, collectively, the 13 1/4% Diamond Indenture, the 11 3/4% Diamond Indenture, the 10 3/4% Diamond Indenture and the 9 1/8% and 10% Diamond Indenture. "Diamond Notes" means, collectively, the 13 1/4% Diamond Notes, the 11 1/4% Diamond Notes, the 10 3/4% Diamond Notes, the 9 1/8% Diamond Notes and the 10% Diamond Notes. "Disqualified Stock" means any Capital Stock which, by its terms (or by the terms of any security into which it is convertible or for which it is exchangeable), or upon the happening of any event, matures or is mandatorily redeemable, pursuant to a sinking fund obligation or otherwise, or redeemable at the option of the holder thereof, in whole or in part, on or prior to the date on which the Notes mature. "dollars" or "$" shall mean lawful money of the United States of America. "EBITDA" means, for any Person, for any period, an amount equal to (A) the sum of (i) Consolidated Net Income for such period (exclusive of any gain or loss realized in such period upon an Asset Sale), plus (ii) the provision for taxes for such period based on income or profits to the extent such income or profits were included in computing Consolidated Net Income and any provision for taxes utilized in computing net loss under clause (i) hereof, plus (iii) Consolidated Interest Expense for such period, plus (iv) depreciation for such period on a consolidated basis, plus (v) amortization of intangibles for such period on a consolidated basis, plus (vi) any other non-cash item reducing Consolidated Net Income for such period (excluding any such non-cash item to the extent that it represents an accrual of or reserve for cash expenses in any future period or amortization of a prepaid cash expense that was paid in a prior period), minus (B) all non-cash items increasing Consolidated Net Income for such period, all for such Person and its Subsidiaries determined in accordance with GAAP consistently applied. "Equity Interests" means Capital Stock and all warrants, options or other rights to acquire Capital Stock (but excluding any Indebtedness that is convertible into, or exchangeable for Capital Stock). "Engagement Letter" means that certain letter agreement, dated as of March 4, 1999, between the Borrower and Goldman, Sachs & Co. entered into in connection with the Commitment Letter, as amended, modified or supplemented from time to time. 8 14 "ERISA" means the Employee Retirement Income Security Act of 1974, as amended, and any regulation promulgated thereunder. "ERISA Affiliate" means any trade or business (whether or not incorporated) that, together with the Borrower or any of its Subsidiaries is treated as a single employer under Section 414(b) or (c) of the Code, or solely for purposes of Section 302 of ERISA and Section 412 of the Code, is treated as a single employer under Section 414 of the Code. "ERISA Event" means (a) any "reportable event," as defined in Section 4043 of ERISA or the regulations issued thereunder, with respect to a Plan except a reportable event for which the requirement of notice to the PBGC had been waived; (b) the adoption of any amendment to a Plan that would require the provision of security pursuant to Section 401(a)(29) of the Code or Section 307 of ERISA; (c) the existence with respect to any Plan of an "accumulated funding deficiency" (as defined in Section 412 of the Code or Section 302 of ERISA), whether or not waived; (d) the filing pursuant to Section 412(d) of the Code or Section 303(d) of ERISA of an application for a waiver of the minimum funding standard with respect to any Plan; (e) the incurrence of any liability in excess of $1,000,000 under Title IV of ERISA with respect to the termination of any Plan or the withdrawal or partial withdrawal of the Borrower or any of its Subsidiaries or any of their ERISA Affiliates from any Plan or Multiemployer Plan; (f) the receipt by the Borrower or any of its Subsidiaries or any ERISA Affiliate from the PBGC or a plan administrator of a Multiemployer Plan of any notice relating to the intention to terminate any Plan or Plans or to appoint a trustee to administer any Plan; (g) the receipt by the Borrower or any of its Subsidiaries or any ERISA Affiliate of any notice concerning the imposition of Withdrawal Liability in excess of $1,000,000 or a determination that a Multiemployer Plan is, or is expected to be, insolvent or in reorganization, within the meaning of Title IV of ERISA; (h) the occurrence of a "prohibited transaction" with respect to which the Borrower or any of its Subsidiaries is a party to the prohibited transaction and is a "disqualified person" (within the meaning of Section 4975 of the Code) or with respect to which the Borrower or any of its Subsidiaries could otherwise be liable; and (i) any other event or condition with respect to a Plan or Multiemployer Plan that could reasonably be expected to result in liability of the Borrower or any of its Subsidiaries. "Escrow Agent" means The Chase Manhattan Bank, in its capacity as escrow agent pursuant to the Escrow Agreement. "Escrow Agreement" means the escrow agreement among the Borrower, the Administrative Agent, on behalf of the Lenders, and the Escrow Agent, in the form attached as Exhibit D. "Eurocurrency Liabilities" has the meaning assigned to that term in Regulation D of the Board, as in effect from time to time. "European Union member" means any country that is or becomes a member of the European Union or any successor organization thereto. "Event of Default" means any event specified in Section 7.1. "Exchange Act" means the Securities Exchange Act of 1934, as amended. "Exchange Date" has the meaning specified in Section 2.2(a). "Exchange Note Guarantee" has the meaning specified in Section 4.22. 9 15 "Exchange Note Indenture" means, the indenture relating to the Exchange Notes, among the Borrower, as issuer, and the Exchange Note Trustee, in the form attached as Exhibit E, as the same may be amended, modified or supplemented from time to time. "Exchange Notes" means the senior unsecured Exchange Notes of the Borrower, placed into escrow on the Closing Date, to be issued in exchange for certain Bridge Loans pursuant to Section 2.2, in the form attached as an exhibit to the Exchange Note Indenture. "Exchange Note Trustee" means, on any date of determination, the trustee under the Exchange Note Indenture. "Exchange Notice" has the meaning specified in Section 2.2(a). "Exchange Rate Contract" means, with respect to any Person, any currency swap agreements, forward exchange rate agreements, foreign currency futures or options, exchange rate collar agreements, exchange rate insurance and other agreements or arrangements, or combination thereof, the principal purpose of which is to provide protection against fluctuations in currency exchange rates. An Exchange Rate Contract may also include an Interest Rate Agreement. "Existing Indebtedness" means Indebtedness of the Borrower and its Subsidiaries in existence on the date hereof, until such amounts are repaid, including, without limitation, the Existing Notes. "Existing Notes" means the Old Notes and the Convertible Subordinated Notes. "Expiration Date" has the meaning specified in the Diamond Indentures. "Federal Funds Rate" means, for any day, the rate per annum (rounded upwards, if necessary, to the nearest 1/100 of 1%) equal to the weighted average of the rates on overnight Federal funds transactions with members of the Federal Reserve System arranged by Federal funds brokers on such day, as published by the Federal Reserve Bank of New York on the Business Day next succeeding such day; provided that (a) if such day is not a Business Day, the Federal Funds Rate for such day shall be such rate on such transactions on the next preceding Business Day as so published on the next succeeding Business Day and (b) if no such rate is so published on such next succeeding Business Day, the Federal Funds Rate for such day shall be the average rate charged to the Administrative Agent (in its individual capacity) on such day on such transactions as determined by the Administrative Agent. "Fee Letter" means that certain Fee Letter, dated as of March 4, 1999, among the Borrower, Goldman Sachs Credit Partners L.P. and Goldman, Sachs & Co., entered into in connection with the Commitment Letter, as amended, modified or supplemented from time to time. "Foreign Lender" means a Lender that is a foreign person for purposes of the U.S. federal income tax. "Foreign Participant" means a Participant that is a foreign person for purposes of the U.S. federal income tax. "Funding Date" means, collectively, Funding Date A and Funding Date B. 10 16 "Funding Date A" means the date on which the conditions set forth in Article V subsection (B) are satisfied or waived in accordance with Section 12.3 and the initial Bridge Loans are made by the Lenders. "Funding Date B" means the date on which the conditions set forth in Article V subsection (B) are satisfied or waived in accordance with Section 12.3 and Bridge Loans are made by the Lenders on a date after Funding Date A. "GAAP" means generally accepted accounting principles set forth in the opinions and pronouncements of the Accounting Principles Board of the American Institute of Certified Public Accountants and statements and pronouncements of the Financial Accounting Standards Board or in such other statements by such other entity as have been approved by a significant segment of the accounting profession, which are in effect on the date of this Agreement and are applied on a consistent basis. "Governmental Entity" means any government or political subdivision or any agency, authority, bureau, central bank, commission, department or instrumentality thereof, or any court, tribunal, grand jury or arbitrator, in each case whether foreign or domestic. "Government Securities" means direct obligations of, or obligations guaranteed by, the United States of America, and the payment for which the United States pledges its full faith and credit. "Guarantee" means a guarantee (other than by endorsement of negotiable instruments for collection in the ordinary course of business), direct or indirect, in any manner (including, without limitation, letters of credit and reimbursement agreements in respect thereof), of all or any part of any Indebtedness. "Guarantor" means the Parent as guarantor under the Note Guarantees. "Indebtedness" means, with respect to any Person, any indebtedness of such Person, whether or not contingent, in respect of borrowed money or evidenced by bonds, notes, debentures or similar instruments or letters of credit (or reimbursement agreements in respect thereof) or representing the balance deferred and unpaid of the purchase price of any property (including pursuant to capital leases and sale-and-leaseback transactions) or representing any hedging obligations under an Exchange Rate Contract or an Interest Rate Agreement, except any such balance that constitutes an accrued expense or trade payable, if and to the extent any of the foregoing indebtedness (other than obligations under an Exchange Rate Contract or an Interest Rate Agreement) would appear as a liability upon a balance sheet of such Person prepared in accordance with GAAP, and also includes, to the extent not otherwise included, the Guarantee of items which would be included within this definition. The amount of any Indebtedness outstanding as of any date shall be the accreted value thereof, in the case of any Indebtedness issued with original issue discount. "Indemnified Party" has the meaning specified in Section 10.1. "Initial Period" means the period beginning on (and including) Funding Date A to (but not including) the Anniversary Date. "Initial Spread" means 500 basis points at all times during the period commencing on and including Funding Date A and ending on the 90th day thereafter, and increasing by 25 basis points on the 90th day after Funding Date A and by an additional 25 basis points on the last day of each 90-day period thereafter for so long as any Bridge Loans are outstanding during the Initial Period. 11 17 "Interbank Offered Rate" means, for any LIBOR Rate Loan for any Interest Period therefor, the rate per annum (rounded upwards, if necessary, to the nearest 1/100th of 1%) appearing on Telerate Page 3750 (or any successor page) as the London interbank offered rate for deposits in dollars at approximately 11:00 a.m. (London time) two Business Days prior to the first day of such Interest Period for a term comparable to such Interest Period. If for any reason such rate is not available, the term "Interbank Offered Rate" shall mean, for any LIBOR Rate Loan for any Interest Period therefor, the rate per annum (rounded upwards, if necessary, to the nearest 1/100th of 1%) appearing on Reuters Screen LIBO Page as the London interbank offered rate for deposits in dollars at approximately 11:00 a.m. (London Time) two Business Days prior to the first day of such Interest Period for a term comparable to such Interest Period; provided, however, if more than one rate is specified on Reuters Screen LIBO Page, the applicable rate shall be the arithmetic mean of all such rates. "Interest Rate Agreement" means, for any Person, any interest rate swap agreement, interest rate cap agreement, interest rate collar agreement, or other similar agreement, the principal purpose of which is to protect the party indicated therein against fluctuations in interest rates. "Interest Payment Date" means (i) the last day of each Interest Period in the case of LIBOR Rate Loans and Base Rate Loans, (ii) the Maturity Date, and (iii) the date of any prepayment of all or any portion of the principal of the Loans. "Interest Period" means, (i) in the case of the first Interest Period applicable to the Bridge Loans made by the Lenders on Funding Date A, the period commencing on and including Funding Date A and ending on the numerically corresponding date in the month thereafter, (ii) in the case of the first Interest Period applicable to the Bridge Loans made by the Lenders on Funding Date B, the period commencing on and including Funding Date B and ending on the date specified in clause (i), and (iii) in the case of each subsequent Interest Period for all Bridge Loans, the period beginning on the last day of the prior Interest Period and ending on the numerically corresponding date in the month thereafter; provided, however, that if any Interest Period would end on a day other than a Business Day, such Interest Period shall be extended until the next succeeding Business Day unless the next Business Day would fall in the next calendar month, in which case such Interest Period shall end on the next preceding Business Day. Notwithstanding the foregoing, no Interest Period in respect of the Bridge Loans may extend beyond the Maturity Date and each Interest Period that would otherwise commence before and end after the Maturity Date shall end on the Maturity Date. "Investment Bank" means, Goldman, Sachs & Co. "Investment Grade" means BBB- or higher by S&P or Baa3 or higher by Moody's or the equivalent of such ratings by S&P or Moody's. In the event that the Borrower shall be permitted to select any other Rating Agency, the equivalent of such ratings by such Rating Agency shall be used. "Investments" means, with respect to any Person, all investments by such Person in other Persons (including Affiliates) in the forms of loans (including Guarantees), advances or capital contributions (excluding commission, travel and similar advances and loans, joint property ownership and other arrangements, in each case, made to officers and employees made in the ordinary course of business), purchases or other acquisitions for consideration of Indebtedness, Equity Interests or other securities and all other items that are or would be classified as investments on a balance sheet prepared in accordance with GAAP. "Legal Holiday" means a Saturday, a Sunday or any other day on which banking institutions in the City of New York, or at a place of payment are authorized by law, regulation or executive order to remain closed and, if such day relates to a payment or prepayment of principal of, or 12 18 interest on, or an Interest Period for, LIBOR Rate Loans, any day which is also a day on which dealings in dollar deposits are carried out in the London interbank markets. "Lenders" shall mean (a) each financial institution that has executed a counterpart to this Agreement (other than any such financial institution that has ceased to be a party hereto pursuant to an Assignment and Acceptance) and (b) any financial institution that has become a party hereto pursuant to an Assignment and Acceptance. "LIBOR Lending Office" means, with respect to any Lender, the office, if any, of such Lender specified from time to time as its "LIBOR Lending Office" in a written notice to the Borrower. "LIBOR Rate" means the interest rate per annum calculated according to the following formula: LIBOR Rate = Interbank Offered Rate ---------------------------- 1 - LIBOR Reserve Percentage "LIBOR Rate Loan" means a Bridge Loan at any time the interest rate thereon is computed with reference to the LIBOR Rate. "LIBOR Reserve Percentage" means, for any day, that percentage (expressed as a decimal) which is in effect from time to time under Regulation D or any successor regulation, as the maximum reserve requirement (including any basic, supplemental, emergency, special, or marginal reserves) applicable with respect to Eurocurrency liabilities as that term is defined in Regulation D (or against any other category of liabilities that includes deposits by reference to which the interest rate of LIBOR Rate Loans is determined), whether or not any Administrative Agent or any Lender has any Eurocurrency liabilities subject to such requirements, without benefits of credits or proration, exceptions or offsets that may be available from time to time to any Administrative Agent or any Lender. The LIBOR Rate shall be adjusted automatically on and as of the effective date of any change in the LIBOR Reserve Percentage. "License" means any license issued or awarded pursuant to the Broadcasting Act 1990, the Cable and Broadcasting Act 1984, the Telecommunications Act 1984 or the Wireless Telegraphy Act 1948 (in each case, as such Acts may, from time to time, be amended, modified or re-enacted) (or equivalent statutes of any jurisdiction) to operate or own a Cable Business. "Lien" means, with respect to any asset, any mortgage, lien, pledge, charge, security interest or encumbrance of any kind in respect of such asset, whether or not filed, recorded or otherwise perfected under applicable law (including any conditional sale or other title retention agreement, any lease in the nature thereof, any option or other agreement to sell or give a security interest in and any filing of or agreement to give any financing statement under the Uniform Commercial Code (or equivalent statutes) of any jurisdiction). "Liquidated Damages" means all liquidated damages then owing pursuant to Section 3(c) of the Registration Rights Agreement. "Loan" means a Bridge Loan. "Loan Documents" means this Agreement, the Bridge Notes and the Related Documents. 13 19 "Loan Register" means the register maintained by the Administrative Agent on behalf of the Borrower pursuant to Section 6.7. "Majority Lenders" means, at any time, Lenders holding at least a majority of the then aggregate unpaid principal balance of the Bridge Loans, or, if no such principal amount is then outstanding, Lenders having at least a majority of the total Commitments; provided that, for purposes hereof, neither the Borrower nor any of its Affiliates shall be included in (i) the Lenders holding such amount of the Loans or having such amount of the Commitments or (ii) determining the aggregate unpaid principal amount of the Bridge Loans or the total Commitments. "Material Adverse Effect" means any circumstance or event that (i) has, or may be reasonably expected to have, any materially adverse effect upon the validity or enforceability of this Agreement or any of the Loan Documents, (ii) is, or may be reasonably expected to be, materially adverse to the consolidated financial condition, business, operations, assets, liabilities, management or prospects of the Borrower and its Subsidiaries, taken as a whole, or (iii) materially impairs the ability of the Borrower to consummate the Bridge Loans or to perform its Obligations under the Loan Documents. "Material Contracts" has the meaning specified in Section 3.4. "Material License" means a License held by the Borrower or any of its Subsidiaries which License at the time of determination covers a number of Net Households which equals or exceeds 5% of the aggregate number of Net Households covered by all of the Licenses held by the Borrower and its Subsidiaries at such time. "Material Subsidiary" means (i) NTL UK Group, Inc. (formerly known as OCOM Sub II, Inc.), NTL Investment Holdings Limited, NTL Group Limited, CableTel Surrey Limited, CableTel Cardiff Limited, CableTel Glasgow, CableTel Newport and CableTel Kirklees and (ii) any other Subsidiary of the Borrower which is a "significant subsidiary" as defined in Rule 1-02(w) of Regulation S-X under the Securities Act and the Exchange Act (as such Regulation is in effect on the date hereof). "Maturity Date" means (i) in the case of the Series A Bridge Loans and the related Bridge Notes, September 14, 2004; (ii) in the case of the Series B Bridge Loans and the related Bridge Notes, December 16, 2005; and (iii) in the case of the Series C Bridge Loans and the related Bridge Notes, February 2, 2008. "Monetize" means a strategy with respect to Equity Interests that generates an amount of cash equal to the fair value of such Equity Interests. "Moody's" means Moody's Investors Service, Inc. and its successors. "Multiemployer Plan" means a multiemployer plan as defined in Section 4001(a)(3) of ERISA. "Net Cash Proceeds" means the aggregate cash proceeds received by the Borrower or any of its Subsidiaries or any parent holding company of the Borrower (including any cash and cash equivalents and cash payments received by way of deferred payment of principal pursuant to a note, an installment receivable or otherwise, but only as and when received) from any Capital Markets Transaction, net of the direct costs relating to such Asset Sale (including, without limitation, legal, accounting and investment banking fees, and sales commissions) and any relocation expenses incurred as a result thereof, taxes paid or payable as a result thereof (after taking into account any available tax credits or deductions and any tax sharing arrangements), amounts required to be applied to the repayment 14 20 of Indebtedness secured by a Lien on the asset or assets the subject of such Asset Sale and any reserve for adjustment in respect of the sale price of such asset or assets, plus any cash received in connection with the Monetizing, if any, of Equity Interests pursuant to Section 4.10(a)(iii)(y). "Net Households" means the product of (i) the number of households covered by a License in the United Kingdom and (ii) the percentage of the entity holding such License which is owned directly or indirectly by the Borrower. "Net Income" means, with respect to any Person for a specific period, the net income (loss) of such Person during such period, determined in accordance with GAAP, excluding, however, any gain (but not loss) during such period, together with any related provision for taxes on such gain (but not loss), realized during such period in connection with any Asset Sale (including, without limitation, dispositions pursuant to sale-and-leaseback transactions), and excluding any extraordinary gain (but not loss) during such period, together with any related provision for taxes on such extraordinary gain (but not loss). "Non-Controlled Subsidiary" means an entity which is not a Cable Controlled Subsidiary. "Non-Recourse Debt" means Indebtedness or that portion of Indebtedness as to which none of the Borrower, nor any Restricted Subsidiary: (i) provides credit support (including any undertaking, agreement or instrument which would constitute Indebtedness); (ii) is directly or indirectly liable; or (iii) constitutes the lender. "Non-Restricted Subsidiary" means (A) a Subsidiary that (a) at the time of its designation by the Board of Directors as a Non-Restricted Subsidiary has not acquired any assets (other than as specifically permitted by clause (e) of "Permitted Investments" or Section 4.7 hereof), at any previous time, directly or indirectly from the Borrower or any of its Restricted Subsidiaries, (b) has no Indebtedness other than Non-Recourse Debt and (c) that at the time of such designation, after giving pro forma effect to such designation, the ratio of Indebtedness to Annualized Pro Forma EBITDA of the Borrower is equal to or less than the ratio of Indebtedness to Annualized Pro Forma EBITDA of the Borrower immediately preceding such designation, provided, however, that if the ratio of Indebtedness to Annualized Pro Forma EBITDA of the Borrower immediately preceding such designation is 6:1 or less, then the ratio of Indebtedness to Annualized Pro Forma EBITDA of the Borrower may be 0.5 greater than such ratio immediately preceding such designation; (B) any Subsidiary which (a) has been acquired or capitalized out of or by Equity Interests (other than Disqualified Stock) of the Borrower or Capital Stock Sale Proceeds therefrom, (b) has no Indebtedness other than Non-Recourse Debt and (c) is designated as a Non-Restricted Subsidiary by the Board of Directors or is merged, amalgamated or consolidated with or into, or its assets or capital stock is to be transferred to, a Non-Restricted Subsidiary; or (C) any Subsidiary of a Non-Restricted Subsidiary. "Note Guarantees" means, collectively, the Bridge Note Guarantee and the Exchange Note Guarantee. "Obligations" means all now existing and hereafter arising obligations and liabilities of the Borrower to any and all of the Lenders arising under or in connection with the Loan Documents, whether absolute or contingent, and whether for principal, interest, penalties, premium, fees, indemnifications, reimbursements, damages (including, if applicable, Additional Amounts and Liquidated Damages), or otherwise and specifically including post-petition interest (whether or not an allowable claim). 15 21 "Offering Documents" means an offering memorandum or prospectus together with such other documents, instruments and agreements as the Investment Bank may request in its sole discretion in connection with the issuance of the Debt Securities. "Offer to Purchase" has the meaning specified in the Diamond Indentures. "Officer" means, with respect to any Person, the Chairman of the Board, the Chief Executive Officer, the President, the Chief Operation Officer, the Chief Financial Officer, the Treasurer, any Assistant Treasurer, the Controller, the Secretary, any Assistant Secretary or any Vice-President of such Person. "Officers' Certificate" means a certificate signed on behalf of the Borrower by two Officers of the Borrower, one of whom must be the principal executive officer, the principal financial officer, the treasurer or the principal accounting officer of the Borrower. "Old Notes" means the 123/8% Notes, the 12 3/4% Notes, the 11 1/2% Deferred Coupon Notes, the 10 3/4% Notes, the 10% Notes, the 9 3/4% Notes, the 9 1/2% Notes, the 11 1/2% Notes and the 7% Convertible Subordinated Notes. "Other Qualified Notes" means any outstanding senior indebtedness of the Borrower issued pursuant to an indenture having a provision substantially similar to Section 4.10 of the indenture, dated November 6, 1998, between the Borrower and The Chase Manhattan Bank, governing the 123/8% Notes (including, without limitation, the 123/8% Notes, the 12 3/4% Notes, the 11 1/2% Deferred Coupon Notes, the 10 3/4% Notes, the 10% Notes, the 9 3/4% Notes, the 9 1/2% Notes and the 11 1/2% Notes). "Other Taxes" has the meaning specified in Section 2.9(b). "Parent" means any Person that is formed or organized as a holding company for the Borrower and its Subsidiaries. "Participants" has the meaning specified in Section 6.3(a). "Participations" has the meaning specified in Section 6.3. "PBGC" means the Pension Benefit Guaranty Corporation or any entity succeeding to any of its functions under ERISA. "Permitted Acquired Debt" means, with respect to any Acquired Person (including, for this purpose, any Non-Restricted Subsidiary at the time such Non-Restricted Subsidiary becomes a Restricted Subsidiary), Acquired Debt of such Acquired Person and its Subsidiaries in an amount (determined on a consolidated basis) not exceeding the sum of (x) amount of the gross book value of property, plant and equipment of the Acquired Person and its Subsidiaries as set forth on the most recent consolidated balance sheet of the Acquired Person (which may be unaudited) prior to the date it becomes an Acquired Person and (y) the aggregate amount of any Cash Equivalents held by such Acquired Person at the time it becomes an Acquired Person. "Permitted Currency" means the lawful currency of the United States or a European Union member. "Permitted Designee" means (i) a spouse or a child of a Permitted Holder, (ii) trusts for the benefit of a Permitted Holder or a spouse or child of a Permitted Holder, (iii) in the event of the death 16 22 or incompetence of a Permitted Holder, his estate, heirs, executor, administrator, committee or other personal representative or (iv) any corporation or entity at least 50% of the voting power of all classes of the voting stock of which is owned by one or more Permitted Holders. "Permitted Holder" means George S. Blumenthal, J. Barclay Knapp and their Permitted Designees. "Permitted Investments" means (a) any Investments in the Borrower or in a Cable Controlled Property or in a Qualified Subsidiary (including, without limitation, (i) Guarantees of Indebtedness of the Borrower, a Cable Controlled Subsidiary or a Qualified Subsidiary, (ii) Liens securing such Indebtedness or Guarantees or (iii) the payment of any balance deferred and unpaid of the purchase price of any Qualified Subsidiary); (b) any Investments in Cash Equivalents; (c) Investments by the Borrower in Indebtedness of a counter-party to an Exchange Rate Contract for hedging a Permitted Currency exchange risk that are made, for purposes other than speculation, in connection with such contract to hedge not more than the aggregate principal amount of the Indebtedness being hedged (or, in the case of Indebtedness issued with original issue discount, based on the amounts payable after the amortization of such discount); (d) Investments by the Borrower or any Subsidiary of the Borrower in a Person, if as a result of such Investment (i) such Person becomes a Cable Controlled Subsidiary or (ii) such Person is merged, consolidated or amalgamated with or into, or transfers or conveys substantially all of its assets to, or is liquidated into, the Borrower or a Wholly Owned Subsidiary of the Borrower; and (e) any issuance, transfer or other conveyance of Equity Interests (other than Disqualified Stock) in the Borrower (or any Capital Stock Sale Proceeds therefrom) to a Subsidiary of the Borrower. "Permitted Liens" means (a) Liens in favor of the Borrower; (b) Liens on property of a Person existing at the time such Person is merged into or consolidated with the Borrower or any Subsidiary of the Borrower; provided, that such Liens were in existence prior to the contemplation of such merger or consolidation and do not secure any property or assets of the Borrower or any of its Subsidiaries other than the property or assets subject to the Liens prior to such merger or consolidation; (c) liens imposed by law, such as carriers', warehousemen's and mechanics' liens and other similar liens arising in the ordinary course of business which secure payment of obligations not more than 60 days past due or are being contested in good faith and by appropriate proceedings; (d) Liens existing on the date hereof; (e) Liens for taxes, assessments or governmental charges or claims that are not yet delinquent or that are being contested in good faith by appropriate proceedings promptly instituted and diligently concluded; provided, that any reserve or other appropriate provision as shall be required in conformity with GAAP shall have been made therefor and (f) easements, rights of way, restrictions and other similar easements, licenses, restrictions on the use of properties or minor imperfections of title that, in the aggregate, are not material in amount, and do not in any case materially detract from the properties subject thereto or interfere with the ordinary conduct of the business of the Borrower or its Restricted Subsidiaries. "Permitted Non-Controlled Assets" means Equity Interests in any Person primarily engaged, directly or indirectly, in one or more Cable Businesses if such Equity Interests (x) were acquired by the Borrower or any of its Restricted Subsidiaries in connection with any Asset Sale or any Investment otherwise permitted under the terms of this Agreement and (y) to the extent that, after giving pro forma effect to the acquisition thereof by the Borrower or any of its Restricted Subsidiaries, Adjusted Total Controlled Assets is greater than 80% of Adjusted Total Assets based on the most recent consolidated balance sheet of the Borrower. "Person" means any individual, corporation, partnership, limited liability company, joint venture, association, joint stock company, trust, unincorporated organization or government or any agency or political subdivision thereof. 17 23 "Plan" means any employee pension benefit plan (other than a Multiemployer Plan) subject to the provisions of Title IV of ERISA or Section 412 of the Code or Section 307 of ERISA, and in respect of which the Borrower or any of its Subsidiaries or any ERISA Affiliate is (or, if such plan were terminated, would under Section 4069 of ERISA be deemed to be) an "employer" as defined in Section 3(5) of ERISA. "Preferred Stock" means the 13% Senior Redeemable Exchangeable Preferred Stock of the Borrower with an original aggregate liquidation preference of $100,000,000. "Prepayment Date" has the meaning specified in Section 2.7. "Prime Rate" means the rate that UBS announces from time to time as its prime lending rate, as in effect from time to time. The Prime Rate is a reference rate and does not necessarily represent the lowest or best rate actually charged to any customer. The Administrative Agent or any other Lender under this Agreement may make commercial loans or other loans at rates of interest at, above or below the Prime Rate. "Pro Forma EBITDA" means for any Person, for any period, the EBITDA of such Person as determined on a consolidated basis for such Person and its Subsidiaries in accordance with GAAP after giving effect to the following: (i) if, during or after such period, such Person or any of its Subsidiaries shall have made any Asset Sale, Pro Forma EBITDA of such Person and its Subsidiaries for such period shall be reduced by an amount equal to the Pro Forma EBITDA (if positive) directly attributable to the assets which are the subject of such Asset Sale for the period or increased by an amount equal to the Pro Forma EBITDA (if negative) directly attributable thereto for such period and (ii) if, during or after such period, such Person or any of its Subsidiaries completes an acquisition of any Person or business which immediately after such acquisition is a Subsidiary of such Person or whose assets are held directly by such Person or a Subsidiary of such Person, Pro Forma EBITDA shall be computed so as to give pro forma effect to the acquisition of such Person or business (without giving effect to clause (iii) of the definition of Consolidated Net Income); and provided further that, with respect to the Borrower, all of the foregoing references to "Subsidiary" or "Subsidiaries" shall be deemed to refer only to a "Restricted Subsidiary" or "Restricted Subsidiaries" of the Borrower. "Qualified Subsidiary" means a Wholly Owned Subsidiary, or an entity that will become a Wholly Owned Subsidiary after giving effect to the transaction being considered, that at the time of and after giving effect to the consummation of the transaction under consideration, (i) is a Cable Business or holds only Cable Assets, (ii) has no Indebtedness (other than Indebtedness being incurred to consummate such transaction) and (iii) has no encumbrances or restrictions (other than such encumbrances or restrictions imposed or permitted by this Agreement, the indentures governing the Old Notes or any other instrument governing unsecured indebtedness of the Borrower which is pari passu with the Bridge Notes) on its ability to pay dividends or make any other distributions to the Borrower or any of its Subsidiaries. "Rating Agencies" means (i) S&P and (ii) Moody's. "Redeemable Dividend" means, for any dividend with regard to Disqualified Stock, the quotient of the dividend divided by the difference between one and the maximum statutory federal income tax rate (expressed as a decimal number between 1 and 0) then applicable to the issuer of such Disqualified Stock. "Registration Rights Agreement" means the registration rights agreement between the Borrower and the Administrative Agent pursuant to which the Exchange Notes are required to be 18 24 registered for public sale, in the form attached as Exhibit C, as amended, modified or supplemented from time to time. "Regulation D" means Regulation D of the Board as the same may be amended or supplemented from time to time. "Related Documents" means the Exchange Notes, the Exchange Note Indenture, the Registration Rights Agreement, the Escrow Agreement, the Engagement Letter, the Fee Letter and the Note Guarantees. "Replacement Assets" means (w) Cable Assets, (x) Equity Interests of any Person engaged, directly or indirectly, primarily in a Cable Business, which Person is or will become on the date of acquisition thereof a Restricted Subsidiary as a result of the Borrower's acquiring such Equity Interests, (y) Permitted Non-Controlled Assets or (z) any combination of the foregoing. "Request" has the meaning specified in Section 8.1(b). "Restricted Investment" means an Investment other than a Permitted Investment. "Restricted Payments" has the meaning specified in Section 4.7. "Restricted Subsidiary" means any Subsidiary of the Borrower which is not a Non-Restricted Subsidiary. "Restricted Subsidiary Preferred Stock Dividend" means, for any dividend with regard to preferred stock of a Restricted Subsidiary, the quotient of the dividend divided by the difference between one and the maximum statutory federal income tax rate (expressed as a decimal number between 1 and 0) then applicable to the issuer of such preferred stock. "SEC" means the Securities and Exchange Commission. "Securities" means, collectively, the Exchange Notes. "Securities Act" means the Securities Act of 1933, as amended. "Series A Bridge Loans" means the Bridge Loans made by the Lenders to fund the Offer to Purchase the Series A Diamond Notes. "Series B Bridge Loans" means the Bridge Loans made by the Lenders to fund the Offer to Purchase the Series B Diamond Notes. "Series C Bridge Loans" means the Bridge Loans made by the Lenders to fund the Offer to Purchase the Series C Diamond Notes. "Series A Diamond Notes" means the 13 1/4% Diamond Notes. "Series B Diamond Notes" means the 11 3/4% Diamond Notes. "Series C Diamond Notes" means the 10 3/4% Diamond Notes, the 9 1/8% Diamond Notes and the 10% Diamond Notes. 19 25 "Single B Goldman Sachs High Yield Index Rate" means the rate (expressed as a percentage per annum) determined by Goldman, Sachs & Co. to represent the weighted average of the market yields during the preceding month on high-yield debt securities issued in minimum issue sizes of $100 million each. "Solvency Certificate" means a certificate in the form of Exhibit I attached hereto. "Solvent" means, with respect to any Person on a pro forma basis immediately after the consummation of the transaction that (i) the fair value of such Person's assets exceeds its stated liabilities, including all contingent liabilities, (b) the present fair saleable value of such Person's assets exceeds that amount that will be required to pay its probable liability on its debts as they become absolute and mature, (c) such Person will not have incurred debts beyond its ability to pay such debts as they mature, and (d) the then remaining assets of such Person will not constitute an unreasonably small capital for such Person's businesses. "S&P" means Standard & Poor's Ratings Group and its successors. "Subordinated Debentures" means the debentures exchangeable by the Borrower for the Preferred Stock in accordance with the Certificate of Designations therefor. "Subsidiary" means any corporation, association or other business entity of which more than 50% of the total voting power of shares of Capital Stock entitled (without regard to the occurrence of any contingency) to vote in the election of directors, managers or trustees thereof is at the time owned or controlled, directly or indirectly, by any Person or one or more of the other Subsidiaries of that Person or a combination thereof. "Taxes" has the meaning specified in Section 2.9(a). "Transaction Documents" means the Loan Documents and the Diamond Cable Acquisition Agreement. "Transactions" means, collectively, the Acquisition, the related repurchase of the Diamond Notes pursuant to one or more Offers to Purchase made in accordance with the Diamond Indentures, the related financing transactions and each of the other transactions contemplated by the Transaction Documents. "Transferee" has the meaning specified in Section 6.4. "Trust Indenture Act" means the Trust Indenture Act of 1939, as amended. "UBS" means UBS A.G., Stamford Branch. "Unfunded Pension Liabilities" means the `amount of unfunded benefit liabilities' as defined in Section 4001(a)(18) of ERISA. "Voting Stock" of any Person as of any date means the Capital Stock of such Person that is at the time entitled to vote in the election of the board of directors of such Person. "Weighted Average Life to Maturity" means, when applied to any Indebtedness at any date, the number of years obtained by dividing (a) the sum of the products obtained by multiplying (x) the amount of each then remaining installment, sinking fund, serial maturity or other required payments 20 26 of principal, including payment at final maturity, in respect thereof, by (y) the number of years (calculated to the nearest one-twelfth) that will elapse between such date and the making of such payment, by (b) the then outstanding principal amount of such Indebtedness. "West Street" means West Street Fund I, L.L.C., an Affiliate of Goldman Sachs Credit Partners L.P. "Wholly Owned Restricted Subsidiary" of any Person means a Restricted Subsidiary of such Person all of the outstanding Capital Stock or other ownership interests of which (other than directors' qualifying shares) shall at the time be owned (i) by such Person, (ii) by one or more Wholly Owned Restricted Subsidiaries of such Person or (iii) by such Person and one or more Wholly Owned Restricted Subsidiaries of such Person. "Wholly Owned Subsidiary" means, at any time, a Restricted Subsidiary all of the Capital Stock of which (except directors' qualifying shares) is at the time owned directly or indirectly by the Borrower. "Withdrawal Liabilities" means liability to a Multiemployer Plan as a result of a complete or partial withdrawal from such Multiemployer Plan, as such terms are defined in Part I of Subtitle E of Title IV of ERISA. "Year 2000 Problem" has the meaning specified in Section 3.17. Section 1.2. Interpretation. In this Agreement, the singular includes the plural and the plural includes the singular; words implying any gender include the other genders; references to any section, exhibit or schedule are to sections, exhibits or schedules hereto unless otherwise indicated; references to statutes are to be construed as including all statutory provisions consolidating, amending or replacing the statute referred to; references to "writing" include printing, typing, lithography and other means of reproducing words in a visible form; "including" following a word or phrase shall not be construed to limit the generality of such word or phrase; and an accounting term not otherwise defined has the meaning assigned to it in accordance with GAAP. ARTICLE II. THE CREDIT FACILITY Section 2.1. Commitments to Make Bridge Loans. (a) In reliance upon the representations and warranties of the Borrower set forth herein and subject to the terms and conditions herein set forth, each of the Lenders severally agrees to make Bridge Loans to the Borrower on each Funding Date. The proceeds of each Bridge Loan shall be disbursed by wire transfer on the applicable Funding Date as provided in written instructions delivered by the Borrower to each of the Lenders on the Business Day prior to the applicable Funding Date. Each Bridge Loan will mature on the applicable Maturity Date. (b) On Funding Date A, which shall be the initial Funding Date hereunder, the aggregate principal amount of Bridge Loans that shall be funded by the Lenders shall be an amount less than or equal to the Commitment. On Funding Date B, which shall be the second Funding Date hereunder, the aggregate principal amount of the Bridge Loans that shall be funded by the Lenders shall be an amount less than or equal to (x) the Commitment, less (y) the aggregate principal amount of the Bridge Loans made by the Lenders on Funding Date A. Notwithstanding any other provision herein to the contrary, the Lenders, subject to the terms and conditions set forth herein, shall be obligated to make 21 27 Bridge Loans to the Borrower during the ten (10) Business Days immediately succeeding (and including) the Expiration Date. (c) The Borrower shall have given the Administrative Agent an irrevocable written notice (a "Borrowing Notice") prior to 10:00 A.M., New York City time, at least three (3) Business Days prior to the applicable Funding Date. Upon receipt of a Borrowing Notice, the Administrative Agent shall promptly notify the Lenders thereof. Each Borrowing Notice shall specify (i) the aggregate principal amount and the maturity dates of the Diamond Notes that have been tendered in accordance with the Diamond Indentures and (ii) the aggregate principal amount of the Series A Bridge Loans, the Series B Bridge Loans and the Series C Bridge Loans, as the case may be, that the Borrower is requesting the Lenders to make hereunder. The Series A Bridge Loans shall be used to fund the repurchase of the Series A Diamond Notes, the Series B Bridge Loans shall be used to fund the repurchase of the Series B Diamond Notes and the Series C Bridge Loans shall be used to fund the repurchase of the Series C Diamond Notes. Section 2.2. Option to Exchange Bridge Loans for Exchange Notes. (a) On any Business Day on or after the Anniversary Date (if any), any Lender may elect to exchange all or any portion of its Bridge Loan for one or more Exchange Notes by giving not less than sixty days' prior irrevocable written notice (in the form of Annex A to the Escrow Agreement) of such election to the Borrower, the Administrative Agent and the Exchange Note Trustee, which written notice may be delivered by such Lender prior to or after the Anniversary Date, specifying the principal amount of its Bridge Loan to be exchanged (which shall be at least $1,000,000 and integral multiples of $1,000 in excess thereof), the maturity dates of the Exchange Notes (which shall correspond to the Maturity Date of such Bridge Loan) and, subject to Section 6.1, the name of the proposed registered holder and, subject to the terms of the Exchange Note Indenture, the amount of each Exchange Note requested, the date on which the Bridge Loans are to be exchanged (such date to be not less than sixty days from the date of such notice, the "Exchange Date") (each such notice, an "Exchange Notice"); provided, that in no event shall the aggregate principal amount of the Bridge Loans initially exchanged pursuant to this Section 2.2(a) be less than $25,000,000; provided that, during such sixty day period, such Lender may amend, modify or supplement the Exchange Notice and such Lender shall promptly deliver copies of such amendment, modification or supplement to the Borrower, the Administrative Agent and the Exchange Note Trustee. Any such exchanging Lender shall deliver its Bridge Notes to the Administrative Agent within ten Business Days immediately preceding the Exchange Date. Bridge Notes exchanged for Exchange Notes pursuant to this Section 2.2 shall be deemed repaid and canceled and in accordance with Section 2(a) of the Escrow Agreement and the Exchange Notes so issued shall be governed by and construed in accordance with the provisions of the Exchange Note Indenture. (b) Not later than the fifth Business Day immediately preceding the Exchange Date, the Administrative Agent shall deliver to the Escrow Agent the original Bridge Notes delivered to it by the exchanging Lender, together with the applicable Exchange Notice, pursuant to Section 2.2(a). The Escrow Agent shall return each Bridge Note so delivered to it to the Borrower in accordance with Section 2(a) of the Escrow Agreement and, if applicable, the Borrower shall issue a replacement Bridge Note to such Lender in an amount equal to the principal amount of such Lender's Bridge Loan that is not being exchanged. The Escrow Agent shall deliver the applicable Exchange Note(s) to the Exchange Note Trustee for authentication and delivery to the holder or holders thereof specified in the Exchange Notice (c) Each Exchange Note issued pursuant to this Section 2.2 shall bear interest at a fixed rate equal to the rate per annum borne by the Bridge Loan on the date of the Exchange Notice, plus 100 basis points and shall have a maturity date that corresponds to the Maturity Date of the Bridge Loan 22 28 exchanged for such Exchange Note. Accrued interest on Bridge Loans so exchanged shall be paid from and including the most recent date to which interest has been paid on the Bridge Loans so exchanged to (but not including) the Exchange Date and the Exchange Notes received in such exchange shall bear interest from and including the applicable Exchange Date. Section 2.3. Interest; Default Interest. (a) Interest Rate Applicable to Bridge Loans During the Initial Period. Subject to Sections 2.3(d), (e) and (f) below, the unpaid principal balance of all Bridge Loans outstanding at any time during the Initial Period shall accrue interest at a rate per annum equal to the sum of the LIBOR Rate plus the Initial Spread, changing on the first day of each Interest Period when and as the LIBOR Rate and/or the Initial Spread changes. If the Bridge Loans are Base Rate Loans (pursuant to Section 2.8(b) or (c)), the unpaid principal balance thereof shall bear interest until paid at a rate per annum equal to the sum of the Base Rate plus the Initial Spread, changing when and as the Base Rate and/or the Initial Spread changes. (b) Interest Rate Applicable to Bridge Loans As Of and Following the Anniversary Date. Subject to Sections 2.3(d), (e) and (f) below, interest on the unpaid principal balance of all Bridge Loans outstanding at any time on and after the Anniversary Date shall accrue interest at a rate per annum equal to the Continuing Rate plus the Continuing Spread, changing when and as the Continuing Rate and/or Continuing Spread changes. If the Bridge Loans are Base Rate Loans (pursuant to Section 2.8(b) or (c)), the unpaid principal balance thereof shall bear interest until paid at a rate per annum equal to the sum of the Base Rate plus the Continuing Spread, changing when and as the Base Rate and/or the Continuing Spread changes. (c) Basis of Computation of Interest; Payment of Interest. All interest shall be calculated for actual days elapsed on the basis of a 360-day year and shall be payable in arrears not later than 12:00 noon (New York City time) on each Interest Payment Date by wire transfer of immediately available funds in accordance with Section 2.8. (d) Default Interest. If the Borrower shall default in the payment of the principal of or interest on any Bridge Loan or any other Obligation becoming due hereunder, by acceleration or otherwise, or under any other Loan Document, the Borrower shall on demand from time to time pay interest, to the extent permitted by law, on such defaulted amount to but excluding the date of actual payment (after as well as before judgment) to the extent lawful, at a rate per annum equal to 200 basis points in excess of the otherwise applicable interest rate on the Bridge Loans. The Borrower shall pay such default interest and all interest accruing on any overdue Obligation in cash on demand from time to time. (e) Maximum Interest Rate. Notwithstanding anything contained in Section 2.3(a) or 2.3(b) above, in no event shall the interest rate on the Loans for any Interest Period exceed an annual rate equal to the lesser of (i) 16% and (ii) the maximum interest rate permitted by law. (f) Option to Pay Interest in Kind. Subject to Section 2.3 d), to the extent that the interest rate on the Bridge Loans for any Interest Period exceeds a rate equal to 14% per annum, the Borrower shall have the option to pay to each Lender, pro rata, all or a portion of the interest payable for such Interest Period in excess of the amount of interest that would have been payable on such date at an interest rate of 14% per annum, by capitalizing such excess interest and adding it to the aggregate principal amount of outstanding Bridge Loans held by such Lender, effective as of the applicable Interest Payment Date. The Borrower shall give the Administrative Agent an irrevocable notice that it will 23 29 exercise such right at least three Business Days prior to any Interest Payment Date as to which such right is to be exercised. (g) Payment of Interest and Liquidated Damages. Except as otherwise set forth herein, interest, Liquidated Damages and Additional Amounts on each Bridge Loan shall be payable in arrears on and to (i) each Interest Payment Date applicable to that Bridge Loan; (ii) any prepayment of that Bridge Loan, to the extent accrued on the amount being prepaid; (iii) at maturity, including final maturity; and (iv) if such Bridge Loan is a Bridge Loan that is exchanged for an Exchange Note, the date of exchange as specified in the relevant Exchange Notice. All interest, Liquidated Damages and Additional Amounts payments shall be made not later than 12:00 noon (New York City time) on the date specified for payment by wire transfer of immediately available funds in accordance with Section 2.8. Section 2.4. Mandatory Prepayment. (a)Subject to the second succeeding sentence, the Borrower shall prepay the Bridge Loans ratably in accordance with the aggregate outstanding principal balances thereof, with the Net Cash Proceeds of: (i) any direct or indirect public offering or private placement of the Debt Securities, or any debt or equity securities of the Borrower or the Parent, or any Subsidiary of the Borrower issued after the Closing Date (other than the securities listed on Schedule 2.4 hereto), (ii) the incurrence of any other Indebtedness by the Borrower or the Parent, or any Subsidiary of the Borrower after the Closing Date and (iii) any Asset Sale by the Borrower or the Parent, or any Subsidiary of the Borrower after the Closing Date (other than an Asset Sale permitted under Section 4.10 and subject to the requirements of the indentures of the Borrower and the Diamond Indentures, in each case, in existence as of the date hereof) (each of the transactions in the foregoing clauses (i), (ii) and (iii), a "Capital Markets Transaction"). With respect to any securities the net proceeds of which are used to redeem the Borrower's 9.9% Preferred Stock, Series A and/or the Borrower's 9.9% Preferred Stock, Series B (as described on Schedule 2.4 attached hereto), on the date that such securities are issued, the Borrower shall prepay the Bridge Loans in accordance with this Section 2.4 in an amount equal to the net proceeds used or to be used to redeem the Borrower's 9.9% Preferred Stock, Series A and/or the Borrower's 9.9% Preferred Stock, Series B. The Bridge Loans prepaid by the Borrower in accordance with this Section 2.4 shall be paid in the following order of priority: first, the Series C Bridge Loans, second, the Series B Bridge Loans, and third, the Series A Bridge Loans. Subject to Section 2.6 and Section 2.7, the Borrower shall, not later than the fifth Business Day following any Capital Markets Transaction, apply such Net Cash Proceeds or excess available cash to prepay the Bridge Loans pursuant to this Section 2.4, without premium or penalty, by paying to each Lender an amount equal to 100% of such Lender's pro rata share of the aggregate principal amount of the Bridge Loans to be prepaid, plus accrued and unpaid interest thereon to the Prepayment Date. (b) Subject to and in accordance with Section 4.13, in the event of any Change of Control, the Borrower shall offer to prepay the Loans pursuant to Section 4.13. Section 2.5. Optional Prepayment. Subject to Section 2.6 and Section 2.7 and the next succeeding sentence, the Borrower may prepay the Bridge Loans at any time without premium or penalty, in whole or in part, on a pro rata basis, by paying to each applicable Lender an amount equal to 100% of such Lender's pro rata share of the aggregate principal amount of Bridge Loans to be prepaid, plus accrued and unpaid interest thereon to the Prepayment Date. The Bridge Loans prepaid by the Borrower pursuant to this Section 2.5 shall be paid in the following order of priority, first, the Series C Bridge Loans, second, the Series B Bridge Loans, and, third, the Series A Bridge Loans. 24 30 Section 2.6. Breakage Costs; Indemnity. The Borrower agrees to indemnify and hold each Affected Party harmless from and against any loss or expense which such Affected Party sustains or incurs as a consequence of: (a) default by the Borrower in making any prepayment after the Borrower has given a notice thereof in accordance with the provisions of Section 2.4 or 2.5, as applicable, or (b) the mandatory or optional prepayment of LIBOR Rate Loans on a day that is not the last day of an Interest Period. Such indemnification may include an amount equal to the excess, if any of (i) such Affected Party's actual loss and expenses incurred (excluding lost profits) in connection with, or by reason of, any of the foregoing events and (ii) the excess, if any of (A) the amount of interest that would have accrued on the principal amount of Bridge Loans not so made or the principal amount of Bridge Loans so prepaid from the date of such proposed issuance or prepayment in the case of a failure to make Bridge Loans, to the last day of the Interest Period that would have commenced on the proposed date of funding, or in the case of any such prepayment, to the last day of the Interest Period in which such prepayment occurred, in each case at the applicable rate of interest for such Bridge Loans provided for herein (excluding, however, the Initial Spread or the Continuing Spread, as the case may be, included therein, if any) over (B) the amount of interest (as reasonably determined by such Affected Party) which would have accrued to such Affected Party on such amount by placing such amount on deposit for a period comparable to such Interest Period with leading banks in the interbank LIBOR market. A certificate as to any amounts payable pursuant to this Section 2.6 submitted to the Borrower by any Affected Party shall be conclusive in the absence of manifest error. This covenant shall survive the termination of this Agreement and the payment of the Obligations. Section 2.7. Effect of Notice of Prepayment. The Borrower shall notify the Lenders of any prepayment in writing at their addresses shown in the Loan Register, which notice shall be given at least five Business Days prior to any date set for prepayment of Loans (each such day, a "Prepayment Date"). Once such notice is sent or mailed, the Bridge Loans to be prepaid shall become due and payable on the Prepayment Date set forth in such notice. Such notice may not be conditional (other than receipt of proceeds in connection with a refinancing of the Bridge Loans). Section 2.8. Payments. (a) Wire Transfer. The principal of fees, premium, if any, interest, Liquidated Damages, if any, and Additional Amounts, if any, on each Bridge Loan and all other Obligations arising under the Loan Documents shall be payable by wire transfer in immediately available funds (in United States dollars) to the Administrative Agent for the respective accounts of the Lenders set forth below their signatures on the signature pages of this Agreement or otherwise designated in the Loan Register from time to time to the Borrower by any Lender at least three Business Days prior to the due date therefor. (b) Change in Costs. If prior to the first day of any Interest Period with respect to a LIBOR Rate Loan, any Lender shall have determined (which determination shall be conclusive and binding upon the Borrower) that: (i) by reason of circumstances affecting the relevant market, adequate and reasonable means do not exist for ascertaining the LIBOR Rate for such Interest Period, or (ii) the LIBOR Rate determined or to be determined for such Interest Period will not adequately and fairly reflect the cost to such Lender or its LIBOR Lending Office of maintaining its LIBOR Rate Loan during such Interest Period, then such Lender shall give facsimile or telephone notice thereof to the Borrower as soon as practicable thereafter. If such notice is given, the interest rate on each Bridge Loan of such 25 31 Lender for such Interest Period and for each subsequent Interest Period until such Lender gives notice to the Borrower otherwise shall equal the sum of the Base Rate plus the Initial Spread or the Continuing Spread, as the case may be. (c) Change in Law. Notwithstanding any other provision of this Agreement, if any Lender shall notify the Borrower that subsequent to the date hereof the introduction of, or any change in the interpretation of, any law or regulation makes it unlawful, or any Governmental Entity asserts that it is unlawful, for such Lender or its LIBOR Lending Office to make or maintain LIBOR Rate Loans hereunder, (i) the obligation of such Lender to make or maintain LIBOR Rate Loans shall be suspended until such Lender shall notify the Borrower that the circumstances causing such suspension no longer exist and (ii) any LIBOR Rate Loan then outstanding from such Lender shall immediately be converted into a Base Rate Loan. (d) Payments on Business Days. If any payment to be made hereunder or under any Bridge Note shall be due on a day other than a Business Day, such payment shall be made on the next succeeding Business Day (and such extension of time shall be included in computing interest in connection with such payment); provided, however, that if such succeeding Business Day falls in the next calendar month, such payment shall be made on the next preceding Business Day. (e) Partial Prepayments and Redemptions. All partial prepayments and redemptions of the outstanding principal balance of the Bridge Loans shall be made ratably amongst the applicable Lenders in accordance with their respective shares of the aggregate outstanding principal balance of the Bridge Loans eligible for prepayment or redemption; provided, however, that all partial prepayments and redemptions by the Borrower shall be made in the following order of priority: first, the Series C Bridge Loans, second, the Series B Bridge Loans, and third, the Series A Bridge Loans. (f) No Defense. To the fullest extent permitted by law, the Borrower shall make all payments hereunder and under the Bridge Notes regardless of any defense or counterclaim. (g) Allocation. Any money paid to, received by, or collected by any Administrative Agent or any Lender pursuant to this Agreement or any other Loan Document, shall be applied in the following order, at the date or dates fixed by the Administrative Agent: First: to any unpaid fees and reimbursement or unpaid expenses of the Administrative Agent hereunder and under the Fee Letter; Second: to the payment of all costs, expenses, other fees, commissions and taxes owing to any Lender hereunder; Third: to the indefeasible payment of all accrued interest to the date of such payment or collection and any Liquidated Damages and Additional Amounts; Fourth: to the indefeasible payment of the amounts then due and unpaid under this Agreement, the Bridge Notes or any other Loan Document for principal, in respect of which or for the benefit of which such money has been paid or collected, ratably, without preference or priority of any kind, according to the amounts due and payable on the Bridge Notes for principal; and Fifth: the balance, if any, to the Person lawfully entitled thereto. 26 32 Section 2.9. Taxes. (a) Taxes. Any and all payments by the Borrower hereunder or under the Bridge Notes, the Exchange Notes or any other Loan Document shall be made, in accordance with Section 2.8 or the other applicable provision of the applicable Loan Document, free and clear of and without deduction or withholding for or on account of any and all present or future taxes, levies, imposts, deductions, charges, withholdings or additions to tax, interest, penalties and all other liabilities with respect thereto, excluding (i) income, franchise or similar taxes imposed or levied on the Administrative Agent or the Lenders as a result of a present or former connection between the Administrative Agent or the Lenders and the jurisdiction of the governmental authority imposing such tax or any political subdivision or taxing authority thereof or therein (other than any such connection arising solely from such Administrative Agent or such Lenders having executed, delivered or performed its obligations or received a payment under, or enforced, this Agreement) and (ii) in the case of any Foreign Lender, any taxes that are in effect and that would apply to a payment hereunder or under the Bridge Notes, the Exchange Notes or any other Loan Document made to such Foreign Lender as of the date such Foreign Lender becomes a party to this Agreement, or in the case of any other Lender which changes its lending office with respect to a Bridge Loan or the Exchange Notes to an office outside the U.S., any taxes that are in effect and would apply to a payment to such Lender as of the date of the change of the lending office (all such non-excluded taxes, levies, imposts, deductions, charges, withholdings and liabilities being hereinafter referred to as "Taxes"). If the Borrower shall be required by law to deduct or withhold any Taxes from, or in respect of, any sum payable hereunder or under the Bridge Notes, the Exchange Notes or any other Loan Document to the Administrative Agent or the Lenders or any of their respective Affiliates who may become a Lender: (i) the sum payable thereunder shall be increased as may be necessary so that after making all required deductions or withholdings (including deductions or withholdings applicable to additional sums payable under this Section 2.9) the Administrative Agent or the Lenders or any of their respective Affiliates receives an amount equal to the sum it would have received had no such deductions or withholdings been made; (ii) the Borrower shall make such deductions or withholdings; and (iii) the Borrower shall pay the full amount deducted to the relevant tax authority or other authority in accordance with applicable laws. (b) Other Taxes. In addition, the Borrower agrees to pay any present or future stamp, mortgage recording or documentary taxes or any other excise or property taxes, charges or similar levies which arise from any payment made hereunder or under a Bridge Note, Exchange Note or other Loan Document or from the execution, delivery or registration of, or otherwise with respect to, this Agreement or the other Loan Documents (hereinafter referred to as "Other Taxes") and hold each Administrative Agent and each Lender harmless from and against any and all liabilities with respect to or resulting from any delay or omission (other than to the extent attributable to such Lender) to pay such Other Taxes. Each Lender represents that, to the best of its knowledge, except for any such Other Taxes that may be imposed under the federal, state or local laws of the United States (or any political subdivision thereof), it is not aware of any such stamp, mortgage recording or documentary taxes or any other excise or property taxes, charges or similar levies. (c) Indemnity. The Borrower will indemnify any Administrative Agent and any Lender for the full amount of Taxes or Other Taxes arising in connection with payments made under this Agreement or any other Loan Document (including, without limitation, any Taxes or Other Taxes imposed by any jurisdiction on amounts payable under this Section 2.9) paid by any Administrative Agent or any Lender or any of their respective Affiliates and any liability (including penalties, additions to tax interest and expenses) arising therefrom or with respect thereto. Payment under this indemnification shall be made within fifteen days from the date any Administrative Agent or any Lender or any of their respective Affiliates makes written demand therefor; provided, however, that the Borrower shall not be obligated to make payment to the Lender or the Administrative Agent (as the case 27 33 may be) pursuant to this Section 2.9(c) in respect of penalties, interest and other liabilities attributable to any Taxes or Other Taxes, if (i) written demand therefor has not been made by such Lender or such Administrative Agent within 60 days from the date on which such Lender or such Administrative Agent received written notice of the imposition of Taxes or Other Taxes by the relevant taxing or governmental authority, but only to the extent such penalties, interest and other similar liabilities are attributable to such failure or delay by the Administrative Agent or the Lender in making such written demand, (ii) such penalties, interest and other liabilities have accrued after the Borrower had indemnified or paid an additional amount due as of the date of such payment pursuant to this Section 2.9(c) or (iii) such penalties, interest and other liabilities are attributable to the gross negligence or willful misconduct of the Lender or the Administrative Agent or such Affiliates. After the Lender or the Administrative Agent (as the case may be) receives written notice of the imposition of the Taxes or Other Taxes which are subject to this Section 2.9(c), such Lender and the Administrative Agent will act in good faith to promptly notify the Borrower of its obligations hereunder; provided, however, that the failure to so act shall not, standing alone, affect the rights of the Administrative Agent or the Lenders under this Section 2.9(c). (d) Furnish Evidence to Administrative Agent. The Borrower will make reasonable efforts to obtain certified copies of tax receipts evidencing the payment of any Taxes deducted or withheld from each taxing authority imposing such Taxes. The Borrower will furnish to the Lenders, within 60 days after the date the payment of any Taxes so deducted or withheld is due pursuant to applicable law, original or certified copies of tax receipts evidencing such payment by the Borrower or, if such receipts are not obtainable, other evidence of such payments by the Borrower reasonably satisfactory to the Lenders. (e) Survival. Without prejudice to the survival of any other agreement of the Borrower hereunder, the agreements and obligations of the Borrower contained in this Section 2.9 shall survive the payment in full of all amounts due hereunder and under the Bridge Notes. (f) Mitigation. If the Borrower is required to pay additional amounts to or for the account of any Lender pursuant to this Section 2.9 as a result of a change in law or treaty occurring after such Lender first became a party to this Agreement, then such Lender will, at the request of the Borrower, change the jurisdiction of its applicable lending office if such change (i) will eliminate or reduce any such additional payment which may thereafter accrue and (ii) is, in such Lender's sole, reasonable discretion, determined not to be materially disadvantageous or cause unreasonable hardship to such Lender, provided that fees, charges, costs or expenses that are related to such change shall be borne by the Borrower on behalf of a Lender, and the mere existence of such expenses, fees or costs shall not be deemed to be materially disadvantageous or cause undue hardship to the Lender. Each Lender and each Administrative Agent agrees that it will (i) take all reasonable actions reasonably requested by the Borrower in writing that are without risk and material cost to such Lender or such Administrative Agent and consistent with the internal policies of such Lender and applicable legal and regulatory restrictions (as the case may be) to maintain all exemptions, if any, available to it from withholding taxes (whether available by treaty or existing administrative waiver) and (ii) to the extent reasonable and without risk and material cost to it, otherwise cooperate with the Borrower to minimize any amounts payable by the Borrower under this Section 2.9; provided, however, that in each case, any cost relating to such action or cooperation requested by the Borrower shall be borne by the Borrower. (g) Certification. Each Foreign Lender and Foreign Participant shall deliver to the Borrower and the Administrative Agent, and, if applicable, the assigning Lender (and, in the case of a Foreign Participant, to the Lender from which the related participation shall have been purchased) on or 28 34 before the date on which it becomes a party to this Agreement (or, in the case of a Foreign Participant, on or before the date on which such Participant purchases the related Participation) either: (i) two duly completed and signed copies of either Internal Revenue Service Form 1001 or its successor form or Form 4224 or its successor form and related applicable forms, as the case may be; or (ii) in the case of a Foreign Lender that is not a "bank" within the meaning of Section 881(c)(3)(A) of the Code and that does not comply with the requirements of clause (A) hereof, (x) a statement to the effect that such Lender is eligible for a complete exemption from withholding of U.S. Taxes under Code Section 871(h) or 881(c), and (y) two duly completed and signed copies of Internal Revenue Service Form W-8 or successor and related applicable form. Further, each Foreign Lender or Foreign Participant agrees (x) to deliver to the Borrower and the Administrative Agent, and, if applicable, the assigning Lender (and, in the case of a Foreign Participant, to the Lender from which the related Participation shall have been purchased) two further duly completed and signed copies of such Forms 1001 or 4224, as the case may be, or successor and related applicable forms, on or before the date that any such form expires or becomes obsolete and promptly after the occurrence of any event requiring a change from the most recent form(s) previously delivered by it in accordance with applicable U.S. laws and regulations and (y) in the case of a Foreign Lender that delivers a statement pursuant to Section 2.9(g)(ii) above, to deliver to the Borrower and the Administrative Agent, and, if applicable, the assigning Lender, such statement on an annual basis on the anniversary of the date on which such Foreign Lender became a party to this Agreement and to deliver promptly to the Borrower and the Administrative Agent, and if applicable, the assigning Lender, such additional statements and forms as shall be reasonably requested by the Borrower from time to time unless, in any such case, any change in law or regulation has occurred subsequent to the date such Foreign Lender became a party to this Agreement (or in the case of a Foreign Participant, the date on which such Foreign Participant purchased the related Participation) which renders all such forms inapplicable or which would prevent such Lender (or Participant) from properly completing and executing any such form with respect to it and such Lender promptly notifies the Borrower and the Administrative Agent (and, in the case of a Foreign Participant, the Lender from which the related participation shall have been purchased) if it is no longer able to deliver, or if it is required to withdraw or cancel, any form or statement previously delivered by it pursuant to this Section 2.9(g). (h) Failure to Provide Certification. Notwithstanding any provision of this Agreement, the Borrower shall not be required to pay any Taxes or Other Taxes pursuant to this Section 2.9 in respect of U.S. federal income taxes if the obligation to withhold with respect to such Taxes or Other Taxes results from, or would not have occurred but for, the failure of any Foreign Lender or Foreign Participant to deliver the forms described in the preceding Section 2.9 in the manner and at the times specified in such paragraphs. A Foreign Lender or Foreign Participant shall not be required to deliver any form or statement pursuant to Section 2.9(g) that such Foreign Lender or Foreign Participant is not legally able to deliver. Section 2.10. Right of Set Off; Sharing of Payments, Etc. (a) Right of Set-Off. In addition to any rights now or hereafter granted under applicable law or otherwise, and not by way of limitation of any such rights, upon the occurrence and during the continuance of any Event of Default or if the Borrower becomes insolvent, however evidenced, the Borrower authorizes each Lender at any time or from time to time, without presentment, demand, protest or other notice of any kind to the Borrower or to any other Person, any such notice being hereby expressly waived, to set off and to appropriate and apply any and all deposits (general or special, 29 35 time or demand, provisional or final, whether or not collected or available) in any currency and any other indebtedness at any time held by or owing to such Lender or any of its Affiliates (including, without limitation, by branches and agencies of such Lender wherever located) to or for the credit or the account of the Borrower against and on account of the Obligations of the Borrower to such Lender under this Agreement or under any of the other Loan Documents, including, without limitation, all interests in or participation in the Obligations purchased by such Lender, and all other claims of any nature or description arising out of or in connection with this Agreement or any other Loan Document, irrespective of whether or not such Lender shall have made any demand hereunder and although the Obligations, liabilities or claims, or any of them, shall be contingent or unmatured. A Lender may exercise such rights notwithstanding that the amounts concerned may be expressed in different currencies and each Lender is authorized to effect any necessary conversions at a market rate of exchange selected by it. A Lender exercising its rights under this Section 2.10(a) shall provide prompt notice to the Borrower following such exercise. (b) Sharing. If any Lender shall obtain from the Borrower payment of any principal of or interest on any Bridge Loan owing to it or payment of any other amount under this Agreement, a Loan Document or any Bridge Note held by it through the exercise of any right of set-off, banker's lien or counterclaim or similar right or otherwise (other than from the Administrative Agent as provided herein) and, as a result of such payment, such Lender shall have received a greater percentage of the principal of or interest on the Bridge Loans or such other amounts then due to such Lender by the Borrower than the percentage received by any other Lenders, it shall promptly purchase from such other Lenders participation in (or, if and to the extent specified by such Lender, direct interests in) the Bridge Loans or such other amounts, respectively, owing to such other Lenders (or any interest due thereon, as the case may be) in such amounts, and make such other adjustments from time to time as shall be equitable, to the end that all the Lenders shall share the benefit of such excess payment (net of any expenses which may be incurred by such Lender in obtaining or preserving such excess payment) pro rata in accordance with the unpaid principal of and/or interest on the Bridge Loans or such other amounts, respectively, owing to each of the Lenders. To such end all the Lenders shall make appropriate adjustments among themselves (by the resale of participation sold or otherwise) if such payment is rescinded or must otherwise be restored. (c) No Requirement. Nothing in this Agreement shall require any Lender to exercise any such right or shall affect the right of any Lender to exercise, and retain the benefits of exercising, any such right with respect to any other indebtedness or obligation of the Borrower. If, under any applicable bankruptcy, insolvency or other similar law, any Lender receives a secured claim in lieu of a set-off to which this Section 2.10 applies, such Lender shall, to the extent practicable, exercise its rights in respect of such secured claim in a manner consistent with the rights of the Lenders entitled under this Section 2.10 to share in the benefits of any recovery on such secured claim. Section 2.11. Certain Fees. The Borrower agrees to pay to the Administrative Agent, for its own account, the fees specified in the Fee Letter with respect to the Bridge Loans and Exchange Notes, amounts for its expenses incurred hereunder and all other amounts owing under this Agreement and the other Loan Documents. ARTICLE III. REPRESENTATIONS AND WARRANTIES As of the Closing Date and as of each Funding Date, the Borrower hereby agrees with, and represents and warrants to, the Lenders that each of the following representations and warranties is true and will be true after giving pro forma effect to the Transactions. 30 36 Section 3.1. [Intentionally Omitted] Section 3.2. Organization; Powers. (i) The Borrower has been duly incorporated and is validly existing as a corporation in good standing under the laws of the State of Delaware with power and authority (corporate and other) to own its properties and conduct its business as now conducted and as proposed to be conducted, (ii) has been duly qualified as a foreign corporation for the transaction of business and is in good standing under the laws of each other jurisdiction in which it owns or leases properties or conducts any business so as to require such qualification, except to the extent the failure to be so qualified could not reasonably be expected to have a Material Adverse Effect; and (iii) each Subsidiary of the Borrower has been duly incorporated and is validly existing as a corporation in good standing under the laws of its jurisdiction of incorporation, except to the extent the failure to be so qualified could not reasonably be expected to have a Material Adverse Effect. The Borrower has all requisite corporate power and authority to execute, deliver and perform its obligations under each of the Transaction Documents. Section 3.3. Due Authorization and Enforceability. (a) Each of the Transaction Documents: (i) has been duly authorized, executed and delivered by Borrower and (ii) constitutes a valid and binding obligation of Borrower enforceable against each such Person in accordance with its terms, subject, as to enforcement, to bankruptcy, insolvency, reorganization and other laws of general applicability relating to or affecting creditors' rights and to general equity principles. (b) The Bridge Loans, the Bridge Notes and the Exchange Notes have been duly authorized by the Borrower. When the Bridge Notes and the Exchange Notes have been executed and delivered pursuant to the terms of this Agreement or the Exchange Note Indenture, as applicable, each of the Bridge Loans, the Bridge Notes and the Exchange Notes will be valid and binding obligations of the Borrower, enforceable against it in accordance with their terms, subject, as to enforcement, to bankruptcy, insolvency, reorganization and other laws of general applicability relating to or affecting creditors' rights and to general equity principles. Section 3.4. No Conflicts. The execution and delivery of the Transaction Documents, the consummation of the transactions contemplated hereby or thereby and compliance with the terms and provisions hereof or thereof will not require any consent, approval, authorization or other order of any court, regulatory body, administrative agency or other governmental body, including the Federal Communications Commission, Independent Television Commission ("ITC"), the Office of Telecommunications ("OFTEL") and the Department of Trade and Industry ("DTI"), will not conflict with or result in a breach or violation of any of the terms or provisions of, or constitute a default under, any indenture, mortgage, deed of trust, sale/leaseback agreement, loan agreement or other similar financing agreement or instrument or other agreement or instrument (each, a "Material Contract") to which the Borrower or any of its Subsidiaries is a party or by which the Borrower or any of its Subsidiaries is bound or to which any of the property or assets of the Borrower or any of its Subsidiaries is subject, nor will such action result in any violation of the provisions of the Certificate of Incorporation or By-laws (or other governing documents) of the Borrower or any of its Subsidiaries or any statute or any order, rule or regulation of any court or governmental agency or body having jurisdiction over the Borrower or any of its Subsidiaries or any of their properties; and no consent, approval, authorization, order, registration or qualification of or with any such court or governmental agency or body is required for the consummation by the Borrower of the transactions contemplated by this Agreement and the other Transaction Documents or the issuance and delivery of the Bridge Notes and Exchange Notes by the Borrower, except such actions as may be 31 37 required under the Registration Rights Agreement after the date hereof in connection with any transfer of the Exchange Notes (including any laws, statutes, rules or regulations promulgated by ITC, OFTEL or DTI). Section 3.5. No Violations; Material Contracts. Neither the Borrower nor any of its Subsidiaries is in violation of its Certificate of Incorporation or By-laws or other governing documents or in default in the performance or observance of any obligation, agreement or condition contained in any bond, debenture, note or any other evidence of indebtedness or in any indenture, mortgage, deed of trust, loan agreement, lease or other agreement or instrument to which it is a party or by which it or any of its properties may be bound or to which any of their respective properties is subject or is in violation of any law, statute, rule, regulation, judgment or court decree applicable to the Borrower or any of its Subsidiaries or any of their respective properties (including any laws, statutes, rules or regulations promulgated by ITC, OFTEL and DTI, nor has any event occurred which with notice or lapse of time or both would constitute such a violation or default, except in each case, which could not reasonably be expected to have a Material Adverse Effect. Section 3.6. Capital Stock; Subsidiaries. As of the Closing Date, the Borrower has an authorized capitalization as set forth on Schedule 3.6 and all of the issued shares of capital stock of the Borrower have been duly and validly authorized and issued and are fully paid and non-assessable; and all of the issued shares of capital stock of each Subsidiary of the Borrower have been duly and validly authorized and issued, are fully paid and non-assessable and are owned directly or indirectly by the Borrower, free and clear of all Liens, except Permitted Liens. Section 3.7. Liens. There are no Liens on any assets of the Borrower or any of its Subsidiaries except Permitted Liens. Section 3.8. No Violation of Regulations of Board of Governors of Federal Reserve System. None of the transactions contemplated by this Agreement (including without limitation the use of the proceeds from the Bridge Loans and Debt Securities) will violate or result in a violation of Section 7 of the Exchange Act, or any rule or regulation issued pursuant thereto, including, without limitation, Regulations T, U and X of the Board. Section 3.9. Governmental Regulations. None of the Borrower or any of its Subsidiaries is or will be subject to regulation under the Investment Company Act of 1940, as amended, the Public Utility Holding Company Act of 1935, as amended, the Federal Power Act, the Interstate Commerce Act or to any other statute, rule or regulation limiting its ability to incur Indebtedness for borrowed money. Section 3.10. Financial Statements; No Undisclosed Liabilities. (a) The consolidated balance sheet of the Borrower and its Subsidiaries as of September 30, 1998 that is attached hereto as Schedule 3.10(a) fairly presents the consolidated financial position of the Borrower and its Subsidiaries as of such date, in accordance with GAAP consistently applied (except as otherwise specifically indicated therein). The consolidated statements of income and cash flows of the Borrower and its Subsidiaries that are attached hereto as Schedule 3.10(a) have been prepared in conformity with GAAP applied on a consistent basis through all the periods involved (except as otherwise specifically indicated therein) and fairly present the consolidated results of operations of each of the Borrower and its Subsidiaries for the periods indicated. 32 38 (b) The consolidated balance sheet of the Acquired Business and its Subsidiaries as of September 30, 1998 that is attached hereto as Schedule 3.10(b) fairly presents the consolidated financial position of the Acquired Business and its Subsidiaries as of such date, in accordance with GAAP consistently applied (except as otherwise specifically indicated therein). (c) The pro forma consolidated statements of income included in Schedule 3.10(c) fairly present the estimated consolidated income of the Borrower and its Subsidiaries assuming the consummation of the Acquisition as if it had occurred on the date set forth therein, and the pro forma consolidated balance sheet of the Borrower included in Schedule 3.10(c) fairly presents the consolidated financial condition of the Borrower and its Subsidiaries on the Closing Date (after giving effect to all simultaneous transactions to occur on such date). (d) The historical and pro forma financial statements attached hereto as Schedule 3.10(a), Schedule 3.10(b) and Schedule 3.10(c) comply as to form with the requirements applicable to such financial statements in, and constitute all of the financial statements required by, Regulation S-X of the Securities Act for a Form S-1 registration statement. (e) Neither the Borrower nor any of its Subsidiaries (prior to giving effect to the consummation of the Transactions) has any liability (absolute or contingent) except (i) those shown on the most recent audited balance sheets described in Section 3.10(a), (ii) those incurred under the Transaction Documents and (iii) those incurred in the ordinary course of business since the date of such audited balance sheets. (f) For purposes of this Section 3.10, all financial statements required pursuant to Section 5.5 of this Agreement, once approved by the Lenders, shall be added to Schedule 3.10(a), Schedule 3.10(b), or Schedule 3.10(c), as appropriate, and shall become subject to the Borrower's representations contained in Sections 3.10(a) through 3.10(e) above. Section 3.11. Full Disclosure. No information, report, financial statement or certificate delivered or to be delivered to the Lenders in connection with the Transactions contains or will contain any untrue statement of material fact or omitted or omits or will omit to state a material fact necessary to make such statements not misleading in light of the circumstances in which such statements were made; provided that to the extent any such information, report, financial statement, exhibit or schedule was based upon or constitutes a forecast or projection, the Borrower represents only that it acted in good faith and utilized reasonable assumptions and due care in the preparation of such information, report, financial statement, exhibit or schedule. Section 3.12. Private Offering; Rule 144A Matters. (a) Based in part on the accuracy of the representations and warranties of, and compliance with the covenants and agreements by, the Lenders in Section 6.1, the making of the Bridge Loans hereunder and the issuance of the instruments evidencing such Bridge Loans and the Securities are and will be exempt from the registration and prospectus delivery requirements of the Securities Act. The Borrower has not issued or sold Bridge Loans or Securities to anyone other than the Lenders. No securities of the same class (within the meaning of Rule 144A(d) (3) under the Securities Act) as the Bridge Loans or the Securities have been issued or sold by the Borrower within the six-month period immediately prior to the date hereof. The Borrower agrees that neither it, nor anyone acting on its behalf, will (i) offer the Bridge Loans or the Securities so as to subject the making, issuance and/or sale of the Bridge Loans or the Securities to the registration or prospectus delivery requirements of the Securities Act or (ii) offer any securities that are similar to the Bridge Loans or the Securities for issuance or sale to, or solicit any offer to acquire any of the same from, or otherwise approach or 33 39 negotiate with respect to the same with, anyone if the issuance or sale of the Bridge Loans or the Securities and any such securities would be integrated as a single offering for the purposes of the Securities Act, including without limitation, Regulation D thereunder, in such a manner as would require registration under the Securities Act thereof. Each Bridge Note, and (subject to the terms of the Exchange Note Indenture and the Escrow Agreement) each of the Exchange Notes will bear a legend setting forth the restrictions on the transferability thereof imposed by the Securities Act for so long as such restrictions apply. (b) In the case of each offer, sale or issuance of the Bridge Loans or the Securities no form of general solicitation or general advertising was or will be used by the Borrower or their representatives, including, but not limited to, advertisements, articles, notices or other communications published in any newspaper, magazine or similar medium or broadcast over television or radio, or any seminar or meeting whose attendees have been invited by any general solicitation or general advertising. (c) The Securities will be eligible for resale pursuant to Rule 144A under the Securities Act. When the Securities are issued and delivered pursuant to the Loan Documents, they will not be of the same class (within the meaning of Rule 144A(d) (3) under the Securities Act) as any other security of the Borrower that is listed on a national securities exchange registered under Section 6 of the Exchange Act or that is quoted in a United States automated interdealer quotation system. Neither the issuance of the Exchange Notes nor the execution, delivery and performance of the Loan Documents (other than the Registration Rights Agreement) will require the qualification of an indenture under the Trust Indenture Act. Section 3.13. Absence of Proceedings. Except with respect to the matters disclosed in Schedule 3.13, there are no material investigations, proceedings or actions, whether judicial or administrative and whether brought by any regulatory body, administrative agency or other governmental body or by any other person, pending, or, to the knowledge of the Borrower, threatened, to which the Borrower or any of its Subsidiaries is a party or of which any of their respective properties is the subject which, if determined adversely to the Borrower or any of its Subsidiaries, individually or in the aggregate, could reasonably be expected to have a Material Adverse Effect; and, to the best of the Borrower's knowledge, no such proceedings are threatened or contemplated by governmental authorities or threatened by others. Section 3.14. Taxes. The Borrower and its Subsidiaries have duly and timely filed all required tax returns and reports and paid prior to delinquency all taxes, assessments, and governmental levies except those being contested in good faith and by appropriate proceedings. Section 3.15. Financial Condition; Solvency. (a) The Borrower is, and immediately after giving effect to the consummation of the Transactions will be, Solvent. (b) The Borrower does not intend to incur debts beyond its ability to pay such debts as they mature, taking into account the timing and amounts of cash to be received by it and the timing and amounts of cash to be payable on or in respect of its Indebtedness. Section 3.16. Absence of Certain Changes. There has not been any event or series of events, adverse condition or change in or affecting the Borrower that, individually or in the aggregate, could reasonably be expected to have a Material Adverse Effect. 34 40 Section 3.17. Year 2000 Compliance The Borrower has reviewed its operations and that of its Subsidiaries to evaluate the extent to which the business or operations of the Borrower or any of its Subsidiaries will be affected by the Year 2000 Problem. As a result of such review, the Borrower has no reason to believe, and does not believe, that the Year 2000 Problem will have a material adverse effect on the general affairs, management, the current or future consolidated financial position, business prospects, stockholders' equity or results of operations of the Borrower and its subsidiaries or result in any material loss or interference with the Borrower's business or operations. The "Year 2000 Problem" as used herein means any significant risk that computer hardware or software used in the receipt, transmission, processing, manipulation, storage, retrieval, retransmission or other utilization of data or in the operation of mechanical or electrical systems of any kind will not, in the case of dates or time periods occurring after December 31, 1999, function at least as effectively as in the case of dates or time periods occurring prior to January 1, 2000. Section 3.18. Properties. The Borrower and its Subsidiaries have good and marketable title in fee simple to all real property and good and marketable title to all personal property owned by them, in each case free and clear of all liens, encumbrances and defects (other than Permitted Liens) except such as do not materially affect the value of such property and do not interfere with the use made and proposed to be made of such property by the Borrower and its Subsidiaries; and any real property and buildings held under lease by the Borrower and its Subsidiaries are held by them under valid, subsisting and enforceable leases with such exceptions as are not material and do not interfere with the use made and proposed to be made of such property and buildings by the Borrower and its Subsidiaries. Section 3.19. Permits; Registration. (a) The Borrower and each of the Subsidiaries has such permits, licenses, franchises, certificates of need and other approvals or authorizations of any governmental or regulatory authority ("Permits"), including, without limitation, under any laws regulating or relating to the conduct of cable/telephony operations, as are necessary to own, lease and operate its respective properties and to conduct its business, except to the extent that the failure to have such Permits could not reasonably be expected to have a Material Adverse Effect. The Borrower and the Significant Subsidiaries have fulfilled and performed in all material respects, all their respective obligations with respect to the Permits, and no event has occurred which allows, or after notice or lapse of time would allow, revocation or termination thereof or results in any other material impairment of the rights of the holder of any such Permit, except to the extent that any such revocation or termination could not reasonably be expected to have a Material Adverse Effect. None of the Permits contains any restriction that has not previously been satisfied and that is materially burdensome to the Borrower or any of its subsidiaries. Neither the Borrower nor any of its Subsidiaries has any reason to believe that any governmental body or regulatory agency is considering limiting, suspending or revoking any Permits, except as could not reasonably be expected to have a Material Adverse Effect. Section 3.20. ERISA. The Borrower and each of the Subsidiaries are in compliance in all material respects with all presently applicable provisions of the Employee Retirement Income Security Act of 1974, as amended, including the regulations and published interpretations thereunder ("ERISA"); no "reportable event" (as defined in ERISA) has occurred with respect to any "pension plan" (as defined in ERISA) for which the Borrower would have any liability; the Borrower has not incurred and does not expect to incur liability under (i) Title IV of ERISA with respect to termination of, or withdrawal from, any "pension plan" or (ii) Sections 412 or 4971 of the Internal Revenue Code of 1986, as amended, including the regulations and published interpretations thereunder (the "Code"); and each "pension plan" for which the Borrower would have any liability that is intended to be qualified 35 41 under Section 401(a) of the Code is so qualified in all material respects and nothing has occurred, whether by action or by failure to act, which would cause the loss of such qualification. Section 3.21. Environmental Matters. There has been no storage, disposal, generation, manufacture, refinement, transportation, handling or treatment of toxic wastes, medical wastes, hazardous wastes or hazardous substances by the Borrower or any of its Subsidiaries (or, to the knowledge of the Borrower, any of their predecessors in interest) at, upon or from any of the property now or previously owned or leased by the Borrower or any of its Subsidiaries in violation of any applicable law, ordinance, rule, regulation, order, judgment, decree or permit or which would require remedial action under any applicable law, ordinance, rule, regulation, order, judgment, decree or permit, except for any violation or remedial action which would not have, or could not reasonably be expected to have, singularly or in the aggregate, a Material Adverse Effect; there has been no material spill, discharge, leak, emission, injection, escape, dumping or release of any kind onto such property or into the environment surrounding such property of any toxic wastes, medical wastes, solid wastes, hazardous wastes or hazardous substances due to or caused by the Borrower or any of its Subsidiaries or with respect to which the Borrower or any of its Subsidiaries has knowledge, except for any such spill, discharge, leak, emission, injection, escape, dumping or release which could not have or could not reasonably be expected to have, singularly or in the aggregate, a Material Adverse Effect; and the terms "hazardous wastes," "toxic wastes," "hazardous substances" and "medical wastes" shall have the meanings specified in any applicable local, state, federal and foreign laws or regulations with respect to environmental protection. Section 3.22. Acquired Business. The Borrower has acquired the Acquired Business and the Acquired Business is a Subsidiary of the Borrower. ARTICLE IV. COVENANTS So long as any Commitment shall remain outstanding or any Obligation shall remain unpaid, the Borrower covenants and agrees with the Lenders as follows: Section 4.1. Use of Proceeds. The proceeds of the Bridge Loans shall be applied by the Borrower to repay the Diamond Notes tendered by the holders thereof pursuant to an Offer to Purchase in accordance with the terms of the Diamond Indentures, which Offer to Purchase relates to the change of control repurchase obligation due to the Acquisition and/or by the organization of the Parent. No portion of the proceeds of any Bridge Loan shall be used by the Borrower or any of its Subsidiaries in any manner that might cause such Bridge Loan or the application of such proceeds to violate Regulation U, Regulation T or Regulation X of the Board or any other regulation thereof or to violate the Exchange Act, in each case as in effect on the date of such Bridge Loan and the use of proceeds therefrom. Section 4.2. Notice of Default and Related Matters. The Borrower shall furnish to the Administrative Agent (with copies for each Lender) written notice, promptly upon becoming aware of the existence of: (a) any condition or event that constitutes a Default or an Event of Default, specifying the nature and period of existence thereof and the action taken or proposed to be taken with respect thereto; (b) the filing or commencement of, or any threat or notice of intention of any Person to file or commence, any action, suit or proceeding, whether at law or in equity or by or before any Governmental Entity, against or affecting the Borrower or any of its Subsidiaries or any of 36 42 their respective Affiliates that could reasonably be expected to result, individually or in the aggregate, in a Material Adverse Effect; and (c) any development that, individually or in the aggregate, has resulted in, or could reasonably be expected to have, a Material Adverse Effect. Section 4.3. Reports. Whether or not required by the rules and regulations of the SEC, so long as any Bridge Notes are outstanding, the Borrower shall file with the SEC and furnish to the Lenders, all quarterly and annual financial information required to be contained in a filing with the SEC on Forms 10-Q and 10-K (or the equivalent thereof under the Exchange Act for foreign private issuers in the event the Company becomes a corporation organized under the laws of the United Kingdom, the Netherlands, the Netherlands Antilles, Bermuda or the Cayman Islands), including a "Management's Discussion and Analysis of Results of Operations and Financial Condition" and, with respect to the annual information only, a report thereon by the Borrower's certified independent accountants, in each case, in the form required by the rules and regulations of the SEC as in effect on the date hereof. This Section 4.3 will apply notwithstanding that the Borrower becomes a corporation organized under the laws of the United Kingdom, the Netherlands, the Netherlands Antilles, Bermuda or the Cayman Islands. Section 4.4. Compliance Certificate. (a) The Borrower shall deliver to the Administrative Agent (with a copy for each Lender), within 90 days after the end of each fiscal year of the Borrower, an Officers' Certificate stating that a review of the activities of the Borrower and its Subsidiaries during the preceding fiscal year has been made under the supervision of the signing Officers with a view to determining whether the Borrower has kept, observed, performed and fulfilled its obligations under, and complied with the covenants and conditions contained in, this Agreement, and further stating, as to each such Officer signing such certificate, that to the best of his or her knowledge the Borrower has kept, observed, performed and fulfilled each and every covenant, and complied with the covenants and conditions contained in this Agreement and is not in default in the performance or observance of any of the terms, provisions and conditions hereof (or, if a Default or Event of Default shall have occurred, describing all such Defaults or Events of Default of which he or she may have knowledge) and that to the best of his or her knowledge no event has occurred and remains in existence by reason of which payments on account of the principal or of interest, if any, on the Bridge Notes are prohibited. (b) One of the Officers signing such Officers' Certificate shall be either the Borrower's principal executive officer, principal financial officer or principal accounting officer. (c) The Borrower shall so long as any of the Bridge Notes are outstanding, deliver to the Administrative Agent (with a copy for each Lender), forthwith upon becoming aware of any Default or Event of Default, an Officers' Certificate specifying such Default or Event of Default. Section 4.5. Taxes. The Borrower shall pay, and shall cause each of its Subsidiaries to pay, prior to delinquency, all taxes, assessments, and governmental levies except as contested in good faith and by appropriate proceedings. Section 4.6. Stay, Extension and Usury Laws. The Borrower covenants (to the extent that it may lawfully do so) that it shall not at any time insist upon, plead, or in any manner whatsoever claim or take the benefit or advantage of, any stay, extension or usury law wherever enacted, now or at any time hereafter in force, that may affect the covenants or the performance of this Agreement; and the Borrower (to the extent that it may lawfully do so) hereby expressly waives all 37 43 benefit or advantage of any such law, and covenants that it shall not, by resort to any such law, hinder, delay or impede the execution of any power herein granted to the Lenders, but shall suffer and permit the execution of every such power as though no such law has been enacted. Section 4.7. Restricted Payments. (a) The Borrower shall not, and shall not permit any of its Restricted Subsidiaries to, directly or indirectly: (i) declare or pay any dividend or make any distribution on account of the Borrower's or any of its Restricted Subsidiaries' Equity Interests (other than (x) dividends or distributions payable in Equity Interests (other than Disqualified Stock) of the Borrower or such Restricted Subsidiary or (y) dividends or distributions payable to the Borrower or any Wholly Owned Subsidiary of the Borrower, or (z) pro rata dividends or pro rata distributions payable by a Restricted Subsidiary); (ii) purchase, redeem or otherwise acquire or retire for value any Equity Interests of the Borrower (other than any such Equity Interests owned by the Borrower or any Wholly Owned Subsidiary of the Borrower); (iii) subject to Section 4.7(e), voluntarily purchase, redeem or otherwise acquire or retire for value any Indebtedness other than the Bridge Notes; or (iv) make any Restricted Investment (all such payments and other actions set forth in clauses (i) through (iv) above, including those occurring prior to the date hereof, being collectively referred to as "Restricted Payments"), unless, subject to Section 4.7(f) hereof, at the time of such Restricted Payment: (1) no Default or Event of Default shall have occurred and be continuing or would occur as a consequence thereof; and (2) subject to Section 4.7(f), such Restricted Payment, together with the aggregate of all other Restricted Payments made by the Borrower and its Restricted Subsidiaries after the date hereof (including Restricted Payments permitted by clauses (ii) through (ix) of Section 4.7(b)), is less than the sum of (x) the difference between Cumulative EBITDA and 1.5 times Cumulative Interest Expense plus (y) Capital Stock Sale Proceeds (provided that (A) this clause (y) shall apply only to a Restricted Payment made by the Borrower to the Parent or constitutes a Restricted Investment and (B) any Capital Stock Sale Proceeds received after the Closing Date by the Borrower or any of its Subsidiaries shall be used to repay Bridge Loans in accordance with Section 2.4 hereof), plus (z) cash received by the Borrower or a Restricted Subsidiary from a Non-Restricted Subsidiary (other than cash which is or is required to be repaid or returned to such Non-Restricted Subsidiary); provided, however, that to the extent that any Restricted Investment that was made after the date hereof is sold for cash or otherwise liquidated or repaid for cash, the amount credited pursuant to this clause (y) shall be the lesser of (A) the cash received with respect to such sale, liquidation or repayment of such Restricted Investment (less the cost of such sale, liquidation or repayment, if any) and (B) the initial amount of such Restricted Investment, in each case as determined in good faith by the Borrower's Board of Directors. (b) The foregoing provisions in Section 4.7(a) shall not prohibit: 38 44 (i) the payment of any dividend within 60 days after the date of declaration thereof, if at said date of declaration such payment would have complied with the provisions of this Agreement; (ii) subject to Section 2.4, (x) the redemption, repurchase, retirement or other acquisition of any Equity Interests of the Borrower or any Restricted Subsidiary or (y) an Investment in any Person, in each case, in exchange for, or out of the proceeds of, the substantially concurrent sale (other than to a Restricted Subsidiary of the Borrower) of other Equity Interests (other than any Disqualified Stock) of the Borrower, provided that the Borrower delivers to the Administrative Agent (with a copy for each Lender): (1) with respect to any transaction involving in excess of $1 million, a resolution of the Board of Directors set forth in an Officers' Certificate certifying that such transaction is approved by a majority of the directors on the Board of Directors; and (2) with respect to any transaction involving in excess of $25 million, an opinion as to the fairness to the Borrower or such Subsidiary from a financial point of view issued by an investment banking firm of national standing, together with an Officers' Certificate to the effect that such opinion complies with this clause (2), provided that the amount of such proceeds from the sale of any such Equity Interests shall be excluded in each case from Capital Stock Sale Proceeds for purposes of clause (a)(iv)(2)(y), above; (iii) Investments by the Borrower or any Restricted Subsidiary in a Non-Controlled Subsidiary which (A) has no Indebtedness on a consolidated basis other than Indebtedness incurred to finance the purchase of equipment used in a Cable Business, (B) has no restrictions (other than restrictions imposed or permitted by this Agreement or the indentures governing the Other Qualified Notes or any other instrument governing unsecured indebtedness of the Borrower which is pari passu with the Bridge Notes) on its ability to pay dividends or make any other distributions to the Borrower or any of its Restricted Subsidiaries, (C) is or will be a Cable Business and (D) uses the proceeds of such Investment for constructing a Cable Business or the working capital needs of a Cable Business; (iv) subject to Section 2.4, the redemption, purchase, defeasance, acquisition or retirement of Indebtedness that is subordinated to the Bridge Notes (including premium, if any, and accrued and unpaid interest) made by exchange for, or out of the proceeds of the substantially concurrent sale (other than to a Restricted Subsidiary of the Borrower) of (A) Equity Interests of the Borrower, provided that the amount of such proceeds from the sale of any such Equity Interests shall be excluded in each case from Capital Stock Sale Proceeds for purposes of clause (a)(iv)(2)(y), above, or (B) Refinancing Indebtedness permitted to be incurred under Section 4.9 hereof; (v) Investments by the Borrower or any Restricted Subsidiary in a Non-Controlled Subsidiary which is or will be a Cable Business in an amount not to exceed $80 million in the aggregate plus the sum of (x) cash received by the Borrower or a Restricted Subsidiary from a Non-Restricted Subsidiary (other than cash which is or is required to be repaid or returned to such Non-Restricted Subsidiary) and (y) Capital Stock Sale Proceeds (excluding the aggregate net sale proceeds to be received upon conversion of the Convertible Subordinated Notes), provided that the amount of such proceeds from the sale of any such Equity Interests shall be excluded in each case from Capital Stock Sale Proceeds for purposes of clause (a)(iv)(2)(y), above; 39 45 (vi) Investments by the Borrower or any Restricted Subsidiary in Permitted Non-Controlled Assets; (vii) the extension by the Borrower or any Restricted Subsidiary of trade credit to a Non-Restricted Subsidiary extended on usual and customary terms in the ordinary course of business, provided that the aggregate amount of such trade credit shall not exceed $25 million at any one time; (viii) the payment of cash dividends on the Preferred Stock accruing on or after February 15, 2004 or any mandatory redemption or repurchase of the Preferred Stock, in each case, in accordance with the Certificate of Designations therefor; and (ix) the exchange of all of the outstanding shares of Preferred Stock for Subordinated Debentures in accordance with the Certificate of Designations for the Preferred Stock. (c) Any Investment in a Subsidiary (other than the issuance, transfer or other conveyance of Equity Interests of the Borrower (or any Capital Stock Sale Proceeds therefrom)) that is designated by the Board of Directors as a Non-Restricted Subsidiary shall become a Restricted Payment made on the date of such designation in the amount of the greater of (x) the book value of such Subsidiary on the date such Subsidiary becomes a Non-Restricted Subsidiary and (y) the fair market value of such Subsidiary on such date as determined (A) in good faith by the Board of Directors of such Subsidiary if such fair market value is determined to be less than $25 million and (B) by an investment banking firm of national standing if such fair market value is determined to be in excess of $25 million. (d) Not later than the fifth Business Day after making any Restricted Payment (other than those referred to in sub-clause (vii) of Section 4.7(b)), the Borrower shall deliver to the Administrative Agent (with a copy for each Lender) an Officers' Certificate stating that such Restricted Payment is permitted and setting forth the basis upon which the calculations required by this Section 4.7 were computed, which calculations may be based upon the Borrower's latest available financial statements. (e) Notwithstanding any provision in this Section 4.7 or in this Agreement to the contrary, the Borrower shall not, and shall not permit any of its Restricted Subsidiaries to, directly or indirectly, voluntarily purchase, redeem, or otherwise acquire or retire for value any Indebtedness other than the Bridge Notes. (f) Notwithstanding any other provision in this Section 4.7 or in this Agreement to the contrary, the Borrower shall not, and shall not permit any of its Restricted Subsidiaries to, directly or indirectly, make one or more Restricted Payments to the Parent that, individually or in the aggregate, exceed $500 million. Section 4.8. Dividend and Other Payment Restrictions Affecting Restricted Subsidiaries. The Borrower shall not, and shall not permit any of its Restricted Subsidiaries to, directly or indirectly, create or otherwise cause or suffer to exist or become effective any encumbrance or restriction on the ability of any Restricted Subsidiary to: (a) (i) pay dividends or make any other distributions to the Borrower or any of its Subsidiaries (A) on its Capital Stock or (B) with respect to any other interest or participation in, or measured by, its profits, or (ii) pay any indebtedness owed to the Borrower or any of its Subsidiaries, or (b) make loans or advances to the Borrower or any of its Subsidiaries, or 40 46 (c) transfer any of its properties or assets to the Borrower or any of its Subsidiaries, except for such encumbrances or restrictions existing under or by reason of: (i) Existing Indebtedness as in effect on the date hereof; (ii) this Agreement and the Bridge Notes; (iii) any agreement covering or relating to Indebtedness permitted to be incurred under Section 4.9.(b)(i), (ii), (iii), (iv), (v), (viii) or (ix) hereof, (but only, in the case of Section 4.9(b)(viii) or (ix), to the extent contemplated by the then existing Credit Facility), provided that the provisions of such agreement permit any action referred to in clause (a) above in aggregate amounts sufficient to enable the payment of interest and principal and mandatory repurchases pursuant to the terms of this Agreement and the Bridge Notes, but provided further that: (x) any such agreement may nevertheless encumber, prohibit or restrict any action referred to in clause (a) above if an event of default under such agreement has occurred and is continuing or would occur as a result of any such action; and (y) any such agreement may nevertheless contain (I) restrictions limiting the payment of dividends or the making of any other distributions to all or a portion of excess cash-flow (or any similar formulation thereof) and (II) subordination provisions governing Indebtedness owed to the Borrower or any Restricted Subsidiary; (iv) applicable law; (v) any instrument governing Indebtedness or Capital Stock of a Person acquired by the Borrower or any of its Subsidiaries as in effect at the time of such acquisition (except to the extent such Indebtedness was incurred in connection with such acquisition), which encumbrance or restriction is not applicable to any Person, or the properties or assets of any Person, other than the Person, or the property or assets of the Person, so acquired; provided that the EBITDA of such Person is not taken into account in determining whether such acquisition was permitted by the terms of this Agreement; (vi) customary nonassignment provisions in leases entered into in the ordinary course of business and consistent with past practices; (vii) provisions of joint venture or stockholder agreements, so long as such provisions are determined by a resolution of the Board of Directors to be, at the time of such determination, customary for such agreements; (viii) with respect to clause (c) above, purchase money obligations for property acquired in the ordinary course of business or the provisions of any agreement with respect to any Asset Sale (or transaction which, but for its size, would be an Asset Sale), solely with respect to the assets being sold; or (ix) permitted Refinancing Indebtedness, provided that the restrictions contained in the agreements governing such Refinancing Indebtedness are determined by a resolution of the Board of Directors to be no more restrictive than those contained in the agreements governing the Indebtedness being refinanced. 41 47 Section 4.9. Incurrence of Indebtedness and Issuance of Preferred Stock. (a) The Borrower shall not, and shall not permit any of its Restricted Subsidiaries to, directly or indirectly, create, incur, issue, assume, guaranty or otherwise become directly or indirectly liable with respect to (collectively, "incur") any Indebtedness (including Acquired Debt) and the Borrower shall not issue any Disqualified Stock and shall not permit any of its Restricted Subsidiaries to issue any shares of preferred stock that is Disqualified Stock; provided, however, that the Borrower may incur Indebtedness or issue shares of Disqualified Stock and any of its Restricted Subsidiaries may issue shares of preferred stock that is Disqualified Stock if after giving effect to such issuance or incurrence on a pro forma basis, the sum of (x) Indebtedness of the Borrower and its Restricted Subsidiaries, on a consolidated basis, (y) the liquidation value of outstanding preferred stock of Restricted Subsidiaries and (z) the aggregate amount payable by the Borrower and its Restricted Subsidiaries, on a consolidated basis, upon redemption of Disqualified Stock to the extent such amount is not included in the preceding clause (y) shall be less than the product of Annualized Pro Forma EBITDA for the latest fiscal quarter for which internal financial statements are available immediately preceding the date on which such additional Indebtedness is incurred or such Disqualified Stock or preferred stock is issued multiplied by 7.0, determined on a pro forma basis (including a pro forma application of the net proceeds therefrom), as if the additional Indebtedness had been incurred, or the Disqualified Stock or preferred stock had been issued, as the case may be, at the beginning of such quarter. (b) The foregoing limitations in Section 4.9.(a) shall not apply to: (i) subject to Section 2.4, the incurrence by the Borrower or any Restricted Subsidiary of Indebtedness pursuant to the Credit Facility; (ii) the issuance by any Restricted Subsidiary of preferred stock (other than Disqualified Stock) to the Borrower, any Restricted Subsidiary of the Borrower or the holders of Equity Interests in any Restricted Subsidiary on a pro rata basis to such holders; (iii) subject to Section 2.4, the incurrence of Indebtedness or the issuance of preferred stock by the Borrower or any of its Restricted Subsidiaries the proceeds of which are (or the credit support provided by any such Indebtedness is), in each case, used to finance the construction, capital expenditure and working capital needs of a Cable Business (including, without limitation, payments made pursuant to any License), the acquisition of Cable Assets or the Capital Stock of a Qualified Subsidiary; (iv) subject to Section 2.4, the incurrence by the Borrower or any of its Restricted Subsidiaries of additional Indebtedness in an aggregate principal amount not to exceed $50 million; (v) the incurrence by the Borrower or any Restricted Subsidiary of any Permitted Acquired Debt; (vi) the incurrence by the Borrower or any Subsidiary of Indebtedness issued in exchange for, or the proceeds of which are used to extend, refinance, renew, replace, or refund the Bridge Notes, Existing Indebtedness or Indebtedness referred to in clauses (ii), (iii), (iv) or (v) above or Indebtedness incurred pursuant to Section 4.9(a) hereof (the "Refinancing Indebtedness"); provided, however, that (1) the principal amount of, and any premium payable in respect of, such Refinancing Indebtedness shall not exceed the principal amount of Indebtedness so extended, refinanced, renewed, replaced or refunded (plus the amount of reasonable expenses incurred in connection therewith); (2) the Refinancing Indebtedness shall 42 48 have (A) a Weighted Average Life to Maturity equal to or greater than the Weighted Average Life to Maturity of, and (B) a stated maturity no earlier than the stated maturity of, the Indebtedness being extended, refinanced, renewed, replaced or refunded; and (3) the Refinancing Indebtedness shall be subordinated in right of payment to the Bridge Notes as and to the extent of the Indebtedness being extended, refinanced, renewed, replaced or refunded; (vii) the issuance of the Preferred Stock in lieu of payment of cash interest on the Subordinated Debentures or the incurrence by the Borrower of Indebtedness represented by the Subordinated Debentures upon the exchange of the Preferred Stock in accordance with the Certificate of Designations therefor; (viii) Indebtedness under Exchange Rate Contracts, provided that such Exchange Rate Contracts are related to payment obligations under Existing Indebtedness or Indebtedness incurred under Section 4.9.(a) or (b) hereof that are being hedged thereby, and not for speculation and that the aggregate notional amount under each such Exchange Rate Contract does not exceed the aggregate payment obligations under such Indebtedness; (ix) Indebtedness under Interest Rate Agreements, provided that the obligations under such agreements are related to payment obligations on Existing Indebtedness or Indebtedness otherwise incurred pursuant to Section 4.9.(a) or (b) hereof, and not for speculation; (x) the incurrence of Indebtedness between the Borrower and any Restricted Subsidiary, between or among Restricted Subsidiaries and between any Restricted Subsidiary and other holders of Equity Interests of such Restricted Subsidiary (or other Persons providing funding on their behalf) on a pro rata basis and on substantially identical principal financial terms; provided, however, that if any such Restricted Subsidiary that is the payee of any such Indebtedness ceases to be a Restricted Subsidiary or transfers such Indebtedness (other than to the Borrower or a Restricted Subsidiary of the Borrower), such events shall be deemed, in each case, to constitute the incurrence of such Indebtedness by the Borrower or by a Restricted Subsidiary, as the case may be, at the time of such event; and (xi) Indebtedness of the Borrower and/or any Restricted Subsidiary in respect of performance bonds of the Borrower or any Subsidiary or surety bonds provided by the Borrower or any Restricted Subsidiary received in the ordinary course of business in connection with the construction or operation of a Cable Business. (c) Any redesignation of a Non-Restricted Subsidiary as a Restricted Subsidiary shall be deemed for purposes of this Section 4.9 to be an incurrence of Indebtedness by the Borrower and its Restricted Subsidiaries of the Indebtedness of such Non-Restricted Subsidiary as of the time of such redesignation to the extent such Indebtedness does not already constitute Indebtedness of the Borrower or one of its Restricted Subsidiaries. Section 4.10. Asset Sales. (a) The Borrower shall not, and shall not permit any of its Restricted Subsidiaries to cause, make or suffer to exist any Asset Sale, unless: (i) no Default exists or is continuing immediately prior to and after giving effect to such Asset Sale; (ii) the Borrower (or the Restricted Subsidiary, as the case may be) receives consideration at the time of such Asset Sale at least equal to the fair market value (evidenced for 43 49 purposes of this Section 4.10 by a resolution of the Board of Directors set forth in an Officers' Certificate delivered to the Administrative Agent (with a copy for each Lender)) of the assets sold or otherwise disposed of; and (iii) at least 80% of the consideration therefor received by the Borrower or such Restricted Subsidiary is in the form of (w) cash or Cash Equivalents, (x) Replacement Assets, (y) publicly traded Equity Interests of a Person who is, directly or indirectly, engaged primarily in one or more Cable Businesses; provided, however, that the Borrower or such Restricted Subsidiary shall Monetize such Equity Interests by sale to one or more Persons (other than to the Borrower or a Subsidiary thereof) at a price not less than the fair market value thereof within 180 days of the consummation of such Asset Sale, or (z) any combination of the foregoing clauses (w) through (y); provided, however, that the amount of (x) any liabilities (as shown on the Borrower's or such Restricted Subsidiary's most recent balance sheet or in the notes thereto) of the Borrower or any Restricted Subsidiary (other than liabilities that are by their terms subordinated to the Bridge Notes) that are assumed by the transferee of any such assets and (y) any notes or other obligations received by the Borrower or any such Restricted Subsidiary from such transferee that are within five Business Days converted by the Borrower or such Restricted Subsidiary into cash, shall be deemed to be Cash Equivalents (to the extent of the Cash Equivalents received in such conversion) for purposes of this clause (iii); provided, however, that the Net Cash Proceeds thereof are applied in accordance with Section 2.4. (b) Subject to Section 4.10(d), within 360 days after any Asset Sale, the Borrower (or the Restricted Subsidiary, as the case may be) shall cause the Net Proceeds from such Asset Sale: (i) to be used to permanently reduce Indebtedness of a Restricted Subsidiary; or (ii) to be invested or reinvested in Replacement Assets. Subject to Section 4.10(d), pending final application of any such Net Proceeds, the Borrower may temporarily reduce revolving credit borrowings or otherwise invest such Net Proceeds in any manner that is not prohibited by this Agreement or the indentures for the Other Qualified Notes. (c) Subject to Section 4.10(d), notwithstanding the provisions of Sections 4.10(a) and (b): the Borrower and its Subsidiaries may: (i) sell, lease, transfer, convey or otherwise dispose of assets or property acquired after October 14, 1993, by the Borrower or any Subsidiary in a sale-and-leaseback transaction so long as the proceeds of such sale are applied within five Business Days to permanently reduce Indebtedness of a Restricted Subsidiary or if there is no such Indebtedness or such proceeds exceed the amount of such Indebtedness then such proceeds or excess proceeds are reinvested in a Replacement Assets within 360 days after such sale, lease, transfer, conveyance or disposition; (ii) (x) swap or exchange assets or property with a Cable Controlled Subsidiary or (y) issue, sell, lease, transfer, convey or otherwise dispose of equity securities of any of the Borrower's Subsidiaries to a Cable Controlled Subsidiary, in each of cases (x) and (y) so long as (A) the ratio of Indebtedness to Annualized Pro Forma EBITDA of the Borrower after such transaction is equal to or less than the ratio of Indebtedness to Annualized Pro Forma EBITDA of the Borrower immediately preceding such transaction; provided, however, that if the ratio of Indebtedness to Annualized Pro Forma EBITDA of the Borrower immediately preceding such transaction is 6:1 or less, then the ratio of Indebtedness to Annualized Pro Forma EBITDA of the Borrower may be 0.5 greater than such ratio immediately preceding such transaction and (B) 44 50 either (I) the assets so contributed consist solely of a license to operate a Cable Business and the Net Households covered by all of the licenses to operate cable and telephone systems held by the Borrower and its Restricted Subsidiaries immediately after and giving effect to such transaction equals or exceeds the number of Net Households covered by all of the licenses to operate cable and telephone systems held by the Borrower and its Restricted Subsidiaries immediately prior to such transaction or (II) the assets so contributed consist solely of Cable Assets and the value of the Capital Stock received, immediately after and giving effect to such transaction, as determined by an investment banking firm of recognized standing with knowledge of the Cable Business, equals or exceeds the value of Cable Assets exchanged for such Capital Stock; or (iii) issue, sell, lease, transfer, convey or otherwise dispose of Equity Interests (other than Disqualified Stock) of the Borrower (or any Capital Stock Sale Proceeds therefrom) to any Person (including Non-Restricted Subsidiaries). (d) Notwithstanding the provisions of this Section 4.10 or any other provision in this Agreement to the contrary, the Borrower shall cause all Net Cash Proceeds to be invested or reinvested in Replacement Assets pursuant to Section 4.10(b)(ii). Section 4.11. Transactions with Affiliates. The Borrower shall not, and shall not permit any of its Restricted Subsidiaries to, sell, lease, transfer or otherwise dispose of any of its properties or assets to, or purchase any property or assets from, or enter into or amend any contract, agreement, understanding, loan, advance or guarantee with, or for the benefit of, any Affiliate (each of the foregoing, an "Affiliate Transaction"), unless: (a) such Affiliate Transaction is on terms that are no less favorable to the Borrower or the relevant Subsidiary than those that could have been obtained in a comparable transaction by the Borrower or such Subsidiary with an unrelated Person and (b) the Borrower delivers to the Administrative Agent (with a copy for each Lender): (i) with respect to any Affiliate Transaction involving aggregate payments in excess of $1 million or any series of Affiliate Transactions with an Affiliate involving aggregate payments in excess of $1 million, a resolution of the Board of Directors set forth in an Officers' Certificate certifying that such Affiliate Transaction complies with Section 4.11(a) and such Affiliate Transaction is approved by a majority of the disinterested directors on the Board of Directors; and (ii) with respect to any Affiliate Transaction involving aggregate payments in excess of $25 million or any series of Affiliate Transactions with an Affiliate involving aggregate payments in excess of $25 million, an opinion as to the fairness to the Borrower or such Subsidiary from a financial point of view issued by an investment banking firm of national standing together with an Officers' Certificate to the effect that such opinion complies with this clause (ii); provided, however, that notwithstanding the foregoing provisions, the following shall not be deemed to be Affiliate Transactions: (1) any employment agreement entered into by the Borrower or any of its Subsidiaries in the ordinary course of business and consistent with the past practice of the Borrower or its predecessor or such Subsidiary; 45 51 (2) transactions between or among the Borrower and/or its Restricted Subsidiaries; (3) transactions permitted by the provisions of Section 4.7 hereof; (4) Liens permitted under Section 4.12 hereof which are granted by the Borrower or any of its Subsidiaries to an unrelated Person for the benefit of the Borrower or any other Subsidiary of the Borrower; (5) any transaction pursuant to an agreement in effect on the date hereof; (6) the incurrence of Indebtedness by a Restricted Subsidiary where such Indebtedness is owed to the holders of the Equity Interests of such Restricted Subsidiary on a pro rata basis and on substantially identical principal financial terms; (7) management, operating, service or interconnect agreements entered into in the ordinary course of business with any Cable Business in which the Borrower or any Restricted Subsidiary has an Investment and which is not a Cable Controlled Subsidiary (and of which no Affiliate of the Borrower is an Affiliate other than as a result of such Investment); and (8) any tax sharing agreement. Section 4.12. Liens. Neither the Borrower nor any of its Restricted Subsidiaries may, directly or indirectly create, incur, assume or suffer to exist any Lien on any asset now owned or hereafter acquired, or any income or profits therefrom or assign or convey any right to receive income therefrom, except: (a) Permitted Liens; (b) Liens securing Indebtedness and related obligations to the extent such Indebtedness and related obligations are permitted under Sections 4.9(b)(i), (iii), (iv), (v), (viii), (ix) and (xi) hereof; (c) Liens on the assets acquired or leased with the proceeds of Indebtedness permitted to be incurred under Section 4.9 hereof; and (d) Liens securing Refinancing Indebtedness permitted to be incurred under Section 4.9 hereof; provided that the Refinancing Indebtedness so issued and secured by such Lien shall not be secured by any property or assets of the Borrower or any of its Restricted Subsidiaries other than the property or assets subject to the Liens securing such Indebtedness being refinanced. Section 4.13. Change of Control. (a) Upon the occurrence of a Change of Control, each Lender will have the right to require the Borrower to prepay all or any part of the principal amount of such Lender's Bridge Loans pursuant to the offer described below (the "Change of Control Offer" at a prepayment price in cash equal to the aggregate principal amount thereof plus (i) accrued and unpaid interest, Liquidated Damages thereon, if any, and Additional Amounts thereon, if any, to the date of prepayment and (ii) the Change of Control Fee thereon (collectively, the "Change of Control Payment"). Within 10 days following any Change of Control, the Borrower will mail a notice to each Lender describing the transaction or transactions that constituted the Change of Control and offer to repay the Bridge Loans on the date specified in such notice, which date shall be no earlier than 30 days 46 52 and no later than 45 days from the date such notice is mailed (the "Change of Control Payment Date"), pursuant to the procedures set forth below. (b) Notice of a Change of Control Offer shall be mailed by the Borrower to the Lenders at their addresses set forth in the Loan Register. The Change of Control Offer shall remain open from the time of mailing until the Change of Control Payment Date. The notice shall be accompanied by a copy of the most recent reports furnished pursuant to Section 4.3 hereof. The notice shall contain all instructions and materials necessary to enable such Lenders to elect to be prepaid pursuant to the Change of Control Offer. (c) On the Change of Control Payment Date, the Borrower shall (i) repay all Bridge Loans or portions thereof of each Lender that properly elected repayment thereof pursuant to the Change of Control Offer, (ii) pay the Change of Control Payment for each such Bridge Loan (or portion thereof) elected to be repaid and (iii) deliver to each such Lender a new Bridge Note equal in principal amount (excluding premiums, if any) to the unpurchased portion of the corresponding Bridge Note surrendered, if any. The Borrower will notify the remaining Lenders of the results of the Change of Control Offer on or as soon as practicable after the Change of Control Payment Date. Section 4.14. Corporate Existence. Subject to Section 4.19 hereof, the Borrower shall do or cause to be done all things necessary to preserve and keep in full force and effect its corporate existence and the corporate, partnership or other existence of each Subsidiary of the Borrower in accordance with the respective organizational documents of each Subsidiary and the rights (charter and statutory), licenses and franchises of the Borrower and its Subsidiaries; provided, however, that the Borrower shall not be required to preserve any such right, license or franchise, or the corporate, partnership or other existence of any Subsidiary, if the Board of Directors shall determine that the preservation thereof is no longer desirable in the conduct of the business of the Borrower and its Subsidiaries taken as a whole and that the loss thereof is not adverse in any material respect to the Lenders. The Borrower shall notify the Administrative Agent in writing of any Subsidiary which qualifies as a Material Subsidiary and is not specified in clause (i) of the definition thereof. Section 4.15. [Intentionally Omitted] Section 4.16. Additional Amounts. At least 10 days prior to the first date on which payment of principal and any premium or interest or Liquidated Damages on the Bridge Notes is to be made, and at least 10 days prior to any subsequent such date if there has been any change with respect to the matters set forth in the Officers' Certificate described in this Section 4.16, the Borrower shall furnish the Administrative Agent (with a copy for each Lender), with an Officers' Certificate instructing the Lenders whether the Borrower is obligated to pay Additional Amounts (as defined in the Bridge Notes) with respect to such payment of principal, or of any premium or interest or Liquidated Damages on the Bridge Notes. If the Borrower will be obligated to pay Additional Amounts with respect to such payment, then such Officers' Certificate shall specify by country the amount, if any, required to be withheld on such payments to such Lenders and the Borrower will pay to the Lenders such Additional Amounts. The Borrower shall indemnify the Administrative Agent and the Lenders for, and hold them harmless against, any loss, liability or expense reasonably incurred without negligence or bad faith on their part arising out of or in connection with actions taken or omitted by any of them in reliance on any Officers' Certificate furnished to them pursuant to this Section 4.16. Whenever in this Agreement there is mentioned, in any context, the payment of principal (and premium, if any), interest, Liquidated Damages, if any, or any other amount payable under or with respect to any Bridge Note such mention shall be deemed to include mention of the payment of Additional Amounts provided for in this Section 4.16 and in the Bridge Notes to the extent that, in such 47 53 context, Additional Amounts are, were or would be payable in respect thereof pursuant to the provisions of this Section 4.16 and in the Bridge Notes and express mention of the payment of Additional Amounts (if applicable) in any provisions hereof shall not be construed as excluding Additional Amounts in those provisions hereof where such express mention is not made (if applicable). Section 4.17. [Intentionally Omitted] Section 4.18. [Intentionally Omitted] Section 4.19. Merger; Sale of All or Substantially All Assets. The Borrower may not consolidate or merge with or into (whether or not the Borrower is the surviving corporation), or sell, assign, transfer, lease, convey or otherwise dispose of all or substantially all of its properties or assets in one or more related transactions to, another corporation, Person or entity unless: (a) the Borrower is the surviving corporation or the entity or the Person formed by or surviving any such consolidation or merger (if other than the Borrower) or to which such sale, assignment, transfer, lease, conveyance or other disposition shall have been made is a corporation organized or existing under the laws of the United Kingdom, the Netherlands, the Netherlands Antilles, Bermuda or the Cayman Islands or of the United States, any state thereof or the District of Columbia; (b) the entity or Person formed by or surviving any such consolidation or merger (if other than the Borrower) or the entity or Person to which such sale, assignment, transfer, lease, conveyance or other disposition will have been made assumes all the Obligations (including the due and punctual payment of Additional Amounts if the surviving corporation is a corporation organized or existing under the laws of the United Kingdom, the Netherlands, the Netherlands Antilles, Bermuda or the Cayman Islands) of the Borrower, pursuant to a supplemental agreement in a form reasonably satisfactory to the Administrative Agent, under the Bridge Notes and this Agreement; (c) immediately after such transaction no Default or Event of Default exists; (d) the Borrower or any entity or Person formed by or surviving any such consolidation or merger, or to which such sale, assignment, transfer, lease, conveyance or other disposition will have been made will have a ratio of Indebtedness to Annualized Pro Forma EBITDA equal to or less than the ratio of Indebtedness to Annualized Pro Forma EBITDA of the Borrower immediately preceding the transaction; provided, however, that if the ratio of Indebtedness to Annualized Pro Forma EBITDA of the Borrower immediately preceding such transaction is 6:1 or less, then the ratio of Indebtedness to Annualized Pro Forma EBITDA of the Borrower may be 0.5 greater than such ratio immediately preceding such transaction; and (e) such transaction would not result in the loss of any material authorization or Material License of the Borrower or its Subsidiaries. Section 4.20. Inspection Rights. The Borrower shall, and shall cause each of its Subsidiaries to, permit the Lenders or any of their respective representatives to visit and inspect any of its properties, to examine and make abstracts from any of its books and records and to discuss its businesses, finances and accounts with its executive officers and, subject to the right of the Borrower's representatives to participate in any such 48 54 discussion, with their independent public accountants, all upon reasonable notice and at such reasonable times and as often as may reasonably be desired. Section 4.21. Special Rights. (a) For so long as any Bridge Loans or Exchange Notes are held by West Street, the Borrower shall, and shall cause each of its Subsidiaries to, promptly provide West Street with such information concerning the businesses, properties or financial condition of the Borrower and such Subsidiaries as West Street may from time to time reasonably request. In that connection, the Borrower shall, and shall cause each of its Subsidiaries to: (i) keep proper books of record and account in which full, true and correct entries shall be made of all dealings and transactions in relation to its business and activities; and (ii) permit West Street or any of its representatives to consult with the Borrower and its Subsidiaries with respect to their businesses and make proposals with respect to such businesses and meet with the respective executive officers and directors of the Borrower and its Subsidiaries with respect to such proposals. (b) For so long as any Bridge Loans or Exchange Notes are held by West Street, the Borrower shall, and shall cause each of its Subsidiaries to, upon prior reasonable request, invite West Street or any of its representatives to attend each regular, special or other meeting of its Board of Directors in a nonvoting observer capacity and in this respect shall, upon prior reasonable request, give West Street or such representative copies of all notices, minutes, consents and other materials that it provides to its directors. West Street or such representative may participate in any and all discussions of matters brought to the Board of Directors. The Borrower shall and shall cause each of its Subsidiaries to allow West Street or any such representative of West Street to attend such meetings by means of conference call or other communications equipment utilized by any other person participating in such meetings. Notwithstanding the foregoing, the Borrower reserves the right to exclude West Street and its representatives from access to any material or meeting or portion thereof if the Borrower believes upon advice of counsel that such exclusion is reasonably necessary to preserve the attorney-client privilege, to protect highly confidential proprietary information or for other similar valid business reasons. (c) In addition to the provisions of Section 12.3, (i) any amendment to the provisions of this Section 4.21 shall require the consent of West Street at any time that West Street holds Bridge Loans and/or Notes and (ii) for so long as West Street holds Bridge Loans and/or Notes having an aggregate principal amount equal to at least 25% of the aggregate principal amount of Bridge Loans originally funded by West Street under this Agreement, any amendment to the provisions of Section 4.7, 4.8, 4.9, 4.10, 4.11, 4.12, 4.13, 4.16, 4.19 and 4.20 shall require the consent of West Street at any time that West Street holds any Loans or Exchange Notes. Section 4.22. Note Guarantees. In the event that the Parent is incorporated or organized with respect to the Borrower and its Subsidiaries, within five (5) Business Days of the date of the incorporation or organization of the Parent, the Borrower shall deliver, or cause to be delivered, (a) to the Administrative Agent (with a copy for each Lender) (i) a guarantee (the "Bridge Note Guarantee") executed by the Parent substantially in the form attached hereto as Exhibit G-1, and (ii) opinions of counsel for the Parent substantially in the form attached hereto as Exhibit H-1, and (b) to Exchange Note Trustee (i) a guarantee (the "Exchange Note Guarantee") executed by the Parent substantially in the form attached hereto as Exhibit G-2, and (ii) opinions of counsel for the Parent substantially in the form attached hereto as Exhibit H-2, and (c) to 49 55 each of the Administrative Agent (with a copy for each Lender) and the Exchange Note Trustee, such other certificates and documents (including, but not limited to, a secretary's certificate, a certification of the organizational document of the Parent certified by the Secretary of State of the jurisdiction in which the Parent was incorporated or organized, and a good standing certificate) as the Administrative Agent and/or the Exchange Note Trustee shall deem to be reasonably necessary or advisable, which certificates and documents shall be in form and substance satisfactory to the Administrative Agent and its counsel and the Exchange Note Trustee and its counsel. Section 4.23. Offer to Purchase. On or prior to April 6, 1999, the Borrower shall have caused the commencement of each Offer to Purchase the Diamond Notes in accordance with the terms of each Diamond Indenture. ARTICLE V. CONDITIONS A. CONDITIONS TO CLOSING DATE. The obligation of each of the Lenders to execute and deliver this Agreement is subject to (i) the representations and warranties of the Borrower in Article III being true, correct and complete in all respects on and as of the Closing Date to the same extent as though made on and as of the Closing Date, (ii) on or prior to the Closing Date, the Borrower having performed and complied with all covenants and conditions to be performed and observed by it on or prior to the Closing Date and (iii) the prior or concurrent satisfaction of each of the following conditions in Section 5.1 to (and including) Section 5.14: Section 5.1. Corporate and Other Proceedings. On or before the Closing Date, all corporate and other proceedings taken or to be taken in connection with the Transactions and all documents incidental thereto shall be satisfactory in form and substance to the Administrative Agent, and the Administrative Agent shall have received on behalf of the Lenders the following items, each of which shall be in form and substance satisfactory to the Administrative Agent and, unless otherwise noted, dated the Closing Date: (a) a certified copy of the Borrower's charters, together with a certificate of status, compliance, good standing or like certificate with respect to the Borrower issued by the appropriate government officials of the jurisdiction of its formation and of each jurisdiction in which the Borrower owns any material assets or carries on any material business, each to be dated a recent date prior to the Closing Date; (b) a copy of the Borrower's bylaws, in each case certified as of the Closing Date by its Secretary or one of its Assistant Secretaries; (c) resolutions of the Borrower's Boards of Directors approving and authorizing the execution, delivery and performance of this Agreement, each of the other Loan Documents and any other documents, instruments and certificates required to be executed by the Borrower in connection herewith or therewith and approving and authorizing the execution, delivery and payment of the Bridge Notes and the Exchange Notes and the consummation of the Transactions, each certified as of the Closing Date by its Secretary or one of its Assistant Secretaries as being in full force and effect without modification or amendment; (d) signature and incumbency certificates of the Borrower's Officers executing this Agreement, the Bridge Notes, the other Loan Documents and any other documents executed in connection therewith; 50 56 (e) executed copies of this Agreement; (f) an Officers' Certificate from the Borrower in form and substance satisfactory to the Administrative Agent to the effect that (i) the representations and warranties of the Borrower in Article III are true, correct and complete in all respects on and as of the Closing Date to the same extent as though made on and as of that date, (ii) on or prior to the Closing Date, the Borrower has performed and complied with all covenants and conditions to be performed and observed by it on or prior to the Closing Date and (iii) all conditions to the consummation of the Transactions have been satisfied on the terms set forth in the documentation relating thereto and have not been waived or amended without the prior written consent of the Administrative Agent; (g) true and correct copies of the final form of each of: (i) the Diamond Cable Acquisition Agreement and (ii) each Offer to Purchase the Diamond Notes, if any; and (h) true and correct copies of each of the other Transaction Documents, each of which shall be satisfactory in form and substance to each of the Lenders. Section 5.2. [Intentionally Omitted] Section 5.3. Absence of Certain Changes. Except as set forth on Schedule 5.3 attached hereto, no change in the capital stock or long-term debt of the Borrower and its Subsidiaries or any material adverse change, or any development involving a prospective material adverse change, in or affecting the general affairs, management, financial position, stockholders' equity, results of operations or prospects of the Borrower shall have occurred since September 30, 1998 and no material inaccuracy in such financial statements shall exist. Except as set forth on Schedule 5.3 attached hereto, the Borrower shall have no material liabilities except those set forth on the balance sheet dated September 30, 1998 and those incurred in the ordinary course of business since such date in amounts that are consistent with past practice. Except for any downgradings, announcements or reviews attributable solely to the events set forth on Schedule 5.3 attached hereto, on or after the date of the Commitment Letter (i) no downgrading shall have occurred in the rating accorded the Borrower's debt securities by any "nationally recognized statistical rating organization," as that term is defined by the SEC for purposes of Rule 436(g)(2) under the Act, and (ii) no such organization shall have publicly announced that it has under surveillance or review, with possible negative implications, its rating of any of the Borrower's debt securities. Section 5.4. Market Disruption. On or after the date of the Commitment Letter there shall not have occurred any of the following: (i) a suspension or material limitation in trading in securities generally on the New York Stock Exchange or on the NASDAQ National Market; (ii) a suspension or material limitation in trading in the Borrower's securities on the NASDAQ National Market; (iii) a general moratorium on commercial banking activities declared by either Federal or New York State authorities; or (iv) the outbreak or escalation of hostilities involving the United States or the declaration by the United States of a national emergency or war, if the effect of any such event specified in this clause (iv) in the judgment of the Lenders makes it impracticable or inadvisable to sell or place the Debt Securities or to syndicate the Bridge Loans on the terms and in manner contemplated in the Commitment Letter and the Engagement Letter; or (v) the occurrence of any material adverse change in the existing financial, political or economic conditions in the United States or elsewhere which, in the judgment of the Lenders, would materially and adversely affect the financial markets or the markets for bridge loans or high yield debt securities in the United States. Section 5.5. Financial Statements. Each of the Lenders shall have received audited financial statements for the three-year period immediately preceding the Closing Date and any 51 57 appropriate unaudited financial statements for any interim period or periods of the Borrower and all other recent or probable acquisitions (including pro forma financial statements), all meeting the requirements of Regulation S-X for Form S-1 registration statements and all such financial statements shall be reasonably satisfactory in form and substance to each of the Lenders. Once approved by the Lenders, all such financial statements shall be added to Schedule 3.10(a), Schedule 3.10(b), or Schedule 3.10(c), as appropriate, and shall become subject to the Borrower's representations in Section 3.10. Such financial statements shall show pro forma consolidated EBITDA of the Borrower (calculated in accordance with Regulation S-X and including only those adjustments that the Administrative Agent agrees are appropriate) for the twelve-month period ended September 30, 1998 and for the latest twelve-month period for which statements are available. Section 5.6. Litigation, etc. There shall not exist any action, suit, investigation, litigation or proceeding pending or threatened in any court or before any arbitrator or governmental authority that, in the opinion of each of the Lenders, could have a Material Adverse Effect. Section 5.7. Payment of Fees and Expenses. All fees and expenses due to the Lenders, Goldman, Sachs Credit Partners L.P. and Goldman, Sachs & Co. or the Administrative Agent on or before the Closing Date in connection with the Bridge Loans, pursuant to the Commitment Letter, the Fee Letter, the Engagement Letter or otherwise, shall have been paid in full. Section 5.8. [Intentionally Omitted] Section 5.9. [Intentionally Omitted] Section 5.10. Registration Rights Agreement. The Borrower and the Administrative Agent shall have entered into the Registration Rights Agreement and a fully executed copy of the Registration Rights Agreement shall have been delivered to each of the Lenders. Section 5.11. Delivery of Opinions. The Administrative Agent shall have received originally executed copies of one or more favorable written opinions of (i) Skadden, Arps, Slate, Meagher & Flom LLP, special counsel for the Borrower, in the form of Exhibit F-1 attached hereto, dated the Closing Date and addressed to the Lenders, (ii) Richard J. Lubasch, Senior Vice President and General Counsel to the Borrower, in the form of Exhibit F-2 attached hereto, dated the Closing Date and addressed to the Lenders and (iii) such other opinions of counsel and such certificates or opinions of accountants, appraisers or other professionals as the Administrative Agent shall have reasonably requested. Section 5.12. [Intentionally Omitted] Section 5.13. No Breach; No Default. The Borrower shall not be in breach or violation of any of its obligations under the Engagement Letter, the Commitment Letter or the Fee Letter and each of the Engagement Letter and the Fee Letter shall have been executed and delivered by the Borrower and shall be in full force and effect. In addition, there shall not exist any Default or Event of Default under, the Bridge Loans, this Agreement or any of the other Loan Documents, or under any other material Indebtedness of the Borrower or its subsidiaries. Section 5.14. Other Conditions. All governmental, shareholder and third-party approvals and consents necessary or desirable in connection with the Acquisition, the Offer to Purchase the Diamond Notes and the financing thereof shall have been received and shall be in full force and effect, and all applicable waiting periods shall have expired without any action being taken by any applicable authority. 52 58 B. CONDITIONS TO FUNDING EACH BRIDGE LOAN. The agreement of each Lender to make any Bridge Loan requested to be made by it on any Funding Date is subject to the prior or concurrent satisfaction of each of the following conditions in Section 5.15 to (and including) Section 5.28: Section 5.15. Representations and Warranties. Each of the representations and warranties made by the Borrower, or any of its Subsidiaries, or the Parent, if applicable, in or pursuant to the Loan Documents shall be true and correct in all material respects on and as of such date immediately prior to, and after giving effect to the Bridge Loans as if made on and as of such Funding Date. Section 5.16. No Breach; No Default. The Borrower shall not be in breach or violation of any of its obligations under the Engagement Letter, the Commitment Letter or the Fee Letter. In addition, there shall not exist any Default or Event of Default under, the Bridge Loans, this Agreement or any of the other Loan Documents, or under any other material Indebtedness of the Borrower or its Subsidiaries. Section 5.17. Absence of Certain Changes. Except as set forth on Schedule 5.3 attached hereto, no change in the capital stock or long-term debt of the Borrower and its Subsidiaries or any material adverse change, or any development involving a prospective material adverse change, in or affecting the general affairs, management, financial position, stockholders' equity, results of operations or prospects of the Borrower shall have occurred since September 30, 1998 and no material inaccuracy in such financial statements shall exist. Except as set forth on Schedule 5.3 attached hereto, the Borrower shall have no material liabilities except those set forth on the balance sheet dated September 30, 1998 and those incurred in the ordinary course of business since such date in amounts that are consistent with past practice. Except for any downgrading, announcements or reviews attributable solely to the events set forth on Schedule 5.3 attached hereto, on or after Closing Date (i) no downgrading shall have occurred in the rating accorded the Borrower's debt securities by any "nationally recognized statistical rating organization," as that term is defined by the SEC for purposes of Rule 436(g)(2) under the Act, and (ii) no such organization shall have publicly announced that it has under surveillance or review, with possible negative implications, its rating of any of the Borrower's debt securities. Section 5.18. Market Disruption. On or after the Closing Date there shall not have occurred any of the following: (i) a suspension or material limitation in trading in securities generally on the New York Stock Exchange or on the NASDAQ National Market; (ii) a suspension or material limitation in trading in the Borrower's securities on the NASDAQ National Market; (iii) a general moratorium on commercial banking activities declared by either Federal or New York State authorities; or (iv) the outbreak or escalation of hostilities involving the United States or the declaration by the United States of a national emergency or war, if the effect of any such event specified in this clause (iv) in the judgment of the Lenders makes it impracticable or inadvisable to sell or place the Debt Securities or to syndicate the Bridge Loans on the terms and in manner contemplated in the Commitment Letter and the Engagement Letter; or (v) the occurrence of any material adverse change in the existing financial, political or economic conditions in the United States or elsewhere which, in the judgment of the Lenders, would materially and adversely affect the financial markets or the markets for bridge loans or high yield debt securities in the United States. Section 5.19. Financial Statements. Each of the Lenders shall have received audited financial statements for the three-year period immediately preceding the Closing Date and any appropriate unaudited financial statements for any interim period or periods of the Borrower and all other recent or probable acquisitions (including pro forma financial statements), all meeting the requirements of Regulation S-X for Form S-1 registration statements and all such financial statements shall be reasonably satisfactory in form and substance to each of the Lenders. Once approved by the Lenders, all 53 59 such financial statements shall be added to Schedule 3.10(a), Schedule 3.10(b), or Schedule 3.10(c), as appropriate, and shall become subject to the Borrower's representations in Section 3.10. Such financial statements shall show pro forma consolidated EBITDA of the Borrower (calculated in accordance with Regulation S-X and including only those adjustments that the Administrative Agent agrees are appropriate) for the twelve-month period ended September 30, 1998 and for the latest twelve-month period for which statements are available. Section 5.20. Litigation, etc. There shall not exist any action, suit, investigation, litigation or proceeding pending or threatened in any court or before any arbitrator or governmental authority that, in the opinion of each of the Lenders, could have a Material Adverse Effect. Section 5.21. Payment of Fees and Expenses. All fees and expenses due to the Lenders, Goldman, Sachs Credit Partners L.P. and Goldman, Sachs & Co. or the Administrative Agent on or before the applicable Funding Date in connection with the Bridge Loans, pursuant to the Commitment Letter, the Fee Letter, the Engagement Letter or otherwise, shall have been paid in full. Section 5.22. Borrowing Notice; Bridge Notes. Timely receipt of a Borrowing Notice. Execution and delivery by the Borrower to the Lenders of the applicable Bridge Notes. Section 5.23. Offer to Purchase. The Offers to Purchase the Diamond Notes shall have been completed in accordance with the Diamond Indentures and the Expiration Dates shall have occurred. Section 5.24. Solvency. The Administrative Agent shall have received originally executed copies of a Solvency Certificate, which shall be signed by the principal financial officer of the Borrower, stating that, after giving effect to the consummation of the Transactions, the Borrower and its Subsidiaries will be Solvent, all in form and substance satisfactory to the Administrative Agent. Section 5.25. Exchange Note Indenture. The Borrower and the Exchange Note Trustee shall have entered into the Exchange Note Indenture in the form attached hereto as Exhibit E, with such revisions as are reasonably requested by the Exchange Note Trustee, and a fully executed copy of the Exchange Note Indenture shall have been delivered to each Lender; provided, however, that such revisions shall be of a ministerial and/or mechanical nature having the effect of curing ambiguities, defects or inconsistencies; provided, further, that such Exchange Note Indenture shall be satisfactory to the Borrower, the Administrative Agent and the Lenders, in each case, in their sole discretion. Section 5.26. Exchange Notes. Exchange Notes shall have been issued by the Borrower and delivered into escrow as contemplated by the Escrow Agreement. Section 5.27. Escrow Agreement. The Borrower, the Administrative Agent and the Escrow Agent shall have entered into the Escrow Agreement in the form attached hereto as Exhibit D, with such revisions as are reasonably requested by the Escrow Agent, and a fully executed copy of the Escrow Agreement shall have been delivered to each Lender; provided, however, that such revisions shall be of a ministerial and/or mechanical nature having the effect of curing ambiguities, defects or inconsistencies; provided, further, that such Escrow Agreement shall be satisfactory to the Borrower, the Administrative Agent and the Lenders, in each case, in their sole discretion. Section 5.28. Additional Matters. Each borrowing by the Borrower hereunder shall constitute a representation and warranty by the Borrower as of the date of such Bridge Loan that the conditions contained in this Article 5, subsection B have been satisfied. 54 60 ARTICLE VI. TRANSFER OF THE LOANS, THE INSTRUMENTS EVIDENCING SUCH LOANS AND THE SECURITIES; REPRESENTATIONS OF LENDERS; PARTICIPATIONS Section 6.1. Transfer of the Loans, the instruments evidencing the Loans and the Securities. Each Lender acknowledges that none of the Loans, the instruments evidencing such Loans and the Securities have been registered under the Securities Act and represents and agrees that it is acquiring the Loans, the instruments evidencing such Loans and the Securities for its own account and that it will not, directly or indirectly, transfer, sell, assign, pledge or otherwise dispose of its Loans, the instruments evidencing such Loans or the Securities (or any interest therein) unless such transfer, sale, assignment, pledge or other disposition is made (i) pursuant to an effective registration statement under the Securities Act or (ii) pursuant to an available exemption from registration under, or in a transaction that is not subject to, the Securities Act. Each Lender represents, warrants, covenants and agrees to and with the Borrower that it is either (i) a qualified institutional buyer within the meaning of Rule 144A under the Securities Act acting for its own account or the account of one or more other qualified institutional buyers, and is aware that the Borrower may rely upon the exemption from the provisions of Section 5 of the Securities Act provided by Rule 144A thereunder or (ii) an institutional "accredited investor" within the meaning of Rule 501(a)(1), (2), (3) or (7) under the Securities Act. Each of the Lenders acknowledges that the instruments evidencing the Loans and the Securities will bear a legend restricting the transfer thereof in accordance with the Securities Act. Subject to the provisions of the previous paragraph, the Borrower agrees that, with the consent of the Administrative Agent, each Lender will be free to sell or transfer all or any part of the Loans, the instruments evidencing the Loans or the Securities (including, without limitation, participation interest in the Loans) to any third party and to pledge any or all of the Securities to any commercial bank or other institutional lender. Section 6.2. Permitted Assignments. Any Lender may, in the ordinary course of its business and in accordance with applicable law, at any time assign to one or more banks or other entities ("Purchasers") all or any part of its rights and obligations hereunder and under the Loan Documents. Such assignment shall be made pursuant to an Assignment and Acceptance substantially in the form of Exhibit A or in such other form as may be agreed to by the parties thereto. The consent of the Borrower and the Administrative Agent shall be required prior to an assignment becoming effective with respect to a Purchaser which is not a Lender, an Affiliate of a Lender (including West Street, in the case of Goldman Sachs Credit Partners L.P.) or a Federal Reserve Bank; provided, however, that if a Default has occurred and is continuing, the consent of the Borrower shall not be required. Such consent shall not be unreasonably withheld or delayed. Section 6.3. Permitted Participants; Effect. (a) Any Lender may, in the ordinary course of its business and in accordance with applicable law, at any time sell to one or more banks or other entities ("Participants") participating interests in any Loan owing to such Lender, any Bridge Note held by such Lender, any Commitment of such Lender or any other interest of such Lender under the Loan Documents; provided that such Lender retain all voting rights with respect to such participating interests on all matters other than such matters that require the consent of each Lender under this Agreement. In the event of any such sale by a Lender of participating interests to a Participant, such Lender's obligations under the Loan Documents shall remain unchanged, such Lender shall remain solely responsible to the other parties hereto for the performance of such obligations, such Lender shall remain the owner of its Loans and the holder of any Bridge Note issued to it in evidence thereof for all purposes under the Loan Documents, all amounts payable by the Borrower under this Agreement shall be determined as if such Lender had not sold such participating interests, and the Borrower and the 55 61 Administrative Agent shall continue to deal solely and directly with such Lender in connection with such Lender's rights and obligations under the Loan Documents. (b) Each Lender shall retain the sole right to approve, without the consent of any Participant, any amendment, modification or waiver of any provision of the Loan Documents other than any amendment, modification or waiver with respect to any Loan or Commitment in which such Participant has an interest which forgives principal, interest or fees or reduces the interest rate or fees payable with respect to any such Loan or Commitment, extends the Maturity Date, postpones any date fixed for any regularly scheduled payment of principal of, or interest or fees on, any such Loan or Commitment or releases any guarantor of any such Loan or releases all or substantially all of the collateral, if any, securing any such Loan. (c) The Borrower agrees that each Participant shall be deemed to have the right of setoff provided in Section 2.10 in respect of its participating interest in amounts owing under the Loan Documents to the same extent as if the amount of its participating interest were owing directly to it as a Lender under the Loan Documents, provided that each Lender shall retain the right of setoff provided in Section 2.10 with respect to the amount of participating interests sold to each Participant. The Lenders agree to share with each Participant, and each Participant, by exercising the right of setoff provided in Section 2.10, agrees to share with each Lender, any amount received pursuant to the exercise of its right of setoff, such amounts to be shared in accordance with Section 2.10 as if each Participant were a Lender. Section 6.4. Dissemination of Information. The Borrower authorizes each Lender to disclose to any Participant or Purchaser or any other Person acquiring an interest in the Loan Documents by operation of law (each a "Transferee") and any prospective Transferee any and all information in such Lender's possession concerning the creditworthiness of the Borrower and its Subsidiaries; provided, however, that any records, documents or information that are designated by the Borrower as confidential at the time of delivery of such records, documents or information shall be kept confidential by each Lender and each Transferee, unless (i) such records, documents or information are in the public domain or otherwise publicly available, (ii) disclosure of such records, documents or information is required by court or administrative order or (iii) disclosure of such records, documents, properties or information, in the opinion of counsel to such Lender or Transferee, is otherwise required by law (including, without limitation, pursuant to the requirements of the Securities Act). Section 6.5. Tax Treatment. If any interest in any Loan Document is transferred to any Transferee which is organized under the laws of any jurisdiction other than the United States or any State thereof, the transferor Lender shall cause such Transferee, concurrently with the effectiveness of such transfer, to comply with the provisions of Section 2.9. Section 6.6. Replacement Securities Upon Transfer or Exchange. Upon surrender of any Securities by any Lender in connection with any permitted transfer or exchange, the Borrower will execute and deliver in exchange therefor a new Security or Securities of the same aggregate tenor and principal amount, payable to the order of such Persons and in such denominations as such Lender may request. The Borrower may require payment by such Lender of a sum sufficient to cover any stamp tax or governmental charge imposed in respect of any such transfer. Section 6.7. Register. The Administrative Agent on behalf of the Borrower shall maintain a register of the principal amount of the Loans held by each Lender and any interest due and payable with respect thereto. The Administrative Agent will allow any Lender to inspect and copy such register at each Administrative Agent's principal place of business during normal business hours. 56 62 ARTICLE VII. EVENTS OF DEFAULT Section 7.1. Events of Default. An "Event of Default" occurs if: (a) any representation or warranty made or deemed made by the Borrower or any of its Subsidiaries or the Guarantor herein or that is contained in any Transaction Document or in any certificate, document or financial or other statement furnished by any of them at any time under or in connection with any Transaction Document shall prove to have been incorrect in any material respect on or as of the date made or deemed made; (b) (x) the Borrower defaults in the payment of interest, Liquidated Damages, if any, and/or Additional Amounts, if any, on any Bridge Note, or defaults in the payment of any other Obligation under this Agreement or any other Loan Document, when the same becomes due and payable and the Default continues for a period of 15 days after the date due and payable or (y) the Guarantor defaults in the payment of any amounts under any Note Guarantee, when the same becomes due and payable and the failure to make such payment continues for a period of 15 days after the date due and payable; (c) the Borrower defaults in the payment of the principal of any Bridge Note when the same becomes due and payable at maturity, upon redemption or otherwise; (d) the Borrower or any of its Subsidiaries fails to observe or perform any covenant or agreement contained in Section 2.4, 4.6, 4.7, 4.8, 4.9, 4.10, 4.11, 4.12, 4.13, 4.16, 4.19, 4.22, 4.23 or Article VIII hereof; (e) the Borrower or any of its Subsidiaries or the Guarantor fails to observe or perform any other covenant or agreement contained in any of the Loan Documents, required by any of them to be performed and the failure continues for a period of 30 days after notice from the Administrative Agent to the Borrower or from Lenders holding at least 25% in aggregate principal amount of the then outstanding Bridge Loans to the Borrower and the Administrative Agent stating that such notice is a "Notice of Default"; (f) default under any mortgage, indenture or instrument under which there may be issued or by which there may be secured or evidenced any Indebtedness for money borrowed by the Borrower or any Restricted Subsidiary or the Guarantor (or the payment of which is guaranteed by the Borrower or any Restricted Subsidiary or the Guarantor) having a principal amount greater than $10.0 million, whether such Indebtedness or guarantee now exists or is created after the date hereof, whether or not such default results in the acceleration of such Indebtedness prior to its express maturity; (g) a final judgment or final judgments (other than any judgment as to which a reputable insurance company has accepted full liability) for the payment of money are entered by a court or courts of competent jurisdiction against the Borrower or any Restricted Subsidiary of the Borrower or the Guarantor which remains undischarged for a period (during which execution shall not be effectively stayed) of 60 days, provided that the aggregate of all such judgments exceeds $5 million; (h) the Borrower or any Material Subsidiary or the Guarantor pursuant to or within the meaning of any Bankruptcy Law: (i) commences a voluntary case; 57 63 (ii) consents to the entry of an order for relief against it in an involuntary case in which it is the debtor; (iii) consents to the appointment of a Custodian of it or for all or substantially all of its property; (iv) makes a general assignment for the benefit of its creditors; or (v) generally is unable to pay its debts as the same become due; (i) a court of competent jurisdiction enters an order or decree under any Bankruptcy Law that: (i) is for relief against the Borrower or any Material Subsidiary or the Guarantor in an involuntary case; (ii) appoints a Custodian of the Borrower or any Material Subsidiary or the Guarantor or for all or substantially all of its property; or (iii) orders the liquidation of the Borrower or any Material Subsidiary or the Guarantor, and the order or decree remains unstayed and in effect for 60 days; (j) the revocation of a Material License; (k) the Borrower or any ERISA Affiliate shall fail to pay when due, after the expiration of any applicable grace period, any installment payment with respect to its withdrawal liability under a Multiemployer Plan; (ii) the Borrower or any ERISA Affiliate shall fail to satisfy its contribution requirements under Section 412(c)(11) of the Code, whether or not it has sought a waiver under Section 412(d) of the Code; (iii) in the case of an ERISA Event involving the withdrawal from a Plan of a "substantial employer" (as defined in Section 4001(a)(2) of Section 4062(e) of ERISA), the withdrawing employer's proportionate share of that Plan's Unfunded Pension Liabilities if paid could reasonably be expected to have a Material Adverse Effect; (iv) in the case of an ERISA Event not described in clause (iii) or (iv), the Unfunded Pension Liabilities of the relevant Plan or Plans if paid could reasonably be expected to have a Material Adverse Effect; (vi) a Plan that is intended to be qualified under Section 401(a) of the Code shall lose its qualification, and with respect to such loss of qualification, the Borrower or ERISA Affiliate can reasonably be expected to be required to pay (for additional taxes, payments to or on behalf of Plan participants, or otherwise) an amount that if paid could reasonably be expected to have a Material Adverse Effect; or (vii) the occurrence of any combination of events listed in clauses (iii) through (vi) that involves a net increase in aggregate Unfunded Pension Liabilities and unfunded liabilities that could reasonably be expected to have a Material Adverse Effect; and (l) the obligations of the Guarantor under any Note Guarantee shall be held in any judicial proceeding to be unenforceable or invalid or shall cease for any reason to be in full force and effect or the Guarantor, or any Person acting on behalf of the Guarantor, shall deny or disaffirm its obligations under any Note Guarantee. Section 7.2. Acceleration. If an Event of Default (other than an Event of Default specified in clauses (h) and (i) of Section 7.1 hereof) occurs and is continuing, the Administrative Agent by notice to the Borrower, or the Lenders holding at least 25% in aggregate principal amount of the then outstanding Bridge Loans by notice to the Borrower and the Administrative Agent, may declare all the Bridge Notes to be due and payable. Upon such declaration, the principal of, premium, if any, and 58 64 interest on, the Bridge Notes shall be due and payable immediately. If an Event of Default specified in clause (h) or (i) of Section 7.1 hereof occurs, such an amount shall ipso facto become and be immediately due and payable without any declaration or other act on the part of the Administrative Agent or any Lender. Section 7.3. Rights and Remedies. If an Event of Default occurs and is continuing, the Administrative Agent may pursue any available remedy to collect the payment of principal or interest on the Bridge Notes or to enforce the performance of any provision of the Bridge Notes or this Agreement. The Administrative Agent may maintain a proceeding even if it does not possess any of the Bridge Notes or does not produce any of them in the proceeding. A delay or omission by the Administrative Agent or any Holder in exercising any right or remedy accruing upon an Event of Default shall not impair the right or remedy or constitute a waiver of or acquiescence in the Event of Default. All remedies are cumulative to the extent permitted by law. Section 7.4. Waiver of Past Defaults. Subject to Section 12.3, the Majority Lenders by notice to the Administrative Agent may waive an existing Default or Event of Default and its consequences except a continuing Default or Event of Default in the payment of the principal or interest on any Bridge Note. When a Default or Event of Default is waived, it is cured and ceases; but no such waiver shall extend to any subsequent or other Default or impair any right consequent thereon. Section 7.5. Rights of Lenders To Receive Payment. Notwithstanding anything to the contrary contained in this Agreement, the right of any Lender to receive payment of principal of, premium, if any, and interest on the Bridge Loans and Bridge Notes held by such Lender, on or after the respective due dates expressed in this Agreement or the Bridge Notes, or to bring suit for the enforcement of any such payment on or after such respective dates, shall not be impaired or affected without the consent of such Lender. ARTICLE VIII. DEBT SECURITIES Section 8.1. Debt Securities. The Borrower shall use its best efforts to do all things required in the reasonable opinion of the Investment Bank in connection with the sale of the Debt Securities, including, but not limited to, those actions specified in the Fee Letter and the Engagement Letter. ARTICLE IX. TERMINATION Section 9.1. Termination. The Lenders, by notice to the Borrower, may terminate this Agreement at any time after June 30, 1999. Section 9.2. Survival of Certain Provisions. If this Agreement is terminated pursuant to this Article IX, such termination shall be without liability of any party to any other party, except that, whether or not the transactions contemplated by this Agreement are consummated, (i) the Obligations of the Borrower to reimburse the Lenders for all of their out-of-pocket expenses pursuant to Section 12.1 and the Engagement Letter and (ii) the indemnity provisions contained in Article X shall, in each case, remain operative and in full force and effect. 59 65 ARTICLE X. INDEMNITY Section 10.1. Indemnification. In the event that any of the Lenders or the Administrative Agent (each, an "Indemnified Party") becomes involved in any capacity in any action, proceeding or investigation brought by or against any Person, including stockholders of the Borrower, in connection with or as a result of either this arrangement or any matter referred to in this Agreement, the Borrower periodically will reimburse such Indemnified Party for its legal and other expenses (including the cost of any investigation and preparation) incurred in connection therewith. The Borrower also will indemnify and hold each Indemnified Party harmless against any and all losses, claims, damages or liabilities to any such Person in connection with or as a result of either this arrangement or any matter referred to in this Agreement, except to the extent that any such loss, claim, damage or liability results from the gross negligence or bad faith of such Indemnified Party in performing the services that are the subject of this Agreement. If for any reason the foregoing indemnification is unavailable to any Indemnified Party or insufficient to hold it harmless, then the Borrower shall contribute to the amount paid or payable by such Indemnified Party as a result of such loss, claim, damage or liability in such proportion as is appropriate to reflect the relative economic interests of the Borrower and its stockholders on the one hand and such Indemnified Party on the other hand in the matters contemplated by this Agreement as well as the relative fault of the Borrower, on the one hand, and such Indemnified Party, on the other hand, with respect to such loss, claim, damage or liability and any other relevant equitable considerations. The reimbursement, indemnity and contribution obligations of the Borrower under this Section 10.1 shall be in addition to any liability which the Borrower may otherwise have, shall extend upon the same terms and conditions to any affiliate of any Indemnified Party and the partners, directors, agents, employees and controlling persons (if any), as the case may be, of such Indemnified Party and any such affiliate, and shall be binding upon and inure to the benefit of any successors, assigns, heirs and personal representatives of the Borrower, such Indemnified Party, any such affiliate and any such Person. The Borrower also agrees that neither any Indemnified Party nor any of such affiliates, partners, directors, agents, employees or controlling persons shall have any liability to the Borrower, any person asserting claims on behalf of or in right of the Borrower or any other person in connection with or as a result of either this arrangement or any matter referred to in this Agreement except to the extent that any losses, claims, damages, liabilities or expenses incurred by the Borrower result from the gross negligence or bad faith of such Indemnified Party in performing the services that are the subject of this Agreement. Notwithstanding any other provision of this Agreement, no indemnified person shall be liable for any indirect or consequential damages in connection with its activities related to the Bridge Loans. Any right to trial by jury with respect to any action or proceeding arising in connection with or as a result of either this arrangement or any matter referred to in the Letters is hereby waived by the parties hereto. Section 10.2. Settlement of Claims. The Borrower agrees that, neither it nor any of its Subsidiaries will settle, compromise or consent to the entry of any judgment in any pending or threatened claim, action or proceeding in respect of which indemnification or contribution could be sought under Section 10.1 (whether or not any Indemnified Party is an actual or potential party to such claim, action or proceeding) without the prior written consent of the Indemnified Parties, unless such settlement, compromise or consent includes an unconditional release of each Indemnified Party from all liability arising out of such claim, action or proceeding, which consent shall not be unreasonably withheld. Section 10.3. Appearance Expenses. If an Indemnified Party is requested or required to appear as a witness in any action brought by or on behalf of or against the Borrower or any Affiliate thereof in which such Indemnified Party is not named as a defendant, the Borrower agrees to reimburse such Indemnified 60 66 Party for all reasonable expenses incurred by it in connection with such Indemnified Party's appearing and preparing to appear as such a witness, including, without limitation, the reasonable fees and disbursements of its legal counsel. Section 10.4. Indemnity for Taxes, Reserves and Expenses. If, after the date hereof, the adoption of any law or guideline or any amendment or change in the administration, interpretation or application of any existing or future law or guideline by any Governmental Entity charged with the administration, interpretation or application thereof, or the compliance with any request or directive of any Governmental Entity (whether or not having the force of law): (a) subjects any Affected Party to any tax of any kind with respect to this Agreement or the Bridge Notes or changes the basis of taxation of payments of amounts due hereunder or thereunder or with respect to this Agreement or any of the other Loan Documents, (including, without limitation, any sales, gross receipts, general corporate, personal property, privilege or license taxes, and including claims, losses and liabilities arising from any failure to pay or delay in paying any such tax (unless such failure or delay results solely from such Affected Party's negligence or willful misconduct), but excluding (i) federal, state or local taxes based on net income incurred by such Affected Party arising out of or under this Agreement or any of the other Loan Documents) and (ii) Taxes, Other Taxes and any taxes, levies, imposts, deductions, charges or withholding specifically excluded under Section 2.9(a); (b) imposes, modifies or deems applicable any reserve (including, without limitation, any reserve imposed by the Board), special deposit or similar requirement against assets of the Borrower held by, credit to the Borrower extended by, deposits of the Borrower with or for the account of, or other acquisition of funds of the Borrower by, any Affected Party; (c) shall change the amount of capital maintained or requested or directed to be maintained by an Affected Party; or (d) imposes upon an Affected Party any other condition or expense (including, without limitation, (i) loss of margin and (ii) attorneys' fees and expenses incurred by officers or employees of an Affected Party (or any successor thereto) and expenses of litigation or preparation therefor in contesting any of the foregoing) with respect to this Agreement or any of the other Loan Documents or the purchase, maintenance or funding of the Loans by an Affected Party, and the result of any of the foregoing is to increase the cost to, reduce the income receivable by, reduce the rate of return on capital of, or impose any expense (including loss of margin) upon, an Affected Party with respect to this Agreement, any of the other Loan Documents, the obligations hereunder or thereunder or the funding of the Loans hereunder, the Affected Party may notify the Borrower of the amount of such increase, reduction, or imposition, and the Borrower hereby agrees to pay to the Affected Party the amount the Affected Party deems necessary to compensate the Affected Party for such increase, reduction or imposition which determination shall be conclusive. Such amounts shall be due and payable by the Borrower 15 days after such notice is given. Section 10.5. Survival of Indemnification. The provisions contained in this Article X shall remain in full force and effect whether or not any of the transactions contemplated hereby are consummated and notwithstanding the termination of this Agreement or the payment in full of all Obligations hereunder. 61 67 Section 10.6. Liability Not Exclusive; Payments. The agreements of the Borrower in this Article X shall be in addition to any liability that it may otherwise have. All amounts due under this Article X shall be payable as incurred upon written demand therefor. ARTICLE XI. THE ADMINISTRATIVE AGENT; THE ARRANGER Section 11.1. Appointment. Each Lender hereby irrevocably designates and appoints the Administrative Agent to act as an agent of such Lender under this Agreement and the other Loan Documents, and each such Lender irrevocably authorizes the Administrative Agent, in such capacity, to take such action on its behalf under the provisions of this Agreement and the other Loan Documents and to exercise such powers and perform such duties as are expressly delegated to the Administrative Agent by the terms of this Agreement and the other Loan Documents, together with such other powers as are reasonably incidental thereto. Notwithstanding any provision to the contrary elsewhere in this Agreement, the Administrative Agent shall have no duties or responsibilities, except those expressly set forth herein, or any fiduciary relationship with any Lender, and no implied covenants, functions, responsibilities, duties, obligations or liabilities shall be read into this Agreement or any other Loan Document or otherwise exist against the Administrative Agent. Section 11.2. Delegation of Duties. The Administrative Agent may execute any of its duties under this Agreement and the other Loan Documents by or through agents or attorneys-in-fact and shall be entitled to the advice of counsel concerning all matters pertaining to such duties. The Administrative Agent shall not be responsible for the negligence or misconduct of any agents or attorneys-in-fact selected by it with reasonable care. Section 11.3. Exculpatory Provisions. Neither the Administrative Agent nor any of its officers, directors, employees, agents, attorneys-in-fact or Affiliates shall be (i) liable for any action lawfully taken or omitted to be taken by it or such Person under or in connection with this Agreement or any other Loan Document (except for its own gross negligence or willful misconduct) or (ii) responsible in any manner to any of the Lenders for any recitals, statements, representations or warranties made by the Borrower or any of its Subsidiaries or any officer thereof contained in this Agreement or any other Loan Document or in any certificate, report, statement, opinion or other document referred to or provided for in, or received by the Administrative Agent under or in connection with, this Agreement or any other Loan Document or for the value, validity, effectiveness, genuineness, enforceability or sufficiency of this Agreement or any other Loan Document or for any failure of the Borrower or any of its Subsidiaries to perform its obligations hereunder or thereunder. The Administrative Agent shall not be under any obligation to any Lender to ascertain or to inquire as to the observance or performance of any of the agreements contained in, or conditions of, this Agreement or any other Loan Document, or to inspect the properties, books or records of the Borrower or any of its Subsidiaries. Section 11.4. Reliance by the Administrative Agent. The Administrative Agent shall be entitled to rely, and shall be fully protected in relying, upon any Bridge Note, writing, resolution, notice, consent, certificate, affidavit, letter, telecopy, telex or teletype message, statement, order or other document or conversation believed by it to be genuine and correct and to have been signed, sent or made by the proper Person or Persons and upon advice and statements of legal counsel (including, without limitation, counsel to the Borrower or any of its Subsidiaries), independent accountants and other experts selected by the Administrative Agent. The Administrative Agent may deem and treat the payee of the Bridge Note as the owner thereof for all purposes unless a written notice of assignment, negotiation or transfer thereof shall have been filed with the Administrative Agent. The Administrative Agent shall be fully justified in failing or refusing to take any action under this Agreement or any other Loan Document unless it shall first receive such advice or concurrence of the Majority Lenders as it deems appropriate or 62 68 it shall first be indemnified to its satisfaction by the Lenders against any and all liability and expense which may be incurred by it by reason of taking or continuing to take any such action. The Administrative Agent shall in all cases be fully protected in acting, or in refraining from acting, under this Agreement and the other Loan Documents in accordance with a request of the Majority Lenders, and such request and any action taken or failure to act pursuant thereto shall be binding upon all the Lenders and all future holders of the Loans. Section 11.5. Notice of Default. The Administrative Agent shall not be deemed to have knowledge or notice of the occurrence of any Default or Event of Default hereunder unless the Administrative Agent has received notice from a Lender, the Borrower or any of its Subsidiaries referring to this Agreement, describing such Default or Event of Default and stating that such notice is a "notice of default." In the event that any of the Administrative Agent receives such a notice, the Administrative Agent shall give notice thereof to the Lenders. The Administrative Agent shall take such action with respect to such Default or Event of Default as shall be reasonably directed by the Majority Lenders; provided that unless and until the Administrative Agent shall have received such directions, the Administrative Agent may (but shall not be obligated to) take such action, or refrain from taking such action, with respect to such Default or Event of Default as it shall deem advisable in the best interests of the Lenders. Section 11.6. Non-Reliance on the Administrative Agent and Other Lenders. Each Lender expressly acknowledges that neither the Administrative Agent nor any of its officers, directors, employees, agents, attorneys-in-fact or Affiliates has made any representations or warranties to it and that no act by the Administrative Agent hereafter taken, including any review of the affairs of the Borrower or any of its Subsidiaries, shall be deemed to constitute any representation or warranty by the Administrative Agent to any Lender. Each Lender represents to the Administrative Agent that it has, independently and without reliance upon the Administrative Agent or any other Lenders, and based on such documents and information as it has deemed appropriate, made its own appraisal of and investigation into the business, operations, property, financial and other condition, prospects and credit worthiness of the Borrower and its Subsidiaries and made its own decision to make its Loans hereunder and enter into this Agreement. Each Lender confirms that it is a qualified institutional buyer within the meaning of Rule 144A under the Securities Act. Each Lender also represents that it will, independently and without reliance upon the Administrative Agent or any other Lender, and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit analysis, appraisals and decisions in taking or not taking action under this Agreement and the other Loan Documents, and to make such investigation as it deems necessary to inform itself as to the business, operations, property, financial and other condition, prospects and credit worthiness of the Borrower and its Subsidiaries. Except for notices, reports and other documents expressly required to be furnished to the Lenders by the Administrative Agent hereunder, the Administrative Agent shall have no duty or responsibility to provide any Lender with any credit or other information concerning the business, operations, property, financial or other condition, prospects or credit worthiness of the Borrower or any of its Subsidiaries which may come into the possession of the Administrative Agent or any of its officers, directors, employees, agents, attorneys-in-fact or Affiliates. Section 11.7. Indemnification. The Lenders agree to indemnify each of the Administrative Agent in its capacity as such (to the extent not reimbursed by the Borrower or any of its Subsidiaries and without limiting the obligation of the Borrower and any of its Subsidiaries to do so), ratably according to their respective Commitments in effect on the date on which indemnification is sought, from and against any and all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements of any kind whatsoever which may at any time (include, without limitation, at any time following the payment of the Loans) be imposed on, incurred by or asserted against the Administrative Agent in any way relating to or arising out of, the Commitments, 63 69 this Agreement, any other Loan Document or any documents contemplated by or referred to herein or therein or the transactions contemplated hereby or thereby or any action taken or omitted by the Administrative Agent under or in connection with any of the foregoing, provided that no Lender shall be liable for the payment of any portion of such liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements resulting solely from the gross negligence or willful misconduct of the Administrative Agent. The agreements in this subsection shall survive the payment of the Loans and all other Obligations payable hereunder. Section 11.8. Administrative Agent, in its Individual Capacity. The Administrative Agent and its Affiliates may make loans to, accept deposits from and generally engage in any kind of business with the Borrower as though such Administrative Agent were not acting in such capacities hereunder and under the other Loan Documents. With respect to the Loans made or renewed by it and the Bridge Note issued to it such Administrative Agent shall have the same rights and powers under this Agreement and the other Loan Documents as any Lender and may exercise the same as though it were not an Administrative Agent, and the terms "Lender" and "Lenders" shall include the Administrative Agent in its individual capacity. Section 11.9. Successor Administrative Agent. The Administrative Agent may resign as Administrative Agent upon 30 days' notice to the Lenders. If the Administrative Agent shall resign as Administrative Agent under this Agreement and the other Loan Documents then the Majority Lenders shall appoint from among the Lenders a successor agent for the Lenders, which successor agent (provided that it shall have been approved by the Borrower), shall succeed to the rights, powers and duties of the Administrative Agent, hereunder. Effective upon such appointment and approval, the term "Administrative Agent" shall mean and include such successor agent, and the former Administrative Agent's rights, powers and duties as Administrative Agent shall be terminated, without any other or further act or deed on the part of such former Administrative Agent, any of the parties to this Agreement or any holders of the Loans. After any retiring Administrative Agent's resignation as Administrative Agent the provisions of this Article XI shall inure to its benefit as to any actions taken or omitted to be taken by it while it was Administrative Agent under this Agreement and the other Loan Documents. Section 11.10. Arranger. Except as expressly set forth herein, the Arranger, in its capacity as such, shall have no duties or responsibilities, and shall incur no liabilities, under this Agreement or the other Loan Documents. ARTICLE XII. MISCELLANEOUS Section 12.1. Expenses; Documentary Taxes. The Borrower agrees to pay (a) all reasonable out-of-pocket expenses (including, without limitation, expenses incurred in connection with due diligence by the Lenders) associated with the preparation, execution and delivery, administration, waiver, enforcement or modification and enforcement of the documentation contemplated hereby and (b) the reasonable fees and disbursements of Latham & Watkins, legal counsel to the Lenders, in connection with the transactions contemplated herein, including in each case those incurred prior to the Closing Date and prior to each Funding Date. The Borrower hereby agrees to indemnify the Lenders against any transfer taxes, documentary taxes, assessments or charges made by any Governmental Entity by reason of the execution and delivery, or the terms, of this Agreement or any of the other Loan Documents. Section 12.2. Notices. All notices and other communications pertaining to this Agreement or any Bridge Note shall be in writing and shall be delivered (a) in Person (with receipt acknowledged), (b) by facsimile (confirmed immediately in writing by a copy mailed by registered or certified mail, return receipt requested, postage prepaid, addressed as hereafter set forth), (c) by 64 70 registered or certified mail, return receipt requested, postage prepaid, or (d) by overnight courier, addressed as follows: (i) If to the Administrative Agent, to it at: Goldman Sachs Credit Partners L.P. c/o Goldman, Sachs & Co. 85 Broad Street New York, New York 10004 Attention: Matthew Leavitt Facsimile No.: (212) 902-3000 with a copy to: Latham & Watkins 885 Third Avenue, Suite 1000 New York, New York 10022 Attention: Kirk A. Davenport Facsimile No.: (212) 751-4864 (ii) If to any Lender, to it at its address set forth on the signature pages hereto: (iii) If to the Borrower, to it at: NTL Incorporated 110 East 59th Street 26th Floor New York, New York 10022 Attention: Richard J. Lubasch Facsimile No.: (212) 906-8497 with a copy to: Skadden, Arps, Slate, Meagher & Flom LLP 919 Third Avenue New York, New York 10022 Attention: Thomas Kennedy Facsimile No.: (212) 735-3637 or to such other Person or address as shall be furnished in writing delivered to the other parties in compliance with this Section 12.2. Section 12.3. Consent to Amendments and Waivers. (a) Except as provided in Section 4.21 and 12.3(b), this Agreement and the Bridge Notes may be amended or supplemented with the consent of the Borrower and the Majority Lenders and any existing default or compliance with any provision of this Agreement or the Bridge Notes may be waived with the consent of the Majority Lenders. Bridge Notes held by the Borrower or any of its Affiliates will not be deemed to be outstanding for purposes of this Section 12.3. 65 71 (b) Notwithstanding the provisions of Section 12.3(a) and in addition to the provisions of Section 4.21, without the consent of each Lender affected thereby, an amendment or waiver may not: (i) reduce the principal amount of any Loan, (ii) change the fixed maturity of any Loan, (iii) reduce the rate of or change the time for payment of interest on any Loan, (iv) waive a Default or Event of Default in the payment of principal of, or premium, fees or interest, if any, on the Loans or any other amounts payable under any of the Loan Documents, (v) make any Loan payable in money other than that stated in the applicable Loan, (vi) make any change in the provisions of this Agreement relating to the rights of Lenders to receive (A) prepayments on, or (B) payments of principal of, premium, if any, or fees or interest on, the Loans, (vii) make any change to the provisions of Article VII that would adversely affect the rights of any Lender or (viii) make any change in the foregoing amendment and waiver provisions. (c) The Borrower shall not and shall not permit any of its Subsidiaries to, directly or indirectly, pay or cause to be paid any consideration, whether by way of interest, fee or otherwise, to any Lender for or as an inducement to any consent, waiver or amendment permitted by Section 12.3(a) unless such consideration is offered to be paid and is paid to all Lenders that consent, waive or agree to amend in the time frame set forth in the solicitation documents relating to such consent, waiver or amendment. Section 12.4. Parties. This Agreement shall inure to the benefit of and be binding upon the Borrower, the Affected Parties and each of their respective successors and assigns. Except as expressly in this Agreement, nothing expressed or mentioned in this Agreement is intended or shall be construed to give any other Person any legal or equitable right, remedy or claim under or in respect of this Agreement or any provision herein contained. Except as expressly provided in this Agreement, this Agreement and all conditions and provisions hereof are intended to be for the sole and exclusive benefit of the Affected Parties and their respective successors and assigns, and for the benefit of no other Person. Section 12.5. New York Law; Submission to Jurisdiction; Waiver of Jury Trial. THIS AGREEMENT AND THE BRIDGE NOTES SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF NEW YORK WITHOUT REGARD TO CONFLICT OF LAW RULES THEREOF. THE BORROWER AND EACH OF THE LENDERS HEREBY SUBMITS TO THE NONEXCLUSIVE JURISDICTION OF THE UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF NEW YORK AND OF ANY NEW YORK STATE COURT SITTING IN NEW YORK CITY (EACH, A "NEW YORK COURT") FOR PURPOSES OF ALL LEGAL PROCEEDINGS ARISING OUT OF OR RELATING TO THE BRIDGE NOTES, THIS AGREEMENT, ANY OF THE OTHER LOAN DOCUMENTS OR THE TRANSACTIONS CONTEMPLATED HEREBY. THE BORROWER AND EACH OF THE LENDERS IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, ANY OBJECTION WHICH IT MAY NOW OR HEREAFTER HAVE TO THE LAYING OF THE VENUE OF ANY SUCH PROCEEDING BROUGHT IN SUCH A COURT AND ANY CLAIM THAT ANY SUCH PROCEEDING BROUGHT IN SUCH A COURT HAS BEEN BROUGHT IN AN INCONVENIENT FORUM. THE BORROWER AND EACH OF THE LENDERS IRREVOCABLY WAIVES ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR RELATING TO THE BRIDGE NOTES, THIS AGREEMENT, ANY OF THE OTHER LOAN DOCUMENTS OR THE TRANSACTIONS CONTEMPLATED HEREBY. Section 12.6. Replacement Notes. If any Bridge Note becomes mutilated and is surrendered by the applicable Lender to the Borrower, or if any Lender claims that any of its Bridge Notes has been lost, destroyed or wrongfully taken, the Borrower shall execute and deliver to such Lender a replacement Bridge Note, upon the delivery by such Lender of an indemnity to the Borrower to 66 72 save it and any agent of it harmless in respect of such loss, destruction or wrongful taking with respect to such Bridge Note. Section 12.7. [Intentionally omitted] Section 12.8. Marshalling; Recapture. None of the Administrative Agent nor any Lender shall be under any obligation to marshall any assets in favor of the Borrower or any other party or against or in payment of any or all of the Obligations. To the extent any Lender receives any payment by or on behalf of the Borrower, which payment or any part thereof is subsequently invalidated, declared to be fraudulent or preferential, set aside or required to be repaid to the Borrower or its estate, trustee, receiver, custodian or any other party under any Bankruptcy Law, state or federal law, common law or equitable cause, then, to the extent of such payment or repayment, the obligation or part thereof which has been paid, reduced or satisfied by the amount so repaid shall be reinstated by the amount so repaid and shall be included within the liabilities of Borrower to such Lender as of the date such initial payment, reduction or satisfaction occurred. Section 12.9. Limitation of Liability. No claim may be made by the Borrower or any other Person against any Administrative Agent or any Lender or the Affiliates, directors, officers, employees, attorneys or agents of any of them for any special, indirect, consequential or punitive damages in respect of any claim for breach of contract or any theory of liability arising out of or related to the transactions contemplated by this Agreement or the other Loan Documents, or any act, omission or event occurring in connection therewith; and the Borrower hereby waives, releases and agrees not to sue and shall cause each of its respective Subsidiaries to waive, release or agree not to sue (if required), upon any claim for any such damages, whether or not accrued and whether or not known or suspected to exist in its favor. Section 12.10. Independence of Covenants. All covenants hereunder shall be given independent effect so that if a particular action or condition is not permitted by any of such covenants, the fact that it would be permitted by an exception to, or be otherwise within the limitations of, another covenant shall not avoid the occurrence of a Default or Event of Default if such action is taken or condition exists. Section 12.11. Currency Indemnity. The Borrower acknowledges and agrees that this is a credit transaction where specification of dollars is of the essence and dollars shall be the currency of account and payment in all events. If, pursuant to a judgment or for any other reason, payment shall be made in another currency and such payment, after prompt conversion to dollars and transfer to New York City in accordance with normal banking procedures, falls short of the sum due the Lenders in dollars, the Borrower shall pay the Lender such shortfall and the Lenders shall have a separate cause of action for such amount. Section 12.12. Waiver of Immunity. To the extent that the Borrower has or hereafter may acquire any immunity from: (a) the jurisdiction of any court of (i) any jurisdiction in which the Borrower owns or leases property or assets or (ii) the United States, the State of New York or any political subdivision thereof; or 67 73 (b) from any legal process (whether through service of notice, attachment prior to judgment, attachment in aid of execution, execution or otherwise) with respect to itself or its property and assets, this Agreement, any Loan Document or actions to enforce judgments in respect of any thereof, it hereby irrevocably waives such immunity in respect of its obligations under the above-referenced document. Section 12.13. Freedom of Choice. The submission to the jurisdiction of the courts referred to in this Article XII shall not (and shall not be construed so as to) limit the right of any Lender to take proceedings against the Borrower in the courts of any country in which the Borrower has assets or in any other court of competent jurisdiction nor shall the taking of proceedings in any one or more jurisdictions preclude the taking of proceedings in any other jurisdiction (whether concurrently or not) if and to the extent permitted by applicable law. Section 12.14. Successors and Assigns. Whenever in this Agreement any of the parties hereto is referred to, such reference shall be deemed to include the successors and assigns of such party; and all covenants and agreements of the Borrower in this Agreement shall bind their respective successors and assigns. The Borrower may not assign or transfer any of its rights or obligations hereunder (by operation of law or otherwise) without the prior written consent of the Majority Lenders. Any assignment by any Lender must be made in compliance with Article VI hereof. Section 12.15. Merger. This Agreement constitutes the entire contract among the parties relating to the subject matter hereof and supersedes any and all previous agreements among the parties relating to the subject matter hereof, except for those provisions in the Fee Letter and the Engagement Letter that are in addition to the provisions contained herein. Section 12.16. Severability Clause. In case any provision in this Agreement or any Bridge Note shall be invalid, illegal or unenforceable in any jurisdiction, the validity, legality and enforceability of the remaining provisions shall not in any way be affected or impaired thereby and such provision shall be ineffective in such jurisdiction only to the extent of such invalidity, illegality or unenforceability. 68 74 Section 12.17. Representations, Warranties and Agreements To Survive Delivery. All representations, warranties and agreements contained in or incorporated into this Agreement, or contained in Officers' Certificates submitted pursuant hereto, shall remain operative and in full force and effect until all Obligations under all of the Loan Documents have been repaid in full, regardless of any investigation made by or on behalf of the Lenders or any controlling Person of the Lenders, or by or on behalf of the Borrower or any controlling Person of the Borrower, and shall survive delivery of the Bridge Notes. IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement as of the date first above written. NTL INCORPORATED By: /s/ Richard J. Lubasch --------------------------------- Name: Richard J. Lubasch Title: Senior Vice President, General Counsel and Secretary GOLDMAN SACHS CREDIT PARTNERS L.P. as Administrative Agent By: /s/ Stephen J. McGuinness ------------------------------- Name: Stephen J. McGuinness Title: Managing Director 69 75 Lenders: Commitment Amount: $1,350,000,000 GOLDMAN SACHS CREDIT PARTNERS L.P. By: /s/ Stephen J. McGuinness ---------------------------------- (Authorized Signatory) 70 76 Wire Transfer Instructions Name of Bank: [Insert name of bank] Address: __________________ ABA#: ___________ For the account of ______________ Account No.: _____________ For further credit to [Insert name of Lender]. Reference: Attention: __________________ Telephone: __________________ 71 77 EXHIBIT A FORM OF ASSIGNMENT AND ACCEPTANCE Reference is made to the Bridge Loan Agreement, dated as of March 17, 1999 (as amended, supplemented or otherwise modified from time to time, the "Bridge Loan Agreement"), by and between NTL Incorporated, a Delaware corporation (the "Borrower"), and Goldman Sachs Credit Partners L.P. (Goldman Sachs Credit Partners L.P., herein called the "Lenders"), as Administrative Agent for the Lenders (in such capacity, the "Administrative Agent"). Unless otherwise defined herein, terms defined in the Bridge Loan Agreement and used herein shall have the meanings given to them in the Bridge Loan Agreement. The Assignor identified on Schedule I hereto (the "Assignor") and the Assignee identified on Schedule I hereto (the "Assignee") agree as follows: 1. The Assignor hereby irrevocably sells and assigns to the Assignee without recourse to the Assignor, and the Assignee hereby irrevocably purchases and assumes from the Assignor without recourse to the Assignor, as of the Effective Date (as defined below), the percentage interest described in Schedule 1 hereto (the "Assigned Interest") in and to the Assignor's rights and obligations under the Bridge Loan Agreement (the "Assigned Facilities"), in a principal amount for the Assigned Facilities as set forth on Schedule I hereto. 2. The Assignor (a) makes no representation or warranty and assumes no responsibility with respect to any statements, warranties or representations made in or in connection with the Bridge Loan Agreement or with respect to the execution, legality, validity, enforceability, genuineness, sufficiency or value of the Bridge Loan Agreement, any other Loan Document or any other instrument or document furnished pursuant thereto, other than that the Assignor has not created any adverse claim upon the interest being assigned by it hereunder and that such interest is free and clear of any such adverse claim: (b) makes no representation or warranty and assumes no responsibility with respect to the financial condition of the Borrower, any of its Subsidiaries or any other obligor or the performance or observance by the Borrower, any of its Subsidiaries or any other obligor of any of their respective obligations under the Bridge Loan Agreement or any other Loan Document or any other instrument or document furnished pursuant hereto or thereto; and (c) attaches any Bridge Notes held by it evidencing the Assigned Facilities and (i) requests that the Administrative Agent, upon request by the Assignee, exchange the attached Bridge Notes for a new Bridge Note or Bridge Notes payable to the Assignee and (ii) if the Assignor has retained any interest in the Assigned Facility, requests that the Administrative Agent exchange the attached Bridge Notes for a new Bridge Note or Bridge Notes payable to the Assignor, in each case in amounts which reflect the assignment being made hereby (and after giving effect to any other assignments which are effective on the Effective Date). 3. The Assignee (a) represents and warrants that it is legally authorized to enter into this Assignment and Acceptance; (b) confirms that it has received a copy of the Bridge Loan Agreement, and all schedules and exhibits thereto together with copies of the financial information delivered pursuant to subsection 4.4 thereof and such other documents and information as it has deemed appropriate to make its own credit analysis and decision to enter into this Assignment and Acceptance; (c) agrees that it will, independently and without reliance upon the Assignor, the Administrative Agent or any other Lender and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit decisions in taking or not taking action under the Bridge Loan Agreement, the other Loan Documents or any other instrument or document furnished pursuant hereto or thereto; (d) appoints and authorizes the Administrative Agent to take such action as agent on its behalf and to exercise such powers and discretion under the Bridge Loan Agreement, the other Loan Documents or any other instrument or document furnished pursuant hereto or thereto as are delegated to the Administrative Agent by the terms thereof, together with such powers as are incidental thereto; (e) agrees 78 that it will be bound by the provisions of the Bridge Loan Agreement and will perform in accordance with its terms all the obligations which by the terms of the Bridge Loan Agreement are required to be performed by it as a Lender; and (f) agrees that it shall have no recourse against the Assignor with respect to any matters relating to the Bridge Loan Agreement, the other Loan Documents or any other instrument or documents furnished pursuant hereto or thereto. 4. The Assignor hereby assigns to Assignee all of its rights and obligations under the Fee Letter with respect to the Assigned Interest. 5. The effective date of this Assignment and Acceptance shall be the Effective Date of Assignment described in Schedule I hereto (the "Effective Date"). Following the execution of this Assignment and Acceptance, it will be delivered to the Administrative Agent for acceptance by them and recording by the Administrative Agent pursuant to Section 6.7 of the Bridge Loan Agreement, effective as of the Effective Date (which shall not, unless otherwise agreed to by the Administrative Agent, be earlier than five Business Days after the date of such acceptance and recording by the Administrative Agent). 6. Upon such acceptance and recording, from and after the Effective Date, the Administrative Agent shall make all payments in respect of the Assigned Interest (including payments of principal, interest, fees and other amounts) to the Assignor for amounts which have accrued to the Effective Date and to the Assignee for amounts which have accrued subsequent to the Effective Date. The Assignor and the Assignee shall make all appropriate adjustments in payments by the Administrative Agent for periods prior to the Effective Date or with respect to the making of this assignment directly between themselves. 7. From and after the Effective Date, (a) the Assignee shall be a party to the Bridge Loan Agreement and the Fee Letter and, to the extent provided in this Assignment and Acceptance, have the rights and obligations of a Lender thereunder and under the other Loan Documents and shall be bound by the provisions thereof and (b) the Assignor shall, to the extent provided in this Assignment and Acceptance, relinquish its rights and be released from its obligations under the Bridge Loan Agreement and the Fee Letter. 8. THIS ASSIGNMENT AND ACCEPTANCE SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK. IN WITNESS WHEREOF, the parties hereto have caused this Assignment and Acceptance to be executed as of the date first above written by their respective duly authorized officers on Schedule I hereto. 2 79 [Name of Assignee] [Name of Assignor] By: By: ----------------------------------- ---------------------------------- Name Name: Title: Title: Accepted: GOLDMAN SACHS CREDIT PARTNERS L.P. as Administrative Agent By: ------------------------------ (Authorized Signatory) [NTL INCORPORATED as Borrower By: ------------------------------- Name: Title:] 3 80 Exhibit A Schedule 1 to Assignment and Acceptance Name of Assignor: ____________________________ Name of Assignee: ____________________________ Effective Date of Assignment: ________________
Credit Facility Principal Commitment Assigned Amount Assigned Commitment Percentage Assigned1 - -------- --------------- ------------------------------- $__________________ ______. _________%
1. Calculate the Commitment Percentage that is assigned to at least 9 decimal places and show as a percentage of the aggregate commitments of all Lenders 81 EXHIBIT B NY_DOCS\328339.4 [THE SECURITY EVIDENCED OR CONSTITUTED HEREBY HAS BEEN ACQUIRED FOR INVESTMENT AND HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED. THIS SECURITY MAY NOT BE SOLD, TRANSFERRED, PLEDGED OR HYPOTHECATED UNLESS THE REGISTRATION PROVISIONS OF SAID ACT (OR AN EXEMPTION THEREFROM) HAVE BEEN COMPLIED WITH.] No. I-__ New York, New York $______________ ______________, 199_ SENIOR BRIDGE NOTE [SERIES A] [SERIES B] [SERIES C] FOR VALUE RECEIVED, the undersigned, NTL Incorporated (the "Borrower"), promises to pay to the order of _______________________________, or its registered assigns (the "Holder"), the principal amount of __________________ Dollars ($_______) and to pay interest from the date hereof on the unpaid principal amount hereof from time to time outstanding, at the rates per annum and on the dates specified in that certain Bridge Loan Agreement, dated as of March 17, 1999, between the Borrower, the Lenders named therein and Goldman Sachs Credit Partners L.P. (as amended, restated and/or otherwise modified from time to time, the "Bridge Loan Agreement"). Terms used herein and not otherwise defined have the meanings assigned to them in the Bridge Loan Agreement. The unpaid principal balance of this Bridge Note, together with all accrued and unpaid interest thereon, shall become due and payable on the Maturity Date. The Borrower promises to pay interest on demand, to the extent permitted by law, on any overdue principal and interest from their due dates at the rate per annum as specified in Section 2.3 of the Bridge Loan Agreement. All payments of the principal of and premium and interest on this Bridge Note shall be made in money of the United States of America that at the time of payment is legal tender for the payment of public and private debts, by transfer of immediately available funds into a bank account designated by the Holder in writing to the Borrower; provided, however, that notwithstanding anything contained in the Bridge Loan Agreement or any of the Bridge Notes to the contrary, in no event shall the interest rate hereon for any period of computation exceed a rate per annum equal to the lesser of 16% and the maximum interest rate permitted by applicable law. The Borrower agrees to pay, upon demand, all reasonable out-of-pocket expenses (including, without limitation, the reasonable fees and disbursements of legal counsel to the Holder) associated with the waiver, enforcement or modification of the Bridge Loan Agreement or this Bridge Note. The Borrower hereby waives diligence, presentment, demand, protest and notice of any kind whatsoever. The nonexercise by the Holder of any of its rights hereunder in any particular instance shall not constitute a waiver thereof in that or any subsequent instance. This Bridge Note is one of the Bridge Notes referred to in the Bridge Loan Agreement, which Agreement, among other things, contains provisions for the acceleration of the maturity hereof upon the happening of certain events, for optional and mandatory prepayment in full of the principal 82 hereof prior to maturity and for the amendment or waiver of certain provisions of the Bridge Loan Agreement, all upon the terms and conditions therein specified. In the event of any conflict between the provisions of this Bridge Note and the Bridge Loan Agreement, the provisions of the Bridge Loan Agreement shall govern. Additional Amounts. This provision shall apply only in the event that the Borrower becomes, or a successor to the Borrower is, a corporation organized or existing under the laws of the United Kingdom, the Netherlands, the Netherlands Antilles, Bermuda or the Cayman Islands. All payments made by the Borrower on this Bridge Note shall be made without deduction for or on account of, any and all present or future taxes, duties, assessments, or governmental charges of whatever nature unless the deduction or withholding of such taxes, duties, assessments or governmental charges is then required by law. If any deduction or withholding for or on account of any present or future taxes, assessments or other governmental charges of the United Kingdom, the Netherlands, the Netherlands Antilles, Bermuda or the Cayman Islands (or any political subdivision or taxing authority thereof or therein) shall at any time be required in respect of any amounts to be paid by the Borrower under this Bridge Note, the Borrower shall pay or cause to be paid such additional amounts ("Additional Amounts") as may be necessary in order that the net amounts received by a Holder of this Bridge Note after such deduction or withholding shall be not less than the amounts specified in this Bridge Note to which the Holder of this Bridge Note is entitled; provided, however, that the Borrower shall not be required to make any payment of Additional Amounts for or on account of: (a) any tax, assessment or other governmental charge to the extent such tax, assessment or other governmental charge would not have been imposed but for (i) the existence of any present or former connection between such Holder (or between a fiduciary, settlor, beneficiary, member or shareholder of, or possessor of a power over, such Holder, if such Holder is an estate, nominee, trust, partnership or corporation), other than the holding of this Bridge Note or the receipt of amounts payable in respect of this Bridge Note, and the United Kingdom, the Netherlands, the Netherlands Antilles, Bermuda or the Cayman Islands (or any political subdivision or taxing authority thereof or therein) including, without limitation, such Holder (or such fiduciary, settlor, beneficiary, member, shareholder or possessor) being or having been a citizen or resident thereof or being or having been present or engaged in trade or business therein or having or having had a permanent establishment therein or (ii) the presentation of this Bridge Note (where presentation is required) for payment on a date more than 30 days after the date on which such payment became due and payable or the date on which payment thereof is duly provided for, whichever occurs later, except to the extent that the Holder would have been entitled to Additional Amounts had this Bridge Note been presented on the last day of such period of 30 days; (b) any tax, assessment or other governmental charge that is imposed or withheld by reason of the failure to comply by the Holder of this Bridge Note or, if different, the beneficial owner of the interest payable on this Bridge Note, with a timely request of the Borrower addressed to such Holder or beneficial owner to provide information, documents or other evidence concerning the nationality, residence, identity or connection with the taxing jurisdiction of such Holder or beneficial owner which is required or imposed by a statute, regulation or administrative practice of the taxing jurisdiction as a precondition to exemption from all or part of such tax, assessment or governmental charge; (c) any estate, inheritance, gift, sales, transfer, personal property or similar tax, assessment or other governmental charge; (d) any tax, assessment or other governmental charge which is collectible otherwise than by withholding from payments of principal amount, redemption amount, Change of Control Payment or interest with respect to a Bridge Note or withholding from the proceeds of a sale or exchange of a Bridge Note; (e) any tax, assessment or other governmental charge required to be withheld by any Paying Agent from any payment of principal amount, redemption amount, Change of Control Payment or interest with respect to a Bridge Note, if such payment can be made, and is in fact made, without such withholding by any other Paying Agent located inside the United States; (f) any tax, assessment or other governmental charge imposed on a Holder that is not the beneficial owner of a Bridge Note to the extent that the beneficial owner would not have been entitled to the payment of any such Additional Amounts had the beneficial owner directly held the Bridge Note; (g) any combination of items (a), (b), (c), (d), (e) and (f) above; nor shall Additional Amounts be paid with 2 83 respect to any payment of the principal of, or any interest on, this Bridge Note to any Holder who is a fiduciary or partnership or other than the sole beneficial owner of such payment to the extent that a beneficiary or settlor would not have been entitled to any Additional Amounts had such beneficiary or settlor been the Holder of this Bridge Note. All references to principal amount or interest on the Bridge Notes in the Bridge Loan Agreement or the Bridge Notes shall include any Additional Amounts payable to the Borrower pursuant to this provision. THIS SECURITY WAS ISSUED WITH ORIGINAL ISSUE DISCOUNT UNDER SECTION 1273 OF THE INTERNAL REVENUE CODE. YOU MAY CONTACT RICHARD J. LUBASCH, GENERAL COUNSEL AND SENIOR VICE PRESIDENT OF NTL INCORPORATED, 110 EAST 59TH STREET, NEW YORK, NEW YORK 10022, TELEPHONE NUMBER: 212-906-8440, WHO WILL PROVIDE YOU WITH ANY REQUIRED INFORMATION REGARDING THE ORIGINAL ISSUE DISCOUNT. THIS BRIDGE NOTE SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF NEW YORK. IN WITNESS WHEREOF, the Borrower has caused this Bridge Note to be signed in its corporate name by its duly authorized officer and to be dated as of the day and year first above written. NTL INCORPORATED By: ------------------------------------- Name: Title: 3 84 [Back of Bridge Note] OPTION OF HOLDER TO ELECT PREPAYMENT UPON CHANGE OF CONTROL If you want to elect to have this Bridge Note prepaid by the Borrower pursuant to Section 4.13 of the Bridge Loan Agreement check the box below. |_| Please prepay the entire amount of this Bridge Note If you want to elect to have only part of this Bridge Note prepaid by the Borrower pursuant to Section 4.13 of the Bridge Loan Agreement, state the amount you elect to have purchased: $_____________. Date: ________________________ Your Signature: __________________________________________________ (Sign exactly as your name appears on the face of this Note) Tax Identification No. _______________________ Signature Guarantee: ___________________________ 85 EXHIBIT C ================================================================================ REGISTRATION RIGHTS AGREEMENT between NTL INCORPORATED and GOLDMAN SACHS CREDIT PARTNERS L.P. Dated as of March 17, 1999 ================================================================================ 86 THIS REGISTRATION RIGHTS AGREEMENT (this "Agreement") is made and entered into as of March 17, 1999, between NTL Incorporated, a Delaware corporation (the "Borrower"), and Goldman Sachs Credit Partners L.P., as ("Administrative Agent"). RECITALS This Agreement is made pursuant to the Bridge Loan Agreement, dated as of the date hereof (the "Bridge Loan Agreement"), among the Borrower, the Lenders referred to therein (the "Lenders") and the Administrative Agent. In order to induce the Lenders to enter into the Bridge Loan Agreement, the Borrower has agreed to provide the registration rights set forth in this Agreement. The execution of this Agreement is a condition to the funding of any Bridge Loan. AGREEMENT The parties agree as follows: 1. Definitions. Capitalized terms used herein without definition have the meanings assigned to them in the Bridge Loan Agreement. As used in this Agreement, the following capitalized terms shall have the following meanings: Business Day: Each Monday, Tuesday, Wednesday, Thursday and Friday that is not a day on which banking institutions in New York are generally authorized or obligated by law or executive order to close. Effectiveness Date: See Section 3(a) hereof. Exchange Act: The Securities Exchange Act of 1934, as amended. Exchange Notes: As defined in the Bridge Loan Agreement. Exchange Note Indenture: The Exchange Note Indenture, dated as of March 17, 1999, between the Borrower and The Chase Manhattan Bank, as trustee, pursuant to which the Exchange Notes are issued, as the same may be amended from time to time in accordance with the terms thereof. Exchange Note Indenture Trustee: See Section 5(r) hereof. Filing Date: See Section 3(a) hereof. Indemnified Holder: See Section 7(a) hereof. Interest Payment Date: As defined in the Bridge Loan Agreement. Interest Period: As defined in the Bridge Loan Agreement. Liquidated Damages: See Section 3(c) hereof. Registration Rights Agreement Page 1 87 Loan: As defined in the Bridge Loan Agreement. NASD: National Association of Securities Dealers, Inc. Person: An individual, partnership, limited liability company, corporation, trust, unincorporated organization, or a government or agency or political subdivision thereof. Prospectus: The prospectus included in the Registration Statement, as amended or supplemented by any prospectus supplement with respect to the terms of the offering of any portion of the Registrable Securities covered by such Registration Statement and by all other amendments and supplements to the prospectus, including post-effective amendments and all material incorporated by reference in such prospectus. Recommencement Date: See Section 5 hereof. Registrable Securities: All Exchange Notes; provided that an Exchange Note ceases to be a Registrable Security when it is no longer a Transfer Restricted Security. Registration Default: See Section 3(c) hereof. Registration Expenses: See Section 6 hereof. Registration Statement: Any registration statement of the Borrower which covers any of the Registrable Securities pursuant to the provisions of this Agreement, including the Prospectus, amendments and supplements to such Registration Statement, including post-effective amendments, all exhibits and all material incorporated by reference in such Registration Statement. SEC: The Securities and Exchange Commission. Securities Act: The Securities Act of 1933, as amended. Shelf Registration: See Section 3(a) hereof. Suspension Notice: See Section 5 hereof. TIA: The Trust Indenture Act of 1939, as amended (15 U.S.C. Section 77aaa-77bbbb) as in effect on the date of the Exchange Note Indenture. Transfer Restricted Securities: The Registrable Securities upon original issuance thereof, and with respect to any particular such Registrable Security, until such securities are sold to the public in unrestricted sales. "underwritten registration" or "underwritten offering": A registration in which securities of the Borrower are sold to an underwriter for reoffering to the public. Registration Rights Agreement Page 2 88 2. Holders of Registrable Securities. A Person is deemed to be a holder of Registrable Securities whenever such Person owns Registrable Securities of record or has provided evidence reasonably satisfactory to the Borrower that such Person has the right to acquire such Registrable Securities, whether or not such acquisition has actually been effected and disregarding any legal restrictions upon the exercise of such right; provided however that there can only be one holder of any Registrable Security at any given time. 3. Shelf Registration. (a) Filing of Shelf Registration. The Borrower shall file a "shelf" registration statement on any appropriate form pursuant to Rule 415 (or similar rule that may be adopted by the SEC) under the Securities Act (a "Shelf Registration") as promptly as practicable and in no event later than the date that is 300 days after the initial funding of the Bridge Loans (the "Filing Date") to permit resales of all of the Registrable Securities. The Borrower agrees to use its best efforts to cause such Shelf Registration to become effective as promptly as possible after the filing thereof, but in no event later than 90 days after the Filing Date (the "Effectiveness Date"). The Borrower shall use its best efforts to keep any Shelf Registration required by this Section 3(a) continuously effective, supplemented and amended as required by and subject to the provisions of Section 5 hereof to the extent necessary to ensure that it is available for sales of Registrable Securities by the holders thereof entitled to the benefit of this Section 3(a) and to ensure that it conforms with the requirements of this Agreement, the Securities Act and the policies, rules and regulations of the SEC as announced from time to time until all Registrable Securities covered by the Shelf Registration have been sold pursuant thereto. (b) Provision by Holders of Certain Information in Connection with the Shelf Registration. No holder of Registrable Securities may include any of its Registrable Securities in any Shelf Registration pursuant to this Agreement unless and until such holder furnishes to the Borrower in writing, within 20 days after receipt of a request therefor, the information specified in Item 507 or 508 of Regulation S-K, as applicable, of the Securities Act for use in connection with any Shelf Registration or Prospectus or preliminary Prospectus included therein. No holder of Registrable Securities shall be entitled to Liquidated Damages pursuant to Section 3(c) hereof unless and until such holder shall have provided all such information. Each selling holder of Registrable Securities agrees to promptly furnish additional information required to be disclosed in order to make the information previously furnished to the Borrower by such holder not materially misleading. (c) Liquidated Damages. If (i) the Registration Statement required by this Agreement is not filed with the SEC on or prior to the Filing Date, (ii) the Registration Statement has not been declared effective by the SEC on or prior to the Effectiveness Date or (iii) the Registration Statement required by this Agreement is filed and declared effective but shall thereafter cease to be effective or fail to be usable for its intended purpose without being succeeded immediately by a post-effective amendment to the Registration Statement that cures such failure and that is itself declared effective Registration Rights Agreement Page 3 89 immediately (each such event referred to in clauses (i) through (iii), a "Registration Default"), then the Borrower agrees to pay to each holder of Registrable Securities and Loans liquidated damages ("Liquidated Damages") in an amount equal to 25 basis points per annum times the principal amount of Registrable Securities or Loans, as the case may be, for each week or portion thereof that the Registration Default continues for the first 90-day period immediately following the occurrence of such Registration Default (such 90-day period to begin on the date on which the first such Registration Default occurs). The amount of such Liquidated Damages shall increase by an additional 25 basis points per annum on the principal amount of Registrable Securities or Loans, as the case may be, with respect to each subsequent 90-day period until all Registration Defaults have been cured, up to a maximum amount of Liquidated Damages of 100 basis points per annum on the principal amount of Registrable Securities or Loans, as the case may be; provided that the Borrower shall in no event be required to pay Liquidated Damages for more than one Registration Default on any Registrable Securities or Loans, as the case may be, at any given time. All Liquidated Damages shall be calculated based on the actual number of days elapsed in a 360 day year and all accrued Liquidated Damages shall be paid on the applicable Interest Payment Date in accordance with the Exchange Note Indenture or the Bridge Loan Agreement, as the case may be, to each holder of Registrable Securities or Loans, as the case may be, in cash. Notwithstanding anything to the contrary set forth herein, (1) upon filing the Registration Statement, in the case of (i) above, (2) upon the effectiveness of the Registration Statement, in the case of (ii) above or (3) upon the filing of a post-effective amendment to the Registration Statement or an additional Registration Statement that causes the Registration Statement to again be declared effective or made usable in the case of (iii) above, the Liquidated Damages payable with respect to the Registrable Securities or Loans, as the case may be, as a result of such clause (i), (ii) or (iii), as applicable, shall cease. All obligations of the Borrower set forth in the preceding paragraph that are outstanding with respect to any Registrable Security or Loan at the time such security ceases to be a Registrable Security or Loan shall survive until such time as all such obligations with respect to such Registrable Securities or Loans have been satisfied in full. Any holder of Registrable Securities or any Lender may notify the Exchange Note Indenture Trustee (and any paying agent under the Exchange Note Indenture) and/or the Administrative Agent under the Bridge Loan Agreement immediately after the occurrence of each and every event which pursuant to this Section 3(c) results in the accrual of Liquidated Damages with respect to such Registrable Securities or Loans, as the case may be. 4. [Intentionally Omitted] Registration Rights Agreement Page 4 90 5. Registration Procedures. In connection with the Borrower's registration obligations set forth in Section 3 hereof, the Borrower shall use its best efforts to effect such registration to permit the sale of such Registrable Securities being sold in accordance with the intended method or methods of distribution thereof (as indicated in the information furnished to the Borrower pursuant to Section 3(b) hereof), and pursuant thereto the Borrower shall, as expeditiously as possible prepare and file with the SEC a Registration Statement or Registration Statements relating to the Shelf Registration on any appropriate form under the Securities Act, which form shall be available for the sale of the Registrable Securities in accordance with the intended method or methods of distribution thereof within the time periods and otherwise in accordance with the provisions hereof and shall cooperate and assist in any filings required to be made with the NASD and in the performance of any due diligence investigation by any underwriter (including any "qualified independent underwriter") that is required to be retained in accordance with the rules and regulations of the NASD. In connection with any Registration Statement and any related Prospectus required by this Agreement, the Borrower shall: (a) use all commercially reasonable efforts to keep such Registration Statement continuously effective and provide all requisite financial statements for the period specified in Section 3 of this Agreement, as applicable. Upon the occurrence of any event that would cause any such Registration Statement or the Prospectus contained therein (1) to contain a material misstatement or omission or (2) not to be effective and usable for resale of Registrable Securities during the period required by this Agreement, the Borrower shall promptly file an appropriate amendment to such Registration Statement curing such defect, and, if SEC review is required, use all commercially reasonable efforts to cause such amendment to be declared effective as soon as practicable; (b) prepare and file with the SEC such amendments and post-effective amendments to the applicable Registration Statement as may be necessary to keep such Registration Statement effective for the applicable period set forth in Section 3 hereof; cause the Prospectus to be supplemented by any required Prospectus supplement, and as so supplemented to be filed pursuant to Rule 424 under the Securities Act, and to comply fully with Rules 424, 430A and 462, as applicable under the Securities Act in a timely manner; and comply with the provisions of the Securities Act with respect to the disposition of all securities covered by such Registration Statement during the applicable period in accordance with the intended method or methods of distribution by the sellers thereof set forth in such Registration Statement or supplement to the Prospectus; the Borrower shall not be deemed to have used its best efforts to keep such Registration Statement effective during the applicable period if it voluntarily takes any action that would result in selling holders of the Registrable Securities covered thereby being unable to sell such Registrable Securities during that period unless such action is required under applicable law, provided that the foregoing shall not apply to actions taken by the Borrower in good faith and for valid business reasons, including without limitation the acquisition or divestiture of assets, so long as the Borrower promptly thereafter complies with the requirements of Section 5(k) hereof, if applicable; Registration Rights Agreement Page 5 91 (c) advise the selling holders of Registrable Securities and the managing underwriters, if any, promptly, and, if requested by any such Person, confirm such advice in writing, (1) when the Prospectus or any Prospectus supplement or post-effective amendment has been filed, and, with respect to any applicable Registration Statement or any post-effective amendment, when the same has become effective, (2) of any request by the SEC for amendments to the Registration Statement or for amendments or supplements to the Prospectus or for additional information relating thereto, (3) of the issuance by the SEC of any stop order suspending the effectiveness of the Registration Statement under the Securities Act or of the suspension by any state securities commission of the qualification of the Registrable Securities for offering or sale in any jurisdiction or the initiation of any proceedings for that purpose and (4) of the existence of any fact or the happening of any event that makes any statement of a material fact made in the Registration Statement, the Prospectus, any amendment or supplement thereto or any document incorporated by reference therein untrue or that requires the making of any addition to or changes in the Registration Statement in order to make the statements therein, in the light of the circumstances under which they were made, not misleading or that requires the making of any additions to or changes in the Prospectus in order to make the statements therein, in the light of the circumstances under which they were made, not misleading. If at any time the SEC shall issue any stop order suspending the effectiveness of the Registration Statement, or any state securities commission or other regulatory authority shall issue an order suspending the qualification or exemption from qualification of the Registrable Securities under state securities or Blue Sky laws, the Borrower shall use all commercially reasonable efforts to obtain the withdrawal or lifting of such order at the earliest possible time; (d) furnish to each selling holder of Registrable Securities covered by any Registration Statement or Prospectus in connection with such sale, and each underwriter, if any, before filing with the SEC, copies of any Registration Statement or any Prospectus included therein or any amendments or supplements to any such Registration Statement or Prospectus (including all documents incorporated by reference after the initial filing of such Registration Statement), which documents will be subject to the review and comment of such Persons in connection with such sale, if any, for a period of at least five Business Days, and the Borrower will not file any such Registration Statement or Prospectus or any amendment or supplement to any such Registration Statement or Prospectus (including all such documents incorporated by reference) to which the selling holders of the Registrable Securities covered by such Registration Statement in connection with such sale, or the underwriters, if any, shall reasonably object within five Business Days after the receipt thereof. A selling holder of Registrable Securities or underwriter, if any, shall be deemed to have reasonably objected to such filing if such Registration Statement, amendment, Prospectus or supplement, as applicable, as proposed to be filed, contains a material misstatement or omission or fails to comply with the applicable requirements of the Securities Act; (e) if requested by the managing underwriter or underwriters in connection with an underwritten offering or any selling holders of Registrable Securities in connection with such sale, promptly include in any Registration Statement or Prospectus pursuant to a supplement or post-effective amendment, if necessary, such information as Registration Rights Agreement Page 6 92 the managing underwriters or such selling holders may reasonably request to have included therein, including, without limitation, information relating to the "Plan of Distribution," with respect to the principal amount of Registrable Securities being sold to such underwriters, the purchase price being paid therefor by such underwriters and any other terms of the underwritten (or best efforts underwritten) offering of the Registrable Securities to be sold in such offering; and make all required filings of such Prospectus supplement or post-effective amendment as soon as practicable after the Borrower is notified of the matters to be included in such Prospectus supplement or post-effective amendment; (f) furnish to each selling holder of Registrable Securities and each managing underwriter, if any, without charge, at least one signed copy of the Registration Statement, as first filed with the SEC, and of each amendment thereto, all documents incorporated by reference therein and all exhibits (including exhibits incorporated by reference therein); (g) deliver to each selling holder of Registrable Securities and the underwriters, if any, without charge, as many copies of the Prospectus (including each preliminary prospectus) and any amendment or supplement thereto as such Persons may reasonably request; the Borrower hereby consents to the use (in accordance with law) of the Prospectus or any amendment or supplement thereto by each of the selling holders of Registrable Securities and the underwriters, if any, in connection with the offering and the sale of the Registrable Securities covered by the Prospectus or any amendment or supplement thereto; (h) prior to any public offering of Registrable Securities, cooperate with the selling holders of Registrable Securities, the underwriters, if any, and their respective counsel in connection with the registration and qualification of such Registrable Securities under the securities or Blue Sky laws of such jurisdictions as any such seller or underwriter, if any, may request and do any and all other acts or things necessary or advisable to enable the disposition in such jurisdictions of such Registrable Securities covered by the applicable Registration Statement; provided, however, that the Borrower will not be required to register or qualify as a foreign corporation where the Borrower is not then so qualified or to take any action that would subject the Borrower to the service of process in suits or to taxation, other than as to matters and transactions relating to the Registration Statement in any jurisdiction where the Borrower is not then so subject; (i) in connection with any sale of Registrable Securities that will result in such securities no longer being Transfer Restricted Securities, cooperate with the selling holders of Registrable Securities and the managing underwriters, if any, to facilitate the timely preparation and delivery of certificates representing such Registrable Securities to be sold and not bearing any restrictive legends; and to register such Registrable Securities in such denominations and such names as such managing underwriters or selling holders may request at least two Business Days prior to such sale of Registrable Securities; (j) use all commercially reasonable efforts to cause the disposition of the Registrable Securities covered by the applicable Registration Statement to be registered Registration Rights Agreement Page 7 93 with or approved by such other governmental agencies or authorities as may be necessary to enable the seller or sellers thereof or the underwriters, if any, to consummate the disposition of such Registrable Securities, subject to the proviso in clause (h) above; (k) subject to Section 5(a) hereof, if any fact or event contemplated by Section 5(c)(4) hereof shall exist or have occurred, prepare a supplement or post-effective amendment to the Registration Statement or related Prospectus or any document incorporated therein by reference or file any other required document so that, as thereafter delivered to the purchasers of the Registrable Securities, the Prospectus will not contain an untrue statement of a material fact or omit to state any material fact necessary to make the statements therein in the light of the circumstances under which they were made, not misleading; (l) if requested by the holders of a majority in aggregate principal amount of the Registrable Securities or the managing underwriters, if any, cause all Registrable Securities covered by a Registration Statement to be listed on each securities exchange on which similar securities issued by the Borrower are then listed; (m) cause the Registrable Securities covered by a Registration Statement to be rated with such rating agencies as the holders of a majority in aggregate principal amount of the Registrable Securities or the managing underwriters, if any, may designate; (n) provide a CUSIP number for all Registrable Securities not later than the effective date of a Registration Statement covering such Registrable Securities, and provide the Exchange Note Indenture Trustee with printed certificates for the Registrable Securities which are in a form eligible for deposit with The Depository Trust Company; (o) enter into such agreements (including an underwriting agreement in customary form) and take all such other actions in connection therewith in order to expedite or facilitate the disposition of such Registrable Securities pursuant to the Registration Statement contemplated by this Agreement and in such connection, whether or not an underwriting agreement is entered into and whether or not the registration is an underwritten registration (1) make such representations and warranties in a certificate signed on behalf of the Borrower by (x) the President and (y) the principal financial officer of the Borrower, to the holders of such Registrable Securities and the underwriters, if any, in form, substance and scope as are customarily made by issuers to underwriters in primary underwritten offerings; (2) obtain opinions of counsel to the Borrower and updates thereof (which counsel and opinions (in form, scope and substance) shall be reasonably satisfactory to the managing underwriters, if any, and the holders of a majority in principal amount of the Registrable Securities) addressed to each selling holder and the underwriters, if any, covering the matters customarily covered in opinions requested in underwritten offerings and such other matters as may be reasonably requested by such selling holders and underwriters and in any event including a statement to the effect that such counsel has participated in conferences with officers and other representatives of the Borrower, representatives of the independent public accountants for the Borrower and have considered the matters required to be stated therein and the statements contained therein, although such counsel has not independently verified the Registration Rights Agreement Page 8 94 accuracy, completeness or fairness of such statements; and that such counsel advises that, on the basis of the foregoing no facts came to such counsel's attention that caused such counsel to believe that the applicable Registration Statement, at the time such Registration Statement or any post-effective amendment thereto became effective, contained an untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary to make the statements therein not misleading, or that the Prospectus contained in such Registration Statement as of its date contained an untrue statement of a material fact or omitted to state a material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading; without limiting the foregoing, such counsel may state further that such counsel assumes no responsibility for, and has not independently verified, the accuracy, completeness or fairness of the financial statements, notes and schedules and financial data set forth or referred to in any Registration Statement contemplated by this Agreement or the related Prospectus; (3) obtain "comfort" letters and updates thereof from the Borrower's independent certified public accountants addressed to such selling holders and underwriters, if any, such letters to be in customary form and covering matters of the type customarily covered in "comfort" letters to underwriters in connection with primary underwritten offerings; (4) if an underwriting agreement is entered into, the same shall set forth in full the indemnification provisions and procedures of Section 7 hereof with respect to all parties to be indemnified pursuant to Section 7; and (5) deliver such documents and certificates as may be requested by the holders of a majority of the Registrable Securities being sold and the managing underwriters, if any, to evidence compliance with Section 5(k) hereof and with any customary conditions contained in the underwriting agreement or other agreement entered into by the Borrower. The above shall be done at each closing under such underwriting or similar agreement or as and to the extent required thereunder. If at any time the representations and warranties of the Borrower set forth in the certificate contemplated in clause (o)(1) above cease to be true and correct, the Borrower shall so advise the underwriters, if any, and each selling holder promptly and, if requested by such Persons, shall confirm such advice in writing; (p) make available at reasonable times for inspection by the selling holders of Registrable Securities and any underwriter participating in any disposition of such Registrable Securities pursuant to a Shelf Registration, and any attorney or accountant retained by such selling holders or underwriters, if any, all financial and other records and pertinent corporate documents of the Borrower, and cause the Borrower's officers, directors and employees to supply all information reasonably requested by any such selling holders, underwriter, attorney or accountant in connection with such Registration Statement or any post-effective amendment thereto subsequent to the filing thereof and prior to its effectiveness; (q) otherwise use all commercially reasonable efforts to comply with all applicable rules and regulations of the SEC, and make generally available to their security holders, with regard to any applicable Registration Statement, as soon as practicable, a consolidated earnings statement meeting the requirements of Rule 158 (which need not be audited) covering a twelve-month period beginning after the effective date of the Registration Statement (as such term is defined in paragraph (c) of Rule 158 under the Securities Act); Registration Rights Agreement Page 9 95 (r) cause the Exchange Note Indenture to be qualified under the TIA, and provide an indenture trustee for the Registrable Securities (the "Exchange Note Indenture Trustee") not later than the effective date of the first Registration Statement required by this Agreement and, and in connection therewith, cooperate with the Exchange Note Indenture Trustee and the holders of the Exchange Notes to effect such changes to the Exchange Note Indenture as may be required for the Exchange Note Indenture to be so qualified in accordance with the terms of the TIA and execute, and use their respective best efforts to cause the Exchange Note Indenture Trustee to execute, all documents as may be required to effect such changes and all other forms and documents required to be filed with the SEC to enable the Exchange Note Indenture to be so qualified in a timely manner; (s) promptly prior to the filing of any document which is to be incorporated by reference into the Registration Statement or Prospectus, provide copies of such document to the selling holders of Registrable Securities covered by such Registration Statement and to the managing underwriters, if any, make the Borrower's representatives available for discussion of such document and other customary due diligence matters, and include such information in such document prior to the filing thereof as such selling holders or underwriters, if any, may reasonably request; (t) make appropriate officers of the Borrower reasonably available to such holders and the underwriters, if any, for meetings with prospective purchasers of the Registrable Securities and prepare and present to potential investors "road show" material in a manner consistent with other new issuances of high yield debt securities; and (u) provide promptly to each holder, upon request, each document filed with the SEC pursuant to the requirements of Section 13 or Section 15(d) of the Exchange Act. Each holder of Registrable Securities agrees by acceptance of such Registrable Securities that, upon receipt of any notice referred to in Section 5(a) hereof or any notice from the Borrower of the existence of any fact or event of the kind described in Section 5(c)(4) hereof (in each case, a "Suspension Notice"), such holder will forthwith discontinue disposition of Registrable Securities pursuant to the applicable Registration Statement until (i) such holder has received copies of the supplemented or amended Prospectus contemplated by Section 5(k) hereof, or (ii) such holder is advised in writing by the Borrower that the use of such Prospectus may be resumed, and has received copies of any additional or supplemental filings that are incorporated by reference in such Prospectus, (in each case, the "Recommencement Date"). Each holder receiving a Suspension Notice hereby agrees that it will either (i) destroy any Prospectuses, other than permanent file copies, then in such holder's possession that have been replaced by the Borrower with more recently dated Prospectuses or (ii) deliver to the Borrower (at the Borrower's expense) all copies, other than permanent file copies, then in such holder's possession of the Prospectus covering such Registrable Securities that was current at the time of receipt of the Suspension Notice. 6. Registration Expenses. Registration Rights Agreement Page 10 96 (a) All expenses incident to the Borrower's performance of or compliance with this Agreement will be borne by the Borrower, regardless of whether a Registration Statement becomes effective, including without limitation, (i) all registration and filing fees and expenses, fees and expenses associated with filings required to be made with the NASD (including, if applicable, the fees and expenses of any "qualified independent underwriter" and their counsel as may be required by the rules and regulations of the NASD); (ii) all fees and expenses of compliance with federal securities and state Blue Sky laws or securities laws (including fees and disbursements of counsel for the underwriters or selling holders in connection with Blue Sky qualifications of the Registrable Securities and determination of their eligibility for investment under the laws of such jurisdictions as the managing underwriters or holders of a majority in aggregate principal amount of the Registrable Securities being sold may designate); (iii) all expenses of printing (including printing certificates for the Registrable Securities in a form eligible for deposit with The Depository Trust Company and of printing Prospectuses), messenger and delivery services and telephone; (iv) all fees and disbursements of counsel for the Borrower and for the sellers of the Registrable Securities (subject to the provisions of Section 6(b) hereof); (v) all fees and disbursements of independent certified public accountants of the Borrower (including the expenses of any special audit and "comfort" letters required by or incident to such performance), and of underwriters (excluding discounts, commissions or fees of underwriters, selling brokers, dealer managers or similar securities industry professionals relating to the distribution of the Registrable Securities or legal expenses of any Person other than the Borrower and the selling holders); (vi) the cost of securities acts liability insurance if the Borrower so desires; (vii) all "road show" travel and other expenses incurred in connection with the marketing and sale of the Registrable Securities; (viii) all fees and expenses in connection with the rating of the Registrable Securities by rating agencies, if any; (ix) all application and filing fees in connection with listing the Registrable Securities on a national securities exchange or automated quotation system pursuant to the requirements hereof; and (x) all fees and expenses of other Persons retained by the Borrower (all such expenses being herein called "Registration Expenses"). The Borrower will, in any event, bear its own internal expenses (including, without limitation, all salaries and expenses of their respective officers and employees performing legal or accounting duties), the expense of any annual audit and fees and expenses of any Person, including special experts, retained by the Borrower. (b) In connection with any Registration Statement required by this Agreement (including, without limitation, the Shelf Registration), the Borrower will reimburse the selling holders of Registrable Securities being registered in such registration for the reasonable fees and disbursements of not more than one counsel who shall be Latham & Watkins unless another firm shall be chosen by the selling holders of a majority in principal amount of Registrable Securities for whose benefit such Registration Statement is being prepared. 7. Indemnification. Registration Rights Agreement Page 11 97 (a) The Borrower agrees to indemnify and hold harmless each holder of Registrable Securities to be included in such registration and each person who participates as a placement or sales agent or as an underwriter in any offering or sale of such Registrable Securities, (any such person may hereinafter be referred to as an "Indemnified Holder"), against any losses, claims, damages or liabilities to which such Indemnified Holder may become subject, under the Securities Act or otherwise, insofar as such losses, claims, damages or liabilities (or actions in respect thereof) arise out of or are based upon an untrue statement or alleged untrue statement of a material fact contained in any Registration Statement, preliminary prospectus or Prospectus (or any amendment or supplement thereto), or arise out of or are based upon the omission or alleged omission to state therein a material fact necessary to make the statements therein not misleading, and will reimburse each Indemnified Holder for any legal or other expenses reasonably incurred by such Indemnified Holder in connection with investigating or defending any such action or claim as such expenses are incurred; provided, however, that the Borrower shall not be liable in any such case to the extent that any such loss, claim, damage or liability arises out of or is based upon an untrue statement or alleged untrue statement or omission or alleged omission made in any Registration Statement, preliminary prospectus or Prospectus (or any amendment or supplement thereto), in reliance upon and in conformity with written information furnished to the Borrower by any Indemnified Holder expressly for use therein. (b) Each Indemnified Holder will indemnify and hold harmless the Borrower against any losses, claims, damages or liabilities to which the Borrower may become subject, under the Securities Act or otherwise, insofar as such losses, claims, damages or liabilities (or actions in respect thereof) arise out of or are based upon an untrue statement or alleged untrue statement of a material fact contained in any Registration Statement, preliminary prospectus or Prospectus (or any amendment or supplement thereto), or arise out of or are based upon the omission or alleged omission to state therein a material fact or necessary to make the statements therein not misleading, in each case to the extent, but only to the extent, that such untrue statement or alleged untrue statement or omission or alleged omission was made in any Registration Statement, preliminary prospectus or Prospectus (or any amendment or supplement thereto), in reliance upon and in conformity with written information furnished to the Borrower by such Indemnified Holder expressly for use therein; and will reimburse the Borrower for any legal or other expenses reasonably incurred by the Borrower in connection with investigating or defending any such action or claim as such expenses are incurred. (c) Promptly after receipt by an indemnified party under subsection (a) or (b) above of notice of the commencement of any action, such indemnified party shall, if a claim in respect thereof is to be made against the indemnifying party under such subsection, notify the indemnifying party in writing of the commencement thereof; but the omission so to notify the indemnifying party shall not relieve it from any liability which it may have to any indemnified party otherwise than under such subsection. In case any such action shall be brought against any indemnified party and it shall notify the indemnifying party of the commencement thereof, the indemnifying party shall be entitled to participate therein and, to the extent that it shall wish, jointly with any other indemnifying party similarly notified, to assume the defense thereof, with counsel Registration Rights Agreement Page 12 98 satisfactory to such indemnified party (who shall not, except with the consent of the indemnified party, be counsel to the indemnifying party), and, after notice from the indemnifying party to such indemnified party of its election so to assume the defense thereof, the indemnifying party shall not be liable to such indemnified party under such subsection for any legal expenses of other counsel or any other expenses, in each case subsequently incurred by such indemnified party, in connection with the defense thereof other than reasonable costs of investigation. No indemnifying party shall, without the written consent of the indemnified party, effect the settlement or compromise of, or consent to the entry of any judgment with respect to, any pending or threatened action or claim in respect of which indemnification or contribution may be sought hereunder (whether or not the indemnified party is an actual or potential party to such action or claim) unless such settlement, compromise or judgment (i) includes an unconditional release of the indemnified party from all liability arising out of such action or claim and (ii) does not include a statement as to, or an admission of, fault, culpability or a failure to act, by or on behalf of any indemnified party. (d) If the indemnification provided for in this Section 7 is unavailable to or insufficient to hold harmless an indemnified party under subsection (a) or (b) above in respect of any losses, claims, damages or liabilities (or actions in respect thereof) referred to therein, then each indemnifying party shall contribute to the amount paid or payable by such indemnified party as a result of such losses, claims, damages or liabilities (or actions in respect thereof) in such proportion as is appropriate to reflect the relative benefits received by the Borrower on the one hand and the Indemnified Holders on the other from the sale of the Registrable Securities. If, however, the allocation provided by the immediately preceding sentence is not permitted by applicable law or if the indemnified party failed to give the notice required under subsection (c) above, then each indemnifying party shall contribute to such amount paid or payable by such indemnified party in such proportion as is appropriate to reflect not only such relative benefits but also the relative fault of the Borrower on the one hand and the Indemnified Holders on the other in connection with the statements or omissions which resulted in such losses, claims, damages or liabilities (or actions in respect thereof), as well as any other relevant equitable considerations. The relative fault shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or the omission or alleged omission to state a material fact relates to information supplied by the Borrower on the one hand or the Indemnified Holders on the other and the parties' relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission. The Borrower and the Indemnified Holders agree that it would not be just and equitable if contribution pursuant to this subsection (d) were determined by pro rata allocation (even if the Indemnified Holders were treated as one entity for such purpose) or by any other method of allocation which does not take account of the equitable considerations referred to above in this subsection (d). The amount paid or payable by an indemnified party as a result of the losses, claims, damages or liabilities (or actions in respect thereof) referred to above in this subsection (d) shall be deemed to include any legal or other expenses reasonably incurred by such indemnified party in connection with investigating or defending any such action or claim. Notwithstanding the provisions of this subsection (d), no Indemnified Holder shall be required to contribute any amount in excess of the amount by which the total amount received by Registration Rights Agreement Page 13 99 such Indemnified Holder with respect to its sale of Registrable Securities pursuant to a Registration Statement exceeds the sum of the (i) amount paid by such Indemnified Holder for such Registrable Security and (ii) amount of any damages which such Indemnified Holder has otherwise been required to pay by reason of such untrue or alleged untrue statement or omission or alleged omission. The holders' and any underwriter's obligations in this subsection (d) to contribute are several in proportion to the respective principal amount of Registrable Securities registered or underwritten, as the case may be, by them and not joint. (e) The obligations of the Borrower under this Section 7 shall be in addition to any liability which the Borrower may otherwise have and shall extend, upon the same terms and conditions, to each person, if any, who controls any Indemnified Holder within the meaning of the Securities Act; and the obligations of the Indemnified Holders under this Section 7 shall be in addition to any liability which the respective Indemnified Holders may otherwise have and shall extend, upon the same terms and conditions, to each officer and director of the Borrower and to each person, if any, who controls the Borrower within the meaning of the Securities Act. 8. Rule 144. The Borrower covenants for so long as any Registrable Securities remain outstanding that it will file the reports required to be filed by it under the Securities Act and the Exchange Act and the rules and regulations adopted by the SEC thereunder (or, if any of them is not required to file such reports, the applicable party will, upon the request of any holder of Registrable Securities make publicly available other information so long as necessary to permit sales pursuant to Rule 144 under the Securities Act), and it will take such further action as any holder of Registrable Securities may reasonably request, all to the extent required from time to time to enable such holder to sell Registrable Securities without registration under the Securities Act within the limitation of the exemptions provided by (a) Rule 144 under the Securities Act, as such Rule may be amended from time to time, or (b) any similar rule or regulation hereafter adopted by the SEC. Upon the request of any holder of Registrable Securities, the Borrower will deliver to such holder a written statement as to whether they have complied with such information and filing requirements. 9. Miscellaneous. (a) Remedies. Each holder of Registrable Securities and Loans, in addition to being entitled to exercise all rights provided herein, in the Exchange Note Indenture or granted by law, including recovery of damages, in connection with the breach by the Borrower of its obligations to register the Registrable Securities will be entitled to specific performance of its rights under this Agreement. The Borrower acknowledges and agrees that monetary damages (including the Liquidated Damages contemplated hereby) would not be adequate compensation for any loss incurred by reason of a breach by any of them of the provisions of this Agreement and each agrees to waive the defense in any action for specific performance that a remedy at law would be adequate. Registration Rights Agreement Page 14 100 (b) No Inconsistent Agreements. The Borrower will not on or after the date of this Agreement enter into any agreement with respect to its securities which is inconsistent with the rights granted to the holders of Registrable Securities in this Agreement or otherwise conflicts with the provisions hereof. The Borrower has not previously entered into, any agreement with respect to its securities granting any registration rights to any Person, which is inconsistent with the rights granted to the holders of Registrable Securities in this Agreement or otherwise conflicts with the provisions hereof. The rights granted to the holders of Registrable Securities hereunder do not in any way conflict with and are not inconsistent with the rights granted to the holders of the Borrower's respective securities under any other agreements. (c) Amendments and Waivers. The provisions of this Agreement may not be amended, modified or supplemented, and waivers or consents to departures from the provisions of this Agreement may not be given unless (i) in the case of Section 3(c) and this Section 9(c)(i), the Borrower has obtained the written consent of the holders of all of the outstanding (x) Registrable Securities and (y) Loans (excluding Registrable Securities held by the Borrower or one of its affiliates) and (ii) in the case of all other provisions hereof, the Borrower has obtained the written consent of holders of majority of the outstanding principal amount of the (x) Registrable Securities and (y) Loans (excluding Registrable Securities held by the Borrower or one of its affiliates). (d) Third Party Beneficiary. The holders of Registrable Securities shall be third party beneficiaries to the agreements made hereunder between the Borrower, on the one hand, and the Administrative Agent, on the other hand, and shall have the right to enforce such agreements directly to the extent they may deem such enforcement necessary or advisable to protect its rights or the rights of holders hereunder. (e) Notices. All notices and other communications provided for or permitted hereunder shall be made in writing by hand-delivery, registered first-class mail, facsimile or air courier guaranteeing overnight delivery: (i) if to a holder of Registrable Securities, at the most current address given by such holder to the Borrower in accordance with the provisions of this Section 9(e), which address initially is, with respect to the Administrative Agent to them at the address set forth in the Bridge Loan Agreement, with a copy to Latham & Watkins, 885 Third Avenue, Suite 1000, New York, New York 10022-4802, Attention: Kirk A. Davenport, Esq.; and (ii) if to the Borrower, initially to them at the address set forth in the Bridge Loan Agreement and thereafter at such other address, notice of which is given in accordance with the provisions of this Section 9(e), with a copy to Skadden, Arps, Slate, Meagher & Flom LLP, 919 Third Avenue, New York, New York 10022, Attn.: Thomas H. Kennedy, Esq. All such notices and communications shall be deemed to have been duly given at the time delivered by hand, if personally delivered; five Business Days after being deposited in the mail, postage prepaid, if mailed; when receipt acknowledged, if delivered Registration Rights Agreement Page 15 101 by facsimile; and on the next Business Day if timely delivered to an air courier guaranteeing overnight delivery. Copies of all such notices, demands or other communications shall be concurrently delivered by the Person giving the same to the Exchange Note Indenture Trustee at the address specified in the Exchange Note Indenture. (f) Successors and Assigns. This Agreement shall inure to the benefit of and be binding upon the successors and assigns of each of the parties hereto, including without limitation and without the need for an express assignment, all subsequent holders of Registrable Securities or Loans; provided, that nothing herein shall be deemed to permit any assignment, transfer or other disposition of Registrable Securities in violation of the terms hereof or the Exchange Note Indenture. If any transferee of any holder shall acquire Registrable Securities in any manner, whether by operation of law or otherwise, such Registrable Securities shall be held subject to all of the terms of this Agreement, and by taking and holding such Registrable Securities such Person shall be conclusively deemed to have agreed to be bound by and to perform all of the terms and provisions of this Agreement, including the restrictions on resale set forth in this Agreement and such Person shall be entitled to receive the benefits hereof. (g) Counterparts. This Agreement may be executed in any number of counterparts and by the parties hereto in separate counterparts, each of which when so executed shall be deemed to be an original and all of which taken together shall constitute one and the same agreement. (h) Headings. The headings in this Agreement are for convenience of reference only and shall not limit or otherwise affect the meaning hereof. (i) Governing Law; Submission to Jurisdiction; Waiver of Jury Trial. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO CONFLICT OF LAW RULES THEREOF. EACH PARTY HERETO HEREBY SUBMITS TO THE NONEXCLUSIVE JURISDICTION OF THE UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF NEW YORK AND OF ANY NEW YORK STATE COURT SITTING IN NEW YORK CITY FOR PURPOSES OF ALL LEGAL PROCEEDINGS ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY. EACH PARTY HERETO IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, ANY OBJECTION WHICH IT MAY NOW OR HEREAFTER HAVE TO THE LAYING OF THE VENUE OF ANY SUCH PROCEEDING BROUGHT IN SUCH A COURT AND ANY CLAIM THAT ANY SUCH PROCEEDING BROUGHT IN SUCH A COURT HAS BEEN BROUGHT IN AN INCONVENIENT FORUM. EACH PARTY HERETO IRREVOCABLY WAIVES ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY. Registration Rights Agreement Page 16 102 (j) Severability. In the event that any one or more of the provisions contained herein, or the application thereof in any circumstance, is held invalid, illegal or unenforceable in any jurisdiction, the validity, legality and enforceability of any such provision in such jurisdiction in every other respect and of the remaining provisions contained herein shall not be affected or impaired thereby. Registration Rights Agreement Page 17 103 (k) Entire Agreement. This Agreement is intended by the parties as a final expression of their agreement with respect to the subject matter contained herein and intended to be a complete and exclusive statement of the agreement and understanding of the parties hereto in respect of the subject matter contained herein. There are no restrictions, promises, warranties or undertakings, other than those set forth or referred to herein with respect to the registration rights granted by the Borrower with respect to the securities sold pursuant to the Bridge Loan Agreement. This Agreement supersedes all prior agreements and understandings between the parties with respect to such subject matter. IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first written above. NTL INCORPORATED By: ---------------------------- Name: Title: GOLDMAN SACHS CREDIT PARTNERS L.P., as Administrative Agent By: ------------------------------- (Authorized Signatory) Registration Rights Agreement Page 18 104 Exhibit D ================================================================================ ESCROW AGREEMENT among NTL INCORPORATED, as Borrower, GOLDMAN SACHS CREDIT PARTNERS L.P. as Administrative Agent and The Chase Manhattan Bank, as Escrow Agent Dated as of March 17, 1999 ================================================================================ 105 THIS ESCROW AGREEMENT (this "Agreement"), dated as of March 17, 1999 (the "Closing Date"), is by and among NTL Incorporated, a Delaware corporation (the "Borrower"), Goldman Sachs Credit Partners L.P., as the Administrative Agent under the Bridge Loan Agreement referred to below (the "Administrative Agent"), and The Chase Manhattan Bank, a New York banking corporation acting by and through its corporate trust department (in its capacity as escrow agent, the "Escrow Agent"). Capitalized terms used herein and not otherwise defined have the meanings assigned to them in the Bridge Loan Agreement referred to below. RECITALS WHEREAS, the Administrative Agent, the Borrower, the Arranger and the Lenders referred to therein have entered into a Bridge Loan Agreement dated as of March 17, 1999 (as amended, restated or otherwise modified from time to time, the "Bridge Loan Agreement") providing for certain Bridge Loans to be made by the Lenders thereunder to the Borrower (the "Bridge Loans"), which Bridge Loans will be evidenced by certain promissory notes of the Borrower (the "Bridge Notes"); WHEREAS, the Borrower has agreed to place in escrow various Exchange Notes due 2004, 2005, and 2008 (the "Exchange Notes") in the form of Exhibit A to the Indenture dated as of the date hereof (the "Exchange Note Indenture") duly executed by the Borrower and The Chase Manhattan Bank, as trustee (the "Exchange Note Indenture Trustee"); and WHEREAS, it is a condition to the making of Bridge Loans under the Bridge Loan Agreement that the Exchange Notes be delivered into escrow pursuant to this Agreement. AGREEMENT NOW, THEREFORE, in consideration of the premises and the mutual covenants and agreements herein contained, the parties hereto agree as follows: 1. Deposit of Escrowed Notes by the Borrower. On the Closing Date, concurrently with the execution and delivery of this Agreement, the Borrower is delivering to the Escrow Agent 40 undated Exchange Notes, duly executed by the Borrower, but not authenticated by the Exchange Note Indenture Trustee, with the payee, date, interest rate, maturity date and aggregate principal amount in blank (the "Escrowed Notes"). 2. Release of Escrowed Notes. The Escrow Agent shall hold the Escrowed Notes in escrow pursuant to this Agreement, until authorized hereunder to deliver them as follows: (a) Release to Holder or its Designees. If, on any Business Day on or after the Anniversary Date, the Escrow Agent receives one or more Bridge Notes from the Administrative Agent accompanied by a properly completed and executed written notice from the Administrative Agent, executed by the applicable Lender, in the form of Annex A hereto (each, an "Exchange Notice"), such Bridge Notes and Exchange Notice to be delivered by the Administrative Agent to the Escrow Agent not less than five Business Days prior to the Exchange Date, the Escrow Agent shall no later than on the Exchange Date (as such term is defined in the Exchange Notice), date, complete and deliver one or more Exchange Notes in accordance with such Exchange Notice. Upon receipt of written notice from the Administrative Agent that all cash interest thereon required to be paid pursuant to this Section 2 (a) and in accordance with the Bridge Loan Agreement, to the Exchange Date, has been paid, the Escrow Escrow Agreement Page 1 106 Agent shall return the Bridge Note(s) so surrendered to the Borrower for cancellation in accordance with Section 7 of the Exchange Notice. Upon completing the Exchange Notes in accordance with Section 2 (a)(i) hereof, the Escrow Agent shall promptly deliver such Exchange Notes to the Exchange Note Trustee in accordance with Section 5 of the Exchange Notice for authentication and delivery to the applicable holder thereof on the Exchange Date. If less than all of the surrendered Bridge Note(s) are to be exchanged for Exchange Notes, the Borrower shall deliver to the Person specified in the Exchange Notice on or within three Business Days after the Exchange Date, a replacement Bridge Note dated the Exchange Date, equal to the amount of any principal not so exchanged, all as specified in Section 6 of the Exchange Notice and in accordance with the Bridge Loan Agreement. Upon delivery of any Exchange Notes pursuant to this clause (a), the Borrower shall within five Business Days after the Exchange Date make payment in cash in accordance with Section 2.3(g) of the Bridge Loan Agreement of all accrued and unpaid interest up to but not including the date specified in the Exchange Notice as the Exchange Date. (b) Release to the Borrower. On or within one Business Day after receipt by the Escrow Agent of a certificate from the Administrative Agent in the form of Annex B hereto certifying that all Obligations with respect to the Bridge Loans have been paid in full, the Escrow Agent shall deliver to the Borrower all Escrowed Notes then remaining in escrow. 3. Certain Additional Agreements. The Borrower and the Administrative Agent shall, upon request by the Escrow Agent, execute and deliver to the Escrow Agent such additional written instructions and certificates hereunder as may be reasonably required by the Escrow Agent to give effect to the provisions of Sections 1 and 2 hereof. 4. Escrow Agent. (a) The Escrow Agent shall have no duties or responsibilities, including, without limitation, a duty to review or interpret the Bridge Loan Agreement or to determine compliance therewith, except those expressly set forth herein and no implied covenants or obligations shall be read into this Agreement against the Escrow Agent. Except for this Agreement, the Escrow Agent, in its capacity as such, is not a party to, or bound by, any agreement that may be required under, evidenced by, or arise out of the Bridge Loan Agreement. The Escrow Agent makes no representations as to the validity or genuineness of any Exchange Note held or delivered by it hereunder and shall be entitled to conclusively assume that any Bridge Note delivered to it hereunder is genuine. The Escrow Agent also shall have no responsibility for determining whether the Borrower has complied with its agreement herein to deliver replacement Bridge Notes. (b) If the Escrow Agent shall be uncertain as to its duties or rights hereunder or shall receive instructions from any of the undersigned with respect to the Escrowed Notes, which, in its opinion, are in conflict with any of the provisions of this Agreement, it shall be entitled to refrain from taking any action until it shall be directed otherwise in writing by the Borrower or the Administrative Agent or by order of a court of competent jurisdiction. The Escrow Agent may conclusively rely on and shall be protected in acting upon any notice, request, waiver, consent, receipt or other document reasonably believed by the Escrow Agent to be signed by the proper party or parties. (c) The Escrow Agent shall not be liable for any error or judgment or for any act done or step taken or omitted by it in good faith or for any mistake of fact or law, or for anything that it may do or refrain from doing in connection herewith, except for its own gross negligence Escrow Agreement Page 2 107 or willful misconduct, and the Escrow Agent shall have no duties to anyone except the Borrower or the Administrative Agent and their respective successors and permitted assigns. In no event shall the Escrow 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 Escrow Agent has been advised of the likelihood of such loss or damage and regardless of the form of action. (d) The Escrow Agent may consult legal counsel in the event of any dispute or question as to the construction of this Agreement, or the Escrow Agent's duties hereunder, and the Escrow Agent shall incur no liability and shall be fully protected with respect to any action taken or omitted in good faith in accordance with the opinion and instructions of counsel. (e) In the event of any disagreement between the undersigned or any of them, and/or any other person, resulting in adverse claims and demands being made in connection with or for the Escrowed Notes, the Escrow Agent shall be entitled at its option to refuse to comply with any such claim or demand, so long as such disagreement shall continue, and in so doing the Escrow Agent shall not be or become liable for damages or interest to the undersigned or any of them or to any person named herein or in any Annex hereto for its failure or refusal to comply with such conflicting or adverse demands. The Escrow Agent shall be entitled to continue to so refrain and refuse to so act until all differences shall have been resolved by agreement and the Escrow Agent shall have been notified thereof in writing signed by the Borrower and the Administrative Agent. In the event of such disagreement which continues for 90 days or more, the Escrow Agent in its discretion may, but shall be under no obligation to, file a suit in interpleader for the purpose of having the respective rights of the claimants adjudicated and may deposit with the court all documents and property held hereunder. The Borrower agrees to pay all reasonable out-of-pocket costs and expenses incurred by the Escrow Agent in such action, including reasonable attorney's fees and disbursements. (f) The Escrow Agent is hereby indemnified by the Borrower from all losses, costs and expenses of any nature incurred by the Escrow Agent arising out of or in connection with this Agreement or with the administration of its duties hereunder, unless such losses, costs or expenses shall have been caused by the Escrow Agent's willful misconduct or gross negligence. Such indemnification shall survive termination of this Agreement until extinguished by any applicable statute of limitations. (g) The Escrow Agent does not have any interest in the Escrowed Notes deposited hereunder but is serving as escrow holder only and having only possession thereof. This paragraph shall survive notwithstanding any termination of this Agreement or the resignation of the Escrow Agent. (h) The Escrow Agent (and any successor Escrow Agent) may at any time resign as such by giving written notice of its resignation to the parties hereto at least 30 days prior to the date specified for such resignation to take effect. Upon the effective date of such resignation, the Escrowed Notes shall be delivered by it to such successor escrow agent or as otherwise shall be instructed in writing by the Borrower and the Administrative Agent; whereupon the Escrow Agent shall be discharged of and from any and all further obligations arising in connection with this Agreement. If at that time the Escrow Agent has not received such instruction, the Escrow Agent's sole responsibility after that time shall be to safekeep the Escrowed Notes until receipt of a designation of successor Escrow Agent, or a joint written instruction as to disposition of the Escrowed Notes by the Borrower and the Administrative Agent or a final order of a court of competent jurisdiction mandating disposition of the Escrowed Notes. Escrow Agreement Page 3 108 (i) The Escrow Agent hereby accepts its appointment and agrees to act as escrow agent under the terms and conditions of this Agreement and acknowledges receipt of the Escrowed Notes. The Borrower agrees to pay to the Escrow Agent as payment in full for its services hereunder the Escrow Agent's compensation set forth in Schedule I hereto. The Borrower further agrees to reimburse the Escrow Agent for all reasonable out-of-pocket expenses, disbursements and advances incurred or made by the Escrow Agent in the performance of its duties hereunder (including reasonable fees, and out-of-pocket expenses and disbursements, of its counsel). The obligations of the Borrower under this subparagraph shall survive the termination of this Agreement until extinguished by any applicable statute of limitations. 5. Notices. Any notices or other communications required or permitted hereunder shall be effective if in writing and delivered personally or sent by telecopier, overnight courier, Federal Express, United Parcel Service, registered or certified mail, postage prepaid, addressed as follows: If to the Administrative Agent or the Arranger, to: Goldman Sachs Credit Partners L.P. c/o Goldman Sachs & Co. 85 Broad Street New York, New York 10004 Attention: Amy Shapero Facsimile No.: (212) 902-3000 with a copy to: Latham & Watkins 885 Third Avenue New York, New York 10022 Attention: Kirk A. Davenport Facsimile No.: (212) 751-4864 If to the Borrower, to: NTL Incorporated 110 East 59th Street 26th Floor New York, NY 10022 Attention: General Counsel Facsimile No.: (212) 906-8497 with a copy to: Skadden, Arps, Slate Meagher & Flom LLP 919 Third Avenue New York, New York 10022 Attention: Thomas H. Kennedy Facsimile No.: (212) 735-3637 Escrow Agreement Page 4 109 If to the Escrow Agent, to: The Chase Manhattan Bank 450 West 33rd Street New York, NY 10001 Attention: Mr. Andrew Deck, Vice President Facsimile No.: (212) 946-8159 If to the Exchange Note Indenture Trustee, to: The Chase Manhattan Bank 450 West 33rd Street New York, NY 10001 Attention: Mr. Andrew M. Deck, Vice President Facsimile No.: (212) 946-8161 Unless otherwise specified herein, such notices or other communications shall be deemed effective (a) on the date delivered, if delivered personally, (b) one Business Day after being delivered, if delivered by telecopier with confirmation of good transmission, (c) one Business Day after being sent by overnight courier, if sent by overnight courier, (d) two Business Days after being sent by Federal Express or United Parcel Service, if sent by Federal Express or United Parcel Service, or (e) three Business Days after being sent, if sent by registered or certified mail. Each of the parties hereto shall be entitled to specify a different address by giving notice as aforesaid to each of the other parties hereto. 6. Termination. This Agreement shall automatically terminate upon the final distribution of the Escrowed Notes in accordance with the terms hereof. 7. Governing Law; Jurisdiction. 7.1. Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the State of New York, without regard to conflict of law rules thereof. 7.2. Consent to Jurisdiction. Each of the parties agrees that all actions, suits or proceedings arising out of or based upon this Agreement or the subject matter hereof may be brought and maintained in the federal district court in the Southern District of New York and in any New York state court sitting in New York City (each, a "New York Court"). Each of the parties hereto by execution hereof (i) hereby irrevocably submits to the jurisdiction of such court in New York, New York, for the purpose of any action, suit or proceeding arising out of or based upon this Agreement or the subject matter hereof and (ii) hereby waives to the extent not prohibited by applicable law, and agrees not to assert, by way of motion, as a defense or otherwise, in any such action, suit or proceeding, any claim that it is not subject personally to the jurisdiction of one of the above-named courts, that it is immune from extraterritorial injunctive relief or other injunctive relief, that its property is exempt or immune from attachment or execution, that any such action, suit or proceeding brought or maintained in one of the above-named courts should be dismissed on the grounds of forum non conveniens, should be transferred to any court other than one of the above-named courts, should be stayed by virtue of the pendency of any other action, suit or proceeding in any court other than one of the above-named courts, or that this Agreement or the subject matter hereof may not be enforced in or by the above-named courts. Each of the parties hereto hereby consents to service of process in any such suit, action or proceeding in any manner permitted by the laws of the State of New York, agrees that service of process by registered or certified mail, return receipt requested, at the address specified in or pursuant to Section 5 hereof is reasonably calculated to give actual notice and waives and agrees not to assert by way of motion, as a Escrow Agreement Page 5 110 defense or otherwise, in any such action, suit or proceeding any claim that service of process made in accordance with Section 5 hereof does not constitute good and sufficient service of process. The provisions of this Section 7.2 shall not restrict the ability of any party to enforce in any court any judgment obtained in the federal district court in the Southern District of New York or any New York Court. 7.3. Waiver of Jury Trial. To the extent not prohibited by any applicable law that cannot be waived, each of the parties hereto hereby waives, and covenants that it will not assert (whether as plaintiff, defendant, or otherwise), any right to trial by jury in any forum in any respect of any issue, claim, demand, cause of action, action, suit or proceeding arising out of or based upon this Agreement or the subject matter hereof, in each case whether now existing or hereafter arising and whether in contract or tort or otherwise. Any of the parties hereto may file an original counterpart or a copy of this Section 7.3 with any court as written evidence of the consent of each of the parties hereto to the waiver of his or its right to trial by jury. 7.4. Reliance. Each of the parties hereto acknowledges that it has been informed by each other party that the provisions of this Section 7 constitute a material inducement upon which such party is relying and will rely in entering into this Agreement and the transactions contemplated hereby. 8. Miscellaneous. 8.1. Entire Agreement; Waivers. This Agreement constitutes the entire agreement among the parties hereto pertaining to the subject matter hereof and supersedes all prior and contemporaneous agreements, understandings, negotiations and discussions, whether oral or written, of the parties with respect to such subject matter. No waiver of any provision of this Agreement (a) shall be deemed to or shall constitute a waiver of any other provision hereof (whether or not similar), (b) shall constitute a continuing waiver unless otherwise expressly provided therein or (c) shall be effective unless in writing and executed by each party against whom it is to be enforced. 8.2. Amendment or Modification, etc. The parties hereto may not amend or modify this Agreement except in such manner as may be agreed upon by a written instrument executed by all of the parties hereto and that is consented to in writing by the Majority Lenders; provided, that the Escrow Agent shall be entitled to rely conclusively on the Administrative Agent's determination of Majority Lenders. Any written amendment, modification or waiver executed by all of the parties hereto shall be binding upon all such parties and their respective successors and assigns. 8.3. Headings, etc. Section and subsection headings are not to be considered part of this Agreement, are included solely for convenience, are not intended to be full or accurate descriptions of the content thereof and shall not affect the construction hereof. This Agreement shall be deemed to express the mutual intent of the parties, and no rule of strict construction shall be applied against any party. 8.4. Severability. In the event that any provision hereof would, under applicable law, be invalid or unenforceable in any respect, such provision shall (to the extent permitted by applicable law) be construed by modifying or limiting it so as to be valid and enforceable to the maximum extent compatible with, and possible under, applicable law. The provisions hereof are severable, and in the event any provision hereof should be held invalid or unenforceable in any respect, it shall not invalidate, render unenforceable or otherwise affect any other provision hereof. 8.5. Counterparts. This Agreement may be executed in any number of counterparts, each of which shall be deemed an original, but all of which together shall constitute but one and the same Escrow Agreement Page 6 111 instrument. 8.6. Successors and Assigns. All of the terms and provisions of this Agreement shall be binding upon and shall inure to the benefit of the parties hereto and their respective permitted transferees, successors and assigns (each of which shall be deemed to be a party hereto for all purposes hereof). Except as expressly provided herein, this Agreement shall not confer any right or remedy upon any person other than the parties and their respective transferees, successors and assigns. 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, as Borrower By: --------------------------------- Name: Title: GOLDMAN SACHS CREDIT PARTNERS L.P., as Administrative Agent By: Goldman, Sachs & Co. By: --------------------------------- (Authorized Signatory) The Chase Manhattan Bank,, as Escrow Agent By: --------------------------- Name: Title: Escrow Agreement Page 7 112 Schedule I to Escrow Agreement Escrow Agent's Fees ESCROW AGENT'S FEES Annual Fee $7,500
Schedule I of the Escrow Agreement Page 1 113 Annex A to Escrow Agreement Form of Exchange Notice GOLDMAN SACHS CREDIT PARTNERS L.P. C/O GOLDMAN SACHS & CO. 85 BROAD STREET NEW YORK, NEW YORK 10004 EXCHANGE NOTICE Date: __________, ____ The Chase Manhattan Bank 450 West 33rd Street New York, NY 10001 Attention: Mr. Andrew M. Deck, Vice President Re: NTL Incorporated Escrow Agreement Ladies and Gentlemen: Reference is hereby made to the Escrow Agreement dated as of March 17, 1999 (as amended, modified or supplemented from time to time, the "Escrow Agreement"), by and among NTL Incorporated, a Delaware corporation (the "Borrower"), Goldman Sachs Credit Partners L.P., as the Administrative Agent under the Bridge Loan Agreement referred to below (the "Administrative Agent"), and The Chase Manhattan Bank, a New York banking corporation acting by and through its corporate trust department (in its capacity as escrow agent, the "Escrow Agent"). Capitalized terms used herein and not otherwise defined in this Exchange Notice have the meanings assigned to them in the Escrow Agreement. 1. Surrender of Bridge Note(s). Enclosed herewith [is an/are] original Bridge Note[s] issued to the order of the Lender specified in Section 4 below in the aggregate principal amount of $_____________ (the "Surrendered Note(s)"). 2. Accrued and Unpaid Interest. The [aggregate] amount of accrued and unpaid interest on the Surrendered Note(s) as of ________________, ____ [Insert date of exchange of Surrendered Notes for Exchange Notes, 60 days after the above date] (the "Exchange Date") is $______, all of which is required by Section 2.3(g) of the Bridge Loan Agreement to be paid in cash. 3. Interest Rate; Maturity Date. The undersigned hereby certifies that the interest rate on the Surrendered Note(s) on the Exchange Date is equal to ___% per annum. Pursuant to Section 2.2(c) of the Bridge Loan Agreement, the Exchange Notes to be issued pursuant to this Exchange Notice will bear interest at the rate of __% per annum [insert the interest rate then in effect on the Surrendered Note(s) as of the Exchange Date plus 100 basis points]. Pursuant to Section 2.2 of the Bridge Loan Agreement, the maturity date of the Exchange Notes shall be ___________ __ [insert maturity date that corresponds to the Maturity Date of the Surrendered Note(s)]. Annex A of the Escrow Agreement Page 1 114 4. Request for Exchange. _____________ [name of Lender] wishes to exchange [all/$_______] of the Surrendered Note(s) to be exchanged for ____ [number] Exchange Note(s) each dated the Exchange Date, bearing interest from (and including) the Exchange Date at the rate and having a maturity date as specified in Section 3 above and made payable to the following payees:
Amount(s) Name(s) of Payee(s) Address(es) of Payee(s) $_____________ _______________________ _________________________ $_____________ _______________________ _________________________
5. Issuance of Exchange Notes; Cancellation of Surrendered Note(s). No later than the Exchange Date please (a) issue the Exchange Note(s) dated the Exchange Date, bearing interest at the rate specified in Section 3 above from and including the Exchange Date, having a maturity date as specified in Section 3 above, in the amount(s) and to the payee(s) set forth in Section 4 above, (b) deliver such Exchange Note(s) by hand or by overnight courier to the Exchange Note Indenture Trustee for authentication and delivery to the [respective] payee(s) identified in Section 4 above at the address(es) specified therein and (c) upon receipt of written notice from the Administrative Agent that all cash interest has been paid in accordance with Section 7 below and the terms of the Bridge Loan Agreement, deliver the Surrendered Note(s) to the Borrower for cancellation. 6. Issuance of Replacement Term Note. On or within three Business Days after the Exchange Date, the Borrower shall (a) issue replacement Bridge Note(s) dated the Exchange Date, bearing interest at the rate then in effect on the Surrendered Note(s), having a Maturity Date corresponding to the Surrendered Note(s), in the aggregate amount of $_____, representing $____ of principal on the Surrendered Note(s) not so exchanged, in the respective amount(s) and to the payee(s) set forth below and (b) deliver such replacement Bridge Note(s) by hand or by overnight courier to the [respective] payee(s) identified in this Section 6 at the address(es) specified below:
Amount(s) Name(s) of Payee(s) Address(es) of Payee(s) $_____________ _______________________ _________________________ $_____________ _______________________ _________________________
7. Payment of Accrued and Unpaid Interest. Not later than five Business Days after the Exchange Date, and in any event prior to the cancellation of the Surrendered Notes contemplated by Section 5 above, the Borrower shall make payment in cash in accordance with Section 2.3(g) of the Bridge Loan Agreement of all accrued and unpaid interest specified in Section 2 above. 8. W-9 Forms. Attached hereto is a completed form W-9 for each of the above-referenced payees. Annex A of the Escrow Agreement Page 2 115 Thank you in advance for your prompt attention to this Exchange Notice. Very truly yours, By: -------------------------------- Name: Title: cc: The Chase Manhattan Bank in its capacity as Exchange Note Indenture Trustee cc: NTL Incorporated, as Borrower Annex A of the Escrow Agreement Page 3 116 Annex B to Escrow Agreement Certificate GOLDMAN SACHS CREDIT PARTNERS L.P. C/O GOLDMAN SACHS & CO. 85 BROAD STREET NEW YORK, NEW YORK 10004 CERTIFICATE Date: __________ The Chase Manhattan Bank 450 West 33rd Street New York, NY 10001 Attention: Mr. Andrew Deck, Vice President Re: NTL Incorporated Escrow Agreement Ladies and Gentlemen: Reference is hereby made to the Escrow Agreement dated as of March 17, 1999 (as amended, modified or supplemented from time to time, the "Escrow Agreement"), by and among NTL Incorporated, a Delaware corporation, Goldman Sachs Credit Partners L.P., as Administrative Agent under the Bridge Loan Agreement, and The Chase Manhattan Bank, a New York banking corporation acting by and through its corporate trust department. Capitalized terms used herein and not otherwise defined in this Certificate shall have the meanings assigned to them in the Escrow Agreement. This Certificate, delivered to you pursuant to Section 2(b) of the Escrow Agreement, confirms that all Obligations with respect to the Bridge Loans have been paid in full by the Borrower. Annex B of the Escrow Agreement Page 1 117 Thank you in advance for your prompt attention to this Certificate. Very truly yours, By: ------------------------------ Name: Title: Annex B of the Escrow Agreement Page 2 118 EXHIBIT E ================================================================================ NTL INCORPORATED SENIOR EXCHANGE NOTES DUE 2004, 2005 AND 2008 ------------------------ INDENTURE Dated as of March 17, 1999 ------------------------ ---------------- The Chase Manhattan Bank Trustee ---------------- ================================================================================ 119 TABLE OF CONTENTS ARTICLE I......................................................................1 Section 1.01. Definitions..............................................1 Section 1.02. Other Definitions.......................................14 Section 1.03. Incorporation by Reference of Trust Indenture Act.......15 Section 1.04. Rules of Construction...................................15 Section 1.05. Effectiveness of Indenture..............................16 ARTICLE II. THE NOTES.........................................................16 Section 2.01. Form and Dating.........................................16 Section 2.02. Execution and Authentication............................18 Section 2.03. Registrar and Paying Agent..............................18 Section 2.04. Paying Agent to Hold Money in Trust.....................19 Section 2.05. Holder Lists............................................19 Section 2.06. Transfer and Exchange...................................19 Section 2.07. Replacement Notes.......................................23 Section 2.08. Outstanding Notes.......................................23 Section 2.09. Treasury Notes..........................................24 Section 2.10. Temporary Notes; Global Notes...........................24 Section 2.11. Cancellation............................................25 Section 2.12. Defaulted Interest......................................25 ARTICLE III. REDEMPTION.......................................................25 Section 3.01. Notices to Trustee......................................25 Section 3.02. Selection of Notes to Be Redeemed.......................25 Section 3.03. Notice of Redemption....................................26 Section 3.04. Effect of Notice of Redemption..........................26 Section 3.05. Deposit of Redemption Price.............................26 Section 3.06. Notes Redeemed in Part..................................26 Section 3.07. Optional Redemption and Optional Tax Redemption.........27 Section 3.08. Mandatory Redemption....................................27 Section 3.09. Asset Sale Offer and Purchase Offer.....................27 ARTICLE IV. COVENANTS.........................................................30 Section 4.01. Payment of Notes........................................30 Section 4.02. Reports.................................................30 Section 4.03. Compliance Certificate..................................30 Section 4.04. Stay, Extension and Usury Laws..........................31 Section 4.05. Corporate Existence.....................................31 Section 4.06. Taxes...................................................31 Section 4.07. Limitations on Liens....................................32 Section 4.08. Incurrence Of Indebtedness And Issuance Of Preferred Stock...................................................32 Section 4.09. Restricted Payments.....................................34 Section 4.10. Asset Sales.............................................37 Section 4.11. Transactions with Affiliates............................39 Section 4.12. Dividends and Other Payment Restrictions Affecting Restricted Subsidiaries.................................40 Section 4.13. Change of Control.......................................41 Section 4.14. Payment of Additional Amounts...........................41 120 Section 4.15. Exchange Note Guarantee.................................42 Section 4.16. Exchange of Certificated Initial Notes or Certificated New Notes for Global Notes.................42 ARTICLE V. SUCCESSORS.........................................................42 Section 5.01. Merger, Consolidation or Sale of Assets.................43 Section 5.02. Successor Corporation Substituted.......................43 ARTICLE VI. DEFAULTS AND REMEDIES.............................................44 Section 6.01. Events of Default.......................................44 Section 6.02. Acceleration............................................45 Section 6.03. Other Remedies..........................................46 Section 6.04. Waiver of Past Defaults.................................46 Section 6.05. Control by majority.....................................46 Section 6.06. Limitation on Suits.....................................46 Section 6.07. Rights of Holders to Receive Payment....................47 Section 6.08. Collection Suit by Trustee..............................47 Section 6.09. Trustee May File Proofs of Claim........................47 Section 6.10. Priorities..............................................47 Section 6.11. Undertaking for Costs...................................48 ARTICLE VII. TRUSTEE..........................................................48 Section 7.01. Duties of Trustee.......................................48 Section 7.02. Rights of Trustee.......................................49 Section 7.03. Individual Rights of Trustee............................49 Section 7.04. Trustee's Disclaimer....................................49 Section 7.05. Notice of Defaults......................................49 Section 7.06. Reports by Trustee to Holders...........................50 Section 7.07. Compensation and Indemnity..............................50 Section 7.08. Replacement of Trustee..................................50 Section 7.09. Successor Trustee by Merger, Etc........................51 Section 7.10. Eligibility; Disqualification...........................51 Section 7.11. Preferential Collection of Claims Against Company.......52 ARTICLE VIII. DISCHARGE OF INDENTURE..........................................52 Section 8.01. Termination of Company's Obligations....................52 Section 8.02. Option to Effect Defeasance.............................52 Section 8.03. Application of Trust Money..............................54 Section 8.04. Repayment to Company....................................54 Section 8.05. Reinstatement...........................................54 ARTICLE IX. AMENDMENTS, SUPPLEMENTS AND WAIVERS...............................55 Section 9.01. Without Consent of Holders..............................55 Section 9.02. With Consent of Holders.................................55 Section 9.03. Compliance with Trust Indenture Act.....................56 Section 9.04. Revocation and Effect of Consents.......................56 Section 9.05. Notation on or Exchange of Notes........................57 Section 9.06. Trustee Protected.......................................57 ARTICLE X. MISCELLANEOUS......................................................57 Section 10.01.Trust Indenture Act Controls............................57 Section 10.02.Notices.................................................57 Section 10.03.Communication by Holders with Other Holders.............58 Section 10.04.Certificate and Opinion as to Conditions Precedent......58 ii 121 Section 10.05.Statements Required in Certificate or Opinion...........58 Section 10.06.Rules by Trustee and Agents.............................58 Section 10.07.Legal Holidays..........................................59 Section 10.08.No Recourse Against Others..............................59 Section 10.09.Counterparts and Facsimile Signatures...................59 Section 10.10.Variable Provisions.....................................59 Section 10.11.Governing Law...........................................60 Section 10.12.No Adverse Interpretation of Other Agreements...........60 Section 10.13.Successors..............................................60 Section 10.14.Severability............................................60 Section 10.15.Table of Contents, Headings, Etc........................60 Exhibit A Form of Face of Initial Note Exhibit B Form of Face of New Note Exhibit C Form of Transfer Certificate for Transfer from Rule 144A Global Note to Regulation S Global Note Exhibit D Form of Transfer Certificate from Regulation S Global Note to Rule 144A Global Note Exhibit E Form of Transfer Certificate for Transfer From Global Note on Restricted Note to Restricted Note Exhibit F Form of Accredited Investor Transferee Certificate Exhibit G Form of Certificate for Transfers of Regulation S Global Note for Restricted Notes Exhibit H Form of Exchange Note Guarantee Exhibit I Form of Opinions of Counsel to Parent iii 122 CROSS-REFERENCE TABLE* Trust Indenture Act Section Indenture Section 310 (a)(1)............................................................7.10 (a)(2) ...............................................................7.10 (a)(3)................................................................N.A. (a)(4)................................................................N.A. (a)(5)................................................................7.10 (b)...................................................................7.08, 7.10 (c)...................................................................N.A. 311(a)................................................................7.11 (b)...................................................................7.11 (c)...................................................................N.A. 312 (a)...............................................................2.05 (b)...................................................................10.03 (c)...................................................................10.03 313(a)................................................................7.06 (b)(1)................................................................N.A. (b)(2)................................................................7.06 (c)...................................................................7.06 (d)...................................................................7.06 314(a)................................................................4.02 4.03, (b)...................................................................N.A. (c)(1)................................................................10.04 (c)(2)................................................................10.04 (c)(3)................................................................N.A. (d)...................................................................N.A. (e)...................................................................N.A. (f)...................................................................N.A. 315(a)................................................................7.01(b) (b)...................................................................7.05 (c) ..................................................................7.01(a) (d)...................................................................7.01(c) (e)...................................................................6.11 316 (a)(last sentence)................................................2.09 (a)(1)(A).............................................................6.05 (a)(1)(B).............................................................6.04 (a)(2)................................................................N.A. (b)...................................................................6.07 (c)...................................................................9.04 317 (a)(1)............................................................6.08 (a)(2)................................................................6.09 (b)...................................................................2.04 318 (a)...............................................................N.A. N.A. means not applicable. *This Cross-Reference Table is not part of the Indenture. iv 123 INDENTURE, dated as of March 17, 1999, between NTL Incorporated, a Delaware corporation (the "Company"), and The Chase Manhattan Bank, a New York corporation, as trustee (the "Trustee"). Each party agrees as follows for the benefit of the other party and for the equal and ratable benefit of the Holders (as defined in Section 1.01) of the Company's Senior Exchange Notes due the Applicable Maturity Date and, if and when issued in exchange for Initial Notes, the Company's Series B Senior Exchange Notes due the Applicable Maturity Date: ARTICLE I. SECTION 1.01. DEFINITIONS. "9 1/2% Notes" means the Company's 9 1/2% Senior Notes due 2008 and the Company's 9 1/2% Series B Senior Notes due 2008. "9 3/4% Notes" means the Company's 9 3/4% Senior Deferred Coupon Notes due 2008 and the Company's 9 3/4% Series B Senior Deferred Coupon Notes due 2008. "10% Notes" means the Company's 10% Series B Senior Notes due 2007. "10 3/4% Notes" means the Company's 10 3/4% Senior Deferred Coupon Notes due 2008 and the Company's 10 3/4% Series B Senior Deferred Coupon Notes due 2008. "11 1/2% Deferred Coupon Notes" means the Company's 11 1/2% Series B Senior Deferred Coupon Notes due 2006. "11 1/2% Notes" means the Company's 11 1/2% Senior Notes due 2008 and the Company's 11 1/2% Series B Senior Notes due 2008. "12 3/4% Notes" means the Company's 12 3/4% Series A Senior Deferred Coupon Notes due 2005. "123/8% Notes" means the Company's 123/8% Senior Deferred Coupon Notes due 2008. "Acquired Debt" means, with respect to any specified Person, Indebtedness of any other Person (the "Acquired Person") existing at the time such Acquired Person merged with or into or became a Subsidiary of such specified Person, including Indebtedness incurred in connection with, or in contemplation of, such Acquired Person merging with or into or becoming a Subsidiary of such specified Person. "Acquired Person" has the meaning specified in the definition of Acquired Debt. "Adjusted Total Assets" means the total amount of assets of the Company and its Restricted Subsidiaries (including the amount of any Investment in any Non-Restricted Subsidiary), except to the extent resulting from write-ups of assets (other than write-ups in connection with accounting for acquisitions in conformity with GAAP), after deducting therefrom (i) all current liabilities of the Company and its Restricted Subsidiaries, and (ii) all goodwill, trade names, trademarks, patents, unamortized debt discount and expense and other like intangibles, all as calculated in conformity with GAAP. For purposes of this Adjusted Total Assets definition, (a) assets shall be calculated less applicable accumulated depreciation, accumulated amortization and other valuation reserves, and (b) all calculations shall exclude all intercompany items. 124 "Adjusted Total Controlled Assets" means the total amount of assets of the Company and its Cable Controlled Subsidiaries, except to the extent resulting from write-ups of assets (other than write-ups in connection with accounting for acquisitions in conformity with GAAP), after deducting therefrom (i) all current liabilities of the Company and such Cable Controlled Subsidiaries; and (ii) all goodwill, trade names, trademarks, patents, unamortized debt discount and expense and other like intangibles of the Company and such Restricted Subsidiaries, all as calculated in conformity with GAAP; provided that Adjusted Total Controlled Assets shall be reduced (to the extent not otherwise reduced in accordance with GAAP) by an amount equal to the aggregate amount of all Investments of the Company or any such Cable Controlled Subsidiaries in any Person other than a Cable Controlled Subsidiary, except Cash Equivalents. For purposes of this Adjusted Total Controlled Assets definition, (a) assets shall be calculated less applicable accumulated depreciation, accumulated amortization and other valuation reserves, and (b) all calculations shall exclude all intercompany items. "Administrative Agent" means Goldman Sachs Credit Partners L.P. acting in its capacity as administrative agent under the Bridge Loan Agreement, and its successors and assigns. "Affiliate" of any specified Person means any other Person directly indirectly controlling or controlled by or under direct or indirect common control with such specified Person. For purposes of this definition, "control" (including, with correlative meanings, the terms "controlling," "controlled by" and "under common control with"), as used with respect to any Person, shall mean the possession, directly or indirectly, of the power to direct or cause the direction of the management or policies of such Person, whether through the ownership of voting securities, by agreement or otherwise; provided, however, that beneficial ownership of 10% or more of the voting securities of a Person shall be deemed to be control. "Agent" means any Registrar or Paying Agent. "Annualized Pro Forma EBITDA" means, with respect to any Person, such Person's Pro Forma EBITDA for the latest fiscal quarter multiplied by four. "Applicable Maturity Date" means, with respect to the Notes, September 14, 2004, December 16, 2005 or February 2, 2008, as specified on each Note. "Asset Sale" means (i) any sale, lease, transfer, conveyance or other disposition of any assets (including by way of a sale-and-leaseback) other than the sale or transfer of inventory or goods held for sale in the ordinary course of business (provided that the sale, lease, transfer, conveyance or other disposition of all or substantially all of the assets of the Company shall be governed by Section 4.13 or 5.01 hereof) or (ii) any issuance, sale, lease, transfer, conveyance or other disposition of any Equity Interests of any of the Company's Restricted Subsidiaries to any Person; in either case other than (A) to (w) the Company, (x) any Wholly Owned Subsidiary, or (y) any Subsidiary which is a Subsidiary of the Company on the Loan Date provided that at the time of and after giving effect to such issuance, sale, lease, transfer, conveyance or other disposition to such Subsidiary, the Company's ownership percentage in such Subsidiary is equal to or greater than such percentage on the Loan Date or (B) the issuance, sale, transfer, conveyance or other disposition of Equity Interests of a Subsidiary in exchange for capital contributions made on a pro rata basis by the holders of the Equity Interests of such Subsidiary. "Board of Directors" means the Board of Directors of the Company or any authorized committee of the Board. -2- 125 "Bridge Loan Agreement" means the Bridge Loan Agreement dated as of March __, 1999, among the Company, the Lenders named therein and Goldman Sachs Credit Partners L.P. as arranger and administrative agent, as amended, modified or supplemented from time to time. "Bridge Loans" means, collectively, up to $1.35 billion in aggregate principal amount of Series A Bridge Loans, Series B Bridge Loans and Series C Bridge Loans made to the Company pursuant to the terms of the Bridge Loan Agreement. "Bridge Notes" means the Bridge Notes representing Indebtedness of the Company incurred pursuant to the Bridge Loan Agreement. "Business Day" means any day that is not a Legal Holiday. "Cable Assets" means tangible or intangible assets, licenses (including, without limitation, Licenses) and computer software used in connection with a Cable Business. "Cable Business" means (i) any Person directly or indirectly operating, or owning a license to operate, a cable and/or television and/or telephone and/or telecommunications system or service principally within the United Kingdom and/or the Republic of Ireland and (ii) any Cable Related Business. "Cable Controlled Property" means a Cable Controlled Subsidiary or a Cable Asset held by a Cable Controlled Subsidiary. "Cable Controlled Subsidiary" means any Restricted Subsidiary that is primarily engaged, directly or indirectly, in one or more Cable Businesses. "Cable Related Business" means a Person which directly or indirectly owns or provides a service or product used in a Cable Business, including, without limitation, any television programming, production and/or licensing business or any programming guide or telephone directory business or content or software related thereto. "Capital Stock" means any and all shares, interests, participations, rights or other equivalents (however designated) of corporate stock, including, without limitation, partnership interests. "Capital Stock Sale Proceeds" means the aggregate net sale proceeds (including from the sale of any property received for the Capital Stock or the fair market value of such property, as determined by an independent appraisal firm) received by the Company or any Subsidiary of the Company from the issue or sale (other than to a Subsidiary) by the Company of any class of its Capital Stock after October 14, 1993 (including Capital Stock of the Company issued after October 14, 1993 upon conversion of or in exchange for other securities of the Company). "Cash Equivalents" means (i) Permitted Currency, (ii) securities issued or directly and fully guaranteed or insured by the United States government, a European Union member government or any agency or instrumentality thereof having maturities of not more than six months and two days from the date of acquisition, (iii) certificates of deposit and eurodollar time deposits with maturities of six months or less from the date of acquisition, bankers' acceptances with maturities not exceeding six months and overnight bank deposits, in each case with any commercial bank(s) domiciled in the United States, the United Kingdom, the Republic of Ireland or any other European Union member having capital and surplus in excess of $500 million, (iv) repurchase obligations with a term of not more than seven days for underlying securities of the types described in clauses (ii) and (iii) entered into with any financial -3- 126 institution meeting the qualifications specified in clause (iii) above, (v) commercial paper rated P-1 or the equivalent thereof by Moody's or A-1 or the equivalent thereof by S & P and in each case maturing within six months and two days after the date of acquisition and (vi) money market funds at least 95% of the assets of which constitute Cash Equivalents of the kinds described in clauses (i)-(v) of this definition. "Change of Control" means (i) the sale, lease or transfer of all or substantially all of the assets of the Company to any "Person" or "group" (within the meaning of Sections 13(d)(3) and 14(d)(2) of the Exchange Act or any successor provision to either of the foregoing, including any group acting for the purpose of acquiring, holding or disposing of securities within the meaning of Rule 13d-5(b)(1) under the Exchange Act) (other than any Permitted Holder), (ii) the approval by the requisite stockholders of the Company of a plan of liquidation or dissolution of the Company, (iii) any "Person" or "group" (within the meaning of Sections 13(d) and 14(d)(2) of the Exchange Act or any successor provision to either of the foregoing, including any group acting for the purpose of acquiring, holding or disposing of securities within the meaning of Rule 13d- 5(b)(1) under the Exchange Act), other than any Permitted Holder, becomes the "beneficial owner" (as defined in Rule 13d-3 under the Exchange Act) of more than 50% of the total voting power of all classes of the voting stock of the Company and/or warrants or options to acquire such voting stock, calculated on a fully diluted basis, unless, as a result of such transaction, the ultimate direct or indirect ownership of the Company is substantially the same immediately after such transaction as it was immediately prior to such transaction, or (iv) during any period of two consecutive years, individuals who at the beginning of such period constituted the Company's Board of Directors (together with any new directors whose election or appointment by such board or whose nomination for election by the shareholders of the Company was approved by a vote of a majority of the directors then still in office who were either directors at the beginning of such period or whose election or nomination for election was previously so approved) cease for any reason to constitute a majority of the Company's Board of Directors then in office. "Change of Control Triggering Event" means the occurrence of both a Change of Control and a Ratings Decline. "Company" means the party named as such above until a successor replaces it in accordance with Article V and thereafter means the successor. "Consolidated Interest Expense" means, for any Person, for any period, the amount of interest in respect of Indebtedness (including amortization of original issue discount, amortization of debt issuance costs, and non-cash interest payments on any Indebtedness and the interest portion of any deferred payment obligation and after taking into account the effect of elections made under any Interest Rate Agreement, however denominated, with respect to such Indebtedness), the amount of Redeemable Dividends, Restricted Subsidiary Preferred Stock Dividends and the interest component of rentals in respect of any capital lease obligation paid, in each case whether accrued or scheduled to be paid or accrued by such Person and its Subsidiaries (other than Non-Restricted Subsidiaries) during such period to the extent such amounts were deducted in computing Consolidated Net Income, determined on a consolidated basis in accordance with GAAP. For purposes of this definition, interest on a capital lease obligation shall be deemed to accrue at an interest rate reasonably determined by such Person to be the rate of interest implicit in such capital lease obligation in accordance with GAAP consistently applied. "Consolidated Net Income" means, with respect to any Person, for any period, the aggregate of the Net Income of such Person and its Subsidiaries (other than Non-Restricted Subsidiaries) for such period, on a consolidated basis, determined in accordance with GAAP; provided that (i) the Net Income of any Person that is not a Subsidiary or that is accounted for by the equity method of accounting shall be included only to the extent of the amount of dividends or distributions paid to the referent Person or a Wholly Owned Subsidiary, (ii) the Net Income of any Person that is a Subsidiary (other than a -4- 127 Subsidiary of which at least 80% of the Capital Stock having ordinary voting power for the election of directors or other governing body of such Subsidiary is owned by the referent Person directly or indirectly through one or more Subsidiaries) shall be included only to the extent of the amount of dividends or distributions paid to the referent Person or a Wholly Owned Subsidiary, (iii) the Net Income of any Person acquired in a pooling of interests transaction for any period prior to the date of such acquisition shall be excluded and (iv) the cumulative effect of a change in accounting principles shall be excluded. "Convertible Subordinated Notes" means the Company's 7% Convertible Subordinated Notes issued pursuant to an indenture dated as of June 12, 1996, between the Company and The Chase Manhattan Bank (formerly known as Chemical Bank), as trustee and the 7% Convertible Subordinated Notes issued pursuant to an indenture dated as of December 16, 1998, between the Company and The Chase Manhattan Bank, as trustee. "Credit Facility" means the Facilities Agreement, dated October 17, 1997, between NTL (UK) Group Inc., as principal guarantor, Chase Manhattan plc, as arranger, Chase Manhattan International Limited, as agent and security trustee and the Chase Manhattan Bank as issuer, as such Facilities Agreement may be supplemented, amended, restated, modified, renewed, refunded, replaced or refinanced, in whole or in part, from time to time in an aggregate outstanding principal amount not to exceed the greater of (i) (pound)555 million and (ii) the amount of the aggregate commitments thereunder as the same may be increased after March 13, 1998 as contemplated by the Facilities Agreement as amended or supplemented to March 13, 1998, but in no event greater than (pound)875 million, less in each case, the aggregate amount of all Net Proceeds of Asset Sales that have been applied to permanently reduce Indebtedness under the Credit Facility pursuant Section 4.10 hereof. Indebtedness that may otherwise be incurred under this Indenture may, but need not, be incurred under the Credit Facility without regard to the limit set forth in the preceding sentence. Indebtedness outstanding under the Credit Facility on the date hereof shall be deemed to have been incurred on such date in reliance on the exception provided by Section 4.08(b)(i). "Cumulative EBITDA" means the cumulative EBITDA of the Company from and after the Loan Date to the end of the fiscal quarter immediately preceding the date of a proposed Restricted Payment, or, if such cumulative EBITDA for such period is negative, minus the amount by which such cumulative EBITDA is less than zero; provided, however, that EBITDA of Non-Restricted Subsidiaries shall not be included. "Cumulative Interest Expense" means the aggregate amount of Consolidated Interest Expense paid, accrued or scheduled to be paid or accrued by the Company from the Loan Date to the end of the fiscal quarter immediately preceding a proposed Restricted Payment, determined on a consolidated basis in accordance with GAAP. "Default" means any event that is, or with the passage of time or the giving of notice or both would be, an Event of Default. "Depositary" shall mean The Depository Trust Company, its nominees and their respective successors. "Disqualified Stock" means any Capital Stock which, by its terms (or by the terms of any security into which it is convertible or for which it is exchangeable), or upon the happening of any event, matures or is mandatorily redeemable, pursuant to a sinking fund obligation or otherwise, or redeemable at the option of the holder thereof, in whole or in part, on or prior to the date on which the Notes mature. -5- 128 "EBITDA" means, for any Person, for any period, an amount equal to (A) the sum of (i) Consolidated Net Income for such period (exclusive of any gain or loss realized in such period upon an Asset Sale), plus (ii) the provision for taxes for such period based on income or profits to the extent such income or profits were included in computing Consolidated Net Income and any provision for taxes utilized in computing net loss under clause (i) hereof, plus (iii) Consolidated Interest Expense for such period, plus (iv) depreciation for such period on a consolidated basis, plus (v) amortization of intangibles for such period on a consolidated basis, plus (vi) any other non-cash item reducing Consolidated Net Income for such period (excluding any such non-cash item to the extent that it represents an accrual of or reserve for cash expenses in any future period or amortization of a prepaid cash expense that was paid in a prior period), minus (B) all non-cash items increasing Consolidated Net Income for such period, all for such Person and its Subsidiaries determined in accordance with GAAP consistently applied. "Equity Interests" means Capital Stock and all warrants, options or other rights to acquire Capital Stock (but excluding any Indebtedness that is convertible into, or exchangeable for Capital Stock). "Escrow Agent" means The Chase Manhattan Bank acting in its capacity as escrow agent under the Escrow Agreement, and its successors and assigns. "Escrow Agreement" means the Escrow Agreement dated as of the Loan Date, between the Company, the Administrative Agent and the Escrow Agent, as amended, modified or supplemented from time to time. "European Union member" means any country that is or becomes a member of the European Union or any successor organization thereto. "Exchange Act" means the Securities Exchange Act of 1934, as amended. "Exchange Date" with respect to any Initial Note delivered to the Trustee by the Escrow Agent, has the meaning set forth in the Exchange Notice delivered by the Escrow Agent to the Trustee with such Initial Note. "Exchange Notice" has the meaning specified in the Escrow Agreement. "Exchange Rate Contract" means, with respect to any Person, any currency swap agreements, forward exchange rate agreements, foreign currency futures or options, exchange rate collar agreements, exchange rate insurance and other agreements or arrangements, or combination thereof, the principal purpose of which is to provide protection against fluctuations in currency exchange rates. An Exchange Rate Contract may also include an Interest Rate Agreement. "Existing Indebtedness" means Indebtedness of the Company and its Subsidiaries in existence on the Loan Date, until such amounts are repaid, including, without limitation, the Existing Notes. "Existing Notes" means the Old Notes and the Convertible Subordinated Notes. "Funding Date A" means the initial date on which Bridge Loans are made to the Company pursuant to the terms of the Bridge Loan Agreement, prompt written notice of which shall be given to the Trustee by the Company. "GAAP" means generally accepted accounting principles set forth in the opinions and pronouncements of the Accounting Principles Board of the American Institute of Certified Public -6- 129 Accountants and statements and pronouncements of the Financial Accounting Standards Board or in such other statements by such other entity as approved by a significant segment of the accounting profession, which are in effect on the Loan Date and are applied on a consistent basis. "Guarantee" means a guarantee (other than by endorsement of negotiable instruments for collection in the ordinary course of business), direct or indirect, in any manner (including, without limitation, letters of credit and reimbursement agreements in respect thereof), of all or any part of any Indebtedness. "Holder" means a Person in whose name a Note is registered in the register referred to in Section 2.03. "Indebtedness" means, with respect to any Person, any indebtedness of such Person, whether or not contingent, in respect of borrowed money or evidenced by bonds, notes, debentures or similar instruments or letters of credit (or reimbursement agreements in respect thereof) or representing the balance deferred and unpaid of the purchase price of any property (including pursuant to capital leases and sale-and-leaseback transactions) or representing any hedging obligations under an Exchange Rate Contract or an Interest Rate Agreement, except any such balance that constitutes an accrued expense or trade payable, if and to the extent any of the foregoing indebtedness (other than obligations under an Exchange Rate Contract or an Interest Rate Agreement) would appear as a liability upon a balance sheet of such Person prepared in accordance with GAAP, and also includes, to the extent not otherwise included, the Guarantee of items which would be included within this definition. The amount of any Indebtedness outstanding as of any date shall be the accreted value thereof, in the case of any Indebtedness issued with original issue discount "Indenture" means this Indenture, as amended from time to time. "Initial Notes" means the Senior Exchange Notes due the Applicable Maturity Date of the Company held in escrow pursuant to the Escrow Agreement and authenticated pursuant to Section 2.02. "Interest Rate Agreement" means, for any Person, any interest rate swap agreement, interest rate cap agreement, interest rate collar agreement, or other similar agreement, the principal purpose of which is to protect the party indicated therein against fluctuations in interest rates. "Investment Grade" means BBB- or higher by S&P or Baa3 or higher by Moody's or the equivalent of such ratings by S&P or Moody's. In the event that the Company shall be permitted to select any other Rating Agency, the equivalent of such ratings by such Rating Agency shall be used. "Investments" means, with respect to any Person, all investments by such Person in other Persons (including Affiliates) in the forms of loans (including Guarantees), advances or capital contributions (excluding commission, travel and similar advances and loans, joint property ownership and other arrangements, in each case, made to officers and employees made in the ordinary course of business), purchases or other acquisitions for consideration of Indebtedness, Equity Interests or other securities and all other items that are or would be classified as investments on a balance sheet prepared in accordance with GAAP. "License" means any license issued or awarded pursuant to the Broadcasting Act 1990, the Cable and Broadcasting Act 1984, the Telecommunications Act 1984 or the Wireless Telegraphy Act 1948 (in each case, as such Acts may, from time to time, be amended, modified or re-enacted) (or equivalent statutes of any jurisdiction) to operate or own a Cable Business. -7- 130 "Lien" means, with respect to any asset, any mortgage, lien, pledge, charge, security interest or encumbrance of any kind in respect of such asset, whether or not filed, recorded or otherwise perfected under applicable law (including any conditional sale or other title retention agreement, any lease in the nature thereof, any option or other agreement to sell or give a security interest in and any filing of or agreement to give any financing statement under the Uniform Commercial Code (or equivalent or successor statutes) of any jurisdiction). "Liquidated Damages" means all liquidated damages then owing pursuant to Section 3(c) of the Registration Rights Agreement and Section 2 of the Initial Notes. "Loan Date" means March 17, 1999, the date of the Bridge Loan Agreement. "Material License" means a License held by the Company or any of its Subsidiaries which License at the time of determination covers a number of Net Households which equals or exceeds 5% of the aggregate number of Net Households covered by all of the Licenses held by the Company and its Subsidiaries at such time. "Material Subsidiary" means (i) NTL UK Group, Inc. (formerly known as OCOM Sub II, Inc.), NTL Investment Holdings Limited, NTL Group Limited, CableTel Surrey Limited, CableTel Cardiff Limited, CableTel Glasgow, CableTel Newport and CableTel Kirklees and (ii) any other Subsidiary of the Company which is a "significant subsidiary" as defined in Rule 1-02(w) of Regulation S-X under the Securities Act and the Exchange Act (as such Regulation is in effect on the date hereof). "Monetize" means a strategy with respect to Equity Interests that generates an amount of cash equal to the fair value of such Equity Interests. "Moody's" means Moody's Investors Service, Inc. and its successors. "Net Households" means the product of (i) the number of households covered by a License in the United Kingdom and (ii) the percentage of the entity holding such License which is owned directly or indirectly by the Company. "Net Income" means, with respect to any Person for a specific period, the net income (loss) of such Person during such period, determined in accordance with GAAP, excluding, however, any gain (but not loss) during such period, together with any related provision for taxes on such gain (but not loss), realized during such period in connection with any Asset Sale (including, without limitation, dispositions pursuant to sale-and-leaseback transactions), and excluding any extraordinary gain (but not loss) during such period, together with any related provision for taxes on such extraordinary gain (but not loss). "Net Proceeds" means the aggregate cash proceeds received by the Company or any of its Subsidiaries in respect of any Asset Sale, net of the direct costs relating to such Asset Sale (including, without limitation, legal, accounting and investment banking fees, and sales commissions) and any relocation expenses incurred as a result thereof, taxes paid or payable as a result thereof (after taking into account any available tax credits or deductions and any tax sharing arrangements), amounts required to be applied to the repayment of Indebtedness secured by a Lien on the asset or assets the subject of such Asset Sale and any reserve for adjustment in respect of the sale price of such asset or assets. "New Notes" means the Series B Senior Exchange Notes due the Applicable Maturity Date of the Company issued pursuant to this Indenture in connection with a resale of Notes in reliance on the Shelf Registration Statement. -8- 131 "Non-Controlled Subsidiary" means an entity which is not a Cable Controlled Subsidiary. "Non-Recourse Debt" means Indebtedness or that portion of Indebtedness as to which none of the Company, nor any Restricted Subsidiary: (i) provides credit support (including any undertaking, agreement or instrument which would constitute Indebtedness); (ii) is directly or indirectly liable; or (iii) constitutes the lender. "Non-Restricted Subsidiary" means (A) a Subsidiary that (a) at the time of its designation by the Board of Directors as a Non-Restricted Subsidiary has not acquired any assets (other than as specifically permitted by clause (e) of "Permitted Investments" or Section 4.09 hereof), at any previous time, directly or indirectly from the Company or any of its Restricted Subsidiaries, (b) has no Indebtedness other than Non-Recourse Debt and (c) that at the time of such designation, after giving pro forma effect to such designation, the ratio of Indebtedness to Annualized Pro Forma EBITDA of the Company is equal to or less than the ratio of Indebtedness to Annualized Pro Forma EBITDA of the Company immediately preceding such designation, provided, however, that if the ratio of Indebtedness to Annualized Pro Forma EBITDA of the Company immediately preceding such designation is 6:1 or less, then the ratio of Indebtedness to Annualized Pro Forma EBITDA of the Company may be 0.5 greater than such ratio immediately preceding such designation; (B) any Subsidiary which (a) has been acquired or capitalized out of or by Equity Interests (other than Disqualified Stock) of the Company or Capital Stock Sale Proceeds therefrom, (b) has no Indebtedness other than Non-Recourse Debt and (c) is designated as a Non-Restricted Subsidiary by the Board of Directors or is merged, amalgamated or consolidated with or into, or its assets or capital stock is to be transferred to, a Non-Restricted Subsidiary; or (C) any Subsidiary of a Non-Restricted Subsidiary. "Notes" means (i) the Initial Notes and (ii) the New Notes. "Obligations" means any principal, interest, penalties, fees, indemnifications, reimbursements, damages and other liabilities payable under the documentation governing any Indebtedness. "Officers' Certificate" means a certificate signed by two Officers, one of whom must be the Chairman of the Board, the President, the Treasurer or a Vice President of the Company. See Sections 10.04 and 10.05 hereof. "Old Notes" means the 123/8% Notes, the 12 3/4% Notes, the 11 1/2% Deferred Coupon Notes, the 10 3/4% Notes, the 10% Notes, the 9 3/4% Notes, the 9 1/2% Notes and the 11 1/2% Notes. "Opinion of Counsel" means a written opinion from legal counsel who is acceptable to the Trustee. The counsel may be an employee of or counsel to the Company or the Trustee. See Sections 10.04 and 10.05 hereof. "Other Qualified Notes" means any outstanding senior indebtedness of the Company issued pursuant to an indenture having a provision substantially similar to Section 4.10 hereof (including, without limitation, the 123/8% Notes, the 12 3/4% Notes, the 11 1/2% Deferred Coupon Notes, the 10 3/4% Notes, the 10% Notes, the 9 3/4% Notes, the 9 1/2% Notes and the 11 1/2% Notes). "Parent" means any Person that is formed or organized as a holding company for the Company and its Subsidiaries. "Permitted Acquired Debt" means, with respect to any Acquired Person (including, for this purpose, any Non-Restricted Subsidiary at the time such Non-Restricted Subsidiary becomes a Restricted Subsidiary), Acquired Debt of such Acquired Person and its Subsidiaries in an amount (determined on a -9- 132 consolidated basis) not exceeding the sum of (x) amount of the gross book value of property, plant and equipment of the Acquired Person and its Subsidiaries as set forth on the most recent consolidated balance sheet of the Acquired Person (which may be unaudited) prior to the date it becomes an Acquired Person and (y) the aggregate amount of any Cash Equivalents held by such Acquired Person at the time it becomes an Acquired Person. "Permitted Currency" means the lawful currency of the United States or a European Union member. "Permitted Designee" means (i) a spouse or a child of a Permitted Holder, (ii) trusts for the benefit of a Permitted Holder or a spouse or child of a Permitted Holder, (iii) in the event of the death or incompetence of a Permitted Holder, his estate, heirs, executor, administrator, committee or other personal representative or (iv) any Person so long as a Permitted Holder owns at least 50% of the voting power of all classes of the voting stock of such Person. "Permitted Holders" means George S. Blumenthal, J. Barclay Knapp and their Permitted Designees. "Permitted Investments" means (a) any Investments in the Company or in a Cable Controlled Property or in a Qualified Subsidiary (including, without limitation, (i) Guarantees of Indebtedness of the Company, a Cable Controlled Subsidiary or a Qualified Subsidiary, (ii) Liens securing such Indebtedness or Guarantees or (iii) the payment of any balance deferred and unpaid of the purchase price of any Qualified Subsidiary); (b) any Investments in Cash Equivalents; (c) Investments by the Company in Indebtedness of a counter-party to an Exchange Rate Contract for hedging a Permitted Currency exchange risk that are made, for purposes other than speculation, in connection with such contract to hedge not more than the aggregate principal amount of the Indebtedness being hedged (or, in the case of Indebtedness issued with original issue discount, based on the amounts payable after the amortization of such discount); (d) Investments by the Company or any Subsidiary of the Company in a Person, if as a result of such Investment (i) such Person becomes a Cable Controlled Subsidiary or (ii) such Person is merged, consolidated or amalgamated with or into, or transfers or conveys substantially all of its assets to, or is liquidated into, the Company or a Wholly Owned Subsidiary of the Company; and (e) any issuance, transfer or other conveyance of Equity Interests (other than Disqualified Stock) in the Company (or any Capital Stock Sale Proceeds therefrom) to a Subsidiary of the Company. "Permitted Liens" means (a) Liens in favor of the Company; (b) Liens on property of a Person existing at the time such Person is merged into or consolidated with the Company or any Subsidiary of the Company; provided, that such Liens were in existence prior to the contemplation of such merger or consolidation and do not secure any property or assets of the Company or any of its Subsidiaries other than the property or assets subject to the Liens prior to such merger or consolidation; (c) liens imposed by law, such as carriers', warehousemen's and mechanics' liens and other similar liens arising in the ordinary course of business which secure payment of obligations not more than 60 days past due or are being contested in good faith and by appropriate proceedings; (d) Liens existing on the Loan Date; (e) Liens for taxes, assessments or governmental charges or claims that are not yet delinquent or that are being contested in good faith by appropriate proceedings promptly instituted and diligently concluded; provided, that any reserve or other appropriate provision as shall be required in conformity with GAAP shall have been made therefor and (f) easements, rights of way, restrictions and other similar easements, licenses, restrictions on the use of properties or minor imperfections of title that, in the aggregate, are not material in amount, and do not in any case materially detract from the properties subject thereto or interfere with the ordinary conduct of the business of the Company or its Restricted Subsidiaries. -10- 133 "Permitted Non-Controlled Assets" means Equity Interests in any Person primarily engaged, directly or indirectly, in one or more Cable Businesses if such Equity Interests (x) were acquired by the Company or any of its Restricted Subsidiaries in connection with any Asset Sale or any Investment otherwise permitted under the terms of the Indenture and (y) to the extent that, after giving pro forma effect to the acquisition thereof by the Company or any of its Restricted Subsidiaries, Adjusted Total Controlled Assets is greater than 80% of Adjusted Total Assets based on the most recent consolidated balance sheet of the Company. "Person" means any individual, corporation, partnership, joint venture, association, joint stock company, trust, unincorporated organization or government or any agency or political subdivision thereof. "Preferred Stock" means the 13% Senior Redeemable Exchangeable Preferred Stock of the Company with an original aggregate liquidation preference of $100,000,000. "Pro Forma EBITDA" means for any Person, for any period, the EBITDA of such Person as determined on a consolidated basis for such Person and its Subsidiaries in accordance with GAAP after giving effect to the following: (i) if, during or after such period, such Person or any of its Subsidiaries shall have made any Asset Sale, Pro Forma EBITDA of such Person and its Subsidiaries for such period shall be reduced by an amount equal to the Pro Forma EBITDA (if positive) directly attributable to the assets which are the subject of such Asset Sale for the period or increased by an amount equal to the Pro Forma EBITDA (if negative) directly attributable thereto for such period and (ii) if, during or after such period, such Person or any of its Subsidiaries completes an acquisition of any Person or business which immediately after such acquisition is a Subsidiary of such Person or whose assets are held directly by such Person or a Subsidiary of such Person, Pro Forma EBITDA shall be computed so as to give pro forma effect to the acquisition of such Person or business (without giving effect to clause (iii) of the definition of Consolidated Net Income); and provided further that, with respect to the Company, all of the foregoing references to "Subsidiary" or "Subsidiaries" shall be deemed to refer only to a "Restricted Subsidiary" or "Restricted Subsidiaries" of the Company. "Qualified Subsidiary" means a Wholly Owned Subsidiary, or an entity that will become a Wholly Owned Subsidiary after giving effect to the transaction being considered, that at the time of and after giving effect to the consummation of the transaction under consideration, (i) is a Cable Business or holds only Cable Assets, (ii) has no Indebtedness (other than Indebtedness being incurred to consummate such transaction) and (iii) has no encumbrances or restrictions (other than such encumbrances or restrictions imposed or permitted by this Indenture, the indentures governing the Old Notes or any other instrument governing unsecured indebtedness of the Company which is pari passu with the Notes) on its ability to pay dividends or make any other distributions to the Company or any of its Subsidiaries. "Rating Agencies" means (i) S&P, (ii) Moody's and (iii) if S&P or Moody's or both shall not make a rating of the Notes publicly available, a nationally recognized securities rating agency or agencies, as the case may be, selected by the Company, which shall be substituted for S&P or Moody's or both, as the case may be. "Rating Category" means (i) with respect to S&P, any of the following categories: BB, B, CCC, CC, C and D (or equivalent successor categories), (ii) with respect to Moody's, any of the following categories: Ba, B, Caa, Ca, C and D (or equivalent successor categories) and (iii) the equivalent of any such category of S&P or Moody's used by another Rating Agency. In determining whether the rating of the Notes has decreased by one or more gradations, gradations within Rating Categories (+ and - for S&P; 1, 2 and 3 for Moody's; or the equivalent gradations for another Rating Agency) shall be taken into -11- 134 account (e.g., with respect to S&P, a decline in a rating from BB to BB-, as well as from BB-to B+, will constitute a decrease of one gradation). "Rating Date" means that date which is 90 days prior to the earlier of (x) a Change of Control and (y) public notice of the occurrence of a Change of Control or of the intention by the Company or any Permitted Holder to effect a Change of Control. "Ratings Decline" means the occurrence of any of the following events on, or within six months after, the date of public notice of the occurrence of a Change of Control or of the intention of the Company or any Person to effect a Change of Control (which period shall be extended so long as the rating of any of the Company's debt securities is under publicly announced consideration for possible downgrade by any of the Rating Agencies): (a) in the event that any of the Company's debt securities are rated by both of the Rating Agencies on the Rating Date as Investment Grade, the rating of such securities by either of the Rating Agencies shall be below Investment Grade, (b) in the event that any of the Company's debt securities are rated by either, but not both, of the Rating Agencies on the Rating Date as Investment Grade, the rating of such securities by both of the Rating Agencies shall be below Investment Grade, or (c) in the event any of the Company's debt securities are rated below Investment Grade by both of the Rating Agencies on the Rating Date, the rating of such securities by either Rating Agency shall be decreased by one or more gradations (including gradations within Rating Categories as well as between Rating Categories). "Redeemable Dividend" means, for any dividend with regard to Disqualified Stock, the quotient of the dividend divided by the difference between one and the maximum statutory federal income tax rate (expressed as a decimal number between 1 and 0) then applicable to the issuer of such Disqualified Stock. "Registration Rights Agreement" means the Registration Rights Agreement dated as of the Loan Date, between the Company and Goldman Sachs Credit Partners L.P., as amended, modified or supplemented from time to time. "Replacement Assets" means (w) Cable Assets, (x) Equity Interests of any Person engaged, directly or indirectly, primarily in a Cable Business, which Person is or will become on the date of acquisition thereof a Restricted Subsidiary as a result of the Company's acquiring such Equity Interests, (y) Permitted Non-Controlled Assets or (z) any combination of the foregoing. "Restricted Investment" means an Investment other than a Permitted Investment. "Restricted Subsidiary" means any Subsidiary of the Company which is not a Non-Restricted Subsidiary. "Restricted Subsidiary Preferred Stock Dividend" means, for any dividend with regard to preferred stock of a Restricted Subsidiary, the quotient of the dividend divided by the difference between one and the maximum statutory federal income tax rate (expressed as a decimal number between 1 and 0) then applicable to the issuer of such preferred stock. "S&P" means Standard & Poor's Ratings Group and its successors. "SEC" means the Securities and Exchange Commission. "Securities Act" means the Securities Act of 1933, as amended. -12- 135 "Shelf Registration Statement" means the Shelf Registration as defined in the Registration Rights Agreement. "Specified Premium" means, with respect to each Note, (i) during the one-year period commencing on the fifth anniversary of Funding Date A, the Specified Premium shall equal a percentage of the principal amount of such Note equal to 50% of the fixed interest rate on such Note; and (ii) during each one-year period commencing on the sixth anniversary of Funding Date A until the date that is two years prior to the maturity of the applicable Note, the Specified Premium, referred to in clause (i) shall decline ratably. For example, if the fixed interest rate on a Note having a maturity of 10 years was equal to 15%, then the Specified Premium would equal (a) 7.5% during the one-year period commencing on the fifth anniversary of Funding Date A and ending on the day prior to the sixth anniversary of Funding Date A; (b) 5.0% during the one-year period commencing on the sixth anniversary of Funding Date A and ending on the day prior to the seventh anniversary of Funding Date A; (c) 2.5% during the one-year period commencing on the seventh anniversary of Funding Date A and ending on the day prior to the eighth anniversary of Funding Date A; (d) 0% during the one-year period commencing on the eighth anniversary of Funding Date A and ending on the day prior to the ninth anniversary of Funding Date A; and (e) 0% during the one-year period commencing on the ninth anniversary of Funding Date A and ending on the day prior to the tenth anniversary of Funding Date A. "Subordinated Debentures" means the debentures exchangeable by the Company for the Preferred Stock in accordance with the Certificate of Designations therefor. "Subsidiary" means any corporation, association or other business entity of which more than 50% of the total voting power of shares of Capital Stock entitled (without regard to the occurrence of any contingency) to vote in the election of directors, managers or trustees thereof is at the time owned or controlled, directly or indirectly, by any Person or one or more of the other Subsidiaries of that Person or a combination thereof. "TIA" means the Trust Indenture Act of 1939 (15 U.S. Code (ss.)(ss.) 77aaa-77bbbb) as in effect on the date of execution of this Indenture. "Trustee" means the party named as such above until a successor replaces it in accordance with the applicable provisions of this Indenture and thereafter means the successor. "Trust Officer" means the Chairman of the Board, the President or any other officer or assistant officer of the Trustee assigned by the Trustee to administer its corporate trust matters. "Weighted Average Life to Maturity" means, when applied to any Indebtedness at any date, the number of years obtained by dividing (a) the sum of the products obtained by multiplying (x) the amount of each then remaining installment, sinking fund, serial maturity or other required payments of principal, including payment at final maturity, in respect thereof, by (y) the number of years (calculated to the nearest one-twelfth) that will elapse between such date and the making of such payment, by (b) the then outstanding principal amount of such Indebtedness. "Wholly Owned Subsidiary" means, at any time, a Restricted Subsidiary all of the Capital Stock of which (except directors' qualifying shares) is at the time owned directly or indirectly by the Company. SECTION 1.02. OTHER DEFINITIONS. -13- 136 Defined Term in Section ---- ---------- "Additional Amounts"....................4.14 "Affiliate Transaction".................4.11 "Agent Member"..........................2.01 "Asset Sale Offer"......................4.10 "Bankruptcy Law"........................6.01 "Cedel".................................2.01 "Change of Control Payment".............4.13 "Commencement Date".....................3.09 "Custodian".............................6.01 "Defeasance"............................8.02 "Euroclear".............................2.01 "Event of Default"......................6.01 "Excess Proceeds".......................4.10 "Exchange Note Guarantee"...............4.15 "Global Note"...........................2.01 "incur".................................4.08 "Legal Holiday"........................10.08 "Offer Amount"..........................3.09 "Officer"..............................10.11 "Paying Agent"..........................2.03 "Payment Default".......................6.01 "Purchase Date".........................3.09 "Purchase Offer"........................4.13 "QIBs"..................................2.01 "Refinancing Indebtedness"..............4.08 "Regulation S"..........................2.01 "Regulation S Global Note" .............2.01 "Registrar".............................2.03 "Restricted Notes"......................2.01 "Restricted Payments"...................4.09 "Rule 144A".............................2.01 "Rule 144A Global Note".................2.01 "Tender Period".........................3.09 "U.S. Government Obligations"...........8.02 SECTION 1.03. INCORPORATION BY REFERENCE OF TRUST INDENTURE ACT. Whenever this Indenture refers to a provision of the TIA, the provision is incorporated by reference in and made a part of this Indenture. The following TIA terms used in this Indenture have the following meanings: "indenture securities" means the Notes; "indenture security Holder" means a Holder of a Note; "indenture to be qualified" means this Indenture; -14- 137 "indenture trustee" or "institutional trustee" means the Trustee; and "obligor" on the Notes means the Company or any other obligor on the Notes. All other terms used in this Indenture that are defined by the TIA, defined by TIA reference to another statute or defined by SEC rule under the TIA have the meanings so assigned to them. SECTION 1.04. RULES OF CONSTRUCTION. Unless the context otherwise requires: (a) a term has the meaning assigned to it; (b) an accounting term not otherwise defined has the meaning assigned to it in accordance with GAAP consistently applied; (c) references to "GAAP" shall mean GAAP in effect as of the time when and for the period as to which such accounting principles are to be applied; (d) "or" is not exclusive; (e) words in the singular include the plural, and in the plural include the singular; (f) provisions apply to successive events and transactions; (g) references to sections of or rules under the Securities Act shall be deemed to include substitute, replacement or successor sections or rules adopted by the SEC from time to time; and (h) a reference to "$" or U.S. Dollars is to United States dollars and a reference to "(pound)" or pounds sterling is to British pounds sterling. SECTION 1.05. EFFECTIVENESS OF INDENTURE. The provisions of this Indenture as set forth in Article IV, Article V and Article VI shall not be effective unless and until the Company issues any Notes hereunder and such Notes are released from escrow by the Escrow Agent. ARTICLE II. THE NOTES SECTION 2.01. FORM AND DATING. (a) General. The Initial Notes and the Trustee's certificate of authentication shall be substantially in the form of Exhibit A hereto, which is hereby incorporated by reference and expressly made a part of this Indenture. The New Notes and the Trustee's certificate of authentication shall be substantially in the form of Exhibit B hereto, which is hereby incorporated by reference and expressly made a part of this Indenture. The Notes may have notations, legends or endorsements required by law, stock exchange rule, agreements to which the Company is subject, if any, or usage (provided that any such notation, -15- 138 legend or endorsement is in a form acceptable to the Company). The Company shall furnish any such legend not contained in Exhibit A or Exhibit B to the Trustee in writing. Each Note shall be dated the date of its authentication. The Notes shall be in denominations of $1,000 and integral multiples thereof. The terms and provisions of the Notes set forth in Exhibit A and Exhibit B are part of this Indenture and to the extent applicable, the Company and the Trustee, by their execution and delivery of this Indenture, expressly agree to such terms and provisions and to be bound thereby. However, to the extent any provision of any Note conflicts with the express provisions of this Indenture, the provisions of this Indenture shall govern and be controlling. (b) Global Notes. Initial Notes offered and sold in reliance on Regulation S under the Securities Act ("Regulation S"), shall be issued initially in the form of one or more permanent Global Notes in definitive, fully registered form without interest coupons with the Global Notes Legend and Restricted Notes Legend set forth in Exhibit A hereto (the "Regulation S Global Note"), which shall be deposited on behalf of the purchasers of the Initial Notes represented thereby with the Trustee, at its New York office, as custodian, for the Depositary, and registered in the name of the Depositary or the nominee of the Depositary for the accounts of designated agents holding on behalf of the Euroclear System ("Euroclear") or Cedel Bank, societe anonyme ("Cedel"), duly executed by the Company and authenticated by the Trustee as hereinafter provided. The aggregate principal amount of the Regulation S Global Note may from time to time be increased or decreased by adjustments made on the records of the Trustee and the Depositary or its nominee as hereinafter provided. Initial Notes offered and sold to Qualified Institutional Buyers ("QIBs") in reliance on Rule 144A under the Securities Act ("Rule 144A"), shall be issued initially in the form of one or more permanent Global Notes in definitive, fully registered form without interest coupons with the Global Notes Legend and Restricted Notes Legend set forth in Exhibit A hereto ("Rule 144A Global Note"), which shall be deposited on behalf of the purchasers of the Initial Notes represented thereby with the Trustee, at its New York office, as custodian for the Depositary, and registered in the name of the Depositary or a nominee of the Depositary, duly executed by the Company and authenticated by the Trustee as hereinafter provided. The aggregate principal amount of the Rule 144A Global Note may from time to time be increased or decreased by adjustments made on the records of the Trustee and the Depositary or its nominee as hereinafter provided. (c) Book-Entry Provisions. This Section 2.01(c) shall apply only to the Regulation S Global Note, the Rule 144A Global Note and the New Notes issued in the form of one or more permanent Global Notes (collectively, the "Global Notes") deposited with or on behalf of the Depositary. The Company shall execute and the Trustee shall, in accordance with this Section 2.01(c), authenticate and deliver initially one or more Global Notes or in accordance with Section 4.16 authenticate and deliver one or more Global Notes that (a) shall be registered in the name of the Depositary for such Global Note or Global Notes or the nominee of such Depositary and (b) shall be delivered by the Trustee to such Depositary or pursuant to such Depositary's instructions or held by the Trustee as custodian for the Depositary. Members of, or participants in, the Depositary ("Agent Members") shall have no rights under this Indenture with respect to any Global Note held on their behalf by the Depositary or by the Trustee as the custodian of the Depositary or under such Global Note, and the Depositary may be treated by the Company, the Trustee and any agent of the Company or the Trustee as the absolute owner of such Global -16- 139 Note for all purposes whatsoever. Notwithstanding the foregoing, nothing herein shall prevent the Company, the Trustee or any agent of the Company or the Trustee from giving effect to any written certification, proxy or other authorization furnished by the Depositary or impair, as between the Depositary and its Agent Members, the operation of customary practices of such Depositary governing the exercise of the rights of an owner of a beneficial interest in any Global Note. (d) Certificated Notes. Notwithstanding any other provisions in this Indenture to the contrary, the Initial Notes held in escrow by the Escrow Agent pursuant to the Escrow Agreement shall be certificated and shall bear the Restricted Notes Legend set forth in Exhibit A hereto, but such Initial Notes shall not bear the Global Notes Legend. Such Initial Notes shall be Restricted Notes. In addition to the provisions of Section 2.10, owners of beneficial interests in Global Notes may, upon request to the Trustee, receive a certificated Initial Note, which certificated Initial Note shall bear the Restricted Notes Legend set forth in Exhibit A hereto ("Restricted Notes"). After a transfer or exchange of any Initial Notes during the period of the effectiveness of a Shelf Registration Statement with respect to the Initial Notes and pursuant thereto, all requirements for Restricted Notes Legends on such Initial Note will cease to apply, and a certificated New Note without a Restricted Notes Legend will be available to the Holder of such Initial Notes. SECTION 2.02. EXECUTION AND AUTHENTICATION. One Officer shall sign the Notes for the Company by manual or facsimile signature. If the Officer whose signature is on a Note no longer holds that office at the time the Note is authenticated, the Note shall nevertheless be valid. A Note shall not be valid until authenticated by the manual signature of an authorized officer of the Trustee. The signature shall be conclusive evidence that the Note has been authenticated under this Indenture. The Trustee shall upon receipt from the Escrow Agent of a copy of an Exchange Notice, together with an Initial Note(s) executed by the Company, authenticate such Initial Note(s), having an Applicable Maturity Date, interest rate, principal amount and payee as set forth in such Exchange Notice, provided, that the aggregate principal amount of all Notes issued hereunder may not exceed the amount stated in paragraph 6 of the Initial Notes. On the Exchange Date, the Trustee shall deliver such Initial Note(s) to the Holder thereof. Notwithstanding any other provisions in this Indenture, the aggregate principal amount of Notes outstanding at any time shall not exceed the amount set forth herein, except as provided in Section 2.07. The Trustee may appoint an authenticating agent acceptable to the Company to authenticate Notes. An authenticating agent may authenticate Notes whenever the Trustee may do so. Each reference in this Indenture to authentication by the Trustee includes authentication by such agent. An authenticating agent has the same rights as an Agent to deal with Holders, the Company or an Affiliate. SECTION 2.03. REGISTRAR AND PAYING AGENT. The Company shall maintain in the Borough of Manhattan, City of New York, State of New York and, if and as long as the Notes are listed on the Luxembourg Stock Exchange, in Luxembourg, (i) -17- 140 offices or agencies where the Notes may be presented for registration of transfer or for exchange ("Registrar") and (ii) offices or agencies where the Notes may be presented for payment ("Paying Agent"). The Company initially designates the Trustee at its corporate trust offices in the Borough of Manhattan, City of New York, State of New York to act as principal Registrar and Paying Agent and Chase Manhattan Bank Luxembourg S.A. to act as a Registrar and Paying Agent. The principal Registrar shall keep a register of the Notes and of their transfer and exchange. The Company may appoint one or more co-registrars and one or more additional paying agents in such other locations as it shall determine. The term "Registrar" includes any co-registrar and the term "Paying Agent" includes any additional paying agent. The Company may change any Paying Agent or Registrar without prior notice to any Holder. The Company shall notify the Trustee of the name and address of any Agent not a party to this Indenture. If the Company fails to appoint or maintain another entity as Registrar or Paying Agent, the Trustee shall act as such. The Company or any of its Affiliates may act as Paying Agent or Registrar. SECTION 2.04. PAYING AGENT TO HOLD MONEY IN TRUST. The Company shall require each Paying Agent other than the Trustee to agree in writing that the Paying Agent will hold in trust for the benefit of Holders or the Trustee all money held by the Paying Agent for the payment of principal, interest, Liquidated Damages, if any, or Additional Amounts, if any, on the Notes, and will notify the Trustee of any default by the Company in making any such payment. While any such default continues, the Trustee may require a Paying Agent to pay all money held by it to the Trustee and to account for any money disbursed by it. The Company at any time may require a Paying Agent to pay all money held by it to the Trustee. Upon payment over to the Trustee, the Paying Agent (if other than the Company or an Affiliate of the Company) shall have no further liability for the money. If the Company or an Affiliate of the Company acts as Paying Agent, it shall segregate and hold in a separate trust fund for the benefit of the Holders all money held by it as Paying Agent. SECTION 2.05. HOLDER LISTS. The Trustee shall preserve in as current a form as is reasonably practicable the most recent list available to it of the names and addresses of Holders. If the Trustee is not the Registrar, the Company shall furnish to the Trustee on or before each interest payment date and at such other times as the Trustee may request in writing a list in such form and as of such date as the Trustee may reasonably require of the names and addresses of Holders. SECTION 2.06. TRANSFER AND EXCHANGE. Where Notes are presented to the Registrar or a co-registrar with a request to register a transfer or to exchange them for an equal principal amount of Notes of other denominations, the Registrar shall register the transfer or make the exchange if its requirements for such transactions are met. To permit registrations of transfers and exchanges, the Company shall issue and the Trustee shall authenticate Notes at the Registrar's request. No service charge shall be made for any registration of transfer or exchange (except as otherwise expressly permitted herein), but the Company may require payment of a sum sufficient to cover any transfer tax or similar governmental charge payable in connection therewith (other than any such transfer tax or similar governmental charge payable upon exchanges pursuant to Sections 2.10, 3.06 or 9.05 hereof). The Company shall not be required (i) to issue, register the transfer of or exchange any Note for a period beginning at the opening of business 15 days before the day of any selection of Notes to be redeemed under Section 3.02 hereof and ending at the close of business on the day of selection, or (ii) to -18- 141 register the transfer, or exchange, of any Note so selected for redemption in whole or in part, except the unredeemed portion of any Note being redeemed in part. (a) Notwithstanding any provision to the contrary herein, so long as a Global Note remains outstanding and is held by or on behalf of the Depositary, transfers of a Global Note, in whole or in part, or of any beneficial interest therein, shall only be made in accordance with Section 2.01(b) and this Section 2.06(a); provided, however, that beneficial interests in a Global Note may be transferred to Persons who take delivery thereof in the form of a beneficial interest in the same Global Note. (i) Except for transfers or exchanges made in accordance with clauses (ii) through (iv) of this Section 2.06(a), transfers of a Global Note shall be limited to transfers of such Global Note in whole, but not in part, to nominees of the Depositary or to a successor of the Depositary or such successor's nominee. (ii) Rule 144A Global Note to Regulation S Global Note. If an owner of a beneficial interest in the Rule 144A Global Note deposited with the Depositary or the Trustee as custodian for the Depositary wishes at any time to transfer its interest in such Rule 144A Global Note to a Person who is required to take delivery thereof in the form of an interest in the Regulation S Global Note, such owner may, subject to the rules and procedures of the Depositary, exchange or cause the exchange of such interest for an equivalent beneficial interest in the Regulation S Global Notes. Upon receipt by the principal Registrar of (1) instructions given in accordance with the Depositary's procedures from an Agent Member directing the principal Registrar to credit or cause to be credited a beneficial interest in the Regulation S Global Note in an amount equal to the beneficial interest in the Rule 144A Global Note to be exchanged, (2) a written order given in accordance with the Depositary's procedures containing information regarding the participant account of the Depositary and the Euroclear or Cedel account to be credited with such increase and (3) a certificate in the form of Exhibit C attached hereto given by the Holder of such beneficial interest, then the principal Registrar shall instruct the Depositary to reduce or cause to be reduced the principal amount at maturity of the Rule 144A Global Note and to increase or cause to be increased the principal amount at maturity of the Regulation S Global Note by the aggregate principal amount at maturity of the beneficial interest in the Rule 144A Global Note equal to the beneficial interest in the Regulation S Global Note to be exchanged or transferred, to credit or cause to be credited to the account of the Person specified in such instructions a beneficial Interest in the Regulation S Global Note equal to the reduction in the principal amount at maturity of the Rule 144A Global Note and to debit or cause to be debited from the account of the Person making such exchange or transfer the beneficial interest in the Rule 144A Global Note that is being exchanged or transferred. (iii) Regulation S Global Note to Rule 144A Global Note. If an owner of a beneficial interest in the Regulation S Global Note deposited with the Depositary or with the Trustee as custodian for the Depositary wishes at any time to transfer its interest in such Regulation S Global Note to a Person who is required to take delivery thereof in the form of an interest in the Rule 144A Global Note, such Holder may, subject to the rules and procedures of Euroclear or Cedel, as the case may be, and the Depositary, exchange or cause the exchange of such interest for an equivalent beneficial interest in the Rule 144A Global Note. Upon receipt by the principal Registrar of (1) instructions from Euroclear or Cedel, if applicable, and the Depositary, directing the principal Registrar to credit or cause to be credited a beneficial interest in the Rule 144A Global Note equal to -19- 142 the beneficial interest in the Regulation S Global Note to be exchanged or transferred, such instructions to contain information regarding the participant account with the Depositary to be credited with such increase, (2) a written order given in accordance with the Depositary's procedures containing information regarding the participant account of the Depositary and (3) a certificate in the form of Exhibit D attached hereto given by the owner of such beneficial interest, then Euroclear or Cedel or the principal Registrar, as the case may be, will instruct the Depositary to reduce or cause to be reduced the Regulation S Global Note and to increase or cause to be increased the principal amount at maturity of the Rule 144A Global Note by the aggregate principal amount at maturity of the beneficial interest in the Regulation S Global Note to be exchanged or transferred, and the principal Registrar shall instruct the Depositary, concurrently with such reduction, to credit or cause to be credited to the account of the Person specified in such instructions a beneficial interest in the Rule 144A Global Note equal to the reduction in the principal amount of the Regulation S Global Note and to debit or cause to be debited from the account of the Person making such exchange or transfer the beneficial interest in the Regulation S Global Note that is being exchanged or transferred. (iv) Global Note to Restricted Note. If an owner of a beneficial interest in a Global Note deposited with the Depositary or with the Trustee as custodian for the Depositary wishes at any time to transfer its interest in such Global Note to a Person who is required to take delivery thereof in the form of a Restricted Note, such owner may, subject to the rules and procedures of Euroclear or Cedel, if applicable, and the Depositary, cause the exchange of such interest for one or more Restricted Notes of any authorized denomination or denominations and of the same aggregate principal amount. Upon receipt by the principal Registrar of (1) instructions from Euroclear or Cedel, if applicable, and the Depositary directing the principal Registrar to authenticate and deliver one or more Restricted Notes of the same aggregate principal amount as the beneficial interest in the Global Note to be exchanged, such instructions to contain the name or names of the designated transferee or transferees, the authorized denomination or denominations of the Restricted Notes to be so issued and appropriate delivery instructions, (2) a certificate in the form of Exhibit E attached hereto given by the owner of such beneficial interest to the effect set forth therein, (3) a certificate in the form of Exhibit F attached hereto given by the Person acquiring the Restricted Notes for which such interest is being exchanged, to the effect set forth therein, and (4) such other certifications, legal opinions or other information as the Company may reasonably require to confirm that such transfer is being made pursuant to an exemption from, or in a transaction not subject to, the registration requirements of the Securities Act, then Euroclear or Cedel, if applicable, or the principal Registrar, as the case may be, will instruct the Depositary to reduce or cause to be reduced such Global Note by the aggregate principal amount of the beneficial interest therein to be exchanged and to debit or cause to be debited from the account of the Person making such transfer the beneficial interest in the Global Note that is being transferred, and concurrently with such reduction and debit the Company shall execute, and the Trustee shall authenticate and deliver, one or more Restricted Notes of the same aggregate principal amount in accordance with the instructions referred to above. (v) Restricted Note to Restricted Note. If a Holder of a Restricted Note wishes at any time to transfer such Restricted Note to a Person who is required to take delivery thereof in the form of a Restricted Note, such Holder may, subject to the restrictions on transfer set forth herein and in such Restricted Note, cause the exchange -20- 143 of such Restricted Note for one or more Restricted Notes of any authorized denomination or denominations and of the same aggregate principal amount. Upon receipt by the principal Registrar of (1) such Restricted Note, duly endorsed as provided herein, (2) instructions from such Holder directing the principal Registrar to authenticate and deliver one or more Restricted Notes of the same aggregate principal amount as the Restricted Note to be exchanged, such instructions to contain the name or authorized denomination or denominations of the Restricted Notes to be so issued and appropriate delivery instructions, (3) a certificate from the Holder of the Restricted Note to be exchanged in the form of Exhibit E attached hereto, (4) a certificate in the form of Exhibit F attached hereto given by the Person acquiring the Restricted Notes for which such interest is being exchanged, to the effect set forth therein, and (5) such other certifications, legal opinions or other information as the Company may reasonably require to confirm that such transfer is being made pursuant to an exemption from, or in a transaction not subject to, the registration requirements of the Securities Act, then the Registrar shall cancel or cause to be canceled such Restricted Note and concurrently therewith, the Company shall execute, and the Trustee shall authenticate and deliver, one or more Restricted Notes of the same aggregate principal amount, in accordance with the instructions referred to above. (vi) Other Exchanges. In the event that a beneficial interest in a Global Note is exchanged for Notes in definitive registered form pursuant to Section 2.10, prior to the effectiveness of a Shelf Registration Statement with respect to such Notes, such Notes may be exchanged only in accordance with such procedures as are substantially consistent with the provisions of clauses (ii) through (v) above (including the certification requirements intended to ensure that such transfers comply with Rule 144A, Rule 144, Regulation S or any other available exemption from registration, as the case may be) and such other procedures as may from time to time be adopted by the Company. (vii) Distribution Compliance Period. Prior to the termination of the "distribution compliance period" (as defined in Regulation S) with respect to the issuance of the Notes, transfers of interests in the Regulation S Global Note to "U.S. Persons" (as defined in Regulation S) shall be limited to transfers to QIBs made pursuant to the provisions of Sections 2.06(a)(iii). The Company shall advise the Trustee as to the termination of the distribution compliance period and the Trustee may rely conclusively thereon. (viii) Regulation S Global Note to Certificated Note. Upon proper presentment to the Trustee of a certificate substantially in the form of Exhibit G hereto and subject to the rules and procedures of the Depositary or its direct or indirect participants, including Euroclear and Cedel, an interest in a Regulation S Global Note may be exchanged for a certificated Restricted Note. (b) Except in connection with a Shelf Registration Statement contemplated by and in accordance with the terms of the Registration Rights Agreement, if Initial Notes are issued upon the transfer, exchange or replacement of Initial Notes bearing the Restricted Securities Legend set forth in Exhibit A hereto, or if a request is made to remove such Restricted Notes Legend on Initial Notes, the Initial Notes so issued shall bear the Restricted Notes Legend, or the Restricted Notes Legend shall not be removed, as the case may be, unless there is delivered to the Company such satisfactory evidence, which may include an opinion of counsel licensed to practice law in the State of New York, as may be reasonably required by the Company, that neither the legend -21- 144 nor the restrictions on transfer set forth therein are required to ensure that transfers thereof comply with the provisions of Rule 144A, Rule 144, Regulation S or any other available exemption from registration under the Securities Act or, with respect to Restricted Notes, that such Notes are not "restricted" within the meaning of Rule 144 under the Securities Act. Upon provision of such satisfactory evidence, the Trustee, at the direction of the Company, shall authenticate and deliver Initial Notes that do not bear the legend. With respect to any transfer or exchange of any Initial Note during the period of the effectiveness of a Shelf Registration Statement, the Company shall execute New Notes that do not have a Restricted Notes Legend and shall deliver such New Notes to the Trustee for authentication, as applicable. (c) Neither the Company nor the Trustee shall have any responsibility for any actions taken or not taken by the Depositary and the Company shall have no responsibility for any actions taken or not taken by the Trustee as agent or custodian of the Depositary. (d) In any transfer, exchange or replacement of a Note or a beneficial interest therein contemplated by this Indenture, the Note issued in connection with such transfer, exchange or replacement or the Global Note that is reduced or increased in connection therewith shall have the same terms as (i) the Note presented or surrendered for transfer, exchange or replacement or in lieu of which such replacement Note was issued or (ii) the Global Note the beneficial interest in which is being transferred or exchanged. SECTION 2.07. REPLACEMENT NOTES. If the Holder of a Note claims that the Note has been lost, destroyed or wrongfully taken or if such Note is mutilated and is surrendered to the Trustee, the Company shall issue and the Trustee shall authenticate a replacement Note if the Trustee's and the Company's requirements are met. If required by the Trustee or the Company, an indemnity bond must be sufficient in the judgment of both to protect the Company, the Trustee, any Agent or any authenticating agent from any loss which any of them may suffer if a Note is replaced. The Company may charge for its expenses in replacing a Note. In case any such mutilated, destroyed, lost or stolen Note has become or is about to become due and payable, or is about to be purchased by the Company pursuant to Article III hereof, the Company in its discretion may, instead of issuing a new Note, pay or purchase such Note, as the case may be. Every replacement Note is an additional obligation of the Company and shall be entitled to all of the benefits of this Indenture equally and proportionately with all other Notes duly issued hereunder. SECTION 2.08. OUTSTANDING NOTES. The Notes outstanding at any time are all the Notes authenticated by the Trustee except for those canceled by it, those delivered to it for cancellation, and those described in this Section as not outstanding. If a Note is replaced, paid or purchased pursuant to Section 2.07 hereof, it ceases to be outstanding unless the Trustee receives proof satisfactory to it that the replaced, paid or purchased Note is held by a bona fide purchaser. If the principal amount of any Note is considered paid under Section 4.01 hereof, such Note ceases to be outstanding and interest on it ceases to accrue. -22- 145 Except as set forth in Section 2.09 hereof, a Note does not cease to be outstanding because the Company or an Affiliate of the Company holds the Note. SECTION 2.09. TREASURY NOTES. In determining whether the Holders of the required principal amount at maturity of Notes have concurred in any direction, waiver or consent, Notes owned by the Company or an Affiliate of the Company shall be considered as though they are not outstanding, except that for the purposes of determining whether the Trustee shall be protected in relying on any such direction, waiver or consent, only Notes that the Trustee knows are so owned shall be so disregarded. SECTION 2.10. TEMPORARY NOTES; GLOBAL NOTES. (a) Until definitive Notes are ready for delivery, the Company may prepare and the Trustee shall authenticate temporary Notes. Temporary Notes shall be substantially in the form of definitive Notes but may have variations that the Company considers appropriate for temporary Notes. Without unreasonable delay, the Company shall prepare and the Trustee shall authenticate definitive Notes in exchange for temporary Notes. Holders of temporary Notes shall be entitled to all of the benefits of this Indenture. (b) A Global Note deposited with the Depositary or with the Trustee as custodian for the Depositary pursuant to Section 2.01 shall be transferred to the beneficial owners thereof in the form of certificated Notes only in accordance with Section 2.01(d) or if such transfer complies with Section 2.06 and (i) the Depositary notifies the Company that it is unwilling or unable to continue as Depositary for such Global Note or if at any time such Depositary ceases to be a "clearing agency" registered under the Exchange Act and a successor depositary is not appointed by the Company within 90 days of such notice, or (ii) an Event of Default has occurred and is continuing. (c) Any Global Note that is transferable to the beneficial owners thereof in the form of certificated Notes pursuant to Section 2.01(d) or to this Section 2.10 shall be surrendered by the Depositary to the Trustee to be so transferred, in whole or from time to time in part, without charge, and the Trustee shall authenticate and deliver, upon such transfer of each portion of such Global Note, an equal aggregate principal amount of Initial Notes of authorized denominations in the form of certificated Notes. Any portion of a Global Note transferred pursuant to this Section shall be executed, authenticated and delivered only in denominations of $1,000 and any integral multiple thereof and registered in such names as the Depositary shall direct. Any Initial Note in the form of certificated Notes delivered in exchange for an interest in the Global Notes shall, except as otherwise provided by Section 2.06(b) bear the Restricted Notes Legend set forth in Exhibit A hereto. (d) The registered Holder of a Global Note may grant proxies and otherwise authorize any Person, including Agent Members and Persons that may hold interests through Agent Members, to take any action which a Holder is entitled to take under this Indenture or the Notes. (e) In the event of the occurrence of either of the events specified in Section 2.10(b), the Company will promptly make available to the Trustee a reasonable supply of certificated Notes in definitive, fully registered form without interest coupons. -23- 146 SECTION 2.11. CANCELLATION. The Company at any time may deliver Notes to the Trustee for cancellation. The Registrar and Paying Agent shall forward to the Trustee any Notes surrendered to them for registration of transfer, exchange or payment. The Trustee shall promptly cancel all Notes surrendered for registration of transfer, exchange, payment, replacement or cancellation and shall dispose of canceled Notes as the Company directs. The Company may not issue new Notes to replace Notes that it has paid or that have been delivered to the Trustee for cancellation. SECTION 2.12. DEFAULTED INTEREST. If the Company fails to make a payment of interest on the Notes, it shall pay such defaulted interest plus any interest payable on the defaulted interest, in any lawful manner. It may pay such defaulted interest, plus any such interest payable on it, to the Persons who are Holders on a subsequent special record date. The Company shall fix any such record date and payment date, provided that no such record date shall be less than 10 days prior to the related payment date for such defaulted interest. At least 15 days before any such record date, the Company shall mail to Holders a notice that states the special record date, the related payment date and amount of such interest to be paid. ARTICLE III. REDEMPTION SECTION 3.01. NOTICES TO TRUSTEE. If the Company elects to redeem Notes pursuant to the optional redemption provisions of the Notes and Section 3.07 hereof or pursuant to the Optional Tax Redemption provision of the Notes (Section 8 of the Initial Notes and Section 7 of the New Notes), it shall notify the Trustee of the redemption date and the principal amount of Notes to be redeemed, and in connection with an Optional Tax Redemption as provided in the Notes, such notice shall be accompanied by an Officers' Certificate to the effect that the conditions to such redemption contained herein have been complied with. The Company shall give each notice provided for in this Section 3.01 at least 50 days before the redemption date (unless a shorter notice period shall be satisfactory to the Trustee). SECTION 3.02. SELECTION OF NOTES TO BE REDEEMED. If less than all of the Notes are to be redeemed at any time, selection of Notes shall be made by the Trustee on a pro rata basis or by lot or by method that complies with the requirements of any exchange on which the Notes are listed and that the Trustee considers fair and appropriate, provided that no Notes of $1,000 or less shall be redeemed in part. The Trustee shall make the selection not more than 60 days and not less than 30 days before the redemption date from Notes outstanding not previously called for redemption. Notes and portions of Notes selected shall be in amounts of $1,000 or integral multiples of $1,000. Provisions of this Indenture that apply to Notes called for redemption also apply to portions of Notes called for redemption. The Trustee shall notify the Company promptly of the Notes or portions of Notes to be called for redemption. SECTION 3.03. NOTICE OF REDEMPTION. At least 30 days but not more than 60 days before a redemption date, the Company shall mail, by first class mail, a notice of redemption to each Holder whose Notes are to be redeemed at its registered address. The notice shall identify the Notes to be redeemed and shall state: -24- 147 (a) the redemption date; (b) the redemption price; (c) if any Note is to be redeemed in part only, the portion of the principal amount at maturity thereof redeemed, and that, after the redemption date, upon surrender of such Note, a new Note in principal amount equal to the unredeemed portion thereof shall be issued in the name of the Holder thereof upon cancellation of the original Note; (d) the name and address of the Paying Agent; (e) that Notes called for redemption must be surrendered to the Paying Agent to collect the redemption price plus accrued interest, if any; (f) that interest on Notes called for redemption ceases to accrue on and after the redemption date; and (g) the paragraph of the Notes pursuant to which the Notes called for redemption are being redeemed. At the Company's request, the Trustee shall give notice of redemption in the Company's name and at its expense; provided that the Company shall have delivered to the Trustee, at least 45 days prior to the redemption date, an Officers' Certificate requesting that the Trustee give such notice and setting forth the information to be stated in such notice, as provided in the preceding paragraph. SECTION 3.04. EFFECT OF NOTICE OF REDEMPTION. Once notice of redemption is mailed in accordance with Section 3.03 hereof, Notes called for redemption become due and payable on the redemption date at the price set forth in the Note. A notice of redemption may not be conditional. SECTION 3.05. DEPOSIT OF REDEMPTION PRICE. On or before the redemption date, the Company shall deposit with the Trustee or with the Paying Agent money sufficient to pay the redemption price of and accrued interest, if any, on all Notes to be redeemed on that date. The Trustee or the Paying Agent shall return to the Company any money not required for that purpose. SECTION 3.06. NOTES REDEEMED IN PART. Upon surrender of a Note that is redeemed in part, the Company shall issue and the Trustee shall authenticate for the Holder at the expense of the Company a new Note equal in principal amount at maturity to the unredeemed portion of the Note surrendered. SECTION 3.07. OPTIONAL REDEMPTION AND OPTIONAL TAX REDEMPTION. Subject to Section 7 of the Initial Notes and Section 6 of the New Notes, the Company may redeem all or any portion of the Notes, in whole or in part, at a redemption price equal to 100% of the principal amount thereof plus the Specified Premium plus accrued and unpaid interest and Liquidated Damages thereon, if any, to the applicable redemption date. The Company may also redeem all of the Notes in accordance with the Optional Tax Redemption provision of the Notes (Section 8 of the Initial -25- 148 Notes and Section 7 of the New Notes). Any redemption pursuant to this Section 3.07 shall be made pursuant to the provisions of Section 3.01 through 3.06 hereof. SECTION 3.08. MANDATORY REDEMPTION The Company shall not be required to make mandatory redemption payments with respect to the Notes. SECTION 3.09. ASSET SALE OFFER AND PURCHASE OFFER. (a) In the event that the Company shall commence an offer to all Holders of the Notes to purchase Notes pursuant to Section 4.10 hereof (the "Asset Sale Offer") or pursuant to Section 4.13 hereof (the "Purchase Offer"), the Company shall follow the procedures in this Section 3.09. (b) The Asset Sale Offer or the Purchase Offer, as the case may be, shall remain open for a period specified by the Company which shall be no less than 30 calendar days and no more than 40 calendar days following its commencement (the "Commencement Date") (as determined in accordance with Section 4.10 or 4.13 hereof, as the case may be), except to the extent that a longer period is required by applicable law (the "Tender Period"). Upon the expiration of the Tender Period (the "Purchase Date"), the Company shall purchase the principal amount of Notes required to be purchased pursuant to Section 4.10 or 4.13 hereof (the "Offer Amount") or, if less than the Offer Amount has been tendered, all Notes tendered in response to the Asset Sale Offer or the Purchase Offer, as the case may be. (c) If the Purchase Date is (i) on or after an interest payment record date and (ii) on or before the related interest payment date, any accrued interest shall be paid to the Person in whose name a Note is registered at the close of business on such record date, and no additional interest will be payable to Holders who tender Notes pursuant to the Asset Sale Offer or the Purchase Offer, as the case may be. (d) The Company shall provide the Trustee with notice of the Asset Sale Offer or the Purchase Offer, as the case may be, at least 10 days before the Commencement Date. (e) On or before the Commencement Date, the Company or the Trustee (at the expense of the Company) shall send, by first class mail, a notice to each of the Holders, which shall govern the terms of the Asset Sale Offer or the Purchase Offer and shall state: (i) that the Asset Sale Offer or the Purchase Offer is being made pursuant to this Section 3.09 and, as applicable, Section 4.10 or 4.13 hereof and the length of time the Asset Sale Offer or the Purchase Offer will remain open; (ii) the Offer Amount, the purchase price (as determined in accordance with Section 4.10 or 4.13 hereof) and the Purchase Date, and in the case of a Purchase Offer made pursuant to Section 4.13 hereof, that all Notes tendered will be accepted for payment; (iii) that any Note or portion thereof not tendered or accepted for payment will continue to accrue interest; -26- 149 (iv) that, unless the Company defaults in the payment of the purchase price, any Note or portion thereof accepted for payment pursuant to the Asset Sale Offer or the Purchase Offer will cease to accrue interest after the Purchase Date; (v) that Holders electing to have a Note or portion thereof purchased pursuant to any Asset Sale Offer or Purchase Offer will be required to surrender the Note, with the form entitled "Option of Holder to Elect Purchase" on the reverse of the Note completed, to the Company, a depositary, if appointed by the Company, or a Paying Agent at the address specified in the notice prior to the close of business on the third Business Day preceding the Purchase Date; (vi) that Holders will be entitled to withdraw their election if the Company, depositary or Paying Agent, as the case may be, receives, not later than the close of business on the second Business Day preceding the Purchase Date, or such longer period as may be required by law, a letter or a telegram, telex or facsimile transmission (receipt of which is confirmed and promptly followed by a letter) setting forth the name of the Holder, the principal amount at maturity of the Note or portion thereof the Holder delivered for purchase and a statement that such Holder is withdrawing his election to have the Note or portion thereof purchased; (vii) that, in the event of an Asset Sale Offer, if the aggregate principal amount of Notes surrendered by Holders exceeds the Offer Amount, the Trustee will select the Notes to be purchased pro rata or by a method that complies with the requirements of any exchange on which the Notes are listed and that the Trustee considers fair and appropriate with such adjustments as may be deemed appropriate by the Company so that only Notes in denominations of $1,000, or integral multiples thereof, shall be purchased; and (viii) that Holders whose Notes were purchased only in part will be issued new Notes equal in principal amount to the unpurchased portion of the Notes surrendered. In addition, the notice shall, to the extent permitted by applicable law, be accompanied by a copy of the information regarding the Company and its Subsidiaries which is required to be contained in the most recent Quarterly Report on Form 10-Q or Annual Report on Form 10-K (including any financial statements or other information required to be included or incorporated by reference therein) and any Reports on Form 8-K filed since the date of such Quarterly Report or Annual Report (or would have been required to file if the Company remained a company incorporated in the United States), as the case may be, which the Company has filed (or would have been required to file if it remained a company incorporated in the United States) with the SEC on or prior to the date of the notice. The notice shall contain all instructions and materials necessary to enable such Holders to tender Notes pursuant to the Asset Sale Offer or the Purchase Offer, as the case may be. (f) At least one Business Day prior to the Purchase Date, the Company shall irrevocably deposit with the Trustee or a Paying Agent in immediately available funds an amount equal to the Offer Amount to be held for payment in accordance with the terms of this Section. On the Purchase Date, the Company shall, to the extent lawful, (i) accept for payment the Notes or portions thereof tendered pursuant to the Asset Sale Offer or the Purchase Offer, (ii) deliver or cause the depositary or Paying Agent to deliver to the Trustee Notes so accepted and (iii) deliver to the Trustee an Officers' Certificate stating such Notes or portions thereof have been accepted for payment by the Company in accordance with the terms of this Section 3.09. -27- 150 The depositary, the Paying Agent or the Company, as the case may be, shall promptly (but in any case not later than ten (10) calendar days after the Purchase Date) mail or deliver to each tendering Holder an amount equal to the purchase price of the Notes tendered by such Holder and accepted by the Company for purchase, and the Trustee shall promptly authenticate and mail or deliver to such Holders a new Note equal in principal amount to any unpurchased portion of the Note surrendered. Any Notes not so accepted shall be promptly mailed or delivered by or on behalf of the Company to the Holder thereof. The Company will publicly announce in a newspaper of general circulation the results of the Asset Sale Offer or the Purchase Offer on the Purchase Date. (g) For the purposes of calculating the allocation of available Excess Proceeds to the Notes and each issue of Other Qualified Notes on a pro rata basis according to accreted value or principal amount, as the case may be, the relevant principal amount or the accreted value, as the case may be, of any Other Qualified Notes denominated in a currency other than United States dollars will be nationally converted into United States dollars from the currency such Other Qualified Notes are denominated in (the "Base Currency"); (i) in the case of determining the maximum principal amount or accreted value of Notes and Other Qualified Notes that may be purchased out of the Excess Proceeds, at the noon buying rate in the City of New York as certified for customs purposes by the Federal Reserve Bank of New York for cable transfers in the Base Currency (the "Noon Buying Rate") on the Business Day which is 10 Business Days prior to the Commencement Date; and (ii) in the case of determining the allocation of the remaining Excess Proceeds if the aggregate principal amount or accreted value, as the case may be, of Notes and Other Qualified Notes surrendered by holders in the Asset Sale Offer exceeds the remaining amount of Excess Proceeds, at the Noon Buying Rate on the second Business Day preceding the Purchase Date. (h) The Asset Sale Offer or the Purchase Offer shall be made by the Company in compliance with all applicable provisions of the Exchange Act, and all applicable tender offer rules promulgated thereunder, and shall include all instructions and materials necessary to enable such Holders to tender their Notes. ARTICLE IV. COVENANTS SECTION 4.01. PAYMENT OF NOTES. The Company shall pay the principal of, premium, if any, Liquidated Damages, if any, and interest on, the Notes on the dates and in the manner provided in the Notes. Principal, premium, if any, Liquidated Damages, if any, and interest shall be considered paid on the date due if the Paying Agent (other than the Company or an Affiliate of the Company) holds on that date money designated for and sufficient to pay all principal of, premium, if any, Liquidated Damages, if any, and interest then due. To the extent lawful, the Company shall pay interest (including post-petition interest in any proceeding under any Bankruptcy Law) on (i) overdue principal, Liquidated Damages, if any, and premium, if any, at the applicable rate borne by the Notes, compounded semiannually; and (ii) overdue installments of -28- 151 interest (without regard to any applicable grace period) at the same rate, compounded semiannually. The Company shall pay all Liquidated Damages, if any, in the same manner on the dates and in the amounts set forth in the Registration Rights Agreement. The Company shall pay interest (including post-petition interest in any proceeding under any Bankruptcy Law) on overdue principal at the rate equal to 1% per annum in excess of the then applicable interest rate on the Notes to the extent lawful; it shall pay interest (including post-petition interest in any proceeding under any Bankruptcy Law) on overdue installments of interest and Liquidated Damages (without regard to any applicable grace period) at the same rate to the extent lawful. SECTION 4.02. REPORTS. Whether or not required by the rules and regulations of the SEC, so long as any Notes are outstanding, the Company shall file with the SEC and furnish to the Trustee and to the Holders of Notes, all quarterly and annual financial information required to be contained in a filing with the SEC on Forms 10-Q and 10-K (or the equivalent thereof under the Exchange Act for foreign private issuers in the event the Company becomes a corporation organized under the laws of the United Kingdom, the Netherlands, the Netherlands Antilles, Bermuda or the Cayman Islands), including a "Management's Discussion and Analysis of Results of Operations and Financial Condition" and, with respect to the annual information only, a report thereon by the Company's certified independent accountants, in each case, in the form required by the rules and regulations of the SEC as in effect on the Loan Date. This Section 4.02 will apply notwithstanding that the Company becomes a corporation organized under the laws of the United Kingdom, the Netherlands, the Netherlands Antilles, Bermuda or the Cayman Islands. SECTION 4.03. COMPLIANCE CERTIFICATE. The Company shall deliver to the Trustee, within 90 days after the end of each fiscal year of the Company, an Officers' Certificate stating that a review of the activities of the Company and its subsidiaries during the preceding fiscal year has been made under the supervision of the signing Officers with a view to determining whether the Company has kept, observed, performed and fulfilled its obligations under, and complied with the covenants and conditions contained in, this Indenture, and further stating, as to each such Officer signing such certificate, that to the best of his knowledge the Company has kept, observed, performed and fulfilled each and every covenant, and complied with the covenants and conditions contained in this Indenture and is not in default in the performance or observance of any of the terms, provisions and conditions hereof (or, if a Default or Event of Default shall have occurred, describing all such Defaults or Events of Default of which he may have knowledge) and that to the best of his knowledge no event has occurred and remains in existence by reason of which payments on account of the principal, interest or Liquidated Damages, if any, on the Notes are prohibited. One of the Officers signing such Officers' Certificate shall be either the Company's principal executive officer, principal financial officer or principal accounting officer. The Company will so long as any of the Notes are outstanding, deliver to the Trustee, forthwith upon becoming aware of any Default or Event of Default an Officers' Certificate specifying such Default or Event of Default. Immediately upon the occurrence of any event giving rise to the accrual of Liquidated Damages or the cessation of such accrual, the Company shall give the Trustee notice thereof and of the event giving rise to such accrual or cessation (such notice to be contained in an Officers' Certificate) and prior -29- 152 to receipt of such Officers' Certificate the Trustee shall be entitled to assume that no such accrual has commenced or ceased, as the case may be. SECTION 4.04. STAY, EXTENSION AND USURY LAWS. The Company covenants (to the extent that it may lawfully do so) that it will not at any time insist upon, plead, or in any manner whatsoever claim or take the benefit or advantage of, any stay, extension or usury law wherever enacted, now or at any time hereafter in force, which may affect the covenants or the performance of this Indenture; and the Company (to the extent it may lawfully do so) hereby expressly waives all benefit or advantage of any such law, and covenants that it will not, by resort to any such law, hinder, delay or impede the execution of any power herein granted to the Trustee, but will suffer and permit the execution of every such power as though no such law had been enacted. SECTION 4.05. CORPORATE EXISTENCE. Subject to Article V hereof, the Company will do or cause to be done all things necessary to preserve and keep in full force and effect its corporate existence and the corporate, partnership or other existence of each subsidiary of the Company in accordance with the respective organizational documents of each subsidiary and the rights (charter and statutory), licenses and franchises of the Company and its subsidiaries; provided, however, that the Company shall not be required to preserve any such right, license or franchise, or the corporate, partnership or other existence of any subsidiary, if the Board of Directors shall determine that the preservation thereof is no longer desirable in the conduct of the business of the Company and its subsidiaries taken as a whole and that the loss thereof is not adverse in any material respect to the Holders. The Company shall notify the Trustee in writing of any subsidiary which qualifies as a Material Subsidiary and is not specified in clause (i) of the definition thereof. SECTION 4.06. TAXES. The Company shall, and shall cause each of its subsidiaries to, pay prior to delinquency all taxes, assessments and governmental levies, except as contested in good faith and by appropriate proceedings. SECTION 4.07. LIMITATIONS ON LIENS. Neither the Company nor any of its Restricted Subsidiaries may, directly or indirectly create, incur, assume or suffer to exist any Lien on any asset now owned or hereafter acquired, or any income or profits therefrom or assign or convey any right to receive income therefrom, except: (a) Permitted Liens; (b) Liens securing Indebtedness and related obligations to the extent such Indebtedness and related obligations are permitted under Sections 4.08(b)(i), (iii), (iv), (v), (viii), (ix) and (xi) hereof; (c) Liens on the assets acquired or leased with the proceeds of Indebtedness permitted to be incurred under Section 4.08 hereof; and (d) Liens securing Refinancing Indebtedness permitted to be incurred under Section 4.08 hereof; provided that the Refinancing Indebtedness so issued and secured by such Lien shall not be secured by any property or assets of the Company or any of its Restricted Subsidiaries other than the property or assets subject to the Liens securing such Indebtedness being refinanced. -30- 153 SECTION 4.08. INCURRENCE OF INDEBTEDNESS AND ISSUANCE OF PREFERRED STOCK. (a) The Company shall not, and shall not permit any of its Restricted Subsidiaries to, directly or indirectly, create, incur, issue, assume, guaranty or otherwise become directly or indirectly liable with respect to (collectively, "incur") any Indebtedness (including Acquired Debt) and the Company shall not issue any Disqualified Stock and shall not permit any of its Restricted Subsidiaries to issue any shares of preferred stock that is Disqualified Stock; provided, however, that the Company may incur Indebtedness or issue shares of Disqualified Stock and any of its Restricted Subsidiaries may issue shares of preferred stock that is Disqualified Stock if after giving effect to such issuance or incurrence on a pro forma basis, the sum of (x) Indebtedness of the Company and its Restricted Subsidiaries, on a consolidated basis, (y) the liquidation value of outstanding preferred stock of Restricted Subsidiaries and (z) the aggregate amount payable by the Company and its Restricted Subsidiaries, on a consolidated basis, upon redemption of Disqualified Stock to the extent such amount is not included in the preceding clause (y) shall be less than the product of Annualized Pro Forma EBITDA for the latest fiscal quarter for which internal financial statements are available immediately preceding the date on which such additional Indebtedness is incurred or such Disqualified Stock or preferred stock is issued multiplied by 7.0, determined on a pro forma basis (including a pro forma application of the net proceeds therefrom), as if the additional Indebtedness had been incurred, or the Disqualified Stock or preferred stock had been issued, as the case may be, at the beginning of such quarter. (b) The foregoing limitations in Section 4.08(a) shall not apply to: (i) the incurrence by the Company or any Restricted Subsidiary of Indebtedness pursuant to the Credit Facility; (ii) the issuance by any Restricted Subsidiary of preferred stock (other than Disqualified Stock) to the Company, any Restricted Subsidiary of the Company or the holders of Equity Interests in any Restricted Subsidiary on a pro rata basis to such holders; (iii) the incurrence of Indebtedness or the issuance of preferred stock by the Company or any of its Restricted Subsidiaries the proceeds of which are (or the credit support provided by any such Indebtedness is), in each case, used to finance the construction, capital expenditure and working capital needs of a Cable Business (including, without limitation, payments made pursuant to any License), the acquisition of Cable Assets or the Capital Stock of a Qualified Subsidiary; (iv) the incurrence by the Company or any of its Restricted Subsidiaries of additional Indebtedness in an aggregate principal amount not to exceed $50 million; (v) the incurrence by the Company or any Restricted Subsidiary of any Permitted Acquired Debt; (vi) the incurrence by the Company or any Subsidiary of Indebtedness issued in exchange for, or the proceeds of which are used to extend, refinance, renew, replace, or refund the Notes, Existing Indebtedness or Indebtedness referred to in clauses (i), (ii), (iii), (iv) or (v) above or Indebtedness incurred pursuant to Section 4.08(a) hereof (the "Refinancing Indebtedness"); provided, however, that (1) the principal amount of, and any premium payable in respect of, such Refinancing Indebtedness shall not exceed the -31- 154 principal amount of Indebtedness so extended, refinanced, renewed, replaced or refunded (plus the amount of reasonable expenses incurred in connection therewith); (2) the Refinancing Indebtedness shall have (A) a Weighted Average Life to Maturity equal to or greater than the Weighted Average Life to Maturity of, and (B) a stated maturity no earlier than the stated maturity of, the Indebtedness being extended, refinanced, renewed, replaced or refunded; and (3) the Refinancing Indebtedness shall be subordinated in right of payment to the Notes as and to the extent of the Indebtedness being extended, refinanced, renewed, replaced or refunded; (vii) the issuance of the Preferred Stock in lieu of payment of cash interest on the Subordinated Debentures or the incurrence by the Company of Indebtedness represented by the Subordinated Debentures upon the exchange of the Preferred Stock in accordance with the Certificate of Designations therefor; (viii) Indebtedness under Exchange Rate Contracts, provided that such Exchange Rate Contracts are related to payment obligations under Existing Indebtedness or Indebtedness incurred under Section 4.08(a) or (b) hereof that are being hedged thereby, and not for speculation and that the aggregate notional amount under each such Exchange Rate Contract does not exceed the aggregate payment obligations under such Indebtedness; (ix) Indebtedness under Interest Rate Agreements, provided that the obligations under such agreements are related to payment obligations on Existing Indebtedness or Indebtedness otherwise incurred pursuant to Section 4.08(a) or (b) hereof, and not for speculation; (x) the incurrence of Indebtedness between the Company and any Restricted Subsidiary, between or among Restricted Subsidiaries and between any Restricted Subsidiary and other holders of Equity Interests of such Restricted Subsidiary (or other Persons providing funding on their behalf) on a pro rata basis and on substantially identical principal financial terms; provided, however, that if any such Restricted Subsidiary that is the payee of any such Indebtedness ceases to be a Restricted Subsidiary or transfers such Indebtedness (other than to the Company or a Restricted Subsidiary of the Company), such events shall be deemed, in each case, to constitute the incurrence of such Indebtedness by the Company or by a Restricted Subsidiary, as the case may be, at the time of such event; and (xi) Indebtedness of the Company and/or any Restricted Subsidiary in respect of performance bonds of the Company or any Subsidiary or surety bonds provided by the Company or any Restricted Subsidiary received in the ordinary course of business in connection with the construction or operation of a Cable Business. (c) Any redesignation of a Non-Restricted Subsidiary as a Restricted Subsidiary shall be deemed for purposes of this Section 4.08 to be an incurrence of Indebtedness by the Company and its Restricted Subsidiaries of the Indebtedness of such Non-Restricted Subsidiary as of the time of such redesignation to the extent such Indebtedness does not already constitute Indebtedness of the Company or one of its Restricted Subsidiaries. -32- 155 SECTION 4.09. RESTRICTED PAYMENTS. (a) The Company shall not, and shall not permit any of its Restricted Subsidiaries to, directly or indirectly: (i) declare or pay any dividend or make any distribution on account of the Company's or any of its Restricted Subsidiaries' Equity Interests (other than (x) dividends or distributions payable in Equity Interests (other than Disqualified Stock) of the Company or such Restricted Subsidiary or (y) dividends or distributions payable to the Company or any Wholly Owned Subsidiary of the Company, or (z) pro rata dividends or pro rata distributions payable by a Restricted Subsidiary); (ii) purchase, redeem or otherwise acquire or retire for value any Equity Interests of the Company (other than any such Equity Interests owned by the Company or any Wholly Owned Subsidiary of the Company); (iii) voluntarily purchase, redeem or otherwise acquire or retire for value any Indebtedness that is subordinated to the Notes; or (iv) make any Restricted Investment (all such payments and other actions set forth in clauses (i) through (iv) above being collectively referred to as "Restricted Payments"), unless, at the time of such Restricted Payment: (1) no Default or Event of Default shall have occurred and be continuing or would occur as a consequence thereof; and (2) such Restricted Payment, together with the aggregate of all other Restricted Payments made by the Company and its Restricted Subsidiaries after the Loan Date (including Restricted Payments permitted by clauses (ii) through (ix) of Section 4.09(b)), is less than the sum of (x) the difference between Cumulative EBITDA and 1.5 times Cumulative Interest Expense plus (y) Capital Stock Sale Proceeds plus (z) cash received by the Company or a Restricted Subsidiary from a Non-Restricted Subsidiary (other than cash which is or is required to be repaid or returned to such Non-Restricted Subsidiary); provided, however, that to the extent that any Restricted Investment that was made after the date of this Indenture is sold for cash or otherwise liquidated or repaid for cash, the amount credited pursuant to this clause (z) shall be the lesser of (A) the cash received with respect to such sale, liquidation or repayment of such Restricted Investment (less the cost of such sale, liquidation or repayment, if any) and (B) the initial amount of such Restricted Investment, in each case as determined in good faith by the Company's Board of Directors. (b) The foregoing provisions in Section 4.09(a) shall not prohibit: (i) the payment of any dividend within 60 days after the date of declaration thereof, if at said date of declaration such payment would have complied with the provisions of this Indenture; (ii) (x) the redemption, repurchase, retirement or other acquisition of any Equity Interests of the Company or any Restricted Subsidiary or (y) an Investment in any Person, in each case, in exchange for, or out of the proceeds of, the substantially concurrent sale (other than to a Restricted Subsidiary of the Company) of other Equity -33- 156 Interests (other than any Disqualified Stock) of the Company, provided that the Company delivers to the Trustee: (1) with respect to any transaction involving in excess of $1 million, a resolution of the Board of Directors set forth in an Officers' Certificate certifying that such transaction is approved by a majority of the directors on the Board of Directors; and (2) with respect to any transaction involving in excess of $25 million, an opinion as to the fairness to the Company or such Subsidiary from a financial point of view issued by an investment banking firm of national standing with high yield experience, together with an Officers' Certificate to the effect that such opinion complies with this clause (2), provided that the amount of such proceeds from the sale of such Equity Interests shall be excluded in each case from Capital Stock Sale Proceeds for purposes of clause (a)(iv)(2)(y), above; (iii) Investments by the Company or any Restricted Subsidiary in a Non-Controlled Subsidiary which (A) has no Indebtedness on a consolidated basis other than Indebtedness incurred to finance the purchase of equipment used in a Cable Business, (B) has no restrictions (other than restrictions imposed or permitted by this Indenture or the indentures governing the Other Qualified Notes or any other instrument governing unsecured indebtedness of the Company which is pari passu with the Notes) on its ability to pay dividends or make any other distributions to the Company or any of its Restricted Subsidiaries, (C) is or will be a Cable Business and (D) uses the proceeds of such Investment for constructing a Cable Business or the working capital needs of a Cable Business; (iv) the redemption, purchase, defeasance, acquisition or retirement of Indebtedness that is subordinated to the Notes (including premium, if any, and accrued and unpaid interest) made by exchange for, or out of the proceeds of the substantially concurrent sale (other than to a Restricted Subsidiary of the Company) of (A) Equity Interests of the Company, provided that the amount of such proceeds from the sale of such Equity Interests shall be excluded in each case from Capital Stock Sale Proceeds for purposes of clause (a)(iv)(2)(y) above or (B) Refinancing Indebtedness permitted to be incurred under Section 4.08 hereof; (v) Investments by the Company or any Restricted Subsidiary in a Non-Controlled Subsidiary which is or will be a Cable Business in an amount not to exceed $80 million in the aggregate plus the sum of (x) cash received by the Company or a Restricted Subsidiary from a Non-Restricted Subsidiary (other than cash which was or is required to be repaid or returned to such Non-Restricted Subsidiary) and (y) Capital Stock Sale Proceeds (excluding the aggregate net sale proceeds to be received upon conversion of the Convertible Subordinated Notes), provided that the amount of such proceeds from the sale of such Equity Interests shall be excluded in each case from the Capital Stock Sale Proceeds for purposes of clause (a)(iv)(2)(y) above; (vi) Investments by the Company or any Restricted Subsidiary in Permitted Non-Controlled Assets; (vii) the extension by the Company or any Restricted Subsidiary of trade credit to a Non-Restricted Subsidiary extended on usual and customary terms in the -34- 157 ordinary course of business, provided that the aggregate amount of such trade credit shall not exceed $25 million at any one time; (viii) the payment of cash dividends on the Preferred Stock accruing on or after February 15, 2004 or any mandatory redemption or repurchase of the Preferred Stock, in each case, in accordance with the Certificate of Designations therefor; and (ix) the exchange of all of the outstanding shares of Preferred Stock for Subordinated Debentures in accordance with the Certificate of Designations for the Preferred Stock. (c) Any Investment in a Subsidiary (other than the issuance, transfer or other conveyance of Equity Interests of the Company (or any Capital Stock Sale Proceeds therefrom)) that is designated by the Board of Directors as a Non-Restricted Subsidiary shall become a Restricted Payment made on the date of such designation in the amount of the greater of (x) the book value of such Subsidiary on the date such Subsidiary becomes a Non-Restricted Subsidiary and (y) the fair market value of such Subsidiary on such date as determined (A) in good faith by the Board of Directors of such Subsidiary if such fair market value is determined to be less than $25 million and (B) by an investment banking firm of national standing with high yield underwriting expertise if such fair market value is determined to be in excess of $25 million. (d) Not later than the fifth Business Day after making any Restricted Payment (other than those referred to in sub-clause (vii) of Section 4.09(b)), the Company shall deliver to the Trustee an Officers' Certificate stating that such Restricted Payment is permitted and setting forth the basis upon which the calculations required by this Section 4.09 were computed, which calculations may be based upon the Company's latest available financial statements. SECTION 4.10. ASSET SALES. (a) The Company will not, and will not permit any of its Restricted Subsidiaries to cause, make or suffer to exist any Asset Sale, unless: (i) no Default exists or is continuing immediately prior to and after giving effect to such Asset Sale; (ii) the Company (or the Restricted Subsidiary, as the case may be) receives consideration at the time of such Asset Sale at least equal to the fair market value (evidenced for purposes of this Section 4.10 by a resolution of the Board of Directors set forth in an Officers' Certificate delivered to the Trustee) of the assets sold or otherwise disposed of; and (iii) at least 80% of the consideration therefor received by the Company or such Restricted Subsidiary is in the form of (w) Cash Equivalents, (x) Replacement Assets, (y) publicly traded Equity Interests of a Person who is, directly or indirectly, engaged primarily in one or more Cable Businesses; provided, however, that the Company or such Restricted Subsidiary shall Monetize such Equity Interests by sale to one or more Persons (other than to the Company or a Subsidiary thereof) at a price not less than the fair market value thereof within 180 days of the consummation of such Asset Sale, or (z) any combination of the foregoing clauses (w) through (y); provided, however, that the amount of (x) any liabilities (as shown on the Company's or such Restricted Subsidiary's most recent balance sheet or in the notes thereto) of the -35- 158 Company or any Restricted Subsidiary (other than liabilities that are by their terms subordinated to the Notes) that are assumed by the transferee of any such assets and (y) any notes or other obligations received by the Company or any such Restricted Subsidiary from such transferee that are within five Business Days converted by the Company or such Restricted Subsidiary into cash, shall be deemed to be Cash Equivalents (to the extent of the Cash Equivalents received in such conversion) for purposes of this clause (iii). (b) Within 360 days after any Asset Sale, the Company (or the Restricted Subsidiary, as the case may be) shall cause the Net Proceeds from such Asset Sale: (i) to be used to permanently reduce Indebtedness of a Restricted Subsidiary; or (ii) to be invested or reinvested in Replacement Assets. Pending final application of any such Net Proceeds, the Company may temporarily reduce revolving credit borrowings or otherwise invest such Net Proceeds in any manner that is not prohibited by this Indenture or the indentures for the Other Qualified Notes. Any Net Proceeds from any Asset Sale that are not used or reinvested as provided in the preceding sentence constitute "Excess Proceeds." When the aggregate amount of Excess Proceeds exceeds $15 million, the Company shall make an offer (an "Asset Sale Offer") to all holders of Notes and Other Qualified Notes to purchase the maximum principal amount of Notes and Other Qualified Notes (determined on a pro rata basis according to the accreted value or principal amount, as the case may be, of the Notes and the Other Qualified Notes and in accordance with Section 3.09(g)(i)) that may be purchased out of the Excess Proceeds (x) with respect to the Other Qualified Notes, based on the terms set forth in the indenture related to each issue of the Other Qualified Notes and (y) with respect to the Notes, at an offer price in cash in an amount equal to 100% of the outstanding principal amount thereof plus accrued and unpaid interest, if any, and Liquidated Damages, if any, to the date fixed for the closing of such offer, in accordance with the procedures set forth in Section 3.09 hereof. To the extent that the aggregate principal amount or accreted value, as the case may be, of Notes and Other Qualified Notes tendered pursuant to an Asset Sale Offer is less than the Excess Proceeds, the Company may use such deficiency for general corporate purposes. If the aggregate principal amount or accreted value, as the case may be, of Notes and Other Qualified Notes surrendered by holders thereof exceeds the amount of Excess Proceeds, then such remaining Excess Proceeds shall be allocated pro rata according to accreted value or principal amount, as the case may be, to the Notes and each issue of the Other Qualified Notes and in accordance with Section 3.09(g)(ii), and the Trustee shall select the Notes to be purchased from the amount allocated to the Notes on the basis set forth in Section 3.09(e) hereof. Upon completion of such offers to purchase each of the Notes and the Other Qualified Notes, the amount of Excess Proceeds will be reset at zero. (c) Notwithstanding the provisions of Sections 4.10(a) and (b): the Company and its Subsidiaries may: (i) sell, lease, transfer, convey or otherwise dispose of assets or property acquired after October 14, 1993, by the Company or any Subsidiary in a sale-and-leaseback transaction so long as the proceeds of such sale are applied within five Business Days to permanently reduce Indebtedness of a Restricted Subsidiary or if there is no such Indebtedness or such proceeds exceed the amount of such Indebtedness then -36- 159 such proceeds or excess proceeds are reinvested in a Replacement Assets within 360 days after such sale, lease, transfer, conveyance or disposition; (ii) (x) swap or exchange assets or property with a Cable Controlled Subsidiary or (y) issue, sell, lease, transfer, convey or otherwise dispose of equity securities of any of the Company's Subsidiaries to a Cable Controlled Subsidiary, in each of cases (x) and (y) so long as (A) the ratio of Indebtedness to Annualized Pro Forma EBITDA of the Company after such transaction is equal to or less than the ratio of Indebtedness to Annualized Pro Forma EBITDA of the Company immediately preceding such transaction; provided, however, that if the ratio of Indebtedness to Annualized Pro Forma EBITDA of the Company immediately preceding such transaction is 6:1 or less, then the ratio of Indebtedness to Annualized Pro Forma EBITDA of the Company may be 0.5 greater than such ratio immediately preceding such transaction and (B) either (I) the assets so contributed consist solely of a license to operate a Cable Business and the Net Households covered by all of the licenses to operate cable and telephone systems held by the Company and its Restricted Subsidiaries immediately after and giving effect to such transaction equals or exceeds the number of Net Households covered by all of the licenses to operate cable and telephone systems held by the Company and its Restricted Subsidiaries immediately prior to such transaction or (II) the assets so contributed consist solely of Cable Assets and the value of the Capital Stock received, immediately after and giving effect to such transaction, as determined by an investment banking firm of recognized standing with knowledge of the Cable Business, equals or exceeds the value of Cable Assets exchanged for such Capital Stock; or (iii) issue, sell, lease, transfer, convey or otherwise dispose of Equity Interests (other than Disqualified Stock) of the Company (or any Capital Stock Sale Proceeds therefrom) to any Person (including Non-Restricted Subsidiaries). SECTION 4.11. TRANSACTIONS WITH AFFILIATES. The Company shall not, and shall not permit any of its Restricted Subsidiaries to, sell, lease, transfer or otherwise dispose of any of its properties or assets to, or purchase any property or assets from, or enter into or amend any contract, agreement, understanding, loan, advance or guarantee with, or for the benefit of, any Affiliate (each of the foregoing, an "Affiliate Transaction"), unless: (a) such Affiliate Transaction is on terms that are no less favorable to the Company or the relevant Subsidiary than those that could have been obtained in a comparable transaction by the Company or such Subsidiary with an unrelated Person and (b) the Company delivers to the Trustee: (i) with respect to any Affiliate Transaction involving aggregate payments in excess of $1 million or any series of Affiliate Transactions with an Affiliate involving aggregate payments in excess of $1 million, a resolution of the Board of Directors set forth in an Officers' Certificate certifying that such Affiliate Transaction complies with Section 4.11 (a) and such Affiliate Transaction is approved by a majority of the disinterested directors on the Board of Directors; and (ii) with respect to any Affiliate Transaction involving aggregate payments in excess of $25 million or any series of Affiliate Transactions with an Affiliate -37- 160 involving aggregate payments in excess of $25 million, an opinion as to the fairness to the Company or such Subsidiary from a financial point of view issued by an investment banking firm of national standing with high yield experience together with an Officers' Certificate to the effect that such opinion complies with this clause (ii); provided, however, that notwithstanding the foregoing provisions, the following shall not be deemed to be Affiliate Transactions: (1) any employment agreement entered into by the Company or any of its Subsidiaries in the ordinary course of business and consistent with the past practice of the Company or its predecessor or such Subsidiary; (2) transactions between or among the Company and/or its Restricted Subsidiaries; (3) transactions permitted by the provisions of Section 4.09 hereof; (4) Liens permitted under Section 4.07 hereof which are granted by the Company or any of its Subsidiaries to an unrelated Person for the benefit of the Company or any other Subsidiary of the Company; (5) any transaction pursuant to an agreement in effect on the Loan Date; (6) the incurrence of Indebtedness by a Restricted Subsidiary where such Indebtedness is owed to the holders of the Equity Interests of such Restricted Subsidiary on a pro rata basis and on substantially identical principal financial terms; (7) management, operating, service or interconnect agreements entered into in the ordinary course of business with any Cable Business in which the Company or any Restricted Subsidiary has an Investment and which is not a Cable Controlled Subsidiary (and of which no Affiliate of the Company is an Affiliate other than as a result of such Investment); and (8) any tax sharing agreement. SECTION 4.12. DIVIDENDS AND OTHER PAYMENT RESTRICTIONS AFFECTING RESTRICTED SUBSIDIARIES. The Company shall not, and shall not permit any of its Restricted Subsidiaries to, directly or indirectly, create or otherwise cause or suffer to exist or become effective any encumbrance or restriction on the ability of any Restricted Subsidiary to: (a) (i) pay dividends or make any other distributions to the Company or any of its Subsidiaries (A) on its Capital Stock or (B) with respect to any other interest or participation in, or measured by, its profits, or (ii) pay any indebtedness owed to the Company or any of its Subsidiaries, or (b) make loans or advances to the Company or any of its Subsidiaries, or (c) transfer any of its properties or assets to the Company or any of its Subsidiaries, except for such encumbrances or restrictions existing under or by reason of: -38- 161 (i) Existing Indebtedness as in effect on the Loan Date; (ii) this Indenture and the Notes; (iii) any agreement covering or relating to Indebtedness permitted to be incurred under Section 4.08(b)(i), (ii), (iii), (iv), (v), (viii) or (ix) hereof (but only, in the case of Section 4.08(b)(viii) or (ix), to the extent contemplated by the then-existing Credit Facility), provided that the provisions of such agreement permit any action referred to in clause (a) above in aggregate amounts sufficient to enable the payment of interest and principal and mandatory repurchases pursuant to the terms of this Indenture and the Notes, but provided further that: (x) any such agreement may nevertheless encumber, prohibit or restrict any action referred to in clause (a) above if an event of default under such agreement has occurred and is continuing or would occur as a result of any such action; and (y) any such agreement may nevertheless contain (I) restrictions limiting the payment of dividends or the making of any other distributions to all or a portion of excess cash-flow (or any similar formulation thereof) and (II) subordination provisions governing Indebtedness owed to the Company or any Restricted Subsidiary; (iv) applicable law; (v) any instrument governing Indebtedness or Capital Stock of a Person acquired by the Company or any of its Subsidiaries as in effect at the time of such acquisition (except to the extent such Indebtedness was incurred in connection with such acquisition), which encumbrance or restriction is not applicable to any Person, or the properties or assets of any Person, other than the Person, or the property or assets of the Person, so acquired; provided that the EBITDA of such Person is not taken into account in determining whether such acquisition was permitted by the terms of this Indenture; (vi) customary nonassignment provisions in leases entered into in the ordinary course of business and consistent with past practices; (vii) provisions of joint venture or stockholder agreements, so long as such provisions are determined by a resolution of the Board of Directors to be, at the time of such determination, customary for such agreements; (viii) with respect to clause (c) above, purchase money obligations for property acquired in the ordinary course of business or the provisions of any agreement with respect to any Asset Sale (or transaction which, but for its size, would be an Asset Sale), solely with respect to the assets being sold; or (ix) permitted Refinancing Indebtedness, provided that the restrictions contained in the agreements governing such Refinancing Indebtedness are determined by a resolution of the Board of Directors to be no more restrictive than those contained in the agreements governing the Indebtedness being refinanced. SECTION 4.13. CHANGE OF CONTROL. (a) Upon the occurrence of a Change of Control Triggering Event, each Holder of Notes shall have the right to require the Company to repurchase all or any part (equal to $1,000 or an integral multiple thereof) of such Holder's Notes pursuant to the offer described in Section -39- 162 3.09 hereof (the "Purchase Offer") at a purchase price equal to 101% of the principal amount thereof plus accrued and unpaid interest thereon, if any, and Liquidated Damages, if any, to the date of purchase (the "Change of Control Payment"). (b) Within 40 days following any Change of Control Triggering Event, the Company shall mail to each Holder the notice provided by Section 3.09(e). SECTION 4.14. PAYMENT OF ADDITIONAL AMOUNTS. At least 10 days prior to the first date on which payment of principal and any premium, Liquidated Damages, or interest on the Notes is to be made, and at least 10 days prior to any subsequent such date if there has been any change with respect to the matters set forth in the Officers' Certificate described in this Section 4.14, the Company shall furnish the Trustee and the Paying Agent, if other than the Trustee, with an Officers' Certificate instructing the Trustee and the Paying Agent whether the Company is obligated to pay Additional Amounts (as defined in Section 3 of the Initial Notes or Section 2 of the New Notes) with respect to such payment of principal, or of any premium, Liquidated Damages, or interest on the Notes. If the Company will be obligated to pay Additional Amounts with respect to such payment, then such Officers' Certificate shall specify by country the amount, if any, required to be withheld on such payments to such Holders and the Company will pay to the Trustee or the Paying Agent such Additional Amounts. The Company shall indemnify the Trustee and the Paying Agent for, and hold them harmless against, any loss, liability or expense reasonably incurred without negligence or bad faith on their part arising out of or in connection with actions taken or omitted by any of them in reliance on any Officers' Certificate furnished to them pursuant to this Section 4.14. Whenever in this Indenture there is mentioned, in any context, the payment of principal (and premium, if any, or Liquidated Damages, if any), Offer Amount, interest or any other amount payable under or with respect to any Note such mention shall be deemed to include mention of the payment of Additional Amounts provided for in this Section 4.14 and Section 3 of the Initial Notes (or Section 2 of the New Notes) to the extent that, in such context, Additional Amounts are, were or would be payable in respect thereof pursuant to the provisions of this Section 4.14 and Section 3 of the Initial Notes (or Section 2 of the Exchange Notes) and express mention of the payment of Additional Amounts (if applicable) in any provisions hereof shall not be construed as excluding Additional Amounts in those provisions hereof where such express mention is not made (if applicable). SECTION 4.15. EXCHANGE NOTE GUARANTEE. In the event that the Parent is incorporated or organized with respect to the Company and its Subsidiaries, within five (5) Business Days of the date of the incorporation or organization of the Parent, the Company shall deliver, or cause to be delivered, to the Trustee (a) a guarantee (the "Exchange Note Guarantee") executed by the Parent substantially in the form attached hereto as Exhibit H, and (ii) opinions of counsel for the Parent substantially in the form attached hereto as Exhibit I, and (c) such other certificates and documents (including, but not limited to, a secretary's certificate, a certification of the organizational document of the Parent certified by the Secretary of State of the jurisdiction in which the Parent was incorporated or organized, and a good standing certificate) as the Trustee shall deem to be reasonably necessary or advisable, which certificates and document shall be in form and substance satisfactory to the Trustee and its counsel. -40- 163 SECTION 4.16. EXCHANGE OF CERTIFICATED INITIAL NOTES OR CERTIFICATED NEW NOTES FOR GLOBAL NOTES. Upon the request of the Administrative Agent, acting on behalf of the holders of Bridge Notes and/or Holders of Initial Notes, or any Holder of an Initial Note or a New Note, the Company shall as soon as is reasonably practicable (i) enter into any necessary agreements with the Depositary in order to deposit Global Notes representing Initial Notes and/or New Notes with the Trustee, as custodian for the Depositary, file a PORTAL Application and obtain CUSIP and CINS numbers, such Global Notes to be authenticated by the Trustee upon a written order of the Company signed by two Officers and (ii) execute the necessary Global Notes and deliver such Global Notes to the Trustee for authentication. Thereafter, Holders of certificated Initial Notes or certificated New Notes may exchange such certificated Initial Notes or certificated New Notes with the Trustee for beneficial interests in the applicable Global Note. Global Notes representing Initial Notes shall be issued as Rule 144A Global Notes and/or Regulation S Global Notes, all as specified in such written order. -41- 164 ARTICLE V. SUCCESSORS SECTION 5.01. MERGER, CONSOLIDATION OR SALE OF ASSETS. The Company may not consolidate or merge with or into (whether or not the Company is the surviving corporation), or sell, assign, transfer, lease, convey or otherwise dispose of all or substantially all of its properties or assets in one or more related transactions to, another corporation, Person or entity unless: (a) the Company is the surviving corporation or the entity or the Person formed by or surviving any such consolidation or merger (if other than the Company) or to which such sale, assignment, transfer, lease, conveyance or other disposition shall have been made is a corporation organized or existing under the laws of the United Kingdom, the Netherlands, the Netherlands Antilles, Bermuda or the Cayman Islands or of the United States, any state thereof or the District of Columbia; (b) the entity or Person formed by or surviving any such consolidation or merger (if other than the Company) or the entity or Person to which such sale, assignment, transfer, lease, conveyance or other disposition will have been made assumes all the Obligations (including the due and punctual payment of Additional Amounts if the surviving corporation is a corporation organized or existing under the laws of the United Kingdom, the Netherlands, the Netherlands Antilles, Bermuda or the Cayman Islands) of the Company, pursuant to a supplemental indenture in a form reasonably satisfactory to the Trustee, under the Notes and this Indenture; (c) immediately after such transaction no Default or Event of Default exists; (d) the Company or any entity or Person formed by or surviving any such consolidation or merger, or to which such sale, assignment, transfer, lease, conveyance or other disposition will have been made will have a ratio of Indebtedness to Annualized Pro Forma EBITDA equal to or less than the ratio of Indebtedness to Annualized Pro Forma EBITDA of the Company immediately preceding the transaction; provided, however, that if the ratio of Indebtedness to Annualized Pro Forma EBITDA of the Company immediately preceding such transaction is 6:1 or less, then the ratio of Indebtedness to Annualized Pro Forma EBITDA of the Company may be 0.5 greater than such ratio immediately preceding such transaction; and (e) such transaction would not result in the loss of any material authorization or Material License of the Company or its Subsidiaries. SECTION 5.02. SUCCESSOR CORPORATION SUBSTITUTED. Upon any consolidation or merger, or any sale, assignment, transfer, lease, conveyance or other disposition of all or substantially all of the assets of the Company in accordance with Section 5.01 hereof, the successor corporation formed by such consolidation or into or with which the Company is merged or to which such sale, assignment, transfer, lease, conveyance or other disposition is made shall succeed to, and be substituted for and may exercise every right and power of, the Company under this Indenture with the same effect as if such successor Person has been named as the Company herein; provided, however, that the predecessor Company in the case of a sale, assignment, transfer, lease, -42- 165 conveyance or other disposition shall not be released from the obligation to pay the principal of and interest on the Notes. ARTICLE VI. DEFAULTS AND REMEDIES SECTION 6.01. EVENTS OF DEFAULT. An "Event of Default" occurs if: (a) the Company defaults in the payment of interest (and Additional Amounts, if applicable, and Liquidated Damages, if applicable) on any Note when the same becomes due and payable and the Default continues for a period of 30 days after the date due and payable; (b) the Company defaults in the payment of the principal of or premium, if any, on any Note when the same becomes due and payable at maturity, upon redemption or otherwise; (c) the Company fails to observe or perform any covenant or agreement contained in Section 4.08, 4.09, or 4.13 hereof; (d) the Company fails to observe or perform any other covenant or agreement contained in this Indenture or the Notes, required by any of them to be performed and the Default continues for a period of 60 days after notice from the Trustee to the Company or from the Holders of 25% in aggregate principal amount of the then outstanding Notes to the Company and the Trustee stating that such notice is a "Notice of Default"; (e) default under any mortgage, indenture or instrument under which there may be issued or by which there may be secured or evidenced any Indebtedness for money borrowed by the Company or any Restricted Subsidiary (or the payment of which is guaranteed by the Company or any Restricted Subsidiary), whether such Indebtedness or guarantee now exists or is created after the Loan Date, which default: (i) is caused by a failure to pay when due principal of or interest on such Indebtedness within the grace period provided for in such Indebtedness (which failure continues beyond any applicable grace period) (a "Payment Default"); or (ii) results in the acceleration of such Indebtedness prior to its express maturity and, in each case, the principal amount of any such Indebtedness, together with the principal amount of any other such Indebtedness under which there is a Payment Default or the maturity of which has been so accelerated, aggregates $10 million or more; (f) a final judgment or final judgments (other than any judgment as to which a reputable insurance company has accepted full liability) for the payment of money are entered by a court or courts of competent jurisdiction against the Company or any Restricted Subsidiary of the Company which remains undischarged for a period (during which execution shall not be effectively stayed) of 60 days, provided that the aggregate of all such judgments exceeds $5 million; -43- 166 (g) the Company or any Material Subsidiary pursuant to or within the meaning of any Bankruptcy Law: (i) commences a voluntary case; (ii) consents to the entry of an order for relief against it in an involuntary case in which it is the debtor; (iii) consents to the appointment of a Custodian of it or for all or substantially all of its property; (iv) makes a general assignment for the benefit of its creditors; or (v) generally is unable to pay its debts as the same become due; (h) a court of competent jurisdiction enters an order or decree under any Bankruptcy Law that: (i) is for relief against the Company or any Material Subsidiary in an involuntary case; (ii) appoints a Custodian of the Company or any Material Subsidiary or for all or substantially all of its property; or (iii) orders the liquidation of the Company or any Material Subsidiary, and the order or decree remains unstayed and in effect for 60 days; and (i) the revocation of a Material License. The term "Bankruptcy Law" means Title 11, U.S. Code or any similar Federal, state or foreign law for the relief of debtors or the protection of creditors. The term "Custodian" means any receiver, trustee, assignee, liquidator or similar official under any Bankruptcy Law. SECTION 6.02. ACCELERATION. If an Event of Default (other than an Event of Default specified in clauses (g) and (h) of Section 6.01 hereof) occurs and is continuing, the Trustee by notice to the Company, or the Holders of at least 25% in principal amount at maturity of the then outstanding Notes by notice to the Company and the Trustee, may declare all the Notes to be due and payable. Upon such declaration, the principal of, premium, if any, and interest on, and Liquidated Damages, if any, with respect to, the Notes shall be due and payable immediately. If an Event of Default specified in clause (g) or (h) of Section 6.01 hereof occurs, such an amount shall ipso facto become and be immediately due and payable without any declaration or other act on the part of the Trustee or any Holder. The Holders of a majority in principal amount of the then outstanding Notes by notice to the Trustee may rescind an acceleration and its consequences if the rescission would not conflict with any judgment or decree and if all existing Events of Default have been cured or waived except nonpayment of principal or interest that has become due solely because of the acceleration. In the case of any Event of Default pursuant to the provisions of Section 6.01 occurring by reason of any willful action (or inaction) taken (or not taken) by or on behalf of the Company with the intention of avoiding payment of the premium that the Company would have had to pay if the Company then had elected to redeem the Notes pursuant to Section 7 of the Initial Notes -44- 167 (Section 6 in the case of the New Notes), an equivalent premium shall, upon demand of the Holders of at least 25% in principal amount of the then outstanding Notes delivered to the Company and the Trustee, also become and be immediately due and payable to the extent permitted by law, anything in this Indenture or in the Notes contained to the contrary notwithstanding. SECTION 6.03. OTHER REMEDIES. If an Event of Default occurs and is continuing, the Trustee may pursue any available remedy to collect the payment of principal, premium, if any, Liquidated Damages, if any, or interest on the Notes or to enforce the performance of any provision of the Notes or this Indenture. The Trustee may maintain a proceeding even if it does not possess any of the Notes or does not produce any of them in the proceeding. A delay or omission by the Trustee or any Holder in exercising any right or remedy accruing upon an Event of Default shall not impair the right or remedy or constitute a waiver of or acquiescence in the Event of Default. All remedies are cumulative to the extent permitted by law. SECTION 6.04. WAIVER OF PAST DEFAULTS. The Holders of a majority in principal amount of the then outstanding Notes by notice to the Trustee may waive an existing Default or Event of Default and its consequences except a continuing Default or Event of Default in the payment of the principal of, premium, if any, and Liquidated Damages, if any, or interest on any Note. When a Default or Event of Default is waived, it is cured and ceases; but no such waiver shall extend to any subsequent or other Default or impair any right consequent thereon. SECTION 6.05. CONTROL BY MAJORITY. The Holders of a majority in principal amount of the then outstanding Notes may direct the time, method and place of conducting any proceeding for any remedy available to the Trustee or exercising any trust or power conferred on it. However, the Trustee may refuse to follow any direction that conflicts with law or this Indenture, is unduly prejudicial to the rights of other Holders, or would involve the Trustee in personal liability. SECTION 6.06. LIMITATION ON SUITS. A Holder may pursue a remedy with respect to this Indenture or the Notes only if: (a) the Holder gives to the Trustee notice of a continuing Event of Default; (b) the Holders of at least 25% in principal amount of the then outstanding Notes make a request to the Trustee to pursue the remedy; (c) such Holder or Holders offer to the Trustee indemnity satisfactory to the Trustee against any loss, liability or expense; (d) the Trustee does not comply with the request within 60 days after receipt of the request and the offer of indemnity; and (e) during such 60-day period the Holders of a majority in principal amount of the then outstanding Notes do not give the Trustee a direction inconsistent with the request. -45- 168 A Holder may not use this Indenture to prejudice the rights of another Holder or to obtain a preference or priority over another Holder. SECTION 6.07. RIGHTS OF HOLDERS TO RECEIVE PAYMENT. Notwithstanding any other provision of this Indenture, the right of any Holder of a Note to receive payment of principal of, premium, Liquidated Damages, if any, and interest on the Note, on or after the respective due dates expressed in the Note, or to bring suit for the enforcement of any such payment on or after such respective dates, shall not be impaired or affected without the consent of the Holder made pursuant to this Section. SECTION 6.08. COLLECTION SUIT BY TRUSTEE. If an Event of Default specified in Section 6.01(a) or (b) occurs and is continuing, the Trustee may recover judgment in its own name and as trustee of an express trust against the Company for the whole amount of principal of, premium, if any, Liquidated Damages, if any, and interest remaining unpaid on the Notes and interest on overdue principal and interest and such further amount as shall be sufficient to cover the costs and, to the extent lawful, expenses of collection, including the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel. SECTION 6.09. TRUSTEE MAY FILE PROOFS OF CLAIM. The Trustee may file such proofs of claim and other papers or documents as may be necessary or advisable in order to have the claims of the Trustee and the Holders allowed in any judicial proceedings relative to the Company, its creditors or its property. Nothing contained herein shall be deemed to authorize the Trustee to authorize or consent to or accept or adopt on behalf of any Holder any plan of reorganization, arrangement, adjustment or composition affecting the Notes or the rights of any Holder thereof, or to authorize the Trustee to vote in respect of the claim of any Holder in any such proceeding. SECTION 6.10. PRIORITIES. If the Trustee collects any money pursuant to this Article, it shall pay out the money in the following order: First: to the Trustee for amounts due under Section 7.07 hereof; Second: to Holders for amounts due and unpaid on the Notes for principal, premium, if any, Liquidated Damages, if any, and interest (and Additional Amounts, if applicable), ratably, without preference or priority of any kind, according to the amounts due and payable on the Notes for principal, premium, if any, Liquidated Damages, if any, and interest, respectively; and Third: to the Company. The Trustee may fix a record date and payment date for any payment to Holders made pursuant to this Section. SECTION 6.11. UNDERTAKING FOR COSTS. In any suit for the enforcement of any right or remedy under this Indenture or in any suit against the Trustee for any action taken or omitted by it as a Trustee, a court in its discretion may require the -46- 169 filing by any party litigant in the suit of an undertaking to pay the costs of the suit, and the court in its discretion may assess reasonable costs, including reasonable attorneys' fees, against any party litigant in the suit, having due regard to the merits and good faith of the claims or defenses made by the party litigant. This Section does not apply to a suit by the Trustee, a suit by a Holder pursuant to Section 6.07 hereof, or a suit by Holders of more than 10% in principal amount of the then outstanding Notes. ARTICLE VII. TRUSTEE SECTION 7.01. DUTIES OF TRUSTEE. (a) If an Event of Default has occurred and is continuing, the Trustee shall exercise such of the rights and powers vested in it by this Indenture, and use the same degree of care and skill in their exercise, as a prudent man would exercise or use under the circumstances in the conduct of his own affairs. (b) Except during the continuance of an Event of Default: (i) the Trustee need perform only those duties that are specifically set forth in this Indenture and no others and (ii) in the absence of bad faith on its part, the Trustee may conclusively rely, as to the truth of the statements and the correctness of the opinions expressed therein, upon certificates or opinions furnished to the Trustee and conforming to the requirements of this Indenture. However, the Trustee shall examine the certificates and opinions to determine whether or not they conform to the requirements of this Indenture and to confirm the correctness of all mathematical computations. (c) The Trustee may not be relieved from liability for its own negligent action, its own negligent failure to act, or its own willful misconduct, except that: (i) this paragraph does not limit the effect of paragraph (b) of this Section 7.01; (ii) the Trustee shall not be liable for any error of judgment made in good faith by a Trust Officer, unless it is proved that the Trustee was negligent in ascertaining the pertinent facts and (iii) the Trustee shall not be liable with respect to any action it takes or omits to take in good faith in accordance with a direction received by it pursuant to Section 6.05 hereof. (d) Every provision of this Indenture that in any way relates to the Trustee is subject to paragraphs (a), (b) and (c) of this Section 7.01. (e) The Trustee may refuse to perform any duty or exercise any right or power unless it receives indemnity satisfactory to it against any loss, liability or expense. (f) The Trustee shall not be liable for interest on any money received by it except as the Trustee may agree in writing with the Company. Money held in trust by the Trustee need not be segregated from other funds except to the extent required by law. SECTION 7.02. RIGHTS OF TRUSTEE. (a) The Trustee may rely on any document believed by it to be genuine and to have been signed or presented by the proper Person. The Trustee need not investigate any fact or matter stated in the document. -47- 170 (b) Before the Trustee acts or refrains from acting, it may require an Officers' Certificate or an Opinion of Counsel, or both. The Trustee shall not be liable for any action it takes or omits to take in good faith in reliance on such Officers' Certificate or Opinion of Counsel. (c) The Trustee may act through agents and shall not be responsible for the misconduct or negligence of any agent appointed with due care. (d) The Trustee shall not be liable for any action it takes or omits to take in good faith which it believes to be authorized or within its rights or powers. (e) The Trustee shall not be charged with knowledge of any Event of Default under subsection (c), (d), (e), (f) or (i) (and subsection (a) or (b) if the Trustee does not act as Paying Agent) of Section 6.01 or of the identity of any Material Subsidiary referred to in clause (ii) of the definition thereof unless either (1) a Trust Officer of the Trustee assigned to its Corporate Trustee Administration Department shall have actual knowledge thereof, or (2) the Trustee shall have received notice thereof in accordance with Section 10.02 hereof from the Company or any Holder. SECTION 7.03. INDIVIDUAL RIGHTS OF TRUSTEE. The Trustee in its individual or any other capacity may become the owner or pledgee of Notes and may otherwise deal with the Company or an Affiliate with the same rights it would have if it were not Trustee. Any Agent may do the same with like rights. However, the Trustee is subject to Sections 7.10 and 7.11 hereof. SECTION 7.04. TRUSTEE'S DISCLAIMER. The Trustee makes no representation as to the validity or adequacy of this Indenture or the Notes, it shall not be accountable for the Company's use of the proceeds from the Notes, and it shall not be responsible for any statement of the Company in the Indenture or any statement in the Notes other than its authentication or for compliance by the Company with the Registration Rights Agreement. SECTION 7.05. NOTICE OF DEFAULTS. If a Default or Event of Default occurs and is continuing and if it is known to the Trustee, the Trustee shall mail to Holders a notice of the Default or Event of Default within 90 days after it occurs. Except in the case of a Default or Event of Default in payment on any Note, the Trustee may withhold the notice if and so long as a committee of its Trust Officers in good faith determines that withholding the notice is in the interests of Holders. SECTION 7.06. REPORTS BY TRUSTEE TO HOLDERS. Within 60 days after the reporting date stated in Section 10.10, the Trustee shall mail to Holders a brief report dated as of such reporting date that complies with TIA (ss.) 313(a) if and to the extent required by such (ss.) 313(a). The Trustee also shall comply with TIA (ss.) 313(b)(2). The Trustee shall also transmit by mail all reports as required by TIA (ss.) 313(c). -48- 171 A copy of each report at the time of its mailing to Holders shall be filed with the SEC and each stock exchange on which the Notes are listed. The Company shall notify the Trustee when the Notes are listed on any stock exchange. SECTION 7.07. COMPENSATION AND INDEMNITY. The Company shall pay to the Trustee from time to time reasonable compensation for its services hereunder. The Trustee's compensation shall not be limited by any law on compensation of a trustee of an express trust. The Company shall reimburse the Trustee upon request for all reasonable disbursements, expenses and advances incurred or made by it. Such disbursements and expenses may include the reasonable disbursements, compensation and expenses of the Trustee's agents and counsel. The Company shall indemnify the Trustee against any loss or liability incurred by it except as set forth in the next paragraph. The Trustee shall notify the Company promptly of any claim for which it may seek indemnity. The Company shall defend the claim and the Trustee shall cooperate in the defense. The Trustee may have separate counsel and the Company shall pay the reasonable fees, disbursements and expenses of such counsel. The Company need not pay for any settlement made without its consent, which consent shall not be unreasonably withheld. The Company need not reimburse any expense or indemnify against any loss or liability incurred by the Trustee through negligence or bad faith. To secure the Company's payment obligations in this Section, the Trustee shall have a lien prior to the Notes on all money or property held or collected by the Trustee, except money or property held in trust to pay principal and interest on particular Notes. Without prejudice to any other rights available to the Trustee under applicable law, when the Trustee incurs expenses or renders services after an Event of Default specified in Section 6.01(g) or (h) occurs, the expenses and the compensation for the services are intended to constitute expenses of administration under any Bankruptcy Law. All amounts owing to the Trustee under this Section shall be payable by the Company in United States dollars. SECTION 7.08. REPLACEMENT OF TRUSTEE. A resignation or removal of the Trustee and appointment of a successor Trustee shall become effective only upon the successor Trustee's acceptance of appointment as provided in this Section. The Trustee may resign by so notifying the Company. The Holders of a majority in principal amount of the then outstanding Notes may remove the Trustee by so notifying the Trustee and the Company. The Company may remove the Trustee if: (a) the Trustee fails to comply with Section 7.10 hereof, unless the Trustee's duty to resign is stayed as provided in TIA (ss.) 310(b); (b) the Trustee is adjudged a bankrupt or an insolvent or an order for relief is entered with respect to the Trustee under any Bankruptcy Law; (c) a Custodian or public officer takes charge of the Trustee or its property; or -49- 172 (d) the Trustee becomes incapable of acting. If the Trustee resigns or is removed or if a vacancy exists in the office of Trustee for any reason, the Company shall promptly appoint a successor Trustee. Within one year after the successor Trustee takes office, the Holders of a majority in principal amount of the then outstanding Notes may appoint a successor Trustee to replace the successor Trustee appointed by the Company. If a successor Trustee does not take office within 60 days after the retiring Trustee resigns or is removed, the retiring Trustee, the Company or the Holders of at least 10% in principal amount of the then outstanding Notes may petition any court of competent jurisdiction for the appointment of a successor Trustee. If the Trustee fails to comply with Section 7.10 hereof, unless the Trustee's duty to resign is stayed as provided in TIA (ss.) 310(b), any Holder who has been a bona fide Holder of a Note for at least six months may petition any court of competent jurisdiction for the removal of the Trustee and the appointment of a successor Trustee. A successor Trustee shall deliver a written acceptance of its appointment to the retiring Trustee and to the Company. Thereupon the resignation or removal of the retiring Trustee shall become effective, and the successor Trustee shall have all the rights, powers and duties of the Trustee under this Indenture. The successor Trustee shall mail a notice of its succession to Holders. The retiring Trustee shall promptly transfer all property held by it as Trustee to the successor Trustee, subject to the lien provided for in Section 7.07 hereof. Notwithstanding replacement of the Trustee pursuant to this Section 7.08 hereof, the Company's obligations under Section 7.07 hereof shall continue for the benefit of the retiring trustee with respect to expenses and liabilities incurred by it prior to such replacement. SECTION 7.09. SUCCESSOR TRUSTEE BY MERGER, ETC. If the Trustee consolidates, merges or converts into, or transfers all or substantially all of its corporate trust business to, another corporation, the successor corporation without any further act shall be the successor Trustee. SECTION 7.10. ELIGIBILITY; DISQUALIFICATION. This Indenture shall always have a Trustee who satisfies the requirements of TIA (ss.) 310(a)(1) and (5). The Trustee shall always have a combined capital and surplus as stated in Section 10.11 hereof. The Trustee is subject to TIA (ss.) 310(b). The following indentures shall be deemed to be specifically described herein for the purposes of clause (i) of the first proviso contained in TIA (ss.) 310(b): (a) indenture, dated as of April 20, 1995, between the Company and The Chase Manhattan Bank, as trustee, relating to the 12 3/4% Notes, as amended, (b) indenture, dated as of January 30, 1996, between the Company and The Chase Manhattan Bank, as trustee, relating to the 11 1/2% Deferred Coupon Notes, as amended, (c) indenture, dated as February 12, 1997, between the Company and The Chase Manhattan Bank, as trustee, relating to the 10% Notes, as amended, (d) indenture dated as of March 13, 1998, between the Company and The Chase Manhattan Bank, as trustee, relating to the Company's 9 1/2% Notes, (e) indenture, dated as of March 13, 1998, between the Company and The Chase Manhattan Bank, as trustee, relating to the Company's 10 3/4% Notes, (f) indenture, dated as of March 13, 1998, between the Company and The Chase Manhattan Bank, as trustee, relating to Company's the 9 3/4% Notes, (g) indenture, dated as of November 2, 1998, between the Company and The Chase Manhattan Bank, as trustee, relating to the Company's 11 1/2% Notes and (h) indenture, dated as of November 6, 1998, -50- 173 between the Company and The Chase Manhattan Bank, as trustee, relating to the Company's 123/8% Notes. SECTION 7.11. PREFERENTIAL COLLECTION OF CLAIMS AGAINST COMPANY. The Trustee is subject to TIA (ss.) 311(a), excluding any creditor relationship listed in TIA (ss.) 311(b). A Trustee who has resigned or been removed shall be subject to TIA (ss.) 311(a) to the extent indicated therein. ARTICLE VIII. DISCHARGE OF INDENTURE SECTION 8.01. TERMINATION OF COMPANY'S OBLIGATIONS. This Indenture shall cease to be of further effect (except that the Company's obligations under Sections 7.07 and 8.03 hereof shall survive) when all outstanding Notes theretofore authenticated and issued have been delivered to the Trustee for cancellation and the Company has paid all sums payable hereunder. SECTION 8.02. OPTION TO EFFECT DEFEASANCE. Subject to the first sentence of Section 3.07, the Company may, at the option of its Board of Directors evidenced by a resolution set forth in an Officers' Certificate, at any time, elect to have this Section 8.02 be applied to all outstanding Notes upon compliance with the conditions set forth below in this Section. Subject to the first sentence of Section 3.07, upon the Company's election to have this Section 8.02 apply to all the outstanding Notes, the Company shall, subject to the satisfaction of the conditions set forth in the next paragraph, be deemed to have been discharged from its obligations with respect to all outstanding Notes on the date such conditions are satisfied (hereinafter, "Defeasance"). For this purpose, Defeasance means that the Company shall be deemed to have paid and discharged the entire Obligations represented by the outstanding Notes, which shall thereafter be deemed to be "outstanding" only for the purposes of Section 8.03 hereof and the other Sections of this Indenture referred to in clauses (a) and (b) below, and to have satisfied all its other obligations under such Notes and this Indenture (and the Trustee, on demand of and at the expense of the Company, shall execute proper instruments acknowledging the same), except for the following provisions which shall survive until otherwise terminated or discharged hereunder: (i) the rights of Holders of outstanding Notes to receive solely from the trust fund described in the following paragraph, payments in respect of the principal of and interest on such Notes when such payments are due; (ii) the Company's obligations with respect to such Notes under Article II hereof; (iii) the rights, powers, trusts, duties and immunities of the Trustee hereunder and the Company's obligations in connection therewith; and (iv) this Article VIII. In order to exercise Defeasance: (a) the Company must irrevocably deposit with the Trustee, in trust, for the benefit of the Holders, pursuant to an irrevocable trust and security agreement in form satisfactory to the Trustee, money in U.S. dollars sufficient or U.S. Government Obligations the principal of and interest on which will be sufficient or a combination thereof sufficient in the opinion of a nationally recognized firm of independent public accountants, expressed in a written certification thereof (in form satisfactory to the Trustee) to pay the principal of, premium, if any, Liquidated Damages, if any, and interest, if any, on the outstanding Notes on the stated date for payment -51- 174 thereof or on the applicable redemption date, as the case may be, of such principal or installment of principal of, premium, if any, Liquidated Damages, if any, and interest, if any, on the outstanding Notes; (b) the Company shall have delivered to the Trustee, an Opinion of Counsel (which counsel may be an employee of the Company) reasonably acceptable to the Trustee confirming that: (A) the Company has received from, or there has been published by, the Internal Revenue Service a ruling or (B) since the Loan Date, there has been a change in the applicable federal income tax law, in either case to the effect that, and based thereon such Opinion of Counsel shall confirm that, the Holders of the outstanding Notes will not recognize income, gain or loss for federal income tax purposes as a result of such Defeasance and will be subject to federal income tax on the same amounts, in the same manner and at the same times as would have been the case if such Defeasance had not occurred; (c) no Event of Default shall have occurred and be continuing on the date of such Defeasance (other than an Event of Default resulting from or related to the incurrence of Indebtedness, the proceeds of which are to be applied to such deposit) or, insofar as Sections 6.01(g) and (h) hereof are concerned, at any time in the period ending on the 91st day after the date of deposit (or greater period of time in which any such deposit of trust funds may remain subject to the effect of any Bankruptcy Law insofar as those apply to the deposit by the Company); (d) such Defeasance shall not result in a breach or violation of, or constitute a default under, any material agreement or instrument (other than this Indenture) to which the Company or any of its Subsidiaries is a party or by which the Company or any of its Subsidiaries is bound; (e) the Company shall have delivered to the Trustee an Opinion of Counsel to the effect that after the 91st day following the deposit (or such greater period referred to in (c) above), the trust funds will not be subject to the effect of any applicable Bankruptcy Law; (f) the Company shall have delivered to the Trustee an Officers' Certificate stating that the deposit was not made by the Company with the intent of preferring the Holders of Notes over any other creditors of the Company with the intent of defeating, hindering, delaying or defrauding creditors of the Company or others; (g) the deposit shall not result in the Company, the Trustee or the trust fund established pursuant to (a) above being subject to regulation under the Investment Company Act of 1940, as amended; (h) Holders of the Notes will have a valid, perfected and unavoidable (under applicable Bankruptcy Law), subject to the passage of time referred to clause (e) above, first priority security interest in the trust funds; and (i) the Company shall have delivered to the Trustee an Officers' Certificate and an Opinion of Counsel (subject to customary exceptions), each stating that all conditions precedent provided for or relating to the Defeasance have been complied with. "U.S. Government Obligations" means direct obligations of the United States of America for the payment of which the full faith and credit of the United States of America is pledged. In order to have money available on a payment date to pay principal, premium, if any, Liquidated Damages, if any, or -52- 175 interest (including Additional Amounts, if applicable) on the Notes, the U.S. Government Obligations shall be payable as to principal, premium, if any, Liquidated Damages, if any, or interest on or before such payment date in such amounts as will provide the necessary money. U.S. Government Obligations shall not be callable at the issuer's option. SECTION 8.03. APPLICATION OF TRUST MONEY. The Trustee shall hold in trust money or U.S. Government Obligations deposited with it pursuant to Section 8.02 hereof. It shall apply the deposited money and the money from U.S. Government Obligations through the Paying Agent and in accordance with this Indenture to the payment of principal, premium, if any, Liquidated Damages, if any, and interest, if any, on the Notes. SECTION 8.04. REPAYMENT TO COMPANY. The Trustee and the Paying Agent shall promptly pay to the Company upon request any excess money or securities held by them at any time. The Trustee and the Paying Agent shall pay to the Company upon request any money held by them for the payment of principal, premium, if any, Liquidated Damages, if any, or interest that remains unclaimed for two years after the date upon which such payment shall have become due; provided, however, that the Company shall have first caused notice of such payment to the Company to be mailed to each Holder entitled thereto no less than 30 days prior to such payment. After payment to the Company, the Trustee and the Paying Agent shall have no further liability with respect to such money and Holders entitled to the money must look to the Company for payment as general creditors unless any applicable abandoned property law designates another Person. SECTION 8.05. REINSTATEMENT. If (i) the Trustee or Paying Agent is unable to apply any money in accordance with Section 8.03 hereof by reason of any order or judgment of any court or governmental authority enjoining, restraining or otherwise prohibiting such application and (ii) the Holders of at least a majority in principal amount of the then outstanding Notes so request by written notice to the Trustee, the Company's obligations under this Indenture and the Notes shall be revived and reinstated as though no deposit had occurred pursuant to Section 8.02 hereof until such time as the Trustee or Paying Agent is permitted to apply all such money in accordance with Section 8.03 hereof or such request is revoked by such Holders; provided, however, that if the Company makes any payment of interest on or any premium or Liquidated Damages on, or principal of any Note following the reinstatement of its obligations, the Company shall be subrogated to the rights of the Holders of such Notes to receive such payment from the money held by the Trustee or Paying Agent. ARTICLE IX. AMENDMENTS, SUPPLEMENTS AND WAIVERS SECTION 9.01. WITHOUT CONSENT OF HOLDERS. The Company and the Trustee may amend or supplement this Indenture or the Notes without the consent of any Holder: (a) to cure any ambiguity, defect or inconsistency; -53- 176 (b) to comply with Section 5.01 hereof; (c) to provide for uncertificated Notes in addition to or in place of certificated Notes; (d) to make any change that does not adversely affect the interests hereunder of any Holder; or (e) to qualify the Indenture under the TIA or to comply with the requirements of the SEC in order to maintain the qualification of the Indenture under the TIA. SECTION 9.02. WITH CONSENT OF HOLDERS. Subject to Section 6.07 hereof, the Company and the Trustee may amend or supplement this Indenture or the Notes with the written consent of the Holders of at least a majority in principal amount of the then outstanding Notes or, if no Notes are outstanding, the holders of a majority in aggregate principal amount of Bridge Notes then outstanding. Subject to Sections 6.04 and 6.07 hereof, the Holders of a majority in principal amount of the Notes then outstanding or, if no Notes are outstanding, the holders of a majority in aggregate principal amount of Bridge Notes then outstanding may also waive compliance in a particular instance by the Company with any provision of this Indenture or the Notes. However, without the consent of each Holder affected or, if no Notes are outstanding, the holders of at least a majority in aggregate principal amount of Bridge Notes then outstanding, an amendment, supplement or waiver under this Section may not: (a) reduce the amount of Notes whose Holders must consent to an amendment, supplement or waiver; (b) reduce the principal of or change the fixed maturity of any Note or alter the provisions of Sections 7 and 8 of the Initial Note and Sections 6 and 7 of the New Note (other than provisions relating to the covenants described under Sections 4.10 and 4.13); (c) reduce the rate of or change the time for payment of interest on any Note; (d) waive a default in the payment of the principal of, or interest, premium or Liquidated Damages, if any, on, any Note (except a rescission of acceleration of the Notes by the Holders of at least a majority in aggregate principal amount of the Notes and a waiver of the payment default that resulted from such acceleration); (e) except as contemplated by Section 10.07(e), make any Note payable in money other than that stated in the Note; (f) make any change in Section 6.04 or 6.07 hereof; (g) waive a redemption payment with respect to any Note; or (h) make any change in the foregoing amendment and waiver provisions of this Article 9. To secure a consent of the Holders under this Section 9.02, it shall not be necessary for the Holders to approve the particular form of any proposed amendment, supplement or waiver, but it shall be sufficient if such consent approves the substance thereof. -54- 177 After an amendment, supplement or waiver under this Section becomes effective, the Company shall mail to Holders a notice briefly describing the amendment or waiver. The Trustee may conclusively rely on a written notice from the Administrative Agent as to the identity of the holders of the Bridge Notes and the principal amount of such Notes held by each such holder. SECTION 9.03. COMPLIANCE WITH TRUST INDENTURE ACT. Every amendment to this Indenture or the Notes shall be set forth in a supplemental indenture that complies with the TIA as then in effect. SECTION 9.04. REVOCATION AND EFFECT OF CONSENTS. Until an amendment, supplement or waiver becomes effective, a consent to it by a Holder of a Note or, if no Notes are outstanding, a holder of a Bridge Note, as applicable, is a continuing consent by the Holder of a Note or, if no Notes are outstanding, a holder of a Bridge Note, as applicable, and every subsequent Holder of a Note or portion of a Note and, if no Notes are outstanding, every subsequent holder of a Bridge Note or portion of a Bridge Note, as applicable, that evidences the same debt as the consenting Holder's Note or consenting holder's Bridge Note, as applicable, even if notation of the consent is not made on any Note or any Bridge Note. However, any such Holder or subsequent Holder may revoke the consent as to his Note or portion of a Note, and, if no Notes are outstanding, any such holder of a Bridge Note or subsequent holder of a Bridge Note may revoke the consent as to his Bridge Note or portion of a Bridge Note, if the Trustee receives the notice of revocation before the date on which the Trustee receives an Officers' Certificate certifying that the Holders of the requisite principal amount of Notes, or, if no Notes are outstanding, the holders of the requisite principal amount of Bridge Notes, have consented to the amendment, supplement or waiver. The Company may, but shall not be obligated to, fix a record date for the purpose of determining the Holders entitled to consent to any amendment, supplement or waiver. If a record date is fixed, then notwithstanding the provisions of the immediately preceding paragraph, those Persons who were Holders at such record date (or their duly designated proxies), and only those Persons, shall be entitled to consent to such amendment, supplement or waiver or to revoke any consent previously given, whether or not such Persons continue to be Holders after such record date. No consent shall be valid or effective for more than 90 days after such record date unless consents from Holders of the principal amount of Notes required hereunder for such amendment or waiver to be effective shall have also been given and not revoked within such 90-day period. After an amendment, supplement or waiver becomes effective it shall bind every Holder, unless it is of the type described in any of clauses (a) through (h) of Section 9.02 hereof. In such case, the amendment or waiver shall bind each Holder who has consented to it and every subsequent Holder that evidences the same debt as the consenting Holder's Note. SECTION 9.05. NOTATION ON OR EXCHANGE OF NOTES. The Trustee may place an appropriate notation about an amendment or waiver on any Note thereafter authenticated. The Company in exchange for all Notes may issue and the Trustee shall authenticate replacement Notes that reflect the amendment or waiver. -55- 178 Failure to make such notation on a Note or to issue a replacement Note as aforesaid shall not affect the validity and effect of such amendment or waiver. SECTION 9.06. TRUSTEE PROTECTED. The Trustee shall sign all supplemental indentures, except that the Trustee may, but need not, sign any supplemental indenture that adversely affects its rights. ARTICLE X. MISCELLANEOUS SECTION 10.01. TRUST INDENTURE ACT CONTROLS. This Indenture is subject to the provisions of the TIA that are required to be incorporated into this Indenture (or, prior to the registration of the Notes pursuant to the Registration Rights Agreement, would be required to be incorporated into this Indenture if it were qualified under the TIA), and shall, to the extent applicable, be governed by such provisions. If any provision of this Indenture limits, qualifies, or conflicts with another provision which is required (or would be so required) to be incorporated in this Indenture by the TIA, the incorporated provision shall control. SECTION 10.02. NOTICES. Any notice or communication by the Company or the Trustee to the other is duly given if in writing and delivered in Person or mailed by first class mail to the other's address stated in Section 10.10 hereof. The Company or the Trustee by notice to the other may designate additional or different addresses for subsequent notices or communications. Any notice or communication to a Holder shall be mailed by first class mail to his address shown on the register kept by the Registrar. Failure to mail a notice or communication to a Holder or any defect in it shall not affect its sufficiency with respect to other Holders. If a notice or communication is mailed in the manner provided above within the time prescribed, it is duly given, whether or not the addressee receives it. If the Company mails a notice or communication to Holders, it shall mail a copy to the Trustee and each Agent at the same time. All other notices or communications shall be in writing. In case by reason of the suspension of regular mail service, or by reason of any other cause, it shall be impossible to mail any notice as required by the Indenture, then such method of notification as shall be made with the approval of the Trustee shall constitute a sufficient mailing of such notice. SECTION 10.03. COMMUNICATION BY HOLDERS WITH OTHER HOLDERS. Holders may communicate pursuant to TIA (ss.) 312(b) with other Holders with respect to their rights under this Indenture or the Notes. The Company, the Trustee, the Registrar and anyone else shall have the protection of TIA (ss.) 312(c). -56- 179 SECTION 10.04. CERTIFICATE AND OPINION AS TO CONDITIONS PRECEDENT. Upon any request or application by the Company to the Trustee to take any action under this Indenture, the Company shall furnish to the Trustee: (a) an Officers' Certificate stating that, in the opinion of the signers, all conditions precedent, if any, provided for in this Indenture relating to the proposed action have been complied with; and (b) an Opinion of Counsel stating that, in the opinion of such counsel, all such conditions precedent have been complied with. SECTION 10.05. STATEMENTS REQUIRED IN CERTIFICATE OR OPINION. Each certificate or opinion with respect to compliance with a condition or covenant provided for in this Indenture (other than pursuant to Section 4.03) shall include: (a) a statement that the Person signing such certificate or rendering such opinion has read such covenant or condition; (b) a brief statement as to the nature and scope of the examination or investigation upon which the statements or opinions contained in such certificate or opinion are based; (c) a statement that, in the opinion of such Person, such Person has made such examination or investigation as is necessary to enable such Person to express an informed opinion as to whether or not such covenant or condition has been complied with; and (d) a statement as to whether or not, in the opinion of such Person, such condition or covenant has been complied with. SECTION 10.06. RULES BY TRUSTEE AND AGENTS. The Trustee may make reasonable rules for action by, or a meeting of, Holders. The Registrar or Paying Agent may make reasonable rules and set reasonable requirements for its functions. SECTION 10.07. LEGAL HOLIDAYS. A "Legal Holiday" is a Saturday, a Sunday or a day on which banking institutions in the State of New York are not required to be open. If a payment date is a Legal Holiday at a place of payment, payment may be made at that place on the next succeeding day that is not a Legal Holiday, and no interest shall accrue for the intervening period. If any other operative date for purposes of this Indenture shall occur on a Legal Holiday then for all purposes the next succeeding day that is not a Legal Holiday shall be such operative date. SECTION 10.08. NO RECOURSE AGAINST OTHERS. A director, officer, employee or stockholder, as such, of the Company shall not have any liability for any obligations of the Company under the Notes or the Indenture or for any claim based on, in respect of or by reason of such obligations or their creation. Each Holder by accepting a Note waives and releases all such liability. The waiver and release are part of the consideration for the issue of the Notes. -57- 180 SECTION 10.09. COUNTERPARTS AND FACSIMILE SIGNATURES. This Indenture may be executed by manual or facsimile signature in any number of counterparts and by the parties hereto in separate counterparts, each of which when so executed shall be deemed to be an original and all of which taken together shall constitute one and the same agreement. SECTION 10.10. VARIABLE PROVISIONS. "Officer" means the Chairman of the Board, the President, any Vice President, the Treasurer, the Secretary, any Assistant Treasurer or any Assistant Secretary of the Company. The first certificate pursuant to Section 4.03 hereof shall be for the fiscal year ended on December 31, of the year when the first Note is issued under this Indenture and is registered in the name of a holder of record and delivered pursuant to the terms of the Escrow Agreement. The reporting date for Section 7.06 hereof is March 15 of each year. The first reporting date is March 15, of the year when the first Note is issued under this Indenture and is registered in the name of a holder of record and delivered pursuant to the terms of the Escrow Agreement. The Trustee shall always have a combined capital and surplus of at least $100,000,000 as set forth in its most recent published annual report of condition. The Company's address is: NTL Incorporated 110 East 59th Street, 26th Floor New York, New York 10022 Attention: Richard J. Lubasch, Esq. Senior Vice President and General Counsel -58- 181 The Trustee's address is: The Chase Manhattan Bank 450 West 33rd Street New York, New York 10001 Attention: Capital Markets Fiduciary Services SECTION 10.11. GOVERNING LAW. THE INTERNAL LAWS OF THE STATE OF NEW YORK SHALL GOVERN THIS INDENTURE AND THE NOTES, WITHOUT REGARD TO THE CONFLICT OF LAWS PROVISIONS THEREOF. SECTION 10.12. NO ADVERSE INTERPRETATION OF OTHER AGREEMENTS. This Indenture may not be used to interpret another indenture, loan or debt agreement of the Company or an Affiliate. Any such indenture, loan or debt agreement may not be used to interpret this Indenture. SECTION 10.13. SUCCESSORS. All agreements of the Company in this Indenture and the Notes shall bind its successor. All agreements of the Trustee in this Indenture shall bind its successor. SECTION 10.14. SEVERABILITY In case any provision in this Indenture or in the Notes shall be invalid, illegal or unenforceable, the validity, legality and enforceability of the remaining provisions shall not in any way be affected or impaired thereby. SECTION 10.15. TABLE OF CONTENTS, HEADINGS, ETC. The Table of Contents, Cross-Reference Table, and headings of the Articles and Sections of this Indenture have been inserted for convenience of reference only, are not to be considered a part hereof, and shall in no way modify or restrict any of the terms or provisions hereof. -59- 182 SIGNATURES IN WITNESS WHEREOF, the parties hereto have caused this Indenture to be duly executed, all as of the date first written above. NTL INCORPORATED, as Company By: ---------------------------------------- Name: Title: THE CHASE MANHATTAN BANK, as Trustee By: ---------------------------------------- Name: Title: 183 EXHIBIT A [FORM OF FACE OF INITIAL NOTE] [Global Notes Legend] UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), NEW YORK, NEW YORK, TO THE COMPANY OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO CEDE & CO., OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC) ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN. TRANSFERS OF THIS GLOBAL NOTE SHALL BE LIMITED TO TRANSFERS IN WHOLE, BUT NOT IN PART, TO NOMINEES OF DTC OR TO A SUCCESSOR THEREOF OR SUCH SUCCESSOR'S NOMINEE AND TRANSFERS OF PORTIONS OF THIS GLOBAL NOTE SHALL BE LIMITED TO TRANSFERS MADE IN ACCORDANCE WITH THE RESTRICTIONS SET FORTH IN THE INDENTURE REFERRED TO ON THE REVERSE HEREOF. [Restricted Notes Legend] THIS NOTE HAS NOT BEEN REGISTERED UNDER THE U.S. SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND ACCORDINGLY, MAY NOT BE OFFERED OR SOLD WITHIN THE UNITED STATES OR TO, OR FOR THE ACCOUNT OR BENEFIT OF, U.S. PERSONS EXCEPT AS SET FORTH IN THE FOLLOWING SENTENCE. BY ITS ACQUISITION HEREOF, THE HOLDER (1) REPRESENTS THAT (A) IT IS A "QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT) OR (B) IT IS AN INSTITUTIONAL "ACCREDITED INVESTOR" (AS DEFINED IN RULE 501(a)(1), (2), (3) OR (7) OF REGULATION D UNDER THE SECURITIES ACT) (AN "INSTITUTIONAL ACCREDITED INVESTOR") OR (C) IT IS NOT A U.S. PERSON AND IS ACQUIRING THIS NOTE IN AN OFFSHORE TRANSACTION IN COMPLIANCE WITH REGULATION S UNDER THE SECURITIES ACT, (2) AGREES THAT IT WILL NOT, WITHIN THE TIME PERIOD REFERRED TO UNDER RULE 144(k) UNDER THE SECURITIES ACT AS IN EFFECT ON THE DATE OF THE TRANSFER OF THIS NOTE, RESELL OR OTHERWISE TRANSFER THIS NOTE EXCEPT (A) TO THE COMPANY OR ANY SUBSIDIARY THEREOF, (B) TO A QUALIFIED INSTITUTIONAL BUYER IN COMPLIANCE WITH RULE 144A UNDER THE SECURITIES ACT, (C) INSIDE THE UNITED STATES TO AN INSTITUTIONAL ACCREDITED INVESTOR THAT, PRIOR TO SUCH TRANSFER, FURNISHES TO THE TRUSTEE A SIGNED LETTER CONTAINING CERTAIN REPRESENTATIONS AND AGREEMENTS RELATING TO THE RESTRICTIONS ON TRANSFER OF THIS NOTE (THE FORM OF WHICH LETTER CAN BE OBTAINED FROM THE TRUSTEE), AND, IF SUCH TRANSFER IS IN RESPECT OF AN AGGREGATE PRINCIPAL AMOUNT AT MATURITY OF LESS THAN $100,000, AN OPINION OF COUNSEL ACCEPTABLE TO THE COMPANY THAT SUCH TRANSFER IS IN COMPLIANCE WITH THE SECURITIES ACT, (D) OUTSIDE THE UNITED STATES IN AN OFF-SHORE TRANSACTION IN COMPLIANCE WITH RULE 904 UNDER THE SECURITIES ACT, (E) PURSUANT TO THE EXEMPTION FROM REGISTRATION PROVIDED BY RULE 144 UNDER THE SECURITIES ACT (IF AVAILABLE) OR 184 (F) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT AND (3) AGREES THAT IT WILL DELIVER TO EACH PERSON TO WHOM THIS NOTE IS TRANSFERRED A NOTICE SUBSTANTIALLY TO THE EFFECT OF THIS LEGEND. IN CONNECTION WITH ANY TRANSFER OF THIS NOTE WITHIN THE TIME PERIOD REFERRED TO ABOVE, THE HOLDER MUST CHECK THE APPROPRIATE BOX SET FORTH ON THE REVERSE HEREOF RELATING TO THE MANNER OF SUCH TRANSFER AND SUBMIT THIS CERTIFICATE TO THE TRUSTEE. IF THE PROPOSED TRANSFEREE IS AN INSTITUTIONAL ACCREDITED INVESTOR, THE HOLDER MUST, PRIOR TO SUCH TRANSFER, FURNISH TO THE TRUSTEE AND THE COMPANY SUCH CERTIFICATIONS, LEGAL OPINIONS OR OTHER INFORMATION AS EITHER OF THEM MAY REASONABLY REQUIRE TO CONFIRM THAT SUCH TRANSFER IS BEING MADE PURSUANT TO AN EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT. AS USED HEREIN, THE TERMS "OFF-SHORE TRANSACTION," "UNITED STATES" AND "U.S. PERSON" HAVE THE MEANINGS GIVEN TO THEM BY REGULATION S UNDER THE SECURITIES ACT. THE INDENTURE CONTAINS A PROVISION REQUIRING THE TRUSTEE TO REFUSE TO REGISTER ANY TRANSFER OF THIS NOTE IN VIOLATION OF THE FOREGOING RESTRICTIONS. [Original Issue Discount Legend] THE FOLLOWING INFORMATION IS PROVIDED SOLELY FOR PURPOSES OF APPLYING THE UNITED STATES FEDERAL INCOME TAX ORIGINAL ISSUE DISCOUNT RULES TO THIS NOTE. THE ISSUE DATE OF THIS NOTE IS _____________________________. THE ISSUE PRICE OF THIS NOTE IS $_______________ PER $1000.00 OF INITIAL PRINCIPAL AMOUNT AT MATURITY. THIS NOTE IS ISSUED WITH $____________ OF ORIGINAL ISSUE DISCOUNT PER $1000.00 OF INITIAL PRINCIPAL AMOUNT AT MATURITY. THE YIELD TO MATURITY OF THIS NOTE IS _________%. A-2 185 No. ________ $__________ CUSIP No. [ ] /CINS No. ____% SENIOR EXCHANGE NOTE DUE 20___ NTL Incorporated, a Delaware corporation (the "Company"), promises to pay to __________________________ or registered assigns, the principal sum of ____________________ $[____________] [,or such other amount as is indicated on Schedule A hereof*,] on ____________, subject to the further provisions of this Note set forth on the reverse hereof which further provisions shall for all purposes have the same effect as if set forth at this place. Interest Payment Dates: August 1 and February 1, commencing on the first date following the issuance and authentication of this Note in exchange for Bridge Notes. Record Dates: July 15 and January 15 - ---------- * Applicable to Global Notes Only A-3 186 IN WITNESS WHEREOF, NTL Incorporated has caused this Note to be signed manually or by facsimile by its duly authorized officer. Dated:____________________________ NTL INCORPORATED by:_______________________________ TRUSTEE'S CERTIFICATE OF AUTHENTICATION This is one of the Notes described in the within-mentioned Indenture. THE CHASE MANHATTAN BANK, as Trustee By:______________________________ Authorized Officer A-4 187 [FORM OF REVERSE OF INITIAL NOTE] NTL INCORPORATED ___% Senior Exchange Note due 20__ 1. Interest. NTL INCORPORATED, a Delaware corporation (the "Company"), is the issuer of the Senior Exchange Notes referred to in the title of this Note and the other Notes contemplated by the Indenture referred to below (collectively, the "Notes"). The Company promises to pay interest (and Liquidated Damages, if any) on the Notes in cash semiannually on each August 1 and February 1, commencing on the first date following the issuance and authentication of this Note in exchange for Bridge Notes, to Holders of record on the immediately preceding July 15 and January 15, respectively, at the rate per annum referred to in the title of this Note. Interest on the Notes will accrue from the most recent date to which interest has been paid on the Notes, provided that, with respect to the initial payment of interest, interest shall accrue from the applicable Exchange Date. Interest will be computed on the basis of a 360-day year of twelve 30-day months. The Company will pay interest on overdue principal, premium, and Liquidated Damages, if any, at the applicable interest rate borne by the Notes, compounded semiannually, and it shall pay interest on overdue installments of interest (without regard to any applicable grace period) at the same interest rate compounded semiannually. Any interest or Liquidated Damages, if any, paid on this Note shall be increased to the extent necessary to pay Additional Amounts as set forth in this Note. 2. Liquidated Damages. The Holder of this Note is entitled to the benefits of the Registration Rights Agreement relating to the Notes, dated as of March 17, 1999, between the Company and Goldman Sachs Credit Partners, L.P. party thereto, as amended, modified or supplemented, (the "Registration Rights Agreement"). If (i) the registration statement (the "Registration Statement") required by the Registration Rights Agreement is not filed with the SEC on or prior to the 300th day following Funding Date A (the "Filing Date"), (ii) the Registration Statement has not been declared effective by the SEC on or prior to the 90th day immediately succeeding the Filing Date or (iii) the Registration Statement required by the Registration Rights Agreement is filed and declared effective but shall thereafter cease to be effective or fail to be usable for its intended purpose without being succeeded immediately by a post-effective amendment to the Registration Statement that cures such failure and that is itself declared effective immediately (each such event referred to in clauses (i) through (iii), a "Registration Default"), then the Company agrees to pay to each holder of Notes liquidated damages ("Liquidated Damages") in an amount equal to 25 basis points per annum times the principal amount of Notes for each week or portion thereof that the Registration Default continues for the first 90-day period immediately following the occurrence of such Registration Default (such 90-day period to begin on the date on which the first such Registration Default occurs). The amount of such Liquidated Damages shall increase by an additional 25 basis points per annum on the principal amount of Notes with respect to each subsequent 90-day period until all Registration Defaults have been cured, up to a maximum amount of Liquidated Damages of 100 basis points per annum on the principal amount of Notes; provided that the Company shall in no event be required to pay Liquidated Damages for more than one Registration Default on any Notes, at any given time. All Liquidated Damages shall be calculated based on the actual number of days elapsed in a 360 day year and all accrued Liquidated Damages shall be paid on the applicable Interest Payment Date in accordance with the Indenture to each holder of Notes as of the applicable Record Date, in cash. Notwithstanding anything to the contrary set forth herein, (1) upon filing the Registration Statement, in the case of (i) above, (2) upon the effectiveness of the Registration Statement, in the case of (ii) above or (3) upon the filing of a post-effective amendment to the Registration Statement or an additional Registration Statement that causes the Registration Statement to again be declared effective or made A-5 188 usable in the case of (iii) above, the Liquidated Damages payable with respect to the Notes as a result of such clause (i), (ii) or (iii), as applicable, shall cease to accrue. 3. Additional Amounts. This Section 3 shall apply only in the event that the Company becomes, or a successor to the Company is, a corporation organized or existing under the laws of the United Kingdom, the Netherlands, the Netherlands Antilles, Bermuda or the Cayman Islands. All payments made by the Company on this Note shall be made without deduction for or on account of, any and all present or future taxes, duties, assessments, or governmental charges of whatever nature unless the deduction or withholding of such taxes, duties, assessments or governmental charges is then required by law. If any deduction or withholding for or on account of any present or future taxes, assessments or other governmental charges of the United Kingdom, the Netherlands, the Netherlands Antilles, Bermuda or the Cayman Islands (or any political subdivision or taxing authority thereof or therein) shall at any time be required in respect of any amounts to be paid by the Company under this Note, the Company shall pay or cause to be paid such additional amounts ("Additional Amounts") as may be necessary in order that the net amounts received by a Holder of this Note after such deduction or withholding shall be not less than the amounts specified in this Note to which the Holder of this Note is entitled; provided, however, that the Company shall not be required to make any payment of Additional Amounts for or on account of: (a) any tax, assessment or other governmental charge to the extent such tax, assessment or other governmental charge would not have been imposed but for (i) the existence of any present or former connection between such Holder (or between a fiduciary, settlor, beneficiary, member or shareholder of, or possessor of a power over, such Holder, if such Holder is an estate, nominee, trust, partnership or corporation), other than the holding of this Note or the receipt of amounts payable in respect of this Note, and the United Kingdom, the Netherlands, the Netherlands Antilles, Bermuda or the Cayman Islands (or any political subdivision or taxing authority thereof or therein) including, without limitation, such Holder (or such fiduciary, settlor, beneficiary, member, shareholder or possessor) being or having been a citizen or resident thereof or being or having been present or engaged in trade or business therein or having or having had a permanent establishment therein or (ii) the presentation of this Note (where presentation is required) for payment on a date more than 30 days after the date on which such payment became due and payable or the date on which payment thereof is duly provided for, whichever occurs later, except to the extent that the Holder would have been entitled to Additional Amounts had this Note been presented on the last day of such period of 30 days; (b) any tax, assessment or other governmental charge that is imposed or withheld by reason of the failure to comply by the Holder of this Note or, if different, the beneficial owner of the interest payable on this Note, with a timely request of the Company addressed to such Holder or beneficial owner to provide information, documents or other evidence concerning the nationality, residence, identity or connection with the taxing jurisdiction of such Holder or beneficial owner which is required or imposed by a statute, regulation or administrative practice of the taxing jurisdiction as a precondition to exemption from all or part of such tax, assessment or governmental charge; (c) any estate, inheritance, gift, sales, transfer, personal property or similar tax, assessment or other governmental charge; (d) any tax, assessment or other governmental charge which is collectible otherwise than by withholding from payments of principal amount, redemption amount, Change A-6 189 of Control Payment or interest with respect to a Note or withholding from the proceeds of a sale or exchange of a Note; (e) any tax, assessment or other governmental charge required to be withheld by any Paying Agent from any payment of principal amount, redemption amount, Change of Control Payment or interest with respect to a Note, if such payment can be made, and is in fact made, without such withholding by any other Paying Agent located inside the United States; (f) any tax, assessment or other governmental charge imposed on a Holder that is not the beneficial owner of a Note to the extent that the beneficial owner would not have been entitled to the payment of any such Additional Amounts had the beneficial owner directly held the Note; (g) any combination of items (a), (b), (c), (d), (e) and (f) above; nor shall Additional Amounts be paid with respect to any payment of the principal of, or any interest on, or Liquidated Damages with respect to, this Note to any Holder who is a fiduciary or partnership or other than the sole beneficial owner of such payment to the extent that a beneficiary or settlor would not have been entitled to any Additional Amounts had such beneficiary or settlor been the Holder of this Note. All references to principal amount, Liquidated Damages or interest on the Notes in the Indenture or the Notes shall include any Additional Amounts payable to the Company pursuant to this Section 3. 4. Method of Payment. The Company will pay interest and Liquidated Damages, if any, on the Notes (except defaulted interest) to the Persons who are registered Holders of Notes at the close of business on the record date for the next interest payment date even though Notes are canceled after the record date and on or before the interest payment date. Holders must surrender Notes to a Paying Agent to collect principal and premium payments. The Company will pay principal, premium and Liquidated Damages, if any, and interest in money of the United States that at the time of payment is legal tender for payment of public and private debts. However, the Company may pay principal, premium and Liquidated Damages, if any, and interest by check payable in such money. It may mail an interest check to a holder's registered address. If a Holder so requests, principal, premium and Liquidated Damages, if any, and interest may be paid by wire transfer of immediately available funds to an account previously specified in writing by such Holder to the Company and the Trustee. 5. Paying Agent and Registrar. The Trustee will act as Paying Agent and Registrar in the City of New York, New York. Chase Manhattan Bank Luxembourg S.A. will act as Paying Agent and Registrar in Luxembourg if and as long as the Notes are listed on the Luxembourg Stock Exchange. The Company may change any Paying Agent or Registrar without prior notice. The Company or any of its Affiliates may act in any such capacity. 6. Indenture. The Company issued the Notes under an Indenture, dated as of March 17, 1999 (the "Indenture"), between the Company and The Chase Manhattan Bank, as Trustee. The terms of the Notes include those stated in the Indenture and those made part of the Indenture by the Trust Indenture Act of 1939 (15 U.S. Code (ss.)(ss.) 77aaa-77bbbb) as in effect on the date of the Indenture. The Notes are subject to, and qualified by, all such terms, certain of which are summarized hereon, and Holders are referred to the Indenture and such Act for a statement of such terms. The Notes are unsecured general obligations of the Company limited to $1,350,000,000 in aggregate principal amount. 7. Optional Redemption. Except as provided in Section 8 hereof, the Notes are not redeemable at the Company's option prior to the fifth anniversary of Funding Date A (as defined in the Indenture). A-7 190 Thereafter, the Notes will be subject to redemption at the option of the Company, in whole or in part, upon not less than 30 nor more than 60 days' notice, at the redemption price equal to 100% of the principal amount thereof plus the Specified Premium plus accrued and unpaid interest thereon, plus the Liquidated Damages thereon, if any, to the applicable redemption date. "Specified Premium" means, with respect to each Note, (i) during the one-year period commencing on the fifth anniversary of Funding Date A, the Specified Premium shall equal a percentage of the principal amount of such Note equal to 50% of the fixed interest rate on such Note; and (ii) during each one-year period commencing on the sixth anniversary of Funding Date A until the date that is two years prior to the maturity of the applicable Note, the Specified Premium referred to in clause (i) shall decline ratably. For example, if the fixed interest rate on a Note having a maturity of 10 years was equal to 15%, then the Specified Premium would equal (a) 7.5% during the one-year period commencing on the fifth anniversary of Funding Date A and ending on the day prior to the sixth anniversary of Funding Date A; (b) 5.0% during the one-year period commencing on the sixth anniversary of Funding Date A and ending on the day prior to the seventh anniversary of Funding Date A; (c) 2.5% during the one-year period commencing on the seventh anniversary of Funding Date A and ending on the day prior to the eighth anniversary of Funding Date A; (d) 0% during the one-year period commencing on the eighth anniversary of Funding Date A and ending on the day prior to the ninth anniversary of Funding Date A; and (e) 0% during the one-year period commencing on the ninth anniversary of Funding Date A and ending on the day prior to the tenth anniversary of Funding Date A. 8. Optional Tax Redemption. (a) The Notes may be redeemed at the option of the Company, in whole but not in part, upon not less than 30 nor more than 60 days notice, at any time at a redemption price equal to the principal amount thereof plus accrued and unpaid interest to the date fixed for redemption if after the date on which Section 3 of this Note becomes applicable (the "Relevant Date") there has occurred any change in or amendment to the laws (or any regulations or official rulings promulgated thereunder) of the United Kingdom, the Netherlands, the Netherlands Antilles, Bermuda or the Cayman Islands (or any political subdivision or taxing authority thereof or therein), or any change in or amendment to the official application or interpretation of such laws, regulation or rulings (a "Change in Tax Law") which becomes effective after the Relevant Date, as a result of which the Company is or would be so required on the next succeeding Interest Payment Date to pay Additional Amounts with respect to the Notes as described under Section 3 hereof with respect to withholding taxes imposed by the United Kingdom, the Netherlands, the Netherlands Antilles, Bermuda or the Cayman Islands (or any political subdivision or taxing authority thereof or therein) (a "Withholding Tax") and such Withholding Tax is imposed at a rate that exceeds the rate (if any) at which Withholding Tax was imposed on the Relevant Date, provided, however, that (i) this paragraph shall not apply to the extent that, at the Relevant Date it was known or would have been known had professional advice of a nationally recognized accounting firm in the United Kingdom, the Netherlands, the Netherlands Antilles, Bermuda or the Cayman Islands, as the case may be, been sought, that a Change in Tax Law in the United Kingdom, the Netherlands, the Netherlands Antilles, Bermuda or the Cayman Islands was to occur after the Relevant Date, (ii) no such notice of redemption may be given earlier than 90 days prior to the earliest date on which the Company would be obliged to pay such Additional Amounts were a payment in respect of the Notes then due, (iii) at the time such notice of redemption is given, such obligation to pay such Additional Amount remains in effect and (iv) the payment of such Additional Amounts cannot be avoided by the use of any reasonable measures available to the Company. The Notes may also be redeemed, in whole but not in part, at any time at a redemption price equal to the principal amount thereof plus accrued and unpaid interest to the date fixed for redemption if the Person formed after the Relevant Date by a consolidation, amalgamation, reorganization or reconstruction (or other similar arrangement) of the Company or the Person into which the A-8 191 Company is merged after the Relevant Date or to which the Company conveys, transfers or leases its properties and assets after the Relevant Date substantially as an entirety (collectively, a "Subsequent Consolidation") is required, as a consequence of such Subsequent Consolidation and as a consequence of a Change in Tax Law in the United Kingdom, the Netherlands, the Netherlands Antilles, Bermuda or the Cayman Islands occurring after the date of such Subsequent Consolidation to pay Additional Amounts with respect to Notes with respect to Withholding Tax as described under Section 3 hereof and such Withholding Tax is imposed at a rate that exceeds the rate (if any) at which Withholding Tax was or would have been imposed on the date of such Subsequent Consolidation, provided, however, that this paragraph shall not apply to the extent that, at the date of such Subsequent Consolidation it was known or would have been known had professional advice of a nationally recognized accounting firm in the United Kingdom, the Netherlands, the Netherlands Antilles, Bermuda or the Cayman Islands, as the case may be, been sought, that a Change in Tax Law in the United Kingdom, the Netherlands, the Netherlands Antilles, Bermuda or the Cayman Islands was to occur after such date. The Company will also pay, or make available for payment, to Holders on the Redemption Date any Additional Amounts (as described, but subject to the exceptions referred to, in Section 3 hereof) resulting from the payment of such Redemption Price. 9. Notice of Redemption. Notice of redemption will be mailed at least 30 days but not more than 60 days before the redemption date to each Holder of the Notes to be redeemed at his address of record. The Notes in denominations larger than $1,000 may be redeemed in part but only in integral multiples of $1,000. In the event of a redemption of less than all of the Notes, the Notes will be chosen for redemption by the Trustee in accordance with the Indenture. On and after the redemption date, interest ceases to accrue on the Notes or portions of them called for redemption. If this Note is redeemed subsequent to a record date with respect to any interest payment date specified above and on or prior to such interest payment date, then any accrued interest will be paid to the Person in whose name this Note is registered at the close of business on such record date. 10. Mandatory Redemption. The Company will not be required to make mandatory redemption or repurchase payments with respect to the Notes. There are no sinking fund payments with respect to the Notes. 11. Repurchase at Option of Holder. (a) If there is a Change of Control Triggering Event, the Company shall be required to offer to purchase on the Purchase Date all outstanding Notes at a purchase price equal to 101% of the aggregate principal amount thereof, plus accrued and unpaid interest to, and Liquidated Damages, if any, the Purchase Date, Holders of Notes that are subject to an offer to purchase will receive a Change of Control offer from the Company prior to any related Purchase Date and may elect to have such Notes or portions thereof in authorized denominations purchased by completing the form entitled "Option of Holder to Elect Purchase" appearing below. (b) If the Company or a Restricted Subsidiary consummates any Asset Sales, and when the aggregate amount of Excess Proceeds from such Asset Sales exceeds $15 million, the Company shall be required to make an offer (an "Asset Sale Offer") to all holders of the Notes and Other Qualified Notes to purchase the maximum principal amount of Notes and Other Qualified Notes (determined on a pro rata basis according to the principal amount or accreted value, as the case may be, of the Notes and the Other Qualified Notes) that may be purchased out of the Excess Proceeds, with respect to the Notes, at an offer price in cash in an amount equal to 100% of the outstanding principal amount thereof plus accrued and unpaid interest, if any, and Liquidated Damages, if any, to the date fixed for the closing of such A-9 192 offer. To the extent that the aggregate principal amount or accreted value, as the case may be, of Notes and Other Qualified Notes tendered pursuant to an Asset Sale Offer is less than the Excess Proceeds, the Company may use such deficiency for general corporate purposes. If the aggregate principal amount or accreted value, as the case may be, of Notes and Other Qualified Notes surrendered by holders thereof exceeds the amount of Excess Proceeds, then such remaining Excess Proceeds will be allocated pro rata according to principal amount or accreted value, as the case may be, to the Notes and each issue of the Other Qualified Notes and, the Trustee will select the Notes to be purchased in accordance with Section 3.09(e) of the Indenture. Upon completion of such offer to purchase, the amount of Excess Proceeds will be reset at zero. 12. Denominations, Transfer, Exchange. The Notes are in registered form, without coupons, in denominations of $1,000 and integral multiples of $1,000. The transfer of Notes may be registered, and Notes may be exchanged, as provided in the Indenture. The Registrar may require a Holder, among other things, to furnish appropriate endorsements and transfer documents and to pay any taxes and fees required by law or permitted by the Indenture. The Registrar need not exchange or register the transfer of any Note or portion of a Note selected for redemption (except the unredeemed portion of any Note being redeemed in part). Also, it need not exchange or register the transfer of any Note for a period of 15 days before a selection of Notes to be redeemed. 13. Persons Deemed Owners. Except as provided in paragraph 4 of this Note, the registered Holder of a Note may be treated as its owner for all purposes. 14. Unclaimed Money. If money for the payment of principal or interest remains unclaimed for two years, the Trustee and the Paying Agent shall pay the money back to the Company at its written request. After that, Holders of Notes entitled to the money must look to the Company for payment unless an abandoned property law designates another Person and all liability of the Trustee and such Paying Agent with respect to such money shall cease. 15. Defaults and Remedies. The Notes shall have the Events of Default set forth in Section 6.01 of the Indenture. Subject to certain limitations in the Indenture, if an Event of Default occurs and is continuing, the Trustee by notice to the Company or the Holders of at least 25% in aggregate principal amount of the then outstanding Notes by notice to the Company and the Trustee may declare all the Notes to be due and payable immediately, except that in the case of an Event of Default arising from certain events of bankruptcy or insolvency, all unpaid principal and interest accrued on the Notes shall become due and payable immediately without further action or notice. The Holders of a majority in principal amount of the Notes then outstanding by written notice to the Trustee may rescind an acceleration and its consequences if the rescission would not conflict with any judgment or decree and if all existing Events of Default have been cured or waived except nonpayment of principal or interest that has become due solely because of the acceleration. Holders may not enforce the Indenture or the Notes except as provided in the Indenture. Subject to certain limitations, Holders of a majority in principal amount of the then outstanding Notes issued under the Indenture may direct the Trustee in its exercise of any trust or power. The Company must furnish annually compliance certificates to the Trustee. The above description of Events of Default and remedies is qualified by reference, and subject in its entirety, to the more complete description thereof contained in the Indenture. 16. Amendments, Supplements and Waivers. Subject to certain exceptions, the Indenture or the Notes may be amended or supplemented with the consent of the Holders of at least a majority in principal amount of the then outstanding Notes (including consents obtained in connection with a tender offer or exchange offer for Notes), and any existing default may be waived with the consent of the Holders of a A-10 193 majority in principal amount of the then outstanding Notes or, in either case, if no Notes are outstanding, the holders of a majority in aggregate principal amount of Bridge Notes then outstanding. Without the consent of any Holder, the Indenture or the Notes may be amended among other things, to cure any ambiguity, defect or inconsistency, to provide for assumption of the Company's obligations to Holders, to make any change that does not adversely affect the rights of any Holder or to qualify the Indenture under the TIA or to comply with the requirements of the SEC in order to maintain the qualification of the Indenture under the TIA. 17. Restrictive Covenants. The Indenture imposes certain limitations on the ability of the Company and its Subsidiaries to, among other things, engage in certain transactions with Affiliates, incur additional indebtedness and make payments in respect of Capital Stock. The limitations are subject to a number of important qualifications and exceptions. 18. Trustee Dealings with the Company. The Trustee, in its individual or any other capacity may become the owner or pledgee of the Notes and may otherwise deal with the Company or an Affiliate with the same rights it would have, as if it were not Trustee, subject to certain limitations provided for in the Indenture and in the TIA. Any Agent may do the same with like rights. 19. No Recourse Against Others. A director, officer, employee or stockholder, as such, of the Company shall not have any liability for any obligations of the Company under the Notes or the Indenture or for any claim based on, in respect of or by reason of such obligations or their creation. Each Holder of the Notes by accepting a Note waives and releases all such liability. The waiver and release are part of the consideration for the issue of the Notes. 20. Governing Law. THE INTERNAL LAWS OF THE STATE OF NEW YORK SHALL GOVERN THE INDENTURE AND THE NOTES WITHOUT REGARD TO CONFLICT OF LAW PROVISIONS THEREOF. 21. Authentication. The Notes shall not be valid until authenticated by the manual signature of an authorized officer of the Trustee or an authenticating agent. 22. Abbreviations. Customary abbreviations may be used in the name of a Holder or an assignee, such as: TEN COM (= tenants in common), TEN ENT (= tenants by the entireties), JT TEN (= joint tenants with right of survivorship and not as tenants in common), CUST (- Custodian), and UGMA (= Uniform Gifts to Minors Act). A-11 194 The Company will furnish to any Holder of the Notes upon written request and without charge a copy of the Indenture. Request may be made to: NTL Incorporated 110 East 59th Street, 26th Floor New York, New York 10022 Attention of: Richard J. Lubasch, Esq. Senior Vice President and General Counsel A-12 195 ASSIGNMENT FORM To assign this Note, fill in the form below: (I) or (we) assign and transfer this Note to ____________________________________________________ (Insert assignee's social security or tax I.D. no.) ____________________________________________________ ____________________________________________________ (Print or type assignee's name, address and zip code) and irrevocably appoint _________________________________ agent to transfer this Note on the books of the Company. The agent may substitute another to act for him. Your Signature:___________________________________________________________ (Sign exactly as your name appears on the other side of this Note) Date: __________________ Signature Guarantee: * ____________________________________________ In connection with any transfer of any of the Notes evidenced by this certificate occurring prior to the date that is two years after the later of the date of original issuance of such Notes and the last date, if any, on which such Notes were owned by the Company or any Affiliate of the Company, the undersigned confirms that such Notes are being transferred: CHECK ONE BOX BELOW (1) |_| to the Company or any subsidiary thereof, (2) |_| to a qualified institutional buyer in compliance with Rule 144A, (3) |_| inside the United States to an Institutional Accredited Investor that, prior to such transfer, furnishes to the Trustee a signed letter containing certain representations and agreements relating to the restrictions on transfer of the Notes (the form of which letter can be obtained from the Trustee) and, if such transfer is in respect of an aggregate principal amount of Notes of less than $100,000, an opinion of counsel acceptable to the Company that such transfer is in compliance with the Securities Act, (4) |_| outside the United States in compliance with Rule 904 under the Securities Act, (5) |_| pursuant to the exemption from registration provided by Rule 144 under the Securities Act (if available) or (6) |_| pursuant to an effective registration statement under the Securities Act. - ---------- * Signature must be guaranteed by a commercial bank, trust company or member firm of the New York Stock Exchange A-13 196 ____________________________ Signature Signature Guarantee* _______________________________ Signature must be guaranteed ________________________________________________________________________________ TO BE COMPLETED BY PURCHASER IF (2) ABOVE IS CHECKED. The undersigned represents and warrants that it is purchasing this Note for its own account or an account with respect to which it exercises sole investment discretion and that it and any such account is a "qualified institutional buyer" within the meaning of Rule 144A under the Securities Act of 1933, and is aware that the sale to it is being made in reliance on Rule 144A and acknowledges that it has received such information regarding the Company as the undersigned has requested pursuant to Rule 144A or has determined not to request such information and that it is aware that the transferor is relying upon the undersigned's foregoing representations in order to claim the exemption from registration provided by Rule 144A. Date: _____________________ - ---------- * Signature must be guaranteed by a commercial bank, trust company or member firm of the New York Stock Exchange. NOTICE: To be executed by an executive officer A-14 197 OPTION OF HOLDER TO ELECT PURCHASE If you want to elect to have this Note or a portion thereof repurchased by the Company pursuant to Section 3.09, 4.10 or 4.13 of the Indenture, check the box: [ ] If the purchase is in part, indicate the portion (in denominations of $1,000 or any integral multiple thereof) to be purchased: ___________________ Your Signature:___________________________________________________________ (Sign exactly as your name appears on the other side of this Note) Date: ________________________ Signature Guarantee:**/ - ---------- **/ Signature must be guaranteed by a commercial bank, trust company or member firm of the New York Stock Exchange. A-15 198 [TO BE ATTACHED TO GLOBAL NOTES] SCHEDULE A SCHEDULE OF PRINCIPAL AMOUNT The initial principal amount of this Global Note shall be $__________________. The following increases or decreases in the principal amount at maturity of this Global Note have been made:
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A-16 199 EXHIBIT B [FORM OF FACE OF NEW NOTE] [Global Notes Legend, if applicable] UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), NEW YORK, NEW YORK, TO THE COMPANY OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO CEDE & CO., OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC) ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN. TRANSFERS OF THIS GLOBAL NOTE SHALL BE LIMITED TO TRANSFERS IN WHOLE, BUT NOT IN PART, TO NOMINEES OF DTC OR TO A SUCCESSOR THEREOF OR SUCH SUCCESSOR'S NOMINEE AND TRANSFERS OF PORTIONS OF THIS GLOBAL NOTE SHALL BE LIMITED TO TRANSFERS MADE IN ACCORDANCE WITH THE RESTRICTIONS SET FORTH IN THE INDENTURE REFERRED TO ON THE REVERSE HEREOF. B-1 200 [Original Issue Discount Legend] THE FOLLOWING INFORMATION IS PROVIDED SOLELY FOR PURPOSES OF APPLYING THE UNITED STATES FEDERAL INCOME TAX ORIGINAL ISSUE DISCOUNT RULES TO THIS NOTE. THE ISSUE DATE OF THIS NOTE IS _____________________________. THE ISSUE PRICE OF THIS NOTE IS $_______________ PER $1000.00 OF INITIAL PRINCIPAL AMOUNT AT MATURITY. THIS NOTE IS ISSUED WITH $____________ OF ORIGINAL ISSUE DISCOUNT PER $1000.00 OF INITIAL PRINCIPAL AMOUNT AT MATURITY. THE YIELD TO MATURITY OF THIS NOTE IS _________%. No. ___________ $____________ CUSIP No. [ ]CINS No. [ ] ____% SERIES B SENIOR EXCHANGE NOTE DUE 20__ NTL Incorporated, a Delaware corporation (the "Company") promises to pay to _________________________ or registered assigns, the principal sum of [ ] $[ ] [or such other amount as is indicated on Schedule A hereof]**** on _________, 20___, subject to the further provisions of this Note set forth on the reverse hereof which further provisions shall for all purposes have the same effect as if set forth at this place. Interest Payment Dates: August 1 and February 1, commencing on the first date following the issuance and authentication of this Note in exchange for Bridge Notes. Record Dates: July 15 and January 15 IN WITNESS WHEREOF, NTL Incorporated has caused this Note to be signed manually or by facsimile by its duly authorized officer. Dated: ________________ NTL INCORPORATED, by:___________________________________ - ---------- **** Applicable to Global Notes only. B-2 201 TRUSTEE'S CERTIFICATE OF AUTHENTICATION This is one of the Notes described in the within-mentioned Indenture. THE CHASE MANHATTAN BANK, as Trustee By: _____________________________________ Authorized Officer B-3 202 (FORM OF REVERSE OF NEW NOTE) NTL INCORPORATED ____% Series B Senior Exchange Note due 20___ 1. Interest. NTL INCORPORATED, a Delaware corporation (the "Company"), is the issuer of the Series B Senior Exchange Notes referred to in the title of this Note and the other Notes contemplated by the Indenture referred to below (collectively, the "Notes"). The Company promises to pay interest on the Notes in cash semiannually on each August 1 and February 1, commencing on the first date following the issuance and authentication of this Note in exchange for Bridge Notes to Holders of record on the immediately preceding July 15 and August 15, respectively, at the rate per annum referred to in the title of this Note. Interest on the Notes will accrue from the most recent date to which interest has been paid on the Notes, provided that, with respect to the initial payment of interest, interest shall accrue from the applicable Exchange Date. Interest will be computed on the basis of a 360-day year of twelve 30-day months. The Company will pay interest on overdue principal and premium, if any, at the interest rate borne by the Notes, compounded semiannually, and it shall pay interest on overdue installments of interest (without regard to any applicable grace period) at the same interest rate compounded semiannually. Any interest paid on this Note shall be increased to the extent necessary to pay Additional Amounts as set forth in this Note. 2. Additional Amounts. This Section 2 shall apply only in the event that the Company becomes, or a successor to the Company is, a corporation organized or existing under the laws of the United Kingdom, the Netherlands, the Netherlands Antilles, Bermuda or the Cayman Islands. All payments made by the Company on this Note shall be made without deduction for or on account of, any and all present or future taxes, duties, assessments, or governmental charges of whatever nature unless the deduction of such taxes, duties, assessments or governmental charges is then required by law. If any deduction or withholding for or on account of any present or future taxes, assessments or other governmental charges of the United Kingdom, the Netherlands, the Netherlands Antilles, Bermuda or the Cayman Islands (or any political subdivision or taxing authority thereof or taxing authority thereof or therein) shall at any time be required in respect of any amounts to be paid by the Company under this Note, the Company shall pay or cause to be paid such additional amounts ("Additional Amounts") as may be necessary in order that the net amounts received by a Holder of this Note after such deduction or withholding shall be not less than the amounts specified in this Note to which the Holder of this Note is entitled; provided, however, that the Company shall not be required to make any payment of Additional Amounts for or on account of: (a) any tax, assessment or other governmental charge to the extent such tax, assessment or other governmental charge would not have been imposed but for (i) the existence of any present or former connection between such Holder (or between a fiduciary, settlor, beneficiary, member or shareholder of, or possessor of a power over, such Holder, if such Holder is an estate, nominee, trust, partnership or corporation), other than the holding of this Note or the receipt of amounts payable in respect of this Note, the United Kingdom, the Netherlands, the Netherlands Antilles, Bermuda or the Cayman Islands or any political subdivision or taxing authority thereof or therein, including, without limitation, such Holder (or such fiduciary, settlor, beneficiary, member, shareholder or possessor) being or having been a citizen or resident thereof or being or having been present or engaged in trade or business therein or having or having had a permanent establishment therein or (ii) the presentation of this Note (where presentation is required) for payment on a date more than 30 days after the date on which such payment became B-4 203 due and payable or the date on which payment thereof is duly provided for, whichever occurs later, except to the extent that the Holder would have been entitled to Additional Amounts had this Note been presented on the last day of such period of 30 days; (b) any tax, assessment or other governmental charge that is imposed or withheld by reason of the failure to comply by the Holder of this Note or, if different, the beneficial owner of the interest payable on this Note, with a timely request of the Company addressed to such Holder or beneficial owner to provide information, documents or other evidence concerning the nationality, residence, identity or connection with the taxing jurisdiction of such Holder or beneficial owner which is required or imposed by a statute, regulation or administrative practice of the taxing jurisdiction as a precondition to exemption from all or part of such tax, assessment or governmental charge; (c) any estate, inheritance, gift, sales, transfer, personal property or similar tax, assessment or other governmental charge; (d) any tax, assessment or other governmental charge which is collectible otherwise than by withholding from payments of principal amount, redemption amount, Change of Control Payment or interest with respect to a Note or withholding from the proceeds of a sale or exchange of a Note; (e) any tax, assessment or other governmental charge required to be withheld by any Paying Agent from any payment of principal amount, redemption amount, Change of Control Payment or interest with respect to a Note, if such payment can be made, and is in fact made, without such withholding by any other Paying Agent located inside the United States; (f) any tax, assessment or other governmental charge imposed on a Holder that is not the beneficial owner of a Note to the extent that the beneficial owner would not have been entitled to the payment of any such Additional Amounts had the beneficial owner directly held the Note; (g) any combination of items (a), (b), (c), (d), (e) and (f) above; nor shall Additional Amounts be paid with respect to any payment of the principal of, or any interest on, this Note to any Holder who is a fiduciary or partnership or other than the sole beneficial owner of such payment to the extent that a beneficiary or settlor would not have been entitled to any Additional Amounts had such beneficiary or settlor been the Holder of this Note. All references to principal amount or interest on the Notes in the Indenture or the Notes shall include any Additional Amounts payable to the Company pursuant to this Section 2. 3. Method of Payment. The Company will pay interest on the Notes (except defaulted interest) to the Persons who are registered Holders of Notes at the close of business on the record date for the next interest payment date even though Notes are canceled after the record date and on or before the interest payment date. Holders must surrender Notes to a Paying Agent to collect principal and premium payments. The Company will pay principal, premium, if any, and interest in money of the United States that at the time of payment is legal tender for payment of public and private debts. However, the Company may pay principal, premium, if any, and interest by check payable in such money. It may mail an interest check to a holder's registered address. If a Holder so requests, principal, premium, if any, and interest may be paid by wire transfer of immediately available funds to an account previously specified in writing by such Holder to the Company and the Trustee. B-5 204 4. Paying Agent and Registrar. The Trustee will act as Paying Agent and Registrar in the City of New York. Chase Manhattan Bank Luxembourg S.A. will act as Paying Agent and Registrar in Luxembourg if and as long as the Notes are listed on the Luxembourg Stock Exchange. The Company may change any Paying Agent or Registrar without prior notice. The Company or any of its Affiliates may act in any such capacity. 5. Indenture. The Company issued the Notes under an indenture, dated as of March 17, 1999 (the "Indenture"), between the Company and The Chase Manhattan Bank, as Trustee. The terms of the Notes include those stated in the Indenture and those made part of the Indenture by the Trust Indenture Act of 1939 (15 U.S. Code (ss.)(ss.) 77aaa-77bbbb) as in effect on the date of the Indenture. The Notes are subject to, and qualified by, all such terms, certain of which are summarized hereon, and Holders are referred to the Indenture and such Act for a statement of such terms. The Notes are unsecured general obligations of the Company limited to $1,350,000,000 in aggregate principal amount. 6. Optional Redemption. Except as provided in Section 7 herein, the Notes are not redeemable at the Company's option prior to the fifth anniversary of Funding Date A (as defined in the Indenture). Thereafter, the Notes will be subject to redemption at the option of the Company, in whole or in part, upon not less than 30 nor more than 60 days' notice, at the redemption price equal to 100% of the principal amount thereof plus the Specified Premium plus accrued and unpaid interest thereon, if any, to the applicable redemption date. "Specified Premium" means, with respect to each Note, (i) during the one-year period commencing on the fifth anniversary of Funding Date A, the Specified Premium shall equal a percentage of the principal amount of such Note equal to 50% of the fixed interest rate on such Note; and (ii) during each one-year period commencing on the sixth anniversary of Funding Date A until the date that is two years prior to the maturity of the applicable Note, the Specified Premium referred to in clause (i) shall decline ratably. For example, if the fixed interest rate on a Note having a maturity of 10 years was equal to 15% then the Specified Premium would equal (a) 7.5% during the one-year period commencing on the fifth anniversary of Funding Date A and ending on the day prior to the sixth anniversary of Funding Date A; (b) 5.0% during the one-year period commencing on the sixth anniversary of Funding Date A and ending on the day prior to the seventh anniversary of Funding Date A; (c) 2.5% during the one-year period commencing on the seventh anniversary of Funding Date A and ending on the day prior to the eighth anniversary of Funding Date A; (d) 0% during the one-year period commencing on the eighth anniversary of Funding Date A and ending on the day prior to the ninth anniversary of Funding Date A; and (e) 0% during the one-year period commencing on the ninth anniversary of Funding Date A and ending on the day prior to the tenth anniversary of Funding Date A. 7. Optional Tax Redemption. (a) The Notes may be redeemed at the option of the Company, in whole but not in part, upon not less than 30 nor more than 60 days notice, at any time at a redemption price equal to the principal amount thereof plus accrued and unpaid interest to the date fixed for redemption if after the date on which Section 2 of this Note becomes applicable (the "Relevant Date") there has occurred any change in or amendment to the laws (or any regulations or official rulings promulgated thereunder) of the United Kingdom, the Netherlands, the Netherlands Antilles, Bermuda or the Cayman Islands (or any political subdivision or taxing authority thereof or therein), or any change in or amendment to the official application or interpretation of such laws, regulations or rulings (a "Change in Tax Law") which becomes effective after the Relevant Date, as a result of which the Company is or would be so required on the next succeeding Interest Payment Date to pay Additional Amounts with respect to the Notes as described under Section 2 hereof with respect to withholding taxes imposed by the United Kingdom, the Netherlands, the Netherlands Antilles, Bermuda or the Cayman Islands (or any political subdivision or taxing authority thereof or therein) (a "Withholding Tax") and such Withholding Tax is imposed at a rate that exceeds the rate (if any) at which Withholding Tax was imposed on the B-6 205 Relevant Date, provided, however, that (i) this paragraph shall not apply to the extent that, at the Relevant Date it was known or would have been known had professional advice of a nationally recognized accounting firm in the United Kingdom, the Netherlands, the Netherlands Antilles, Bermuda or the Cayman Islands, as the case may be, been sought, that a change in Tax Law in the United Kingdom, the Netherlands, the Netherlands Antilles, Bermuda or the Cayman Islands was to occur after the Relevant Date, (ii) no such notice of redemption may be given earlier than 90 days prior to the earliest date on which the Company would be obliged to pay such Additional Amounts were a payment in respect of the Notes then due, (iii) at the time such notice of redemption is given, such obligation to pay such Additional Amount remains in effect and (iv) the payment of such Additional Amounts cannot be avoided by the use of any reasonable measures available to the Company. (b) The Notes may also be redeemed, in whole but not in part, at any time at a redemption price equal to the principal amount thereof plus accrued and unpaid interest to the date fixed for redemption if the Person formed after the Relevant Date by a consolidation, amalgamation, reorganization or reconstruction (or other similar arrangement) of the Company or the Person into which the Company is merged after the Relevant Date or to which the Company conveys, transfers or leases its properties and assets after the Relevant Date substantially as an entirety (collectively, a "Subsequent Consolidation") is required, as a consequence of such Subsequent Consolidation and as a consequence of a Change in Tax Law in the United Kingdom, the Netherlands, the Netherlands Antilles, Bermuda or the Cayman Islands occurring after the date of such Subsequent Consolidation to pay Additional Amounts with respect to Notes with respect to Withholding Tax as described under Section 2 hereof and such Withholding Tax is imposed at a rate that exceeds the rate (if any) at which Withholding Tax was or would have been imposed on the date of such Subsequent Consolidation, provided, however, that this paragraph shall not apply to the extent that, at the date of such Subsequent Consolidation it was known or would have been known had professional advice of a nationally recognized accounting firm in the United Kingdom, the Netherlands, the Netherlands Antilles, Bermuda or the Cayman Islands, as the case may be, been sought, that a Change in Tax Law in the United Kingdom, the Netherlands, the Netherlands Antilles, Bermuda or the Cayman Islands was to occur after such date. The Company will also pay, or make available for payment, to Holders on the Redemption Date any Additional Amounts (as described, but subject to the exceptions referred to, in Section 2 hereof) resulting from the payment of such Redemption Price. 8. Notice of Redemption. Notice of redemption will be mailed at least 30 days but not more than 60 days before the redemption date to each Holder of the Notes to be redeemed at his address of record. The Notes in denominations larger than $1,000 may be redeemed in part but only in integral multiples of $1,000. In the event of a redemption of less than all of the Notes, the Notes will be chosen for redemption by the Trustee in accordance with the Indenture. On and after the redemption date, interest ceases to accrue on the Notes or portions of them called for redemption. If this Note is redeemed subsequent to a record date with respect to any interest payment date specified above and on or prior to such interest payment date, then any accrued interest will be paid to the Person in whose name this Note is registered at the close of business on such record date. 9. Mandatory Redemption. The Company will not be required to make mandatory redemption or repurchase payments with respect to the Notes. There are no sinking fund payments with respect to the Notes. 10. Repurchase at Option of Holder. (a) If there is a Change of Control Triggering Event, the Company shall be required to offer to purchase on the Purchase Date all outstanding Notes at a purchase price equal to 101% of the aggregate principal amount thereof, plus accrued and unpaid interest to the B-7 206 Purchase Date. Holders of Notes that are subject to an offer to purchase will receive a Change of Control offer from the Company prior to any related Purchase Date and may elect to have such Notes or portions thereof in authorized denominations purchased by completing the form entitled "Option of Holder to Elect Purchase" appearing below. (b) If the Company or a Restricted Subsidiary consummates any Asset Sales, and when the aggregate amount of Excess Proceeds from such Asset Sales exceeds $15 million, the Company shall be required to make an offer (an "Asset Sale Offer") to all holders of the Notes and Other Qualified Notes to purchase the maximum principal amount of Notes and other Qualified Notes (determined on a pro rata basis according to the principal amount or accreted value, as the case may be, of the Notes and the Other Qualified Notes) that may be purchased out of the Excess Proceeds with respect to the Notes, at an offer price in cash in an amount equal to 100% of the outstanding principal amount thereof plus accrued and unpaid interest, if any, to the date fixed for the closing of such offer. To the extent that the aggregate principal amount or accreted value, as the case may be, of Notes and Other Qualified Notes tendered pursuant to an Asset Sale Offer is less than the Excess Proceeds, the Company may use such deficiency for general corporate purposes. If the aggregate principal amount or accreted value, as the case may be, of Notes and Other Qualified Notes surrendered by holders thereof exceeds the amount of Excess Proceeds then any remaining Excess Proceeds will be allocated pro rata according to principal amount or accreted value, as the case may be, to the Notes and each issue of the Other Qualified Notes and, the Trustee will select the Notes to be purchased in accordance with Section 3.09(e) of the Indenture. Upon completion of such offer to purchase, the amount of Excess Proceeds will be reset at zero. 11. Denominations, Transfer, Exchange. The Notes are in registered form, without coupons, in denominations of $1,000 and integral multiples of $1,000. The transfer of Notes may be registered, and Notes may be exchanged, as provided in the Indenture. The Registrar may require a Holder, among other things, to furnish appropriate endorsements and transfer documents and to pay any taxes and fees required by law or permitted by the Indenture. The Registrar need not exchange or register the transfer of any Note or portion of a Note selected for redemption (except the unredeemed portion of any Note being redeemed in part). Also, it need not exchange or register the transfer of any Note for a period of 15 days before a selection of Notes to be redeemed. 12. Persons Deemed Owners. Except as provided in paragraph 3 of this Note, the registered Holder of a Note may be treated as its owner for all purposes. 13. Unclaimed Money. If money for the payment of principal or interest remains unclaimed for two years, the Trustee and the Paying Agent shall pay the money back to the Company at its written request. After that, Holders of Notes entitled to the money must look to the Company for payment unless an abandoned property law designates another Person and all liability of the Trustee and such Paying Agent with respect to such money shall cease. 14. Defaults and Remedies. The Notes shall have the Events of Default as set forth in Section 6.01 of the Indenture. Subject to certain limitations in the Indenture, if an Event of Default occurs and is continuing, the Trustee by notice to the Company or the Holders of at least 25% in aggregate principal amount of the then outstanding Notes by notice to the Company and the Trustee may declare all the Notes to be due and payable immediately, except that in the case of an Event of Default arising from certain events of bankruptcy or insolvency, all unpaid principal and interest accrued on the Notes shall become due and payable immediately without further action or notice. The Holders of a majority in principal amount of the Notes then outstanding by written notice to the Trustee may rescind an acceleration and its consequences if the rescission would not conflict with any judgment or decree and if B-8 207 all existing Events of Default have been cured or waived except nonpayment of principal or interest that has become due solely because of the acceleration. Holders may not enforce the Indenture or the Notes as provided in the Indenture. Subject to certain limitations, Holders of a majority in principal amount of the then outstanding Notes issued under the Indenture may direct the Trustee in its exercise of any trust or power. The Company must furnish annually compliance certificates to the Trustee. The above description of Events of Default and remedies is qualified by reference, and subject in its entirety, to the more complete description thereof contained in the Indenture. 15. Amendments, Supplements and Waivers. Subject to certain exceptions, the Indenture or the Notes may be amended or supplemented with the consent of the Holders of at least a majority in principal amount of the then outstanding Notes (including consents obtained in connection with a tender offer or exchange offer for Notes), and any existing default may be waived with the consent of the Holders of a majority in principal amount of the then outstanding Notes or, in either case, if no Notes are outstanding, the holders of a majority in aggregate principal amount of Bridge Notes then outstanding. Without the consent of any Holder, the Indenture or the Notes may be amended among other things, to cure any ambiguity, defect or inconsistency, to provide for assumption of the Company's obligations to Holders, to make any change that does not adversely affect the rights of any Holder or to qualify the Indenture under the TIA or to comply with the requirements of the SEC in order to maintain the qualification of the Indenture under the TIA. 16. Restrictive Covenants. The Indenture imposes certain limitations on the ability of the Company and its Subsidiaries to, among other things, engage in certain transactions with Affiliates, incur additional Indebtedness and make payments in respect of Capital Stock. The limitations are subject to a number of important qualifications and exceptions. 17. Trustee Dealings with the Company. The Trustee, in its individual or any other capacity may become the owner or pledgee of the Notes and may otherwise deal with the Company or an Affiliate with the same rights it would have, as if it were not Trustee, subject to certain limitations provided for in the Indenture and in the TIA. Any Agent may do the same with like rights. 18. No Recourse Against Others. A director, officer, employee or stockholder, as such, of the Company shall not have any liability for any obligations of the Company under the Notes or the Indenture or for any claim based on, in respect of or by reason of such obligations or their creation. Each Holder of the Notes by accepting a Note waives and releases all such liability. The waiver and release are part of the consideration for the issue of the Notes. 19. Governing Law. THE INTERNAL LAWS OF THE STATE OF NEW YORK SHALL GOVERN THE INDENTURE AND THE NOTES WITHOUT REGARD TO CONFLICT OF LAW PROVISIONS THEREOF. 20. Authentication. The Notes shall not be valid until authenticated by the manual signature of an authorized officer of the Trustee or an authenticating agent. 21. Abbreviations. Customary abbreviations may be used in the name of a Holder or an assignee, such as: TEN COM (= tenants in common), TEN ENT (= tenants by the entireties), JT TEN (= joint tenants with right of survivorship and not as tenants in common), CUST (= Custodian), and UGMA (= Uniform Gifts to Minors Act). B-9 208 The Company will furnish to any Holder of the Notes upon written request and without charge a copy of the Indenture. Request may be made to: NTL Incorporated 110 East 59th Street, 26th Floor New York, New York 10022 Attention of: Richard J. Lubasch, Esq. Senior Vice President and General Counsel B-10 209 ASSIGNMENT FORM To assign this Note, fill in the form below: (I) or (we) assign and transfer this Note to __________________________________________________ (Insert assignee's social security or tax I.D. no.) __________________________________________________ __________________________________________________ (Print or type assignee's name, address and zip code) and irrevocably appoint _________________________________ agent to transfer this Note on the books of the Company. The agent may substitute another to act for him. Your Signature:___________________________________________________________ (Sign exactly as your name appears on the other side of this Note) Date: __________________ Signature Guarantee: **/ ______________________________ - ---------- **/ Signature must be guaranteed by a commercial Bank, trust company or member of the New York Stock Exchange. B-11 210 OPTION OF HOLDER TO ELECT PURCHASE If you want to elect to have this Note or a portion thereof repurchased by the Company pursuant to Section 3.09, 4.10 or 4.13 of the Indenture, check the box: If the purchase is in part, indicate the portion (in denominations of $1,000 or any integral multiple thereof) to be purchased:_______________________ Your Signature:___________________________________________________________ (Sign exactly as your name appears on the other side of this Note) Date: __________________ Signature Guarantee:*** - ---------- *** Signature must be guaranteed by a commercial bank, trust company or member firm of the New York Stock Exchange. B-12 211 SCHEDULE A SCHEDULE OF PRINCIPAL AMOUNT The initial principal amount of this Global Note shall be $__________________. The following increases or decreases in the principal amount of this Global Note have been made:
================================================================================ Amount of Amount of Signature of Date of decrease in increase in Principal authorized exchange principal principal amount of officer of following such amount of this amount of this this Global Trustee or decrease or Global Note Global Note Note Notes Custodian increase - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- ================================================================================
B-13 212 EXHIBIT C FORM OF TRANSFER CERTIFICATE FOR TRANSFER FROM RULE 144A GLOBAL NOTE TO REGULATION S GLOBAL NOTE (Transfers pursuant to (ss.) 2.06(a)(ii) of the Indenture) The Chase Manhattan Bank, as Trustee 450 West 33rd Street New York, New York 10001 Attn: Corporate Trustee Administration Department Re: NTL Incorporated _____% Senior Exchange Notes due 20__ (the "Notes") Reference is hereby made to the Indenture, dated as of March 17, 1999 (the "Indenture"), between NTL Incorporated, as Issuer, and The Chase Manhattan Bank, as Trustee. This letter relates to $[ ] aggregate principal amount of Notes which are held in the form of the [Rule 144A Global Note (CUSIP No. )] with the Depositary in the name of [name of transferor] (the "Transferor") to effect the transfer of the Notes in exchange for an equivalent beneficial interest in the Regulation S Global Notes. In connection with such request, the Transferor does hereby certify that such transfer has been effected in accordance with the transfer restrictions set forth in the Notes and (i) with respect to transfers made in reliance on Regulation S, does hereby certify that: (1) the offer of the Notes was not made to a Person in the United States; (2) the transaction was executed in, on or through the facilities of a designated offshore securities market and neither the Transferor nor any Person acting on its behalf knows that the transaction was pre-arranged with a buyer in the United States; (3) no directed selling efforts have been made in contravention of the requirements of Rule 903(b) or 904(b) of Regulation S, as applicable; and (4) the transaction is not part of a plan or scheme to evade the registration requirements of the United States Securities Act of 1933, as amended (the "Securities Act"); and (ii) with respect to transfers made in reliance on Rule 144 does hereby certify that the Notes are being transferred in a transaction permitted by Rule 144 under the Securities Act; and (iii) with respect to transfers made in reliance on Rule 144A, does hereby certify that such Notes are being transferred in accordance with Rule 144A under the Securities Act to a transferee that the Transferor reasonably believes is purchasing the Notes for its own account or an account with respect to which the transferee exercises sole investment discretion and the transferee and any such account is a "qualified institutional buyer" within the meaning of Rule 144A, in a transaction meeting the requirements of Rule 144A and in accordance with applicable securities laws of any state of the United States or any other jurisdiction. In addition, if the sale is made during a distribution compliance period and the provisions of Rule 903(c)(2) or (3) or Rule 904(c)(1) of Regulation S are applicable thereto, we confirm that such C-1 213 sale has been made in accordance with the applicable provisions of Rule 903(c)(2) or (3) or Rule 904(c)(1), as the case may be. You and the Company are entitled to rely upon this letter and are irrevocably authorized to produce this letter or a copy hereof to any interested party in any administrative or legal proceedings or official inquiry with respect to the matters covered hereby. Capitalized terms used in this certificate and not otherwise defined in the Indenture have the meanings set forth in Regulation S. [Name of Transferor] By:___________________________ Name: Title: Dated: cc: NTL Incorporated 110 East 59th Street New York, New York 10022 Attn: Richard J. Lubasch, Esq. Senior Vice President and General Counsel C-2 214 EXHIBIT D FORM OF TRANSFER CERTIFICATE FOR TRANSFER FROM REGULATION S GLOBAL NOTE TO RULE 144A GLOBAL NOTE (Transfers pursuant to (ss.) 2.06(a)(iii) of the Indenture) The Chase Manhattan Bank, as Trustee 450 West 33rd Street New York, New York 10001 Attn: Corporate Trustee Administration Department Re: NTL Incorporated ____% Senior Exchange Notes due 20__ (the "Notes") Reference is hereby made to the Indenture, dated as of March 17, 1999 (the "Indenture"), between NTL Incorporated, as Issuer, and The Chase Manhattan Bank, as Trustee. Capitalized terms used but not defined herein shall have the respective meanings given them in the Indenture. This letter relates to $[ ] aggregate principal amount of Notes which are held in the form of the Regulation S Global Note (CINS No. [ ]) with the Depositary in the name of [name of transferor] (the "Transferor") to effect the transfer of the Notes in exchange for an equivalent beneficial interest in the Rule 144A Global Note. In connection with such request, and in respect of such Notes the Transferor does hereby certify that such Notes are being transferred in accordance with (i) the transfer restrictions set forth in the Notes and (ii) Rule 144A under the United States Securities Act of 1933, as amended, to a transferee that the Transferor reasonably believes is purchasing the Notes for its own account or an account with respect to which the transferee exercises sole investment discretion and the transferee and any such account is a "qualified institutional buyer" within the meaning of Rule 144A, in a transaction meeting the requirements of Rule 144A and in accordance with applicable securities laws of any state of the United States or any other jurisdiction. [Name of Transferor], By:___________________________ Name: Title: Dated: cc: NTL Incorporated 110 East 59th Street New York, New York 10022 Attn: Richard J. Lubasch, Esq. Senior Vice President and General Counsel D-1 215 EXHIBIT E FORM OF TRANSFER CERTIFICATE FOR TRANSFER FROM GLOBAL NOTE OR RESTRICTED NOTE TO RESTRICTED NOTE (Transfers pursuant to (ss.) 2.06(a)(iv) or (ss.) 2.06(a)(v) of the Indenture) The Chase Manhattan Bank, as Trustee 450 West 33rd Street New York, New York 10001 Attn: Corporate Trustee Administration Department Re: NTL Incorporated ____% Senior Exchange Notes due 20__ (the "Notes") Reference is hereby made to the Indenture, dated as of March 17, 1999 (the "Indenture"), between NTL Incorporated, as Issuer, and The Chase Manhattan Bank, as Trustee. Capitalized terms used but not defined herein shall have the respective meanings given them in the Indenture. This letter relates to $[ ] aggregate principal amount of Notes which are held [in the form of the [Rule 144A/Regulation S] [Global] [Restricted] Note (CUSIP No. [ ] CINS No. [ ]) with the Depositary in the name of [name of transferor] (the "Transferor") to effect the transfer of the Notes. In connection with such request, and in respect of such Notes, the Transferor does hereby certify that such Notes are being transferred (i) in accordance with the transfer restrictions set forth in the Notes and (ii) in accordance with applicable securities laws of any state of the United States or any other jurisdiction. *Insert, if appropriate. [Name of Transferor], By:___________________________ Name: Title: Dated: cc: NTL Incorporated 110 East 59th Street New York, New York 10022 Attn: Richard J. Lubasch, Esq. Senior Vice President and General Counsel E-1 216 EXHIBIT F FORM OF ACCREDITED INVESTOR TRANSFEREE CERTIFICATE The Chase Manhattan Bank, as Trustee 450 West 33rd Street New York, New York 10001 Attn: Corporate Trustee Administration Department Re: NTL Incorporated _____% Senior Exchange Notes due 20__ (the "Notes") Reference is hereby made to the Indenture, dated as of March 17, 1999 (the "Indenture), between NTL Incorporated, as Issuer, and [The Chase Manhattan Bank], as Trustee. Capitalized terms used but not defined herein shall have the respective meanings given them in the Indenture. This letter relates to $[ ] aggregate principal amount of Notes which are held [in the form of the [Rule 144/Regulation S] [Restricted] [Global] Note (CUSIP No. [ ] CINS No. [ ]) with the Depositary * * in the name of [name of transferor] (the "Transferor") to effect the transfer of the Notes to the undersigned. In connection with such request, and in respect of such Notes we confirm that: 1. We understand that the Notes were originally offered in a transaction not involving any public offering in the United States within the meaning of the United States Securities Act of 1933, as amended (the "Securities Act"), that the Notes have not been registered under the Securities Act and that (A) the Notes may be offered, resold, pledged or otherwise transferred only (i) to a Person who the seller reasonably believes is a "qualified institutional buyer" (as defined in Rule 144A under the Securities Act) in a transaction meeting the requirements of Rule 144A, in a transaction meeting the requirements of Rule 144 under the Securities Act, to a Person who the seller reasonably believes is an institutional "accredited investor" (as defined in Rule 501(a)(1), (2), (3) or (7) of Regulation D under the Securities Act), outside the United States in a transaction meeting the requirements of Rule 903 or 904 of Regulation S under the Securities Act or in accordance with another exemption from the registration requirements of the Securities Act (and based upon an opinion of counsel if the Company so requests), (ii) to the Company, (iii) pursuant to any other available exemption from registration or (iv) pursuant to an effective registration statement, and, in each case, in accordance with any applicable securities laws of any state of the United States or any other applicable jurisdiction and (B) the purchaser will, and each subsequent Holder is required to, notify any subsequent purchaser from it of the resale restrictions set forth in (A) above. 2. We are a corporation, partnership or other entity having such knowledge and experience in financial and business matters as to be capable of evaluating the merits and risks of an investment in the Notes, and we are (or any account for which we are purchasing under paragraph 4 below is) an institutional "accredited investor" as defined in Rule 501(a)(1), (2), (3) or (7) under the Securities Act, able to bear the economic risk of our proposed investment in the Notes. - ---------- * Insert and modify if appropriate F-1 217 3. We are acquiring the Notes for our own account (or for accounts as to which we exercise sole investment discretion and have authority to make, and do make, the statements contained in this letter) and not with a view to any distribution of the Notes, subject, nevertheless, to the understanding that the disposition of our property shall at all times be and remain within our control. 4. We are, and each account (if any) for which we are purchasing Notes is, purchasing Notes having an aggregate principal amount of not less than $100,000 and, if such transfer is in respect of an aggregate principal amount of Notes of less than $100,000, we are providing an opinion of counsel acceptable to the Company that such transfer is in compliance with the Securities Act. 5. We understand that (a) the Notes will be delivered to us in registered form only and that the certificate delivered to us in respect of the Notes will bear a legend substantially to the following effect: THIS NOTE HAS NOT BEEN REGISTERED UNDER THE U.S. SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND ACCORDINGLY, MAY NOT BE OFFERED OR SOLD WITHIN THE UNITED STATES OR TO, OR FOR THE ACCOUNT OR BENEFIT OF, U.S. PERSONS EXCEPT AS SET FORTH IN THE FOLLOWING SENTENCE. BY ITS ACQUISITION HEREOF, THE HOLDER (1) REPRESENTS THAT (A) IT IS A "QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT) OR (B) IT IS AN INSTITUTIONAL "ACCREDITED INVESTOR" (AS DEFINED IN RULE 501(a)(1), (2), (3) OR (7) OF REGULATION D UNDER THE SECURITIES ACT) (AN "INSTITUTIONAL ACCREDITED INVESTOR") OR (C) IT IS NOT A U.S. PERSON AND IS ACQUIRING THIS NOTE IN AN OFFSHORE TRANSACTION IN COMPLIANCE WITH REGULATION S UNDER THE SECURITIES ACT, (2) AGREES THAT IT WILL NOT, WITHIN THE TIME PERIOD REFERRED TO UNDER RULE 144(k) UNDER THE SECURITIES ACT AS IN EFFECT ON THE DATE OF THE TRANSFER OF THIS NOTE, RESELL OR OTHERWISE TRANSFER THIS NOTE EXCEPT (A) TO THE COMPANY OR ANY SUBSIDIARY THEREOF, (B) TO A QUALIFIED INSTITUTIONAL BUYER IN COMPLIANCE WITH RULE 144A UNDER THE SECURITIES ACT, (C) INSIDE THE UNITED STATES TO AN INSTITUTIONAL ACCREDITED INVESTOR THAT, PRIOR TO SUCH TRANSFER, FURNISHES TO THE TRUSTEE A SIGNED LETTER CONTAINING CERTAIN REPRESENTATIONS AND AGREEMENTS RELATING TO THE RESTRICTIONS ON TRANSFER OF THIS NOTE (THE FORM OF WHICH LETTER CAN BE OBTAINED FROM THE TRUSTEE), AND, IF SUCH TRANSFER IS IN RESPECT OF AN AGGREGATE PRINCIPAL AMOUNT OF LESS THAN $100,000, AN OPINION OF COUNSEL ACCEPTABLE TO THE COMPANY THAT SUCH TRANSFER IS IN COMPLIANCE WITH THE SECURITIES ACT, (D) OUTSIDE THE UNITED STATES IN AN OFF-SHORE TRANSACTION IN COMPLIANCE WITH RULE 904 UNDER THE SECURITIES ACT, (E) PURSUANT TO THE EXEMPTION FROM REGISTRATION PROVIDED BY RULE 144 UNDER THE SECURITIES ACT (IF AVAILABLE) OR (F) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT AND (3) AGREES THAT IT WILL DELIVER TO EACH PERSON TO WHOM THIS NOTE IS TRANSFERRED A NOTICE SUBSTANTIALLY TO THE EFFECT OF THIS LEGEND. IN CONNECTION WITH ANY TRANSFER OF THIS NOTE WITHIN THE TIME PERIOD REFERRED TO ABOVE, THE HOLDER MUST CHECK THE APPROPRIATE BOX SET FORTH ON THE REVERSE HEREOF RELATING TO THE MANNER OF SUCH TRANSFER AND SUBMIT THIS CERTIFICATE TO THE TRUSTEE. IF THE PROPOSED TRANSFEREE IS AN INSTITUTIONAL ACCREDITED INVESTOR, THE HOLDER MUST, PRIOR TO SUCH TRANSFER, FURNISH TO THE TRUSTEE AND THE COMPANY SUCH CERTIFICATIONS, LEGAL OPINIONS OR OTHER INFORMATION AS EITHER OF THEM MAY REASONABLY REQUIRE TO CONFIRM THAT SUCH TRANSFER IS BEING MADE PURSUANT TO AN EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT F-2 218 TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT. AS USED HEREIN, THE TERMS "OFF-SHORE TRANSACTION," "UNITED STATES" AND "U.S. PERSON" HAVE THE MEANINGS GIVEN TO THEM BY REGULATION S UNDER THE SECURITIES ACT. THE INDENTURE CONTAINS A PROVISION REQUIRING THE TRUSTEE TO REFUSE TO REGISTER ANY TRANSFER OF THIS NOTE IN VIOLATION OF THE FOREGOING RESTRICTIONS. and (b) such certificates will be reissued without the foregoing legend only in accordance with the terms of the Indenture. 6. We agree that in the event that at some future time we wish to dispose of any of the Notes, we will not do so unless: (a) the Notes are sold to the Company; (b) the Notes are sold to a qualified institutional buyer in compliance with Rule 144A under the Securities Act; (c) the Notes are sold outside the United States in compliance with Rule 903 or Rule 904 under the Securities Act; (d) the Notes are sold pursuant to an effective registration statement under the Securities Act; or (e) the Notes are sold pursuant to any other available exemption from registration, subject to the requirements of the legend set forth above. Very truly yours, [PURCHASER] By: _____________________________ Name: Title: Dated: cc: NTL Incorporated 110 East 59th Street New York, New York 10022 Attn: Richard J. Lubasch, Esq. Senior Vice President and General Counsel F-3 219 EXHIBIT G FORM OF CERTIFICATE FOR TRANSFERS OF REGULATION S GLOBAL NOTE FOR RESTRICTED NOTES (Transfers pursuant to (ss.) 2.06(a)(viii)) (Transferor) The Chase Manhattan Bank 450 West 33rd Street New York, New York 10001 Attn: Corporate Trustee Administration Department Re: NTL Incorporated _____% Senior Exchange Notes due 20__ (the "Notes") Reference is hereby made to the Indenture, dated as of March 17, 1999 (the "Indenture"), between NTL Incorporated, as Issuer, and [The Chase Manhattan Bank], as Trustee. Capitalized terms used but not defined herein shall have the respective meanings given them in the Indenture. This certificate relates to $[ ] aggregate principal amount of Notes which are held in the form of the Regulation S Global Note (CINS No. [ ]) with the Depositary in the name of [name of transferor] (the "Transferor") to effect the transfer of the beneficial interest in such Regulation S Global Note for a beneficial interest in an equivalent aggregate principal amount of Restricted Securities. In connection with such request, and in respect of such Notes, we confirm that: We are either not a U.S. Person (as defined below) or we have purchased our beneficial interest in the above referenced Regulation S Global Note in a transaction that is exempt from the registration requirements under the Securities Act. We are delivering this certificate in connection with obtaining a beneficial interest in Restricted Securities in exchange for our beneficial interest in the Regulation S Global Note. For purposes of this certificate, "U.S. Person" means (i) any individual resident in the United States, (ii) any partnership or corporation organized or incorporated under the laws of the United States, (iii) any estate of which an executor or administrator is a U.S. Person (other than an estate governed by foreign law and of which at least one executor or administrator is a non-U.S. Person who has sole or shared investment discretion with respect to its assets), (iv) any trust of which any trustee is a U.S. Person (other than a trust of which at least one trustee is a non-U.S. Person who has sole or shared investment discretion with respect to its assets and no beneficiary of the trust (and no settlor if the trust is revocable) is a U.S. Person), (v) any agency or branch of a foreign entity located in the United States, (vi) any non- discretionary or similar account (other than an estate or trust) held by a dealer or other fiduciary for the benefit or account of a U.S. Person, (vii) any discretionary or similar account (other than an estate or trust) held by a dealer or other fiduciary organized, incorporated or (if an individual) resident in the United States (other than such an account held for the benefit or account of a non-U.S. Person), (viii) any partnership or corporation organized or incorporated under the laws of a foreign jurisdiction and formed by a U.S. Person principally for the purpose of investing in securities not registered under the Securities Act (unless it is organized or incorporated, and owned, by accredited investors within the meaning of Rule 501(a) under the Securities Act who are not natural Persons, estates or trusts); provided, G-1 220 however, that the term "U.S. Person" shall not include (A) a branch or agency of a U.S. Person that is located and operating outside the United States for valid business purposes as a locally regulated branch or agency engaged in the banking or insurance business, (B) any employee benefit plan established and administered in accordance with the law, customary practices and documentation of a foreign country and (C) the international organizations set forth in Section 902(o)(7) of Regulation S under the Securities Act and any other similar international organizations, and their agencies, affiliates and pension plans. We irrevocably authorize you to produce this certificate or a copy hereof to any interested party in any administrative or other proceedings with respect to the matters covered by this certificate. Very truly yours, [TRANSFEROR] By:___________________________ Name: Title: Dated: To be completed by the account Holder as, or as agent for, the beneficial owner(s) of the Notes to which this certificate relates. cc: NTL Incorporated 110 East 59th Street New York, New York 10022 Attn: Richard J. Lubasch, Esq. Senior Vice President and General Counsel G-2 221 EXHIBIT F-1 [FORM OF OPINION OF SKADDEN, ARPS, SLATE, MEAGHER & FLOM LLP] March 17, 1999 Goldman, Sachs Credit Partners, L.P. c/o Goldman, Sachs & Co. 85 Broad Street New York, NY 10004, as Administrative Agent The Lenders listed on Schedule I attached hereto Re: NTL Incorporated We have acted as special counsel to NTL Incorporated, a Delaware corporation (the "Borrower"), in connection with the execution and delivery of that certain Bridge Loan Agreement, dated as of March 17, 1999 (the "Bridge Loan Agree ment"), among the Borrower, the lenders named therein and Goldman Sachs Credit Partners L.P., as arranger and administrative agent (the "Administrative Agent"). This opinion is being delivered to you pursuant to Section 5.11(i) of the Bridge Loan Agree ment. Capitalized terms used herein and not otherwise defined herein shall have the same meanings herein as ascribed thereto in the Bridge Loan Agreement. In rendering the opinions set forth below, we have examined and relied on originals or copies, certified or otherwise identified to our satisfaction, of the following: (a) the Bridge Loan Agreement; (b) the Bridge Notes; (c) the Registration Rights Agreement; (d) the Escrow Agreement; 222 Goldman Sachs Credit Partners, L.P. March 17, 1999 Page 2 (e) the Exchange Note Indenture; (f) the Exchange Notes; (g) the Engagement Letter; (h) the Fee Letter; (i) the Certificate of Incorporation and By-Laws of the Borrower, as currently in effect; (j) certain resolutions of the Board of Directors of the Borrower relating to the Loan Documents and the transactions contemplated thereby; (k) a certificate of good standing from the Secretary of State of the State of Delaware as to the good standing of the Borrower in such jurisdiction; (l) certificates and telegrams from public officials in the jurisdictions listed on Schedule II as to the good standing of the Borrower as a foreign corporation in each such jurisdiction; and (m) such other documents as we have deemed necessary or appropriate as a basis for the opinions set forth below. The documents referred to in clauses (a) through (h) above are hereinafter referred to collectively as the "Operative Documents". For purposes of this opinion (i) the term "Applicable Laws" shall mean the General Corporation Law of Delaware and those laws, rules and regulations of the State of New York and of the United States of America (including, without limitation, Regulations T, U and X of the Board of Gover nors of the Federal Reserve System) which, in our experience, are normally applicable to transactions of the type contemplated by the Operative Documents, (ii) the term "Gov ernmental Approval" means any consent, approval, license, authorization or validation of, or filing, recording or registration with, any state or federal executive, legislative, judicial, administrative, or regulatory body which, in our experience, are normally applicable to transactions of the type contemplated by the Operative Documents pursuant to Applicable Laws, (iii) the term "Applicable Contract" shall mean those agreements or 223 Goldman Sachs Credit Partners, L.P. March 17, 1999 Page 3 instruments governing the Borrower's material indebtedness and the primary agreement governing the acquisition of the Acquired Business, each as set forth on Schedule III hereto and which have been identified to us as such by the Borrower in the Borrower's Certificate (as hereinafter defined), (iv) "Governmental Authorities" means any court, regulatory body, administrative agency, or governmental body of the State of Delaware, the State of New York or the United States of America having jurisdiction over the Borrower or any of its subsidiaries under Applicable Laws, and (iv) the term "Applicable Orders" means those judgments, orders or decrees of any Governmental Authorities specifically identified to us by the Borrower to be applicable to the Borrower or any of its subsidiaries, as identified on Schedule IV hereto. In our examination we have assumed the genuineness of all signatures, the legal capacity of all 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 or photostatic copies, and the authenticity of the originals of such copies. As to any facts material to this opinion which we did not independently establish or verify, we have relied upon statements and representations of the Borrower and its officers and other representatives, and of others. In particular, we have also reviewed, and are relying upon as to factual matters as a basis for the opinions set forth herein, a certificate (the "Borrower's Certificate") of the President, Chief Executive Officer and Chief Financial Officer of the Borrower certifying that, among other things, the proceeds of the Bridge Loans, the issuance of the Bridge Notes and the Exchange Notes will be used by the Borrower in accordance with the applicable provisions of the relevant Applicable Contracts. We do not express any opinion as to the laws of any jurisdiction other than (i) the laws of the State of New York, (ii) the General Corporation Law of the State of Delaware and (iii) the federal laws of the United States of America to the extent specifically referred to herein. The opinions set forth below are subject to the following assumptions and qualifications: (a) the opinions set forth in paragraph 5 are based in part upon the matters set forth in the Borrower's Certificate, without our having made any independent investigation or verification of such matters; 224 Goldman Sachs Credit Partners, L.P. March 17, 1999 Page 4 (b) enforcement may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or other similar laws affecting creditors' rights generally and by general principles of equity (regardless of whether enforcement is sought in equity or at law); (c) we express no opinion as to the applicability or effect of any fraudulent transfer or similar law on the opinions expressed below, any provision of the Operative Documents or any transaction contemplated thereby; (d) we express no opinion as to any provision of the Operative Documents that purports to grant participants of the Lenders rights of set-off against the Borrower or as to whether any affiliate or branch of the Administrative Agent or any Lender has a right of set-off against the Borrower pursuant to the Operative Documents; (e) we express no opinion as to the effect on the opinions expressed herein of (i) the compliance or noncompliance of the Administrative Agent, any of the Lenders or any other party (other than the Borrower) to the Operative Documents with any state, federal or other laws or regulations applicable to them or (ii) the legal or regulatory status or nature of the business of the Administrative Agent, any of the Lenders or any such other party; (f) we have assumed each of the Operative Documents constitutes a valid and binding obligation of each party to such Operative Document (other than the Borrower) enforceable against such party (other than the Borrower) in accordance with its terms; and (g) we express no opinion as to the enforceability of any rights to contribution or indemnification which are violative of the public policy underlying any law, rule or regulation (including, without limitation, any federal or state securities law, rule or regulation). In rendering the opinions expressed below, we have assumed, without any independent investigation or verification of any kind, that: (a) the execution, delivery and performance by the Borrower of the Operative Documents and the consummation of the transactions contemplated thereby do not and will not conflict with, contravene, violate or constitute a default under (i) any 225 Goldman Sachs Credit Partners, L.P. March 17, 1999 Page 5 lease, indenture, instrument or other agreement to which the Borrower or its property is subject (other than the Applicable Contracts as to which we express our opinion in paragraph 5 herein), (ii) any rule, law or regulation to which the Borrower is subject (other than Applicable Laws as to which we express our opinion in paragraph 5 herein) or (iii) any judicial or administrative order or decree of any governmental authority (other than Applicable Orders as to which we express our opinion in paragraph 5 herein); and (b) no authorization, consent or other approval of, notice to or filing with any court, governmental authority or regulatory body (other than Governmental Approvals as to which we express our opinion in paragraph 5 herein) is required to authorize or is required in connection with the execution, delivery or performance by the Borrower of the Operative Documents or the transactions contemplated thereby. Based upon the foregoing and subject to the assumptions and qualifica tions set forth herein, we are of the opinion that: 1. The Borrower has been duly incorporated and is validly existing and is in good standing as a corporation under the laws of the State of Delaware. 2. Based solely on certificates from the Secretary of State of the applicable jurisdiction, the Borrower is duly qualified as a foreign corporation to transact business and is in good standing in each jurisdiction listed in the Borrower's Certificate attached as Exhibit A hereto. 3. The Borrower has full corporate power and authority to execute, deliver and perform the Operative Documents. 4. The Borrower has taken all necessary corporate action to authorize the execution, delivery and performance by it of the Operative Documents. 5. The execution, delivery and performance of the Operative Documents by the Borrower, compliance by the Borrower with the terms thereof and the consummation by the Borrower of the transactions contemplated thereby will not (i) conflict with the Certificate of Incorporation or By-laws of the Borrower, (ii) constitute a violation of, or a default under the terms of any Applicable Contract (except we do not express any opinion as to any covenant, restriction or provision of any such agreement or instrument with respect to financial ratios or tests), (iii) result in the creation or imposi- 226 Goldman Sachs Credit Partners, L.P. March 17, 1999 Page 6 tion of any Lien upon property or assets of the Borrower pursuant to the terms of any Applicable Contract, (iv) contravene any provision of any Applicable Laws or Applicable Orders or (v) require any Governmental Approval, except such as have been obtained or made on or prior to the date hereof, such as may be required in connection with the registration under the Securities Act of the Exchange Notes in accordance with the Registration Rights Agreement. 6. Each of the Operative Documents (other than the Exchange Notes) has been duly authorized, executed and delivered by the Borrower and constitutes a valid and binding obligation of the Borrower enforceable against the Borrower in accordance with its terms, except that the waiver contained in Section 4.6 of the Bridge Loan Agreement and Section 4.04 of the Exchange Note Indenture may be unenforceable. 7. The Exchange Notes have been duly authorized, executed and delivered by the Borrower and, assuming due authentication in accordance with the terms of the Exchange Indenture by the Exchange Trustee, upon delivery to the holders of Bridge Loans, in exchange for Bridge Notes, will constitute legal, valid and binding obligations of the Borrower entitled to the benefits of the Exchange Note Indenture and enforceable against the Borrower in accordance with their terms, except that the waiver contained in Section 4.04 of the Exchange Note Indenture may be unenforceable. 8. No registration of the Bridge Loans, the Bridge Notes or the Exchange Notes under the Securities Act of 1933, as amended, is required for the funding of the Bridge Loans and the issuance of the Bridge Notes and the Exchange Notes, except such as may be required in connection with the registration under the Securities Act of the Exchange Notes in accordance with the Registration Rights Agreement, and, in each case, in the manner contemplated by the Bridge Loan Agreement and the Escrow Agreement, as applicable. We express no opinion, however, as to when or under what circumstances the Bridge Loans, the Bridge Notes or the Exchange Notes subsequently may be resold. 9. The Borrower is not and, upon the issuance of the Bridge Notes and the Exchange Notes and the application of the net proceeds to the Borrower of such issuance, will not be an "investment company" within the meaning of the Investment Company Act of 1940, as amended. 227 Goldman Sachs Credit Partners, L.P. March 17, 1999 Page 7 10. None of the transactions contemplated by the Bridge Loan Agreement, including, without limitation, the use of the proceeds of the Bridge Loans provided for in the Loan Documents, will violate or result in a violation of Section 7 of the Securities Exchange Act of 1934, as amended, any regulations issued pursuant thereto, or regulations T, U or X of the Board of Governors of the Federal Reserve System. This opinion is being furnished only to the addressees named above in connection with the satisfaction of the condition precedent specified in Section 5.11 of the Bridge Loan Agreement and is solely for their benefit and is not to be used or relied upon by any other person or for any other purpose without our prior written consent, except that any financial institution who becomes a "Lender" in accordance with Section 6.2 of the Bridge Loan Agreement (as from time to time amended) may rely on this opinion as if addressed and delivered to that financial institution on the date hereof. Very truly yours, 228 Schedule I Lenders Goldman Sachs Credit Partners, L.P. 229 Schedule II Foreign Jurisdictions
Name Jurisdiction - ---- ------------ NTL Incorporated New Jersey New York
230 Schedule III Applicable Contracts 1. Indenture, dated as of April 20, 1995 between the Borrower and Chemical Bank, as Trustee governing the Borrower's 12 3/4% Senior Deferred Coupon Notes Due 2005, as amended by a First Supplemental Indenture, dated as of January 22, 1996, between the Borrower and Chemical Bank, as Trustee, as further amended by a Second Supplemental Indenture, dated as of October 14, 1998, between the Borrower and The Chase Manhattan Bank, as Trustee. 2. Indenture, dated as of January 30, 1996, between the Borrower and Chemical Bank, as Trustee governing the Borrower's 11 1/2% Senior Deferred Coupon Notes Due 2006 as amended by a First Supplemental Indenture, dated October 14, 1998, between the Borrower and The Chase Manhattan Bank, as Trustee. 3. Indenture, dated as of June 12, 1996, between the Borrower and Chemical Bank, as Trustee governing the Borrower's 7% Convertible Subordinated Notes Due 2008. 4. Indenture, dated as of February 12, 1997, between the Borrower and The Chase Manhattan Bank, as Trustee governing the Borrower's 10% Senior Notes Due 2007, as amended by a First Supplemental Indenture, dated as of October 14, 1998, between the Borrower and The Chase Manhattan Bank, as Trustee. 5. Indenture, dated as of March 13, 1998, between the Borrower and The Chase Manhattan Bank, as Trustee governing the Borrower's 9 1/2% Sterling Senior Notes Due 2008. 6. Indenture, dated as of March 13, 1998, between the Borrower and The Chase Manhattan Bank, as Trustee governing the Borrower's 10 3/4% Sterling Senior Deferred Coupon Notes Due 2008. 7. Indenture, dated as of March 13, 1998, between the Borrower and The Chase Manhattan Bank, as Trustee governing the Borrower's 9 3/4% Senior Deferred Coupon Notes Due 2008. 8. Share Exchange Agreement, dated as of June 16, 1998, among the Borrower and the shareholders of Diamond Cable Communications Plc. signatories thereto. 9. Indenture, dated as of November 2, 1998, between the Borrower and The Chase Manhattan Bank, as Trustee governing the Borrower's 111/2% Senior Notes due 2008. 231 10. Indenture, dated as of November 6,1998, between the Borrower and The Chase Manhattan Bank, as Trustee governing the Borrower's 12 3/8% Senior Deferred Coupon Notes due 2008. 11. Indenture, dated as of December 16, 1998, between the Borrower and The Chase Manhattan Bank, as Trustee governing the Borrower's 7% Convertible Subordinated Notes due 2008. 232 Schedule IV Applicable Orders None. 233 Exhibit A NTL INCORPORATED OFFICER'S CERTIFICATE The undersigned certifies that he is a duly elected and authorized officer of NTL Incorporated, a Delaware corporation (the "Borrower"), and that as such he is authorized to execute this certificate on behalf of the Borrower. The undersigned acknowledges that pursuant to Section 5.11 of the Bridge Loan Agreement, Skadden, Arps, Slate, Meagher & Flom LLP ("SASM&F") is rendering a legal opinion to the Administrative Agent and the Lenders (the "Opinion"). The undersigned further understands that SASM&F is relying on this officer's certificate and the statements made herein in rendering the Opinion and the Lenders are relying on clauses (iv) and (v) of this officer's certificate being provided in connection with the Opinion and the Loan Documents. Capitalized terms used herein and not otherwise defined herein shall have the same meanings herein as ascribed thereto in the Opinion. With regard to the foregoing, the undersigned further certifies that on behalf of the Borrower and its subsidiaries: (i) the undersigned is familiar with the covenants contained in each of the Applicable Contracts. (ii) due inquiry has been made of all persons deemed necessary or appropriate to verify or confirm the statements contained herein. (iii) all the proceeds of the Bridge Loans, Bridge Notes and Exchange Notes will be used in accordance with the applicable provisions of each of the relevant Applicable Contracts; without limiting the generality of the foregoing, each of the Diamond Notes constitutes Permitted Acquired Debt (as defined in the Borrower's Applicable Contracts relating to its 9 1/2% Notes, 9 3/4% Notes, 10% Notes, 10 3/4% Notes, 11 1/2% Deferred Coupon Notes, 11 1/2% Notes, 12 3/4% Notes and 12 3/8% Notes). (iv) Set forth on Schedule I hereto are all of the agreements or instru ments governing the Borrower's material indebtedness and the primary agreement governing the acquisition of the Acquired Business. (v) Set forth on Schedule II hereto are all of the orders, judgments and decrees of any governmental authority which are material to the business or property of the Borrower. 234 (vi) Set forth on Schedule III hereto are all of the jurisdictions in which the Borrower is qualified to do business as a foreign corporation. (vii) The value of all securities owned by the Borrower (excluding those issued by majority-owned Subsidiaries of the Borrower) does not exceed 10% of the value of the Borrower's total assets. (viii)Less than 25 percent of the assets of the Borrower on a consoli dated basis and on an unconsolidated basis consist of margin stock (as such term is defined in Regulation U of the Board of Governors of the Federal Reserve System). (ix) The Borrower (a) is primarily engaged, directly or through a wholly-owned subsidiary or subsidiaries, in a business or businesses other than that of investing, reinvesting, owning, holding or trading in securities and (b) is not engaged and does not propose to engage in the business of investing, reinvesting, owning, holding or trading in securities, and does not own or propose to acquire investment securities having a value exceeding 40 percent of the value of the Borrower's total assets (exclusive of government securities and cash items) on an unconsolidated basis. IN WITNESS WHEREOF, the undersigned has executed this certificate this th day of March, 1999. By:_______________________________ Name: J. Barclay Knapp Title: President, Chief Executive Officer and Chief Financial Officer 235 Schedule I Applicable Contracts 1. Indenture, dated as of April 20, 1995 between the Borrower and Chemical Bank, as Trustee governing the Borrower's 12 3/4% Senior Deferred Coupon Notes Due 2005, as amended by a First Supplemental Indenture, dated as of January 22, 1996, between the Borrower and Chemical Bank, as Trustee, as further amended by a Second Supplemental Indenture, dated as of October 14, 1998, between the Borrower and The Chase Manhattan Bank, as Trustee. 2. Indenture, dated as of January 30, 1996, between the Borrower and Chemical Bank, as Trustee governing the Borrower's 11 1/2% Senior Deferred Coupon Notes Due 2006 as amended by a First Supplemental Indenture, dated October 14, 1998, between the Borrower and The Chase Manhattan Bank, as Trustee. 3. Indenture, dated as of June 12, 1996, between the Borrower and Chemical Bank, as Trustee governing the Borrower's 7% Convertible Subordinated Notes Due 2008. 4. Indenture, dated as of February 12, 1997, between the Borrower and The Chase Manhattan Bank, as Trustee governing the Borrower's 10% Senior Notes Due 2007, as amended by a First Supplemental Indenture, dated as of October 14, 1998, between the Borrower and The Chase Manhattan Bank, as Trustee. 5. Indenture, dated as of March 13, 1998, between the Borrower and The Chase Manhattan Bank, as Trustee governing the Borrower's 9 1/2% Sterling Senior Notes Due 2008. 6. Indenture, dated as of March 13, 1998, between the Borrower and The Chase Manhattan Bank, as Trustee governing the Borrower's 10 3/4% Sterling Senior Deferred Coupon Notes Due 2008. 7. Indenture, dated as of March 13, 1998, between the Borrower and The Chase Manhattan Bank, as Trustee governing the Borrower's 9 3/4% Senior Deferred Coupon Notes Due 2008. 8. Share Exchange Agreement, dated as of June 16, 1998, among the Borrower and the shareholders of Diamond Cable Communications Plc. signatories thereto. 9. Indenture, dated as of November 2, 1998, between the Borrower and The Chase Manhattan Bank, as Trustee governing the Borrower's 111/2% Senior Notes due 2008. 236 10.Indenture, dated as of November 6,1998, between the Borrower and The Chase Manhattan Bank, as Trustee governing the Borrower's 12 3/8% Senior Deferred Coupon Notes due 2008. 11.Indenture, dated as of December 16, 1998, between the Borrower and The Chase Manhattan Bank, as Trustee governing the Borrower's 7% Convertible Subordinated Notes due 2008. 237 Schedule II Applicable Orders None. 238 Schedule III Foreign Jurisdictions
Name Jurisdiction - ---- ------------ NTL Incorporated New Jersey New York
239 EXHIBIT F-2 [FORM OF GENERAL COUNSEL OPINION] [March , 1999] Goldman, Sachs Credit Partners, L.P. c/o Goldman, Sachs & Co. 85 Broad Street New York, NY 10004, as Administrative Agent The Lenders listed on Schedule I attached hereto Re: NTL Incorporated Ladies and Gentleman: I am the General Counsel to NTL Incorporated, a Delaware corporation (the "Borrower"), and have so acted in connection with the execution and delivery of that certain Bridge Loan Agreement, dated as of March __, 1999 (the "Bridge Loan Agree ment"), among the Borrower and Goldman Sachs Credit Partners L.P., as arranger and administrative agent (the "Administrative Agent"). This opinion is being delivered to you pursuant to Section 5.11 of the Bridge Loan Agreement. Capitalized terms used herein and not otherwise defined herein shall have the same meanings herein as ascribed thereto in the Bridge Loan Agreement. In rendering the opinions set forth below, I have examined and relied on originals or copies, certified or otherwise identified to our satisfaction, of the following: (a) the Bridge Loan Agreement; (b) the Bridge Notes; (c) the Registration Rights Agreement; 240 Goldman Sachs Credit Partners, L.P. March , 1999 Page 2 (d) the Escrow Agreement; (e) the Exchange Note Indenture; (f) the Exchange Notes; and (g) such other documents as I have deemed necessary or appropriate as a basis for the opinions set forth below. The documents referred to in clauses (a) through (f) above are hereinafter referred to collectively as the "Operative Documents". In my examination I have assumed the genuineness of all signatures, the legal capacity of all natural persons, the authenticity of all documents submitted to me as originals, the conformity to original documents of all documents submitted to me as certified or photostatic copies, and the authenticity of the originals of such copies. As to any facts material to this opinion which I did not independently establish or verify, I have relied upon statements and representations of the Borrower and its officers and other representatives, and of others. I do not express any opinion as to the laws of any jurisdiction other than the laws of the State of New York. Based upon the foregoing and subject to the assumptions and qualifica tions set forth herein, I am of the opinion that: 1. Except as set forth on Schedule 3.13 to the Bridge Loan Agree ment, to my actual knowledge, there are no legal or governmental proceedings pending or threatened against the Borrower or any of its subsidiaries, or to which any of their respective properties is subject, that could reasonable be expected to have a Material Adverse Effect. 2. To my actual knowledge, neither the Borrower nor any Subsidiary (i) is in default (which default has not been waived) under any agreement, document or instrument to which it is a party or by which it or any of its assets is bound or (ii) is in violation of any law, rule, regulation, judgement, writ, determination, order, decree or 241 Goldman Sachs Credit Partners, L.P. March , 1999 Page 3 arbitral award to which the Borrower or any Subsidiary is a party or by which the Borrower or any Subsidiary or any of their respective properties is bound, which default or violation, as the case may be, would constitute a Default or Event of Default under the Bridge Loan Agreement or otherwise could reasonably be expected to have a Material Adverse Effect. This opinion is being furnished only to the addressees named above in connection with the satisfaction of the condition precedent specified in Section 5.11 of the Bridge Loan Agreement and is solely for their benefit and is not to be used or relied upon by any other person or for any other purpose without our prior written consent, except that any financial institution who becomes a "Lender" in accordance with Section 6.2 of the Bridge Loan Agreement (as from time to time amended) may rely on this opin ion as if addressed and delivered to that financial institution on the date hereof. Very truly yours, By:______________________________ Richard J. Lubasch General Counsel 242 EXHIBIT G-1 FORM OF BRIDGE NOTE GUARANTEE THIS GUARANTEE (as amended, supplemented, amended and restated or otherwise modified from time to time, this "Guarantee") is made and entered into as of ____________, ____, by ________________, a _____________ corporation (the "Guarantor"), in favor of GOLDMAN SACHS CREDIT PARTNERS, L.P., in its capacity as administrative agent (in such capacity, the "Administrative Agent"), for the benefit of the Lenders (as defined below) of the Bridge Notes issued pursuant to that certain Bridge Loan Agreement, dated as of March 17, 1999 (the "Bridge Loan Agreement"), among NTL Incorporated, a Delaware corporation (the "Borrower"), the Lenders party thereto and Goldman Sachs Credit Partners, L.P., as Administrative Agent. The Administrative Agent and the Lenders are referred to herein as, the "Guaranteed Parties"). Capitalized terms used herein and not otherwise defined shall have the meanings given in the Bridge Loan Agreement. RECITALS The Guarantor will derive significant direct and indirect benefits from the issuance of the Bridge Notes pursuant to the Bridge Loan Agreement. AGREEMENT NOW THEREFORE, in consideration of the promises and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Guarantor hereby agrees with the Administrative Agent for its benefit and the ratable benefit of the Guaranteed Parties as follows: SECTION 1. THE GUARANTEE. The guarantee of the Guarantor hereunder is as follows: Section 1.1. Guarantee. Subject to Section 1.2, the Guarantor hereby unconditionally, absolutely and irrevocably guarantees to the Guaranteed Parties and their successors, endorsees, transferees and assigns, the prompt payment (whether at stated maturity, on mandatory prepayment, by acceleration or otherwise) and performance of all of the Obligations of the Borrower under the Bridge Loan Agreement and the other Loan Documents (the "Guaranteed Obligations"). The Guarantor agrees that this Guarantee is a guaranty of payment and performance and not of collection, and that its obligations under this Guarantee shall be joint and several with any other Persons which may at any time or from time to time be or become directly or indirectly financially responsible to the Guaranteed Parties with respect to the Guaranteed Obligations and shall be under all circumstances primary, absolute and unconditional, irrespective of, and unaffected by: (a) the genuineness, validity, regularity, enforceability or any future amendment of, or change in, this Guarantee, the Bridge Loan Agreement, any other Loan 243 Document or other agreement, document or instrument to which the Borrower is or are or may become a party; (b) the absence of any action to enforce this Guarantee, the Bridge Loan Agreement, any other Loan Document or the waiver or consent by the Guaranteed Parties with respect to any of the provisions hereof or thereof; (c) [intentionally omitted] (d) any bankruptcy, insolvency, reorganization, arrangement, adjustment, composition, liquidation or the like of the Borrower including, but not limited to, (i) any Guaranteed Party's election, in any proceeding instituted under Title 11 of the United States Code (11 U.S.C. ss. 101 et seq.) or any replacement or supplemental federal statutes dealing with the bankruptcy of debtors (the "Bankruptcy Code"), of the application of Section 1111(b)(2) or any successor provision of the Bankruptcy Code, (ii) any borrowing, issuance of notes or grant of a lien by the Borrower as debtor-in-possession, under Section 364 of the Bankruptcy Code, or (iii) the disallowance of all or any portion of any Guaranteed Party's claim(s) for repayment of the Guaranteed Obligations under Section 502 of the Bankruptcy Code; (e) any merger or consolidation of the Borrower into or with any other Person, or any sale, lease or transfer of any or all of the assets of the Borrower to any other Person; (f) any circumstance which might constitute a defense available to, or a discharge of the Borrower; (g) any sale, transfer or other disposition of any stock, limited liability company interests, partnership interests or other ownership interests of the Borrower; (h) absence of any notice to, or knowledge by, the Guarantor of the existence or occurrence of any of the matters or events set forth in the foregoing clauses (a) through (g); or (i) any other fact or circumstance which might otherwise constitute a defense available to, or a discharge of, a surety or guarantor; it being agreed by the Guarantor that its obligations under this Guarantee shall not be discharged until the payment in immediately available funds and performance, in full, of the Guaranteed Obligations or written release of the Guarantor by the Guaranteed Parties, whichever shall occur first. The Guarantor shall be regarded, and shall be in the same position, as principal debtor with respect to the Guaranteed Obligations and specifically agrees that, notwithstanding any discharge of the Borrower, any other Person or the operation of any other provision of the Bankruptcy Code with respect to the Guaranteed Obligations or any such Persons, the Guarantor shall be fully responsible for paying all interest which may at any time accrue with respect to the Guaranteed Obligations or which would accrue but for the operation of any provision of or doctrine with respect to the Bankruptcy Code and whether or not an allowed claim. The Guarantor expressly waives all rights it may have now or in the future under any statute, or at common law, or at law or in equity, or otherwise, to compel the Guaranteed Parties to proceed in respect of the Guaranteed Obligations against the Borrower or any other Person before proceeding against, or as a condition to proceeding against, the Guarantor. The Guarantor agrees 2 244 that any notice or directive given at any time to the Guaranteed Parties which is inconsistent with the waiver in the immediately preceding sentence shall be null and void and may be ignored by the Guaranteed Parties, and, in addition, may not be pleaded or introduced as evidence in any litigation relating to this Guarantee for the reason that such pleading or introduction would be at variance with the written terms of this Guarantee unless the Administrative Agent has specifically agreed otherwise in a writing expressly referring to this Section 1.1. It is agreed between the Guarantor and the Guaranteed Parties that the foregoing waivers are of the essence of the transaction contemplated by the Loan Documents and that, but for this Guarantee and such waivers, the Guaranteed Parties would have declined to enter into the Bridge Loan Agreement. Section 1.2. Maximum Liability. Notwithstanding any provision to the contrary herein or in any other Loan Document, the maximum liability of the Guarantor hereunder shall be limited to the maximum aggregate amount as would not render the Guarantor's obligations hereunder subject to avoidance as a fraudulent transfer or conveyance under Section 548 of the Bankruptcy Code (as hereinafter defined) or any applicable provisions of any state or foreign law having similar effect. Section 1.3. Demand By The Administrative Agent. In addition to the terms of the Guarantee set forth in Section 1.1 hereof, and in no manner imposing any other limitation on such terms, it is expressly understood and agreed that, if any or all of the then outstanding principal amount of the Guaranteed Obligations (together with all accrued but unpaid interest thereon, any prepayment premium, any Liquidated Damages and any Additional Amounts payable in respect thereof) becomes due and payable, then the obligations of the Guarantor shall, at the option of the Administrative Agent, without notice or demand, become due and payable and the Guarantor shall, upon demand in writing therefor by the Administrative Agent to such Guarantor, pay to the holder or holders of the Guaranteed Obligations the outstanding Guaranteed Obligations due and owing to such holder or holders. Payment by the Guarantor shall be made in dollars to the Administrative Agent for the ratable benefit of the Guaranteed Parties, in immediately available funds to an account designated by the Administrative Agent or at the address set forth herein for the giving of notice to the Administrative Agent or at any other address that may be specified in writing from time to time by the Administrative Agent. Section 1.4. Enforcement Of Guarantee. In no event shall the Administrative Agent or any Guaranteed Party have any obligation (although it is entitled, at its option) to proceed against the Borrower or any other Person before seeking satisfaction from the Guarantor, and the Administrative Agent may proceed, prior or subsequent to, or simultaneously with, the enforcement of the Guaranteed Parties' rights hereunder, to exercise any right or remedy which it or they may have. The obligations of the Guarantor hereunder are independent of the obligations of any other guarantor of the Guaranteed Obligations of the Borrower, and a separate action or actions may be brought and prosecuted against the Guarantor whether or not action is brought against any other guarantor or the Borrower, and whether or not any other guarantor or the Borrower is joined in any such action or actions. Section 1.5. Waivers. In addition to the waivers contained in Section 1.1 hereof, the Guarantor waives, and agrees that it shall not at any 3 245 time insist upon, plead or in any manner whatever claim or take the benefit or advantage of, any appraisal, valuation, stay, extension, marshaling of assets or redemption or similar laws, or exemption, whether now or at any time hereafter in force, which may delay, prevent or otherwise affect the performance by the Guarantor of its obligations under, or the enforcement by the Administrative Agent or any Guaranteed Party of, this Guarantee. The Guarantor hereby waives diligence, presentment and demand (whether for nonpayment or protest or of acceptance, maturity, extension of time, change in nature or form of the Guaranteed Obligations, acceptance of further security, release of further security, composition or agreement arrived at as to the amount of, or the terms of, the Guaranteed Obligations, notice of adverse change in the Borrower's financial condition or any other fact which might materially increase the risk to such Guarantor) with respect to any of the Guaranteed Obligations (except as provided in Section 1.3 above) and waives the benefit of all provisions of law which are or might be in conflict with the terms of this Guarantee. The Guarantor hereby waives any requirement on the part of any holder of any Bridge Note to mitigate the damages resulting from any default under such Bridge Note. The Guarantor represents, warrants and agrees that, as of the date of this Guarantee, its obligations under this Guarantee are not subject to any offsets or defenses against any Guaranteed Party or the Borrower of any kind. The Guarantor further agrees that its obligations under this Guarantee shall not be subject to any counterclaims, offsets or defenses against any Guaranteed Party or the Borrower of any kind which may arise in the future. Section 1.6. Benefit Of Guarantee. The provisions of this Guarantee are for the ratable benefit of the Guaranteed Parties and their respective successors, transferees, endorsees and assigns, and nothing herein contained shall impair, as between the Borrower and the Guaranteed Parties, the obligations of the Borrower under the Loan Documents. In the event all or any part of the Guaranteed Obligations are transferred, endorsed or assigned by the Guaranteed Parties to any Person or Persons in accordance with the terms of the Bridge Loan Agreement, any reference to "Guaranteed Parties" herein shall be deemed to refer equally to such Person or Persons. Section 1.7. Modification Of Guaranteed Obligations. If the Guaranteed Parties shall at any time or from time to time, with or without the consent of, or notice to, the Guarantor: (a) issue Bridge Notes or extend other credit to the Borrower, change the time, manner or place of payment of, or any other term of, all or any portion of, the Guaranteed Obligations, or otherwise waive or consent to any departure from the terms of any Loan Document; (b) take any action under or in respect of the Loan Documents in the exercise of any remedy, power or privilege contained therein or available to it at law, equity or otherwise, or waive or refrain from exercising any such remedies, powers or privileges; (c) amend or modify, in any manner whatsoever, the Loan Documents; (d) extend or waive the time for and of any Guarantor's, the Borrower's or any other Person's performance of, or compliance with, any term, covenant or agreement on its part to be performed or observed under the Loan Documents, or waive such performance or compliance or consent to a failure of, or departure from, such performance or compliance; 4 246 (e) [intentionally omitted]; (f) release or limit the liability of anyone who may be liable in any manner for the payment of any amounts owed by the Guarantor or the Borrower to the Guaranteed Parties; (g) modify or terminate the terms of any intercreditor or subordination agreement pursuant to which claims of other creditors of the Guarantor or the Borrower are subordinated to the claims of any of the Guaranteed Parties; and/or (h) apply any sums by whomever paid or however realized to any amounts owing by the Guarantor or the Borrower to the Guaranteed Parties in such manner as the Guaranteed Parties shall determine in their discretion; then the Guaranteed Parties shall not incur any liability to the Guarantor pursuant hereto as a result thereof and no such action shall impair or release the obligations of the Guarantor under this Guarantee. Section 1.8. Reinstatement. This Guarantee shall remain in full force and effect and continue to be effective in the event any petition is filed by or against the Borrower, the Guarantor or any other Person for liquidation or reorganization, in the event the Borrower, the Guarantor or any other Person becomes insolvent or makes an assignment for the benefit of creditors or in the event a receiver or trustee is appointed for all or any significant part of any of the Borrower's, the Guarantor's or such other Person's assets, and shall continue to be effective or be reinstated, as the case may be, if at any time payment and performance of the Guaranteed Obligations, or any part thereof, is, pursuant to applicable law, rescinded or reduced in amount, or must otherwise be restored or returned by the Guaranteed Parties, whether as a "voidable preference", "fraudulent conveyance", or otherwise, all as though such payment or performance had not been made. In the event that any payment, or any part thereof, is rescinded, reduced, restored or returned, the Guaranteed Obligations shall be reinstated and deemed reduced only by such amount paid and not so rescinded, reduced, restored or returned. Section 1.9. Waiver Of Subrogation. THE GUARANTOR HEREBY IRREVOCABLY WAIVES UNTIL INDEFEASIBLE PAYMENT IN FULL OF THE OBLIGATIONS ALL RIGHTS OF SUBROGATION (WHETHER CONTRACTUAL, UNDER SECTION 509 OF THE BANKRUPTCY CODE, UNDER COMMON LAW, OR OTHERWISE) TO THE CLAIMS OF THE GUARANTEED PARTIES AGAINST THE BORROWER AND ALL CONTRACTUAL, STATUTORY OR COMMON LAW RIGHTS OF CONTRIBUTION, REIMBURSEMENT, INDEMNIFICATION AND SIMILAR RIGHTS AND "CLAIMS" (AS SUCH TERM IS DEFINED IN THE BANKRUPTCY CODE) AGAINST BORROWER WHICH ARISE IN CONNECTION WITH, OR AS A RESULT OF, THIS GUARANTEE. Section 1.10. Continuing Guarantee; Transfer Of Notes. This Guarantee is a continuing guaranty and shall (i) remain in full force and effect until payment in immediately available funds and performance in full of the Guaranteed Obligations, (ii) be binding upon the Guarantor and its successors and permitted transferees and assigns, and (iii) inure, together with 5 247 the rights and remedies of the Guaranteed Parties hereunder, to the benefit of the Guaranteed Parties and their respective permitted successors, transferees, endorsees and assigns. Without limiting the generality of foregoing clause (iii), any Guaranteed Party may, except as limited by the express terms of the Bridge Loan Agreement, assign or otherwise transfer any Bridge Note held by it to any other Person or entity, and such other Person or entity shall thereupon become vested with all the benefits in respect thereof granted to such Guaranteed Party herein or otherwise. SECTION 2. SUBORDINATION OF OTHER OBLIGATIONS. Any indebtedness of the Borrower now or hereafter held by or owed to any Guarantor is hereby subordinated in right of payment to the Guaranteed Obligations, and any such indebtedness of the Borrower to the Guarantor collected or received by the Guarantor shall be held in trust for the Administrative Agent on behalf of the Guaranteed Parties and shall forthwith be paid over to the Administrative Agent for the benefit of the Guaranteed Parties in the form received (with any necessary or requested endorsements) to be credited and applied against the Guaranteed Obligations but without affecting, impairing or limiting in any manner the liability of the Guarantor under any other provision of this Guarantee. SECTION 3. DELIVERIES. In a form satisfactory to the Administrative Agent, the Guarantor shall deliver to the Administrative Agent, concurrently with the execution of this Guarantee, the other instruments, certificates and documents as are required to be delivered by the Guarantor on or before the date hereof to the Guaranteed Parties under the Bridge Loan Agreement. SECTION 4. REPRESENTATIONS, WARRANTIES AND COVENANTS. As of the date hereof, the Guarantor hereby represents and warrants to the Guaranteed Parties that each of the following representations and warranties is true: Section 4.1. Organization; Powers. The Guarantor has been duly incorporated and is validly existing as a corporation in good standing under the laws of the State of _______ with power and authority (corporate and other) to own its properties and conduct its business as now conducted and as proposed to be conducted, and has been duly qualified as a foreign corporation for the transaction of business and is in good standing under the laws of each other jurisdiction in which it owns or leases properties or conducts any business so as to require such qualification, or is subject to no material liability or disability by reason of the failure to be so qualified in any such jurisdiction. The Guarantor has all requisite corporate power and authority to execute, deliver and perform its obligations under this Guarantee. Section 4.2. Due Authorization and Enforceability. This Guarantee: (i) has been duly authorized, executed and delivered by the Guarantor and (ii) constitutes a valid and binding obligation of the Guarantor enforceable against the Guarantor in accordance with its terms, subject, as to enforcement, to bankruptcy, insolvency, reorganization and other laws of general applicability relating to or affecting creditors' rights and to general equity principles. Section 4.3. No Conflicts. The execution and delivery of this Guarantee, the consummation of the transactions contemplated hereby and compliance with the terms and provisions hereof will not require any consent, approval, authorization or other order of any 6 248 court, regulatory body, administrative agency or other governmental body, will not conflict with or result in a breach or violation of any of the terms or provisions of, or constitute a default under, any indenture, mortgage, deed of trust, sale/leaseback agreement, loan agreement or other similar financing agreement or instrument or other agreement or instrument to which the Guarantor is a party or by which the Guarantor is bound or to which any of the property or assets of the Guarantor is subject, nor will such action result in any violation of the provisions of the Certificate of Incorporation or By-laws (or other governing documents) of the Guarantor or any statute or any order, rule or regulation of any court or governmental agency or body having jurisdiction over the Guarantor or any of its properties; and no consent, approval, authorization, order, registration or qualification of or with any such court or governmental agency or body is required for the consummation by the Guarantor of the transactions contemplated by this Guarantee. Section 4.4. No Violations; Material Contracts. The Guarantor is not in violation of its Certificate of Incorporation or By-laws or other governing documents or in default in the performance or observance of any obligation, agreement or condition contained in any bond, debenture, note or any other evidence of indebtedness or in any indenture, mortgage, deed of trust, loan agreement, lease or other agreement or instrument to which it is a party or by which it or any of its properties may be bound or to which any of its properties is subject or is in violation of any law, statute, rule, regulation, judgment or court decree applicable to the Guarantor or any of its properties, nor has any event occurred which with notice or lapse of time or both would constitute such a violation or default, except in each case, which could not reasonably expected to have a Material Adverse Effect. "Material Adverse Effect" means any circumstance or event that (i) has, or may be reasonably expected to have, any materially adverse effect upon the validity or enforceability of this Guarantee, (ii) is, or may be reasonably expected to be, materially adverse to the consolidated financial condition, business, operations, assets, liabilities, management or prospects of the Guarantor, or (iii) materially impairs the ability of the Guarantor to perform its Obligations under this Guarantee. Section 4.5. Absence of Proceedings. There are no material investigations, proceedings or actions, whether judicial or administrative and whether brought by any regulatory body, administrative agency or other governmental body or by any other person, pending, or, to the knowledge of the Guarantor, threatened, to which the Guarantor is a party or of which any of its properties is the subject which, if determined adversely to the Guarantor, individually or in the aggregate, could reasonably be expected to have a Material Adverse Effect; and, to the best of the Guarantor's knowledge, no such proceedings are threatened or contemplated by governmental authorities or threatened by others. Section 4.6. Mandatory Prepayment.The Guarantor shall prepay, or cause the Borrower to prepay, the Bridge Loans ratably in accordance with the aggregate outstanding principal balances thereof, with the Net Cash Proceeds of: (i) any direct or indirect public offering or private placement of any debt or equity securities of the Guarantor issued after the Closing Date, (ii) the incurrence of any other Indebtedness by the Guarantor after the Closing Date and (iii) any Asset Sale by the Guarantor after the Closing Date (other than an Asset Sale permitted under Section 4.10 of the Bridge Loan Agreement) (each of the transactions in the foregoing clauses (i), (ii) and (iii), a "Capital Markets Transaction"). The Bridge Loans prepaid by the Borrower or the Guarantor, as applicable, in accordance with Section 2.4 of the Bridge 7 249 Loan Agreement shall be paid in the following order priority: first, the Series C Bridge Loans, second, the Series B Bridge Loans, and third, the Series A Bridge Loans. Subject to Section 2.6 and Section 2.7 of the Bridge Loan Agreement, the Guarantor shall, not later than the fifth Business Day following any Capital Markets Transaction, apply, or cause to be applied, such Net Cash Proceeds or excess available cash to prepay the Bridge Loans pursuant to this Section 4.6 and Section 2.4 of the Bridge Loan Agreement, without premium or penalty, by paying to each Lender an amount equal to 100% of such Lender's pro rata share of the aggregate principal amount of the Bridge Loans to be prepaid, plus accrued and unpaid interest thereon to the Prepayment Date. SECTION 5. FURTHER ASSURANCES. The Guarantor agrees, upon the written request of the Administrative Agent, and at the Guarantor's expense, to execute and deliver to the Administrative Agent, from time to time, any additional instruments or documents considered necessary or advisable by the Administrative Agent to cause this Guarantee to be, become or remain valid and effective in accordance with its terms. SECTION 6. PAYMENTS FREE AND CLEAR OF TAXES. Section 6.1. Payment of Taxes. If at any time the Guarantor is required to make any deduction or withholding in respect of Taxes from any payment due under this Guaranty or any other Loan Document for the account of the Administrative Agent or any Guaranteed Party, the sum due from such Guarantor in respect of such payment shall, subject to Section 6.2, be increased to the extent necessary to yield to the Administrative Agent and each Guaranteed Party on the due date for such payment (free from any liability in respect of such deduction or withholding) a net sum equal to the sum which it would have received had no such deduction or withholding been required to be made, and such Guarantor shall, or shall cause the other Guarantors to, indemnify the Administrative Agent and each Guaranteed Party against any losses or costs incurred by any of them by reason of any failure of such Guarantor to make any such deduction or withholding or by reason of any increased payment not being made on the due date for such payment. Each Guarantor shall pay the full amount deducted or withheld to the relevant taxing or other authority in accordance with applicable Requirements of Law and as promptly as possible thereafter deliver to the Administrative Agent or the applicable Guaranteed Party the original or a certified copy of an original official receipt received by the Guarantor showing payment thereof. Section 6.2. Other Taxes. The Guarantor agrees to pay Other Taxes and defend and hold the Administrative Agent and each Guaranteed Party harmless from and against any and all liabilities with respect to Other Taxes or resulting from any delay or omission to pay such Other Taxes. Section 6.3. Indemnification. The Guarantor agrees to indemnify, defend and hold harmless the Administrative Agent and each Guaranteed Party for the full amount of Taxes and Other Taxes (including, without limitation, any Taxes and Other Taxes imposed or asserted (whether or not correctly) by any jurisdiction on amounts payable under this Section 6) paid by 8 250 the Administrative Agent or such Guaranteed Party (as the case may be) and any liability (including any penalties, interest and expenses) arising therefrom or with respect thereto. This indemnification shall be paid within five days after the Administrative Agent or the applicable Guaranteed Party (as the case may be) makes demand therefor. Section 6.4. Survival. Without prejudice to the survival of any other agreement of the Guarantors hereunder, the agreements and obligations of the Guarantor contained in this Section 6 shall survive the payment in full of the Guaranteed Obligations. Section 6.5. Transferees. The Guarantor agrees that the provisions of this Section 6 shall inure to the benefit of any transferee of any Bridge Note. SECTION 7. RIGHT OF SET-OFF. In addition to and not in limitation of all rights of offset that any Guaranteed Party or other holder of a Bridge Note may have under applicable law or under any Loan Document, each Guaranteed Party or other holder of a Bridge Note shall upon the occurrence and during the continuation of any Event of Default and whether or not such Guaranteed Party or such holder has made any demand or such Guarantor's obligations are matured, have the right to appropriate and apply to the payment of such Guarantor's obligations hereunder, all deposits (general or special, time or demand, provisional or final) then or thereafter held by and other indebtedness or property then or thereafter owing by such Guaranteed Party or other holder to such Guarantor, whether or not related to this Guarantee or any transaction hereunder. SECTION 8. MISCELLANEOUS. Section 8.1. Amendments. Any amendment or waiver of any provision of this Guarantee and any consent to any departure by the Guarantor from any provision of this Guarantee shall be effective only if made or given in compliance with all of the terms and provisions of Section 12.3 of the Bridge Loan Agreement. Section 8.2. Expenses. The Guarantor shall promptly pay to the Administrative Agent, for the ratable benefit of the Guaranteed Parties, the amount of any and all reasonable out-of-pocket costs and expenses of the Guaranteed Parties (both before and after the execution hereof) in connection with any matters contemplated by or arising out of this Guarantee or any of the Loan Documents whether (a) costs and expenses of the Administrative Agent and the Guaranteed Parties to prepare, negotiate or execute (i) any amendment to, modification of or extension of this Guarantee or any other Loan Document to which the Guarantor is a party or (ii) any instrument, document or agreement in connection with any sale or attempted sale of any interest herein to any assignee or participant, (b) to commence, defend, or intervene in any litigation or to file a petition, complaint, answer, motion or other pleadings necessary to protect or enforce the rights of the Guaranteed Parties under this Guarantee or any other Loan Document, (c) to take any other action in or with respect to any suit or proceeding (bankruptcy or otherwise) necessary to protect the rights of the Guaranteed Parties under this Guarantee or any other Loan Document or to respond to any subpoena, deposition or interrogatory with respect to any litigation involving any Guarantor, or (d) to attempt to enforce or to enforce any rights of the Guaranteed Parties to collect any of the Guaranteed Obligations, including all reasonable fees and expenses of attorneys and paralegals (including reasonable charges for inside counsel). 9 251 Section 8.3. Headings. The headings in this Guarantee are for purposes of reference only and shall not otherwise affect the meaning or construction of any provision of this Guarantee. Section 8.4. Severability. The provisions of this Guarantee are severable, and if any clause or provision shall be held invalid or unenforceable in whole or in part in any jurisdiction, then such invalidity or unenforceability shall affect in that jurisdiction only such clause or provision, or part thereof, and shall not in any manner affect such clause or provision in any other jurisdiction or any other clause or provision of this Guarantee in any jurisdiction. Section 8.5. Notices. All notices, approvals, consents or other communications required or desired to be given hereunder shall be in the form and manner provided in the Bridge Loan Agreement, and delivered to each of the parties hereto at their respective addresses set forth below: If to the Administrative Agent: Goldman Sachs Credit Partners L.P. c/o Goldman Sachs & Co. 85 Broad Street New York, NY 10004 Attention: [Amy Shapero] Telecopy: 902-3000 with a copy to: Kirk A. Davenport Latham & Watkins 885 Third Avenue New York, NY 10022-4802 Telecopy: (212) 751-4864 If to the Guarantor: NTL Incorporated 110 East 59th Street New York, NY 10022 Attention: Richard Lubasch, Esq. Telecopy: (212) 906-8497 Section 8.6. Remedies Cumulative. Each right, power and remedy of the Guaranteed Parties provided in this Guarantee or now or hereafter existing at law or in equity or by statute or otherwise shall be cumulative and concurrent and shall be in addition to every other right, power or remedy provided for in this Guarantee or now or hereafter existing at law or in equity or by statute or otherwise. The exercise or partial exercise by the Guaranteed Parties of any one or more of such rights, powers or remedies shall not preclude the simultaneous or later exercise by the Guaranteed Parties of all such other rights, powers or remedies, and no failure or delay on the part of any Guaranteed Party to exercise any such right, power or remedy shall operate as a waiver thereof. 10 252 Section 8.7. Statute of Limitations. To the full extent permitted by applicable law, the Guarantor hereby waives the right to plead any statute of limitations as a defense to performance of its obligations under, or enforcement of, this Guarantee. Section 8.8. Final Expression. This Guarantee, together with any other agreement executed in connection herewith, is intended by the parties as a final expression of the Guarantee and is intended as a complete and exclusive statement of the terms and conditions thereof. Acceptance of or acquiescence in a course of performance rendered under this Guarantee shall not be relevant to determine the meaning of this Guarantee even though the accepting or acquiescing party had knowledge of the nature of the performance and opportunity for objection. Section 8.9. Financial Status. The Guarantor hereby assumes responsibility for keeping itself informed of the financial condition of the Guarantor and the Borrower and any and all endorsers and/or other guarantors of any instrument or document evidencing all or any part of the Guaranteed Obligations and of all other circumstances bearing upon the risk of nonpayment or nonperformance of the Guaranteed Obligations or any part thereof that diligent inquiry would reveal, and the Guarantor hereby agrees that the Guaranteed Parties shall have no duty to advise the Guarantor of information known to the Guaranteed Parties regarding such condition or any such circumstances. In the event the Guaranteed Parties, in their discretion, undertake at any time or from time to time to provide any such information to the undersigned, the Guaranteed Parties shall be under no obligation (i) to undertake any investigation not a part of their regular business routine, (ii) to disclose any information which the Guaranteed Parties wish to maintain confidential, or (iii) to make any other or future disclosures of such information or any other information to the Guarantor or any other Person. Section 8.10. Assignability. This Guarantee shall be binding on the Guarantor and its successors and permitted assigns and transferees and shall inure to the benefit of the Guaranteed Parties and their respective successors, transferees, endorsees and assigns. The Guarantor may not assign this Guarantee. Section 8.11. Non-Waiver. The failure of any Guaranteed Party to exercise any right or remedy hereunder, or promptly to enforce any such right or remedy, shall not constitute a waiver thereof, nor give rise to any estoppel against any Guaranteed Party, nor excuse any Guarantor from its obligations hereunder. Section 8.12. Termination. Subject to the provisions of Sections 1.8 and 6.4, this Guarantee shall terminate upon the receipt by each of the Guaranteed Parties of the payment in immediately available funds and performance in full of the Guaranteed Obligations and any other amounts which may be owing hereunder, or the written release of the Guarantor by the Guaranteed Parties, whichever shall occur first. At the time of such termination, the Guaranteed Parties, at the request and expense of the Guarantor, will execute and deliver to the Guarantor a proper instrument or instruments acknowledging the satisfaction and termination of this Guarantee. Section 8.13. Counterparts. This Guarantee may be executed in any number of counterparts and by the different parties hereto on separate counterparts, each of which, when so 11 253 executed and delivered, shall be an original, but all of which shall together constitute one and the same agreement. Section 8.14. New York Law; Submission to Jurisdiction; Waiver of Jury Trial. THIS GUARANTEE SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF NEW YORK WITHOUT REGARD TO CONFLICT OF LAW RULES THEREOF. THE GUARANTOR HEREBY SUBMITS TO THE NONEXCLUSIVE JURISDICTION OF THE UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF NEW YORK AND OF ANY NEW YORK STATE COURT SITTING IN NEW YORK CITY (EACH, A "NEW YORK COURT") FOR PURPOSES OF ALL LEGAL PROCEEDINGS ARISING OUT OF OR RELATING TO THE BRIDGE NOTES, THIS GUARANTEE OR ANY OF THE OTHER LOAN DOCUMENTS OR THE TRANSACTIONS CONTEMPLATED HEREBY. THE GUARANTOR IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, ANY OBJECTION WHICH IT MAY NOW OR HEREAFTER HAVE TO THE LAYING OF THE VENUE OF ANY SUCH PROCEEDING BROUGHT IN SUCH A COURT AND ANY CLAIM THAT ANY SUCH PROCEEDING BROUGHT IN SUCH A COURT HAS BEEN BROUGHT IN AN INCONVENIENT FORUM. THE GUARANTOR IRREVOCABLY WAIVES ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR RELATING TO THE BRIDGE NOTES, THIS GUARANTEE OR ANY OF THE OTHER LOAN DOCUMENTS OR THE TRANSACTIONS CONTEMPLATED HEREBY. Section 8.15. [Intentionally omitted] Section 8.16. Limitation Of Liability. No claim may be made by the Guarantor or any other Person against the Administrative Agent or any Guaranteed Party or the Affiliates, directors, officers, employees, attorneys or agents of any of them for any special, indirect, consequential or punitive damages in respect of any claim for breach of contract or any theory of liability arising out of or related to the transactions contemplated by this Guarantee or the other Loan Documents, or any act, omission or event occurring in connection therewith; and the Guarantor hereby waives, releases and agrees not to sue and shall cause each of its respective Subsidiaries to waive, release or agree not to sue (if required), upon any claim for any such damages, whether or not accrued and whether or not known or suspected to exist in its favor. Section 8.17. Payments. Notwithstanding any provision to the contrary herein or in any Loan Document, all payments made under or in connection with this Guarantee and the other Loan Documents shall be in immediately available funds and in lawful currency of the United States. [SIGNATURE PAGE FOLLOWS] 12 254 IN WITNESS WHEREOF, the Guarantor has caused this Guarantee to be duly executed and delivered as of the date first above written. [GUARANTOR] By: --------------------------------- Name: Title: 255 EXHIBIT G-2 FORM OF EXCHANGE NOTE GUARANTEE THIS GUARANTEE (as amended, supplemented, amended and restated or otherwise modified from time to time, this "Guarantee") is made and entered into as of ____________, ____, by ________________, a _____________ corporation (the "Guarantor"), in favor of The Chase Manhattan Bank, in its capacity as trustee (in such capacity, the "Trustee"), for the benefit of the Holders (as defined in the Indenture) of the Notes issued pursuant to that certain Indenture, dated as of March 17, 1999 (as amended, modified or supplemented from time to time, the "Indenture"), between NTL Incorporated, a Delaware corporation (the "Company") and the Trustee. The Trustee and the Holders are referred to herein as, the "Guaranteed Parties"). Capitalized terms used herein and not otherwise defined shall have the meanings given in the Indenture. RECITALS The Guarantor will derive significant direct and indirect benefits from the issuance of the Notes pursuant to the Indenture. AGREEMENT NOW THEREFORE, in consideration of the promises and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Guarantor hereby agrees with the Trustee for its benefit and the ratable benefit of the Guaranteed Parties as follows: SECTION 1. THE GUARANTEE. The guarantee of the Guarantor hereunder is as follows: Section 1.1. Guarantee. Subject to Section 1.2, the Guarantor hereby unconditionally, absolutely and irrevocably guarantees to the Guaranteed Parties and their successors, endorsees, transferees and assigns, the prompt payment (whether at stated maturity, on mandatory prepayment, by acceleration or otherwise) and performance of all of the Obligations of the Company under the Indenture, the Notes and the Registration Rights Agreement (collectively, the "Guaranteed Obligations"). The Guarantor agrees that this Guarantee is a guaranty of payment and performance and not of collection, and that its obligations under this Guarantee shall be joint and several with any other Persons which may at any time or from time to time be or become directly or indirectly financially responsible to the Guaranteed Parties with respect to the Guaranteed Obligations and shall be under all circumstances primary, absolute and unconditional, irrespective of, and unaffected by: (a) the genuineness, validity, regularity, enforceability or any future amendment of, or change in, this Guarantee, the Indenture, the Notes, the Registration Rights 256 Agreement or other agreement, document or instrument to which the Company is or are or may become a party; (b) the absence of any action to enforce this Guarantee, the Indenture, the Notes, the Registration Rights Agreement or the waiver or consent by the Guaranteed Parties with respect to any of the provisions hereof or thereof; (c) [intentionally omitted] (d) any bankruptcy, insolvency, reorganization, arrangement, adjustment, composition, liquidation or the like of the Company including, but not limited to, (i) any Guaranteed Party's election, in any proceeding instituted under Title 11 of the United States Code (11 U.S.C. ss. 101 et seq.) or any replacement or supplemental federal statutes dealing with the bankruptcy of debtors (the "Bankruptcy Code"), of the application of Section 1111(b)(2) or any successor provision of the Bankruptcy Code, (ii) any borrowing, issuance of notes or grant of a lien by the Company as debtor-in-possession, under Section 364 of the Bankruptcy Code, or (iii) the disallowance of all or any portion of any Guaranteed Party's claim(s) for repayment of the Guaranteed Obligations under Section 502 of the Bankruptcy Code; (e) any merger or consolidation of the Company into or with any other Person, or any sale, lease or transfer of any or all of the assets of the Company to any other Person; (f) any circumstance which might constitute a defense available to, or a discharge of the Company; (g) any sale, transfer or other disposition of any stock, limited liability company interests, partnership interests or other ownership interests of the Company; (h) absence of any notice to, or knowledge by, the Guarantor of the existence or occurrence of any of the matters or events set forth in the foregoing clauses (a) through (g); or (i) any other fact or circumstance which might otherwise constitute a defense available to, or a discharge of, a surety or guarantor; it being agreed by the Guarantor that its obligations under this Guarantee shall not be discharged until the payment in immediately available funds and performance, in full, of the Guaranteed Obligations or written release of the Guarantor by the Guaranteed Parties, whichever shall occur first. The Guarantor shall be regarded, and shall be in the same position, as principal debtor with respect to the Guaranteed Obligations and specifically agrees that, notwithstanding any discharge of the Company, any other Person or the operation of any other provision of the Bankruptcy Code with respect to the Guaranteed Obligations or any such Persons, the Guarantor shall be fully responsible for paying all interest which may at any time accrue with respect to the Guaranteed Obligations or which would accrue but for the operation of any provision of or doctrine with respect to the Bankruptcy Code and whether or not an allowed claim. The Guarantor expressly waives all rights it may have now or in the future under any statute, or at common law, or at law or in equity, or otherwise, to compel the Guaranteed Parties to proceed in respect of the Guaranteed Obligations against the Company or any other Person before 2 257 proceeding against, or as a condition to proceeding against, the Guarantor. The Guarantor agrees that any notice or directive given at any time to the Guaranteed Parties which is inconsistent with the waiver in the immediately preceding sentence shall be null and void and may be ignored by the Guaranteed Parties, and, in addition, may not be pleaded or introduced as evidence in any litigation relating to this Guarantee for the reason that such pleading or introduction would be at variance with the written terms of this Guarantee unless the Trustee has specifically agreed otherwise in a writing expressly referring to this Section 1.1. It is agreed between the Guarantor and the Guaranteed Parties that the foregoing waivers are of the essence of the transaction contemplated by the Indenture and that, but for this Guarantee and such waivers, the Guaranteed Parties would have declined to enter into the Indenture. Section 1.2. Maximum Liability. Notwithstanding any provision to the contrary herein or in the Indenture, the Notes or the Registration Rights Agreement, the maximum liability of the Guarantor hereunder shall be limited to the maximum aggregate amount as would not render the Guarantor's obligations hereunder subject to avoidance as a fraudulent transfer or conveyance under Section 548 of the Bankruptcy Code (as hereinafter defined) or any applicable provisions of any state or foreign law having similar effect. Section 1.3. Demand By The Trustee. In addition to the terms of the Guarantee set forth in Section 1.1 hereof, and in no manner imposing any other limitation on such terms, it is expressly understood and agreed that, if any or all of the then outstanding principal amount of the Guaranteed Obligations (together with all accrued but unpaid interest thereon, any prepayment premium, any Liquidated Damages and any Additional Amounts payable in respect thereof) becomes due and payable, then the obligations of the Guarantor shall, at the option of the Trustee, without notice or demand, become due and payable and the Guarantor shall, upon demand in writing therefor by the Trustee to such Guarantor, pay to the holder or holders of the Guaranteed Obligations the outstanding Guaranteed Obligations due and owing to such holder or holders. Payment by the Guarantor shall be made in dollars to the Trustee for the ratable benefit of the Guaranteed Parties, in immediately available funds to an account designated by the Trustee or at the address set forth herein for the giving of notice to the Trustee or at any other address that may be specified in writing from time to time by the Trustee. Section 1.4. Enforcement Of Guarantee. In no event shall the Trustee or any Guaranteed Party have any obligation (although it is entitled, at its option) to proceed against the Company or any other Person before seeking satisfaction from the Guarantor, and the Trustee may proceed, prior or subsequent to, or simultaneously with, the enforcement of the Guaranteed Parties' rights hereunder, to exercise any right or remedy which it or they may have. The obligations of the Guarantor hereunder are independent of the obligations of any other guarantor of the Guaranteed Obligations of the Company, and a separate action or actions may be brought and prosecuted against the Guarantor whether or not action is brought against any other guarantor or the Company, and whether or not any other guarantor or the Company is joined in any such action or actions. Section 1.5. Waivers. In addition to the waivers contained in Section 1.1 hereof, the Guarantor waives, and agrees that it shall not at any time insist upon, plead or in any manner whatever claim or take the benefit or advantage of, any appraisal, valuation, stay, 3 258 extension, marshaling of assets or redemption or similar laws, or exemption, whether now or at any time hereafter in force, which may delay, prevent or otherwise affect the performance by the Guarantor of its obligations under, or the enforcement by the Trustee or any Guaranteed Party of, this Guarantee. The Guarantor hereby waives diligence, presentment and demand (whether for nonpayment or protest or of acceptance, maturity, extension of time, change in nature or form of the Guaranteed Obligations, acceptance of further security, release of further security, composition or agreement arrived at as to the amount of, or the terms of, the Guaranteed Obligations, notice of adverse change in the Company's financial condition or any other fact which might materially increase the risk to such Guarantor) with respect to any of the Guaranteed Obligations (except as provided in Section 1.3 above) and waives the benefit of all provisions of law which are or might be in conflict with the terms of this Guarantee. The Guarantor hereby waives any requirement on the part of any holder of any Note to mitigate the damages resulting from any default under such Note. The Guarantor represents, warrants and agrees that, as of the date of this Guarantee, its obligations under this Guarantee are not subject to any offsets or defenses against any Guaranteed Party or the Company of any kind. The Guarantor further agrees that its obligations under this Guarantee shall not be subject to any counterclaims, offsets or defenses against any Guaranteed Party or the Company of any kind which may arise in the future. Section 1.6. Benefit Of Guarantee. The provisions of this Guarantee are for the ratable benefit of the Guaranteed Parties and their respective successors, transferees, endorsees and assigns, and nothing herein contained shall impair, as between the Company and the Guaranteed Parties, the obligations of the Company under the Indenture, the Notes or the Registration Rights Agreement. In the event all or any part of the Guaranteed Obligations are transferred, endorsed or assigned by the Guaranteed Parties to any Person or Persons in accordance with the terms of the Indenture, any reference to "Guaranteed Parties" herein shall be deemed to refer equally to such Person or Persons. Section 1.7. Modification Of Guaranteed Obligations. If the Guaranteed Parties shall at any time or from time to time, with or without the consent of, or notice to, the Guarantor: (a) issue Notes or extend other credit to the Company, change the time, manner or place of payment of, or any other term of, all or any portion of, the Guaranteed Obligations, or otherwise waive or consent to any departure from the terms of the Indenture, the Notes or the Registration Rights Agreement; (b) take any action under or in respect of the Indenture, the Notes or the Registration Rights Agreement in the exercise of any remedy, power or privilege contained therein or available to it at law, equity or otherwise, or waive or refrain from exercising any such remedies, powers or privileges; (c) amend or modify, in any manner whatsoever, the Indenture, the Notes or the Registration Rights Agreement; (d) extend or waive the time for and of any Guarantor's, the Company's or any other Person's performance of, or compliance with, any term, covenant or agreement on its part to be performed or observed under the Indenture, the Notes or the Registration Rights 4 259 Agreement, or waive such performance or compliance or consent to a failure of, or departure from, such performance or compliance; (e) [intentionally omitted]; (f) release or limit the liability of anyone who may be liable in any manner for the payment of any amounts owed by the Guarantor or the Company to the Guaranteed Parties; (g) modify or terminate the terms of any intercreditor or subordination agreement pursuant to which claims of other creditors of the Guarantor or the Company are subordinated to the claims of any of the Guaranteed Parties; and/or (h) apply any sums by whomever paid or however realized to any amounts owing by the Guarantor or the Company to the Guaranteed Parties in such manner as the Guaranteed Parties shall determine in their discretion; then the Guaranteed Parties shall not incur any liability to the Guarantor pursuant hereto as a result thereof and no such action shall impair or release the obligations of the Guarantor under this Guarantee. Section 1.8. Reinstatement. This Guarantee shall remain in full force and effect and continue to be effective in the event any petition is filed by or against the Company, the Guarantor or any other Person for liquidation or reorganization, in the event the Company, the Guarantor or any other Person becomes insolvent or makes an assignment for the benefit of creditors or in the event a receiver or trustee is appointed for all or any significant part of any of the Company's, the Guarantor's or such other Person's assets, and shall continue to be effective or be reinstated, as the case may be, if at any time payment and performance of the Guaranteed Obligations, or any part thereof, is, pursuant to applicable law, rescinded or reduced in amount, or must otherwise be restored or returned by the Guaranteed Parties, whether as a "voidable preference", "fraudulent conveyance", or otherwise, all as though such payment or performance had not been made. In the event that any payment, or any part thereof, is rescinded, reduced, restored or returned, the Guaranteed Obligations shall be reinstated and deemed reduced only by such amount paid and not so rescinded, reduced, restored or returned. Section 1.9. Waiver Of Subrogation. THE GUARANTOR HEREBY IRREVOCABLY WAIVES UNTIL INDEFEASIBLE PAYMENT IN FULL OF THE OBLIGATIONS ALL RIGHTS OF SUBROGATION (WHETHER CONTRACTUAL, UNDER SECTION 509 OF THE BANKRUPTCY CODE, UNDER COMMON LAW, OR OTHERWISE) TO THE CLAIMS OF THE GUARANTEED PARTIES AGAINST THE COMPANY AND ALL CONTRACTUAL, STATUTORY OR COMMON LAW RIGHTS OF CONTRIBUTION, REIMBURSEMENT, INDEMNIFICATION AND SIMILAR RIGHTS AND "CLAIMS" (AS SUCH TERM IS DEFINED IN THE BANKRUPTCY CODE) AGAINST THE COMPANY WHICH ARISE IN CONNECTION WITH, OR AS A RESULT OF, THIS GUARANTEE. Section 1.10. Continuing Guarantee; Transfer Of Notes. This Guarantee is a continuing guaranty and shall (i) remain in full force and effect until payment in immediately 5 260 available funds and performance in full of the Guaranteed Obligations, (ii) be binding upon the Guarantor and its successors and permitted transferees and assigns, and (iii) inure, together with the rights and remedies of the Guaranteed Parties hereunder, to the benefit of the Guaranteed Parties and their respective permitted successors, transferees, endorsees and assigns. Without limiting the generality of foregoing clause (iii), any Guaranteed Party may, except as limited by the express terms of the Indenture, assign or otherwise transfer any Note held by it to any other Person or entity, and such other Person or entity shall thereupon become vested with all the benefits in respect thereof granted to such Guaranteed Party herein or otherwise. SECTION 2. SUBORDINATION OF OTHER OBLIGATIONS. Any indebtedness of the Company now or hereafter held by or owed to any Guarantor is hereby subordinated in right of payment to the Guaranteed Obligations, and any such indebtedness of the Company to the Guarantor collected or received by the Guarantor shall be held in trust for the Trustee on behalf of the Guaranteed Parties and shall forthwith be paid over to the Trustee for the benefit of the Guaranteed Parties in the form received (with any necessary or requested endorsements) to be credited and applied against the Guaranteed Obligations but without affecting, impairing or limiting in any manner the liability of the Guarantor under any other provision of this Guarantee. SECTION 3. DELIVERIES. In a form satisfactory to the Trustee, the Guarantor shall deliver to the Trustee, concurrently with the execution of this Guarantee, the other instruments, certificates and documents as are required to be delivered by the Guarantor on or before the date hereof to the Guaranteed Parties under the Indenture. SECTION 4. REPRESENTATIONS AND WARRANTIES. As of the date hereof, the Guarantor hereby represents and warrants to the Guaranteed Parties that each of the following representations and warranties is true: Section 4.1. Organization; Powers. The Guarantor has been duly incorporated and is validly existing as a corporation in good standing under the laws of the State of _______ with power and authority (corporate and other) to own its properties and conduct its business as now conducted and as proposed to be conducted, and has been duly qualified as a foreign corporation for the transaction of business and is in good standing under the laws of each other jurisdiction in which it owns or leases properties or conducts any business so as to require such qualification, or is subject to no material liability or disability by reason of the failure to be so qualified in any such jurisdiction. The Guarantor has all requisite corporate power and authority to execute, deliver and perform its obligations under this Guarantee. Section 4.2. Due Authorization and Enforceability. This Guarantee: (i) has been duly authorized, executed and delivered by the Guarantor and (ii) constitutes a valid and binding obligation of the Guarantor enforceable against the Guarantor in accordance with its terms, subject, as to enforcement, to bankruptcy, insolvency, reorganization and other laws of general applicability relating to or affecting creditors' rights and to general equity principles. Section 4.3. No Conflicts. The execution and delivery of this Guarantee, the consummation of the transactions contemplated hereby and compliance with the terms and provisions hereof will not require any consent, approval, authorization or other order of any 6 261 court, regulatory body, administrative agency or other governmental body, will not conflict with or result in a breach or violation of any of the terms or provisions of, or constitute a default under, any indenture, mortgage, deed of trust, sale/leaseback agreement, loan agreement or other similar financing agreement or instrument or other agreement or instrument to which the Guarantor is a party or by which the Guarantor is bound or to which any of the property or assets of the Guarantor is subject, nor will such action result in any violation of the provisions of the Certificate of Incorporation or By-laws (or other governing documents) of the Guarantor or any statute or any order, rule or regulation of any court or governmental agency or body having jurisdiction over the Guarantor or any of its properties; and no consent, approval, authorization, order, registration or qualification of or with any such court or governmental agency or body is required for the consummation by the Guarantor of the transactions contemplated by this Guarantee. Section 4.4. No Violations; Material Contracts. The Guarantor is not in violation of its Certificate of Incorporation or By-laws or other governing documents or in default in the performance or observance of any obligation, agreement or condition contained in any bond, debenture, note or any other evidence of indebtedness or in any indenture, mortgage, deed of trust, loan agreement, lease or other agreement or instrument to which it is a party or by which it or any of its properties may be bound or to which any of its properties is subject or is in violation of any law, statute, rule, regulation, judgment or court decree applicable to the Guarantor or any of its properties, nor has any event occurred which with notice or lapse of time or both would constitute such a violation or default, except in each case, which could not reasonably expected to have a Material Adverse Effect. "Material Adverse Effect" means any circumstance or event that (i) has, or may be reasonably expected to have, any materially adverse effect upon the validity or enforceability of this Guarantee, (ii) is, or may be reasonably expected to be, materially adverse to the consolidated financial condition, business, operations, assets, liabilities, management or prospects of the Guarantor, or (iii) materially impairs the ability of the Guarantor to perform its Obligations under this Guarantee. Section 4.5. Absence of Proceedings. There are no material investigations, proceedings or actions, whether judicial or administrative and whether brought by any regulatory body, administrative agency or other governmental body or by any other person, pending, or, to the knowledge of the Guarantor, threatened, to which the Guarantor is a party or of which any of its properties is the subject which, if determined adversely to the Guarantor, individually or in the aggregate, could reasonably be expected to have a Material Adverse Effect; and, to the best of the Guarantor's knowledge, no such proceedings are threatened or contemplated by governmental authorities or threatened by others. SECTION 5. FURTHER ASSURANCES. The Guarantor agrees, upon the written request of the Trustee, and at the Guarantor's expense, to execute and deliver to the Trustee, from time to time, any additional instruments or documents considered necessary or advisable by the Trustee to cause this Guarantee to be, become or remain valid and effective in accordance with its terms. SECTION 6. PAYMENTS FREE AND CLEAR OF TAXES. 7 262 Section 6.1. Payment of Taxes. All payments required to be made by the Guarantor hereunder shall be made to the Guaranteed Parties free and clear of, and without deduction for, any and all present and future Taxes. If the Guarantor shall be required by law to deduct any Taxes from or in respect of any sum payable hereunder, (a) the sum payable shall be increased as much as shall be necessary so that after making all required deductions (including deductions applicable to additional sums payable under this Section 6) the Guaranteed Parties shall receive an amount equal to the sum they would have received had no such deductions been made, (b) the Guarantor shall make such deductions, and (c) the Guarantor shall pay the full amount deducted to the relevant taxing or other authority in accordance with applicable law. Within thirty (30) days after the date of any payment of Taxes, the Guarantor shall furnish to the Trustee the original or a certified copy of a receipt evidencing payment thereof. The Guarantor shall indemnify and, within ten (10) days of demand therefor, pay each Guaranteed Party for the full amount of Taxes (including any Taxes imposed by any jurisdiction on amounts payable under this Section 6) paid by such Guaranteed Party and any liability (including penalties, interest and expenses) arising therefrom or with respect thereto, whether or not such Taxes were correctly or legally asserted. "Taxes" shall mean taxes, levies, imposts, deductions, Charges or witholdings, and all liabilities with respect thereto, excluding taxes imposed on or measured by the net income of a Guaranteed Party by the jurisdiction under the laws of which such Guaranteed Party is organized or any political subdivision thereof. "Charges" shall mean all federal, state, county, city, municipal, local, foreign or other governmental taxes, levies, assessments, charges, liens, claims or encumbrances upon or relating to (a) the Notes or (b) the Guaranteed Obligations. Section 6.2. [Intentionally Omitted] Section 6.3. [Intentionally Omitted] Section 6.4. Survival. Without prejudice to the survival of any other agreement of the Guarantors hereunder, the agreements and obligations of the Guarantor contained in this Section 6 and Section 8.2 shall survive the payment in full of the Guaranteed Obligations. Section 6.5. Transferees. The Guarantor agrees that the provisions of this Section 6 shall inure to the benefit of any transferee of any Note. SECTION 7. RIGHT OF SET-OFF. In addition to and not in limitation of all rights of offset that any Guaranteed Party or other holder of a Note may have under applicable law or under the Indenture, the Notes or the Registration Rights Agreement, each Guaranteed Party or other holder of a Note shall upon the occurrence and during the continuation of any Event of Default and whether or not such Guaranteed Party or such holder has made any demand or such Guarantor's obligations are matured, have the right to appropriate and apply to the payment of such Guarantor's obligations hereunder, all deposits (general or special, time or demand, provisional or final) then or thereafter held by and other indebtedness or property then or thereafter owing by such Guaranteed Party or other holder to such Guarantor, whether or not related to this Guarantee or any transaction hereunder. SECTION 8. MISCELLANEOUS. 8 263 Section 8.1. Amendments. Any amendment or waiver of any provision of this Guarantee and any consent to any departure by the Guarantor from any provision of this Guarantee shall be effective only if made or given in compliance with all of the terms and provisions of Article IX of the Indenture. Section 8.2. Expenses. The Guarantor shall promptly pay to the Trustee, for the ratable benefit of the Guaranteed Parties, the amount of any and all reasonable out-of-pocket costs and expenses of the Guaranteed Parties (both before and after the execution hereof) in connection with any matters contemplated by or arising out of this Guarantee, the Indenture, the Notes or the Registration Rights Agreement whether (a) costs and expenses of the Trustee and the Guaranteed Parties to prepare, negotiate or execute (i) any amendment to, modification of or extension of this Guarantee, the Indenture, the Notes or the Registration Rights Agreement to which the Guarantor is a party or (ii) any instrument, document or agreement in connection with any sale or attempted sale of any interest herein to any assignee or participant, (b) to commence, defend, or intervene in any litigation or to file a petition, complaint, answer, motion or other pleadings necessary to protect or enforce the rights of the Guaranteed Parties under this Guarantee, the Indenture, the Notes or the Registration Rights Agreement, (c) to take any other action in or with respect to any suit or proceeding (bankruptcy or otherwise) necessary to protect the rights of the Guaranteed Parties under this Guarantee, the Indenture, the Notes or the Registration Rights Agreement or to respond to any subpoena, deposition or interrogatory with respect to any litigation involving any Guarantor, or (d) to attempt to enforce or to enforce any rights of the Guaranteed Parties to collect any of the Guaranteed Obligations, including all reasonable fees and expenses of attorneys and paralegals (including reasonable charges for inside counsel). Section 8.3. Headings. The headings in this Guarantee are for purposes of reference only and shall not otherwise affect the meaning or construction of any provision of this Guarantee. Section 8.4. Severability. The provisions of this Guarantee are severable, and if any clause or provision shall be held invalid or unenforceable in whole or in part in any jurisdiction, then such invalidity or unenforceability shall affect in that jurisdiction only such clause or provision, or part thereof, and shall not in any manner affect such clause or provision in any other jurisdiction or any other clause or provision of this Guarantee in any jurisdiction. Section 8.5. Notices. All notices, approvals, consents or other communications required or desired to be given hereunder shall be in the form and manner provided in the Indenture, and delivered to each of the parties hereto at their respective addresses set forth below: If to the Trustee: The Chase Manhattan Bank 450 West 33rd Street New York, New York 10001 Attention: Capital Markets Fiduciary Services Telecopy: 212-946-8161 9 264 If to the Guarantor: [Name of Guarantor] c/o NTL Incorporated 110 East 59th Street New York, NY 10022 Attention: Richard Lubasch, Esq. Telecopy: (212) 906-8497 Section 8.6. Remedies Cumulative. Each right, power and remedy of the Guaranteed Parties provided in this Guarantee or now or hereafter existing at law or in equity or by statute or otherwise shall be cumulative and concurrent and shall be in addition to every other right, power or remedy provided for in this Guarantee or now or hereafter existing at law or in equity or by statute or otherwise. The exercise or partial exercise by the Guaranteed Parties of any one or more of such rights, powers or remedies shall not preclude the simultaneous or later exercise by the Guaranteed Parties of all such other rights, powers or remedies, and no failure or delay on the part of any Guaranteed Party to exercise any such right, power or remedy shall operate as a waiver thereof. Section 8.7. Statute of Limitations. To the full extent permitted by applicable law, the Guarantor hereby waives the right to plead any statute of limitations as a defense to performance of its obligations under, or enforcement of, this Guarantee. Section 8.8. Final Expression. This Guarantee, together with any other agreement executed in connection herewith, is intended by the parties as a final expression of the Guarantee and is intended as a complete and exclusive statement of the terms and conditions thereof. Acceptance of or acquiescence in a course of performance rendered under this Guarantee shall not be relevant to determine the meaning of this Guarantee even though the accepting or acquiescing party had knowledge of the nature of the performance and opportunity for objection. Section 8.9. Financial Status. The Guarantor hereby assumes responsibility for keeping itself informed of the financial condition of the Guarantor and the Company and any and all endorsers and/or other guarantors of any instrument or document evidencing all or any part of the Guaranteed Obligations and of all other circumstances bearing upon the risk of nonpayment or nonperformance of the Guaranteed Obligations or any part thereof that diligent inquiry would reveal, and the Guarantor hereby agrees that the Guaranteed Parties shall have no duty to advise the Guarantor of information known to the Guaranteed Parties regarding such condition or any such circumstances. In the event the Guaranteed Parties, in their discretion, undertake at any time or from time to time to provide any such information to the undersigned, the Guaranteed Parties shall be under no obligation (i) to undertake any investigation not a part of their regular business routine, (ii) to disclose any information which the Guaranteed Parties wish to maintain confidential, or (iii) to make any other or future disclosures of such information or any other information to the Guarantor or any other Person. Section 8.10. Assignability. This Guarantee shall be binding on the Guarantor and its successors and permitted assigns and transferees and shall inure to the benefit of the Guaranteed Parties and their respective successors, transferees, endorsees and assigns. The Guarantor may not assign this Guarantee. 10 265 Section 8.11. Non-Waiver. The failure of any Guaranteed Party to exercise any right or remedy hereunder, or promptly to enforce any such right or remedy, shall not constitute a waiver thereof, nor give rise to any estoppel against any Guaranteed Party, nor excuse any Guarantor from its obligations hereunder. Section 8.12. Termination. Subject to the provisions of Sections 1.8 and 6.4, this Guarantee shall terminate upon the receipt by each of the Guaranteed Parties of the payment in immediately available funds and performance in full of the Guaranteed Obligations and any other amounts which may be owing hereunder, or the written release of the Guarantor by the Guaranteed Parties, whichever shall occur first. At the time of such termination, the Guaranteed Parties, at the request and expense of the Guarantor, will execute and deliver to the Guarantor a proper instrument or instruments acknowledging the satisfaction and termination of this Guarantee. Section 8.13. Counterparts. This Guarantee may be executed in any number of counterparts and by the different parties hereto on separate counterparts, each of which, when so executed and delivered, shall be an original, but all of which shall together constitute one and the same agreement. Section 8.14. New York Law; Submission to Jurisdiction; Waiver of Jury Trial. THIS GUARANTEE SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF NEW YORK WITHOUT REGARD TO CONFLICT OF LAW RULES THEREOF. THE GUARANTOR HEREBY SUBMITS TO THE NONEXCLUSIVE JURISDICTION OF THE UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF NEW YORK AND OF ANY NEW YORK STATE COURT SITTING IN NEW YORK CITY (EACH, A "NEW YORK COURT") FOR PURPOSES OF ALL LEGAL PROCEEDINGS ARISING OUT OF OR RELATING TO THIS GUARANTEE, THE INDENTURE, THE NOTES, THE REGISTRATION RIGHTS AGREEMENTS OR THE TRANSACTIONS CONTEMPLATED HEREBY. THE GUARANTOR IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, ANY OBJECTION WHICH IT MAY NOW OR HEREAFTER HAVE TO THE LAYING OF THE VENUE OF ANY SUCH PROCEEDING BROUGHT IN SUCH A COURT AND ANY CLAIM THAT ANY SUCH PROCEEDING BROUGHT IN SUCH A COURT HAS BEEN BROUGHT IN AN INCONVENIENT FORUM. THE GUARANTOR IRREVOCABLY WAIVES ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR RELATING TO THIS GUARANTEE, THE INDENTURE, THE NOTES, THE REGISTRATION RIGHTS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY. Section 8.15. [Intentionally omitted] Section 8.16. Limitation Of Liability. No claim may be made by the Guarantor or any other Person against the Trustee or any Guaranteed Party or the Affiliates, directors, officers, employees, attorneys or agents of any of them for any special, indirect, consequential or punitive damages in respect of any claim for breach of contract or any theory of liability arising out of or related to the transactions contemplated by this Guarantee, the Indenture, the Notes or the Registration Rights Agreement, or any act, omission or event occurring in connection 11 266 therewith; and the Guarantor hereby waives, releases and agrees not to sue and shall cause each of its respective Subsidiaries to waive, release or agree not to sue (if required), upon any claim for any such damages, whether or not accrued and whether or not known or suspected to exist in its favor. Section 8.17. Payments. Notwithstanding any provision to the contrary herein or in the Indenture, the Notes or the Registration Rights Agreement, all payments made under or in connection with this Guarantee and the Indenture, the Notes and the Registration Rights Agreement shall be in immediately available funds and in lawful currency of the United States. [SIGNATURE PAGE FOLLOWS] 12 267 IN WITNESS WHEREOF, the Guarantor has caused this Guarantee to be duly executed and delivered as of the date first above written. [GUARANTOR] By: -------------------------------- Name: Title: 268 Exhibit H-1/H-2 [FORM OF GENERAL COUNSEL OPINION FOR BRIDGE NOTE GUARANTEE AND EXCHANGE NOTE GUARANTEE] [_____ __, ____] Goldman, Sachs Credit Partners, L.P. c/o Goldman, Sachs & Co. 85 Broad Street New York, NY 10004, as Administrative Agent The Lenders listed on Schedule I attached hereto Re: Bridge Note Guarantee and Exchange Note Guarantee Ladies and Gentleman: I am the General Counsel to ___________, a [Delaware] corporation (the "Parent"), and have so acted in connection with the execution and delivery of that certain Bridge Note Guarantee, dated as of _____ __, ____ (the "Bridge Note Guarantee"), by the Parent in favor of Goldman Sachs Credit Partners L.P., as administrative agent (the "Administrative Agent") and that certain Exchange Note Guarantee, dated as of _____ __, ____ (the "Exchange Note Guarantee") by the Parent in favor of The Chase Manhattan Bank, as trustee. This opinion is being delivered to you pursuant to Section 4.22 of the Bridge Loan Agreement, dated as of March 17, 1999 (the "Bridge Loan Agreement"), among NTL Incorporated, the Lenders named therein and the Administra tive Agent. Capitalized terms used herein and not otherwise defined herein shall have the same meanings herein as ascribed thereto in the Bridge Loan Agreement. In rendering the opinions set forth below, I have examined and relied on originals or copies, certified or otherwise identified to my satisfaction, of the following: (a) the Bridge Note Guarantee; and 269 Goldman Sachs Credit Partners, L.P. _____ __, ____ Page 2 (b) the Exchange Note Guarantee; and (c) such other documents as I have deemed necessary or appropriate as a basis for the opinions set forth below. The documents referred to in clauses (a) through (b) above are hereinafter referred to collectively as the "Operative Documents". In my examination I have assumed the genuineness of all signatures, the legal capacity of all natural persons, the authenticity of all documents submitted to me as originals, the conformity to original documents of all documents submitted to me as certified or photostatic copies, and the authenticity of the originals of such copies. As to any facts material to this opinion which I did not independently establish or verify, I have relied upon statements and representations of the Parent and its officers and other representatives, and of others. I do not express any opinion as to the laws of any jurisdiction other than the laws of the State of New York. Based upon the foregoing and subject to the assumptions and qualifica tions set forth herein, I am of the opinion that: 1. [Except as set forth on Schedule II attached hereto,] to my actual knowledge, there are no legal or governmental proceedings pending or threatened against the Parent or any of its subsidiaries, or to which any of their respective properties is subject, that could reasonable be expected to have a Material Adverse Effect. 2. To my actual knowledge, neither the Parent nor any Subsidiary (i) is in default (which default has not been waived) under any agreement, document or instrument to which it is a party or by which it or any of its assets is bound or (ii) is in violation of any law, rule, regulation, judgement, writ, determination, order, decree or arbitral award to which the Parent or any Subsidiary is a party or by which the Parent or any Subsidiary or any of their respective properties is bound, which default or violation, as the case may be, would constitute a Default or Event of Default under the Bridge Loan Agreement or otherwise could reasonably be expected to have a Material Adverse Effect. 270 Goldman Sachs Credit Partners, L.P. _____ __, ____ Page 3 This opinion is being furnished only to the addressees named above in connection with the covenant specified in Section 4.22 of the Bridge Loan Agreement and is solely for their benefit and is not to be used or relied upon by any other person or for any other purpose without our prior written consent, except that any financial institution who becomes a "Lender" in accordance with Section 6.2 of the Bridge Loan Agreement (as from time to time amended) may rely on this opinion as if addressed and delivered to that financial institution on the date hereof. Very truly yours, By:__________________________ 271 Exhibit H-1/Exhibit H-2 [FORM OF OPINION OF SKADDEN, ARPS, SLATE, MEAGHER & FLOM LLP FOR BRIDGE NOTE GUARANTEE AND EXCHANGE NOTE GUARANTEE] [___________, ______] Goldman, Sachs Credit Partners, L.P. c/o Goldman, Sachs & Co. 85 Broad Street New York, NY 10004, as Administrative Agent The Lenders listed on Schedule I attached hereto Re: Bridge Note Guarantee and Exchange Note Guarantee We have acted as special counsel to __________, a [Delaware] corporation (the "Parent"), in connection with the execution and delivery of that certain Bridge Note Guarantee, dated as of _______, ___ (the "Bridge Note Guarantee"), by the Parent in favor of Goldman Sachs Credit Partners L.P. (the "Administrative Agent") and that certain Exchange Note Guarantee, dated as of ______ __, ___ (the "Exchange Note Guarantee"), by the Parent in favor of The Chase Manhattan Bank, as trustee (the "Trustee"). This opinion is being delivered to you pursuant to Section 4.22 of the Bridge Loan Agreement, dated as of March 17, 1999 (the "Bridge Loan Agreement"), among NTL Incorporated, the lenders named therein and the Administrative Agent. Capitalized terms used herein and not otherwise defined herein shall have the same meanings herein as ascribed thereto in the Bridge Loan Agreement. In rendering the opinions set forth below, we have examined and relied on originals or copies, certified or otherwise identified to our satisfaction, of the following: 272 Goldman Sachs Credit Partners, L.P. , Page 2 (a) the Bridge Note Guarantee; (b) the Exchange Note Guarantee; (c) the Certificate of Incorporation and By-Laws of the Parent, as currently in effect; (d) certain resolutions of the Board of Directors of the Parent relating to the Bridge Note Guarantee, the Exchange Note Guarantee and the transactions contemplated thereby; (e) a certificate of good standing from the Secretary of State of the [State of Delaware] as to the good standing of the Parent in such jurisdiction; (f) certificates and telegrams from public officials in the jurisdictions listed on Schedule II as to the good standing of the Parent as a foreign corporation in each such jurisdiction; and (g) such other documents as we have deemed necessary or appropriate as a basis for the opinions set forth below. The documents referred to in clauses (a) through (b) above are hereinafter referred to collectively as the "Operative Documents". For purposes of this opinion (i) the term "Applicable Laws" shall mean the [General Corporation Law of Delaware] and those laws, rules and regulations of the State of New York and of the United States of America (including, without limitation, Regulations T, U and X of the Board of Governors of the Federal Reserve System) which, in our experience, are normally applicable to transactions of the type contemplated by the Operative Documents, (ii) the term "Governmental Approval" means any consent, approval, license, authorization or validation of, or filing, recording or registration with, any state or federal executive, legislative, judicial, administrative, or regulatory body which, in our experience, are normally applicable to transactions of the type contemplated by the Operative Documents pursuant to Applicable Laws, (iii) the term "Applicable Contract" shall mean those agreements or instruments governing the Parent's material indebtedness, each as set forth on Schedule III hereto and which have been identified to us as such by the Parent in the Parent's Certificate (as hereinafter defined), (iv) "Governmental Authorities" means any court, regulatory body, administrative agency, or governmental body of the [State of Delaware], 273 Goldman Sachs Credit Partners, L.P. , Page 3 the State of New York or the United States of America having jurisdiction over the Parent or any of its subsidiaries under Applicable Laws, and (iv) the term "Applicable Orders" means those judgments, orders or decrees of any Governmental Authorities specifically identified to us by the Parent to be applicable to the Parent or any of its subsidiaries, as identified on Schedule IV hereto. In our examination we have assumed the genuineness of all signatures, the legal capacity of all 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 or photostatic copies, and the authenticity of the originals of such copies. As to any facts material to this opinion which we did not independently establish or verify, we have relied upon statements and representations of the Parent and its officers and other representatives, and of others. In particular, we have also reviewed, and are relying upon as to factual matters as a basis for the opinions set forth herein, a certificate (the "Parent's Certificate") of an authorized officer of the Parent certifying that, among other things, the execution, delivery and performance of Operative Documents will not violate any applicable provisions of the relevant Applicable Contracts. We do not express any opinion as to the laws of any jurisdiction other than (i) the laws of the State of New York, [(ii) the General Corporation Law of the State of Delaware and] (iii) the federal laws of the United States of America to the extent specifically referred to herein. The opinions set forth below are subject to the following assumptions and qualifications: (a) the opinions set forth in paragraph 5 are based in part upon the matters set forth in the Parent's Certificate, without our having made any independent investigation or verification of such matters; (b) enforcement may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or other similar laws affecting creditors' rights generally and by general principles of equity (regardless of whether enforcement is sought in equity or at law); 274 Goldman Sachs Credit Partners, L.P. , Page 4 (c) we express no opinion as to the applicability or effect of any fraudulent transfer or similar law on the opinions expressed below, any provision of the Operative Documents or any transaction contemplated thereby; (d) we express no opinion as to any provision of the Operative Documents that purports to grant participants of the Lenders rights of set-off against the Parent or as to whether any affiliate or branch of the Administrative Agent or any Lender has a right of set-off against the Parent pursuant to the Operative Documents; (e) we express no opinion as to the effect on the opinions expressed herein of (i) the compliance or noncompliance of the Administrative Agent, any of the Lenders or any other party (other than the Parent) to the Operative Documents with any state, federal or other laws or regulations applicable to them or (ii) the legal or regulatory status or nature of the business of the Administrative Agent, any of the Lenders or any such other party; and (f) we express no opinion as to the enforceability of any rights to contribution or indemnification which are violative of the public policy underlying any law, rule or regulation (including, without limitation, any federal or state securities law, rule or regulation). In rendering the opinions expressed below, we have assumed, without any independent investigation or verification of any kind, that: (a) the execution, delivery and performance by the Parent of the Operative Documents and the consummation of the transactions contemplated thereby do not and will not conflict with, contravene, violate or constitute a default under (i) any lease, indenture, instrument or other agreement to which the Parent or its property is subject (other than the Applicable Contracts as to which we express our opinion in paragraph 5 herein), (ii) any rule, law or regulation to which the Parent is subject (other than Applicable Laws as to which we express our opinion in paragraph 5 herein) or (iii) any judicial or administrative order or decree of any governmental authority (other than Applicable Orders as to which we express our opinion in paragraph 5 herein); and (b) no authorization, consent or other approval of, notice to or filing with any court, governmental authority or regulatory body (other than Governmental Approvals as to which we express our opinion in paragraph 5 herein) is required to 275 Goldman Sachs Credit Partners, L.P. , Page 5 authorize or is required in connection with the execution, delivery or performance by the Parent of the Operative Documents or the transactions contemplated thereby. Based upon the foregoing and subject to the assumptions and qualifications set forth herein, we are of the opinion that: 1. The Parent has been [duly incorporated] and is validly existing and is in good standing as a corporation under the laws of the [State of Delaware.] 2. Based solely on certificates from the Secretary of State of the applicable jurisdiction, the Parent is duly qualified as a foreign corporation to transact business and is in good standing in each jurisdiction listed in the Parent's Certificate attached as Exhibit A hereto. 3. The Parent has full corporate power and authority to execute, deliver and perform the Operative Documents. 4. The Parent has taken all necessary corporate action to authorize the execution, delivery and performance by it of the Operative Documents. 5. The execution, delivery and performance of the Operative Documents by the Parent, compliance by the Parent with the terms thereof and the consummation by the Parent of the transactions contemplated thereby will not (i) conflict with the Certificate of Incorporation or By-laws of the Parent, (ii) constitute a violation of, or a default under the terms of any Applicable Contract (except we do not express any opinion as to any covenant, restriction or provision of any such agreement or instrument with respect to financial ratios or tests), (iii) result in the creation or imposition of any Lien upon property or assets of the Parent pursuant to the terms of any Applicable Contract, (iv) contravene any provision of any Applicable Laws or Applicable Orders or (v) require any Governmental Approval, except such as have been obtained or made on or prior to the date hereof, such as may be required in connection with the registration under the Securities Act of the Exchange Notes in accordance with the Registration Rights Agreement. 6. Each of the Operative Documents has been duly authorized, executed and delivered by the Parent and constitutes a valid and binding obligation of the Parent enforceable against the Parent in accordance with its terms. 276 Goldman Sachs Credit Partners, L.P. , Page 6 7. The Parent is not and, upon the execution and delivery of the Operative Documents will not be an "investment company" within the meaning of the Investment Company Act of 1940, as amended. This opinion is being furnished only to the addressees named above in connection with the covenant specified in Section 4.22 of the Bridge Loan Agreement and is solely for their benefit and is not to be used or relied upon by any other person or for any other purpose without our prior written consent, except that any financial institution who becomes a "Lender" in accordance with Section 6.2 of the Bridge Loan Agreement (as from time to time amended) may rely on this opinion as if addressed and delivered to that financial institution on the date hereof. Very truly yours, 277 Schedule I Lenders Goldman Sachs Credit Partners, L.P. 278 Schedule II Foreign Jurisdictions Name Jurisdiction 279 Schedule III Applicable Contracts 280 Schedule IV Applicable Orders 281 Exhibit A NTL INCORPORATED OFFICER'S CERTIFICATE The undersigned certifies that he is a duly elected and authorized officer of ______________, a [Delaware] corporation (the "Parent"), and that as such he is authorized to execute this certificate on behalf of the Parent. The undersigned acknowledges that pursuant to Section 4.22 of the Bridge Loan Agreement, Skadden, Arps, Slate, Meagher & Flom LLP ("SASM&F") is rendering a legal opinion to the Administrative Agent and the Lenders (the "Opinion"). The undersigned further understands that SASM&F is relying on this officer's certificate and the statements made herein in rendering the Opinion and the Lenders are relying on clauses (iv) and (v) of this officer's certificate being provided in connection with the Opinion and the Loan Documents. Capitalized terms used herein and not otherwise defined herein shall have the same meanings herein as ascribed thereto in the Opinion. With regard to the foregoing, the undersigned further certifies that on behalf of the Parent: (i) the undersigned is familiar with the covenants contained in each of the Applicable Contracts. (ii) due inquiry has been made of all persons deemed necessary or appropriate to verify or confirm the statements contained herein. (iii) the execution, delivery and performance of the Operative Documents will not violate any applicable provisions of the relevant Applicable Contracts (iv) Set forth on Schedule I hereto are all of the agreements or instruments governing the Parent's material indebtedness. (v) Set forth on Schedule II hereto are all of the orders, judgments and decrees of any governmental authority which are material to the business or property of the Parent. (vi) Set forth on Schedule III hereto are all of the jurisdictions in which the Parent is qualified to do business as a foreign corporation. 282 (vii) The value of all securities owned by the Parent (excluding those issued by majority-owned Subsidiaries of the Parent) does not exceed 10% of the value of the Parent's total assets. (viii) Less than 25 percent of the assets of the Parent on a consolidated basis and on an unconsolidated basis consist of margin stock (as such term is defined in Regulation U of the Board of Governors of the Federal Reserve System). (ix) The Parent (a) is primarily engaged, directly or through a wholly-owned subsidiary or subsidiaries, in a business or businesses other than that of investing, reinvesting, owning, holding or trading in securities and (b) is not engaged and does not propose to engage in the business of investing, reinvesting, owning, holding or trading in securities, and does not own or propose to acquire investment securities having a value exceeding 40 percent of the value of the Parent's total assets (exclusive of government securities and cash items) on an unconsolidated basis. IN WITNESS WHEREOF, the undersigned has executed this certificate this __th day of ________, ____. By:_______________________________ Name: Title: 283 Schedule I Applicable Contracts 284 Schedule II Applicable Orders 285 Schedule III Foreign Jurisdictions Name Jurisdiction 286 EXHIBIT I SOLVENCY CERTIFICATE I, the undersigned, the Chief Financial Officer of NTL Incorporated, a Delaware corporation (the "Company" or the "Borrower"), do hereby certify as follows: 1. This Certificate is furnished to the Administrative Agent and the Lenders pursuant to Section 5.24 of the Bridge Loan Agreement dated as of March 17, 1999 (as it may be amended, supplemented or otherwise modified from time to time, the "Bridge Loan Agreement"), by and among the Company, the Lenders referred to therein, and Goldman Sachs Credit Partners L.P., as administrative agent. Capitalized terms used herein and not otherwise defined herein shall have the meanings ascribed thereto in the Bridge Loan Agreement. 2. For purposes of this Certificate, the terms below shall have the following definitions: "Unreasonably Small Capital" relates to the ability of the Borrower on a consolidated basis after giving effect to the consummation of the Transactions, to continue as a going concern and not lack sufficient capital for its present needs and anticipated needs, including, without limitation, Identified Contingent Liabilities, without substantial unplanned disposition of assets outside the ordinary course of business, restructuring of debt, externally forced revisions of its operations, or similar actions. "Fair Market Value" means the amount at which the aggregate assets of an entity would change hands between a willing buyer and a willing seller, within a commercially reasonable period of time, each having reasonable knowledge of the relevant facts, neither being under any compulsion to act, with equity to both. "Identified Contingent Liabilities" means the maximum reasonably estimated liabilities of the Borrower on a consolidated basis that may result from pending litigation, asserted claims and assessments, guaranties, indemnities, environmental conditions, contract obligations, uninsured risks, and other contingent liabilities as identified and explained to me in terms of their nature and estimated dollar magnitude by management of the Borrower (the "Management"). Based on my reasonable inquiries and analysis in connection with this certificate, I have no reason to believe that such identified contingent liabilities are materially understated and nothing has come to my attention suggesting that material contingent liabilities have not been identified or disclosed. I do not give any opinion as to whether such contingent liabilities meet the criteria for accrual under Statement of Financial Accounting Standards No. 5. "Financing" means the indebtedness being incurred, assumed or guaranteed by the Borrower through the issuance of the Bridge Loans. "Present Fair Saleable Value" means the aggregate amount that may be realized from an independent willing buyer if an entity's assets are sold as an entirety with Bridge Loan Agreement Solvency Certificate Page 1 287 reasonable promptness in an arm's-length transaction under present conditions for the sale of assets as an entirety of the business comprising such entity. "Stated Liabilities" means the recorded liabilities of the Borrower on a consolidated basis pursuant to the unaudited September 30, 1998 balance sheet as prepared by the Borrower. Stated Liabilities excludes indebtedness under the Financing. Based upon representations made within the Bridge Loan Agreement by the Borrower and my investigations as described herein, I have no reason to believe that there has been any such material adverse change since September 30, 1998 other than those changes set forth on Schedule 5.3 of the Bridge Loan Agreement. 3. For purposes of this Certificate, I, or officers of the Company under my direction and supervision, have performed the following procedures as of and for the periods set forth below. a. I have reviewed the financial statements (including the pro forma financial statements) referred to in Section 3.10 of the Bridge Loan Agreement. b. I have made inquiries of certain officials of the Company and its Subsidiaries who have responsibility for financial and accounting matters regarding (i) the existence and amount of Identified Contingent Liabilities associated with the business of the Company and its Subsidiaries and (ii) whether the unaudited pro forma projected consolidated financial statements referred to in paragraph (a) above have been constructed based on information and assumptions that, in the judgment of management, are reasonable. c. I have knowledge of and have reviewed to my satisfaction the Loan Documents and the respective Schedules and Exhibits thereto. d. With respect to Identified Contingent Liabilities, I: i. inquired of certain officials of the Company and its Subsidiaries who have responsibility for legal, financial and accounting matters as to the existence and estimated liability with respect to all contingent liabilities associated with the business of the Company and its Subsidiaries; and ii. confirmed with officers of the Company and its Subsidiaries that, to the best of such officers' knowledge, (i) all appropriate items were included in Stated Liabilities or Identified Contingent Liabilities and that (ii) the amounts relating thereto were the maximum estimated amount of liabilities reasonably likely to result therefrom as of the date hereof e. I have made inquiries of certain officers of the Company and its Subsidiaries who have responsibility for financial reporting and accounting matters regarding whether they were aware of any events or conditions that, as of the date hereof, would cause the Borrower (on a consolidated basis), after giving effect to the consummation of the Transactions to (i) have assets with a Fair Market Value that is less than the sum of Stated Liabilities, Identified Contingent Liabilities and the Bridge Loan Agreement Solvency Certificate Page 2 288 Financing; (ii) have assets with a Present Fair Saleable Value that is less than the sum of Stated Liabilities, Identified Contingent Liabilities and the Financing; (ii) have Unreasonably Small Capital; or (iv) not be able to pay the respective Stated Liabilities, Identified Contingent Liabilities, and the Financing as they mature or otherwise become payable. 4. Based on and subject to the foregoing, I hereby certify on behalf of the Company that, after giving effect to the consummation of the Transactions, it is my opinion that: a. The Fair Market Value of the assets of the Borrower (on a consolidated basis) exceeds and will exceed its liabilities (including, without limitation, the Financing, Stated Liabilities and Identified Contingent Liabilities); b. The Present Fair Saleable Value of the assets of the Borrower (on a consolidated basis) exceeds and will exceed its probable liabilities on its debts (including, without limitation, the Financing, Stated Liabilities and Identified Contingent Liabilities) as such debts become absolute and matured; c. The Borrower (on a consolidated basis) is and will be able to pay its debts (including, without limitation, the Financing, Stated Liabilities and Identified Contingent Liabilities) as such debts mature; and d. The Borrower (on a consolidated basis) does not and will not have Unreasonably Small Capital with which to conduct its present and anticipated business. I am not an appraiser or a valuation expert and have not obtained or relied on the services of appraisers or valuation experts in making the above statements. All such statements regarding Fair Value and Present Saleable Value are made to the best of my knowledge without having made any investigation or inquiry, except as specifically provided in Paragraph 3 above. This Certificate is given solely in my capacity as an officer of the Company and not in my individual capacity. Bridge Loan Agreement Solvency Certificate Page 3 289 IN WITNESS WHEREOF, I have set forth my name below as of the date written. By: --------------------------- Name: Date: _____ __, 1999 Title: Chief Financial Officer Bridge Loan Agreement Solvency Certificate Signature Page EX-11 12 STATEMENT RE: COMPUTATION OF PER SHARE EARNINGS 1 EXHIBIT 11 NTL INCORPORATED CALCULATION OF NET (LOSS) PER SHARE
Weighted Average Number of Shares --------------------------------------------------------------------------- Date Description Total Year Ended Year Ended Year Ended Year Ended Issued of Issuance Outstanding 31-Dec-98 31-Dec-97 31-Dec-96 31-Dec-95 - ------------------------------------------------------------------------------------------------------------------------------------ 12/31/94 Common Stock 30,180,114 30,180,114 30,180,114 30,180,114 30,180,114 01/01/95 Common Stock 20 20 20 20 20 01/12/95 Common Stock 200 200 200 200 193 02/02/95 Common Stock 2,075 2,075 2,075 2,075 1,887 02/23/95 Common Stock 556 556 556 556 474 04/04/95 Common Stock 1,333 1,333 1,333 1,333 990 06/08/95 Common Stock 2,667 2,667 2,667 2,667 1,505 08/04/95 Common Stock 200 200 200 200 82 08/07/95 Common Stock 417 417 417 417 167 08/21/95 Common Stock 156 156 156 156 56 09/05/95 Common Stock 13,333 13,333 13,333 13,333 4,274 02/13/96 Common Stock 2,223 2,223 2,223 1,956 02/22/96 Common Stock 533 533 533 456 02/28/96 Common Stock 4,919 4,919 4,919 4,126 03/06/96 Common Stock 1,133 1,133 1,133 929 03/12/96 Common Stock 5,925 5,925 5,925 4,759 03/20/96 Common Stock 3,450 3,450 3,450 2,696 03/25/96 Common Stock 75,000 75,000 75,000 57,582 04/11/96 Common Stock 10,419 10,419 10,419 7,515 04/26/96 Common Stock 25,000 25,000 25,000 17,008 05/30/96 Common Stock 1,333 1,333 1,333 783 06/13/96 Common Stock 128,793 128,793 128,793 70,731 06/14/96 Common Stock 132,000 132,000 132,000 72,131 08/29/96 Common Stock 1,415,000 1,415,000 1,415,000 599,249 11/06/96 Common Stock 44 44 44 7 11/25/96 Common Stock 1,112 1,112 1,112 109 12/26/96 Common Stock 5,500 5,500 5,500 75 12/27/96 Common Stock 2,000 2,000 2,000 22 12/31/96 Common Stock 50,667 50,667 50,667 0 01/14/97 Common Stock 1,000 1,000 962 01/17/97 Common Stock 4,489 4,489 4,280 01/21/97 Common Stock 23,332 23,332 20,914 02/06/97 Common Stock 223 223 183 03/26/97 Common Stock 1,500 1,500 1,151 05/30/97 Common Stock 900 900 530 06/20/97 Common Stock 1,001 1,001 532 06/25/97 Common Stock 5,334 5,334 2,762 07/10/97 Common Stock 17,967 17,967 8,565 09/16/97 Common Stock 3,533 3,533 1,026 09/26/97 Common Stock 28,666 28,666 7,540 10/03/97 Common Stock 200 200 49 10/15/97 Common Stock 8,239 8,239 1,738 10/16/97 Common Stock 2,250 2,250 468 12/10/97 Common Stock 556 556 32 12/18/97 Common Stock 719 719 26 12/22/97 Common Stock 2,000 2,000 49 12/26/97 Common Stock 2,000 2,000 27 01/08/98 Common Stock 40,137 39,257 01/12/98 Common Stock 5,400 5,222 01/16/98 Common Stock 3,342 3,196 01/26/98 Common Stock 1,500 1,393 01/28/98 Common Stock 19,333 17,850 01/29/98 Common Stock 300 276 02/03/98 Common Stock 8,000 7,255 02/06/98 Common Stock 1,000 899 02/09/98 Common Stock 7,333 6,529 02/10/98 Common Stock 1,200 1,065
2
Weighted Average Number of Shares --------------------------------------------------------------------------- Date Description Total Year Ended Year Ended Year Ended Year Ended Issued of Issuance Outstanding 31-Dec-98 31-Dec-97 31-Dec-96 31-Dec-95 - ------------------------------------------------------------------------------------------------------------------------------------ 02/11/98 Common Stock 3,256 2,881 02/17/98 Common Stock 8,200 7,122 02/25/98 Common Stock 2,800 2,370 03/04/98 Common Stock 200 165 03/06/98 Common Stock 3,800 3,123 03/11/98 Common Stock 9,300 7,516 03/12/98 Common Stock 1,400 1,128 03/13/98 Common Stock 2,600 2,087 03/23/98 Common Stock 7,067 5,480 04/02/98 Common Stock 3,000 2,244 04/06/98 Common Stock 3,800 2,800 04/07/98 Common Stock 6,667 4,895 04/13/98 Common Stock 1,700 1,220 04/20/98 Common Stock 3,700 2,585 04/24/98 Common Stock 6,957,519 4,784,486 04/27/98 Common Stock 1,000 679 05/07/98 Common Stock 1,951,000 1,272,159 05/12/98 Common Stock 800 511 05/18/98 Common Stock 2,000 1,244 05/19/98 Common Stock 4,400 2,724 05/21/98 Common Stock 2,700 1,657 05/26/98 Common Stock 24,167 14,500 05/27/98 Common Stock 3,600 2,150 06/05/98 Common Stock 2,000 1,145 06/08/98 Common Stock 975 550 06/10/98 Common Stock 3,200 1,788 06/25/98 Common Stock 10,000 5,178 06/29/98 Common Stock 400 203 07/02/98 Common Stock 12,583 6,275 07/06/98 Common Stock 1,600 780 07/14/98 Common Stock 4,700 2,189 07/16/98 Common Stock 200 92 07/22/98 Common Stock 800 355 07/23/98 Common Stock 1,100 485 07/29/98 Common Stock 26,800 11,382 08/03/98 Common Stock 30,667 12,603 08/12/98 Common Stock 6,500 2,511 08/20/98 Common Stock 2,200 802 08/26/98 Common Stock 17,067 5,938 09/17/98 Common Stock 7,500 2,158 10/02/98 Common Stock 400 99 10/05/98 Common Stock 11,106 2,647 10/07/98 Common Stock 260 61 10/19/98 Common Stock 2,833 567 10/21/98 Common Stock 4,492 874 10/27/98 Common Stock 8,654,156 1,541,151 10/30/98 Common Stock 35 6 11/09/98 Common Stock 100 14 11/16/98 Common Stock 12,950 1,597 11/17/98 Common Stock 10,096,451 1,217,106 11/19/98 Common Stock 12,760 1,468 11/24/98 Common Stock 6,000 608 11/25/98 Common Stock 77 8 11/30/98 Common Stock 14,000 1,189 12/02/98 Common Stock 411 33 12/07/98 Common Stock 8,110 533 12/08/98 Common Stock 12,033 758 12/11/98 Common Stock 2,000 110 12/15/98 Common Stock 250 11 12/22/98 Common Stock 37 1 12/23/98 Common Stock 95 2 12/24/98 Common Stock 80 2 12/29/98 Common Stock 10,000 55 12/30/98 Common Stock 1,537 4
3
Weighted Average Number of Shares --------------------------------------------------------------------------- Date Description Total Year Ended Year Ended Year Ended Year Ended Issued of Issuance Outstanding 31-Dec-98 31-Dec-97 31-Dec-96 31-Dec-95 - ------------------------------------------------------------------------------------------------------------------------------------ 12/31/98 Common Stock 8,584 0 ---------- ------------- ------------- ------------- ------------ Total 60,249,301 41,202,037 32,116,957 31,041,206 30,189,763 ========== ============= ============= ============= ============ Loss before extraordinary item ($503,927,000) ($328,557,000) ($254,454,000) ($90,785,000) Preferred stock dividend (18,761,000) (11,978,000) 0 0 ------------- ------------- ------------- ------------ (522,688,000) (340,535,000) (254,454,000) (90,785,000) Loss from early extinguishment of debt (30,689,000) (4,500,000) 0 0 ------------- ------------- ------------- ------------ Loss available to common shareholders ($553,377,000) ($345,035,000) ($254,454,000) ($90,785,000) ============= ============= ============= ============ Basic and diluted net (loss) per common share: (Loss) before extraordinary item ($12.69) ($10.60) ($8.20) ($3.01) Extraordinary item (0.74) (0.14) 0.00 0.00 ============= ============= ============= ============ Net (loss) per common share ($13.43) ($10.74) ($8.20) ($3.01) ============= ============= ============= ============
EX-21 13 SUBSIDIARIES OF THE REGISTRANT 1 Exhibit 21 SUBSIDIARIES OF NTL INCORPORATED All of the corporations listed below were organized in the United Kingdom. Andover Cablevision Limited Anglia Cable Communications Limited Berkhamsted Properties & Building Contractors Limited Bracknell Cable TV Limited Cable Television Limited Cable Thames Valley Limited CableTel Cardiff Limited CableTel Central Hertfordshire Limited CableTel Glasgow CableTel Hertfordshire Limited CableTel Herts and Beds Limited CableTel Investments Limited CableTel Kirklees CableTel Limited CableTel Newport CableTel North Bedfordshire Limited CableTel Northern Ireland Limited CableTel Scotland Limited CableTel South Wales Limited CableTel Surrey and Hampshire Limited CableTel Telecom Supplies Limited CableTel (UK) Limited CableTel West Glamorgan Limited CableTel West Riding Limited Cambridge Cable Limited Cambridge Cable Services Limited Cambridge Holding Company Limited CCL Corporate Communication Services Limited Chiltern Cable Limited Columbia Management Limited ComTel Limited ComTel Cable Services Limited ComTel Coventry Limited Credit-Track Debt Recovery Limited Digital Television Network Limited DTELS Limited East Coast Cable Limited Enablis Limited Heartland Cablevision (UK) Limited Heartland Cablevision II (UK) Limited Herts Cable Limited 2 Lichfield Cable Communications Limited Maza Limited Metro Hertfordshire Limited Metro South Wales Limited National Transcommunications LimitNorthampton Cable Television Limited NTL Communications Limited NTL Darlington Limited NTL Digital Limited NTL Digital Radio Limited NTL Group Limited NTL Insurance Limited NTL Internet Limited NTL Investment Holdings Limited NTL Limited NTL Networks Limited NTL Systems Limited NTL Teesside Limited NTL Telecom Services Limited (formerly Eastern Group Telecoms Ltd) NTL Trustees Limited Oxford Cable Limited Premium TV Limited Prospectre Limited Secure Backup Systems Limited South Yorkshire Cablevision (UK) Limited Southern East Anglia Cable Limited Stafford Communications Limited Swindon Cable Limited Tamworth Cable Communications Limited Vision Networks Services UK Limited Wessex Cable Limited XL Debt Recovery Agency Limited All of the corporations listed below were incorporated in Delaware except where otherwise noted: Bearsden Nominees, Inc. CableTel Programming, Inc. CableTel Ventures Limited Cellular Paging, Inc. L.D. Data, Inc. NTL (UK) Group, Inc. NTL Digital (US), Inc. NTL International Services, Inc. OCOM Corporation OCOM New York, Inc. All of the companies listed below were formed in Bermuda except where otherwise noted: Comcast UK Cable Partners Limited Comcast UK Consulting, Inc. (US Virgin Islands company) 2 3 Comcast UK Programming Limited Comcast UK Holdings Limited NTL (Bermuda) Limited 3 4 All of the corporations listed below were organized in the United Kingdom. Diamond Cable Acquisitions Limited Diamond Cable (Bassetlaw) Limited Diamond Cable (Burton-upon-Trent) Limited Diamond Cable (Chesterfield) Limited Diamond Cable Communications plc Diamond Cable Communications (UK) Limited Diamond Cable Construction Limited Diamond Cable CPE Limited Diamond Cable (Grantham) Limited Diamond Cable (Grimclee) Limited Diamond Cable (Hinckley) Limited Diamond Cable (Leicester) Limited Diamond Cable (Lincoln) Limited Diamond Cable (Lincolnshire) Limited Diamond Cable (Mansfield) Limited Diamond Cable (Melton Mowbray) Limited Diamond Cable (Newark-on-Trent) Limited Diamond Cable (Ravenshead) Limited Diamond Cable (Vale of Belvoir) Limited Diamond Holdings plc Diamond Visual Communications Limited East Midlands Cable Communications Limited East Midlands Cable Group Limited East Midlands Cable Holdings Limited Jewel Holdings Limited LCL Cable (Holdings) Limited LCL Telephones Limited 4 EX-23.1 14 CONSENT OF ERNST & YOUNG LLP 1 EXHIBIT 23.1 CONSENT OF INDEPENDENT AUDITORS We consent to the incorporation by reference in the (i) Registration Statements (Forms S-8 No. 33-41527, No. 33-55446, No. 33-55448, No. 33-78848, No. 33-78844, No. 333-44763, No. 333-44765, No. 333-13007, No. 33-78834, No. 33-95270, No. 333-13015 and No. 333-07879) of NTL Incorporated (the "Company") and (ii) Registration Statements (Forms S-3 No. 333-00118, No. 33-92792, No. 333-07879, No. 333-16751, No. 333-72335, No. 333-66855 and No. 333-63615) of the Company and in the related Prospectuses of our report dated March 26, 1999, with respect to the consolidated financial statements and schedules of the Company included in the Annual Report (Form 10-K) for the year ended December 31, 1998. ERNST & YOUNG LLP New York, New York March 26, 1999 EX-27.1 15 FINANCIAL DATA SCHEDULE
5 12-MOS DEC-31-1998 JAN-01-1998 DEC-30-1998 736,265,000 260,631,000 190,831,000 (38,475,000) 0 55,248,000 4,363,791,000 (509,361,000) 6,194,097,000 603,951,000 5,043,803,000 124,127,000 2,000 602,000 354,550,000 6,194,097,000 0 747,015,000 0 372,134,000 337,384,000 0 328,815,000 (507,254,000) 3,327,000 (503,927,000) 0 (30,689,000) 0 (534,616,000) (13.43) (13.43)
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